Renewable Wealth Portfolio: U.S. Geothermal (HTM)

Welcome to the third installment in the Renewable Wealth model portfolio. Our third pick focuses on clean energy. The alternative energy sector is red-hot right now, boosted by high oil prices and rising consumer awareness. We’re starting out in an area that’s hot both literally and figuratively: Geothermal Energy.

How Does Geothermal Energy Work?

Like many forms of energy production, geothermal energy is really just a fancy way of heating water. Water is pumped down far beneath the earth’s surface, where heat seeping up from the earth’s core is plentiful. This heat can be harnessed to create energy in a variety of different ways, but at its core the concept is always the same: harvest and use the heat energy that’s waiting there beneath the surface.

Of course not all areas are suited to geothermal energy. Much depends on the geological makeup of a particular area. Iceland, for example, is well known to have huge amounts of geothermal capacity — in fact, it now generates all its residential power using geothermal.

As it turns out, the U.S. also has great geothermal resources — mostly concentrated on the West coast. Our next pick, U.S. Geothermal ( HTM ), owns the rights to a good chunk of these resources, and looks to be another excellent long-term addition to our green stock portfolio.

A Great Time to Get In

U.S. Geothermal has been in the build-out stage for a while now, but production is starting to ramp up. As you might imagine, it’s expensive to get a geothermal plant up and running, so the numbers didn’t look great in years past, but that’s all about to change. HTM owns the rights to a number of excellent geothermal resources which are just about to start bearing fruit. Their Raft River, Idaho facility is now online, and has sold 10 MW out of an estimated 40-110 MW capacity. Another plant in Neal Hot Springs, Oregon is slated to come online within the next few months, delivering 26 MW of capacity. HTM is also in the process of acquiring smaller plants, like their recent purchase of an operating 3.6 MW plant in Nevada just a few weeks ago.

Volcanic Volatility

At $172m in market cap, you can expect HTM to be volatile in the short term. Don’t let that spook you. Use dips as opportunities to add to your position, and plan to hold for the long term. As oil grows more and more dear, times can only get better and better for alternative energy, and geothermal is a proven technology. The future looks bright for this sector.

Author Holds No Position in HTM at the time of writing.