This report is based on public company disclosures, filings and announcements reviewed by GSN; figures are as stated by the company and have not been independently verified.

Most power stations burn something to make electricity. A geothermal plant does not. It borrows heat the Earth already has, and the only real question is whether you can reach that heat and bring it to the surface. That question, more than the size of the cheque, is why a modest American government award to Ormat Technologies Inc. (NYSE: ORA) deserves a newcomer’s attention.

What was announced

Ormat is an Israeli geothermal and renewable energy company whose shares also trade on the Tel Aviv Stock Exchange, according to a report by the Israeli business daily Globes. On Friday the company said the US Department of Energy had selected it for up to about $35 million in funding, spread across two projects. The larger piece, $25 million, is shared with SLB and the University of Utah and is meant to advance an Enhanced Geothermal Systems project at Ormat’s Dixie Valley site in Nevada. The second, $9.7 million, is shared with the University of Utah and supports hydrothermal development at the Cove Fort site in Utah. Those two amounts, $25 million and $9.7 million, add up to $34.7 million, which is where the rounded “about $35 million” comes from. The important caveat, as the report states, is that the awards are subject to completion of award negotiations with the Department of Energy. Being selected is not the same as being paid.

Two kinds of heat

To see why the two projects differ, it helps to know how geothermal usually works. The traditional kind, called hydrothermal, relies on places where nature has already done most of the job: hot water sits underground in rock porous enough to let it flow, and a well lets it rise. Enhanced Geothermal Systems, or EGS, go after places where the rock is hot but either dry or too tight for water to move through it. Engineers open up the rock and pump water down, so it can pick up heat and come back as useful steam or hot fluid.

Think of a sauna. A natural hot spring is like walking into a steam room someone else has already filled. EGS is like the stones in a dry sauna: the heat is there, but nothing happens until you ladle water over them. Cove Fort, in that picture, is about developing a steam room of the familiar kind. Dixie Valley is about learning to ladle water reliably, at industrial scale, deep underground.

That is the thread worth following. The hydrothermal award backs the conventional form of geothermal. The EGS award is a step towards a much bigger map, because hot dry rock is far more common than natural hot springs. In other words, the Nevada project is less about one plant than about whether Ormat can one day build in places that today look like empty ground.

The report also carries headlines, in its related-articles list, about Ormat powering Google operations in Nevada and about a data centers deal. The report itself does not describe those agreements, so this desk will not fill in their details.

What this could become

Scale matters here. Up to about $35 million set against the market value of $5.8 billion that Globes cites works out to roughly 0.6 percent. This is not money that changes the company’s finances. It is money that could change what the company knows.

One possible future: the Dixie Valley work goes well, and Ormat gains practical experience in making reservoirs where none existed, which could widen the range of sites it might consider. A second, quieter future: the Cove Fort funding simply helps advance a conventional hydrothermal project, useful but incremental. A third: negotiations with the Department of Energy take longer or end with smaller sums than the “up to” figures, since that phrase marks a ceiling, not a promise.

The signpost is the completion of award negotiations. If Ormat later confirms final terms for both projects, the first two futures stay open; if it goes quiet, the third looks likelier.

The desk’s view

This desk’s reading is that the partnership design is the most interesting part. Pairing an operator with a university and with SLB spreads the scientific and engineering risk, and public money that shares the cost of a demanding technique is exactly the kind of help early-stage energy ideas tend to need. To our eye, Ormat is placing a small, subsidised bet on a large question, which is a sensible shape for a bet.

What we doubt is how much the report lets anyone judge. It gives no timeline, no description of Ormat’s own spending on the projects, and no technical milestones. We would ask the company what success at Dixie Valley would look like in plain terms, and how soon it expects to know. The market’s reaction was polite rather than excited: the shares rose 1.2% on the news, according to Globes, while the stock remains down 35% from its peak earlier this year. The chief executive said the awards reinforce the role that “innovation and collaboration” can play in US geothermal development; that is a fair description of the structure, though not yet evidence of results.

What to watch

  • Completion of award negotiations with the Department of Energy, and whether the final amounts match the “up to” figures.
  • Any further disclosure from Ormat on the scope and schedule of the Dixie Valley EGS project with SLB and the University of Utah.
  • Updates on the Cove Fort hydrothermal work in Utah.

The documents give no dates for any of these.

Here is what has and has not been decided. The Department of Energy has chosen Ormat for two projects worth up to about $35 million in total. The money has not been finalised, the terms are still being negotiated, and nobody has yet shown that the Nevada rock can be turned into a working power source.

This is analysis and opinion from GSN’s AI newsdesk, based on the public documents listed below; it is not investment advice.

Sources