Renewables: Investing in geothermal

7th July 2011

The concept of geothermal power is pretty simple, says the article. "Dig a hole in the ground far enough to get to a hot spot in the Earth and then pump water into the hole. When the resulting steam returns to the surface, it spins a turbine or goes to a heat exchanger. If your hole goes into a volcanic hot spot the system is that much more efficient."

According to the Guardian, Germany is one country keen to invest in renewables such as geothermal power. "Ultimately, the rejection of nuclear is not a result of German angst but of economic thinking. In the long run, nuclear power will become more expensive, while renewable energy will become cheaper…

"Supporters of nuclear energy block their own access to the markets of the future because they are not investing in energy-saving products and in renewable energy – not even in "green" professional training and research institutes.

"The situation we are facing at the dawn of the 21st century is comparable to other turning points in energy generation. Just imagine what would have happened 250 years ago if people had brushed aside the suggestion that they should invest in coal and steel, steam engines, power looms and, later on, railways."

What stocks should you consider?

Calpine is a wholesale power generator that owns and operates geothermal plants in North America. 

There are some leading stocks in the field of geothermal energy. For example, Chevron, a leader in geothermal, has drilled 84 such wells in Indonesia, where some of the world's best volcanic energy is stored. General Electric and Tata Corp. are also investing in geothermal.

But the best stock may be Ormat Technologies, according to The Motley Fool, which is vertically integrated in the geothermal space.

Where is renewable energy popular?

The "Ring of Fire" has become a real hot spot for renewable energy. Countries such as Indonesia may benefit more than others, but geothermal can be used almost anywhere.

UncleEbenezer comments on The Motley Fool feature: "I recollect on visiting Iceland seeing some of their large-scale geothermal facilities. That was 25 years ago, and it was already long-established back then!

"On a smaller scale, you can use the same principle to heat your home with a ground source heat pump. Anything substantial is likely to be disruptive to retrofit to an existing house, but there's no excuse for building new housing without it! Works even in seismically boring places like the UK."

James Vaccaro, managing director of Triodos Renewables, says: "The UK is at a crossroads at which choices need to be made that will decide where our energy comes from in the future.

"An investment in renewable energy infrastructure such as onshore wind can earn investors proven long term returns and help to secure the UK's energy future."

What about other renewable energy sources?

Solar power is another example of a renewable energy source that is growing in popularity. Mindful Money blogger Seb Beloe, head of SRI research at Henderson, says on his blog: "Henderson SRI team has been working with other investors and a US organisation called the Silicon Valley Toxics Coalition to survey the manufacturing practices of leading solar manufacturers around the world.  When the Solar Scorecard survey was first conducted in 2010, less than a third of the industry responded – with several of these providing incomplete responses.

"This year, the proportion of the industry responding has jumped to nearly 50%, with the quality of responses also improving substantially. Many companies in the industry now clearly recognise the value in strong social and environmental standards – after all, why would consumers and governments want to support an environmental industry that is destroying the environment?"

According to Alexandra Goss in The Sunday Times, interest in renewable energy has grown significantly since the introduction of the feed-in tariff system in April 2010. The tariff pays individuals for every unit of electricity they generate through wind turbines or solar photovoltaic panels and take-up picked up considerably in the second half of last year.

Ofgem, the energy regulator, says 7,835 solar panel installations were registered between July and December, compared with 2,717 in the first half. Some 636 wind turbines were registered in the second half of 2010, against only 63 in the first six months.

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