ElectraTherm sees potential in hot water from oil wells

John Fox makes two observations about the generation of electricity from geothermal heat:

* The big risk, much of the cost and the hardest part of a geothermal deal to finance is exploration the business of drilling holes thousands of feet below the earth's surface to find a source of heat.

* At the same time, hundreds of thousands of oil and gas wells already are producing hot water that could be used to drive electric-generation systems.

And that, Fox figures, is potentially a lucrative market for his ElectraTherm Inc., a Reno company that makes systems that use otherwise wasted heat to generate electricity.

The company has been focused on industrial applications of its system attaching its Green Machine to industrial engines, for instance, to generate electricity but it's now taking a closer look as well at the natural resources industry.

Since the arrival of Fox as chief executive officer early this year, ElectraTherm shut down production and completed a major redesign of its Green Machine to increase its reliability.

And Fox, the former general manager of a United Technologies Corp. initiative into small generating systems, is looking to widen the potential markets for the system.

For instance, the company this month was awarded a $982,000 grant from the U.S. Department of Energy to spur development of a generating system that uses hot water produced at the Florida Canyon gold mine operated by Japan's Jipangu Inc. about 40 miles southwest of Winnemucca.

Water comes from the earth at the Florida Canyon Mine at 230 degrees, and the mine leaves it in cooling ponds before putting it to use in mining operations.

But 230-degree water falls into the sweet spot for ElectraTherm's technology, which can generate electricity from as little as 190-degree heat. A Green Machine at the mine will be able to produce 30 to 70 kilowatts.

The federal funds will help ElectraTherm to develop a portable system that's rugged enough for use in remote locations.

And that knowledge, Fox says, has lots of applications in a potentially bigger market: Generating electricity from the hot water produced by oil and gas wells.

Hot water is a common byproduct at the 823,000 oil and gas wells in the United States, and wells from the eight biggest oil-producing states generate three million gallons of hot water per minute.

"Today, it's a nuisance," Fox says.

But a 2006 study by the Massachusetts Institute of Technology estimates that the waste hot water produced by wells in the eight big oil states could be used to generate three gigawatts of power enough to meet the needs of more than a half million homes.

But those wells are disbursed widely across the country, and the amount of hot water produced by an individual well often is modest. That, Fox figures, creates an opportunity for ElectraTherm's Green Machine, which is scaled for use with relatively small sources of heat or hot water.

An ElectraTherm unit located at a well that produces 2,000 to 4,000 barrels of hot water daily could generate 30 to 70 kilowatts of electricity.

An operator of an oil well probably couldn't make money from the sale of electricity alone, Fox says, particularly in Texas and Louisiana where electric rates are among the lowest in the nation.

But ElectraTherm installations may make sense in locations where utilities are willing to pay a premium for electricity produced by renewable sources so that they can meet regulatory standards.

The additional revenue from electric generation also might be a difference-maker for the operator of a low-production well who otherwise might face the expense of closing and capping a well, Fox says.

The company currently is working with operators who want to test Green Machines on wells in Louisiana and Mississippi.

Privately held ElectraTherm has been financed by venture capital firms such as San Francisco's Greener Capital Partners.

The company employs about 30 at its office and production facility in southeast Reno.