Can Pagosa’s hot water heat homes, grow plants & generate power?
Public-private partnerships hopes to soon begin drilling
by Allen Best
Nobody doubts that the Colorado town of Pagosa Springs has hot water. It bubbles to the surface at around 140 degrees and in quantities sufficient to sustain a large commercial spa and several more public pools along the San Juan River.
As well, the hot water heats 13 businesses and 5 homes in downtown Pagosa Springs plus the Archuleta County courthouse, delivering this energy at a cost roughly 20 to 25 percent below the going rate for natural gas and 30 percent less than electricity.
But is there sufficient hot water available to produce electricity, warm 10 acres of greenhouses, and deliver heat to 600 homes?
Geologic modeling suggests there is, but until additional wells are drilled, as is expected later this summer, there’s no way of knowing for sure. If those exploratory wells confirm large volumes of hot water, then two large-bore wells will be required to extract the hot water and, after the heat is transferred from the water, return it underground.
Federal and state grants this year have given the project traction. The U.S. Department of Energy delivered $3.9 million, followed by $1.9 million from state sources. The town and county governments created a consortium called the Pagosa Area Geothermal Water and Power Authority to provide 30 percent in local funds, or $520,000, as required by the federal grant.
A private company, Pagosa Verde, which is pushing the project, came up with an equal amount in in-kind services. It owns 20 percent of the project and has the backing of a South Carolina-based investment firm called Natural Energy LLC.
Another milestone occurred in late May, when Colorado Gov. John Hickenlooper stopped in Pagosa to sign H.B. 14-1222 into law. The law, co-sponsored by Sen. Ellen Roberts, a Republican from Durango, and Sen. Gail Schwartz, a Democrat from Snowmass Village, lengthens the repayment period and otherwise provides great flexibility for private-activity bonds issued with the backing of the state government for geothermal and other renewable energy projects.
Michael McReynolds, policy advisor at the Colorado Energy Office, says the new law recognizes the large costs of proving the geothermal resource exists before development can occur.
However, other areas of the state are interested in replicating the business model of diverse revenue streams being assembled at Pagosa Springs. “It really depends upon the specific communities and what they want to pursue,” he said when asked if the new law will be used to finance other community renewable energy projects.
Jerry Smith, the chief executive at Pagosa Verde, says the new law was “huge” in allowing the project in Pagosa Springs to go forward.
In providing access up to $16.7 million available for as little as 2 percent interest, Smith’s project can now proceed. He estimates the need to spend $26 million before revenue can be gained.
“It’s a community-scale project, replicable throughout the Rocky Mountain states. I wanted town and county citizens to own it,” says Smith. “They only way they could participate was by forming an authority, similar to a housing authority. It’s a quasi-governmental authority.”
The public-private partnership is called Pagosa Waters LLC.
Because of the lower-cost money produced by the state and federal grants plus the clear bonding authority enabled by the new state law, he sees a financial path opening up.
Bonds will be just 2 percent. “That’s essentially free money,” he says. “We can borrow as much as we need to secure revenue for the project, “and it’s a way we go.”
Cheap borrowed money also relieves the onus of finding extremely hot water and arranging for sale of electricity, says Smith. If tests reveal merely hot water, such as bubbles up in the local springs, then that’s still hot enough for greenhouses and living rooms.
From the Romans forward
Hot water originating underground has long been put to practical uses. Romans at Pompei used hot water to heat buildings.
The Idaho Capitol Building has been heated with water drawn from 3,000 feet below ground, but 86 buildings with more than 5.5 million square feet of space are also heated by a separate geothermal heating district, according to Jon Gunnerson, geothermal coordinator for the City of Boise Public Works. It is the largest geothermal heating system in the United States, he says.
Commercial electrical production from geothermal sources began in 1911 in Larderello, Italy. The first commercial electrical production in the United States began in 1960 at The Geysers in California.
In 2013, according to the Geothermal Energy Association, the United States had 3,386 megawatts of installed geothermal capacity, or about three times as much as the trio of giant coal-fired power plants found in the Comanche complex near Pueblo, Colo.
Less prominent than photovoltaic panels, geothermal was nonetheless responsible for 0.41 percent of all electrical generation last year, ahead of solar at 0.23 percent. Biomass, wind, and hydro all produced more than geothermal.
California far and away has the most geothermal installed capacity, followed by Nevada, then trailed more distantly by Hawaii, Utah, and Idaho.
In Colorado, geothermal resources have been used to heat small greenhouses associated with the Mt. Princeton Hot Springs, near Buena Vista, as well as commercial springs. But no electrical production has been achieved because of concerns that new uses will rob existing users of their heat.
“Until very recently, Colorado’s geothermal potential for generating electricity has been assigned little promise,” notes the Colorado School of Mines at its geothermal website. “This appears to be based more on a lack of study, rather than on sound science.”
The website article goes on to note that a 2008 report from the Massachusetts Institute of Technology found that Colorado is the top state in the nation for potential commercial development of its heat, mostly if deep wells are drilled near Rico, Trinidad and other hot spots in a process called enhanced geothermal recovery.
Potential in Pagosa
Just how much electricity the Pagosa project could produce depends upon the heat of water. Colorado School of Mines studies concluded a strong likelihood of substantial hot water 2,000 to 5,000 feet under the land leased by Smith’s company about two miles south of downtown Pagosa Springs. Hot water for the downtown heating district is drawn from a depth of 300 feet.
Smith says it’s a cinch that the water found 2,000 to 5,000 deep will be at least 140 degrees Fahrenheit, the temperature of the water found closer to the surface. If so, it should be enough to produce four megawatts of round-the-clock electricity, what is called base-load generation.
Archuleta County altogether has baseload demand for 20 megawatts of generation. Another renewable source, a proposed biomass plant that would burn forest products to generate electricity, would generate 5 megawatts. Both biomass and geothermal generators probably need to get paid more for their electricity by the local electrical cooperative, La Plata Electric, than what the cooperative currently pays.
Biomass plant proponent J.R. Ford last winter said he needed 15 to 20 percent more than what the La Plata and other electrical cooperatives pay wholesale provider Tri-State Generation and Transmission. Tri-State’s power comes primarily from coal, natural gas, and hydroelectric.
Both the geothermal and biomass projects in Archuleta County are representative of small sources of electricity called distributed generation. In a famous 1976 essay published in Foreign Affairs, Aspen-area resident Amory Lovins advocated more localized generation as necessary to shift power production from giant but often distant coal-fired power plants. In that same essay, Lovins also stressed that more local sources of electricity would reduce the vulnerability of the grid to terrorism.
“Distributed energy is what the world needs to get to,” says Smith, who cites Lovins as one of his heroes.
Smith moved to Archuleta County in 1989 after a career in the entertainment industry in California. He describes himself as a “liberal arts guy who values things that most people find technical and dry.”
Geothermal is wet, of course, but whether it moves forward in Pagosa Springs depends upon the outcome of a review by the U.S. Fish and Wildlife Service. The 600 acres of land leased for the drilling between the San Juan River and Highway 84 has a plant species, the Pagosa skyrocket (Ipomopsis polyantha), which has been listed as endangered under the Endangered Species Act.
The plant grows one or two feet tall, often in the understory of Ponderosa pine, and has been found in only three places, all near Pagosa Springs.
The federal grant money triggered the need for a biological assessment, which will be the basis for a biological opinion. If adverse effects can be avoided, such as by using care in the placement of wells, the Fish and Wildlife Service can approve the drilling this summer.
Existing wells reach a maximum 1,200 feet, but Smith expects to need wells 2,500 to 5,000 feet deep. The working hypothesis is that the underground rocks at the site are fractured than those that provide the water for the commercial hot springs and downtown heating district.
How will anybody know if the new wells are tapping a new source of heat instead of robbing the existing geothermal resource? Smith says his company will inject heat and pressure gauges on all local hot-water wells, “so they know immediately whether we are tapping the resource.” Colorado law and new regulations in Archuleta County protect existing geothermal users in case of damage to their resource.
Chris Gallegos, who administers the town’s geothermal heating district, says it’s “an unknown” whether Smith’s project would impair the existing users. “Through the test wells we should be able to determine whether the extraction of that heat would affect us or not,” he says.