Geothermal Energy
EM 530 – Energy, Economics & the Environment

Josh Marder – Nicole Glick – Ali Yasir – Giovanni Rumbolo 4/20/2012

TABLE OF CONTENTS Problem Statement: Introduction: Page 2 Page 2

Past and Present Uses: Page 3 Energy: Economics: Environment: Risk Analysis: Recommendations: Page 7 Page 19 Page 28 Page 32 Page 34

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PROBLEM STATEMENT There is a looming energy crisis in the United States, as the country is currently relying on a finite supply of fossil fuels. This energy crisis, along with economic growth and environmental stability must be sustained by developing alternative, renewable energy sources. Population is expanding at a geometric rate and each doubling will increase energy demand that will far exceed supply. China and India have recently developed into industrialized nations and several more will follow. Many leading scientists describe the “tipping point” for carbon dioxide emissions as having already passed, meaning it could be too late for renewable energy options to have an impact (McKibben, 2008). However, until the full impact is determined, scientists worldwide should be developing energy alternatives, in order to help stabilize the environment, secure national policy interests and boost to the economy. Geothermal energy represents a sizeable, renewable power source and is one of several alternative energy options that should be utilized. In order for this technology to be able to move forward with any success, it must achieve the highest efficiency, through smart thinking and conservation methods. Society needs to integrate energy, environmental, economic and political policies; otherwise, there is no chance for a sustainable future. INTRODUCTION TO GEOTHERMAL ENERGY Geothermal energy originates as heat from the Earth’s core and is constantly flowing, conducting outwards towards the surface. This is most easily displayed in the form of geysers, like Old Faithful in Yellowstone National Park; however, geothermal heat is available everywhere in the world. The majority of rainwater that seeps into the ground remains under impermeable rock in superheated geothermal reservoirs. A 2010 study of US capacity by researchers at the National Renewable Energy Laboratory (NREL) and the U.S. Department of Energy (DOE) placed geothermal in the following categories: 1) 2) 3) 4) Identified hydrothermal (6.39 gigawatts) Undiscovered hydrothermal (30.03 gigawatts) Enhanced Geothermal Systems (EGS) (7.03 gigawatts) Deep EGS (15,908 gigawatts)

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Cumulatively, the energy potential for geothermal is substantial and will be available for several billion years (Trabish, 2010). PAST AND PRESENT USES FOR GEOTHERMAL ENERGY Ancient societies, such as the Romans, used geothermal heat for spas and to heat rooms; 10,000 years ago in the US, Native Americans used this heat source for cooking and medicine, and have a history with every major hot spring in the country (US Department of Energy, 2011). France has been heating up to 200,000 homes with geothermal heat since 1960. Today, geologists and engineers have better technology and equipment for identification and speculation of reservoirs for power plant electricity production. However, geothermal heat and cooling, whether from a power plant or small residential system, are not common in the United States, as of yet. Geothermal uses fall into three categories: 1) Direct-use, for example the Blue Lagoon spas in Iceland; 2) Dry-steam, flash or binary power plants for large-scale electricity generation, and 3) Heating, air conditioning and domestic hot water for small systems that replace existing HVAC applications The latest geothermal loops are made out of high-density polyethylene, which have excellent thermal properties, do not oxidize, and have some elasticity. “Low-level” geothermal involves geothermal loops that are no more than 250 feet into the ground. These systems are used for heating and cooling and have minimal risks in quake zone unless they are drilled into bedrock. Even in bedrock, the plastic is very durable and it has some elasticity. In terms of infrastructure, the municipal sewer and potable water delivery systems would be damaged first before a geothermal loop in the event of an earthquake. “Mid-level” geothermal consists of loops 250-1200 feet into the ground and are mostly used for commercial applications that also provide heating and cooling. The risks for quake zones are a bit higher then low-level, but still minimal. “High-level” geothermal are loops 400-2500 feet into the ground. These are for electricity generation and are far more complex than the other two methods.

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For a small residential system operating in the winter, the liquid in the underground pipes absorb the geothermal heat from the ground, which is compressed by the heat pump and distributed throughout the home. In summer months, the ground acts as a heat sink, instead of a heat source in a residential system, and provides cool air to the home. Heating can be done either with conventional HVAC methods or hydronic floor heating. A residential geothermal system can also provide domestic hot water to the home and act as a 3-in-1 HVAC system (Exhibit 1). To fully understand the impact that geothermal energy can have on the home or office, hydronic flooring, building efficiency and energy conservation must be considered. EXHIBIT 1:

Hydronic Flooring Hydronic flooring is an example of a high-efficiency product combination that works very well for residential systems, by utilizing coils beneath floors to provide heat. This should ideally be done in new-construction projects, as part of an architectural and engineering plan. Retrofitting the hydronic flooring is possible but not recommended, due to the high costs of ripping up and repairing floors. Traditional forced-air heating requires that the air is initially

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heated to approximately 130°F, goes through the vent at about 90°F, then dissipates at room temperature, to heat the space. The fluids inside hydronic floors remain at a level of 65 - 75°F; when coupled with a geothermal system, this is a more efficient system that will provide cost-savings over the long term. Other advantages, such as better air quality and the uneven heat supply of forced-air are additional values of hydronic floor heating (Hackleman, 2000). A long-term approach to the architecture, engineering, and design portion of the three E’s is essential to the success of newly implemented energy systems, like geothermal. Building Efficiency Techniques Efficiency will need to be a trademark of the future home and office; considerable advances have already been made in several areas. LED lighting is about nine times more efficient than incandescent bulbs and do not have the environmental concerns associated with CFL models. Energy Star products, such as refrigerators, washer/dryers and dishwashers are designed for efficient use. Architects can now use passive solar techniques and better windows and doors that work to conserve heat or cool as necessary. Green spaces are replacing blacktops, as the former lowers cooling needs for a building, while the latter heats surfaces up to very high temperatures. The technology and infrastructure already exists to utilize renewable energy systems, like geothermal, with all available building efficiency techniques to create the high-efficiency homes and businesses of the future. Geothermal / Solar Photovoltaic (PV) Hybrid Systems It is possible to combine solar PV with geothermal energy to create a hybrid system that provides 100% renewable energy, known as a net zero home. Geothermal systems do not require much electric power to operate; actually, with the right amount of PV panels and a battery backup, it is possible to power a home that is completely off the grid for power needs. The batteries will provide power when there is no sun and a backup propane heating system can likewise be installed. For grid-tied homes, the battery backup is not necessary, because at night the geothermal system will run on grid electricity and any excess solar generated power will be sent back to the grid. The takeaway here is that a Geothermal / PV hybrid system gives homeowners the ability to have total energy independence; even a small PV system can supply the electrical power necessary for a small geothermal system (GeothermalEnergy.org, 2011).
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Conservation Measures There is no doubt that Americans have grown accustomed to an excessive and wasteful process in regards to energy consumption; unfortunately, this problem is being replicated globally by other nations looking to join the industrial and technological era. Europeans emit about half the carbon dioxide per capita compared to Americans, and this excess significantly contributes to global warming concerns. If the US does not lead the way to a new form of living that takes energy efficiency and conservation into account, what chance does the rest of the world have? A true shift in consumer and market behavior is necessary on every level of modern society for there to be a sustainable impact on the 3 E’s, and it may take a political policy solution to implement the necessary changes. Several conservation methods are already visible in modern society, but these methods need to become standard practice. Systems like smart-grid technology and automated business functions need to be better utilized. Exhibit 2 details the “Energy Pyramid”, with renewables at the top, efficiency measures in the middle, and conservation forming the base of the pyramid. EXHIBIT 2:

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ENERGY Background The United States possesses vast underground stores of heat whose full potential has yet to be realized. The Earth’s interior reaches temperatures greater than 4,000°C (>7,200°F), and this geothermal energy flows continuously to the surface. The energy content of domestic geothermal resources to a depth of 3 km (~2 mile) is estimated to be 3 million quads, equivalent to a 30,000-year supply of energy at our current rate for the United States. While the entire resource base cannot be recovered, the recovery of even a very small percentage of this heat would make a large difference to the nation’s energy supplies. New low-temperature electric generation technology may greatly expand the geothermal resources that can be developed economically today. Unlike other renewable energies, such as wind and solar, geothermal power generation can operate steadily nearly twenty-four hours a day, seven days a week. Continual production makes geothermal an ideal candidate for providing nearly zero-emission renewable base-load power. In 2009, the 15.2 billion kilowatt-hours (kWh) of geothermal electricity generated in the United States constituted 13 percent of the nonhydroelectric, renewable electricity generation, but only 0.4 percent of total electricity generation (EIA 2010 Annual Energy Review 2008). The same year, nine states generated electricity from geothermal energy (AK, CA, HI, ID, MT, NV, OR, UT, and WY), but California alone accounted for 83 percent of U.S. geothermal electric generating capacity. Geothermal plays an important role in some of the states where it is installed. Geothermal facilities satisfy 4.5 percent of California’s electricity consumption and 2.1 percent of Hawaii’s (Energy Information Administration 2010, Hawaii Renewable Electricity Profile). Classification of Geothermal Energy Use Most of the heat inside the Earth originates from the natural decay of radioactive elements. Through various thermal processes, this heat is slowly transferred to the surface of the Earth where it can be accessed to provide for various human needs. The Geo-Heat Center at the Oregon Institute of Technology devised a simplified geothermal classification system based on the temperature of the resource. This classification system defines geothermal
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energy in terms of temperature (low, moderate, and high temperature resources) and how the geothermal heat can be utilized. Geothermal energy has many uses besides the most well-known applications — electrical power production and geothermal heat pumps. For the purposes of this paper, geothermal resources are divided into three main categories:  Geothermal Electricity Production,  Direct Use  Geothermal HVAC systems Exhibit 3 shows that in the United States, more than 90% of geothermal production is from power plants. These plants, with aggregate capacity of more than 3,100 MW, accounted for 5% of the nation’s total renewable energy and almost 13% of non-hydro renewable generation in 2008. (EIA, July 2009) EXHIBIT 3:

Geothermal Electricity Production Geothermal power plants use the earth’s heat— in the form of underground steam or hot water— to spin a turbine and generate electricity. Wells hundreds to thousands of feet deep are used to deliver the hot fluid to the power plant on the surface, where the heat is converted to electrical energy. Nearly all the water is returned to the reservoir through injection wells to be reheated. Currently, geothermal electricity production is limited to certain
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western states where the hottest resources are closer to the surface. Advances in drilling and energy conversion technologies could make it possible to expand the use of geothermal power plants to other states. The three types of commercial geothermal power plants are dry steam plants that use resources of pure steam, flash steam and binary cycle plants that tap reservoirs of hot water. Dry Steam Dry steam plants draw steam directly from under the earth’s surface to a turbine that drives a generator. The steam then condenses into water and is re-injected into the geothermal reservoir. However, these resources are rare; only five such fields have been discovered to date. The only commercially developed steam field in the United States is The Geysers, located in Northern California, which began the commercial production of electricity in 1960. Flash Steam Geothermal reservoirs that contain hot, pressurized water are much more common and provide energy for all domestic geothermal power production except The Geysers. Flash steam power plants use resources that are typically hotter than 350ºF. Before fluids enter the plant, the pressure of the fluid is reduced until it begins to boil, or flash. This process produces both steam and water. The steam subsequently is used to drive the turbine; the water is injected back into the reservoir. These types of power plants operate in California, Hawaii, Nevada and Utah. Binary Cycle This rapidly expanding technology uses geothermal resources with temperatures as low as 190°F. Rather than flashing the geothermal fluid to produce steam, this type of power plant uses heat exchangers to transfer the heat of the water to another working fluid that vaporizes at lower temperatures. This vapor drives a turbine to generate power, after which it is condensed and circulated back to the heat exchangers. This type of geothermal plant has superior environmental characteristics compared to the others because the hot water (which tends to contain dissolved salts and minerals) is never exposed to the atmosphere before it is injected back into the reservoir. Binary power plants were introduced in the mid-1980s and are
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the fastest growing generating technology currently with more than 350 MW of binary generation capacity in California, Hawaii, Nevada and Utah. The Industry Despite its current limited application, geothermal energy has a very large potential for expansion; although most of the U.S. geothermal potential is in the western states. The U.S. Geological Survey estimates that current technologies could exploit nearly 40,000 MW of geothermal resources in America’s West, compared to a current U.S. electric generating capacity of roughly 1 million MW (Williams et al., 2008). The development of geothermal energy resources for utility-scale electricity production in the United States began in the 1960’s. Since that time, the continual development of geothermal resources and technology has positioned the US as a leader in the global geothermal industry. Exhibit 4 displays that the US currently has approximately 3187 MW of installed geothermal capacity, more than any other country in the world compared to the global capacity of 11224 MW for the year 2012. EXHIBIT 4:

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Current Installed Capacity Geothermal companies continue to increase the development of geothermal resources in the US. In 2010 geothermal energy accounted for 3% of renewable energy-based electricity consumption in the United States (US Energy Information Administration, Renewable Energy Consumption and Electricity Statistics 2010). While the majority of geothermal installed capacity in the US is concentrated in California and Nevada, geothermal power plants are also operating in Alaska, Hawaii, Idaho, Oregon, Utah, and Wyoming. Exhibit 5 draws a picture of total US Geothermal installed capacity by technology for the period of 1975-2012. Due to the varying resource characteristics of different geothermal reservoirs, a variety of technologies are used to generate geothermal electricity in the US. Dry-steam power plants account for approximately 1585 MW (almost 50%) of installed geothermal capacity in the US, and are all located in California. Another sizeable portion of installed geothermal capacity in the US (900 MW) is comprised of steam-flash power plants, the majority of which is also located in California. The implementation of binary geothermal technology (capacity of 702 MW) has enabled the industry to develop lower temperature resources, which has expanded the geothermal industry’s geographical footprint beyond California, especially in the last decade. The US geothermal industry’s trend of sustained steady growth continued in 2011 and the first quarter of 2012. In that period two geothermal power plants and three expansion projects to existing power plants were completed for a total of approximately 91 MW of newly installed capacity.

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EXHIBIT 5:

Direct Use Direct-use applications tap geothermal resources to provide thermal energy. These projects are feasible throughout a larger section of the country because they use more widespread, low temperature resources (generally from 70°F to 300°F). Direct use applications commonly support agricultural and industrial activities but are also an efficient means of heating and cooling buildings. Agricultural Applications Direct use of geothermal resources has been well received within the agribusiness industry, with the two primary uses being greenhouses and aquaculture (fish farming). Geothermal water (100°F/38°C and above) has been used in at least 40 greenhouses since the late 1970s, in the western states (Geo-Heat Center, Oregon Institute of Technology, 3201 Campus Dr., Klamath Falls). Many of these facilities cover several acres, raising vegetables, flowers, houseplants, and tree seedlings. The DOE Energy Efficiency and Renewable Energy program reports that greenhouse operators using geothermal resources estimate energy savings of about 80 percent compared to fuel costs for traditional energy sources (U.S. Department of Energy, 2006).
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Aquaculture ponds and ground heating to extend the growing season for specialty crops (85°F water and above) exist in 12 states. These Direct Use applications are usually in relatively rural settings due to the need for large amounts of land and can stimulate the economy for a rural area. District Heating During the 19th century, hot water began to be used for local space heating applications in the United States. However, it wasn’t until the 20th century that more widespread use of geothermal heat became popular. District geothermal systems distribute hydrothermal water from one or more geothermal wells through a series of pipes to several houses and buildings, or to blocks of buildings. District heating can save consumers 30 to 50 percent of the cost of heating compared with natural gas (U.S. Department of Energy EERE — Geothermal Technologies Program, Direct Use of Geothermal Energy 2006). The geothermal production well and distribution piping replace the fossil-fuel burning heat source of the traditional heating system. Boise, Idaho has a number of district heating systems to heat more than 350 buildings throughout the city, including the State Capitol. The first system has been in operation since 1892. In addition to heating buildings, Klamath Falls, Oregon, uses this technology for melting snow on some streets, bridges and sidewalks. Spa Health Facilities and Therapy Pools Warm water from hot mineral springs or shallow geothermal wells have been used by humans for bathing, soaking and recreation throughout history. Today’s spa facilities and therapy pools use warm water with methods similar to those used in ancient times as the primary means of health care and restorative recreation. This past decade has seen a revival in the spa industry with 1 in 4 Americans having visited a spa and over 32 million active spa-goers worldwide. In 2006 there were 110 million spa visits generating $9.4 billion of revenue in the U.S. with an increase of 16 percent from 2005 to 2006 (International Spa Association, Lexington, Kentucky, The North American Spa Industry Fast Facts, 2007). Spa facilities and pools range from multi-million dollar resorts with luxury spas to reasonably priced public bathhouses and natural pools. The economic impact to communities is largely due to the draw of visitors into the area, with related expenses for food, lodging, and recreation needs as well
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as employment and housing for staff of the facilities (Altman, Nathaniel, Healing Springs, The Ultimate Guide to Taking the Waters, Healing Arts Press, Rochester, Vermont, 2000). Currently there are approximately 200,000 people employed in the U.S. Spa industry. In West Texas for example, at Chianti Hot Springs there are over 80,000 visitors annually (International Spa Association, Lexington, Kentucky, The North American Spa Industry Fast Facts, 2007). Geothermal Heat Pumps Geothermal heat pumps (GHPs) use the Earth’s huge energy storage capability to heat and cool buildings, and to provide hot water. GHPs use conventional vapor compression (refrigerant-based) heat pumps to extract the low-grade heat from the Earth for space heating. In summer, the process reverses and the Earth becomes a heat sink while providing space cooling. GHPs are used in all 50 U.S. states today, with great potential for near-term market growth and savings. Exhibit 6 shows an illustration of a geothermal heat pump for a commercial application. Although these systems are powered with electricity, the power is used to move, not generate, heat; consequently, a heat pump delivers three to four times more energy than it consumes. More than 1 million geothermal heat pumps operate across the country with a total capacity to generate approximately 8,600 MW of heat. Heat pumps use less energy than traditional heating and air conditioning systems because they use the earth as a heat source whose temperature is more constant than the outside air. For example, if the outside air temperature is 20°F a traditional air source heat pump requires electrical coils to boost that temperature to maintain a comfortable indoor climate of approximately 70°F. A heat pump, however, draws on the relatively constant temperature in the ground (usually between 50°F to 60°F) and thus does not require electrical booster coils to maintain that same comfortable indoor climate/air temperature. Heat pumps can reduce a building’s energy consumption by 30 percent to 50 percent, compared to conventional electric heating and cooling systems.

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EXHIBIT 6:

Geothermal HVAC One of the simplest ways to make use of the geothermal resource is through Geothermal Heating, Ventilation and Air Conditioning (HVAC) systems for homes and buildings. This application of geothermal resources can be used by anyone from the average homeowner to the large commercial developer for the heating and cooling of buildings. According to the U.S. Environmental Protection Agency (EPA), geothermal heat pumps are the most energyefficient, environmentally clean, and cost-effective systems for temperature control (Environmental Protection Agency, Space Conditioning: The Next Frontier — Report 430-R-93-004, 1993). From 2002 to 2006 there was a 71 percent increase in Geothermal HVAC system installations for residential applications in the United States (Energy Information Administration, Renewable Energy-Geothermal Heat Pumps Data and Information, from form EIA-902). There are three components to a Geothermal HVAC system: 1) the local soil and geological environment; 2) the thermal transfer exchange system, or loop field; and 3) the mechanical system or heat pump and the ventilation ducts inside the building. Most installations are done by small to medium sized mechanical engineering or HVAC companies who coordinate with the building
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contractor. Project coordination includes design of the loop system, a borehole drilling contractor, pump installation inside the building, and a ventilation contractor for the building. These systems have reduced maintenance costs because the equipment is typically inside the building and loops are below ground so they are not susceptible to vandalism or extremes in weather conditions. Recent Technological Developments Geothermal power plants need reservoirs that contain heat, water, and permeable rocks located less than 15,000 feet below the surface to generate affordable electricity. Researchers and geothermal developers are searching for ways to enhance the productivity of geothermal reservoirs and to use more marginal areas, such as those that have ample heat but perhaps are only slightly permeable to water, or which are at greater depths. Advanced power generation techniques may make it possible to generate electricity using much lower temperature resources while advances in drilling may allow developers to tap valuable resources located deeper underground. Low-Temperature Hydrothermal A hydrothermal system is defined as a subterranean geothermal reservoir that transfers heat energy upward by vertical circulation of fluids driven by differences in fluid density that correspond to differences in temperature. Hydrothermal systems can be classified into two types—vapor-dominated and hot water—depending on whether the fluid is steam or liquid water, respectively. Most high-temperature geothermal resources occur where magma (molten rock) has penetrated the upper crust of the Earth. The magma heats the surrounding rock, and when the rock is permeable enough to allow the circulation of water, the resulting hot water or steam is referred to as a hydrothermal resource. Exhibit 7 shows an illustration of a hydrothermal reservoir, showing the natural recharge, fractures, and heat source (Courtesy: Geothermal Education Office). Such resources are used today for the commercial production of geothermal power. They benefit from continuous recharge of energy as heat flows into the reservoir from greater depths.

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EXHIBIT 7:

Enhanced Geothermal Systems Deep geothermal systems (a.k.a. enhanced geothermal systems or EGS) are defined as engineered reservoirs that have been created to extract heat from economically unproductive geothermal resources. The deep geothermal/EGS concept is to extract heat by creating a subsurface fracture system to which water can be added through injection wells. The water is heated by contact with the rock and returns to the surface through production wells, just as in naturally occurring hydrothermal systems. Fracking and stimulation techniques are used widely in the oil and gas industry to extend production, and can be used to greatly extend and expand use of geothermal resources. Exhibit 8 (Courtesy: Southern Methodist University Geothermal Laboratory) gives a graphic idea of the domestic scope of geothermal resources at just 6 kilometers (3.7 miles), a nominal drilling depth in the oil and gas industry. Exhibit 9 shows the steps involved to access heat energy stored in hot rock formations lacking a natural water source which is achieved by creating an artificial reservoir using EGS technology.

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EXHIBIT 8:

EXHIBIT 9:

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Geo-pressured Resources The geo-pressured resource consists of deeply buried reservoirs of hot brine, under abnormally high pressure, that contain dissolved methane. Geopressured brine reservoirs with pressures approaching litho-static load are known to occur both onshore and offshore beneath the Gulf of Mexico coast, along the Pacific west coast, in Appalachia, and in deep sedimentary basins elsewhere in the United States. The resource contains three forms of energy: methane, heat, and hydraulic pressure. In the past, DOE conducted research on geo-pressured reservoirs in the northern Gulf of Mexico sedimentary basin, and operated a 1-megawatt (MW) power plant using the heat and methane from the resource (i.e. Pleasant Bayou, TX, 1989 – 1990). Co-Produced Geothermal Fluids Sometimes referred to as the ‘produced water cut’ or ‘produced water’ from oil and gas wells, co-produced geothermal fluids are hot and are often found in water-flood fields in a number of U.S oil and gas production regions. This water is typically considered a nuisance to the oil and gas industry (and industry is accountable for proper disposal), but could be used to produce electricity for internal use or sale to the grid. Like geo-pressured resources, co-produced geothermal resources can deliver near-term energy savings, diminish greenhouse gas emissions, and extend the economical use of an oil or gas field. New low-temperature electric generation technology may greatly expand the geothermal resources that can be developed economically today. ECONOMICS Geothermal Power Plants Power plants are a large-scale application of geothermal resources that produce electricity for a large population base. These power plants work on the same basic principle of conventional thermal power plants, harnessing the Earth’s heat to provide the kinetic power needed to move a turbine to produce electricity. Exhibit 10 displays the three different power plant systems.

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EXHIBIT 10:

DRY STEAM

FLASH

BINARY

Costs of Geothermal Power Plants There are a variety of financial factors that need to be taken into account when developing a geothermal power plant. These factors are mainly divided between Startup Costs and Operations & Maintenance Costs (O&M). Startup Costs Startup Costs are very capital intensive regardless of the type of power plant that is being developed. The follow are brief explanations of various factors that influence the startup budget of a power plant. Land survey costs are costs associated with locating sites with the best geothermal resources. This is time-intensive and expensive; however, this step is critical for the initial development of geothermal plants. Not all locations are suited for large-scale applications of geothermal energy, making it necessary to search areas with optimal ground temperature or suitable hydrothermal reservoirs. Land surveys provide planners with information regarding the suitability of a particular area, which allows the excavating decision to be made more appropriately and saves money on drilling equipment and labor.

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The decision to purchase development land is made using the current regulations, which state that a developer is required to lease or purchase the rights to 2,000 acres or more to fully explore a geothermal resource. Rural land values fluctuate between $400 and $15,000 per acre based on the state and region. Earmarking funds towards land purchases can dramatically increase the amount of capital needed for the investment. Excavation and development of plant locations are the most cost intensive factors when it comes to startup costs: they can amount to up to 36 percent of the total initial capital investments. One of the main reasons for this is the high costs incurred due to frequent replacements of expensive drilling equipment. One way for developers to get around this cost is to utilize existing holes already drilled by mining companies or oil and natural gas companies that encountered a dry source. Commissioning costs, which are basically the construction costs involved in building the power plant itself, can vary based on the type of geothermal design chosen for the plant. Currently, binary cycle plants are the most expensive to construct due to the heat exchange technology utilized in the power generation method. Decommissioning costs are a common expense that developers encounter during the construction of facilities and power plants. Once a plant has run its lifetime it needs to be decommissioned in order to prevent any negative impact on the environment and the surrounding properties in the area (USDA, 2012). Operations & Maintenance Costs O&M Costs are the ongoing expenses of running the power plant. For a geothermal energy power plant these costs are going to be relatively low and steady due to the main fuel source being the heat generated by the Earth’s core. Workforce and administrative costs cover the overhead associated with providing the workforce necessary to operate the plant efficiently as well as any related administrative costs. Services and supplies covers the overhead incurred for the maintenance and replacement of the equipment used in operating the power plant. Taxes can either be an operating cost or a credit for the developer, depending on the location of the power plant and policies in place. Some states provide tax incentives to developers who invest in clean energy.

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A power plant’s fuel costs are relatively low and stable due to its origin. Fuel costs are the lowest expense encountered in dealing with geothermal power plants. The average cost of power production over the life of the power plant takes into account all capital expenses and O&M costs, as well as fuel costs for plants that rely on external fuel sources. Major factors affecting geothermal power costs are the depth and temperature of the resource, well productivity, environmental compliance, location of the power plant, project infrastructure and economic factors, such as the scale of development and project financing costs (Renewable Project – Economics). See Exhibit 11 for a comparison of the levelized costs of electricity production for a variety of power plants. EXHIBIT 11: Cost of New Electricity Production (cents/kilowatt hour)
Technology Geothermal Flash 3.50 1.43 -0.54 4.39 0.12 0.01 0.13 4.52 Geothermal Binary 5.14 3.08 -0.91 7.28 0.08 0.00 0.08 7.37 Wind Hydro power 4.62 1.12 0.29 6.03 0.00 0.00 0.00 6.03 Natural Gas Combined Cycle (Baseload) 0.93 0.19 0.01 1.12 3.83 0.24 4.06 5.18 Turbine Simple Cycle (Peaking) 6.93 2.43 0.12 9.49 5.11 1.09 6.20 15.69

Capital & Financing Cost Fixed Operating Costs Taxes (credit) Total Fixed Costs Fuel Cost Variable O & M Costs Total Variable Costs Total Levelized Costs

3.49 1.79 -0.34 4.93 0.00 0.00 0.00 4.93

Source: Badr, M & Benjamin R. “Comparative Cost of California Central Station Electricity Generation Technologies, California Energy Commission June 5, 2003

Geothermal flash energy comes in as the cheapest form of energy produced, even compared to natural gas. Geothermal energy even tops more popular renewables like hydropower and wind power. This is due to the higher fixed costs associated with these technologies as well as the lack of tax incentives when it comes to the production of hydropower. There is a marked difference between the production costs of the two geothermal designs presented for comparison. Binary-cycle plants have a higher production costs due to the higher capital investments involved in the construction and operation. These

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costs, however, may be reduced greatly with the creation of improved technologies. Final Observations on Geothermal Power Plants Geothermal plants require a large amount of capital to be invested, with startup costs often accounting for two thirds of the total cost of the plant, with financing often structured to pay back the capital costs in 15 years. All of these factors make this unattractive for any type of investor interested in obtaining a quick return on investment. However, with most plants staying in operation for 30 – 45 years, costs fall by 50 – 70 percent, to cover just operations and maintenance for the remaining 15 – 30 years for which the facility operates. This reduction in costs makes geothermal plants a viable solution for developers who are not necessarily concerned with a quick turnaround. Direct Use: Geothermal Heat Pumps (GHP) As with geothermal power plants, there are several factors that need to be taken into account when investing in GHP. Capital costs for these systems are quite high compared to conventional fossil heating oil, natural gas, or electric run HVAC units. These capital costs only increase if the system is being retrofitted into an existing building, due to factors such as the size of living area, the age of the home, insulation characteristics, the geology of the area, and location of the property, in addition to the ancillary costs associated with the additional labor and possible demo and reconstruction costs that may be encountered. Homeowners need to also take into account the economic benefits for them based on the relative costs of electricity and fuels at their location. It may not be the best investment for a homeowner that already has relatively low heating costs due to the large capital needed for the installation of a GHP system; currently the average geothermal system runs homeowners anywhere from $15,000 to $35,000, based on the location of the dwelling and the geology of the ground. However GHPs have the advantage of relying on an inexpensive renewable energy source like geothermal energy, providing homeowner’s savings in the ranges of 30 to 70 percent of their heating costs with conventional heating systems. Depending on the cost of heating and electricity in their area homeowners can end up recouping their initial investment in as early as 2 to 4

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years, considering the typical maintenance costs of a GHP system is similar to that of a conventional system (National Geothermal Collaborative, 2010). Ideal GHP Scenario GHP systems are ideally suited to service the needs of new single family dwellings, in a rural setting with a considerable housing lot. In our specific case we chose a new detached single family home being constructed in a rural area of the Northeastern U.S. There are several reasons why we picked this as our ideal scenario. New constructions provide an ideal “canvas” to install a closed loop GHP system in the foundations, saving money on capital costs that would have incurred, if any additional excavation had been necessary. The choice to go with a rural location was dictated by the fact that most rural homes especially in areas with low population densities like in the Northeast, rely mainly on periodical deliveries of liquid propane to fuel their heating needs. Depending on the cost of fuel in the area, this can be a substantial part of a family’s living expense. This type of situation creates a perfect market for GHP to become a more than viable option to the conventional systems currently in use, mainly because of the very low operational costs associated with this technology. Based on data obtained from a comparable case study by RETscreen International, the residence would be outfitted with a 14.8kW ground source closed loop heat pump system. The costs associated with the system are the following:  Ground Source System & Ductwork = $10,541  Ground Loop= $8,742 The system qualified for a utility rebate of $200 per kW, which is not uncommon, depending on the state, county and municipality and its policy on the utilization of renewable energies. The cost of an average conventional fuel oil system was quoted at $16,200. Below are the resulting costs associated with the GHP system taking into account the utility rebate and how it compares to the conventional system.     Ground Source System & Ductwork = $10,541 Ground Loop= $8,742 Utility rebate= $200/kW*14.8 kW= $2,960 Total Cost=$10,541+$8,742-$2,960= $16,323
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 Conventional system= $16,200 With HVAC maintenance costs being similar for both the GHP and conventional system, the cost to the homeowner of a new geothermal system is less than a couple of hundred dollars more than that of adopting a conventional system (RETscreen International, 2012). Knowing that operating costs for the GHP system will be completely negligible, this scenario demonstrates that adopting a GHP system is in the financial best interest of the customer. Even in cases where there are no rebates to incentivize the purchase of an energy friendly system like a GHP, the difference between the two systems could be recouped in a short period of time especially considering other factors of interest to the homeowner, such as comfort and environmental benefits . There are additional direct use options for geothermal resources that have a clear economic and environmental advantage. Below are brief descriptions: Agricultural Applications: greenhouses are a great way to utilize direct use geothermal energy. This method leads to a decrease in the operational costs of the greenhouse, resulting in thousands of dollars in savings. Small scale district heating: district heating provides geothermal heat to buildings and homes within a network of distribution pipes in a small area. The district heating offers a cheap and clean alternative to fossil fuel powered heating. Schools & long term use buildings: Long term use buildings, like municipal buildings or schools, are a great place to utilize direct-use geothermal energy due to the advantage these buildings provide in amortizing the initial startup costs over several years which, combined with the yearly savings generated by not using conventional heating, make geothermal an ideal technology to use. Tourism: for centuries, spas have utilized geothermal energy to fuel the relaxation and beauty needs of their frequenters. Communities that have access to geothermal sources can utilize them to supplement their economy through tourism. Iceland’s Blue Lagoon is one of the county’s main tourist attractions.

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Small-Scale Geothermal Cost by Region Comparing geothermal systems for small residences in different parts of the country must take into account the systems that are replaced, in this case, heating and air conditioning. All renewables replace and offset something a homeowner already uses. In the case of solar PV, only electrical loads are being offset; since geothermal replaces both heat and air conditioning, both energy requirements must be evaluated to see the varying payback periods between regions. In the United States, heat typically comes from natural gas, propane or fuel oil. Natural gas is currently very inexpensive compared to propane and fuel oil. Air conditioning uses electricity, which is generally expensive and varies greatly in price between states. Therefore, these are the first variables considered: the price of heat and the price of electricity for air conditioning. Exhibit 12 displays the variables and payback periods for 5 different regions of the country using state-by-state data from the US Energy Information Administration. The most important factor in determining the payback period between regions is the balance of a particular area's heating and cooling needs. This is why California comes in as the worst payback (18 years) for geothermal, as most of their needs are related to air conditioning and they have really cheap natural gas as well. Also, California does not have as decent a balance of the heat to air conditioning ratio, as compared to states like Illinois, New York or Vermont. Vermont comes in as the best payback (4.5 years) due to the following variables: the heating and air conditioning needs are very balanced meaning it gets hot and cold fairly equally, they have a much higher cost for heat (propane), and they have a higher cost of electricity. To compare three additional regions, Illinois has an 8.7 year payback primarily because the state has a good balance of heat and cooling needs. Illinois has cheaper than average natural gas and electricity and does not have nearly as fast a payback as Vermont, but a much faster payback than California. Hawaii, which has a seven year payback, is an example of a state with a major imbalance of heating and air conditioning needs; however, due to extremely high electricity costs, the payback period is similar to that of New York, which achieves a seven year payback through a combination of balanced heating and air conditioning needs as well as higher than average electricity and natural gas costs. The primary takeaway is that all variables must be
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taken into account to determine an accurate payback period, assuming that the capital investment is relatively constant between regions. EXHIBIT 12: Region Heat & DHW Natural Gas ($/therm) 0.91 4.33 1.36 0.97 1.57 1.109 Cooling Electric Simple Pre-Tax IRR ($/kWh) Payback 0.0975 8.7 yrs 16.80% 0.3013 7.0 yrs 20.30% 0.1731 7.0 yrs 20.20% 0.1578 18.2 yrs 8.40% 0.1573 0.1095 4.5 yrs 29.20% Capacity Delivered (MWh) Heating 22 1 21 16 22 Cooling 55 95 35 45 25

Illinois Hawaii New York California (Worst) Vermont (Best) US Average

Additional Economic Advantages Geothermal energy does not only provide direct economic advantages to individuals that utilize geothermal power or own a GHP system in their homes. Geothermal energy is a resource that can help provide economic and environmental advantages on a macro level. Adoption of geothermal energy, both on a large and small scale, guarantees the creation of jobs, both directly and indirectly. Geothermal power plants would guarantee a steady flow of jobs for the entire period the plants are in service, and an increased use in GHP systems will create the need for trained HVAC specialists, providing a way for out of work HVAC laborers to be retrained in a new skill or opening up a market for new labor to be gainfully employed. A steady increase in jobs will also guarantee additional economic output that could help stimulate local business around the power plants or in regions where GHPs are prominently used. Geothermal energy would also create the need for ancillary businesses like consulting firms, engineering firms, and design firms, all geared to fulfilling needs created by a stronger adoption of geothermal energy. Last, but not least, the savings generated by utilizing geothermal energy can be diverted into other needs by the consumers. Geothermal energy provides a cheap, renewable, environmentally friendly fuel; it has the potential to create
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thousands of quality jobs around the country while boosting local economies; it reduces foreign oil imports as well as our dependence on fossil fuels and helps to diversify our indigenous energy supply. ENVIRONMENTAL BENEFITS OF GEOTHERMAL ENERGY Geothermal literally means, “Heat from the earth,” and is legally recognized as a renewable resource. Both wind and solar energy are excellent uses of renewable resources as well; however, both are dependent upon weather alterations and climate changes, which makes neither available 24 hours a day, 7 days a week, like geothermal energy. Exhibit 13 represents a study comparing the emissions from a geothermal plant with those of a coal plant with emission-control technologies. The result was that the coal plant still discharged twenty-four times more carbon dioxide, 10,837 times more sulfur dioxide, and 3,865 times more nitrous oxides per megawatt hour as compared to a geothermal plant (Kagel & Bates & Gawell, 2007). EXHIBIT 13:

In addition to just emissions, there are other environmental impacts that can be had by a technology: noise pollution, water use, water quality, land use, resources, impact on wildlife and vegetation. There is a false thought that geothermal technology produces a lot of noise; however, the reality is that this is not an issue at all: geothermal plants produce about the same amount of noise as swirling leaves in the wind. Secondly, the amount of water used by
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geothermal plants is approximately five gallons of fresh water per megawatt hour, compared with natural gas facilities, which use approximately 360 gallons per megawatt hour. Thirdly, the fluid used in geothermal plants is not released into groundwater sources; rather, these fluids are injected into reservoirs specifically designated for geothermal use. These wells are sheathed with a thick casing, in order to prevent cross-contamination. Next, the land used by geothermal plants is not a significant factor, as these plants can be incorporated into multiple-use facilities, to be used with farming, skiing, or hunting. Also, when compared using a thirty-year life cycle analysis, geothermal facilities use approximately 400 square meters of land per gigawatt hour, while a coal facility uses 3,632 square meters of land per gigawatt hour (Geothermal Energy Association, 2007). The impact on land development is represented in Exhibit 14. Bottom-line surface features, such as geysers, are used to determine the location of resources but are never used in the actual development of geothermal energy. Lastly, to address the impact on wildlife and vegetation; before any construction is to begin, there is an environmental review on the land, in order to assess any potential affects that might be had on the plant and animal life in the vicinity. Also, all geothermal power plants are built in accordance with state and federal regulations, which minimize that potential affect (Kagel & Bates & Gawell, 2007). EXHIBIT 14:

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One of the big questions about geothermal energy is: Can this technology assist in the reduction of global warming? Carbon dioxide is one of the dominant components of greenhouse gas emissions, making up approximately 83%. The remaining percentage is made up of nitrous oxides and methane. Carbon dioxide is not emitted or is emitted at very low levels by geothermal facilities, and there are essentially zero emissions of nitrous oxides and methane. Using geothermal plants can assist in the reduction of greenhouse gases, due to the fact that using geothermal energy is cleaner and renewable while fossil fuels are neither clean nor renewable. Another question is: Can geothermal energy offset other environmental impacts? Utilizing this type of source eliminates the need to mine, process, and transport the required resources for fossil fueled-electricity generation. Also, there is a technology being explored that would allow for the minerals that are currently mined, to be extracted from geothermal water, in order for the environmental impacts of mining to be eliminated. MYTHS AND TRUTHS There are many challenges that are associated with geothermal progress, as there a lack of understanding of the underlying principles. This section will attempt to dispel some of the rumors surrounding this technology. Myth: Geothermal energy is experimental and not widely used. Truth: Geothermal resources have been used for thousands of years, archeologically speaking. As has been previously stated, geothermal energy is a clean, renewable resource that offers energy around the world. First, geothermal springs were used by the Paleo-Indians for warmth and cleansing. Secondly, Italy opened the first large-scale geothermal plant in 1904 and is still in operation today. Over twenty-one countries use geothermal energy for their power production. Lastly, as this technology advances, the cost and risk associated will decrease as the usage and contribution to energy needs increases. Myth: Geothermal resources are nonrenewable.

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Truth: Geothermal resources are, both by legal classification and scientific definition, renewable. Geothermal energy, as it is from Earth, is literally inexhaustible. According to science, temperatures at the Earth’s core, which is approximately 4000 miles deep, is upwards of 9000°F; this has been the case for over 4 billion years and will continue for billions of years to come. Legally speaking, both the National Energy Policy Act of 1992 and the Pacific Northwest Electric Power Planning and Conservation Act of 1980 define geothermal energy as a renewable resource. Myth: Geothermal power plants emit smoke. Truth: The visible plumes rising from geothermal plants are actually vapor emissions, meaning steam, not smoke, caused by the evaporation cooling system. There is no combustion that takes place at geothermal facilities. If the facility employs an air-cooled system, then there would be no water vapor. If the facility employs a water-cooling process, then approximately fifty percent of the cooling tower fluids would be released into the atmosphere as water vapor and the remainder would return to the reservoir. Myth: Extraction and injection of geothermal brines contaminates drinking water. Truth: No contamination of groundwater has occurred as a result of geothermal activity. A lot of effort is put into the geothermal industry, in order to minimize the affects on groundwater systems, surface features, and local water. Brines from geothermal plants are injected into specific reservoirs, which use a special wall casing, made of a thick pipe encased in cement, to prevent groundwater cross-contamination. The EPA, along with the Underground Injection Control Program, in hopes of protecting underground water resources, regulates these determinations. Myth: Natural geothermal surface features are used during geothermal development.

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Truth: While surface features, such as geysers, are typically useful in identifying the locations of geothermal resources, these features are not used during geothermal development. It is actually not possible to extract geothermal resources form these surface features themselves, for large-scale development purposes. Furthermore, most geothermal resources have already been, or are currently being, developed in these surface feature areas, and most of the geothermal resource that has yet to be developed is not located around these surface features. Myth: Current geothermal development alters geothermal land features. Truth: Although all geothermal development can potentially disrupt land features proper project management reduces or altogether eliminates land alteration. In the simplest terms, geothermal development is forbidden in sensitive areas, in order to prevent devastation of national landmarks. In the 70s and 80s, surface features, including surrounding geysers and fumaroles, were altered by geothermal development. The United States, with the retroactive intentions of protecting national parks and their associated thermal features, passed the Steam Act and other laws (Kagel & Bates & Gawell, 2007). Geothermal energy is defined, by law, as a renewable resource, as it is, by definition, heat from the earth. Geothermal energy has a multitude of environmental benefits. Geothermal energy is reliable and renewable. Secondly, not only are there minimal air emissions, but also it offsets the air emissions of fossil fuel-fired power plants. In addition to offsetting air emissions, using geothermal energy can offset other environmental impacts. Lastly, this is a combustion-free energy, with minimal land impacts, and also, is competitive with other energy technologies when environmental costs are considered (Geothermal Energy Association 2009). RISK ANALYSIS Geothermal energy, whether on the large or small scale, is a promising technology for the United States; however, there are several risk factors. Regarding the energy component, it is possible that geothermal technology will not move forward and will, therefore, suffer a similar fate to that of the fuel cell, which scientists have been working on for many years with limited results. The long-term payback periods, whether for the large or small scale,
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could be deemed too risky of an investment without heavy tax incentives or subsidies. The risk associated with operating a power plant and potential earthquakes actually revolve around fracking. Power plants are built to specifications that require certain parameters and as the underground temperature lowers with time (15-100 yrs), one of the ways that plant management recoups this loss is by fracking, which has associated environmental risks. For example, a plant in Switzerland caused a number of small earthquakes in the area through fracking. Since the Swiss building codes are not designed for earthquakes, the small 3-3.4 Richter Scale activity caused millions of damage as a direct result (Domenico, 2009). Therefore, the risk in this situation lies in a power plant’s managerial decision to use fracking methods, but not from the geothermal itself. This is still a risk, however, that should be acknowledged and incorporated into policy measures. Again, it must be noted that many leading scientists believe the planet is close to or already past the tipping point for carbon dioxide emissions; therefore, geothermal and all renewable systems could have no impact whatsoever. If that is the case, all scientific research and development should be deployed on the path of saving the planet and preserving the human race in some form. However, one of the rising threats to both geothermal and other renewables of the future is poor leadership from the government, in terms of designing and implementing energy policies. The United States government has no comprehensive energy plan, and this lack of policy extends to the state and local levels as well. Most current renewable portfolio standards are targeted at renewables as a whole instead of individually, which do not support individual strengths and weaknesses in a rapidly changing energy marketplace. Jimmy Carter preached conservation and renewables in 1977, and the country is nowhere close to the former president’s hopes from 35 years ago. The primary reason for this failure of leadership is a lack of scientific understanding of the complex issues interlocking energy, the economy, and the environment. Even when the government actually does create a helpful policy, there is not adequate marketing to the public, and the policy ends up deemed a failure because not enough consumers take advantage. For example, the USDA’s Rural Energy for America Program (REAP) expired in January 2012 and has not been renewed. The program offers up to 25 percent of
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project costs for all renewable systems constructed on a rural business property for systems up to $100,000. Not enough people took advantage of this policy because the public generally did not know it existed. Creating sound policy is meaningless if it cannot be communicated and implemented properly by political leadership. RECOMMENDATIONS It is the primary recommendation that the US pursues and enacts policies to encourage geothermal development, along with other available energy options, in order to meet anticipated demand, help economic development, and preserve a fragile environment. Energy supply, access to clean drinking water, and devastating climate change are all connected and must all must be addressed. What is the point of elaborate energy systems if we run out of water or clean air? New policies must be enacted with the logical combination of efficiency and conservation, which means significant changes at every level of American thinking. Groundbreaking political leadership is needed to make this a reality. In reference to new financing options, the Property Assessed Clean Energy (PACE) financing could be an excellent vehicle that would make geothermal feasible for more households. It allows homeowners to get a loan for any energy efficiency and renewable energy system. Loans are raised via municipal bonds and the homeowner spreads the payments on a 10-20 year term, which is then attached to the current property taxes. Currently, PACE is being held up in congress by the FHA, but the measure has the potential to be the top financing vehicle for geothermal and other renewable energy systems. The system stays with the home and not the homeowner; therefore, it will transfer over once the building gets sold. The cost of the loan will be lower than what is saved on the energy reductions (Solar Financing, 2011). Specifically regarding geothermal, the team’s recommendations are for the United States policies to assist development on both the large and small scale. Geothermal electricity power plants have major potential, but the payback period may be too long for most investors; subsidies and incentives may be necessary to move this type of power production forward. At the residential level, it makes the most sense to target new construction projects in rural areas that also have a balance of heating and cooling needs, like Vermont, or that pay an extremely high average rate for electricity, like Hawaii. State and local governments also have the ability to provide incentives to dramatically
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shorten the payback period for a geothermal system. There may only be a short window of time left to pursue these options before drastic climate change renders them obsolete; strong leadership is needed if the United States hopes to solve the complex issues intertwining energy, the economy and the environment.

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