With negligible fuel costs and no greenhouse gas emissions, geothermal energy offers base load power generation that operates continuously. Nonetheless, geothermal energy remains economically unattractive due to large capital investment and a high level of technological risk. Despite its large resource base, geothermal energy supplies less than 1.0 percent of the world's energy. The total installed capacity for geothermal power around the world is 10,902 megawatts (MW).
Favorable economics, including high fossil fuel prices, falling geothermal field development costs, extension of tax credits provided through government policies and carbon credits, are likely to boost the application of geothermal energy. Advancements in extraction technology and increased energy conversion efficiencies will also bolster the future growth of geothermal energy.
With more than 2,300 MW of geothermal projects under development worldwide, electricity production from geothermal energy will likely to experience high growth during the next seven years.
Higher Capital Cost versus Low Levelized Cost of Energy
Project developers indicate that the initial investment cost for geothermal plants is much higher than other renewable energy sources. The average investment cost of a geothermal plant depends on the type of technology installed and the number of wells drilled. Investment costs range between $2.5 million and $5.0 million per MW, which is more than 50 percent more costly than wind.
At first glance, the initial investment costs are quite high, which could discourage investors. However, geothermal plants have a higher capacity factor. Geothermal power production facilities can achieve capacity factors (the ratio of a plant's actual power output to its production potential) as high as 98 percent, the highest of any generation source. Given this high level of reliability, geothermal energy is considered to be an ideal source of base load power – an important factor to utilities and other energy purchasers. Many renewable energy sources, such as wind and solar, vary according to climatic conditions, and this diminishes their value as a source of energy. A geothermal plant's high capacity factor also enables it to produce roughly three to five times more power than a wind or solar project of similar size.
As a result, when levelized cost of energy (LCOE) is considered, geothermal energy is one of the most cost competitive sources of electricity generation.
According to the U.S. Department of Energy, the LCOE considers capital cost, fuel cost, fixed and variable operation and maintenance (O&M)cost, financing costs, and an assumed utilization rate of the power plant. Geothermal LCOE varies from $0.09 to $0.12 per kilowatt hour (kWh) in the United States. These figures do not include financial incentives, such as state or federal tax credits, which impact the cost and the competitiveness of the technology.
Looking at LCOE, geothermal energy is cost competitive with other renewable energy sources — solar photovoltaic, solar thermal, biomass and offshore wind energy — and with some conventional sources for power generation, such as natural gas conventional combustion turbine and advanced coal.
Advances in low-grade resources, improvements in drilling techniques, and increased deployment are expected to significantly reduce the capital and LCOE of geothermal plants.
Current and Future Status of the Geothermal Market
The global geothermal power market experienced high growth during the last three years due to increasing government concerns about energy security and independence. In addition, government incentives on renewable energy have contributed to the acceleration of market growth.
In North America, geothermal energy qualifies for inclusion under certain tax programs such as the U.S. production tax credit (PTC) and the Canadian ecoEnergy for renewable power programs, for regional incentives such as renewable portfolio standards (RPS), and for accelerated depreciation.
Europe, Germany and Spain, the world leaders in wind and solar energy markets, have passed feed-in-tariffs for the geothermal energy sector. Other incentives, such as the geothermal finance and awareness in European regions (GEOFAR) project, were designed to develop and promote financing for geothermal projects as part of the intelligent energy Europe (IEE) program. The availability of these incentives and mandates serve to enhance project economics and enable developers to attract project financing.
Geothermal Energy Market: Installed Capacity Forecast (Global), 2007-2014
Source (News - Alert): Frost & Sullivan Analysis
In terms of installed capacity, by the end of 2010, there were approximately 10,902 MW of geothermal installed capacity in the world. It is expected that more than 4,000 MW will be installed during the next four years.
Due to its vast geothermal resources, the United States is the world leader in geothermal energy production.
Total installed geothermal power capacity in the United States reached 3,086 MW in 2010. The majority of this capacity has been installed in California and Nevada, which represented 97 percent of the total U.S geothermal market.
All the world regions are expected to experience higher growth during the forecast period, although some are projected to grow more than others. The Asia Pacific region – particularly Indonesia, New Zealand and the Philippines — is expected to become the main location for new geothermal installation with installed capacity increasing more than 1,700 MW by the end of the forecast period.TMCnet publishes expert commentary on various telecommunications, IT, call center, CRM and other technology-related topics. Are you an expert in one of these fields, and interested in having your perspective published on a site that gets several million unique visitors each month? Get in touch.
Edited by Rich Steeves