This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Calpine Sees Risk to Geothermal as Green Energy Grows

Updated from 11:33 a.m. ET Sunday June 22 to add video.

NEW YORK (TheStreet) -- Shrinking the options for green energy is probably not what the leaders of the State of California have in mind. But that may be what's happening.

According to energy giant Calpine (CPN - Get Report), hundreds of millions of dollars in historically profitable geothermal energy investments at its famed Geysers facilities may be at risk as California utilities marginalize geothermal power in favor of other renewables, like wind and solar.

As the state's renewable energy mandate expands, utilities are not being required to contract for geothermal power and, according to the company, are instead choosing wind and solar. Geothermal has been an established energy source for 100 years and while maintenance of its wells, plants and infrastructure carries considerable expense, it is a proven technology and a constant source of power that is already embedded in the local economy.

"We're really a large participant in the community," Calpine's vice president for the geothermal region, Michael Rogers, told TheStreet in a video interview Friday. The company provides "nearly 500 full-time, high-paying jobs" plus tens of millions of dollars in royalties, taxes and maintenance that benefits the local economy, he added.

Wind and solar are subsidized energy sources, making it more difficult to compete against them in price. Rogers said. Calpine also claims the true costs of integrating solar and wind into the existing energy grid are not being factored into utilities' decisions.

"The subsidies for the other energy sources as well as the lack of inclusion of integration costs really puts us at something of a competitive disadvantage," Rogers said.

Terri Prosper, a spokesperson for the California Public Utilties Commission, said the issue is not an attempt to quash geothermal but is more about trying to grow the state's green energy supply, an effort guided by the "renewable portfolio standards" or RPS.

"A large increase in solar and wind resources is necessary to meet the 33 percent RPS mandate as the undeveloped potential for both resources in California is far greater than the untapped potential for geothermal," Prosper said in an email. "Consequently, while the total megawatts of geothermal may not decline over time the growth in wind and solar mean geothermal' s percentage of total load will."

However Danielle Matthews Seperas, a spokesperson for Calpine, said that even existing contracts are at risk of non-renewal.

"The Geysers provides numerous environmental and economic benefits but despite those benefits and the state of California's continued support of strong environmental policies, the utilities are not being required to contract for more geothermal," Seperas said. "Without changes to existing policies, 55% or, 400 megawatts of the 725 megawatts of Calpine's Geysers power will be without a contract by the end of 2017."

In addition, the company has permits in hand to build two new plants -- the first since 1989 -- each capable of producing up to 49 MW of clean energy, enough to power more than 70,000 homes, according to company documents. Without power purchase agreements, those projects will not be built, Rogers said.

Small but Important 

Only a small percentage of Calpine's power output is geothermal, but it is the largest of only a few players in the U.S. energy sector invested in the technology. Most of the company's 94 power plants burn natural gas, with only 15 geothermal turbine-based plants. The geothermal capacity of 725 MW is roughly 2.5% of the company's total capacity. Even so, the loss of contracts for that power would be significant to investors and to the community.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CPN $15.78 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs