Glitnir pouring cash into geothermal

Iceland's Glitnir Bank released a report today on the booming geothermal market in the U.S., and it intends to be a part of it.

The bank, which opened its first U.S. office in New York today, said it plans to invest $1 billion in U.S. geothermal energy projects over the next five years.

"The challenges are numerous, but the potential is huge," Arni Magnusson, managing director of sustainable energy for Glitnir, told a press conference today.

Iceland loves its geothermal >>

But Glitnir's investment is only a portion of the market the company predicts for the States.

In its U.S. Geothermal Market Report, Glitnir estimates investments required to service current geothermal projects to be $9.5 billion.

The bank said a total of $39.4 billion in investments will be needed to develop resources available through 2025.

Glitnir, hoping to grab at least 10 percent of the current market, said it already financed three geothermal energy deals in the U.S. this year and plans to make one or two more deals before January, making a total investment of $70 million to $100 million.

Glitnir announced last year that it would jump into the U.S. geothermal market, but didn't peg a dollar amount to those intentions (see Icelandic geothermal capital entering United States).

At the time, Magnusson said that in Iceland, the model for financing and producing cost-efficient geothermal energy has been proven. "We have since applied our expertise to countries around the globe."

Formerly known as Íslandsbanki, the bank's roots are in commercial banking, and funds focused on industrial and fishery loans and investments.

Iceland's Straumur Investment Bank owns 25 percent of Glitnir. Milestone, another Icelandic investment firm, owns 15 percent.

In its report, Glitnir predicts a more than six-fold increase in the annual sales of electricity from geothermal sources in the United States to $11 billion in 2025, up from $1.8 billion now.

The report said geothermal energy could fill up to 20 percent of California's electricity needs, 60 percent of Nevada's and 30 percent of Hawaii's.

Glitnir is no stranger to geothermal, with 90 percent of all houses in Iceland being heated geothermally.

But it says the U.S. is a global leader in geothermal, with a current installed capacity of 2,800 megawatts and annual electricity generation of 16,000 gigawatt hours. Current projects, when completed, could bring that installed capacity up by another 2,800 megawatts, according to Glitnir.

The bank sees consolidation in the industry over the next few years in the U.S., calling the market there "still very fragmented," in its report.

It said there are relatively few large companies and many small ones, with some of the smaller companies lacking the financial muscle to fully develop projects with the potential to be profitable.

While installation costs are high for geothermal, the bank said it can be very economical, with electricity generated around the clock, all year round, with a typical utilization rate of more than 95 percent.

The company is also looking globally for investments in geothermal.

It formed an investment group in January called Geysir Green Energy with the aim of investing $1 billion in renewable energy around the world by 2010, focusing on geothermal sources.

Formed with FL Group and VGK Hönnun Engineering, the initial equity investment in Geysir was $100 million.

Glitnir is very confident that the heat won't be dying down in geothermal any time soon. It says the heat continuously flowing from the Earth's interior is estimated to be equivalent to 42 million megawatts of power.

And the bank said the interior of the Earth is expected to remain extremely hot for billions of year to come.

Cleantech developments making news in the past 24 hours

• Generating energy underwater from good vibrations
• Indian companies order 300MW in wind power
• Beijing meets "blue sky days" target early
• Finland, Vietnam launch fish fuel project

View the last week of cleantech developments here | Subscribe to full feed