Geothermal Energy Costs

Geothermal power generation typically involves relatively high levels of capital investment. Such expenditure, required to prove the geothermal resource capacity, involves some risk. Geothermal power projects involve high capital investment for exploration, drilling wells, and installation of the plant, but the projects have low operating costs because of the low marginal cost of fuel. Return on investment is not achieved as quickly as with cheaper fossil fuel power plants, but longer term economic benefits accrue from the use of this indigenous fuel source. Capital costs per kW are higher as the plant becomes smaller.In comparison, fossil fuel station capital costs are usually significantly cheaper than geothermal power stations, but fuel costs are much higher. Diesel powered generation plant capital costs, for example, are typically less than 50% of the cost of geothermal plants. However, diesel can cost between USD 3 to 6 per GJ. There are many other benefits in utilising an indigenous geothermal energy resource. Geothermal power reduces the national reliance on imported fossil fuels, thereby saving valuable foreign exchange earnings. With the unit cost of diesel generation at least USD 0.10 per kWh and up to USD 0.20 per kWh, geothermal generation is a very attractive option, especially in remote, off grid areas and small islands where diesel generation is often the only alternative for power generation. Generation costs depend on a number of factors, but they are particularly determined by the temperature of the geothermal fluid produced, which influences the size of the turbine, heat exchangers, and cooling system. The DOE reports that current costs of producing power are as low as USD cents 1.5 to 2.5 per kWh at the Geysers (the largest geothermal power facility in the world), USD cents 2 to 4 for single flash, and USD cents 3 to 5 for binary systems. New constructions deliver power at USD cents 5 to 6.5 or 8 per kWh, depending on the source. These figures fall within the ranges quoted below from the World Bank. The latter figures are similar to those reported in Europe. Generation costs per kWh are EUR 0.05 to 0.09 for traditional power plants (liquid-steam water resources) and EUR 0.20 to 0.30 for HDR.

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