Wednesday, October 24, 2012

The economic viability of geothermal energy

A certain energy source can be very reliable, extremely positive for environment, abundant, and involve all kind of other positive energy aspects, but if it fails to meet the criteria of economic viability everything else will be soon forgotten. Geothermal energy is no exception and we must look at a number of different factors prior to deciding whether we can categorize geothermal energy as economically viable or not.

Let us first take a look at the production costs connected with geothermal power plants. In average, these costs are around 6.5 cents per kilowatt-hour. These aren't exactly the costs comparable to coal and natural gas, but if we look at other renewables we can say that geothermal energy has respectable production costs. 

Unlike solar and wind geothermal energy isn't intermittent energy source and doesn't depend on weather conditions like this is the case with solar panels and wind turbines. This is what gives geothermal energy excellent base load electricity. Since earth's heat is available 24-7, in all days of the year, it is fairly easy to predict the amount of generated electricity from given geothermal power plant. This predictability in terms of reliable output is especially valuable when developing expensive long-term energy projects, because this is what gives investors certainty, and they do not have to worry about negative factors like underproduction or "wasted" production.

Geothermal capital costs are relatively low (excluding of course relatively high drilling costs). Geothermal power plants typically require significantly less land as compared to wind or solar energy projects. Since geothermal power plants aren't that harmful for our environment like nuclear or coal power facilities they also require fewer permits, which is something that investors tend to highly appreciate.

Many new coal power plants are obliged to capture or sequester carbon emissions, which is a requirement that can add 40-60% to capital cost of building new coal power plant, while new geothermal power plants do not have to satisfy these standards as they are connected with minimum amount of carbon emissions.

The good side of geothermal energy is also very high load factor. Load factor refers to the difference between how much the generator is designed to produce and how much it actually produces. The smaller the difference, the higher the load factor. The load factor of conventional power plants is in average around 50%, while wind farms have the load factor of around 30-40%. Geothermal power plants, on the other hand, have load factor close to 90% because harnessing geothermal energy is impervious to weather conditions.

To conclude, respectable production costs, excellent load base electricity, and very high load factor – these all are important factors that decide in favor of geothermal energy as an economically viable source of energy. The drilling costs cannot be ignored though, but once further advancement in drilling technologies leads to cheaper solution(s) geothermal energy could even challenge fossil fuels in terms of cost-effectiveness.