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Ormat to Experience Declining Profit, if Geothermal Power Sector Stagnates

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Published on : Jun 19, 2015

Geothermal energy market has witnessed quite impressive growth in the past few years and is presently an important part of the market sector – renewable energy. By harnessing the giant reserves of thermal energy present in the earth, clean energy can be created in relative abundance. One of the top firms in the geothermal market is Ormat Technologies. This firm boasts of around 2GW in power plants, which are supplied across the globe.

Though Ormat has expanded remarkably in the past couple of years, there are many reasons people are believing that it is headed for a long-term decline. Several sources are bragging about the potential of geothermal energy on the basis of terawatts of the thermal energy that can be theoretically harvested from the earth’s core. However, the technology that takes to actually harness this power can be questionable in the long run. Furthermore, the rapid battery innovation can take away this renewable source’s big advantage of possessing base load qualities.

Moreover, once other types of renewable energies such as wind are able to cost effectively store power, the base load edge of geothermal power will be lost compared to other potentially promising alternative energies. This makes Ormat particularly vulnerable in the light of this technology being more expensive to others.

Geothermal energy are capital intensive in several aspects. They need large amounts of resources to build geothermal plants, furthermore, the installation of geothermal pumps can be very expensive. The fast expansion rate of the firm Ormat could in the future prove negative for the company. The company’s expensive geothermal plants in the future could end up costing the firm lost sunk costs in case the subsidies in this sector dry up in the foreseeable future. Besides, geothermal energy, many other renewables such as wind and solar PV are showing good growth potential, which might further hamper the geothermal power market.