Technical Paper: Managing Geothermal Resource Risk - Experience From The United States

Date: 11/11/2008


Commercial geothermal power has been produced in the United States since 1960. Today, about 3,000 MW of geothermal power capacity exist in several geologic provinces in the United States, and several hundred MW of additional capacity is anticipated in the next few years. The body of experience that results from this level of development has enabled best practices to be adopted for the exploration, development and management of geothermal resources, which has helped reduce resource risk. Regulatory changes requiring investor-owned utilities to buy power from independent producers, favorable government-mandated power purchase contracts and tax credits have spurred the development of more geothermal power: profitable projects could be developed, providing a reason to accept resource risks. Government support for exploration and R&D activities has helped mitigate both exploration and operational risks. A government-sponsored Loan Guarantee Program enabled a few development projects to move forward. A long history with natural resource development in the United States has led to an acceptance that resource risk is an inherent part of geothermal development. Other than well control insurance, which is commonly obtained, insurance is neither readily obtainable nor used for risk reduction. In addition to government support for exploration in some projects, US geothermal developers mitigate resource risk (which is greatest during the exploration phase) through commercial approaches, such as equity partnerships, joint ventures and risk pooling. Project financing can be obtained once the resource is confirmed by deep drilling; such confirmation significantly lowers the level of risk. In the operational phase, risk is mitigated by collection and evaluation of resource performance data, and innovative changes in wellfield operations.

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