Cold Water Dampens Raser Technologies Future

Heat Transfer Technology

Geothermal energy developer Raser Technologies said in a company release that it anticipated being able to deliver 130 megawatts (MW) of electricity for sale by the end of 2012. As the company’s first geothermal power plant in Utah is having trouble operating at full capacity, might this be too ambitious a goal?

Based on the evaluation of its existing construction, and advances in technology, Raser plans to add 40 MW of electricity available for sale in each of 2010, 2011 and 2012, bringing the total megawatts available for sale by the end of 2012 to 130 MW. Back in June, the company had said it would have 377 MW of power available for sale to utilities.

Power plants generating electricity from geothermal reservoirs traditionally require water or steam at minimum temperatures of 300° Fahrenheit. Raser has long boasted that its proprietary heat transfer technology could economically generate power from temperatures as low as 165° Fahrenheit. Yet six months after turning the lights on, the plant is delivering only 4.9 MW of electricity of a contracted 9 MW (at a selling price of $78 per MW hour) to the city of Anaheim, CA. The company now alleges the production wells are producing geothermal water with “insufficient heat,” according to the latest quarterly report filed with the Securities and Exchange Commission.

Raser still maintains that the five production wells drilled to date are viable geothermal resources, with demonstrated flow temperatures in “commercially productive” ranges of approximately 240° Fahrenheit to 300° Fahrenheit, and bottom-hole temperatures in excess of 350° Fahrenheit. Never mind questioning previous statements by management supporting the economics of its technology at “lower temperatures.”

The company has contracted with Rocky Mountain Power to supply the city with about 4 MW of power. Reported sales in the second-quarter were $407,241 — but operating expenses exceeded $7.5 million. Breakeven — forget profits — remains an elusive dream, as the company continues to hemorrhage red ink: accumulated deficit was almost $100 million at June 30. Debt and purchase obligations of some $30 million coming due in less than twelve months — no surprise the company’s auditor has questioned the company’s ability to survive, slapping a “going concern” label on Raser’s financial statement.

Management cheerfully says it can deliver 40 MW of power by year-end 2010. Well field drilling costs to date (alone!) related to its geothermal plant have exceeded $38 million! Keep in mind that the company qualified its goal with “if adequate financing can be obtained.”

The company is re-working the five production wells drilled to date, believing that if it can isolate cooler water purportedly leaking in, the wells can pump out water near 280° Fahrenheit.

“Fiction is obliged to stick to possibilities. Truth isn’t,” said Mark Twain. Management at Raser has a troubling tendency to over-promise and under-deliver. Back in 2005, senior executives boasted its proprietary Symetron platform would revolutionize the efficiency of electric motors, offering the “tremendous promise in delivering improvements in power and efficiency in many industrial motor applications.” Latest sales from automakers — or anyone — for this technology: zero.

Given Raser’s checkered history, I wouldn’t pin my hopes on the company solving its geothermal power problems. Management will likely stumble onto other revenue pathways to profitability. In a press release last month the company heralded that it has a new electric Hummer 3E that could achieve more than 190 mpg! The company is currently seeking monies from the Department of Defense for military applications for its plug-in battery technology.