Economics of Direct Use Geothermal Development

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Economics of Direct Use Geothermal Development

• R. Gordon Bloomquist, Ph.D.
• Presented by
• Andrew Chiasson
• Geo-Heat Center

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Economic Factors Common to all ProjectsSystems
and Equipment

• Provision of fuel, i.e. the geothermal resource.
• Known vs. unknown resource
• Design and construction of the conversion
  facility and related surface equipment
• The distribution system and customer connections
• Retrofit costs

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Economic Factors Common to all ProjectsFinancial

• The generation of revenue
• How will heat be used?
• Financing
• Ownership structure
• Utility
• Energy services company
• Private company or individual
• Economic evaluation
• Payback period
• Return on investment
• Level of risk

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Obtaining Access and Regulatory Approval

• Unknown resources
• Obtain rights to explore for and develop
• Access must be obtained through lease or
  concession from the surface and subsurface
  owners.
• Such access may require lease payments and/or
  royalties.
• Water rights
• Water disposal requirements
• Environmental assessments and securing all
  required permits and licenses

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Systems and EquipmentWell Drilling

• Well cost can vary from a few tens of thousands
  of dollars to million dollars per well
• 30/ft to 300/ft (100/m to 1000/m)
• Recent cost increases due to
• Labor and material supply vs. demand
• Fuel costs
• Steel and cement costs

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Energy Distribution

• Distance from geothermal source to the end user
  is one of the key factors in the project
  economics
• The further the load from the source, the larger
  it needs to be to offset capital costs
• Pipeline costs are often as much or more than
  drilling costs
• How much over-sizing for potential future uses?
• Insulated vs. un-insulated pipelines
• Metal vs. plastic piping

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End Uses of Thermal Energy

• Generally desire as high a capacity factor as
  possible
• consider absorption cooling
• peaking systems
• cascaded uses
• heat pumping of low
• Retrofit costs
• water vs. air systems
• central vs. unitary systems
• Central vs. end-use heat exchangers
• Monitoring and control systems (especially in
  district systems)

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Revenue Generation

• Sale of thermal energy itself
• district systems
• Energy savings, lower annual costs relative to
• Fossil fuels
• Wood
• Biomass
• Other incentives
• Renewable credits
• Tax credits
• Carbon trading

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Improving the EconomicsCo-Generation, Cascaded
Uses
Optimal Use of Resource
Snow Melting
Heat Pump Applications
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Improving the EconomicsCo-Production

• Refers to the production of other marketable
  products from geothermal brines besides energy
• Silica
• Metals
• Hydrocarbon

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Summary

• Economic factors that affect direct-use
  geothermal projects are complex and variable
• Energy source gt Distribution gt End Uses gt
  Fluid Disposal
• Project ownership structure
• Revenue generation
• Regulatory issues
• A good, flexible pre-design is necessary, refined
  as project progresses

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The End