Green investors should go geothermal

FRANKFURT, GERMANY - Investors looking for fresh opportunities in the volatile renewable energy sector should look at stocks in the geothermal industry, a VCH Investment Group fund manager told Reuters.

"Geothermal energy, albeit still a tiny market itself, is a young growth area but a strong one. You can see that already happening in the United States, where there is large geothermal activity," Olaf Koester said in an interview.

Geothermal power — which, along with solar thermal power, is part of the second generation of renewable energy sources — uses the earth's inner heat and turns it into electricity by using specially designed power plants.

Koester's fund — which quadrupled its volume in 2009 and stands at 10 million euros (US $14.04 million) — solely invests in global renewable energy stocks, including more traditional fields such as photovoltaic, wind and water.

But Koester expects the geothermal market will grow to above 20 gigawatts (GW) by 2020, from about 10 GW in 2008, compared with expectations of more than 150 GW for solar and more than 1,000 GW for wind power.

Koester said that the U.S. will be one of the growth drivers in geothermal power and referred to large geological activity in Hawaii and the San Andreas fault.

"This is why the first question I asked Ormat was whether they could build earthquake-proof geothermal plants," he said, noting that Ormat does build such plants.

Ormat Technologies is one of the market leaders in the geothermal sector and, along with Germany's Daldrup and Waterfurnace Renewable Energy, held in Koester's fund, which gained about 12 percent in 2009 versus a 3 percent gain in the S&P Global Clean Energy Index.

"One reason why I like the sector is its stability. Unlike wind and solar power — where you need the wind to blow and the sun to shine — geothermal power is stable and sustainable. You can have energy creation 24/7 without any fluctuation."