RELIABILITY OF RENEWABLE ENERGY: GEOTHERMAL
Jordan Lofthouse, BS, Strata Policy
Randy T Simmons, PhD, Utah State University
Ryan M. Yonk, PhD, Utah State University
The Institute of Political Economy (IPE) at Utah State University seeks to promote a better understanding of the
foundations of a free society by conducting research and disseminating findings through publications, classes,
seminars, conferences, and lectures. By mentoring students and engaging them in research and writing projects, IPE
creates diverse opportunities for students in graduate programs, internships, policy groups, and business.
ECONOMIC RELIABILITY
RELIABILITY OF RENEWABLE
ENERGY: GEOTHERMAL
INTRODUCTION
As Americans have grown more concerned with fossil
fuel emissions, policymakers have responded to their
constituencies by mandating and subsidizing
renewable energy sources, including geothermal
energy. Though government mandates and subsidies
have encouraged the growth of the geothermal
industry, geothermal power only accounted for 0.4
percent of U.S. electricity production in 2014. 1 One
way to determine whether government mandates and
subsidies for geothermal power are beneficial is to
examine the reliability of geothermal power. If
geothermal power is unreliable, government policies
that bolster the geothermal industry are misguided and
should be discontinued. A recent report by the Institute
of Political Economy (IPE) examined the economic,
physical, and environmental implications of
geothermal power to assess its overall reliability.
The IPE report found that geothermal electricity
production is physically reliable and more
environmentally friendly than traditional fossil fuels.
The high startup costs and failure rates for geothermal
development discourage many investors from entering
the geothermal market. Because of these
characteristics, the growth of the geothermal industry
is dependent on financial assistance from the
government and is economically unviable.
Institute for Energy Research. (2014). Geothermal. Retrieved
from
http://instituteforenergyresearch.org/topics/encyclopedia/geother
mal/
2
United States Energy Information Administration. 2015a.
Electricity Net Generation: Total. [Table]. United States
Department of Energy. Retrieved from
http://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf
3
United States Energy Information Administration. 2015a.
Electricity Net Generation: Total. [Table]. United States
Department of Energy. Retrieved from
http://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf
4
Geothermal Energy Association. (n.d.) Geothermal Basics 1
The high startup costs of geothermal power plants and
the risks involved with the exploration and drilling
phases of geothermal projects make geothermal power
unattractive to investors. As a result, the growth of
much of the geothermal industry in the United States
is dependent on government subsidies. Because much
of the geothermal industry’s growth is dependent on
government financial assistance, geothermal power is
economically unviable.
In 1960, the annual output of geothermal net electricity
generation was 33 million kilowatt-hours.2 Since then,
the geothermal industry experienced two major growth
spurts, in the 1980’s and early 2000’s. As a result,
annual geothermal electricity production was 16,628
million kilowatt-hours by the end of 2014. 3 These
periods of growth directly followed the passage of
major federal and state laws designed to increase
renewable-energy production. This pattern suggests
that the growth of geothermal energy industry is
responsive to government assistance.
Geothermal power plants have high capital investment
costs for exploration, drilling wells, and plant
installation. 4 Exploration and drilling alone make up
more than 51 percent of the total project costs for
5
geothermal power plants. The initial stages of a
geothermal project are not only expensive, they are
also high risk. Failure rates measure the number of
wells drilled that do not provide a sufficient resource.
Failure rates for geothermal wells are higher than
6 , 7
failure rates for oil and natural gas wells.
Furthermore, a geothermal developer may expend
millions of dollars in the exploration phase before
realizing that they are unlikely to find a useful
Power Plant Costs. Retrieved from http://geoenergy.org/geo_basics_plant_cost.aspx
5
National Renewable Energy Laboratory. (n.d.). Financing
Geothermal Projects. Retrieved from
http://www.nrel.gov/geothermal/financing/overview.html
6
Cochener, J. (2010, June 28). Quantifying Drilling Efficiency. US
Energy Information Administration. p. 7. Retrieved from
http://www.eia.gov/workingpapers/pdf/drilling_efficiency.pdf
7
International FInance Corporation. (2013, June). Success of
Geothermal Wells: A Global Study. p. 4-5. Retrieved from
http://www.ifc.org/wps/wcm/connect/7e5eb4804fe24994b118ff2
3ff966f85/ifc-drilling-success-report-final.pdf?MOD=AJPERES
Read the full report at usu.edu/ipe
geothermal reservoir in the area and have to abandon
8
the project. These high risks, combined with
geothermal development’s high capital costs make
geothermal development unattractive to many
investors. Geothermal power plants, however, have
low fuel, operations, and maintenance costs. Once a
geothermal power plant has been established, it can
produce electricity inexpensively.9
PHYSICAL RELIABILITY
Geothermal power plants can generate electricity
efficiently, consistently, and flexibly. The ability to
produce geothermal power is dependent on areas with
abundant water and geothermal heat. Therefore,
geothermal power is physically reliable when power
plants are built in suitable locations.
Geothermal plants are highly efficient, making
geothermal power advantageous over wind and solar
power, which are inefficient and intermittent. The
efficiency of a power plant is measured by its capacity
factor, which is the ratio of the power plant’s actual
output to its potential output (if operating at full
capacity) over a period of time. Geothermal power
plants have a capacity factor range from 70 to 95
percent. For comparison, wind power's capacity factor
ranges from 30-52 percent and solar photovoltaics'
Geothermal Energy Association. (2005, August). Factors
Affecting Costs of Geothermal Power Development. p. 7.
Retrieved from http://geoenergy.org/reports/Factors%20Affecting%20Cost%20of%20Geot
hermal%20Power%20Development%20-%20August%202005.pdf
9
Geothermal Energy Association. (n.d.). Geothermal Basics –
Power Plant Costs. Retrieved from: http://geoenergy.org/geo_basics_plant_cost.aspx
10
Open Energy Information. (n.d.). Transparent costs database LCOE. Capacity Factor. Retrieved from
http://en.openei.org/apps/TCDB/transparent_cost_database
11
Matek, B. (2015, May 1). Geothermal Energy Association Issue
Brief: Firm and Flexible Power Services Available from Geothermal
Facilities. p. 4. Retrieved from http://geoenergy.org/reports/2015/Firm%20and%20Flexible%20Power%20
Services%20from%20Geothermal.pdf
12
Spinning reserve and non-spinning reserve. (2006, January 31).
Retrieved from
http://www.caiso.com/Documents/SpinningReserveandNonSpinn
ingReserve.pdf
13
US Department of Energy. (2012, September). What is an
Enhanced Geothermal System (EGS)? p. 1. Retrieved from
https://www1.eere.energy.gov/geothermal/pdfs/egs_basics.pdf
14
Geothermal Maps. (n.d.). Retrieved from
8
capacity factor ranges from 16-30 percent. 10
Geothermal plants also have the ability to change their
output as needed. 11 This flexibility allows grid
operators use geothermal plants to match changes in
electricity demand within several minutes.12
The ability to generate geothermal power, however, is
dependent on the presence of abundant water and
geothermal heat. For geothermal power generation to
be possible, an area must have high underground
temperatures and geothermal fluid (natural
underground water reservoirs), and electricity
producers must be able to access that fluid through
13
rock openings. Potential geothermal locations are in
the United States are most commonly found in the
14
West. Because geothermal resources are often
remotely located, the cost of building transmission
lines to connect geothermal power plants to the grid
15
can also be a barrier to geothermal development.
Enhanced Geothermal Systems (EGS) attempt to
overcome geothermal power’s geographic limitations
by manufacturing underground reservoirs in areas that
16
already have high underground temperatures. EGS
could increase the geothermal potential in the United
17
States by 13 times. The U.S. Department of Energy
has spent millions of taxpayer dollars on multiple
18
projects to demonstrate the viability of EGS. The
http://www.nrel.gov/gis/geothermal.html
15
Kagel, A. (2008, January). The State of Geothermal Technology
Part II: Surface Technology. Geothermal Energy Association. p. 13.
Retrieved from http://www.geoenergy.org/reports/Geothermal%20Technology%20%20Part%20II%20%28Surface%29.pdf
16
Schlumberger Business Consulting. (n.d.). Improving the
Economics of Geothermal Development through Oil and Gas
Industry Approach. p. 2. Retrieved from:
http://www.sbc.slb.com/Energy_Expertise/~/media/Files/Point%
20of%20View%20Docs/Improving_the_Economics_of_Geotherm
al_Development.pdf
17
Williams, C. F., Reed, M. J., Mariner, R. H., DeAngelo, J.,
Galanis, S. P. (2008) Assessment of moderate- and hightemperature geothermal resources of the United States: U.S.
Geological Survey Fact Sheet 2008. p. 4 Retrieved from
http://pubs.usgs.gov/fs/2008/3082/pdf/fs2008-3082.pdf
18
Energy Department Announces Project Selections for Enhanced
Geothermal Systems (EGS) Subsurface Laboratory. (2015, April 1).
Retrieved from
http://www.energy.gov/eere/geothermal/articles/energydepartment-announces-project-selections-enhanced-geothermalsystems
Read the full report at usu.edu/ipe
21
capital costs of EGS, however, are estimated to be 37
percent higher than the capital costs of conventional
geothermal systems, which already have prohibitively
19
high capital costs. This makes EGS a less attractive
investment than conventional geothermal systems,
and more dependent on government for its
development until new technology can bring EGS
prices down.
if released into waterways. Geothermal developers
prevent geothermal fluid from contaminating the
environment by collecting geothermal fluid in holding
ponds and by injecting used geothermal fluid back into
22 , 23
geothermal reservoirs.
Success is measured by
the lack of a single reported instance of water
contamination from a geothermal site in the United
States.24
ENVIRONMENTAL RELIABILITY
Geothermal power plant’s water use can strain local
fresh water supplies. A study conducted by the
National Renewable Energy Laboratory showed that
the amount of water a geothermal plant needs
depends heavily on the type of cooling system used.
Binary cycle geothermal plants with cooling towers
used 1,700 to 3,963 gallons of water per megawatt
hour, while binary cycle geothermal plants with dry
cooling systems used 0-270 gallons of water per
megawatt hour. 25 Geothermal plants can use
geothermal fluids, or even sewage water to meet their
,
water cooling needs.26 27
Geothermal energy is an environmentally reliable
source of energy when compared to traditional fossil
fuel energy sources. Using geothermal energy,
however, is not without environmental costs. Most of
these costs can be minimized or prevented entirely by
using proper technologies to contain harmful
emissions and protect local water sources from
geothermal runoff. Also, correct management of fluid
levels in geothermal reservoirs reduces the chance of
land subsidence and seismic activity.
Geothermal fluid can contain heavy concentrations of
salt, as well as harmful chemicals and heavy metals
such as hydrogen sulfide, arsenic, boron, mercury,
lead, and aluminum.20 These high levels of materials in
geothermal reservoirs are problematic because they
can contaminate local environments and water sources
DeLaquil, P., Goldstein, G., and Wright, E. (n.d.) US Technology
Choices, Costs and Opportunities under the Lieberman-Warner
Climate Security Act: Assessing Compliance Pathways. Natural
Resources Defense Council. p. 25. Retrieved from:
http://docs.nrdc.org/globalwarming/files/glo_08051401A.pdf
20
Kristmannsdo´ttir, H., & A´ rmannsson, H. (2003, May 19).
Environmental aspects of geothermal energy utilization.
Geothermics. p. 455. Retrieved from http://ac.elscdn.com/S037565050300052X/1-s2.0-S037565050300052Xmain.pdf?_tid=9d7e58f6-4dba-11e5-b1d000000aab0f26&acdnat=1440790140_2636ece771c9fed79e94a600
d4b7cf05
21
United States Department of Energy. (n.d.). Chapter 8
Environmental Impacts, Attributes, and Feasibility Criteria. Office
of Energy Efficiency and Renewable Energy. p. 8-6. Retrieved
from:
https://www1.eere.energy.gov/geothermal/pdfs/egs_chapter_8.p
df
22
United States Department of Energy. (n.d.). Chapter 8
Environmental Impacts, Attributes, and Feasibility Criteria. Office
of Energy Efficiency and Renewable Energy. p. 6. Retrieved from:
https://www1.eere.energy.gov/geothermal/pdfs/egs_chapter_8.p
df
23
Kagel, A., Bates, D., & Gawell K. (2007, April) A Guide to
19
Geothermal plants have lower pollutants than
traditional fossil fuel plants. They emit less than one
percent of the nitrous oxide, one percent of the sulfur
dioxide, and about five percent of the carbon dioxide
emitted by a coal-fired plant with the same production
capacity.28 Geothermal plants do emit large amounts
Geothermal Energy and the Environment. Geothermal Energy
Association. p. 44. Retrieved from http://www.geoenergy.org/reports/Environmental%20Guide.pdf
24
Environmental Protection Agency. (n.d.) Class V UIC Study Fact
Sheet: Geothermal Direct Heat Return Flow Wells. Retrieved from
http://www.epa.gov/safewater/uic/class5/pdf/study_uicclass5_classvstudy_fs_geo_heat_wells.pdf
25
Macknick, J., Newmark, R., Garvin, H., & Hallett, K. (2011,
March). A Review of Operational Water Consumption and
Withdrawal Factors for Electricity Generating Technologies.
National Renewable Energy Laboratory. p. 12. Retrieved from
http://www.nrel.gov/docs/fy11osti/50900.pdf
26
Macknick, J., Newmark, R., Garvin, H., & Hallett, K. (2011,
March). A Review of Operational Water Consumption and
Withdrawal Factors for Electricity Generating Technologies.
National Renewable Energy Laboratory. p. 5. Retrieved from
http://www.nrel.gov/docs/fy11osti/50900.pdf
27
Kagel, A. (2008, January). The State of Geothermal Technology
Part II: Surface Technology. Geothermal Energy Association. p. 9.
Retrieved from http://www.geoenergy.org/reports/Geothermal%20Technology%20%20Part%20II%20%28Surface%29.pdf
28
Matek, B. (2013, April). Promoting Geothermal Energy: Air
Emissions Comparison and Externality Analysis. Geothermal
Read the full report at usu.edu/ipe
of hydrogen sulfide, a toxic and flammable gas that is
naturally present in many geothermal reservoirs. In the
past, hydrogen sulfide emissions have been regulated
by the federal government, but are currently only
29 , 30
regulated by some states.
Some geothermal
developers manage hydrogen sulfide emissions with
advanced abatement equipment, which converts more
than 99 percent of hydrogen sulfide into sulfur, an
element with practical agricultural uses.31 Geothermal
energy has minimal emissions and, unlike wind and
solar power, does not have to be backed up by less
environmental friendly sources of energy like coal.
Geothermal energy production may lead to land
subsidence due to removing water from underground
reservoirs. This phenomenon was first observed in the
Wairakei Power Station in New Zealand, where the
plants did not use any type of reinjection. The rate of
subsidence in this area was recorded at levels as high
as 0.45 meters per year. To prevent or mitigate the
risks of this occurrence, plants have continued the
practice of injecting used geothermal fluids and other
sources of water back into the reservoirs once the heat
has been captured.32
amount of fluid being extracted from and injected into
the earth by geothermal power plants in the area.33
Since 1975 The Geysers, a Northern California
Geothermal plant, has experienced earthquakes that
have all been caused by geothermal energy
production.34 Geothermal developers can minimize the
amount of seismic activity they induce by reducing the
size of the fractures they drill into the earth's crust. The
larger the fracture created, the more seismic activity
induced. At The Geysers, developers aim to keep
earthquakes small, with a magnitudes of less than
two.35 Generally speaking, the seismic activity caused
by geothermal energy production has not posed a
serious threat to man-made structures.
CASE STUDY: ICELAND
Iceland’s geographic location has made importing
traditional fossil fuels expensive and has increased
Iceland’s need for alternatives like geothermal.
Iceland’s geology provides it with a large amount of
geothermal reserves.36 After several decades of
government promotion and subsidization, geothermal
energy now provides over a quarter of Iceland’s entire
electricity supply.37
Drilling for geothermal resources, as well as removing
fluid from, and injecting it back into underground
reservoirs can induce seismic activity. A 2013 study on
a geothermal field in Southern California found a
strong correlation between seismic activity and the
Iceland now has some of the cheapest electricity
prices in the European Union, however, current
electricity prices hide the true cost that implementing
geothermal energy has had on Icelandic citizens.38
Energy Association. p. 7. Retrieved from http://geoenergy.org/events/Air%20Emissions%20Comparison%20and%20
Externality%20Analysis_Publication.pdf
29
Environmental Protection Agency. (1990, February). Ambient Air
Quality Standards. Retrieved from:
http://www.epa.gov/region4/air/sips/ky/KY-Ch-53.pdf
30
Maine Department of Health and Human Services. (2006,
March). Ambient Air Guidelines for Hydrogen Sulfide. Retrieved
from:
http://www.maine.gov/dep/waste/publications/documents/ambi
entairguidelines.pdf
31
Kagel, A., Bates, D., & Gawell K. (2007, April) A Guide to
Geothermal Energy and the Environment. Geothermal Energy
Association. p. 22. Retrieved from http://www.geoenergy.org/reports/Environmental%20Guide.pdf
32
Union of Concerned Scientists. (n.d.). Environmental Impacts of
Geothermal Energy. Retrieved from:
http://www.ucsusa.org/clean_energy/our-energychoices/renewable-energy/environmental-impacts-geothermalenergy.html#.VdztEhNVhBc
33
Stephens, T. (2013, July 11). Geothermal power facility induces
earthquakes, study finds. University of California Santa Cruz.
Retrieved from http://news.ucsc.edu/2013/07/geothermalearthquakes.html
34
Harmon, K. (2009, June 29). How Does Geothermal Drilling
Trigger Earthquakes? Scientific American. Retrieved from
http://www.scientificamerican.com/article/geothermal-drillingearthquakes/
35
Harmon, K. (2009, June 29). How Does Geothermal Drilling
Trigger Earthquakes? Scientific American. Retrieved from
http://www.scientificamerican.com/article/geothermal-drillingearthquakes/
36
Iceland. (n.d.). Graduate School of Oceanography University of
Rhode Island. Retrieved October 7, 2015, from
http://www.gso.uri.edu/lava/Iceland/Iceland.html
37
Árni Ragnarsson. (2015, April). Geothermal Development in
Iceland 2010-2014. Proceeding World Geothermal Congress 2015.
p. 6 Retrieved from
https://pangea.stanford.edu/ERE/db/WGC/papers/WGC/2015/01
077.pdf
38
Half-yearly electricity and gas prices, second half of year, 2012–
14. (2015, June 5). Retrieved from
http://ec.europa.eu/eurostat/statisticsexplained/index.php/File:Half-
Read the full report at usu.edu/ipe
Many of the costs and risks associated with
developing geothermal were subsidized by the
Icelandic government and thus born by Icelandic
citizens through taxation.39 Also, because the United
States has a much larger population and much more
localized geothermal resources, geothermal power
would be cost prohibitive for the United States to
implement on a scale comparable to Iceland. Iceland’s
experience, however, illustrates that geothermal
power can provide large amounts of baseload
electricity reliably.
CONCLUSION
Geothermal electricity production is both physically
reliable and more environmentally friendly than
traditional fossil fuels. The risks and costs associated
with exploration, drilling, and construction are higher
than most other energy sources, which discourages
many investors from entering the geothermal market.
As a result, much of the geothermal industry's growth
has been dependent on government subsidies.
Geothermal power is not economically viable because
it is typically not developed without government aid for
the initial investment of building a geothermal plant.
Advancements in exploration and drilling technology
could decrease the costs and risks in the early stages
of geothermal development in the future. Allowing
markets, rather than government policies, to decide
which energy sources get developed will ensure that
we get our power from the most cost-effective energy
sources.
yearly_electricity_and_gas_prices,_second_half_of_year,_2012–
14_(EUR_per_kWh)_YB15.png
39
Orkustofnun. (2010, February). Geothermal Development and
Research in Iceland. p. 17, 18. Retrieved from
http://www.nea.is/media/utgafa/GD_loka.pdf
Read the full report at usu.edu/ipe