Why Geothermal Remains a Buried Treasure

As renewable energies go, geothermal energy has a lot on its side.

The naturally occurring heat trapped deep in the earth can be pumped up to the surface to produce electricity that's clean, is always available without the fickleness of wind and solar, and, according to some studies, is even cheaper than coal-fired power.

So why is the industry, whose North American financial base is now on Bay Street, struggling so hard to get respect?

The problem for geothermal developers is that expansion, or "adding megawatts," is a slow, technically complex and expensive process.

As with mining, the upfront costs of developing a geothermal resource are high and it can take five to seven years from discovery to commercial operation. By comparison, a wind or solar farm can be up and running from scratch in a year to 18 months.

"It is a much longer-term gain than most investors are looking for. You don't get the hedge funds that are pushing the solar and wind stocks," said Jeff Bencik, green technology analyst at Kaufman Bros.

Some analysts say the sector could still bloom if a few areas are fixed. For one, the process of getting permits needs to be massively sped up.

The industry also needs a legal resource classification scheme, such as exists in the mining and oil and gas sectors, so that projects across the industry can be compared and assessed more easily, said Alison Thompson, chairwoman of the Canadian Geothermal Energy Association.

"Geothermal companies are still too small for investors. They need to consolidate to have mass and size," said Marin Katusa, chief energy investment strategist at Casey Research.