In mid-April, Italian energy giant Enel opened two geothermal power plants in the state of Nevada in the US. The project, operated by Enel Green Power North America, was completed in record time: two years from its initial conception in 2007 by parent company Enel Group, instead of the usual timescale of four to five years.
Enel’s strategy for entry into the US market was through the acquisition of a small renewable energy company, AMP Resources, in March 2007, which gave the company 150 megawatts (MW) of planned geothermal capacity in California and Utah as well as Nevada.
The head of Enel Green Power North America, Toni Volpe, says that the company committed to such a fast-track development of the Nevada plants because, at the time, federal government incentives were only available until the end of 2008. “In the US there has typically been a short visibility of incentives, but the Obama administration has changed all that for the better,” he says. Under the new administration, federal level tax credits are now guaranteed until 2013.
Government involvement was critical for the successful development of the project, including both federal and state level incentives. Federal tax credits of $20 on each megawatt of power produced for 10 years are available, as well as grant equivalents of about 25% to 30% of the money spent on a project. At state level there is an abatement of state sales tax, part of which is shared with the local community.
Mr Volpe says that as well as the financial incentives, the local Nevada authorities made operating in the region easy, making it more competitive than its neighbouring states. “To build the project in California, for example, would be very difficult in terms of regulation and permits,” he says.
In terms of location, there is no choice of where to build a plant, because the decision is based primarily on where the resources are found. Significant geothermal resources in the US are located mainly in California and Nevada, as well as some in Utah, Idaho and Oregon. The firm considers geothermal from a global perspective and although the technology was invented in Tuscany 100 years ago, and Italy remains the largest provider of geothermal energy in Europe, the US is considered a strategic place to develop such projects.
In Nevada, construction permits were relatively easy to obtain and the company was able to fast-track development of the plants by working in parallel phases instead of sequentially. The two plants, Stillwater and Salt Wells, generate 65MW – enough to power 40,000 households in northern Nevada. The plants will help the state to achieve its Renewable Portfolio Standard of producing 20% of its power from renewable resources by 2015.
Greenfield and brownfield
In Nevada, Salt Wells was a greenfield project and Still Water was a brownfield project comprising an existing power plant with an output of 7MW, from which Enel built a bigger and more efficient plant.
The plants use the natural hot steam and water deep in the ground, so they have no emissions other than hot water and air. The operations team comprises 25 local staff. Enel is planning possible future expansion in Nevada on additional land close to Salt Wells and Still Water – another eight or nine wells over the next five years in addition to the project’s existing three wells. All further development will be greenfield and will start with construction of a reservoir model with simulation software using existing geothermal data – expertise developed in Italy over time and imported to North America, which Mr Volpe considers the firm’s key competency.
ENEL GREEN POWER
December 2008Worldwide operations
13 countries across Europe and the USEnel Green Power 2008 revenue