Sector Analysis Background: DTL Power Corporation

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Table of Contents

Overview
Nature of Competition
Recent News Story
Sector’s Societal Importance
References

Overview

Structure

The geothermal sector is growing tremendously in diverse countries across the world because it is a renewable form of energy. In the energy sector, renewable form of energy contributes about 17% of energy, while non-renewable sources such as fossil fuels and nuclear contributes about 80% and 3% respectively.

As geothermal energy is one of the renewable forms of energy, it contributes barely 1% globally, but it has huge potential. For instance, geothermal energy contributes 30%, 24%, 24%, and 15% of electricity in Iceland, El Salvador, Kenya, Philippines, and Costa Rica respectively.

According to the Geothermal Energy Association (2014), the western part of the US has excellent geothermal potential. It is estimated that the region can supply up to 20 percent of the energy requirement in the country.

In the United States, the geothermal field in California has the largest geothermal plant in the world called The Geysers, which produces 3,386 megawatts.

New Mexico relies heavily on electricity generated from fossil fuels, yet it has geothermal resources in the Jemez Mountains, which has the potential of generating huge amounts of electricity that can serve New Mexico and neighboring states.

In this view, the structure of geothermal industry shows that it has immense potential of generating electricity, which requires exploitation.

Major Players

The major players in the geothermal sector are federal government and energy companies. The federal government regulates exploitation of geothermal resources by ensuring that it benefits all stakeholders and generates renewable forms of energy for industrial development.

Through the Department of Energy, the federal government formulates policies and regulations, which guide exploitation of geothermal resources in various states.

The federal government also uses Federal Energy Regulatory Commission in regulating interstate transmission of electricity in the United States and protects consumers using Federal Trade Commission.

Through Environmental Protection Agency, federal government ensures that exploitation and use of geothermal resources do not pose any harm to the environment. Fundamentally, the federal government is an important player in the energy industry because it dictates exploitation of geothermal resources.

Geothermal Energy Association is an integral player in the geothermal sector because it is a trade union of geothermal companies, which advocate for the exploitation of geothermal resources across the world.

Moreover, the geothermal companies that belong to this trade union actively exploit geothermal resources in various parts of the world.

According to the Geothermal Energy Association (2015), Chadbourne and Park, Scientific Drilling International, Therma Source, Ethos Energy Group, and Industrial Builders are the companies that form the executive level, while Calpine Corporation, Gradient Resources, Enel Green Power North America, Bershire, Cyrq Energy, and Ormat Technologies are some of the companies that form the board level.

The Calpine Corporation controls about 90 percent of the geothermal resources in the US. As these companies advocate for the exploitation of geothermal resources and represent geothermal companies, they deliberate on issues and make important decisions, which influence policies and regulations in the geothermal sector.

Other major players in the United States are Energy Vision International Florida, Kepler Energy, Asheville Geothermal, Evergreen Energy, Earth Source Energy Solutions, and Geo power Texas amongst others. Examination of the players in the geothermal sector indicates that it is a very competitive sector.

A Brief historical Perspective

Although geothermal resources have existed for thousands of centuries, the technology to exploit them as a renewable energy has been lacking. Archeological evidence indicates that ancient people used hot springs as a source of water for bathing, cleaning, and extracting minerals.

In the United States, archeological evidence shows that Paleo-Indians used hot springs in washing, cleaning, extracting minerals, and warming themselves. In recent years, technological developments have allowed large corporations to produce energy from geothermal sources in a cost-effective manner.

In the United States, the first geothermal plant called The Geysers was established in 1960 in the Californian geothermal field.

According to the Geothermal Energy Association (2014), huge investments by the Calpine Corporation have seen the number of geothermal units grow to the current 18. Given that 80% of electricity emanates from fossil fuels, it contributes to global warming.

The need to mitigate global warming has promoted exploitation of geothermal resources because they are renewable sources, which do contribute significantly to global warming. Globally, governments in conjunction with Geothermal Energy Association and other bodies, are advocating for the exploitation geothermal resources.

Currently, geothermal resources only produce 1% of electricity, yet they have the potential of producing over 30%, as in the case of the geothermal sector in Iceland.

Nature of Competition

The nature of competition that exists in the geothermal sector in New Mexico and the United States is highly competitive.

Since geothermal companies operate in a free market economy, they operate in a highly competitive environment, which requires enormous resources, compliance with prevailing legislations, acquisition of experts, and application of novel technology.

The costs involved in starting geothermal company are prohibitive in that mega-companies can only afford (The Geothermal Energy Association, 2014). National and international companies compete for the scarce geothermal resources in various parts of the world, including New Mexico.

The ability to exploit the available geothermal resources is mainly dependent on the capacity of a company to mobilize required startup capital. In this view, DTL Power Corporation should be ready to invest a competitive amount of capital in the establishment and development of geothermal plant in New Mexico.

Additionally, geothermal sector is highly competitive because it has a number of legislations that geothermal companies must comply with before receiving permission to explore and exploit geothermal resources.

The federal government requires geothermal companies to comply with regulations of the Department of Energy, Federal Energy Regulatory Commission, Environmental Protection Agency, and the Federal Trade Union.

Moreover, the trade union of geothermal companies, Geothermal Energy Association, has legislations that regulate their operations in the geothermal sector (Geothermal Energy Association, 2015).

To survive in a highly competitive geothermal sector, DTL Power Corporation also needs to seek expertise and employ the latest technology, which matches or surpasses that of leading players such as Calpine Corporation.

Recent News Story

The recent news story shows that geothermal industry is growing gradually owing to the promotion of renewable sources of energy by various governments globally.

Galbraith (2014) states that the electricity generated globally from geothermal resources increases by 5% annually, with the United States being the leading producer of electricity from geothermal energy.

The use of oil and gas technology of drilling has enhanced exploration and exploitation of geothermal resources in different parts of the world, including the United States. Given that establishment of geothermal plants is expensive, it has prohibited many countries and companies from exploring and exploiting geothermal resources.

Geothermal engineers explain that it takes about 50-60% of the project’s cost to drill wells and the probability of locating sustainable hot springs is 70-90% (Galbraith, 2014).

The explanation implies that exploration of geothermal resources is very expensive, and thus, requires expertise to increase the probability of locating sustainable hot spring and reduce the expenses.

Sector’s Societal Importance

The geothermal sector has immense benefits to the society because it generates a renewable form of energy, creates employment opportunities, reduces emissions of greenhouse gases, and generates revenue to governments.

Since the current society relies on non-renewable form of energy obtained from fossil fuels, the geothermal sector is very important because it offers renewable source of energy that is sustainable. The renewability and sustainability of geothermal energy emanate from the fact that the geothermal heat is inexhaustible.

Essentially, electricity generated from geothermal resources is very reliable because it is not subject to seasons and intermittent environmental conditions, unlike solar energy and wind energy. The geothermal sector is also beneficial to society because it creates immense opportunities for employment.

Kunkel, Ghomshei, and Ellis (2012) state that geothermal plants create job opportunities for engineers, mechanics, geologists, architects, operators, hydrologists, technicians, researchers, government regulators, and lawyers amongst other related specialists.

In this view, communities that live in areas where geothermal plants exist benefit from the available job opportunities.

The release of harmful emissions such as greenhouse gases limits exploitation and use of fossil fuels. The exploitation of geothermal resources is advantageous because they emit minimal amount of greenhouse gases into the environment, and thus, does not contribute significantly to global warming.

Fundamentally, the beneficial effect of geothermal resources to the society is that it reduces emissions of greenhouse gases, and thus, aid in alleviating the impact of global warming.

Kunkel, Ghomshei, and Ellis (2012) argue that the technology of closed-loop circulation is essential in geothermal sector because it prevents the release of greenhouse gases into the atmosphere.

Overall, the society benefits owing to the reduced emission of greenhouse gases and poisonous gases, which are harmful to humanity and the environment. Geothermal sector also generates revenue for state and federal governments since they collect taxes and royalties from the geothermal companies.

References

Geothermal Energy Association. (2014). 2014 Annual US and Global Geothermal Power Production Report. Web.

Geothermal Energy Association. (2015). Major Companies. Web.

Galbraith, K. (2014). Geothermal Industry Grows, With Help from Oil and Gas Drilling. New York Times. Web.

Kunkel, T., Ghomshei, M., & Ellis, R. (2012). Geothermal energy as an indigenous alternative energy source in British Columbia. Journal of Ecosystems and Management, 13(2), 1-16.

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