The Commodity Investor Q&A
With Matt Badiali
December 9, 2009
Last week, my colleague Tom Dyson told you trend traders are keeping close tabs on the breakout in Ormat's stock – the biggest name in geothermal energy.
His essay ended up generating a huge response. A few were skeptical. Most of you were interested in learning more. And all of you had questions...
A.S. asked, "Could you address the issue of [geothermal] earthquake risks?"
Good question, A.S. Geothermal fields are, by nature, in seismic regions. However, they carry no more risk (and I'd argue much less risk) than an oil or gas field in the same region. There are no environmental concerns and no explosive potential. Damaging a geothermal field wouldn't cause a natural disaster, in the way a damaged oil or gas well would.
C.D. was skeptical about the long-term viability of geothermal. He wrote, "Your article on geothermal electricity production didn't address the life of some projects. I know of one in Central Utah where the initial project was shut down after about 10 years because of the cooling of the substrate."
In 2007, I took a trip to see the Geysers geothermal field in western Sonoma County, California. In the 1970s, Geysers was the largest commercial dry steam geothermal field in the world. Engineers thought the field would last 120 years, producing over 2,000 megawatts.
But poor understanding of the plumbing and too many operators depleted the heat source. By 1990, the field was exhausted.
Geothermal reservoirs are simply hot rocks that heat up groundwater and form steam. You generate power by pulling the energy out of the steam. Then you inject the water back into the reservoir to reheat.
Bad engineering and management can deplete a geothermal heat source over a few years. That's no different from a mine or an oil field.
However, as we've seen in Geysers, the rocks eventually heat up again. Geysers is back, and Calpine, the largest provider of geothermal power in the U.S., is producing power there. The company has a much better understanding of the limits of the field now. Properly managed, this field could easily last centuries.
But plumbing wasn't C.D.'s only concern. What about the cost? He claims one project "proved to be more expensive than original projections because of the sulfur disposal associated with underground steam production. It may yet prove economical with a close looped system, but that remains to be seen."
What C.D. is describing is pollution and buildup (sulfur residue) from the hot water. Here's why it's not a problem...
Hot, geothermal water is full of mineral salts. If you've ever seen pictures of the hot springs at Yellowstone National Park, you know what I mean. When you use that hot water directly, those salts are a problem.
They can foul pipes and turbines in addition to being a disposal nuisance. That's why engineers developed "closed loop" systems. That's where the geothermal source heats a second fluid, which then powers the turbines.
That way, the dirty groundwater never comes out of the pipes. The Energy Information Administration (EIA) has a great webpage to learn more about it.
As longtime Growth Stock Wire readers know, I have little time for energy sources that are three to five times more expensive than conventional sources. (Do you hear me, wind and solar?) But I have a lot of time for sensible, economic power sources like geothermal energy.
If you want to soothe your investing conscience with some green energy that actually makes economic sense, take a look at geothermal energy companies. Unlike most "alternatives," this one works.
Good investing,
Matt
P.S. As Tom mentioned, these stocks are just beginning to move, so you aren't too late to the party. If you want to learn more about investing in geothermal energy and other resources, check out the S&A Resource Report.
In my report on geothermal energy, I recommend the two best geothermal utility companies... as well as the two best geothermal juniors, which could absolutely soar in a geothermal bull market. Click here to learn about a trial subscription.
P.P.S. As always, send your questions on geothermal... or any energy source... here. |
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Telecom giant Verizon powers to new 52-week high... still yielding nearly 6%. |
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Crude oil breaks down to lowest low since early October. |
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Goldman Sachs down 15% from recent peak. |
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Health insurers rally... CIGNA, WellPoint, Health Net reach new highs. |
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Last |
Change |
52-Wk |
| S&P 500 |
1109.30 |
+1.45% |
+27.03% |
| Oil (USO) |
40.29 |
+2.99% |
-12.75% |
| Gold (GLD) |
111.63 |
+1.72% |
+52.29% |
| Silver (SLV) |
18.01 |
+5.01% |
+92.41% |
| U.S. Dollar |
75.37 |
+0.68% |
-13.15% |
| Euro |
1.49 |
-0.70% |
+17.54% |
| VIX |
22.89 |
-2.01% |
-65.48% |
| HUI |
475.53 |
+3.26% |
+155.07% |
| 10-Year Yield |
3.33% |
-0.10 |
-0.37 |
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| Company |
Sym |
Industry |
Telmex |
TII |
telecom |
Southwest |
LUV |
airlines |
OGE Energy |
OGE |
utilities |
Hospitality Prop |
HPT |
retail REIT |
Atheros |
ATHR |
semiconductors |
Plexus |
PLXS |
circuit boards |
IPG Photonics |
IPGP |
semiconductors |
Cyberonics |
CYBX |
medical devices |
Verizon |
VZ |
telecom |
Nidec |
NJ |
industrial equip |
Altera |
ALTR |
semiconductors |
Alliant Energy |
LNT |
utilities |
ITC Holdings |
ITC |
utilities |
Cabot |
CBT |
chemicals |
Alaska Air |
ALK |
airlines |
VisionChina |
VISN |
advertising |
Quicksilver Gas |
KGS |
oil & gas drilling |
Boeing |
BA |
Big Defense |
Agrium |
AGU |
fertilizer |
Lam Research |
LRCX |
semiconductors |
TAM |
TAM |
airlines |
Health Net |
HNT |
health insurance |
Anixter Intl |
AXE |
industrial equip |
Inergy Holdings |
NRGP |
gas distribution |
Acme Packet |
APKT |
telecom |
ZymoGenetics |
ZGEN |
biotech |
Alcon |
ACL |
medical supplies |
NetApp |
NTAP |
data storage |
AMD |
AMD |
semiconductors |
El Paso |
EPB |
gas distribution |
Westar Energy |
WR |
utilities |
Williams Partners |
WPZ |
gas distribution |
Dana |
DAN |
auto parts |
Sanmina-SCI |
SANM |
circuit boards |
SmartHeat |
HEAT |
industrial equip |
FedEx |
FDX |
air freight |
CBS |
CBS |
TV |
Windstream |
WIN |
telecom |
Sonoco |
SON |
paper products |
Inergy |
NRGY |
gas distribution |
Blackboard |
BBBB |
software |
Veeco |
VECO |
semiconductors |
Clearwater Paper |
CLW |
paper products |
Sun Hydraulics |
SNHY |
industrial equip |
WellPoint |
WLP |
health insurance |
CIGNA |
CI |
health insurance |
Nisource |
NI |
utilities |
NBTY |
NTY |
pharma |
Yingli Green |
YGE |
solar energy |
Dillard's |
DDS |
dept stores |
NutriSystem |
NTRI |
weight loss |
Iowa Telecom |
IWA |
telecom |
Sysco |
SYY |
wholesale food |
Brown-Forman |
BF-B |
liquor |
Equinix |
EQIX |
telecom |
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| Company |
Sym |
Industry |
LaBranche |
LAB |
broker |
Isis Pharma |
ISIS |
pharma |
SWS Group |
SWS |
broker |
Corinthian |
COCO |
for-profit ed |
Aviva |
AV |
insurance |
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