Article regarding Nevada Geothermal in this Sundays Arkansas Democrat Gazette, I'm sure it appeared in many Gannett papers across the country.
WASHINGTON — In a remote desert spot in northern Nevada, there is a geothermal plant run by a politically connected cleanenergy startup that has relied heavily on an Obama administration loan guarantee and is now facing financial turmoil.
The company is Nevada Geothermal Power, which like Solyndra, the now-famous California solar company, is struggling with debt after encountering problems at its only operating plant.
After a series of technical missteps that are draining Nevada Geothermal’s cash reserves, its own auditor concluded in a filing released in late September that there was “significant doubt about the company’s ability to continue as a going concern.”
It is a description that echoes the warning issued in 2010 by auditors hired by Solyndra, which benefited from the same Energy Department loan guarantee before its collapse in August resulted in criticism of the Obama administration.
The parallels between the companies illustrate the risk inherent in building the clean-energy marketplace in the United States, government officials and industry experts say. The loan guarantee program exists because none of these ventures is a sure bet.
There are important differences between the fate of Nevada Geothermal and Solyndra, the maker of solar panels that has filed for bankruptcy.
The amount of money the federal government has at stake with Nevada Geothermal — a loan guarantee of $79 million plus at least $66 million in grants — is much smaller than the $528 million investment in Solyndra. There have been no allegations of wrongdoing by Nevada Geothermal or its Blue Mountain, Nev., plant.
Executives of the company express confidence that they can recover and say the government investment is not at risk, despite the challenges they face because of a high debt load and lower-than-expected energy output at their plant.
“We are here,” said Brian Fairbank, the chief executive, who like other company executives works out of Vancouver, British Columbia, where Nevada Geothermal has corporate offices. “We’re doing OK.”
An Energy Department spokesman said he considered the Nevada Geothermal project a success, noting that the company had a long-term contract to sell its power.
“The Blue Mountain power plant is up and running, generating clean, renewable power and has been consistently making its loan payments on time and in full,” the spokesman, Dan Leistikow, said.
The company also did not hire half a dozen Washington lobbying firms, as Solyndra did, and there is no evidence of White House involvement in pushing the project.
But the Nevada Geothermal project has benefited from the support of a bipartisan collection of Nevada politicians, most notably Sen. Harry Reid, a Democrat and the Senate majority leader, who has called his home state the “Saudi Arabia of geothermal energy.”
Nationally, geothermal energy produces only about 3,000 megawatts of power, a minuscule slice of the national electricity supply. The Nevada Geothermal plant generates just 35 megawatts — enough to serve about 35,000 homes for a year — and the company has only 22 employees in the state.
But Reid has taken the nascent geothermal industry under his wing, pressuring the Department of Interior to move more quickly on applications to build clean-energy projects on federally owned land and urging other members of Congress to expand federal tax incentives to help build geothermal plants, benefits that Nevada Geothermal has taken advantage of.
“This project is exactly the type of initiative we need to ensure Nevada creates goodpaying jobs,” Reid said in a statement in April 2010, after he visited the company’s Nevada plant. That was two months before the project even got conditional approval for the Energy Department loan guarantee.
During the tour, Reid had a chance to see electric generation equipment installed by a company called Ormat Technologies, which is a Nevada Geothermal partner. Ormat’s lobbyist in Washington, Kai Anderson, and one of the company’s top executives, Paul Thomsen, are former aides to Reid.
Last month, again with Reid’s support, Ormat secured its own Energy Department loan guarantee, worth $350 million, to help support three other Nevada geothermal projects that are expected to produce 113 megawatts of power.
Reid has received some support from the geothermal industry, in the form of at least $43,000 worth of campaign contributions since 2009, according to an analysis of federal campaign finance records.
Adam Jentleson, a spokesman for Reid, said the senator was proud of his work as an advocate for geothermal power and a broad array of other clean-energy projects in his state. But Jentleson, and the Energy Department spokesman, said Nevada Geothermal had not received, nor been offered, any special treatment.
“If projects like this did not contain a certain level of risk, alongside their enormous potential for creating jobs and generating clean energy, there would be no need for the bipartisan loan guarantee program,” Jentleson said.
An Obama administration official also pointed out that the Nevada Geothermal project won the enthusiastic support of prominent Republicans in the state, and of the Bush administration.
When Nevada Geothermal was finishing construction on its plant in late 2009, there was ample reason for optimism. Boiling waters are not far from the surface at the remote site, three hours outside Reno. The company had a 20-year contract to deliver power to the state’s largest electric utility company.
But even before it applied for the Obama administration incentives, problems at the plant cropped up. Company executives have variously predicted the plant could generate as much as 45 megawatts, after accounting for energy needed to power it.
Yet when the plant started up in October 2009, only 27 megawatts of net power were initially generated from the hot water pumped from the earth. That was not enough for the company to honor its commitment to the electric utility company, or to pay back a $91 million loan — carrying 14 percent interest — that it has with a Washington-based investment firm.
By drilling new wells to produce more steam at Blue Mountain, the company has been able to get the net power output up to a steady 35 megawatts. But, as the annual report released in late September reiterated, that was still not enough production to cover the company’s loans and operating costs.
Geothermal projects in general have encountered complications in recent years. They are a much riskier enterprise than solar panels or wind turbines, because the drilling can take several years and the power output is not guaranteed until the work is complete.
That explains why in recent months, shares of geothermal companies have collapsed, dropping far more than the shares of most renewable-energy businesses. Nevada Geothermal has traded lately for 10 cents a share or less, down from $1.24 when its plant opened in 2009.
Obama administration officials knew about most of these difficulties before the Energy Department agreed in September 2010 to partly guarantee a second major loan to Nevada Geothermal, worth $98.5 million.
Nevada Geothermal executives, meanwhile, are working to renegotiate the company’s $91 million, high-interest loan to avoid a default, which could come as soon as December. They have teamed up with Ormat to drill at a new Nevada site, and hope perhaps to do future drilling at the Blue Mountain site to increase the energy output there.
