The Business Of Geothermal Power:

From Conventional To Unconventional . . .

‘Sedimentary Basins’

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Richard J. Erdlac, Jr., Ph.D., P.G. (TX, PA)Erdlac Energy Consulting

Electric Power Production

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Geothermal energy and geothermal plants are described in MW (megawatt) deliverability.

Size range 10 to 250 MW.

One MW of electricity from a coal plant (75% CF) will provide for 400 (South) to 900 (North) households.

1 bbl crude oil = 1,612 kWh electricity1 mcf gas = 293 kWh electricity

A 250 MW generating plant in one year requires: 1,358,561 bbls of oil or 7,474,403 mcf of gas.

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Conventional & UnconventionalWhat does this mean?

Geothermal map of US from SMU Geothermal Lab, 2004. Red areas have highest surface heat flow at ≥150 mW/m2.

Heat flow values of ≥60 mW/m2 (in yellow) are of geothermal interest.

AAPG 1972 BHT map of US. The orange and red dots represent temperatures from 75oC (167oF) to 265oC (509oF).

Temperatures from 100oC (212oF) and above are good for electrical power generation.

Proposed Power ClassificationErdlac, Gross, McDonald – 2008, Geothermal Resources Council

EEC Special thanks to James Witcher for technical discussions.

U.S. Geothermal Power Activity – May 2007

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State MW Active

Alaska 0.4

California 2492.1

Hawaii 35.0

Nevada 297.4

Utah 26.0

Total U.S. 2850.9

Geothermal power capacity on-line.

(Geothermal Energy Association,West Coast Geothermal Finance & Development Workshop)

State MW DevelopingAlaska 60.6Arizona 2 - 20California 921.3 – 969.3Hawaii 38Idaho 239Nevada 935 - 1162New Mexico 21Oregon 128.2 – 213.2Texas UndefinedUtah 182.6Washington UndefinedWyoming 0.2Total U.S. 2455.9

Newly reported geothermal activity.

Technology For Producing Geothermal Power Changes As The Resource Changes

4) Hybrid – combines technologies (i.e. Single Flash Binary Plant)

5) Kalina – ammonia-water mixture; 20-30% output increase; experimental

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1) 2)

3)

Image Source: Geothermal Education Office.

When To Use Which Technology?→ Resource Temperature – ~220o to 350oF.

Binary technology most appropriate.Many Texas resources in this category.Air cooled and water cooled condensers.Lowest environmental impact.

→ Resource Temperature – over 350oF.Flash technology to producing steam.Steam condensing usually requires water cooled condensers.Combined steam & binary system allows air cooling.

→ Dry High Pressure Steam Production.Conventional steam turbine technology.Water cooled condensers.Higher environmental impact.

EEC Source: Adapted from 2004 Ormat presentation.

It’s Not Just Temperature. It’s Also Water Flow…

Binary system.Assumes 85oF cooling water.Flow & Temperature based on Texas Gulf Coast well.

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Turbine Nomogram

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…And It’s Also The Type Of Working Fluid

Source: Garg, 2007. SMU Geothermal Conference

More Specific Example – Company B

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Installed Cost: $2,400 – $2,700 /kW

ROI: 2.7 – 3.2 years

Modular Approach More Cost Effective

Large scale power plant -$1,500 to $2,500 / installed kWe.

Small scale power plant -$3,000 to $5,000 / installed kWe.

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Exist in range of .3 to 130 MW power plant scale.

Excludes soft costs – permitting, engineering, legal, financing, interest during construction.

Source: Ronald DiPippo, 1999, Small Geothermal Power Plants: Design, Performance, & Economics – updated to 2003 $.

Average Capital And Delivery Costs

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Costs as of 2004.

Slide Source: Ormat Presentation, 2004.

Cost Estimates – Conventional Geothermal

Many of these costs would change depending on how costs for geothermal development are linked to costs for oil & gas development.

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Cost Estimates – Unconventional GeothermalEstimated Long Term

Economics

4 Producing Wells@ 2,400 kW Net Each

1 Injection Well

92% Capacity Factor(22 hrs/day)

$/kWh = $0.067

Net Revenue (20 yrs)~ $128,000,000

Advantage of Dissolved Natural Gas

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Relative Cost In Acquiring The Resource

Adapted From: The World Bank Group, 2004

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Heat content of the extractable fluids.

Geology of the reservoir. Total amount of recoverable reserves.Operating expenses relating to the fluid extraction.Price levels relating to the extraction of fluids or power generated.Capital expenditure requirements relating primarily to drilling of new wells.Productivity of a geothermal resource may decline more than anticipated, resulting in insufficient reserves available.Reservoir engineering is an inexact process of estimating underground accumulations of steam or fluids that cannot be measured in a precise way, and depends on the quantity and accuracy of available data.Potential environmental damage surrounding geothermal plants.

Risk To Geothermal Operations

MBA+ Program

Geothermal Resource Development Plan – 1

1) Develop Regional Project InventoryTemperature and heat flow data for maps; literature search (geochemical, warm &

hot springs, available geophysical/geologic data); electrical grid maps.

2) Surface Prospect Identification & ExplorationObtain existing geoscience maps; surface vegetation & soils maps; available remote

sensing data; identify & categorize existing geothermal evidence; surface mapping & sampling.

3) Subsurface Prospect Identification & ExplorationNear surface temperature evaluations; slim hole drilling; gravity, magnetic, electrical

surveys; seismic surveys.

4) AcquisitionObtain lease rights; infrastructure development; resource production plan.

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Conventional – Western States

Geothermal Resource Development Plan – 2

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1) Define Subsurface Regional Temperature FrameworkTemperature and heat flow data for maps; literature search (geochemical, warm & hot

springs, available geophysical/geologic data); electrical grid maps; obtain regional O&G field production maps; correlate temperature maps to field maps.

2) Define Target Areas & FieldsIdentify potential target field areas; obtained detailed temperature & depth information;

produce detailed temperature maps at depth and in target formations; identify coproduced area.

3) AcquisitionObtain lease rights; infrastructure development; resource production plan.

Unconventional – Sedimentary Basins

Co-Produced Hot FluidsStranded

GeopressuredHydrostatic

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Geothermal Power Capacity versus Wellhead Water Temperature

0

25

50

75

100

125

150 170 190 210 230 250 270 290 310 330 350

Temperature (°F)

W p

er B

/D P

rodu

ctio

n

Single-phase Water(Resource Categories 1 and 2)

Water plus Steam(Resource Categories 2 and 3)

Alaska(40°F Ambient Temperature)

Texas(70°F Ambient Temperature)

Petroleum Well Type With Geothermal Power Capacity

1. PRODUCING OIL OR GAS WELL WITH A WATER CUT2. ABANDONED OIL OR GAS WELL (Texas Case History)3. GEOPRESSUERD WELL (Texas Case History)

Source: Sanyal, 2007, SMU Geothermal Conference

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Abandoned Well – Texas – Permian BasinFormation CharacteristicsDepth: 19,000’Net Pay: 200 to 600’ (with water zone)Porosity: 6 – 10%Permeability: ~25 md

Fluid CharacteristicsReservoir Pressure: 9,000 psiaReservoir Temperature: 280oFGeothermal Gradient: 1.1oF/100’

(may be 2.8oF/100’)Mean Ambient Temperature: 70oFBrine Salinity: 130,000 ppmDissolved Gas: 40 scf/bblGas Heating Volume: 870 BTU/mcf

Well Characteristics13 3/8” Casing to 5,000’10 ¾” Casing below to formation top6 ½” Open hole below 10 ¾” casingProduction thru 2 7/8” or 3 ½” tubingWell Spacing: 3,700’Well abandoned @ gas/water ratio

1,000 scf/bbl

Assessment ResultsMax Available Brine Rate: 7,875 B/DGas Rate: 315 mcf/DNeeds to be self-flowedCombined Power Output: 1,400 kW (net)

Brine: 300 kW (net) – 438 kW (gross)Gas: 1,100 kW (net) @ 30% efficiency

Ways to improve results.Source: Sanyal, 2007, SMU

Geothermal Conference

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Abandoned Well – Texas – GeopressuredFormation CharacteristicsDepth: 16,465’Gross Pay: 60’ (with water zone)Perforated Interval: 14,644 – 16.704’Porosity: 19%Permeability: 200 md

Fluid CharacteristicsBottom Hole Pressure: 9,800 psiaReservoir Temperature: 302oFFlowing Wellhead T: 292oFMax Tested Flow Rate: 25,000 BPDBrine Salinity: 127,000 mg/lDissolved Gas: 24 scf/bblGas Heating Volume: 951 BTU/lb

Well CharacteristicsProduction thru 5 ½” tubing

Assessment ResultsProduction Rate: 20,000 B/DGas Rate: 480 mcf/DCombined Gross Power: 3,890 kW

Brine: 1,460 kW – 37%Gas: 1,900 kW – 49%Shaft Horsepower: 530 kW – 14%

Net Power Capacity: 3,130 kWHydraulic component will decline over timeResults In Net Power: 2,600 kW

Source: Sanyal, 2007, SMU Geothermal Conference

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Electrical Delivery Less Of A Problem Than In Conventional Geothermal Areas

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May Require Geothermal Lease

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Number Wells (2.65 MW ea)(Assuming 600,000 wells)

x 109 kWh/yr (at 60% load)

Value (at 5.1 cents / kWh)

1,000 (0.17%) 14 $714,000,000

5,000 (0.83%) 70 $3,570,000,000

10,000 (1.67%) 140 $7,140,000,000

25,000 (4.17%) 350 $17,850,000,000 *

50,000 (8.33%) 700 $35,700,000,000 *

75,000 (12.5%) 1,050 $53,550,000,000 *

100,000 (16.67%) 1,400 $71,400,000,000

Potential Texas Thermal Resource Value

Calculated On Data From The Ormesa I Binary Isopentane Plant, Producing From A 149oC Sandstone Reservoir.

* Note: These market values are comparable to oil, natural gas, and their combined revenue on a yearly basis due to the renewable nature of the heat.

$43.00 / bbl $5.298 / mcf

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Geothermal Incentive Opportunities:“The American Recovery & Reinvestment Act of 2009”

Summary of Select Project-Finance-Related Provisions in ARRA 2009.

Extends the PTC In-Service Deadline.Provides Option to Elect the ITC in Lieu of the PTC.Provides Option to Elect a Cash grant in Lieu of the ITC.Removes ITC Subsidized Energy Financing Penalty.Extends 50% Bonus Depreciation.Extends Loss Carryback Period.Removes ITC Dollar Caps.Expands Loan Guarantee Program.Adds Funding for Clean Renewable Energy Bonds.

PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United StatesBolinger M. and R. Wiser, Lawrence Berkeley National Laboratory; K. Cory and T. James, National

Renewable Energy Laboratory. LBNL-1642E. March 2009

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Geothermal Incentive Opportunities:“The American Recovery & Reinvestment Act of 2009”

Federal Production Tax Credit(PTC)

10-Year Inflation-Adjusted PTC for Power Generation.$21/MWh (2008) w ~2%/yr Escalation.Generation Must be Online by End of 2013.Power Must be Sold to Unrelated Party (not sold to “self”).

NOTE: PTC generally has higher quantitative advantage over ITC for geothermal projects, though qualitative advantages map exist on a project to project basis.

Federal Investment Tax Credit(ITC)

30% ITC in Lieu of PTC.Qualified Projects Placed in Service Prior to End of 2016, Though Geothermal Credit Has No Expiration Date.ITC is Realized in Year Project Begins Commercial Operations, but Vests Linearly Over 5-Year Period.Option of Cash Grant in Lieu of ITC up to 30% of Cost Basis of Project (some timing restrictions).

PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United StatesBolinger M. and R. Wiser, Lawrence Berkeley National Laboratory; K. Cory and T. James, National

Renewable Energy Laboratory. LBNL-1642E. March 2009

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Conclusions 11) Oil & Gas are and will continue in a

production downturn.

2) Produced hot water contains energy resulting in the water having “value”.

3) Much of existing O&G infrastructure can be used to develop geothermal energy from O&G wells.

4) By passed O&G can be produced as a result of an overall improvement in economics – oil + gas + geothermal.

5) Opportunity for O&G industry to move into renewable energy environment – better PR and offset of potential carbon taxes.

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Conclusions 2Texas may not be

able to have this…

…but it can have this – AGAIN – … and lots of them!