News

Credit Suisse: Geothermal as least expensive

Alexander Richter 4 Feb 2009

A new equity research report that I just received makes a very interesting reading. Unfortunately I cannot find it online, hence no possible download. But in short, it is a great advertisement for geothermal power. The document, an Equity Research piece on “Alternative Energy” (from January 28, 2009) is looking into ..

A new equity research report that I just received makes a very interesting reading. Unfortunately I cannot find it online, hence no possible download. But in short, it is a great advertisement for geothermal power. The document, an Equity Research piece on “Alternative Energy” (from January 28, 2009) is looking into the “How much does it cost?” and compares the costs of alternative energy technologies. The cost per MWh is compared and the order is: US$ 153 for solar crystalline, solar thermal at $ 90 per MWh compared to nuclear power at $ 62 and coal at $55, natural gas at $52 per MWh. The least expensive are wind at $ 43 and geothermal power at $36 per MWh. Credit Suisse is providing an “apples to apples”-comparison in full of the cost of energy (levelized cost of electricity, LCOE) considering:

  • upfront capital investments,
  • the ongoing operating expenses,
  • the life of the asset,
  • all fuel costs, and
  • the capacity utilization rate (or actual average output of power).
The LCOE is calculated in three scenarios, base case, high case, and low case. Credit Suisse’s analysts then estimate an LCOE of ” of $36.22 per MWh of power.  Without the PTC incentive of $0.02/KWh, the cost is $56.22/MWh.  Varying the capital and operating costs, WACC, and plant lifespan assumptions, allows the report to arrive at an LCOE range of $21.61 to $59.26 per MWh.  According to these estimates, geothermal plants, while limited in scalability and geography, are the least expensive form of power. Update: The Credit Suisse report has also been recently covered by Christopher Mims at Scientific American, “Can geothermal power compete with coal on price?.” Source: Credit Suisse, Equity Research – Energy Technology, Alternative Energy Sector review Jan. 28, 2009