Renewable energy is the fastest growing energy source in the United States, up 42% from 2010 to 2020.
This makes green investing, like renewable energy stocks, more popular than ever. One of the most promising sectors in renewable energy is geothermal.
Geothermal energy comes from heat deep within the Earth. It can be used to generate electricity, but can also be used for direct heating and cooling of buildings.
In this post, I'll explore the benefits of geothermal energy, some of the best geothermal stocks, and much more. Let's get started!
What Is Geothermal Energy & How Do Geothermal Power Plants Work?
Geothermal energy is one of the most efficient forms of clean energy.
Geothermal technology creates energy as a result of thermodynamic transfer between the waste heat of the Earth's core and the heat power systems of the power plants.
How Geothermal Energy Works
The core temperature of the Earth is well above 10,000 F, and power plants only need to use a tiny portion of that geothermal capacity to turn steam turbines to produce electricity.
These geothermal heat pumps use only one-quarter of the energy needed to power conventional HVAC systems.
One of the biggest challenges to accessing geothermal energy, however, is drilling down deep enough to get to a point where the core heat is significant enough to be useful.
This means it's crucial for geothermal energy stocks to attract those with capital to invest.
Overall though, developing the capacity for power generation from geothermal energy is growing each day at a rapid pace.
Research from the Department of Energy shows that the US's nearly 4GW of geothermal production accounts for about one-quarter of the total geothermal power generated in the entire world.
Benefits Of Geothermal Energy
Instead of conventional byproducts created by generating electricity, such as carbon from coal and big oil companies, nuclear waste from fission plants, turbine blades from wind power, and others, the only thing geothermal power produces other than electricity is waste heat and steam.
This means that geothermal power plants do not contribute to global warming, making them one of the best ways to produce energy in areas unsuitable for wind and solar power.
Geothermal energy is one of the best options in areas that have significant volcanic or tectonic activity, which may make wind and solar options less effective or altogether impossible. They don't need natural gas or similar fossil fuels to help them meet the energy needs of their customer base.
Both of the byproducts from geothermal projects can also be used for secondary applications.
For example, the heat can be used to heat buildings for commercial and residential customers, and the steam can be condensed and reused in countless applications that need distilled water.
On top of all that, geothermal energy plants are smaller and more efficient than their solar and wind equivalents.
They take up much less surface space, which makes them a better option in areas where clearing large areas for power plant construction may create ecological concerns.
What are Geothermal Stocks?
Geothermal energy stocks are stocks or shares of companies engaged in geothermal resources.
Like many energy stocks, the publicly traded companies that can be counted among the clean energy geothermal and hydroelectric projects can be involved in nearly any aspect of the power generation process.
Some companies generate electricity through the use and operation of geothermal power plants; this is where most companies come into play.
There are also companies that install the generation equipment and energy storage systems designed to meet the demands of global electricity requirements.
Additionally, there are countless companies that create the pieces needed to produce heat power systems and energy storage components.
While many of these businesses will be smaller, privately-owned companies, many investors would be wise to pay attention to them because without them, the geothermal energy business would slow to a crawl.
While geothermal energy only fills about 1% of the power requirements of the US, the Department of Energy projects this to increase to roughly 8% by 2050.
This means if there were ever a time to invest in geothermal stocks, it's now. To invest in this technology now would be on par with investing in Tesla when it was only $150 per share.
Many companies capitalizing on this are domestic, with 18 power plants in the Mayacamas Mountains accounting for one-fifth of California's renewable energy production.
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How To Invest In Geothermal Power
Before you invest in any specific company or stock, it's important to understand how many different ways you can invest in geothermal energy stocks.
You can invest in the research and development businesses that make the systems, businesses that build the plants and install the systems, or in the big company that will eventually run the plant and sell the power to the masses.
Manufacturers Of Geothermal Heat Pumps & Other Components
A company in this category will be on the ground level of catering to industrial customers and may even conduct research funded by government subsidies.
They will research, design, and manufacture the components every geothermal power plant requires to extract power from the Earth's heat.
Typical components that will need to be designed and manufactured are the heat pumps and the physical and computer systems that regulate their operation.
The heat pumps take a significant amount of research and development in order to be effective. They pump high-pressure superheated water through conduits into the power plant, where the water is allowed to depressurize and turn into steam, which turns the turbine.
These pumps need to be able to handle the immense heat from the subsurface geothermal wells and the pressure required to keep that water in a liquid state.
Additionally, similar research needs to go into the system of valves and conduits that allows the superheated water and steam to move from one location to another, eventually being pumped back into the subsurface well to be reheated by the Earth.
Geothermal Power Equipment Installers
The businesses that specialize in building the plants and installing the necessary components, equipment, and systems created by the manufacturers.
While they don't participate in the manufacturing or operation, they have a vital role in the ability of the plant to eventually be viable and profitable.
Installers must be familiar with both the systems they are installing as well as the requirements for the safe and efficient operation of the plant itself.
They ensure that all of the necessary geothermal components are installed and configured properly so that the company can avoid potentially catastrophic failures that can lead to legal liabilities or extended downtime for repairs that can jeopardize their profitability.
Backing these organizations is a crucial and prudent investment because without them the systems manufacturers have nobody to buy their systems and components, and the production company has nobody to build their plant.
Geothermal Energy Production
The final option for investment into geothermal energy stocks will be buying shares of stock for the company that eventually runs the plant.
These are often massive corporate entities that have an international presence and a market cap in the billions.
These organizations are frequently blue-chip stocks that can be traded on the New York Stock Exchange or included in any one of the countless energy sector or clean energy managed funds.
In the context of long-term investments, buying stock for a company in this category will often hold much lower risk than stock for a manufacturer or installer.
Best Geothermal Energy Stocks
If you're ready to start investing, take a look at some of the top geothermal stocks you can add to your investment portfolio.
Ormat Technologies (NYSE: ORA)
Ormat Technologies is one of the most notable geothermal stocks to consider.
They have a market cap of nearly $4B and produce dividend yields of 0.69%.
They operate several geothermal projects in the US, as well as in South America and Indonesia, as well as marketing and selling geothermal equipment to other business entities.
In addition, they specialize in consulting for recovered-energy plants, and they build and operate solar plants.
In total, they have built more than 190 geothermal plants around the world.
While this technically dilutes the effect of geothermal technology on their overall business model, their geothermal production accounts for 94%, and it keeps them diversified and resilient.
Chevron Corporation (NYSE: CVX)
Arguably the largest business on our list, the Chevron Corporation has been making considerable moves into the renewables sector recently.
One of the highly publicized moves was investing in the Canadian-based Eavor Technologies during their most recent funding round.
They are a massive oil business that has been branching out into the geothermal energy field.
This move makes strong business sense since they can explore geothermal profitability while also continuing to drill for oil.
They can potentially expand their operations without significant investment in new or different equipment as other companies would need to do, giving them an edge.
Eversource Energy (NYSE: ES)
While Eversource Energy is a comparatively smaller organization, its stock price has seen immense gains in the last ten years.
They are involved in geothermal energy as well as wind and solar energy, though they seem to have slowed their development and expansion plans since the recent pandemic peaked.
They have a significant number of innovative projects and advancements currently in development and are poised to make several breakthroughs that could send their stock on a run. Even if you don't add Eversource to your portfolio, they are certainly one to add to your watchlist.
Atlas Copco AB (STO: ATCO-A)
Atlas Copco AB is a Swedish company that specializes in providing the equipment and components necessary to create sustainable power solutions.
They manufacture components like vacuum pumps, generators, and assembly systems.
They aren't technically part of the energy sector and instead operate in the space of industrial machinery, but they supply geothermal installers.
They have lost approximately 11% of its stock value in the last 12 months, but they maintain a $110B revenue stream. They are traded on the Stockholm Exchange.
Climeon AB (STO: CLIME-B.ST)
Another Swedish offering, Climeon, is a comparatively small company.
They are in the equipment and component manufacturing space and create heat systems that are used in geothermal applications.
They make a point to maintain unique, patented geothermal solutions.
Despite having a global customer base of industrial and maritime customers, they have a market cap of less than $100M and are currently operating at a loss. They are traded on the Stockholm Exchange.
Polaris Infrastructure (TSE: PIF)
Polaris Infrastructure is based in Toronto and is responsible for operating geothermal and hydroelectric projects in Peru and Nicaragua, which respectively produce 33MW and 72MW of renewable electricity.
With that in mind, they are still in the growth stage and are a more risky investing opportunity.
They only have a $350M market cap and brought in revenue of just $75M, according to their 2020 financials.
Though they have posted a 1-year return of more than 32%, so they are certainly on the rise.
Another risk factor is incredibly low diversification, which leads to lower overall investment interest. They are listed on the Toronto Stock Exchange.
Final Thoughts on the Best Geothermal Stocks
While nothing here should be taken as investment advice, it should be information you take into account as you do your pre-investing research and due diligence to help guide you to the answers you seek.
While investment in geothermal energy is still in its infancy, at the growth rates the Department of Energy projects, investing now could allow you to accumulate significant amounts of stock that could grow in value considerably over the next 20-30 years.
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