Santa Fe, New Mexico May 13, 2008

1

Santa Fe, New MexicoSanta Fe, New MexicoMay 13, 2008May 13, 2008

Daniel J. Fleischmann

Ormat Technologies, Inc.

www.ormat.com

[email protected]

775-356-9029 ext. 2239

Developing Geothermal Resources in New Mexico Developing Geothermal Resources in New Mexico and the Western Marketsand the Western Markets

2

Ormat: Innovative Power Plant TechnologyOrmat: Innovative Power Plant Technology Vertically-integrated company active in the design, engineering, Vertically-integrated company active in the design, engineering, supply, installation, support & operation of renewable & sustainable supply, installation, support & operation of renewable & sustainable energy products and projects since 1965 energy products and projects since 1965

Four decades of experience developing modular power plants from Four decades of experience developing modular power plants from 0.2 MW to 130 MW for geothermal, recovered energy generation (REG), 0.2 MW to 130 MW for geothermal, recovered energy generation (REG), biomass, solar, and re-powering/rehabilitation of existing plantsbiomass, solar, and re-powering/rehabilitation of existing plants

Supplied over 950 MW of geothermal and REG power generation in Supplied over 950 MW of geothermal and REG power generation in 23 countries, about half of the supplied MW are currently owned by 23 countries, about half of the supplied MW are currently owned by OrmatOrmat

The only pure play geothermal and renewable energy company The only pure play geothermal and renewable energy company supplying equipment and technology to utilities and developers as supplying equipment and technology to utilities and developers as well as owning and operating geothermal projects world widewell as owning and operating geothermal projects world wide

3

115 MW Mokai Combined Geo Complex, New Zealand

2000, 2005, 2007

125 MW Upper Mahiao Combined Geo Power Plant, Philippines

1996

57 MW Ormesa Binary Geothermal Complex, California

1987

20 MW Burdette Binary Geothermal Power Plant, Nevada

1994, 1998

40 MW Heber Geothermal No. 2 Binary Power Plant, California

1992

30 MW Puna Combined Cycle Geothermal Power Plant, Hawaii

1992

Ormat’s World Wide Presence Ormat’s World Wide Presence Over 900 MW of Geothermal Power PlantsOver 900 MW of Geothermal Power Plants

2005

4

Pre-Packaged Equipment Supply for Self ConstructPre-Packaged Equipment Supply for Self Construct

Plug and Play On Site Geothermal PowerPlug and Play On Site Geothermal Power

First commercial geothermal application in Nevada. 800 kW OEC, with power supplied to Sierra Pacific Power Co.24 years of operation.

1984

800 kW Wabuska Geothermal Power Unit, Nevada.

Supplying local electrical power and energy for crop drying and cold storage since 1989.19 years of operation.

300 kW Egat Geothermal Power Plant, Thailand

1989

2004 2001 250 kW air-cooled geothermal CHP plant generating electrical power as well as district heating, by utilizing a low temperature geothermal resource. 7 years of operation.

250 kW Geothermal Power Unit at Rogner Hotel & Spa,

Bad Blumau, Austria

Owner installed plant using Ormat supplied equipment, documentation and technical assistance. 4 years of operation.

1.8 MW Oserian Geothermal Power Plant in Naivasha,

Kenya

Ormat supplied equipment for remote and rural applications

5

Presentation PurposePresentation Purpose

• This presentation will examine the power market in New Mexico and general issues related to how geothermal fits into power markets in the Western U.S.

• The presentation will focus on:– New Mexico’s power market– New Mexico’s geothermal potential Based on Western Governor’s Association (WGA) Geothermal Task Force Report

– New Mexico’s needs in order to facilitate geothermal development

– Key issues for geothermal throughout the West– General power market trends throughout the West

6

How Extensive is the U.S Geothermal Resource?How Extensive is the U.S Geothermal Resource?Estimated Earth temperature at 6-km (3.7-mile) depth. SouthernMethodist University (SMU) Geothermal Laboratory. Source – National RenewableEnergy Lab (NREL)

7

Status of the U.S. Geothermal Power MarketStatus of the U.S. Geothermal Power Market

Over 60 Geothermal power plants in 6 U.S. states: (AK, CA, HI, ID, NV, UT)

• Geothermal electricity has been produced in 9 states: (NM, OR, TX)

• At least 9 states expect to have plants in commercial operation by 2010

• Ormat owns and operates geothermal plants in 3 U.S. states, and Ormat has installed plants in 5 U.S. states that currently operate commercially

• There is potential for geothermal power development in all 13 Western States

8

Average Retail Electricity in the Western U.S. in 2006Average Retail Electricity in the Western U.S. in 2006

Source: Energy Information Agency

9

Geothermal Development Issues in New MexicoGeothermal Development Issues in New Mexico

Manzano Mountains; Central New Mexico. Photograph by Hans Schenk; http://www.summitpost.org (Used by permission)

10

New Mexico’s Energy MarketNew Mexico’s Energy Market

Fossil Fuel production Source: Energy Information Agency

• 6th in domestic crude oil production in 2006 • 13th in domestic coal production in 2006• Produced approximately 8.5% of domestic marketed natural gas in 2006 • 40% of New Mexico’s coal and 90% of its natural gas is delivered out of state

Energy Generation Source: Southwest Energy Efficiency Project (SWEEP)

• 55.7% of New Mexico’s electricity generated from coal in 2006• 35.7% of New Mexico’s electricity generated from natural gas in 2006• The rest comes primarily from wind (496 MW installed) and hydro-electric• Net exporter of electricity

Electric Utilities Source: Energy Information Agency

• PNM is the largest IOU in the state, providing approximately 37% of retail sales in 2006• Xcel Energy (SW Public Service) provides 18% in 2006• El Paso Electric and Texas-New Mexico Power are the two other IOUs (~12% in 2006)• Tri-State Generation & Transmission serves many of the rural cooperatives

Other key issuesSources: Energy Information Agency and U.S. Census Bureau

• Average population growth for U.S. (population just below two million in 2007)• Average retail energy price of 7.37 cents per kWh in 2006, about 1.5 cents below U.S.

average

11

New Mexico’s PoliciesNew Mexico’s Policies

• Renewable Portfolio Standard– IOUs – 15% by 2015, 20% by 2020– "Reasonable Cost Threshold" (RCT) at 2% of overall

retail customer rate impact threshold – Co-ops – 10% by 2020

• Tax credits– State renewable energy production tax credit currently

applies to solar, wind, and biomass– Additional tax credits apply to renewable

technologies, such as solar, biomass, and wind– Reconsideration possible if geothermal projects

initiate development?

12

New Mexico Geothermal Resource MapNew Mexico Geothermal Resource Map Source: Idaho National Laboratory

13

New Mexico’s Geothermal ResourceNew Mexico’s Geothermal Resource

• WGA estimate of 80 MW economical potential (by 2015)

• New Mexico has geothermal potential within the Basin and Range province and the Rio Grande Rift

• Many of these resources are “blind”

• Most significant resource is located in northern New Mexico at Valles Caldera

(not included in WGA estimate)

• Much of the geothermal exploration that took place was during the 1970s and early 1980s before binary technology was commercially available

• Figure from “Geothermal Energy in New Figure from “Geothermal Energy in New Mexico” GHC Bulletin, December 2002; author Mexico” GHC Bulletin, December 2002; author Jim Witcher:Jim Witcher: http://geoheat.oit.edu/bulletin/bull23-4/art2.pdf

14

Caliente

Artesia

Blackwater

Guadalupe

B-A

Norton

Ojo

San Juan

Four Corners

Springerville

Greenlee

West Mesa

Belen

Taos

Sandia

Socorro

Elephant Butte

Picacho

Alamogordo

Newman Diablo

Luna

Hidalgo

Las Vegas

Bravo Dome

Springer

Los Alamos

Algodones Santa Fe

Ambrosia

Shiprock

Amrad

HVDC tie

HVDC tie

Moriarty

Willard

Arroyo

Deming

McKinley Yah-tah-ey

PEGS

Rio Grande

345 kV 230 kV 115 kV

Bernardo

The New Mexico Transmission SystemThe New Mexico Transmission SystemSource: PNM Resources presentation to the New Mexico Renewable Energy Transmission Authority (RETA) – 11-15- 2007Source: PNM Resources presentation to the New Mexico Renewable Energy Transmission Authority (RETA) – 11-15- 2007

Web-link: Web-link: http://www.emnrd.state.nm.us/main/RETA2.htm

SPP

Dona Ana

Afton

Walsenburg

Gladstone

PNM “Remote”

ResourcesFour Corners – 192MW

San Juan – 765MW

Palo Verde – 398MW

Tri-State – 50MW*

WECC Path 48

PNM “Load-side”

ResourcesReeves – 157MW

Delta – 140MW *

Afton – 141MW +95

Las Vegas – 20MW

SPS –

200MW*

FPLE – 200MW*

15

New Mexico’s Needs (based on what has New Mexico’s Needs (based on what has worked in other States) – Page 1worked in other States) – Page 1

• Transmission– Examine transmission-related challenges to developing resource

targets in remote areas

• Lease sales– June 2007 BLM geothermal lease sales in Idaho and Utah

generated over $9 million combined – 25% went to County governments

• University efforts– Possible return of New Mexico State’s Geothermal Program and

Business Incubator program?– Educate new generation of students in geothermal technology

• Resource characterization – University of Nevada efforts to apply exploration techniques to

geothermal have led to new resource discoveries in Nevada– These efforts could be applied in New Mexico to survey broader

regions for potential new targets, particularly in “blind” resource areas

16

New Mexico’s Needs (based on what has New Mexico’s Needs (based on what has worked in other States) – Page 2worked in other States) – Page 2

• Utilize US DOE support for Industry Coupled Drilling – similar to GRED – Geothermal Resource Exploration and Development (GRED) program initiated by

USDOE in 1999 – GRED provided funding support and technical assistance for exploration and

development efforts at 22 sites in 7 states (Alaska, Arizona, California, Idaho, Nevada, New Mexico, and Utah)

– Budget of $12.5 million from 1999 through 2005– Resulted in 2 completed power plants– Expansion of U.S. geothermal facilities from 4 states to 6 states – 12 projects under development

• Leasing and permitting– Critical to identify relevant state and federal agencies involved with leasing and

permitting of geothermal projects. – Interagency coordination will be imperative to enable projects to move forward– Follow the example of Nevada and its efforts to streamline the leasing and

permitting process

• Outreach to the public – Critical to bring relevant civic and environmental groups into the discussion of

how to design projects that reduce impact on the local environment– Critical to educate the public on the environmental benefits of geothermal power,

and the environmental impacts they offset

17

Key Issues Throughout the WestKey Issues Throughout the West

• Federal policies• State policies• Resource characterization• Leasing and permitting

– Streamlining – PEIS progress– Federal lease sales

• Transmission planning – to incorporate more renewable power into

the grid

18

Other Applications that may Expand Other Applications that may Expand Geothermal to Other MarketsGeothermal to Other Markets

• Co-production from oil wells and geopressured gas wells – California, Gulf Coast, Rocky Mountains, Northern Great Plains

• Engineered Geothermal Systems (EGS) – Expand existing geothermal fields. – Hot rocks and deep geothermal resources across the U.S.

• Off-Grid applications* – Aluminum Smelting – Alternative fuels – Hydrogen Production – Industrial drying – Local power use – Desalinization

*Generally applicable in hydrothermally active areas

19

Looking Ahead to the FutureLooking Ahead to the Future

20

Three “P’s” and an “R”Three “P’s” and an “R”

Renewable energy markets are being driven by: • Population• Power Prices• Pollution• Reliance on Energy Imports

All 4 of these affect California. Hawaii and Nevada are particularly reliant on energy imports.

What about New Mexico? - Let’s discuss