THE POTENTIAL OF GEOTHERMAL ENERGY

1. THE POTENTIAL OF GEOTHERMAL ENERGY A ONCE AND FUTURE FOCUS OF THE BUREAU OF ECONOMIC GEOLOGY

2. THE POTENTIAL OF GEOTHERMAL ENERGYSummary • An underestimated and largely untapped resource • Not Geographically limited, as hydrothermal sites are • Less costly than solar or wind, in ¢ per KWhr • Largest return on investment of R&D Dollars • Renewable, small footprint, negligible emissions • BEG’s skills in reservoir characterization, flow modeling and carbon sequestration are directly applicable to geothermal energy assessment and development.

3. THE POTENTIAL OF GEOTHERMAL ENERGY • Bureau of Economic Geology lead earlier studies during the late 1970s, 1980s and up to 1992 investigating the Geothermal Energy potential of the Northern Gulf of Mexico Bebout, Loucks, Gregory 1978

4. THE POTENTIAL OF GEOTHERMAL ENERGY What Changed from 1980 to Today? • Advances in Drilling Technology that made 8 to 10km holes possible (polycrystalline diamond compact bits, slimhole drilling) • Advances in controlled fracture development that made “Engineered Geothermal Systems” practical • Advances in Binary-Cycle Heat Exchange Systems that made 100o C heat sources and up economical.

5. Leveraging the Past to Define the Future The basics: Geology Stratigraphy Structural geology; fractures, stress fields Fluid flow Heat flow Reservoir Characterization Yield, Thermal Characteristics, Future Predictions Reservoir Management, Restoration and Maintenance Economics.

14. THE POTENTIAL OF GEOTHERMAL ENERGY • Critical Re-assessment: DOE - MIT (2006) Study Found: • THE EXTRACTABLE RESOURCE BASE IS ESTIMATED AT 2,000 TIMES THE ANNUAL PRIMARY ENERGY CONSUMPTION OF THE UNITED STATES IN 2005. • OVER HALF OF THIS ENERGY IS IN GEOPRESSURED ZONES IN THE NORTHERN GULF OF MEXICO Sediment Thickness Map of US

15. THE POTENTIAL OF GEOTHERMAL ENERGY

16. THE POTENTIAL OF GEOTHERMAL ENERGY Comparison of the costs per kilowatt hour to generate electricity from alternative/renewable sources versus hydrocarbon sources Geothermal is cost competitive with oil and natural gas and is less expensive than solar and wind. Only coal, without carbon tax costs, is less expensive than geothermal Data from NREL in constant 2005 dollars

17. What Our Partners are doing • Chevron is the largest producer of geothermal energy in the world, with operations in Indonesia and the Philippines. • US energy companies Unocal and Gulf Resources are willing to invest US$1.2 billion in geothermal and natural gas projects in the Philippines Source: Chevron Geothermal

18. What are our Industrial Partners Seeing?The Classical, but limited, hydrothermal/magmatic resource • The world-leading geothermal energy company Reykjavik Energy (Orkuveita Reykjavikur) has established US$800 million in capital to invest in new geothermal projects But these projects are hydrothermal sites that are limited in geographic extent.

19. What Our Partners are doingBinary Cycle Rankine Engine • Raser Technologies Hatch Geothermal Power Plant • constructed in just six months • Modular power plant design. • Can produce power from geothermal resources that were previously thought to be not hot enough for commercial power production.

20. What the Business is doing Five Year Stock Price Trends ORA = Ormat Technologies (geothermal) XOM = ExxonMobil CVX = Chevron BP = British Petroleum

21. Why Geothermal?Why Now? • The Economics have changed • geothermal is now cost-competitive with petroleum, and lower cost than solar and wind. • The Resource Base has changed • no longer only hydrothermal-magmatic but widely distributed geothermal heat flow • The extractable resource is 2000 times the annual demand of the US. • The regulations have, or will change • Favoring non-CO2 emitting energy sources

22. Sponsored Research Opportunities • Geothermal Energy – Sponsored Opportunities • The American Recovery and Reinvestment Act: $350 million new investment in this technology. • Geothermal Demonstration Projects = $140 Million • Enhanced Geothermal Systems Technology Research and Development = $80 Million • Innovative Exploration Techniques = $100 Million. • National Geothermal Data System, Resource Assessment, and Classification System = $30 Million • Private funding opportunities for BEG, at this time, equal or exceed the federal or state opportunities.

23. The Bureau’s Immediate Opportunities$11.6 Million over 3 years • Technology Interface System, $3.6 Million over 2 years • Towards Field Testing of CO2 as Operating Fluid for EGS, $4.9 Million over 2 years • Geothermal Energy from Coproduced Fluids, $452,791 for 1 yr. (potential for $MM over 5 years) • Geothermal Energy From Geopressured Resources $361,191 for 1 yr. (potential for $MM over 5 yr) • Geothermal Data Development, Collection and Maintenance, $2.28 Million over 3 years

24. The Bureau’s Long Range Opportunities • Everything we have learned about petroleum reservoir characterization, development and production is applicable to Geopressured / Geothermal Development 3-D Geo-Model Streamline Modeling of Fluid Allocation Factors Streamline Fluid Allocation Factors Source: BEG and I-Reservoir, Inc.

25. Where is the Cutting Edge? • Primary Focus is on Geopressured Zones having Thermal-Kinetic-Chemical Energy Content • Combining geothermal heat extraction using supercritical carbon dioxide • Links geologic sequestration of CO2 with non-polluting, renewable energy production • Results in improvement of heat extraction efficiency by 40% to 180% (Pruess, K. 2006) • Provides a methodology for coal fired power plants to recover the energy penalty incurred in CO2 capture • Metal – Organic heat carriers (MOHC) offer additional improvements in efficiency, at a cost.

26. Cooper Basin Thank you Flow tests at Cooper Basin EGS Site, Australia (Geodynamics, 2005)