With oil racing back towards the $100 a barrel level and other forms of traditional energy gaining in price, alternatives are once again back in the spotlight. While investments like the Guggenheim Solar (NYSE:TAN) have become popular additions to a portfolio, other less glamorous forms of renewable energy have taken a backseat to solar and wind. However, adoption of these methods is growing. One, in particular, is quickly gaining traction in both the United States and the emerging world.

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Hot Rocks
Geothermal energy, which uses high temperature heat and steam from hot springs or wells to spin turbines and generate electric power, is quickly becoming a player in renewable energy. As nation's around the globe look to offset their carbon output and rising energy prices, geothermal sources are getting a new lease on life. A recent report by ABS Energy estimates that the global geothermal market will increase by 78% between now and 2015. Global geothermal generation capacity will rise to 19,000 MW. While the United States saw the bulk of geothermal projects in 2009 at 181 MW, the rest of the emerging world is being to see the geothermal light.

The Philippines has over 22 active volcanoes and produces nearly one third of electricity through geothermal means. Similarly located in the Pacific's Ring of Fire, Indonesia added nearly 137 MW worth of geothermal generation in 2009. In Africa, Kenya has set forth aggressive plans to boost geothermal power generation to nearly 4,000 MW by 2030, adding 1,000 MW in the next five years. South American countries Peru and Chile are also other emerging geothermal markets. Overall, ABS Energy estimates that the number of nations using geothermal energy will rise from 24 to 36 by 2015.

In the United States, geothermal is getting a boost due to potential legislation. A new bipartisan bill would bump up the producer's credit to 30% through 2016. Geothermal producers currently get a credit of 10% of power produced to help offset the increased initial CAPEX requirements.

A Steamy Portfolio
While geothermal is growing as energy source, investments tapping the renewable are pretty sparse. The popular proxy for the alternative energy space PowerShares WilderHill Clean Energy (NYSE:PBW) has less than 7% of its holdings devoted to geothermal energy. This is one instance where investors may want to go with individual stocks versus an index.

Through its Pratt & Whitney division, United Technologies (NYSE:UTX) Pure Cycle geothermal engine can be used at lower temperatures than a traditional geothermal turbines. These turbines have the potential to open new sources of geothermal power in areas previously thought unsuitable for such generation. While the Pure Cycle turbines make up a small portion of UTX's total revenue, the stock does offer much in the way of green investment including fuel cells, energy efficiency and wind power.

Ormat Technologies (NYSE:ORA) could be considered the bellwether for the industry. Functioning as both a seller of geothermal power equipment and a producer of such power, Ormat could be considered a "one stop shop" for investors wanting to add the sector. The company recently reported a 44% slide in profit and has traded down after its previously lofty valuation. Investors may want to place Ormat on their watch-lists until a better price can be had.

For investors wanting to play the utility angle of geothermal power, Calpine (NYSE:CPN) operates 15 plants at The Geysers, the largest complex of geothermal power plants in the world. As the largest geothermal power producer in the United States, the company could be an acquirer of smaller geothermal players such as US Geothermal (NYSE:HTM). In addition, utilities PG & E (NYSE:PCG) and IdaCorp (NYSE:IDA) also operate geothermal plants.

Bottom Line
With traditional energy sources once again rising in price due to increasing demand, alternatives are back in the spotlight. Geothermal energy production is on the rise globally as nations search to find new sources of energy. Often overlooked, the sector does have great long term promise. Investors wanting to add exposure in the sector can do so with the previously mention stocks. (For related reading, take a look at Clean Or Green Technology Investing.)

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Tickers in this Article: TAN, PBW, UTX, ORA, HTM, CPN, IDA, PCG, GEX

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