Earlier this month an article published on Oilprice argued that the future for geothermal power was limited, at best. In short, the article argued;
• There are a shortage of high-temperature resources;
• Geothermal heat can’t be transported and must be used on site; and,
• Questioned geothermal power sustainability.
However, these three points have little to do with geothermal power’s barriers to growth for the following reasons;
• When including temperatures as low as 95?C the resource base vastly expands. With Organic Rankine Cycle technology, geothermal brine can produce electricity at temperatures less than that of boiling water. The geothermal resource base is therefore extremely diverse. New exploration combined with improved technology continues to add generation to countries around the globe.
• In addition, the geothermal industry today is at a similar development stage as the oil industry at the early part of the 20th century. At that time, most of the oil fields had some type of surface expression. Later, oil companies searched for hidden reservoirs and discovered oil fields without geologic surface expressions. If we assume the same pattern of development for the geothermal industry, it is reasonable to anticipate that there are similar large numbers of hidden hydrothermal systems waiting to be discovered
• While geothermal heat must be used on site, electricity can be transported vast distances.
• Geothermal power is, without question, sustainable when fields and resources are managed well. Some fields in California generated electricity for close to half a century, some in Italy even longer. Related: Has The E&P Industry Lost Touch With Reality?
Attend any geothermal conference and you will hear a vastly different list of the barriers hindering geothermal power’s growth. The most significant global barrier is the high upfront risk associated with development.
Exploration can eat up about a third of a project’s costs. Geothermal projects have high upfront risks and significant upfront drilling costs. The graph taken from the World Bank Geothermal Handbook illustrates this problem effectively. About half of a project’s funds need to be spent before plant construction even begins.
GEA estimates about 80 or so countries are currently building or exploring for geothermal power resources. Together these 80 countries account for a significant majority of the global population, including countries such as the U.S., Indonesia, The Philippines, and China. Many of these countries’ power plants are in the early stages of exploration and development. As with all natural resources estimates, these countries’ estimates are not static figures. As knowledge of the resources grow, oftentimes so do the estimates.
For example, go back to the late 70s and the U.S. potential was estimated about 23 GW plus or minus a few gigawatts by the United States Geological Survey (USGS). USGS has since increased that estimate to 39 GW of identified and undiscovered systems. In addition, that estimate only counts high temperature, traditional geothermal resources. This excludes lower temperature resources, Enhanced Geothermal Systems, Co-produced fluids and Geopressured technologies which can even further increase that 39 GW number. Related: Oil Price Rout Set To Inflict Real Pain On Russia
Many countries today are like the U.S. was in the 70s. They only recently placed geothermal on their radar and the industry is learning more about their resources as new studies and research is published on a regular basis.
Part of the reason there is limited knowledge of geothermal resources is that the industry is still very young compared to other energy sectors. The geothermal industry grew out of larger oil and gas companies in the 70s and 80s. These oil companies such as Unocal, Chevron and others were looking for large projects to develop like the Geysers in California.
After Standard Offer 4 contracts ended for renewables, many pulled out of the sector, although their fingerprints remain. Many big oil and gas companies today still have geothermal subsidiaries that build facilities, explore for resources, operate power plants, or provide geothermal parts and engineering services.
Unfortunately, the average geothermal project struggles to attract private or institutional investors until a resource is proven and power plant construction begins because of the project’s risk profile. This misfortune translates into a need for geothermal companies to rely on government assistance, donor money, or venture capital to advance out of the earliest stages of development. A lucky few companies, which are large enough, can finance projects off their balance sheet but this is a minority of power producers in the sector. Related: 9 Reasons Why We Should Be More Worried About Low Oil Prices
There is good news, however, as many government agencies have identified this problem as the main barrier to geothermal power’s development and taken preliminary steps to address it either through investing in technology or good public policy to help projects advance.
For example, The World Bank’s Global Geothermal Development Plan has mobilized $235 million for early-stage investment in geothermal energy projects in developing countries. Alternatively, countries with partial government involvement in the energy sector such as Kenya or Indonesia engage in early public exploration and tendering of proven fields to attract private investment. The U.S. Department of Energy’s FORGE program is expected to accelerate breakthroughs in enhanced geothermal systems which could help increase the production of older fields while opening doors for new geothermal field previously thought out of reach.
So in conclusion, the main global barrier to geothermal power’s growth is not limited resources, or questions about heat, reliability, or sustainability. The barrier is instead a question of risk. How can government agencies and private companies reduce upfront risk of geothermal exploration with technology and public policy so that new geothermal resources can be discovered and built into power plants? Many in government agencies, donor banks, and companies in the private sector are taking steps in the right direction to address these risks.
(Click to enlarge)
By Benjamin Matek for Oilprice.com
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