Page 263 - Geothermal Energy Renewable Energy and The Environment

Use of Geothermal Resources: Economic Considerations 253

The capacity factor for geothermal power production is the highest of all energy conversion tech-
nologies, regardless of whether one is considering flash or binary geothermal facilities. This excep-
tional performance is the consequence of several factors that make geothermal energy production
attractive. One factor is that geothermal power production requires no fuel cycle, as discussed in
Chapter 1. The absence of a fuel cycle insulates geothermal power production from the necessity of
adjusting output to fuel availability and to the volatility of fuel prices.
Another important factor is the baseload nature of geothermal energy. Since it is not affected by
intermittency imposed by externalities such as weather, diurnal cycles, or other factors, it can func-
tion indefinitely without interruption.
Additionally, geothermal power plants operate under relative modest temperature (< 350°C) and
pressure conditions. Power plants that burn fossil fuels must function at temperatures in excess
of 2000°C. Nuclear power plants must accommodate an environment with strong radiation fields.
The relatively modest physical conditions that geothermal power plants experience result in lower
stresses on the materials composing the facility, allowing long life times and less disruptive main-
tenance efforts.
It is the combination of these factors that allow geothermal power generating facilities to achieve
the high capacity factors of which they are capable.

leveliZed cosTs
The ability to compare the cost of generating power using different conversion technologies is
crucial for developing investment strategies, incentive policies, and budgets. One standard method
for doing this is through levelized cost analysis. The levelized cost for power generation is the
minimum cost at which the power generated by the conversion technology must be sold in order
for the facility to break even. Levelized cost takes into account the cost of constructing a facil-
ity, financing, operation costs, maintenance costs, fuel, and the lifetime for operations and power
production. Such an analysis can also include incentives that have been put in place as a result of
policy decisions, taxes, and other costs or benefits that accrue to a technology. But, for accurate and
reasonable comparisons, the same factors must be used in an analysis when comparing different
conversion technologies. Since publicly owned utilities, investor owned utilities, and commercial
enterprises have different taxes structures, incentives, and pricing controls, it is also important that
a levelized cost analysis compare enterprises that function within the same financial environment.
Figure 13.2 shows the levelized costs for various conversion technologies, as compiled for
the state of California for publicly owned utilities for the year 2007 (Klein and Rednam 2007).
Although the absolute values for the levelized costs are different if one were to consider inves-
tor owned utilities or private commercial enterprises, the relative relationships remain about
the same.
The most significant point that emerges from Figure 13.2 is the relatively low levelized costs
for wind and geothermal conversion technologies. For geothermal energy, this reflects a variety of
aspects about the technology that allow it to produce energy at low cost. These include the absence
of a fuel cycle, the extremely high capacity factor and the low costs of maintenance and operation.
Wind is comparable in levelized cost because it has low initial capital expenditures and no fuel costs
despite its lower capacity factor.
Also shown in the figure is the range of retail rates charged to consumers. As is evident, most
renewable energy conversion technologies are competitive within that retail range, with geothermal
and wind being the most competitive in terms of levelized cost.
Figure 13.3 provides a composite view of the relationship between capacity factor and levelized
cost. It is clear in the figure that there is a broad range in both capacity factor and levelized cost, but
consistently, the conversion technologies with the highest capacity factors have among the lowest
levelized costs. However, it is also clear that capacity factor alone is not a good indicator of level-
ized cost.