December 15, 2007

Raft River Geothermal Project, Malta, Idaho

Dr. Robert Peltier, PE

Paying the freight

Financing a project of this magnitude can be as detailed and time-consuming as designing and constructing the plant. If one part is missing, the plant doesn’t run. Or the bills don’t get paid.

Financing Raft River meant finding a partner that would share USG’s vision for the future of Idaho geothermal energy. USG found that financial partner in an affiliate of the Goldman Sachs Group. Together, they formed Raft River Energy I LLC, which built, owns, and will operate the 13-MW Phase One project. USG contributed $5 million and transferred ownership of the five production and two reinjection wells, as well as other geothermal rights and leases covering 1,800 of the 5,200 acres of rights now held, to Raft River Energy I. Goldman Sachs matched with the $34 million needed to construct Phase One.

The project economics are compelling. Power sales are expected to be around $5 million a year from the 25-year agreement with Idaho Power Co. Then there’s the tax rebate: Idaho refunds 100% of its 6% sales tax on the cost of constructing a renewable energy plant.

Also working in USG’s favor was the Energy Policy Act of 2005, which extended the federal production tax credit (PTC) from wind projects only to include geothermal power plants completed by December 31, 2007, when the PTC was due to expire. The Raft River project was accelerated to meet that PTC deadline (although the PTC was extended for an additional year last December). The PTC, currently $19/MWh, kicks in another $1.7 million annually to push the project’s economics from merely average to exciting.

Additionally, USG has signed a $4.6 million renewable energy credit purchase and sale agreement with Holy Cross Energy of Colorado. That 10-year deal is for 10 of the 13 MW produced by Phase One of the Raft River project and is equivalent to approximately $5.25/MWh.

Just warming up

Construction of Raft River Phase One began in June 2006, and Ormat began construction of the OEC in November 2006 (Figure 5). Commercial operation is expected late this year.

5. Raft River rises. The new Raft River geothermal plant’s 13-MW Phase One is scheduled to begin commercial service in late 2007. The original 7-MW DOE demonstration plant only operated for eight months, through mid-1982. Courtesy: U.S. Geothermal
 

The electrical interconnection was completed without incident. A 3.2-mile 34.5-kV extension was built to connect the geothermal power with the Bonneville Power Administration Bridge Substation, where the voltage is kicked up to 138-kV transmission line voltage. The power is then delivered to Idaho Power Co. at its Minidoka Dam substation, approximately 45 miles away.

USG wants to complete Phase Two, a 26-MW unit, by early 2009. If those plans are successful, Phase Three could add another 50 MW by the end of 2012.