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Highlighting the economic value of geothermal power based on results of the IDDP project

Highlighting the economic value of geothermal power based on results of the IDDP project Drilling rig on site of the IDDP (source: IDDP/ HS Orka)
Hákon Skúlason 3 Feb 2017

The first and promising results of the Iceland Deep Drilling Project (IDDP) provide a good indication and this economic analysis shows the potential economic value of a geothermal power plant fuelled by a deep well with supercritical heat as drilled in Iceland.

The Iceland Deep Drilling Project (IDDP) presented some rather interesting results this week at an informational meeting in Reykjavik, Iceland.

With conventional geothermal boreholes reaching a depth of around 2,500 meters and resource temperatures of around 230°C, the borehole of the IDDP project is almost 5,000 meters deep with a  resource temperature of 450°C.

The intention of IDDP is to determine if high temperature geothermal fluid from deep boreholes as compared to conventional boreholes would improve the economics of power production.

By increasing reservoir temperature from 230 to 450°C, increase of power output from 5 to 40 MW could be expected. An eight-fold increase.

First attempt for deep drilling IDDP-1 in Krafla Iceland 2009 failed as the borehole was unintentionally drilled into a magma reservoir. The well had to be abandoned due to undesirable substances in the geothermal fluid.

Second attempt for deep drilling in Iceland IDDP-2 is currently in execution phase at the Reykjanes peninsula adjacent to the Reykjanes Geothermal Power Plant. The setup is to start from the existing and unutilized 2,500 m deep borewell RN-15 and drill downwards to the depth of 4,626 m. The drilling project has now been completed. The current plan consists of ongoing research work and installation of a pilot power plant.

In this article published here on the site states the facts in table 1 on costs of drilling and borehole power.

Table 1 - IDDP Costs of Drilling and Borehole power (source: Skúli Jóhannsson)
Table 1 – IDDP Costs of Drilling and Borehole power (source: Skúli Jóhannsson)

The following assumptions are made:

  • Power Plant Costs $1.9 million/MW
  • Utilization 8,000 hours/year
  • Lifetime of boreholes 15 years, lifetime of power plant 25 years
  • Interest rate 6% yearly
  • Yearly cost of Operation and Maintenance 2.5% of capital costs
  • Currency rate 115 ISK/USD

Table 2 shows the corresponding production costs.

Table 2 - Power Plant Production Cost & Drilling Cost for single flash geothermal power plant (source: Skúli Jóhannsson)
Table 2 – Power Plant Production Cost & Drilling Cost for single flash geothermal power plant (source: Skúli Jóhannsson)

 

Deeper boreholes (case C) and therefore higher resource temperature could possibly lead to additional benefits due to lower power plant costs, not taken into account in table 2.

The significant lowering of drilling costs per produced MWh from $17 /MWh for Case A to $9 /MWh for Case C is an impressive improvement.

Table 2 reveals how the rule of thumb for cost of geothermal power has changed for single flash geothermal power (P:Cost of Power Production, D:Cost of Drilling):

  • (P=50%, D=50%) the old rule of thumb of capital costs
  • (P=53%, D=44%) a revised model of capital costs (P=1.0/1.9, D=0.9/1.9)
  • (P=59%, D=41%) the conventional case A of production costs
  • (P=78%, D=22%) the IDDP case B of production costs
  • (P=73%, D=27%) the deep drilling case C of production costs

Table 3 shows an example of sensitivity analysis for risk aversion.

If the assumptions for deep boreholes in Case B and C are revised as shown in table 3, then the resulting production costs are as follows:

Table 3 - Production costs with revised assumptions for boreholes in cases B and C (source: Skúli Jóhannsson)
Table 3 – Production costs with revised assumptions for boreholes in cases B and C (source: Skúli Jóhannsson)

 

Production of geothermal power in high temperature geothermal areas of the world is still one of the most feasible alternative of energy production from natural and renewable energy resources.