Costs and Potential for Cost Reductions

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Up-front investments for resource exploration and plant construction make up a large share of overall costs. Drilling costs alone can account for as much as one

6 High temperature geothermal resources can be used in electricity generation, while lower temperature geothermal resources can be tapped for a multitude of direct uses, e.g., district healing and industrial processing. This section only deals with geothermal for electricity generation.

third to one-half of the total cost of a geothermal project. IEAs Geothermal Energy Implementing Agreement, which provides a framework for international collaboration on geothermal issues, is pursuing research into advanced geothermal drilling techniques and investigating aspects of well construction with the aim of reducing costs.

The resource type (steam or hot water) and temperature, as well as reservoir productivity, all influence the number of wells that must be drilled for a given plant capacity. Power-plant size and type (flash or binary), as well as environmental regulations, determine the capital cost of the energy conversion system. Because costs are closely related to the characteristics of the local resource system and reservoir, costs cannot be easily assessed for an average geothermal plant. Capital costs for geothermal plants vary from USD 1,150 per kW installed capacity for large, high-quality resources to USD 5,500 for small, low-quality ones.

Generation costs depend on a number of factors, but particularly on the temperature of the geothermal fluid, which influences the size of the turbine, heat exchangers and cooling system. U.S. sources report current costs of producing power from as low as USD 0.015-USD 0.025 per kWh at The Geysers field in California, to USD 0.02-USD 0.04 for single-flash and USD 0.03-USD 0.05 for binary systems. New construction can deliver power at USD 0.05-USD 0.08 per kWh, depending on the source. The latter figures are similar to those reported in Europe, where generation costs per kWh are USD 0.06-USD 0.11 for traditional power plants (liquid-steam water resources). Projected generation costs per kWh for hot dry rock geothermal systems in Europe are in the USD 0.24-USD 0.36 range.

New approaches are helping to exploit resources that would have been uneconomic in the past. This is the case for both power generation plant and field development. Drawing an experience curve for the geothermal power sector is difficult, not only because of the many site-specific features that affect the technology system, but also because of a lack of good data.

The costs of geothermal energy have dropped substantially from those of systems built in the 1970s and 1980s. Overall costs fell by almost 50% from the mid-1980s to 2000. Large cost reductions, however, were achieved by solving initial problems of science and technology development. Future cost reductions may be more difficult to attain.

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