TODAY’S STUDY: WHAT GEOTHERMAL ENERGY OFFERS

The Values of Geothermal Energy: A Discussion of the Benefits Geothermal Power Provides to the Future U.S. Power System

October 2013 (Geothermal Resources Council and Geothermal Energy Association)

Introduction

Geothermal power offers both firm and flexible solutions to the changing U.S. power system by providing a range of services including but not limited to baseload, regulation, load following or energy imbalance, spinning reserve, non-spinning reserve, and replacement or supplemental reserve. It is well known that geothermal plants can operate 24 hours a day with a steady output, regardless of environmental conditions, and are not subject to the unpredictability and voltage swings that variable energy resources (VER) face and, hence, can fulfill the necessary role as a renewable baseload power source. As aging baseload fossil fuel plants retire, geothermal plants can provide the generation these plants have historically provided to the power system.

Geothermal plants can also ramp up or down quickly, allowing them to adjust to the changing needs of the power system and act as a flexible power source in addition to baseload. The increasing percentage of electricity produced from VER, such as solar and wind, is placing an escalating level of stress on an aging power system designed for fossil fuels. The varying output can cause voltage swings in transmission lines, potentially creating power surges and blackouts.

This combination of firm and flexible power positions geothermal energy as an ideal candidate to fill several roles historically performed by emission-heavy fossil fuels, such as baseload, regulation, load- following, and reserve functions typically reserved for coal and/or natural gas plants. In addition to considerable environmental advantages over fossil fuels, geothermal plants generally lack the fuel costs of other baseload sources, or the ancillary and transmission costs associated with variable energy resources that often equate to the long-term stability in energy costs.

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Looking beyond these specific benefits, geothermal has a number of other attractive features, including:

• Geothermal power production has a positive impact on local economies, and creates significantly more jobs per megawatt than natural gas.

• Geothermal power has a smaller land footprint than most other energy sources, particularly when compared with other renewables.

• Geothermal power has very low emission levels. Binary plants produce near-zero GHG emissions while flash and dry steam plants represent a significant reduction compared to fossil fuel based generation.

• Geothermal power’s established history of consistent output demonstrates a level of reliability unmatched by other renewables and fossil fuel based generation.

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Relevant Terms and Definitions

Ancillary services are defined by FERC as the services necessary to support the transmission of electricity from a supplier to a purchaser, given the obligations of a control area and that area’s transmitting utilities to maintain reliable operations of the interconnected transmission system. There are six different kinds of ancillary services: scheduling and dispatch, reactive power and voltage control, loss compensation, load following, system protection, and energy imbalance.

Balancing Authority Area is a metered segment of the electric power system in which electrical balance is maintained. In a balancing authority area, the total of all generation must equal the total of all loads (as supplemented by electrical imports into and exports out of the area).

Baseload Power (Firm Power) is the minimum amount of power that a utility or distribution company must generate for its customers, or the amount of power required to meet minimum demands based on reasonable expectations of customer requirements. Baseload values typically vary from hour to hour in most commercial and industrial areas. Large baseload units also tend to have lower operating costs relative to other fossil-fueled facilities.

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Capacity Factor/Value of a power plant is the ratio of its actual output over a period of time to its potential output if it were possible for it to continuously operate at full nameplate capacity. To calculate the capacity factor, the total amount of energy produced by the power plant during a period of time is divided by the amount of energy the plant would have produced at full capacity. Capacity factors vary greatly depending on the type of fuel that is used and the design of the plant. The capacity factor should not be confused with the availability factor, capacity credit (firm capacity) or with efficiency.

Contingency Spinning Reserve is generation (or responsive load) that is poised, ready to respond immediately, in case a generator or transmission line fails unexpectedly. Spinning reserve begins to respond immediately and must fully respond within 10-15 minutes. Enough contingency reserve (spinning and non-spinning) must be available to deal with the largest failure that is anticipated.

Demand response is not a single technology or rate which a power plant can be activated. Rather, Demand Response is any technology that controls the rate of electricity consumption rather than the rate of generation. FERC defines the term Demand Response to include “consumer actions that can change any part of the load profile of a utility or region, not just the period of peak usage.”

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Dispatchable energy is closely related to load following and ramping. However, dispatchable energy focuses on the energy consumption at times of peak capacity requirements and minimum load while Load Following focuses on the rate of change in generation and consumption, i.e., the ramping requirements. Both can be obtained from sub-hourly and hourly energy markets and/or the movements of the marginal generators or loads.

Distributed generation refers to electricity generated from many small energy sources. Most countries generate electricity in large centralized facilities powered by fossil fuels or hydropower. Distributed generation allows energy to be collected from many sources and may result in a lower environmental impact and improved security of supply.

Dry Steam, Flash, and Binary are the three main types of geothermal power conversion technologies. In dry steam technology, steam is withdrawn directly from a subsurface geothermal reservoir and used to run the turbines that power the generator. In flash plants, high-pressure and high - temperature geothermal fluids separate (“flash”) into steam and water either in the reservoir, in the well, or in a surface separator as a result of pressure decrease. The steam is delivered to a turbine that powers a generator and the resulting liquid is injected back into the reservoir. In binary plants, geothermal fluid is prevented from flashing by maintaining the pressure and is used to heat a secondary liquid called a working fluid, which boils at a lower temperature than water. Heat exchangers are used to transfer the heat energy from the geothermal fluid to vaporize the working fluid. The vaporized working fluid, like steam in flash plants, turns the turbines that power the generators. The geothermal water is injected back into the reservoir. The binary configuration is a closed-loop system with zero emissions that maintains complete separation from groundwater sources.

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Energy Imbalance Service is a market service that provides for the management of unscheduled deviations in individual generator output or load consumption.

Intermediate and Peaking Units are power plants that have fast ramp rates and relatively lower minimum generation levels and can be shut down and started up relatively quickly. Intermediate and peaking units are most often used to provide load following generation service due to their ability to ramp up and down quickly.

Load Following is a slower response (from several minutes to a few hours) whereby available resources are dispatched to follow system ramping requirements. Load following is not a defined FERC service, but is obtained from intra-hour and hourly energy markets. Furthermore, a load following power plant is a power plant that adjusts its power output as demand for electricity fluctuates throughout the day and typically falls between baseload and peaking power plants in efficiency, speed of startup and shutdown, construction cost, cost of electricity, and capacity factor.

Non-Spinning Reserve is similar to spinning reserve, except that response does not need to begin immediately. Full response is still required within 10 minutes, however.

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Organic Rankine Cycle (ORC) is named for its use of an organic, high-molecular mass fluid with a liquid- vapor phase change, or boiling point, which occurs at a lower temperature than the water-steam phase change. The fluid allows Rankine cycle heat recovery from lower temperature sources such as biomass combustion, industrial waste heat, geothermal heat, solar ponds, etc.

Power Purchase Agreement (PPA) is a contract between two parties, one who generates electricity (the seller) and one who is looking to purchase electricity (the buyer). The PPA defines all of the commercial terms for the sale of electricity between the buyer and the seller, including when the project will begin commercial operation, the schedule for delivery of electricity, penalties for under delivery, payment terms, and termination of the agreement. The PPA is the principal agreement that defines the revenue and credit quality of a generating project and is thus a key instrument used in project finance. There are many forms of PPAs in use today and they vary according to the needs of buyer, seller, and financing counterparties

Peaking power plants, also known as “peakers,” are power plants that generally run only when there is a high demand for electricity, often referred to as peak demand. Although these plants supply only occasional power, the power supplied commands a much higher price per kilowatt hour than a plant supplying baseload power.

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Ramp Rate is essentially the speed at which a generator can increase (ramp up) or decrease (ramp down) generation. Generating units have different characteristics making some more suited to supplying certain needed functions.

Regulation is the time frame during which generation (and potentially load) automatically responds to minute-by-minute deviations in a supply-demand balance. Typically, signals are sent by an automatic generation control (AGC) system to one or more generators to increase or decrease output to match the change in load. The frequency regulation control portion of the AGC system is typically called the load frequency control (LFC). Changes in load during the regulation time are typically not predicted or scheduled in advance and must be followed by generation reserve capacity that is online and grid-synchronized.

Replacement or Supplemental Reserve is an additional reserve required in some regions. It begins responding in 30 to 60 minutes. It is distinguished from non-spinning reserve by the response time frame.

Unit commitment typically covers several hours to several days. Unit commitment involves the starting and synchronizing of thermal generation so that it is available when needed to meet expected electricity demand.

Variable Energy Resources (VER) are any sources of energy that are not continuously available due to some factor outside direct control of the resource operator (solar, wind, tidal, etc.). The VER may be predictable, for example, tidal power, but cannot be dispatched to meet the demand of a power system.

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The Changing U.S. Power Market

Until recently, renewable energy technologies represented only a small fraction of the U.S. power system. However, in recent years, renewables have become an increasing contributor to the grid, generating approximately 14% of the electricity of the United States as of June 2013 with wind, solar, and geothermal power generating about 5% of that electrical power.

Wind and solar generation are important and innovative technologies that will play a prominent role in the transition to a clean energy economy and help alleviate the significant consequences of a warming planet. However, wind and solar photovoltaic rely heavily on the prevailing weather conditions for their generation. Changes in wind patterns or a cloudy day can affect the availability of these generation technologies. As a result, reliability of the overall power system can fluctuate. Geothermal energy is a renewable power source that can provide baseload and flexible power, quickly adjusting to fit the needs set by variable renewable energy technologies.

In addition, President Obama’s climate goals encourage new opportunities for geothermal power to provide clean electricity to communities across the U.S. Unfortunately, natural gas is used in many scenarios rather than geothermal power, but not all the externality and ancillary costs associated with natural gas are factored into the price of electricity. This misconception creates the illusion that natural gas power plants are a viable alternative to geothermal power.

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Other actions by President Obama, such as directing the U.S. Environmental Protection Agency to work expeditiously to complete carbon pollution standards for both new and existing power plants, will create new opportunities for geothermal power. In 2012 the President set a goal to issue permits for 10 gigawatts (GWe) of renewables on public lands by the end of the year. With approximately half of geothermal power plants on public lands this new goal should accelerate geothermal development. Also, the Department of Defense – the single largest consumer of energy in the United States – is committed to deploying 3 GWe of renewable energy on military installations, from solar, wind, biomass, and geothermal sources, by 2025. Federal agencies are setting a new goal of reaching 100 megawatts (MWe) of installed renewable capacity across the federally subsidized housing stock by 2020.

Lastly, state Renewable Portfolio Standards (RPS), require electric utilities and other electric service providers to derive a certain percentage of their retail sales, consumption, or some other metric, from eligible renewable energy resources. These standards should increase demand for geothermal power and other renewables. However, not all state RPS requirements treat all renewables equally. For example in California, the bidding process adjusts prices for the "time of day" which devalues technologies that would otherwise provide power as baseload and does not value capacity or integration costs, which historically were given value in the procurement process…

Firm Power: Geothermal the Clean, Cost Effective, Baseload Resource…Replacing Baseload Coal…A Substitute for Natural Gas…Flexible Power: Geothermal Power’s Ability to Adapt to Variability…The Need for a Flexible Power System…The Realities of a 21st Century Power System & Variability…Flexible Power…Ancillary Services, Integration, Transmission Costs…Other Benefits of Geothermal Power…Employment and Economic Development…Small Land Footprint…Near Zero Emissions…Reliability: Predictable and Long-lasting…

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Conclusion

Geothermal power is a reliable, economical, and clean option to provide baseload power for the growing U.S. power system.

• Retirement of emission-heavy coal plants will provide opportunities for more environmentally-friendly friendly geothermal power plants. Among energy sources which are suitable for baseload production, geothermal power represents arguably the smallest carbon footprint. Geothermal power has significantly lower CO2 emissions than coal or natural gas.

• The U.S. Energy Information Administration (EIA) formulates the levelized cost per kilowatthour for various energy sources. The estimated average levelized cost for geothermal power ($89.60/MWh) comes in significantly lower than coal (conventional or advanced), nuclear, or biomass.

• Baseload or Load Following using gas-fired generation is more costly than geothermal power when factoring in ancillary costs of natural gas electrical generation.

• The transition from a coal to a natural-gas-dominated electricity system would not be sufficient to meet U.S. climate goals. A natural-gas-centered power system still carries significant economic, environmental, and public health risks from methane’s impact on climate change as well as environmental consequences from natural gas extraction.

Despite previous misconceptions geothermal power has the ability to operate in a flexible mode that can quickly adapt to uncertainties in the U.S. power system. Geothermal power offers flexible solutions to provide a range of services including, but not limited to, baseload, regulation, load following or energy imbalance, spinning reserve, non-spinning reserve, and replacement or supplemental reserve.

• Geothermal power plants can ramp up and down very quickly, multiple times per day to a minimum of 10% of nominal power and up to 100% of nominal output power. The normal ramp rate for a geothermal ORC turbine is 15% of nominal power per minute.32

• As VER achieve higher levels of penetration in the Western electricity market, market participants and regulatory agencies are realizing the importance of quantifying integration and transmission costs associated with them. Failure to include these costs and the value of ancillary services results in an imprecise price-per-MWh comparison between energy technologies. Well- established inaccurate procurement comparisons increase ratepayer costs on a power system built for older, baseload energy technologies.

• Geothermal power uses already existing transmission capacity efficiently because of its high capacity factors averaging 92%. Meanwhile, VER capacity factors average 20-34%. Therefore, a 100 MW VER needs to consume 100 MW of transmission even though the VER may seldom use the full capacity of that line. As a result, existing transmission capacity becomes unavailable to other generators. Geothermal power on the other hand will almost fully use the transmission capacity that it reserves from that same line.

Geothermal power has a number of other attributes which make it an economical and attractive resource for electrical generation including:

• Geothermal power production has a positive impact on local economies, and creates significantly more jobs per megawatt than natural gas.34

• Geothermal power has a smaller land footprint than most other energy sources, particularly when compared with other renewables.

• Geothermal power has very low emission levels. Binary plants produce near-zero GHG emissions while flash and dry steam plants represent a significant reduction compared to fossil fuels based generation.

• Geothermal power’s established history of consistent output demonstrates a level of reliability unmatched by other renewables and fossil fuel based generation.

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