Nevada Geothermal Poised to Follow Solyndra into Bankruptcy
After accepting federal loan guarantees from the same program that funded the bankrupt Solyndra corporation, Nevada Geothermal Power, Inc. is poised to follow Solyndra and other failed alternative power companies into bankruptcy. U.S. taxpayers will likely again be left on the financial hook for the failed company.
$145 Million Wasted
Nevada Geothermal’s financial trouble was confirmed by its own auditor in a filing of financial statements released in September. According to the financial statements, Nevada Geothermal feels “significant doubt upon the Company’s ability to continue as a going concern.”
Nevada Geothermal received $66 million in federal grants plus another $79 million in federal loan guarantees but still has not found a way to turn a profit and is struggling to stay afloat.
Government a Poor Judge
Daniel Simmons, director of state and regulatory affairs at the Institute of Energy Research, says the failures of Solyndra, Nevada Geothermal, and other alternative energy companies after receiving government grants and loan guarantees illustrate how proficient government is at wasting taxpayer dollars.
“Nevada Geothermal is just one more example of why politicians and bureaucrats should not be trying to pick winners and losers,” Simmons said.
Production Fell Short
Nevada Geothermal experienced problems from the start, generating only 27 megawatts of power, substantially less than the 45 megawatts originally predicted by company executives. By drilling new wells elsewhere in Nevada, the company has managed to increase the net power to a steady 35 megawatts, still significantly short of predicted results.
“The company signed a contract to sell as much as 45 megawatts of electrical power to the grid, but they can't produce that much,” Simmons explained.
Little Power, Large Subsidies
Nationally, geothermal energy produces only 3,000 megawatts of power on an annual basis, the equivalent of less than a half-dozen conventional power plants. Nevada Geothermal and other geothermal companies nevertheless receive generous subsidies, enjoying particularly strong support from Senate Majority Leader Harry Reid (D-NV), who refers to his home state as “the Saudi Arabia of geothermal energy.”
“This project is exactly the type of initiative we need to ensure Nevada creates good-paying jobs and moves our economy forward,” Reid said in a 2010 press statement after visiting the Nevada Geothermal plant.
Reid has taken the initiative in pushing geothermal energy by partnering with Department of the Interior Secretary Ken Salazar to develop alternative energy projects on federally owned land. Reid has also championed expanding federal tax incentives to help build geothermal plants.
Private Investors Not Fooled
But Simmons says spending taxpayer dollars on development of alternative energy, including geothermal, is unnecessary and wasteful.
“If Nevada is indeed the Saudi Arabia of geothermal energy, as Senate Majority Leader Harry Reid claims, and if geothermal is cost-effective, then there is no need for taxpayer dollars. It's that simple,” he said.
If Nevada Geothermal presented a promising business opportunity, the company would not have any problem finding private investors, Simmons notes. Instead the company needed $66 million in taxpayer funding and an additional $79 million in loan guarantees from the federal government.
"If Nevada Geothermal was a better bet, a company like Google—with a market capitalization of $200 billion—surely could have guaranteed the loan instead of the taxpayers," Simmons observed.
Alyssa Carducci (email@example.com) writes from Tampa, Florida.
[Correction: An earlier online version of this article contained a quote incorrectly asserting Nevada Geothermal had to purchase renewable power from other companies to fulfill its contract. Nevada Geothermal was not required to make any such renewable power purchases. We regret the error.]