Geothermal energy is one of many sources of alternative energy that have been discussed as a replacement for traditional sources, and growth in geothermal generation has started to increase sharply. The energy produced is available 24 hours a day, and is environmentally friendly as it emits no greenhouse gases.

IN PICTURES: Seven Ways To Position Yourself For Recovery

What is it?
Geothermal energy is derived from the heat of the earth. The U.S. currently produces just over 3000 MWs of geothermal energy, with most of it in California. There are 126 new projects in various stages of planning, which would add another 5650 MWs to the grid.

Calpine Corporation (NYSE:CPN) operates 15 geothermal plants in Northern California in an area called the Geysers. The company produces 725 megawatts of generating capacity here and is the largest producer in the United States.

Ormat Technologies Inc.
(NYSE:ORA) is another large producer of geothermal energy, and also manufactures and sells power generation units for use in other geothermal plants. The company has a $117 million backlog for these products as of the end of the second quarter of 2009. Ormat also has 72-84 MWs coming online in its electricity segment by the end of 2010, and another 151-168 planned after that.

The Downside Of Geothermal
One bit of bad news for geothermal came from a private company called AltaRock Energy Inc. In August 2008, the company raised a second round of financing in the amount of $26.25 million. The capital raise was notable due to the participation of the venture capital arm of Google, Inc. (Nasdaq:GOOG).

AltaRock is developing what is known as an Engineered Geothermal System, which produces geothermal energy by injecting cold water at high pressure to fracture rocks below the surface. The water then heats up, is brought to the surface and the heat is extracted to produce the energy.

In early September 2009, the company announced it was suspending the drilling of its first well at its demonstration project due to difficulties caused by "geologic anomalies." The company said it would look for other locations to drill there.

AltaRock also has other prospects and signed a deal with Weyerhauser (NYSE:WY) to explore for geothermal sources on 667,000 acres of the company's land.

Most other companies involved in the geothermal industry trade on non-U.S exchanges. Western GeoPower Corp. (TSX:WGP) is securing permits for a facility at the same field where Calpine has its plants. Magma Energy Corp (TSX:MXY) just raised $100 million CAD for its ambitious plans in the geothermal area.

The Bottom Line
Geothermal is seemingly the perfect energy source, as it does not contribute to global warming, and is inexhaustible in the aggregate. Our policymakers should orient our nation's energy policy towards advancing this alternative energy source. (Read more about geothermal and other clean energy sources in our article Clean Or Green Technology Investing.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Mutual Funds & ETFs

    3 Vanguard Equity Fund Underperformers

    Discover three funds from Vanguard Group that consistently underperform their indexes. Learn how consistent most Vanguard low-fee funds are at matching their indexes.
  10. Investing News

    Alphabet Earnings Beat Expectations (GOOGL, AAPL)

    Alphabet's earnings crush analysts' expectations; now bigger than Apple?
RELATED FAQS
  1. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  2. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center