Salton Sea geothermal plant canceled by Warren Buffett's Berkshire Hathaway Energy

UPDATE: A spokesperson for Berkshire Hathaway Energy told The Desert Sun that the company may eventually reapply for a permit for the Black Rock geothermal project, should the economics improve. Like other Salton Sea geothermal developers, Berkshire is "looking at mineral extraction opportunities," the spokesperson said.

ORIGINAL STORY, PUBLISHED 8/16/17:

It's been 14 years since California officials first approved the Black Rock power plant, which would have tapped a powerful geothermal reservoir along the shore of the Salton Sea and generated enough climate-friendly electricity to power about 200,000 homes.

But the long-planned geothermal plant in Imperial County was never built — and now its developer appears to be pulling the plug.

CalEnergy, which is owned by Warren Buffett's Berkshire Hathaway Energy, asked the California Energy Commission earlier this summer to terminate the license for Black Rock. The company had requested and received extensions of the construction start deadline in 2007, 2011 and 2014, but this time decided to move on rather than pay a $27,678 annual compliance fee that would have been due at the end of June.

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Beneath the southern shore of the Salton Sea lies a reservoir of mineral-rich water, heated to temperatures as high as 700 degrees Fahrenheit by the Earth's natural heat. The area's geology allows that heat to rise near the surface, creating one of the world's most potent geothermal energy hot spots. Eleven power plants, 10 of them operated by CalEnergy, already convert a portion of that geothermal potential to carbon-free energy, using steam from the super-heated brine to turn turbines and generate electricity.

But even as renewable solar and wind power have boomed in California, the geothermal industry has lagged. The high up-front costs of building a geothermal plant have kept investors at bay, with only one new plant opening in the Salton Sea area since 2000.

Imperial Valley officials see a geothermal renaissance as a much-needed economic boon for the region, where incomes are low and the air quality is poor. While building a geothermal plant is expensive, the technology can generate climate-friendly electricity 24 hours a day, seven days a week, unlike solar and wind farms, which are intermittent.

For years, state officials rebuffed the pleas from Imperial Valley leaders to support more geothermal development in the region, even as California lawmakers adopted a 33 percent renewable energy mandate and then raised the threshold to 50 percent.

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In 2015, the Imperial Irrigation District sued the California Independent System Operator, which runs the power grid for most of the state. IID, a publicly owned energy and water utility, said the system operator was trying to "crush IID out of existence" by making it difficult to export geothermal and other forms of clean energy from the Imperial Valley.

That lawsuit may be starting to yield results, according to Kevin Kelley, IID's general manager. The utility asked a federal judge for a 60-day pause in the case last month, largely due to progress in geothermal negotiations with state officials, Kelley said.

"We are collaborating on behalf of the geothermal resource at the Salton Sea that we've long advocated for," Kelley said in a recent interview. "We got the state together."

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For years, CalEnergy's Black Rock project was one of the only geothermal plants under development at the Salton Sea. The company's original 2003 license from the California Energy Commission called for a single 215-megawatt generator, which would have been several times larger than any of the area's existing plants and raised the Salton Sea's total geothermal capacity by more than 50 percent. CalEnergy modified its proposal in 2009, making plans to build a 159-megawatt facility consisting of three smaller units.

Dennis Kaspereit spent 10 years as CalEnergy's director of geothermal resources and now works at the Geothermal Resource Group, a Palm Desert-based consultant. He said Black Rock faced the same headwinds as all geothermal projects in the region — the difficulty of securing financing and a power purchase agreement with a utility.

"It all comes down to the return that they need," he said.

Berkshire Hathaway Energy didn't respond to a request for comment about why it had shelved Black Rock. But parent company Berkshire Hathaway, which is led by legendary investor Warren Buffett, has been making less money from its existing Salton Sea facilities, largely due to a regulatory change that altered the structure of some power purchase contracts with utilities. The company's 10 geothermal plants generated $148 million in revenue in 2016 — down from $230 million in 2009, according to financial documents posted on Berkshire's website. The company said in legal filings last year that it had asked CalEnergy staff to prepare a "minimum spend" budget for 2016.

Kaspereit doesn't think CalEnergy is especially interested in building new geothermal plants at the Salton Sea anymore.

"Berkshire Hathaway is big. They've got a lot of wind, they've got solar, they've got other areas. (Geothermal is) a complicated thing to do," Kaspereit said.

A California Energy Commission spokesperson said the agency had received CalEnergy's request to terminate the license for Black Rock and would likely grant the request by early fall.

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Other developers are still trying to build new power plants at the Salton Sea.

An Australian company called Controlled Thermal Resources is doing seismic testing for a massive geothermal plant known as Hell's Kitchen, with plans to drill exploratory wells this year and start construction by 2019. Controlled Thermal doesn't have financing yet, a key hurdle before construction can begin. But the firm has partnered with a startup that claims to have developed technology to extract lithium — a valuable mineral used in batteries for electric cars, cell phones and laptops — from the brine that flows through the pipes of Salton Sea geothermal plants. If that technology can make lithium extraction economically viable, it would make Hell's Kitchen a lot more attractive to investors.

A prior incarnation of the lithium startup, Simbol Materials, failed dramatically in 2015, abruptly firing the vast majority of its staff — but not before drawing a $325-million purchase offer from Elon Musk's Tesla Motors, which ultimately fell through. Musk's willingness to make that offer could be a sign that the company's technology is viable, even if Simbol couldn't work out the finances.

EnergySource, which operates the Salton Sea's newest geothermal plant, is also working on lithium extraction. The company started testing its own extraction process at its Featherstone facility last year, leading to an infusion of cash from a Texas-based investment firm, Mills Capital Group, after early testing showed promise. EnergySource President Eric Spomer has said his company's extraction technique isn't totally new technology, but rather a series of tweaks to existing processes the firm has acquired.

"Everything's been positive. Every scary hurdle we've come to, we've cleared it with room to spare," Spomer said in an interview this week. "It's taking longer than it should, but these kinds of things do."

Sammy Roth writes about energy and the environment for The Desert Sun. He can be reached at sammy.roth@desertsun.com, (760) 778-4622 and @Sammy_Roth.