THE POTENTIAL OF GEOTHERMAL ENERGYA ONCE AND FUTURE FOCUSOFTHE BUREAU OF ECONOMIC GEOLOGY

THE POTENTIAL OF GEOTHERMAL ENERGYSummary

An underestimated and largely untapped resourceNot Geographically limited, as hydrothermal sites areLess costly than solar or wind, in per KWhrLargest return on investment of R&D DollarsRenewable, small footprint, negligible emissionsBEGs skills in reservoir characterization, flow modeling and carbon sequestration are directly applicable to geothermal energy assessment and development.

THE POTENTIAL OF GEOTHERMAL ENERGYBureau of Economic Geology lead earlier studies during the late 1970s, 1980s and up to 1992 investigating the Geothermal Energy potential of the Northern Gulf of Mexico

Bebout, Loucks, Gregory 1978

THE POTENTIAL OF GEOTHERMAL ENERGYWhat Changed from 1980 to Today?

Advances in Drilling Technology that made 8 to 10km holes possible (polycrystalline diamond compact bits, slimhole drilling)Advances in controlled fracture development that made Engineered Geothermal Systems practicalAdvances in Binary-Cycle Heat Exchange Systems that made 100o C heat sources and up economical.

Leveraging the Past to Define the FutureThe basics:GeologyStratigraphyStructural geology; fractures, stress fieldsFluid flowHeat flowReservoir CharacterizationYield, Thermal Characteristics, Future PredictionsReservoir Management, Restoration and MaintenanceEconomics.

THE POTENTIAL OF GEOTHERMAL ENERGYCritical Re-assessment: DOE - MIT (2006) Study Found:

THE EXTRACTABLE RESOURCE BASE IS ESTIMATED AT 2,000 TIMES THE ANNUAL PRIMARY ENERGY CONSUMPTION OF THE UNITED STATES IN 2005. OVER HALF OF THIS ENERGY IS IN GEOPRESSURED ZONES IN THE NORTHERN GULF OF MEXICO

Sediment Thickness Map of US

THE POTENTIAL OF GEOTHERMAL ENERGY

THE POTENTIAL OF GEOTHERMAL ENERGYComparison of the costs per kilowatt hour to generate electricity from alternative/renewable sources versus hydrocarbon sourcesGeothermal is cost competitive with oil and natural gas and is less expensive than solar and wind. Only coal, without carbon tax costs, is less expensive than geothermalData from NREL in constant 2005 dollars

Chart3

100

11

14

16

18

22

Actual Performance Data

Trend Line

Temperature oC

Percent

Efficiency of Heat Recovery and Electrical Generation for Binary Cycle Heat Exchange Systems

Sheet1

100

15011

20014

25016

30018

35022

Chart1

13.811.38469.5125106.351.343

13.110.6745711910047.540

12.5106646.8112.59343.336.3

11.99.45638.310584.538.832.5

11.38.846.827.599783629

10.68.13624937231.325.3

107.530.321.387.568.828.822.5

9.77.22719826325.318.8

9.46.925177759.522.516.8

8.86.323.5167255.52014.8

8.46.3221568.85217.612.5

8.15.921.51466491511.3

7.55.621.31462.54513.810

6.65.32113.85943.3128.8

6.45.120.813.556.340.511.37.6

6.34.92013.35337.59.86.9

6.24.819.31351348.86.3

5.94.418.512.94831.38.45.9

5.641812.846297.85.3

5.33.817.512.843.8277.55

5.13.817.312.842.5267.34.9

53.717.112.840.5246.74.7

4.93.61712.738236.44.6

4.73.416.712.736216.34.5

4.43.21612332064.4

4.33.115113118.85.54.3

Photovoltaics

Concentrating Solar

Wind

Geothermal

Geothermal High

Geothermal Low

Conc. Solar High

Conc. Solar Low

Photovoltaics High

Photovoltaics Low

Wind High

Wind Low

Cents per KWh

Upper and Lower Cost Range of Energy for Alternative Energy Sources, Expressed in Cents per KWhr

Chart2

1.62.12.61.7

1.51.92.11.6

1.51.921.5

1.421.91.5

1.31.71.81.4

1.31.61.81.3

1.21.81.91.3

1.11.81.71.2

1.11.51.41.2

1.11.61.51.1

12.32.21.3

1.12.321.2

1.11.91.81.1

12.62.21.4

1.12.82.21.5

1.23.52.91.8

Oil

Natural Gas

Coal

Composite Hydrocarbon

Coal

Natural Gas

Oil

Composite Hydrocarbon

Year

Cents per Kwhr

Costs, in Cents per KWhr, for Power Generation from Hydrocarbon Sources

Sheet2

Cost of Energy for Alternative Energy Sources, Expressed in Cents per KWhr

GeothermalConcentrating SolarPhotovoltaicsWind

YearUpperLowerUpperLowerUpperLowerUpperLower

198013.811.384.069.5125.0106.351.343.0

198113.110.674.057.0119.0100.047.540.0

198212.510.066.046.8112.593.043.336.3

198311.99.456.038.3105.084.538.832.5

198411.38.846.827.599.078.036.029.0

198510.68.136.024.093.072.031.325.3

198610.07.530.321.387.568.828.822.5

19879.77.227.019.082.063.025.318.8

19889.46.925.017.077.059.522.516.8

19898.86.323.516.072.055.520.014.8CoalNatural GasPetroleumComposite Hydrocarbon

19908.46.322.015.068.852.017.612.519901.62.12.61.7

19918.15.921.514.066.049.015.011.319911.51.92.11.6

19927.55.621.314.062.545.013.810.019921.51.921.5

19936.65.321.013.859.043.312.08.819931.421.91.5

19946.45.120.813.556.340.511.37.619941.31.71.81.4

19956.34.920.013.353.037.59.86.919951.31.61.81.3

19966.24.819.313.051.034.08.86.319961.21.81.91.3

19975.94.418.512.948.031.38.45.919971.11.81.71.2

19985.64.018.012.846.029.07.85.319981.11.51.41.2

19995.33.817.512.843.827.07.55.019991.11.61.51.1

20005.13.817.312.842.526.07.34.9200012.32.21.3

20015.03.717.112.840.524.06.74.720011.12.321.2

20024.93.617.012.738.023.06.44.620021.11.91.81.1

20034.73.416.712.736.021.06.34.5200312.62.21.4

20044.43.216.012.033.020.06.04.420041.12.82.21.5

20054.33.115.011.031.018.85.54.320051.23.52.91.8

Sheet3

Chart3

100

11

14

16

18

22

Actual Performance Data

Trend Line

Temperature oC

Percent

Efficiency of Heat Recovery and Electrical Generation for Binary Cycle Heat Exchange Systems

Sheet1

100

15011

20014

25016

30018

35022

Chart1

13.811.38469.5125106.351.343

13.110.6745711910047.540

12.5106646.8112.59343.336.3

11.99.45638.310584.538.832.5

11.38.846.827.599783629

10.68.13624937231.325.3

107.530.321.387.568.828.822.5

9.77.22719826325.318.8

9.46.925177759.522.516.8

8.86.323.5167255.52014.8

8.46.3221568.85217.612.5

8.15.921.51466491511.3

7.55.621.31462.54513.810

6.65.32113.85943.3128.8

6.45.120.813.556.340.511.37.6

6.34.92013.35337.59.86.9

6.24.819.31351348.86.3

5.94.418.512.94831.38.45.9

5.641812.846297.85.3

5.33.817.512.843.8277.55

5.13.817.312.842.5267.34.9

53.717.112.840.5246.74.7

4.93.61712.738236.44.6

4.73.416.712.736216.34.5

4.43.21612332064.4

4.33.115113118.85.54.3

Photovoltaics

Concentrating Solar

Wind

Geothermal

Geothermal High

Geothermal Low

Conc. Solar High

Conc. Solar Low

Photovoltaics High

Photovoltaics Low

Wind High

Wind Low

Cents per KWh

Upper and Lower Cost Range of Energy for Alternative Energy Sources, Expressed in Cents per KWhr

Chart2

1.62.12.61.7

1.51.92.11.6

1.51.921.5

1.421.91.5

1.31.71.81.4

1.31.61.81.3

1.21.81.91.3

1.11.81.71.2

1.11.51.41.2

1.11.61.51.1

12.32.21.3

1.12.321.2

1.11.91.81.1

12.62.21.4

1.12.82.21.5

1.23.52.91.8

Oil

Natural Gas

Coal

Composite Hydrocarbon

Coal

Natural Gas

Oil

Composite Hydrocarbon

Year

Cents per Kwhr

Costs, in Cents per KWhr, for Power Generation from Hydrocarbon Sources

Sheet2

Cost of Energy for Alternative Energy Sources, Expressed in Cents per KWhr

GeothermalConcentrating SolarPhotovoltaicsWind

YearUpperLowerUpperLowerUpperLowerUpperLower

198013.811.384.069.5125.0106.351.343.0

198113.110.674.057.0119.0100.047.540.0

198212.510.066.046.8112.593.043.336.3

198311.99.456.038.3105.084.538.832.5

198411.38.846.827.599.078.036.029.0

198510.68.136.024.093.072.031.325.3

198610.07.530.321.387.568.828.822.5

19879.77.227.019.082.063.025.318.8

19889.46.925.017.077.059.522.516.8

19898.86.323.516.072.055.520.014.8CoalNatural GasPetroleumComposite Hydrocarbon

19908.46.322.015.068.852.017.612.519901.62.12.61.7

19918.15.921.514.066.049.015.011.319911.51.92.11.6

19927.55.621.314.062.545.013.810.019921.51.921.5

19936.65.321.013.859.043.312.08.819931.421.91.5

19946.45.120.813.556.340.511.37.619941.31.71.81.4

19956.34.920.013.353.037.59.86.919951.31.61.81.3

19966.24.819.313.051.034.08.86.319961.21.81.91.3

19975.94.418.512.948.031.38.45.919971.11.81.71.2

19985.64.018.012.846.029.07.85.319981.11.51.41.2

19995.33.817.512.843.827.07.55.019991.11.61.51.1

20005.13.817.312.842.526.07.34.9200012.32.21.3

20015.03.717.112.840.524.06.74.720011.12.321.2

20024.93.617.012.738.023.06.44.620021.11.91.81.1

20034.73.416.712.736.021.06.34.5200312.62.21.4

20044.43.216.012.033.020.06.04.420041.12.82.21.5

20054.33.115.011.031.018.85.54.320051.23.52.91.8

Sheet3

What Our Partners are doingChevron is the largest producer of geothermal energy in the world, with operations in Indonesia and the Philippines.

US energy companies Unocal and Gulf Resources are willing to invest US$1.2 billion in geothermal and natural gas projects in the PhilippinesSource: Chevron Geothermal

What are our Industrial Partners Seeing?The Classical, but limited, hydrothermal/magmatic resource

The world-leading geothermal energy company Reykjavik Energy (Orkuveita Reykjavikur) has established US$800 million in capital to invest in new geothermal projects But these projects are hydrothermal sites that are limited in geographic extent.

What Our Partners are doingBinary Cycle Rankine EngineRaser Technologies Hatch Geothermal Power Plantconstructed in just six monthsModular power plant design.Can produce power from geothermal resources that were previously thought to be not hot enough for commercial power production.

What the Business is doingFive Year Stock Price TrendsORA = Ormat Technologies (geothermal)XOM = ExxonMobilCVX = ChevronBP = British Petroleum

Why Geothermal?Why Now?The Economics have changed geothermal is now cost-competitive with petroleum, and lower cost than solar and wind.The Resource Base has changed no longer only hydrothermal-magmatic but widely distributed geothermal heat flowThe extractable resource is 2000 times the annual demand of the US.The regulations have, or will changeFavoring non-CO2 emitting energy sources

Sponsored Research OpportunitiesGeothermal Energy Sponsored Opportunities

The American Recovery and Reinvestment Act: $350 million new investment in this technology. Geothermal Demonstration Projects = $140 MillionEnhanced Geothermal Systems Technology Research and Development = $80 MillionInnovative Exploration Techniques = $100 Million. National Geothermal Data System, Resource Assessment, and Classification System = $30 MillionPrivate funding opportunities for BEG, at this time, equal or exceed the federal or state opportunities.

The Bureaus Immediate Opportunities$11.6 Million over 3 years Technology Interface System, $3.6 Million over 2 yearsTowards Field Testing of CO2 as Operating Fluid for EGS, $4.9 Million over 2 yearsGeothermal Energy from Coproduced Fluids, $452,791 for 1 yr. (potential for $MM over 5 years)Geothermal Energy From Geopressured Resources $361,191 for 1 yr. (potential for $MM over 5 yr)Geothermal Data Development, Collection and Maintenance, $2.28 Million over 3 years

The Bureaus Long Range OpportunitiesEverything we have learned about petroleum reservoir characterization, development and production is applicable to Geopressured / Geothermal Development Streamline Modelingof Fluid Allocation Factors3-D Geo-ModelStreamline Fluid Allocation FactorsSource: BEG and I-Reservoir, Inc.

Where is the Cutting Edge?Primary Focus is on Geopressured Zones having Thermal-Kinetic-Chemical Energy ContentCombining geothermal heat extraction using supercritical carbon dioxideLinks geologic sequestration of CO2 with non-polluting, renewable energy productionResults in improvement of heat extraction efficiency by 40% to 180% (Pruess, K. 2006)Provides a methodology for coal fired power plants to recover the energy penalty incurred in CO2 captureMetal Organic heat carriers (MOHC) offer additional improvements in efficiency, at a cost.

Flow tests at Cooper Basin EGS Site, Australia (Geodynamics, 2005)Cooper Basin

Thank you

THE POTENTIAL OF GEOTHERMAL ENERGYAn underestimated and underutilized resourceNot geographically limited, as hydrothermal resources areRenewable, small footprint, negligible emissionsLess costly than solar or wind, in cents per kilowatt hourLargest return on investment of R&D dollarsBEGs skills are directly applicable.History at BEGDon Bebout and Bob Loucks, among others lead research in 1970s to 1990s.Oil prices dropped, and research dollars disappearedWhat has changed since the 1980s to 1990s?Advances in drilling technology that has now made 6 to 8 kilometer drill holes possible, polycrystalline diamond compact bits, slimhole technologyAdvances in controlled fracture development, directional drillingAll of these have allowed a redefinition of the resource base, andAdvances in binary cycle heat exchange systemsKey point is now, what is the magnitude of the resource?The short answer is, there is from 1,200 to 2,000 times the annual primary energy needs of the United States in extractable geopressured-geothermal resources.The majority of this reserve is in the northern Gulf of MexicoMagnitude of the resource In comparison to annual energy use of the USIn comparison to other, Unconventional ResourcesIn rough numbers, over 100 times what might be available from shale oils, tar sands or heavy oils.How does the production of electricity by geothermal energy compare with other Renewables?Cheaper than Wind, Photovoltaics, concentrating Solar.Competitive with Oil and Natural gas.Still more expensive than coal or hydroelectricBut will compete with coal if a carbon tax is imposed.What are our partners doing?Chevron, for example is the largest producer of electrical energy using geothermal resources in the world, but none of this is in the US.Unocal and Gulf Resources are investing substantially in the resourcesEXXONMOBILE still reports, in their 2008 annual report, that geothermal energy is geographically limited In case no one told them, so is oil.Why havent our partners focused more on geothermal energy?Still perceived as a geographically limited resourceStill perceived as messy, polluting, problems with fluid disposal.The new paradigm is Raser Technologies Binary Cycle Rankine EngineModular, efficient.The Market reflects this new technology efficiency.Comparison of ExxonMobil, Chevron and BPs 5 year stock price history to Ormat Technologys 5 year history.In Summary, Why Geothermal? Why Now?The technology has changed, radically revising the economics of geothermal energys use in the production of electrical energy.And, as a result, the resource definition has changed, completely revising the identified resource base from a geographically limited magmatically linked hydrothermal resource to a widely distributed and efficient conductive heat flow resource.Sponsored Research OpportunitiesGovernment Funded opportunities equal to 350 millionImmediate private funding opportunities exceeding 10 to 20 million he Bureau of Economic Geologys existing outstanding proposals:Database assembly and management 2.28 million or 750,000 per year1 million over the next year from private firms, with potential to continue this over 2 to 5 years.Heat mining fluids research, 5 million over next 3 to 5 years The Bureau of Economic Geologys long term opportunities?Everything we have learned about petroleum reservoir characterization, development and production is applicable to Geopressured / Geothermal Development.