GEOTHERMAL RESOURCES COUNCIL
Geothermal Power Purchase Agreements on the Rise

The beginning of 2020 ushered in a wave of Power Purchase Agreements (PPAs) for geothermal energy, the majority of which were signed in California.

The state uses intermittent resources like solar and wind, but what do they do when the sun sets? That's when geothermal energy comes into play. Geothermal projects are one of the few that provide emission-free power 24-hours a day at a reliable rate. Californiais seeing more PPA's being signed because of resource adequacy, which, according to The California Public Utilities Commission, "ensures the safe and reliable operation of the grid in real-time, providing sufficient resources to the California Independent System Operator (CAISO) when and where needed," and also serves to "incentivize the siting and construction of new resources needed for future grid reliability."

"In the geothermal industry, projects have large capital costs," said Paul Thomsen, Vice President of Business Development at Ormat Technologies, Inc. "In order for us to build those projects, we need a guarantee that someone will buy the power over a long period of time and utilities do that through a PPA.

"Nick Goodman, the CEO of Cyrq Energy, Inc., says that there are multiple reasons why more PPAs are being signed, but a major one is the fact that states are looking for renewable energy that can supplement wind and solar energy."

I think a number of states have been updating their renewable portfolio standards and as time passes, those states are requiring more and more renewable energy, and for geothermal, specifically," Goodman said. "When utilities buy too much wind and solar, they start to need something firm,or a baseload to support it. We're starting to see that with certain utilities and certain locations, at least right now, they are full on wind and solar. They need baseload, storage or otherwise.

"Thomsen says that a PPA will typically last from anywhere from 10 to 25 years, and will set the amount that someone will pay for power over that term."A PPA ensures that whoever signed the contract gets clean power over the agreed amount of time, but it also locks in the price,"Thomsen said.  "If the price of power goes up or down, it enables them to forecast quite predictably what their expenses will be moving forward,"