Technical Paper: Quantification of Geothermal Resource Risk - A Practical Perspective

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Presentation Date: 2010


Quantification of geothermal resource risk is of major importance in the financing of geothermal projects. This paper considers several practical merit measures of geothermal resource risk (internal rate of return, levelized cost of power, discounted profit-to-investment ratio, unit capital cost per installed MW, drilling cost per MW delivered and resource base) and various practical approaches to risk quantification utilizing these merit measures. The risk quantification approaches considered in this paper are: sensitivity studies, probabilistic assessment and "certainty equivalent" mapping. Based on such quantification and considering the experience of developers and operators in the geothermal industry, the positive impact of the "learning curve" effect and the "portfolio effect" on resource risk is described. Using certainty equivalent mapping, the evolution of the resource risk profile of a project through its various phases is illustrated. Certainty equivalent mapping is shown to be the best overall tool for resource risk quantification. The case history of the Kamojang geothermal field in Indonesia, which has been generating power for 25 years, is invoked to illustrate some of the concepts.

Technical Paper from GRC Transactions, Vol. 34, 2010

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