ECONOMIC AND FINANCIAL CONSIDERATION

INTRODUCTION
The factors that must be considered when assessing the viability of a geothermal project vary
from project to project, from conversion technology to conversion technology, and especially
from electrical generation to direct use. There are, however, a number of factors common to all
projects, although actual cost and impact on project economics will be, to a large extent,
dependent upon resource characteristics and national or even local political and economic
circumstances.

The economic factors that are common to all projects include:

 provision of fuel, that is, the geothermal resource;
 design and construction of the conversion facility and related surface equipment, for
instance, the electrical generation plant together with required transformers and
transmission lines;
 the generation of revenue;
 financing.
The cost of obtaining the required fuel supply, together with the capital cost of the conversion
facility, will determine the amount that must be financed. Revenue generated through the sale of
electricity, by-products, thermal energy, or product produced, for example, vegetables, plants or
flowers from a greenhouse, minus the cost of operation and maintenance (O&M) of the fuel
supply and conversion facility, must be sufficient to meet or exceed the requirements of the
financing package.

For many new projects, the largest annual operating cost is the cost of capital. In fact, the cost of
capital can be as high as 75 per cent of the annual operating expense for a new geothermal
district energy project, with O&M (15 per cent) and ancillary energy provision (10 per cent)
making up the balance.

The production of electrical power requires that facilities be constructed and operated in a
manner that is economically viable for the local market conditions. When developing a power
producing facility, the key factors that affect the economic viability are as follows:
 Upfront capital costs
 Operating expenses
 The lifetime of the facility
 Fuel costs
 Average rate of power production

a) Upfront capital costs associated with geothermal power

Once a potential site is identified, drilling must take place that allows assessment of the actual
power production potential of the site. And, if viable, a power generation facility must be
constructed and hooked into the local power grid.
 Initial exploration (~1%)
 Permitting, exploratory drilling (~15%)
 Drilling production and injection wells (~35%)
 Plant construction and transmission (~49%)
These costs, however, vary significantly, depending upon the extent to which new development
of a so-called greenfield is required and the quality of the resource. A greenfield is one that has
not been previously explored or developed.

ECONOMIC CONSIDERATIONS
i. Provision of fuel
For most projects that require a sustained and economically attractive fuel supply, the project
sponsor must only contact a supplier and negotiate a long-term supply of natural gas, oil,
propane or coal. To help guarantee low and stable fuel supplies, more and more project sponsors
are purchasing gas fields, or oil or coal reserves. For projects that depend upon biomass (wood),
fuel can be contracted for from a wood-products mill, or the mill may even become a partner in
the project, providing an even more secure supply.

Long term availability of biomass can be determined from long-term timber holdings within a
geographically defined area, and/or plans for harvesting as defined by a state or federal land
management authority. With municipal solid waste, fuel supply can be assured through local
government action requiring that all material be controlled by one authority and delivered to a
specific facility for a given time period.

In the case of geothermal resources, however, the fuel cannot be purchased on the open market,
legislated into existence, bought from a local utility or transported over long distances from a
remote field. Whether the steam or hot water is to be provided by the project sponsor, that is, the
steam field and conversion facility are under one ownership, or the steam is to be provided by a
resource company, the geothermal fuel is only available after extensive exploration, confirmation
drilling and detailed reservoir testing and engineering.

Once located, it must be used near the site and must be able to meet the fuel requirements of the
project for the lifetime of the project. Even before exploration can begin, however, the project
sponsor may incur significant cost, and a number of extremely important legal, institutional,
regulatory and environmental factors must be evaluated fully and their economic impacts
considered.
 ii. Obtaining access and regulatory approval
In order to obtain rights to explore for and develop geothermal resources, access must be
obtained through lease or concession from the surface and subsurface owners. In many countries,
the state claims rights to all land and to all mineral and water resources. In other countries, land
and subsurface rights can be held in private ownership. Unless the geothermal developer has
clear title to both surface and subsurface estates, an agreement for access will have to be entered
into with the titleholder of these estates. Such access will normally require a yearly lease fee and
eventually royalties upon production.

In areas where there is significant competitive interest, competitive bidding may be used to select
the developer. Competitive bids can be in the form of cash bonuses or royalty percentages.
Royalties can be assessed on energy extracted, electrical or thermal energy sales, or even product
sales. Whatever the system, it will have an impact upon project economics and should be
carefully considered in terms of overall economic impact. In particular, developers of direct-use
projects, because of the limited rewards that can be expected, must carefully evaluate how
royalties will be calculated.

The second factor that will have an impact on overall project economics is obtaining all
regulatory approvals, including the completion of all environmental assessments and the securing
of all required permits and licences, including, if necessary, a water right. Increasing concern for
the environment in nearly all countries of the world has resulted in sharply increased cost for
preparing the necessary environmental documents.
Because so many environmental decisions are now contested, a contingency to cover the legal
costs related to appeals must be included in any economic analysis; depending upon the issues
and the financial and political power of those appealing a decision, the cost of obtaining
necessary approvals can easily double. Because most direct-use projects are more limited in
scale, and therefore in environmental impact, these costs may be only a small fraction of the cost
incurred by the proposal for a major power-generation project. Unfortunately for the project
sponsor, most of the cost related to obtaining access and environmental and regulatory approval
must be incurred
early in the project, and in many instances even before detailed exploration or drilling can begin,
and with no clear indication that any of the costs will or can be recovered.

iii. Exploration
Once access has been secured and all necessary regulatory approvals have been obtained, the
developer may initiate a detailed exploration programme, refining whatever data was initially
gathered in the reconnaissance or pre-lease phase of the development process, and sequentially
employing increasingly sophisticated techniques that will lead to the drilling of one or more
exploration wells.
Hopefully these wells will be capable of sustaining a reservoir testing programme, and possibly
also of serving as preliminary discovery and development wells. Reconnaissance, in all
likelihood, will include such activities as
 a literature search,
 temperature gradient measurements in any existing wells,
 spring and soil sampling and geochemical analysis,
 geologic reconnaissance mapping,
 air-photo interpretation,
 regional geophysical studies.
Costs incurred may vary depending on the prior work in the area, geological complexity, and of
course the scale of the proposed project and whether or not the intended use is electrical
generation
or direct application.
Once the area of principal interest has been selected, the exploration programme can be more
intensely focused, with the primary objective of siting deep exploration wells. Techniques likely
to be employed include
 detailed geologic mapping,
 lineament analysis,
 detailed geochemical analysis, including soil surveys and geochemical analysis of all
springs and wells,
 temperature gradient and/or core drilling,
 geophysical surveys, including resistivity, magnetotellurics, gravity and seismic.
Costs increase with the complexity of the techniques and as the detail of the surveys becomes
more
focused. For projects directed toward electrical generation, the cost of this phase of the work is
more than for direct use/applications. The final phase in any geothermal exploration programme
involves the
 siting,
 drilling,
 testing of deep exploratory wells,
 production and injection wells.

Well drilling
Well costs can vary from a low for small, direct-use projects to several million per well for wells
required to access high-temperature resources for electricity generation. Success ratios for
exploration wells can be expected to exceed 60 per cent; however, the risk of dry holes in the
exploration phase remains high and can have a significant economic impact. Even in developed
fields, 10 to 20 per cent of the wells drilled will be unsuccessful. Drilling costs are typically 30 to
50 per cent of the total development cost for an electrical generation project, and variations in
well yield can influence total development cost by some 25 per cent.
Prospective developers must anticipate and prepare for the eventuality that, despite an
investment ranging from a few hundred thousand dollars to several million dollars in lease fees,
environmental studies, licences and permits, and exploration and drilling activities, an
economically viable geothermal reservoir may not be discovered.

If, however, drilling is successful, the reservoir must then be tested to determine its magnitude,
productivity and expected longevity. Only after such testing can a determination be made as to
the eventual size and design of the generating facility or direct-use application.

Well field development

Well field development for an electricity generation project can last from a few months to several
years, depending upon the size and complexity of the project, the speed at which procurement
contracts can be let, and the availability of drill rigs. At this stage it also becomes of increasingly
critical importance to collect detailed data and to refine the information available on the
reservoir. Of course, for most projects this will include both production and injection wells.
Many projects experience unnecessary difficulties and delays in financing or in milestone review
because of incomplete or inaccurate data collection, analysis and/or interpretation.

Such difficulties and delays can seriously affect project economics, and can have a catastrophic
economic impact if delays result in contract forfeiture, or if contracts contain a penalty clause
tied to milestone completion. Coincidental with well field development will be the construction
of well field surface facilities.

Costs associated with both drilling and the construction of well field surface facilities will be
affected by the availability of skilled local labor and by geologic and terrain factors.
Labor costs can be expected to increase by 8 to 12 per cent in areas where most of the labor must
be brought in, or a construction camp erected to provide housing and meals. Terrain and geologic
factors can add from 2 to 5 per cent if special provisions must be made for work on unstable
slopes, or where extensive cut-and-fill is required for roads, well pads, sumps and so on.

Over half of the total production cost over the lifetime of the project will in fact be expenses
associated with the well field. Because of this, it is imperative that wells be properly maintained
and operated to ensure production longevity.
But even with proper O&M, many wells will have to be periodically worked over, and for most
power generation projects, 50 per cent or more of the wells will likely have to be replaced over
the course of the project, adding considerably to the initial well field cost and, of course, to the
cost of
generating power. For example, if 60 per cent of the wells needed to be replaced over the
economic life of the plant, it would have the effect of increasing the levelized cost of electricity
by 15 to 20 per cent.
For small to medium-sized direct-use projects requiring only one or two production and injection
wells, costs will generally be much lower. Because the water chemistry of most geothermal
resources that are developed for direct-use applications is of generally higher quality than that
available for power production, well life can be expected to be much longer and few, if any,
wells will have to be worked over or re-drilled during the economic life of the project.

Project design and facility construction

The power plant
Just as there are numerous geothermal resources throughout the world exhibiting differing
temperatures and chemical characteristics, there are numerous power plant designs.
These include
 direct steam,
 flashed steam,
 double-flashed steam
 binary cycle,
each able to best meet the specific requirements of a particular reservoir. The selection of the
most economically viable power conversion technology can only be accomplished through a
thorough evaluation of the differing strengths and weaknesses of various technologies relative to
the characteristics of the resource and local circumstances, including environmental and
regulatory
requirements (for example, requirements for non-condensable gas emission abatement or fluid
injection).

Terms of the power sales contract can also have a major influence on power plant design. For
example,
 are there premiums paid for availability during certain times of the year or even times of
the day,
 are there advantages to being able to operate in a load-following manner, or is the
capacity factor of paramount importance?
 the manner in which steam is provided; for example, are the steam field and the power
plant under the same ownership, or is steam purchased from another party? If purchased,
the terms of the steam purchase contract can have a profound impact on economics, and
thus on design. For example, if steam is paid for as a percentage of the selling price of
electricity, there is little incentive to achieve high steam use efficiency and a strong
incentive to minimize capital cost. On the other hand, if steam is purchased on the basis
of dollars per kilogram delivered, then achieving the highest possible fuel use efficiency
becomes extremely important.
In order to achieve maximum steam use efficiency, some developers have adopted equipment
procurement evaluation criteria that penalize offerings for inefficient use of steam and/or
electricity at a capitalized rate.

Cycle selection
Direct steam: Although extremely rare in nature, where available, direct steam will result in the
lowest power plant cost.
The steam is directed from the well head, expanded through the turbine, and condensed, or in
certain circumstances exhausted to the atmosphere. If condensed, the condensate can be used for
cooling water make-up and/or injected back into the reservoir.

Flash steam: In the case of high-temperature, liquid dominated resources, a flash-steam plant is
the most economical choice. The hot water or liquid vapour mixture produced from the well head
is directed into a separator where the steam is separated from the liquid. The steam is expanded
through a turbine, and if condensed can be used as cooling water or injected, together with the
separated brine, back into the reservoir. The brine could, however, be used in another application,
such as space or industrial-process heating and/or agriculture, in a technique known as
‘cascading’.

Double-flash steam: A double-flashed steam cycle differs from a single-flash cycle in that the
hot brine is passed through successive separators, each at a subsequently lower pressure. The
steam is directed to a dual-entry turbine, with each steam flow flowing to a different part of the
turbine.

The advantage is increased overall cycle efficiency and better utilization of the geothermal
resource, but at an overall increase in cost. The decision as to whether or not a double-flash plant
is worth the extra cost and complexity can only be made after a thorough economic evaluation
based on the cost of developing and maintaining the fuel supply, or cost of purchasing fuel from
a resource company, plant costs, and the value of the electricity to be sold.

Binary: With a binary cycle, the heat from the geothermal brine is used to vaporize a secondary
or working fluid which is then expanded through the turbine, condensed through an air
condenser, and pumped back to the heat exchanger to be re-vaporized. Binary cycles can more
economically recover power from a low-temperature (<175 °C) reservoir than can a steam cycle.
In addition, binary plants may be more easily sited where environmental concerns are
paramount, and where either gas emissions or cooling tower plumes need to be avoided. Recent
developments in adding spray cooling to air condensers can improve summer efficiency by as
much as 25+ per cent, greatly improving the economics of such operations. The brine can be
used in other cascaded applications and/or injected back into the reservoir.
Other design considerations: In addition to temperature, fluid chemistry is extremely important
in cycle selection and power plant design. Many high-temperature resources are highly
aggressive brines, with high contents of total dissolved solids (TDS), and bring a host of other
problems that
affect both design and economics.

A number of techniques have been adopted to recover power from problem brines. Design
options include the use of a crystallizer reactor clarifier and pH modification technologies.
The use of either technique can add considerably to capital costs as well as to plant O&M cost. If
pH modification is used for scale control, corrosion could also become more severe. Of course,
metallurgy of system components thus also becomes crucial, and can add significant cost to the
plant if more exotic materials such as titanium must be specified.

The use of binary cycles in the presence of high TDS or corrosive brines is limited by the fact
that tube-and-shell heat exchangers can easily be fouled, or suffer rapid deterioration from
corrosion.

The availability of cooling water is also an important consideration in plant design. In a

condensing direct-steam or flashed-steam power plant, the condensate is used for cooling water
make-up. The plant can thus take advantage of the low wet-bulb temperatures that may be
present, even though
the ambient dry-bulb temperature may be quite high. A water-cooled cycle capable of
approaching the wet-bulb temperature presents a significant advantage, as far as overall power
generation is concerned, in comparison to a dry-cooled binary cycle that approaches the dry bulb
instead of the wet bulb. If, however, limited water is available, it may be used to improve the
overall efficiency of a dry-cooled binary plant by injecting a fine spray or mist through the air
condenser or onto a fibrous material (for instance, fiberglass) which can be used to enclose the
sides of the air condenser.
This could be especially attractive where there is a premium for peak summer power. In an area
lacking any source of water for cooling, the optional economic cycle may shift from a binary
cycle to a flashed-steam cycle. In fact, the terms of the power sales agreement may have a
profound influence upon conversion cycle selection, cooling system design, and eventually plant
operation.

Equipment selection
Steam cycle: The turbine generator set is the most expensive piece of equipment in a steam-
cycle power plant. For direct steam and single-flashed cycles, a single admission steam turbine is
appropriate. In turbines up to approximately 30MWe, a single-flow turbine is usually selected.
However, larger turbines generally incorporate double flow, that is, the steam is introduced into
the middle of the turbine and flows in both directions, thus balancing thrust. Single-flow turbines
generally exhaust from the top, allowing the condenser to be located to the side and at the same
elevation as the turbine, thus minimizing cost.

With the double-flow turbine, the steam exhausts downward, requiring the turbine to be mounted
above the condenser. This arrangement increases capital cost, but that cost is more than justified
by the increase in turbine efficiency. Other efficiency considerations include the number of
turbine stages, blade length, and whether the plant will operate as a base load unit, will be used
for load following, or must be dispatchable.
If load following is desirable for either resource or contractual considerations, incorporation of
partial-arc admission into the turbine design is critical. Partial-arc admission, as the name
implies, allows for steam to enter the turbine through only a portion or ‘partial arc’ of blades
under certain
operating conditions, and to enter the turbine through the full arc of blades during other
conditions.

Partial-arc admission allows a turbine to be operated at various output levels while maintaining a
much higher level of operating efficiency than would be possible if the turbine were controlled
through the use of a single throttling valve. In fact, when the plant is operating at the minimum
output allowed by the partial-arc arrangement, it will be only 5 per cent less efficient than at full
output. This operational flexibility ensures the use of the minimum amount of steam possible for
any given level of output. The use of partial-arc admission also allows for plants to be ramped up
very quickly, that is, from minimum output to full output in only a few minutes.

Two major categories of condensers are used with steam cycles:

 the surface condenser
 the direct-contact condenser.
In a surface condenser, the cooling water is circulated through the inside of heat-transfer tubes,
with steam condensing on the outside of the tubes. In contrast, in a direct-contact condenser the
cooling water is sprayed into the condenser, where it directly contacts the steam from the turbine
discharge.

The primary advantage of the surface condenser is that contamination of the cooling water with
constituents of the well-head steam is avoided, an important factor where hydrogen sulfide
abatement is required. The direct-contact condenser, however, is less expensive and is less prone
to maintenance problems, and would thus be the most economical choice if hydrogen sulfide
were not a problem.
The selection of direct-contact or surface condenser will also have an impact on pumps and
pumping requirements, that is, parasitic power requirements. In a surface condenser, the
condensate from the condenser is collected in a hot well, and a condensate pump is required to
pump this condensate up to the top of the cooling tower. The other major pumps required for
surface-condenser operation are the cooling-water pumps, located at the base of the cooling
tower and used to circulate cooling water through the tubes of the condenser and back to the
cooling tower.
Because the condenser itself is under a vacuum, no pump is required in a direct-contact
condenser to move cooling water from the cooling-tower basin into the condenser. However, a
pump is required to pump cooling water and the condensate back into the cooling tower. Because
of the usually high content of carbon dioxide and other contaminates in a direct-contact
condenser, stainless steel pumps are normally specified to resist corrosion.

Non-condensable gases must be removed from the condenser in order to reduce back-pressure
and optimize steam use efficiency. Non-condensable gas removal, however, results in a
significant parasitic load, in terms of either steam used in jet ejectors, or electricity used to power
compression
or vacuum pumps. Steam jet ejectors have by far the lowest capital cost, but are relatively
inefficient in comparison with liquid-ring vacuum pumps or mechanical compression. A
commonly used arrangement employs one or two steam jet ejectors in series, followed by a
liquid-ring vacuum pump, thus taking advantage of the low capital cost of the initial stage with
the higher efficiency final stage.

If the non-condensable gas contains concentrations of hydrogen sulfide that require removal, a
number of options are available, including liquid reduction-oxidation using an iron chelate
solution
Inclusion of hydrogen sulfide abatement can increase the capital cost of a steam cycle plant by
10 per cent or more, and will also result in an ongoing increased cost for O&M.

The cooling tower design can also have a major impact on capital cost, O&M and cycle
efficiency. The most commonly used cooling-tower designs include cross-flow, cross-flow with
high-efficiency fills, and counter-flow. The counterflow tower yields more efficient heat transfer
and greater depression of water temperature than the cross-flow design.

The high-efficiency fill not only increases efficiency at a lower cost than conventional towers,
but also the tower can be shorter, thus resulting in a lower parasite load for pumping cooling
water to the top of the tower. On the downside, high efficiency fills have a tendency to become
clogged, and cooling-water chemistry must be carefully controlled. Biocides are generally added
to minimize algae and other biological growth, and corrosion inhibitors are added to protect the
system. Although dry cooling towers can be used with steam systems, efficiency considerations
will generally discourage their use.

Binary cycle: Selection of the right working fluid is the most critical design decision in the
development of a binary cycle power plant. The selection must achieve a good match between
the heating curve of the working fluid and the cooling curve of the geothermal heat source. The
cooling curve of liquid brine is a relatively straight line, whereas a two-phase flow of liquid and
vapour will give a curve of a different shape. Working fluids used in binary plants fall into two
broad categories:
 light hydrocarbons
 freons.
The light hydrocarbons include butane, propane, isopentane, isobutane, and even hydrocarbon
mixtures designed to find the most efficient match of working fluid to resource. In terms of
freons, R11 and R22 have both been successfully used with low-temperature resources.

The light hydrocarbons have the disadvantage of being highly flammable, requiring installation
of fire control equipment. The use of R11 has been banned because of its adverse impact on the
ozone layer, and R22 will be phased out over the next several years. However, more
environmentally friendly replacements are now available, and work is now being directed toward
the development of other even more efficient and environmentally acceptable replacements.

There is also increasing interest in ammonia as a working fluid, and a number of demonstration
applications are already planned or on-line. Because the heat content of the geothermal resource
is transferred in the binary cycle to the working fluid, the heat exchanger becomes an additional
critical equipment component, and can account for a significant capital-cost increase over a
steam cycle plant. The heat exchanger is generally of shell and tube design, with the geothermal
brine pumped through the tubes and the working fluid on the shell side.

Because of the heating curve, counter-current flow is desired and achieved by laying out the heat
exchangers in series, with single-pass flow on both shell and tube sides. Material selection is
critical to avoid problems of both corrosion and erosion of the heat transfer tubing. For most
applications, carbon steel is acceptable if oxygen can be kept out of the system, and has the
lowest capital cost.

The cost of the heat exchanger can escalate rapidly if stainless steel or even titanium is required.
The use of a direct-contact heat exchanger would reduce capital cost and limit the problems
associated with erosion and corrosion of the heat exchanger tubing. However, problems
associated with contamination of the working fluid by corrosive constituents in the brine and
non-condensable
gases can result in serious problems downstream in the turbine and condenser. Loss of working
fluid to the spent brine is less of a problem, but must still be taken into account by including
recovery equipment.

Another major cost that is specific to the binary cycle is the number of pumps required and the
significant parasitic load they place on the plant. Because the binary cycle operates much more
efficiently if brine from a liquid-dominated reservoir can be maintained as a single-phase flow
through the heat exchanger, production well pumps are used.

The second major requirement for pumps stems from the need to pump the working fluid
through the heat exchangers and to the turbine inlet. The pumps are usually multi-stage, vertical
canned pumps. Multiple stages are used to achieve the required turbine pressure. In addition to
the additional capital cost attributable to the need for production and/or working fluid circulating
pumps, pumping requirements result in a parasitic load of 10 to 15 per cent of the power that is
generated, a significant reduction in the amount of power that is available for sale.

Power plant construction

A number of factors related to power plant construction can have a significant influence on
project economics, including geologic conditions, terrain, accessibility, labour force, economies
of scale, and site or factory assembly of major components.

Geologic conditions and terrain, for instance slope stability and need for extensive cut and fill,
can be expected to increase the cost of construction by 2 to 5 per cent. The need to build or
reinforce roads to carry heavy equipment will also be affected by both geologic conditions and
terrain factors.

The availability of an adequate and skilled labour force can also impact construction cost. If the
site is located in a rural area with little or no skilled construction labour force, most construction
personnel will have to be brought to the site, and in fact, depending upon the commuting
distance, a construction camp may have to be established to provide living quarters and meals for
the workers.

Economics of scale will often favour the larger power plant; however, a number of factors can
virtually eliminate the initial capital cost advantage of opting for the larger power plant and these
factors may also provide operational features that greatly increase plant availability and the
capacity factors. The most important of these are modular design and factory assembly of major
components. Modular design will often allow for factory assembly of major components,
virtually eliminating most weather-related delays, minimizing the need to upgrade roads to carry
extremely heavy pieces of equipment, and helping to ensure more consistent and higher quality
workmanship, possible because of the controlled environment where the work is taking place.
Modular design may also allow for staged startup of generation, providing for a revenue stream
much earlier than with the larger, site-erected plant, and minimizing interest during construction.
Revenue generation
For power generation projects, the power sales contract establishes the legal framework for
revenue generation. For direct use projects, however, the revenue stream to support the project
may well come from the sale of a product, for instance: flowers, plants or vegetables from a
greenhouse project; fish or shellfish from an aquaculture project; value-added service, for
example dehydration in an industrial process; or thermal energy sales for a district energy
project.

Considerable interest in so-called ‘co-production’ is increasing rapidly as a means of improving

the economics of geothermal power generation by providing an additional revenue stream. Co-
production involves the extraction of valuable by-products from the geothermal brine before re-
injection. These by-products may include zinc, manganese, lithium and silica, all of which have
a relatively high market value.

Electricity generation
Ultimately, the economic viability of a particular power generation project will depend on its
ability to generate revenue, and revenue can only be generated from power sales. Such sales
must be equal to or exceed that required to purchase or maintain the fuel supply, to cover debt
service related to capital purchases, and to cover operation and maintenance of the facility. The
output from the plant, and hence the source of revenue generated, will be highly dependent on
how well the plant is maintained, how it is operated, and the ability to take maximum advantage
of incentives to produce at certain times or under certain conditions. For example, a plant selling
into a summer peaking service area must be able to provide maximum possible output when a
premium is being paid for output.

A number of innovative approaches have been adopted to ensure the highest possible capacity
factor, and thus maximum revenue to the plant owner. The most common of these is
 the use of redundant or back-up equipment, including spare wells, cooling-water pumps,
non-condensable gas removal equipment, and the use of multiple-turbine generation sets.
The presence of redundant equipment allows for routine or even forced maintenance to be
accomplished without taking the plant off-line, or at least the entire facility off-line.
 The use of multiple modular turbine generators is a prime example of a strategy to
achieve the maximum capacity factor. In many instances, the steam or brine can be routed
from the downed unit to other operating units capable of operating at slightly over design,
thus providing the possibility of covering the entire load of the unit that is out of service.

Efficiency is further enhanced through the use of a large, multi-pressure condenser that
guarantees a low average condenser pressure, and condenser bypass that allows full steam flow
through the condenser of the operating unit, as well as the use of the entire cooling tower, so that
design back-pressure can be maintained during single-turbine operation. Through such
innovative approaches, not only is maximum capacity and potential for revenue generation
ensured, but efficient use of steam is also achieved.

Revenue can also be affected by plant availability, dispatchability and load-following capability.
Many power purchase contracts provide incentive payments for:
 availability, that is, the ability to generate at certain levels or during certain peak demand
periods
 dispatchability, that is, the ability to go off-line or curtail production when the power is
unneeded
 load-following capability, that is, the ability to match power output to the need for power
of the receiving utility.
Availability, much like plant capacity factor, can be achieved through the highest possible
flexibility and reliability in plant operation, and as with capacity, it is often achieved through the
use of redundant equipment. However, perhaps as important in terms of revenue generation is the
ability of the plant to quickly come on-line after a forced outage, after being tripped off-line, or
after a request of the utility to curtail production.

In many areas, being tripped off-line means shutting in wells to avoid unabated hydrogen sulfide
emission and a lengthy restart because major components have to be brought up to temperature
slowly. The use of a turbine bypass and computerized well-field control can individually or,
ideally, together minimize both these effects and help maximize on-line availability. Because the
steam flow can be routed past the turbine and directly into the condenser, it is possible to remove
the non-condensable gases, and any hydrogen sulfide can be removed and treated in the
hydrogen sulfide abatement system.

Without the turbine bypass, the wells would have to be shut in or vented to the atmosphere, and
it could take up to several hours to bring the wells and plant back to full production.

Co-production
Co-production (that is, the production of silica and other marketable products from geothermal
brines) is rapidly becoming not only a very viable source of additional revenue for power plant
owners, but also a key technique for improving power plant economics by reducing operation
and maintenance costs.

The removal of silica may allow additional geothermal energy extraction in bottoming cycles, or
additional uses of low-grade heat that are presently prohibited because of problems associated
with scaling. Precipitated silica has a relatively high market value for such uses as waste and
odour
control, or as an additive in paper, paint and rubber.
Silica removal also opens the door to the downstream extraction of, for example, zinc (Zn),
manganese (Mn), and lithium (Li), all with relatively high market values.
Silica removal has the additional benefit of helping to minimize re-injection problems. Initial
studies indicate that power plant efficiency of an air-cooled binary plant could be increased by 25
per cent through the use of spray cooling.

Question:
Why are geothermoelectric power plants more sensitive, from the economic viewpoint, to
variations in capacity factor than power plants fed by conventional fuels such as coal or gas?
Answer:
The capacity factor is, in simple terms, the ratio between the amount of power actually generated
in a given period to the maximum power that a plant is capable of generating in that same period.

The cost of electricity produced by a plant is made up of fixed costs and variable costs. Fixed
costs, such as the initial capital cost of the plant, are not influenced by the amount of power
actually generated, whereas the total variable costs reduce with reduced generation. Since a
geothermal project comprises principally fixed costs, a reduction in total generation, implied by a
reduced capacity factor, results in the same fixed costs having to be paid from a reduced total
quantity of generation. This increases the unit cost of the generation.