WORLD GEOTHERMAL POWER GENERATION NEARING ERUPTION

Earth Policy Institute
Plan B Update
For Immediate Release
August 19, 2008

Jonathan G. Dorn

With fossil fuel prices escalating and countries searching for ways to reduce oil dependence and greenhouse gas emissions, capturing the earth’s heat for power generation is garnering new attention. First begun in Larderello, Italy, in 1904, electricity generation using geothermal energy is now taking place in 24 countries, 5 of which use it to produce 15 percent or more of their total electricity. In the first half of 2008, total world installed geothermal power capacity passed 10,000 megawatts and now produces enough electricity to meet the needs of 60 million people, roughly the population of the United Kingdom. In 2010, capacity could increase to 13,500 megawatts across 46 countries–equivalent to 27 coal-fired power plants.

Originating from the earth’s core and from the decay of naturally occurring isotopes such as those of uranium, thorium, and potassium, the heat energy in the uppermost six miles of the planet’s crust is vast–50,000 times greater than the energy content of all oil and natural gas resources. Chile, Peru, Mexico, the United States, Canada, Russia, China, Japan, the Philippines, Indonesia, and other countries along the Ring of Fire (an area of high volcanic activity encircling the basin of the Pacific Ocean) are rich in geothermal energy. Another geothermal hot spot is the Great Rift Valley of Africa, which includes such countries as Kenya and Ethiopia. Worldwide, 39 countries with a cumulative population of over 750 million people have geothermal resources sufficient to meet all their electricity needs. (See data at http://www.earthpolicy.org/Updates/2008/Update74_data.htm.)

Typically, power generation using the earth’s heat required underground pockets of high-temperature water or steam to drive a steam turbine. Now, new technologies that use liquids with low boiling points in closed-loop heat exchange systems allow electricity to be generated at much lower temperatures. This breakthrough is making geothermal power generation viable in countries such as Germany that are not known for their geothermal resources and is one reason why the number of countries using the earth’s heat to generate electricity could almost double by 2010.

One advantage of geothermal power plants, beyond the benefit of producing electricity from a low-carbon, indigenous energy source with no fuel costs, is that they provide baseload power 24 hours a day. Storage or backup-power is not required.

The United States leads the world in generating electricity from the earth’s heat. As of August 2008, geothermal capacity in the United States totaled nearly 2,960 megawatts across seven states–Alaska, California, Hawaii, Idaho, Nevada, New Mexico, and Utah. California, with 2,555 megawatts of installed capacity–more than any country in the world–produces almost 5 percent of its electricity from geothermal energy. Most of this capacity is installed in an area called the Geysers, a geologically active region north of San Francisco.

Thanks to the Energy Policy Act of 2005, which made geothermal power generation eligible to receive the federal renewable energy production tax credit, electricity generated from geothermal resources now costs the same as fossil-fuel-based electricity in many markets in the western United States. With favorable economics, the geothermal industry is experiencing a surge in activity. As of August 2008, some 97 confirmed new geothermal power projects with up to 4,000 megawatts of capacity were under development in 13 states, with some 550 megawatts of this already in the construction phase. Expected to create 7,000 permanent full-time jobs, the new capacity will include numerous large-scale projects such as the 350-megawatt and 245-megawatt projects by Vulcan Power near Salt Wells and Aurora, Nevada; the 155-megawatt project by CalEnergy near the Salton Sea in southern California; and the 120-megawatt project by Davenport Power near the Newberry Volcano in Oregon.

Current development is only scratching the surface of what is possible. The U.S. Department of Energy estimates that with emerging low-temperature technologies, at least 260,000 megawatts of U.S. geothermal resources could be developed. A study led by the Massachusetts Institute of Technology indicates that an investment of roughly $1 billion in geothermal research and development over 15 years (roughly the cost of a single new coal-fired power plant) could lead to commercial deployment of 100,000 megawatts by 2050.

In Europe, the top countries in geothermal energy development are Italy with 810 megawatts and Iceland with 420 megawatts. Italy is expected to nearly double its installed capacity by 2020. Iceland, with 27 percent of its electricity needs met by harnessing the earth’s heat, is number one in the world in the share of its electricity generated from geothermal energy. Germany, with only 8 megawatts of installed capacity, lags behind but is beginning to see the effects of a feed-in tariff of €0.15 (US $0.23) per kilowatt-hour that was implemented in 2004. Almost 150 plants are now in the pipeline in Germany, with most of the activity centered in Bavaria.

Ten of the top 15 countries producing geothermal electricity are in the developing world. The Philippines, which generates 23 percent of its electricity from geothermal energy, is the world’s second biggest producer behind the United States. The Philippines aims to increase its installed geothermal capacity by 2013 by more than 60 percent, to 3,130 megawatts. Indonesia, the world’s third largest producer, has even bigger plans, calling for 6,870 megawatts of new geothermal capacity to be developed over the next 10 years–equal to nearly 30 percent of its current electricity generating capacity from all sources. Pertamina, the Indonesian state petroleum company, anticipates building most of this new capacity–adding its name to the list of conventional energy companies that are beginning to diversify into the renewable energy market.

The geothermal development potential of the Great Rift Valley in Africa is enormous. Kenya is the frontrunner in the effort to tap this potential. In late June 2008, President Mwai Kibaki announced a plan to install some 1,700 megawatts of new geothermal capacity within 10 years–13 times greater than the current capacity and one-and-a-half times greater than the country’s total electricity generating capacity from all sources. Djibouti, aided by Reykjavik Energy Invest’s commitment to provide $150 million for geothermal energy projects in Africa, aims to tap the earth’s heat to produce nearly all of its electricity within the next few years. Further stimulating development is the African Rift Geothermal Development Facility (ARGeo), an international organization partly funded by the World Bank that seeks to increase the use of geothermal energy in the Great Rift Valley by protecting investors from losses during early stages of development.

Industry, which accounts for more than 30 percent of world energy consumption, is also starting to turn to reliable, low-cost geothermal energy. In Papua New Guinea, a 56-megawatt geothermal power station owned by Lihir Gold Limited, a leading global gold company, meets 75 percent of corporate power demand at a notably lower cost than oil-fired power generation. In Iceland, five geothermal power plants planned near Reykjavik, which are slated to have a total capacity of 225 megawatts when completed in 2012, will provide electricity to new aluminum refineries.

Despite development potential measured in the hundreds of thousands of megawatts, tapping this renewable source of power is still in its infancy. But as more and more national leaders begin to see renewable energy as a cost-effective, low-carbon alternative to price-volatile, carbon-intensive fossil fuels, geothermal power generation is expected to move rapidly from marginal to mainstream.

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For more information on Earth Policy Institute’s goal of 200,000 MW of CSP worldwide, part of a plan to cut carbon emissions 80 percent by 2020, see Chapters 11-13 in Plan B 3.0: Mobilizing to Save Civilization, available at http://www.earthpolicy.org for free downloading.

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Why Ethanol Production Will Drive World Food Prices Even Higher in 2008

As published in Earth Policy Institute
by Lester R. Brown

We are witnessing the beginning of one of the great tragedies of history. The United States, in a misguided effort to reduce its oil insecurity by converting grain into fuel for cars, is generating global food insecurity on a scale never seen before.

The world is facing the most severe food price inflation in history as grain and soybean prices climb to all-time highs. Wheat trading on the Chicago Board of Trade on December 17th breached the $10 per bushel level for the first time ever. In mid-January, corn was trading over $5 per bushel, close to its historic high. And on January 11th, soybeans traded at $13.42 per bushel, the highest price ever recorded. All these prices are double those of a year or two ago.

As a result, prices of food products made directly from these commodities such as bread, pasta, and tortillas, and those made indirectly, such as pork, poultry, beef, milk, and eggs, are everywhere on the rise. In Mexico, corn meal prices are up 60 percent. In Pakistan, flour prices have doubled. China is facing rampant food price inflation, some of the worst in decades.

In industrial countries, the higher processing and marketing share of food costs has softened the blow, but even so, prices of food staples are climbing. By late 2007, the U.S. price of a loaf of whole wheat bread was 12 percent higher than a year earlier, milk was up 29 percent, and eggs were up 36 percent. In Italy, pasta prices were up 20 percent.

World grain prices have increased dramatically on three occasions since World War II, each time as a result of weather-reduced harvests. But now it is a matter of demand simply outpacing supply. In seven of the last eight years world grain production has fallen short of consumption. These annual shortfalls have been covered by drawing down grain stocks, but the carryover stocks—the amount in the bin when the new harvest begins—have now dropped to 54 days of world consumption, the lowest on record. (See data.)

From 1990 to 2005, world grain consumption, driven largely by population growth and rising consumption of grain-based animal products, climbed by an average of 21 million tons per year. Then came the explosion in demand for grain used in U.S. ethanol distilleries, which jumped from 54 million tons in 2006 to 81 million tons in 2007. This 27 million ton jump more than doubled the annual growth in world demand for grain. If 80 percent of the 62 distilleries now under construction are completed by late 2008, grain used to produce fuel for cars will climb to 114 million tons, or 28 percent of the projected 2008 U.S. grain harvest.

Historically the food and energy economies have been largely separate, but now with the construction of so many fuel ethanol distilleries, they are merging. If the food value of grain is less than its fuel value, the market will move the grain into the energy economy. Thus as the price of oil rises, the price of grain follows it upward.

A University of Illinois economics team calculates that with oil at $50 a barrel, it is profitable—with the ethanol subsidy of 51¢ a gallon (equal to $1.43 per bushel of corn)—to convert corn into ethanol as long as the price is below $4 a bushel. But with oil at $100 a barrel, distillers can pay more than $7 a bushel for corn and still break even. If oil climbs to $140, distillers can pay $10 a bushel for corn—double the early 2008 price of $5 per bushel.

The World Bank reports that for each 1 percent rise in food prices, caloric intake among the poor drops 0.5 percent. Millions of those living on the lower rungs of the global economic ladder, people who are barely hanging on, will lose their grip and begin to fall off.

Projections by Professors C. Ford Runge and Benjamin Senauer of the University of Minnesota four years ago showed the number of hungry and malnourished people decreasing from over 800 million to 625 million by 2025. But in early 2007 their update of these projections, taking into account the biofuel effect on world food prices, showed the number of hungry people climbing to 1.2 billion by 2025. That climb is already under way.

Since the budgets of international food aid agencies are set well in advance, a rise in food prices shrinks food assistance. The U.N. World Food Programme (WFP), which is now supplying emergency food aid to 37 countries, is cutting shipments as prices soar. The WFP reports that 18,000 children are dying each day from hunger and related illnesses.

As grain prices climb, a politics of food scarcity is emerging as exporting countries restrict exports to limit the rise in domestic food prices. At the end of January, Russia—one of the top five wheat exporters—will impose a 40-percent export tax on wheat, effectively banning exports. Argentina, another leading wheat exporter, closed export registrations for wheat indefinitely in early December until it could assess the condition of the new crop. And Viet Nam, the number two rice exporter after Thailand, has banned rice exports for several months and will likely not lift this ban until the new crop comes to market.

Rising food prices are translating into social unrest. It began in early 2007 with tortilla demonstrations in Mexico. Then came pasta protests in Italy. More recently, rising bread prices in Pakistan have become a source of unrest. In Jakarta, 10,000 Indonesians gathered in front of the presidential palace on January 14th this year to protest the doubling of soybean prices that has raised the price of tempeh, the national soy-based protein staple. When a supermarket in Chongqing, China, where cooking oil prices have soared, offered this oil at a reduced price, the resulting stampede when doors opened killed three people and injured 31.

As economic stresses translate into political stresses, the number of failing states, such as Afghanistan, Somalia, Sudan, the Democratic Republic of the Congo, and Haiti, which was already increasing before the rise in food prices began, could increase even faster.

There is much to be concerned about on the food front. We enter this new crop year with the lowest grain stocks on record, the highest grain prices ever, the prospect of a smaller U.S. grain harvest as several million acres of land that shifted from soybeans to corn last year go back to soybeans, the need to feed an additional 70 million people, and U.S. distillers wanting 33 million more tons of grain to supply the new ethanol distilleries coming online this year. Corn futures prices for December 2008 delivery are higher than those for March, suggesting that market analysts see even tighter supplies after the next harvest.

Whereas previous dramatic rises in world grain prices were weather-induced, this one is policy-induced and can be dealt with by policy adjustments. The crop fuels program that currently satisfies scarcely 3 percent of U.S. gasoline needs is simply not worth the human suffering and political chaos it is causing. If the entire U.S. grain harvest were converted into ethanol, it would satisfy scarcely 18 percent of our automotive fuel needs.

The irony is that U.S. taxpayers, by subsidizing the conversion of grain into ethanol, are in effect financing a rise in their own food prices. It is time to end the subsidy for converting food into fuel and to do it quickly before the deteriorating world food situation spirals out of control.