With concerns about the oil spill and the fate of deepwater drilling looming, many investors are taking a fresh look at renewable and alternative forms of energy. But, with Europe's debt problems comes the threat of austerity measures that has taken the wind out of the turbines, so to speak, as the continent heavily subsidizes the renewable energy industry. Exchange traded funds (ETFs) tracking the solar and wind industries such as the Market Vectors Solar Energy (NYSE:KWT) or the First Trust Global Wind Energy (NYSE:FAN) have fallen over the past few weeks as much of their indexes constituents rely heavily on this financial assistance. However, a more "homegrown" renewable energy source recently received a boost from the U.S. Department of Energy (DOE).

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A Second Round of Stimulus
The geothermal energy industry was recently awarded a new round of grants and loan guarantees from Secretary Chu and the Department of Energy. Nevada Geothermal received a $98.5 million grant to help fund its Blue Mountain project and $102 million went to US Geothermal (AMEX:HTM) in order to build a 22 megawatt geothermal power plant in Oregon. In addition, the DOE earmarked $20 million for continued research and development into new geothermal technologies designed to make wells more efficient.

These current grant initiatives extend the DOE's commitment to making geothermal a viable energy source. The agency handed out $330 million to 123 different geothermal projects last fall. But, it's not just the federal government that is getting involved with geothermal venture capital. Tech giant Google (NASDAQ:GOOG) has recently handed several grants to various universities for the study of geothermal power. These grants are a potential huge win for the industry as the jump from exploration to electricity production is extremely costly. The access to low cost capital can help make the difference in getting projects to the production phase or simply fizzling out. (Learn more about investing in alternative energy, read Clean Or Green Technology Investing.)

Why Geothermal?
While there is no such thing as free lunch, the DOE is seems to think that geothermal may be one of the closest forms of renewable energy to being "free". The energy form taps into underground wells and steam channels and uses this to turn turbines which generate electricity. Geothermal produces no greenhouse gases and unlike solar or wind, the plants are base-load power sources, providing energy 24-7, 365 days a year. Researchers at MIT recently reported that geothermal resources in the United States could provide almost 140,000 times the total annual energy use in the country.

Adding Some Steam to a Portfolio
The DOE's goal of making geothermal energy a larger part of the American energy diet could move stocks higher. Investors taking a longer-termed approach may want to add some of the companies to their portfolios to play the sector's growth. Both the previously mentioned grant winners, Nevada Geothermal and US Geothermal as well as Raser Technologies (NYSE:RZ) represent interesting start-up plays in the field.

As one of the dominant corporations in the field, Ormat Technologies (NYSE:ORA) should be considered a core holding. Through a vertically integrated model, Ormat develops, builds and operates geothermal power plants using its own designed and manufactured equipment. The company sells and operates its plants globally in the United States, Guatemala, Kenya, Nicaragua and the Philippines.

Investors wanting more of "safety net" can add shares of traditional utilities that have geothermal as a percentage of their generation. PG & E Corporation's (NYSE:PCG) California Geyser project has been operating since the 1960s, and is now producing over 725 MW of geothermal energy each year. In addition, both Constellation Energy (NYSE:CEG) and IdaCorp (NYSE:IDA) also have geothermal subsidiaries.

Bottom Line
As America searches for a way to regain its energy independence, several avenues are being considered. The recent grants issued by the DOE may be just what the geothermal power industry needs to be pushed into the forefront. While the number of choices for investors in the sector are limited, those who do invest for the long term could be rewarded quite well as the sector grows. The previously mention stocks or a diversified alternative energy play like the PowerShares WilderHill Clean Energy (NYSE:PBW) are great ways to play this shift in energy consumption. (Outfitting your home with solar power can be a long-term investment, or just a step toward greener living. For more information, see A Solar-Powered Home: Will It Pay Off?)

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