The conversion of heat energy from below the surface of the earth is the process through which geothermal energy is produced.
The potential of this environmentally friendly geothermal energy is enormous, but most of it has not been exploited since the technologies that were available in earlier decades had significant limits.
In order for producers to access this energy source, they drill wells that are around one mile deep. These wells lead to subterranean reservoirs containing steam and hot water, which may be used to power turbines connected to electricity generators.
The definition of geothermal energy
Geothermal energy is ground heat, and geothermal power is a power created from geothermal energy.
There are dry steam power stations, flash steam power stations, and binary cycle power stations used to create geothermal energy.
Geothermal energy generation is utilized in 26 nations, whereas geothermal heating is utilized in 70 nations.
What is the origin of geothermal energy?
Geothermal energy is the heat derived from the earth's subsurface, and it is held in the rocks and fluids beneath the earth's crust and can be found as deep as the earth's magma, a molten rock that is extremely hot.
For geothermal energy power, one-mile-deep wells are excavated into underground reservoirs to extract the steam and hot water, which can then be used to drive turbines attached to electricity generators. Geothermal power plants come in three varieties: dry steam, flash, and binary.
How does the production of geothermal energy work?
The temperature and water temperature down beneath are both extremely high. Under enormous pressure, a geothermal power plant forces this water through a well. At the surface, the pressure drops, transforming the water into steam. The steam then drives turbines connected to an electric generator to generate electricity. As there are no carbon emissions during the process, it is considered a sustainable method of energy production.
These power plants are frequently located in close proximity to hot springs, geysers, or volcanic activity, where subsurface heat is closer to the surface.
For instance, New Zealand electrical network supplier Top Energy has successfully commissioned the Ngawha geothermal power plant in New Zealand. The small community of Ngawha Springs is renowned for its medicinal hot water springs. And is the source of the steam used by the power station in the Ngawha geothermal field.
There are numerous private enterprises involved in geothermal energy, but few publicly traded possibilities exist. Here is a sampling of currently active geothermal stocks.
How does it work?
These underground reservoirs of steam and hot water can be used to generate power or directly heat or cool structures.
A geothermal heat pump system can utilize the constant temperature of the upper ten feet (three meters) of the Earth's surface to heat a home during the winter while removing heat from the residence and transporting it to the relatively cooler ground during the summer.
Geothermal water from deeper into the Earth can be utilized directly for heating homes and workplaces and plant cultivation in greenhouses. Some U.S. communities pipe geothermal hot water beneath roadways and walkways to melt snow.
Geothermal energy is a renewable, environmentally friendly kind of energy obtained from the Earth's heat. The temperature of the Earth's core exceeds 10,800 degrees Fahrenheit, and we may use this heat to generate power. These turbines generate electricity without emitting greenhouse gases, the primary driver of global warming.
In addition to providing power, geothermal energy may heat buildings and greenhouses. Geothermal heat pumps use 75% less energy for heating and cooling than conventional heating and cooling systems.
Geothermal energy is not affected by the weather or the season, unlike solar and wind power, and it can safeguard consumers from the weather-related hazards associated with other renewables. Furthermore, geothermal plants occupy less surface than wind or solar farms.
It is not unexpected that geothermal energy investment has increased. Global geothermal investment surpassed $1 billion in 2021, and government projections indicate $3 billion in capital expenditures in 2026. Even European nations such as Austria are drilling geothermal wells to heat residential and commercial structures.
Indonesia, the Philippines, and Turkey are following the United States in geothermal capacity. California, where geothermal accounts for approximately 6 percent of electricity, is experiencing a geothermal renaissance, and two geothermal facilities are being constructed in California for the first time in a decade.
What are the disadvantages of geothermal energy?
Geothermal energy's carbon-free emissions and clean energy may seem like a winning combination, but it also has disadvantages, which may explain why it delivers less than one percent of the world's electricity.
Drilling into the earth's core raises grave environmental problems. However, it is a myth that geothermal production is similar to hydraulic fracturing. Using fracking to extract shale gas. It involves injecting fluids containing water, sand, and chemicals under high pressure into rocks containing shale gas in order to produce openings that permit the gas to escape.
Geothermal energy production does not fracture geological strata the way fracking does. Instead, it pumps warm water from reservoirs to a heat exchanger.
Additionally, it is only suitable for specific places, typically those near volcanic activity. However, operating in inhospitable regions frequently makes this a costly endeavor. Geothermal projects are, in fact, more expensive than solar, wind, coal, and natural gas plants.
However, geothermal energy offers advantages as well. It can be utilized to generate power or heat structures of any size, shape, or configuration. In addition, geothermal heat pumps consume 75% less energy than conventional heating systems. It is non-intermittent and occupies less surface area than the vast majority of renewable options.
Geothermal equities and other renewable energy stocks are seeing a market decline despite the growing demand for clean energy. This is due to the fact that supply-chain bottlenecks, rising commodity prices, and the possibility of higher interest rates have created a difficult climate.
Installers
Installers are one group active in the geothermal energy business.
Installers are often responsible for the appropriate installation of geothermal energy power plants and also offer guidance on specific issues pertaining to the optimization of system efficiency and the planning of geothermal energy systems.
Additionally, they may participate in political issues concerning the spread of geothermal energy.
Geothermal system manufacturer
Typically, system manufacturers create substantial components for geothermal power plants.
Consequently, they constitute the heart of the geothermal energy sector.
However, they rely heavily on component manufacturers and installers and must frequently collaborate to deliver a functional geothermal system for power generation firms.
Component manufacturers
Manufacturers of geothermal components frequently provide smaller, highly specialized components for the construction of geothermal power plants.
Frequently, they are responsible for delivering spare parts, and they may also manufacture components that are not commercially important to large system manufacturers.
Geo-energy production firms
Energy production companies are businesses that generate geothermal energy.
However, they could not produce energy without installers, system producers, and component manufacturers.
In order to secure the functionality of geothermal power plants, they rely substantially on the proper performance of all other manufacturers in the business.
1. Ormat Technologies (ORA)
ORA stock is attractive among geothermal companies due to its ambitious growth objectives for the upcoming years. After reaching a peak of $128.87 per share in February 2021, ORA stock opened on June 21 at $65.84 per share. The downturn appears to be an excellent opportunity for accumulation.
Ormat bought Nevada geothermal properties with operating contracts for $377 million in recent events. This involves the acquisition of one of Nevada's largest geothermal power plants, the Dixie Valley geothermal power plant.
As part of its organic growth strategy, the company expects to raise geothermal and solar capacity to between 1,182MW and 1,202MW by 2023. This would imply a 27 to 29 percent yearly increase in MW over the following three years. However, the emphasis is on geothermal, and the company is actively developing ten geothermal and four solar projects.
Ormat Technologies has cash and equivalents totaling $493 million from a financial standpoint. Therefore, there has sufficient financial freedom to pursue expansion over the coming years. Notably, the company anticipates an adjusted EBITDA of $400 million for the year. As cash flow visibility rises, financial flexibility will probably stay high.
2. Polaris Infrastructure (RAMPF)
RAMPF stock is an excellent name among geothermal stocks and appears to be flying under the radar. Currently, RAMPF stock trades at an appealing price-to-earnings ratio of 11.14 based on the previous twelve months. In addition to good prices, this stock also yields a dividend of 3.9%.
Polaris Infrastructure administers a 72MW geothermal plant from a business standpoint in Nicaragua. The corporation also owns hydropower plants in Peru.
Polaris reported $9.4 million in operating cash flows for Q1 2021, and this would suggest an OCF of around $40 million per year. Therefore, it is likely capable of maintaining current dividend levels.
Polaris concluded the first quarter of 2021 with a solid cash position of $109.7 million. The organization is "actively pursuing greater portfolio diversification through strategic acquisitions."
Therefore, it is probable that acquisitions will contribute to the company's asset growth and revenue expansion in the next quarters. Concurrently, the corporation has been selling off non-essential assets.
The stock may still have significant upside potential with a concentrated growth plan. In addition, the likelihood of revenue and cash flow growth makes the present P/E ratio of RAMPF stock favorable.
3. Climeon (CLIME-B.ST)
Climeon is a small Swedish heat power system manufacturer that transforms waste heat and geothermal energy into sustainable energy. The company asserts it possesses proprietary, patent-protected technology, and its global customer base consists of both maritime and industrial clients. Climeon generates only a few million dollars in revenue and stays unprofitable. Operations have been extremely difficult in the past year, forcing the stock price to decline significantly. Its current market capitalization is less than $100 million. Climeon, which was founded in 2011, has more than 90 workers and is listed on the Stockholm Stock Exchange.
Climeon (STO: CLIMBE-B), a Swedish company, manufactures heat power systems that transform waste heat and geothermal heat into clean electricity. The company asserts that it is the global leader in transforming low-temperature heat into clean electricity. Its product comprises the Climeon Heat Power system, which generates power from waste heat and low-temperature geothermal heat. The company is in the process of creating the next generation of Climeon Heat Power, which will initially be optimized for the marine sector.
Climeon installed a Heat Power system on one of Maersk's container ships in the fourth quarter. Maersk will study waste heat recovery as part of its efforts to reduce CO2 emissions.
Climeon is also employed by Havila Voyage and Virgin Voyage to construct cruise ships. Primarily, Climeon's geothermal clients are located in Japan and Iceland. Flir, the power plant of Varmaorka, was able to record a 98 percent availability rate from Climeon's Heat Power system. Currently, two further systems are being commissioned in Japan.
Recently, the business issued directed new shares to Peter Lindell, making him Climeon's second-largest shareholder. Lindell acquired 5,000,000 Class B shares for 35,000,000 SEK through his company Cidro Forvaltning AB.
4. Chevron Corporation (NYSE: CVX)
This past spring, Eavor Technologies, a Canadian company, closed a $40 million investment round. This will assist in the nation's ongoing geothermal technology development. Chevron Technology Ventures, BP Ventures, Temasek of Singapore, BDC Capital of Canada, US utility Eversource Energy, and Vickers Venture Partners made contributions.
Chevron Technology Ventures is a significant investor in the geothermal energy stock market. Major oil firms must now be investing in renewable energy sources. However, these massive investments make a great deal of sense and especially considering the association between oil drilling and deep thermal drilling. These businesses already possess a substantial amount of the necessary resources to assist with the transformation.
5. Eversource Energy (NYSE: ES)
The stock of Eversource Energy has enjoyed enormous growth during the past decade. However, this stock has been largely flat since 2020. During last week's results call, geothermal energy was not even mentioned. Instead, the majority of time was spent analyzing the company's investments in wind and solar energy. This may not come as much of a shock to many investors, and priority may not be given to the geothermal sector for several years.
In spite of this, Eversource Energy is developing numerous promising renewable technologies. Observe this geothermal energy stock closely.
6. Berkshire Hathaway Energy (BHE)
Berkshire Hathaway Energy (BHE) is Warren Buffett's Berkshire Hathaway's Utilities and Energy Business.
BHE Renewables, headquartered in Iowa, owns stakes in independent power projects with a net generation capacity of roughly 4,900 megawatts (MW) that are operational in multiple U.S. states. Under long-term contracts, these independent power projects sell power generated mostly from wind, solar, geothermal, and hydro sources.
CalEnergy Operations operates the geothermal facilities of BHE Renewables in Calipatria, California. The corporation owns ten geothermal facilities with a total capacity of 345 MW in California's Imperial Valley. It has 512 MW of natural gas-powered facilities in Illinois, 245 MW in New York, 212 MW in Texas, and 50 MW in Arizona.
PacifiCorp is a subsidiary of Berkshire Hathaway Energy, which runs thermal power facilities that produce energy from coal, natural gas, and geothermal resources.
Future geothermal energy investment
The future of geothermal energy investment is anticipated to increase, particularly as more individuals cut or eliminate their reliance on foreign oil and fossil fuels and shift to more ecologically friendly alternative energy sources. Geothermal energy is produced in regions where there is an abundance of heat in the earth, such as where the plates of the planet's crust meet. Geothermal energy firms and renewable energy stocks provide several investors with excellent investment opportunities. There are now a greater number of public geothermal enterprises from which to choose when investing. Look for geothermal firms that have access to geothermal areas or agreements with utility firms that do.
Look for geothermal firms that have access to ground zero in the geothermal area, the location with the greatest amount of underground heat that can be extracted, since this will reduce the cost of geothermal energy.
Do your homework before investing in renewable energy stocks. Know the company and the underlying technologies before committing any investment funds. Examine the geothermal company's past earnings and history to determine its current financial condition. Invest solely in a reputable organization with competent and seasoned managers and executives. This can reassure you that the geothermal company is operated appropriately, which might directly impact your alternative energy investment investments.
Final Reflections
Geothermal energy generation will be a significant source of energy in the future in regions with abundant geothermal resources. Before geothermal energy's future takes off, investors who understand this will be able to capitalize and profit.
Investing in alternative energy companies bears some risk, but a future independent of foreign oil requires domestically produced renewable and alternative energy sources, including geothermal energy. Geothermal energy is in high demand, and enterprises that can meet that demand will see tremendous growth, resulting in higher returns for investors.
Real-time News
