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Raser Technologies Mines the Power of Geothermal

CEO Brent Cook talks about what his company is doing now and where it's going.

Raser Technologies

(RZ)

is a Provo, Utah- based company that's commanding attention in the renewable energy space.

The company has two segments, a geothermal energy-development business with a fast-growing portfolio of projects in the western U.S., and a motor-technology division for a variety of purposes, from hybrid transportation engines to air conditioners.

In operation since 2003, Raser is expected to become profitable as soon as late this year.

TheStreet.com

recently spoke to Raser CEO Brent Cook about the geothermal space and the niche that Raser fills within it. This is what he had to say.

TSC:

What makes geothermal power, which uses heat generated in the earth's core to power turbines, appealing relative to other renewable energy programs like solar or wind?

Cook:

Wind and solar power only work intermittently. Their functionality relies on the weather and the time of day. Studies have shown that wind power is functional about 20% of the time, and solar power is only slightly more functional than wind power. Geothermal energy is functional 90% of the time. It achieves what industry players call "baseload," which means that it can be depended on as a steady source of energy. Because of this, we believe that geothermal energy will play a major role in this country's quest for energy independence.

TSC:

Describe Raser's geothermal technology.

Cook:

Our geothermal plants are of a type called binary cycle, closed loop. That means that the hot brine that is pulled from the earth is never subjected to the open air. This allows us to do two things. First, it allows us to construct geothermal plants on sites with considerably lower temperature than open systems, which raises the potential number of sites in the U.S. that can accommodate our technology into the hundreds.

Second, because our system is entirely closed, our plants produce zero emissions. There is no ventilation into the air, and so our systems are truly green all the way through.

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TSC:

You've said before that Raser "optimizes the economics instead of the heat." What does that mean?

Cook:

The planning, engineering, approval and completion of a custom geothermal plant can take three to five years. That process includes a thorough analysis of the geothermal resource to determine its energy output potential. While we do that with large, high energy projects, we've developed a way to trim this process for smaller projects. If we determine that a resource has an output potential of at least 10 megawatts, we install a 10 megawatt modular unit. Then, we add on to the plant as the energy output increases. This reduces the total development time down to between 12 and 18 months for a plant that generates less than 40 megawatts of power. Our goal is to be modular and fast.

TSC:

How do leasing rights for geothermal energy projects work? Do you only need to lease the area surrounding the well bore, or do you need to lease out large swaths of acreage like you do in oil and gas deals?

Cook:

You want to control the area around you so that competitors don't siphon off the heat from your play. We generally try to lease between 1,200 and 2,000 acres. Anything smaller than that is usually a piece of a larger puzzle. Anything larger than that could allow for multiple geothermal wells.

TSC:

Who are your major competitors?

Cook:

I'd say that our main competitor is time. Some people say that

Ormat

(ORA) - Get Ormat Technologies, Inc. Report

is our major competitor. We do compete with Ormat in the sense that we compete over geothermal resources. However, our business models are different. Ormat manufactures equipment and develops resources. Our only focus is developing resources.

Other competitors in the geothermal space are major integrated energy firms like

Chevron

(CVX) - Get Chevron Corporation Report

. Generally, we focus on lower-temperature projects than the big players.

TSC:

Can you describe Raser's future build-out schedule?

Cook:

We estimate that we will build 100 megawatts of power generation each year over the next three years, and then 150 megawatts of power generation each year after that. In the beginning, we don't think we will finish 100 megawatts each year, but we will announce 100 megawatts each year.

TSC:

Can you break down your development costs into dollars per megawatt?

Cook:

We think that our plants will cost about $32 million for every 10 megawatts of power generation. This figure includes grid-interconnection costs and well-development costs.

TSC:

How much of your geothermal backlog is funded?

Cook:

We recently entered into a new financing agreement with Merrill Lynch whereby Merrill agreed to fund the next 155 megawatts of our geothermal development projects.

TSC:

When do you anticipate generating a positive income stream?

Cook:

We think we will start making money once three plants that are slated to come online in 2008 are connected to the power grid.