Tuesday, May 19, 2009

Energy Independence Helpful in Building Sustainable Economies

I was searching for more information on Ormat Technologies (ORA), the geothermal stock I'm looking to buy, and came across this article from Green Chip Stocks, via Reuters. It talks about Indonesia, and their past reliance on oil (they are the only member of OPEC in Southeast Asia). But recently, they have been expanding their horizons and are moving into geothermal energy:

With its population spread out over more than 17,000 islands, many Indonesians live in cities, yet some are in areas so remote that electricity access is almost zero.

Indonesia is also the only OPEC member in Southeast Asia, but in recent years it's actually become a net importer of oil. (Production is down from aging oil fields, consumption is up, and the government in Jakarta feels the fire of an energy crisis bubbling beneath the surface.)

But trouble isn't the only thing simmering under this archipelago nation. That's because geothermal energy is about to break out from an underexploited state to become a primary resource for Indonesia's energy needs.

Indonesia's largest listed oil and gas company, PT Medco, is about to break ground on a 330 MW geothermal plant in Northern Sumatra. That project will cost about $800 million to be split with Ormat Technologies (NYSE:ORA) and Japan's Itochu. For Ormat, geothermal is a normal day's work. For Medco, this marks a major reality check for its regional energy ambitions.


For Ormat, its nice to see them ink a project in an area like this. But the main point is that I believe we're going to see countries like Indonesia realize that they can help build sustainable economies by becoming energy independent. The geopolitics of oil have changed the economics of oil for everyone. The major consumers (US, China, etc) are trying to gain possession on these resources to feed their demand. But other countries end up paying higher prices for oil because of lack of access and production. Taking steps like this are allowing countries to stay out of that battle. Its no surprise that leaders in alternative energies aren't who you'd think they'd be (Solar-Germany; Wind-Denmark, Spain). Hopefully, the U.S. and China will become the major drivers in the next push in this industry. Until then, watch for more projects like the one in Indonesia.

Disclosure: None.