Must Renewable Energy Be Diversified?
Most renewable energy companies specialize.
Solar companies do solar. Wind companies do wind. Geothermal companies do geothermal. Biomass companies do biomass.
But a small Canadian merger challenges that assumption.
Magma Energy (MGMXF.PK), a geothermal company, said it will spend about $100 million in stock to buy Plutonic Power (PUOPF.PK), which has wind and hydropower projects, and ambitions to get into solar. The combined companies will go by the name Alterra Power.
Both companies are based in Vancouver.
Size really does matter, crowed Magma CEO Ross Beatty on a conference call announcing the deal. Their merger presentation calls the resulting company "a dominant renewable power developer in Canada."
True, but is this truly size?
Plutonic has only two projects operating at present, with three more under construction. The solar play is, for now, an ambition.
What the deal may really speak to are the prospects of the geothermal industry. "Geothermal is a small energy sector and has real limits to its growth since it only occurs in specific places on earth and many of the world's best geothermal assets are already developed," Beatty said on that same conference call.
Is that true? Last time I heard the Earth was round, and its thermal assets are beneath all of us.
What Beatty is doubtless referring to are the current requirements of geothermal plants. They need to be relatively close to warmth, so they can reach it at low drilling cost, but they can't be so close that the ground they are drilling through will be unstable, prone to earthquakes.
The question I'm asking of my friends in the business today is, then, are these limits absolute? We can drill miles down into the Earth, and slant that pipe so it goes horizontally. We already do this for natural gas. Why not for heat? And I know you don't want to tap directly into magma (despite the company's original name) but aren't there ways to tap heat that don't require absolute stability?
The floor's yours on this one.
There's a second question asked by this merger. Should renewable energy companies specialize in one form of energy, or is consolidation in the whole space inevitable? What is really gained by combining wind, solar, hydro and geothermal assets under one corporate umbrella, other than financing power?
Good questions for this week of the Renewable Energy World show in Tampa.
DISCOLSURE: No positions.
Dana Blankenhorn first covered the energy industries in 1978 with the Houston Business Journal. He returned last month after a short 29 year hiatus because it's the best business story of our time. In between he covered PCs, the Internet, e-commerce, open source, the Internet of Things and Moore's Law. It's the application of the last to harvesting the energy all around us he's most excited about. He lives in Atlanta.