Utility Geothermal Working Group Update

Prepared for

APPA E&O ConferenceGeneration & Fuels

Environmental Committee Round Table

April 18, 2007

Al Pless, Economist

Southeastern Power Administration

(706) 213-3847 alp@sepa.doe.gov

Utility Geothermal Working Group Sponsors

And the Geothermal Resources Council

Contact: Guy Nelson, Team Leader

(541) 994-4670

Gnelson181@aol.com

What is the Utility Geothermal Working Group?

The UGWG is a group of utilities and ancillary associations formed under the US Department of Energy’s (DOE) Geopowering the West (GPW) Initiative

UGWG Support

UGWG is supported by a number of organizations, including:

• Bonneville Power Administration (BPA)• DOE• Geothermal Resources Council (GRC)• Western Area Power Administration (Western)

UGWG MissionTo accelerate the appropriate integration of three geothermal technologies into mainstream applications

• Power Generation• Direct Use• Geothermal

Heat Pumps

Some UGWG Members

Arizona Public Service BPA

State Working Groups GRC

Sandia National Lab Western

Idaho National Lab Ormat, Int’l

South San Joaquin ID Palo Alto Utilities

Salt River Project Redding Electric

Seattle City Light Springfield UB

Webcasts

Power Generation Direct UseGeoExchange Transmission Issues Public Participation Tale of Two BuildingsRECs Project 25x25Central Solar Option

www.repartners.org

GRC Annual Meeting

• UGWG Annual Meeting in conjunction with the GRC meeting

• UGWG Members encouraged to submit papers for the GRC meeting

• Several sessions are designed to address Utility Issues

AffirmationCost Effective Energy Efficiency is the first choice

Duct Loss and Testing

Geothermal Power Productioneothermal Power Production

UTILITY GRADE POWER UTILITY GRADE POWER Modular power plants are readily expanded as needs increase Power costs competitive with current fossil fuel technologies Base Load power produced 24/7 @ over 90% Capacity Factor Fuel Risk assumed by project operator not by consumer

SUSTAINABLE & ENVIRONMENTALLY SAFESUSTAINABLE & ENVIRONMENTALLY SAFE Many projects operating for decades at 98%+ availability Geothermal is non-combustion - near zero emissions

MINIMAL SURFACE USE - INDEPENDENT OF WEATHERMINIMAL SURFACE USE - INDEPENDENT OF WEATHER

FIELD-PROVEN TECHNOLOGIES - 9,000 MW WORLD WIDEFIELD-PROVEN TECHNOLOGIES - 9,000 MW WORLD WIDE

STRAIGHT FORWARD TO INSTALL, OPERATE AND MAINTAINSTRAIGHT FORWARD TO INSTALL, OPERATE AND MAINTAIN Projects developed over 3 year period - O&M by local staff

Binary Cycle Power Plant

Biomass - Energy Forestry Energy Crops

22000

Average Capital and Delivered Costs

Capital Cost (US$/kW)

Cost of deliveredenergy (US$/kWh)

Coal

Gas

Wind without PTC

0

1000

2000

3000

0 0.02 0.04 0.06 0.08 0.10 0.14 0.16

Solar Thermal Power

Solar Photovoltaic

0.12

4000

0.86 0.880.18 0.20

New Geothermal without PTC

Source: International Energy Agency & Ormat

PROJECT DEVELOPMENT 20 MW netPROJECT DEVELOPMENT 20 MW net

1. Exploration & resource assessment $ 5.0 M 12 Months time frame

2. Well field drilling and development 15.0 12 Months time frame after completion of item 1

3. Power plant, surface facilities, & transmission 30.018 Months time frame with overlap of item 2

4. Other costs: 10.0o Commitment feeso Legal & Accounting fees o Consultants, o Interest during construction, ando Debt service and operating reserveo Construction contingencies and Developers fee 12 Month process which should begin after completion of item 1

5. TOTAL FINANCED COST FOR 20 MW PROJECT $ 60 MTo be provided as construction phase financing

6. Total Average Development Period 36 months

Geothermal Power Economics

Gas Fired Combined Cycle Default Choice• Capital Costs + O&M Cost + Fuel Costs = 6.5¢ to

7.2¢ per kWh

Geothermal Power Costs• Capital Costs + O&M Cost + Fuel Costs = 6.5¢ to

9.5¢ per kWh• Geothermal Fuel Costs are zero, O&M costs are

less than 1.0¢ per kWh

Geothermal Power Capital CostsInterest rates are the key!!!!

Capital Cost (CC) = $3000/kW

@ 0.2 Annual Factor, CC = 7.6¢/kWh

(reflects interest rates of ~ 18-20%)

@ 0.15 Annual Factor, CC = 5.7¢/kWh

(reflects interest rates of ~ 13-15%)

Utilities with Geothermal Power in their Resource Portfolios

No. CA Power Agency – including Alameda, Palo Alto, Lodi, Lompoc, Roseville, Redding, Silicon Valley Power, and Turlock Irr. Dist.

So. CA Public Power Authority – including Anaheim, Burbank, Glendale, and Imperial Irr. District

Investor Owned Utilities such as PG&E, SCE, SDG&E, Idaho Power, and PacifiCorp

UGWG Draft Steps to Implementing a Successful Geothermal Power Project

1. Delineated geothermal resource, with bankable

report, defining probable long term performance.

2. Financible Power Purchase Agreement from a Creditworthy purchaser.

3. Defined permitting path without pitfalls.

4. Credible developer with proven track record and experienced supply/subcontract team.

5. Control of entire geothermal resource to preclude competing interests for same fluid/steam supply.

6. Use of Proven Technologies.

Geothermal Heat Pumps

Geothermal heat pumps use the stable temperatures of the ground (often vertical boreholes typically are 100 to 400 feet deep) as a heat source to warm buildings in winter and as a heat sink to cool them in summer. Also called ground-source heat pumps or Geoexchange units.

Illustration developed by NREL

Heating Mode

Geothermal Heat Pumps

Cooling Mode

Illustration developed by NREL

Geo Heat Pumps

Geothermal Heat Pump (GHP) Economics – Residential Customer Perspective

Assumptions: electric rate = 10¢ per kWh, gas rate = $1.50 per therm, res. gas heating use = 900 therms per year, res. electric AC use = 1660 kWh per year

Conventional HVAC costs (gas heating and electric cooling) = $1350 (heating) + $166 (cooling) = $1516/year

GHP costs (all electric) = $1061 + loop lease

Sources for assumptions are USDOE and USEIA. If the conventional source is propane, oil, or electric resistance for heating, GHP economics are better.

Customer GHP Economics Continued

GHP makes sense if the loop lease is less than:

Conv. Cost – GHP costs =

$1516 - $1061 = $455/yr

Loop leases vary due to loan terms.

Assuming 6% - 30 year terms = $332/yr

Other factors influencing GHP economics (customer perspective)

The Utility can sweeten the pot by offering1. A rebate (often in $/ton) and or

2. Favorable rate schedules and or

3. Low (sometimes even zero) loop lease rates

Utility GHP Economics

Utility economics are less straight forward than customer economics.

Considerations include:

• Peak period (Summer vs. Winter)• Default heating option (electric (electric resistance vs. other)

Utilities with GHP in Their Resource Portfolios

Colorado Springs, Delta-Montrose, First Energy, Kansas City P&L, Moon Lake, Otter Tail, Palmetto, Plumas-Sierra, and Yellowstone Valley.

Future UGWG ActivitiesWorkshops and Webinars in conjunction with Western, UWIG, NREL, APPA, and NRECA

See repartners.org website for details

CREBs

-April 4th, Webinar

Heat Pump Economics

-Utility Energy Forum May 4

Future UGWG Activities – Technology Related

•Waste Heat Recovery

•Utility Financing

•Geothermal Heat Pumps

Contact InformationGuy Nelson, UGWG Team Leader

(541) 994-4670, Gnelson181@aol.com