Risk Management for Recoverable Thermal Energy Using a Probabilistic Decision Analysis Approach

Abstract

The financial risks involved in developing a geothermal resource often prove difficult to overcome because of perceived large uncertainties in the decisions that need to be made. These types of risk management decisions are often complex, involving uncertainties in the geothermal resource, availability of sufficient water, costs of development and production, protection of the environment, and uncertainties in the local energy needs. Probabilistic decision analysis is ideally suited to manage expectations and associated uncertainties of a decision problem, and can be applied successfully to choose the optimal decision at each stage of geothermal resource development, which could include continued investment and cessation of development. An integrated decision analysis approach involves building decision models in the early stages of a geothermal project, which are associated with relatively large uncertainties, and refining the decision model for subsequent decisions that are made at each phase of development. At each phase of development the best decision is made in the face of the uncertainties that currently exist. This approach to sequential risk management results in better understanding of the full context of the decision options available, and hence more effective development of geothermal resources.