On a recent research trip to Central America, I investigated the rarely-discussed but emerging geothermal electricity industry, a rising presence in small, developing nations. Geothermal is not a new source of alternative energy. It is, however, improving in efficiency and cost effectiveness.

Commodities prices (especially oil and coal) continue to rise and alternatives are needed, both economically and environmentally. The cleaner fossil fuel, Liquefied Natural Gas (LNG) is clearly leading the ‘alternative’ race and is already a multi-billion dollar industry. In this article, however, I want to focus on the greener geothermal option.

When we think of Green electricity, we usually think of hydro, wind and solar, all of which have merit, but also limitations. The introduction of new technologies, privatisation of development and government incentives are quickly changing the game. Resource-poor countries may soon become centres of clean, green electricity generation and the relatively new geothermal technology is very promising.

Geothermal electricity is created by capturing the steam produced from volcanoes or thermal areas and passing it through turbines. Its advantages include consistency and growth of supply as well as the potential for cost reduction through technological advancements. One country that is taking geothermal very serious is the small Central American nation of Guatemala.

Guatemala is a poor country with a GDP per capita of just $5,200. Their reliance on imported fuels for energy production is huge and the development of geothermal could do wonders for their standard of living, not to mention export potential to the rest of Central and South America. Much of the country is littered with active and inactive volcanoes, many surrounding the densely populated capital, Guatemala City. With its cheap cost of doing business, labour and operating costs, many producers have taken an interest in Guatemala’s geothermal potential. The government has taken steps to provide tax breaks to companies that undertake geothermal projects in the hope that Guatemala will one day have self-sufficient geothermal facilities and eventually a source of revenue and business growth.

Guatemala is not alone. More than 24 countries already have productive geothermal projects. The Philippines produces 27% of its electricity this way. So the race is not about who can get to production, it is more about which companies can produce a technology to make this a viable energy alternative.

As with all alternative energy sources, there are limiting factors, including environmental concerns. There is some evidence that drilling and water injection causes earthquakes and tremors and the extraction of hot water brings toxins and greenhouse gases to the surface, albeit in smaller quantities than burning traditional fossil fuels.

The geothermal industry is very promising. It is relatively new and there are a number of technological advancements still to be made. Next week, we’ll take a closer look at the major players behind geothermal and where you can invest to take advantage of this rapidly (yet quietly) growing industry.

Stay ahead of the game,

Lachlan McPherson