If you take the 10 Freeway from Los Angeles, get on the 86S, or 111S, passed Coachella Valley, you will eventually hit the Salton Sea. The Salton Sea is a 35 (Length) by 15 (Width) mile lake situated in Southeastern Imperial County. It is situated at an altitude of -227 ft, is 51 ft deep at its maximum point and is highly saline at 44 parts per thousand of salt, or somewhere around 500 million tons. Salton City, located in the Westside of the lake, is where most of the Salton Sea inhabitants live. At the corner of Frontage and Marina St, you will find Sheriff Raymond Loera’s office. By the way, he is also the Coroner and the Marshal. The Salton Sea offers boating, fishing, bird watching and camping for visitors. But, many make their trek to the East Side of the lake, where a failed and abandoned city lays in ruins. Once thought to be the Lake Havasu of California, the East Salton banks are more like a nightmarish, nether-dimensional world, with gutted houses, dead fish and abandoned motels, which offers a counterpoint to the growing Salton City just across the bay.
But, the Salton Sea offers something much more sustaining and important: It is a gold mine for renewable energy. The sprawling desert that make up most of the area around the Salton Sea is a source of Geothermal Energy and provides enough space for large Solar Photovoltaic arrays, Solar Thermal and algae pools to synthesize ethanol and jet fuel. Most of the desert land in the Salton Sea is owned by the government, who uses it for oil drilling. All, except for a small 1,280 acre plot, which is privately owned. The story behind this plot proves not only the importance of renewable energy, it provides an invaluable example of how renewable energy can be a sound private investment, and with the right government incentives, have positive implications for many sectors of the economy.
I met Jeff Horwich on a day trip outing to the Salton Sea with my father. He works in the Jewelry Business in Downtown LA, and one of Jeff’s businesses was gold, so he had been one of my father’s clients. Jeff also dabbles in real estate, with a quite a few mortgages with Countrywide. “After 12 mortgages, you get a free hat” he told the waitress over lunch in a nearby café.
Jeff is the owner of the aforementioned 1,280 acre plot. On the drive to the Salton Sea he told me the story of how he obtained the property. A man walked into his shop a couple of years ago, and he got to talking about a property that he owned. He wanted to sell Jeff this 1,280 acre plot in the Salton Sea for 200$/acre. Jeff thought it over and politely declined. Over the next year, the man kept reminding Jeff about the property, until Jeff gave in and bought it. He thought he could use the land to ride ATVs with his son, and could possibly rent out the land for camping. A year after he bought the land, a real estate company contacted him with interest in buying the land. “I thought I could get maybe $1,000/acre on my $250,000 investment,” Jeff told me. So, he sat down at the bargaining table and asked how much they were willing to offer. Their first offer was $12,000/acre. An alarm went off in Jeff’s mind. Why would they offer $12,000/acre on a land that he got for $200/acre, with no accessible resources (there was oil on the land, but it was under a layer of hot water, and inaccessible)? He told the company he would think about it, and got up. $15,000/acre. “They offered me nearly $4 million just for getting out of my seat,” Jeff explained. Once the cash rolled in, he would make nearly 77 times his investment, or somewhere in the neighborhood of $19.2 million. He said he would have to confer with his wife, and left to go do some research.
He got in contact with Iceland America, a company that does commercial geothermal. He walked into their office and sat in the waiting room. On the wall was a picture of strange looking geological formation, or what looked like a miniature volcano. The secretary explained that it was a Carbon Dioxide well, and it was a sign of commercially viable geothermal energy. He had at least 5 on his property. Stunned, the secretary asked him to point out his property. He showed her the West side of the Salton Sea. At first, she didn’t believe him, as she thought all the land around the sea was government owned. Apparently, the man who sold the property had it in his family since the early 1900s and it had never been bought out. Jeff was rushed into the main office, where deals began to spring up. Their offer was $50,000 up front, and %2.5 of the royalties from anything mined. His counteroffer: $500,000 and %2.5 of the royalties. The deal went back and forth for some time, with Jeff finding himself legal representation. When Jeff didn’t budge, the deal broke down and Jeff went elsewhere.
But, first, Jeff had to verify that the geological formations were actually commercially viable geothermal. He hired an independent geologist to do a Helium-3 to Helium-4 ratio measurement. He said if you’re ratio is below 1, you don’t have commercially viable. But, if it is high enough above 1, then you have a gold mine. His ratio: nearly 5. This meant he had magmatic pockets of geothermal energy, which was commercially viable. The estimates were that he had a 100Mw potential on his property for geothermal energy. His property was also large enough that he could put solar photovoltaic arrays on it as well. When he was approached by a company for solar, they estimated that they could build nearly 50Mw of solar. Beyond solar, he also got an offer from an independent environmental group to dig a algae pool to harvest algae for jet fuel. They could produce 33 million gallons of fuel/yr. at $1.75/gallon revenue, over 200 acres with 1,000 acre ft of water. Did I mention that he could also capture carbon dioxide from the wells to feed back into the algae pools? But, wait, there’s more! He is 1.25 miles from the “Greenpath” line which an 850Mw proposed energy line through Imperial and San Diego Counties. And, he will connect his 100Mw geothermal and his 50Mw solar right to it. This will eliminate the cost of transmission problem that faces many renewable energy projects.
Jeff has what we in the renewable energy field call a renewable energy "farm." Following this discovery, he began to shop around for companies who would build a geothermal plant on his property. After going through the likes of Mitsubishi, he found RAM Power, who offered him 4% of the royalties on all resources mined, and offered to build solar thermal on the property as well. The deal is not set in stone, but he hopes to finish negotiations with some company, RAM or otherwise, by the end of the year. REC is the company that has offered to build the photovoltaic array of nearly 50Mw.
The lingering perception is that renewable energy is not economically profitable, and that traditional oil drilling it much better on the bottom line. Jeff has proved this argument to be false, by turning his $250,000 investment into a nearly $200 million yearly revenue stream. I talked to him on the phone recently, and he told me how this cash breaks down:
1.Federal Incentive: 30% cash grant for geothermal projects starting by 2010 and completed between 2013-2016. This can be taken as a tax credit or a cash grant
2.Federal Incentive: 40% credit for the 1st year, and 20% for every year after up until 2016.
3.500% return in geothermal on every 1$ spent.
4.100 Mw of Geothermal = $135 million/yr in revenue
5.50 Mw of solar = $20 million/yr in revenue
6.200 acres of 1,000 acre ft of water for algae, at $1.75/gallon = $15 million/yr in revenue
With the low transmission cost, Jeff’s project will make its money back in 5 years. Beyond that, he will be contributing to power generation by renewable for the people of the Imperial and San Diego Counties, and the residents of Salton City. Did I mention that a house in Salton City is in the neighborhood of $90,000? Since the area is booming, in another 30 or 40 years, Jeff predicts that this revenue stream will extend to real estate.
What does this mean for the economy? First, it shows that renewable can be a profitable business. Second, this project will generate employment in the area, which has been growing rapidly in the last couple of years. It will also cut down on the cost of electricity for users of the new “Greenpath” line, and help people save on their utility bills. Third, geothermal is generates power 24 hours/day, which makes it 100% renewable in the purest definition. The only power that comes close is nuclear, and even nuclear is vulnerable to temperature increases. Lastly, it provides a renewable, sustainable energy alternative to petroleum. As much as companies like BP, Exxon-Mobil and Chevron have huge profits, those profits are based on a dwindling resource. Oil is not something that will sustain our energy needs into the near future. Besides the dwindling number, and the need for more drilling, oil refining causes high amounts of greenhouse gas pollution, and cars burning gasoline are a main source of carbon dioxide, which is a contributor to global warming. If we are to meet our future energy needs, local, national and international governments need to examine projects like Jeff’s, and promote investment into renewable energy. Jeff’s project shows that private individuals and companies can help clean up the environment, offer low cost power to millions of people and make lots of money in the process.
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