Economic Assessment of Geothermal Plant Efficiency Improvements in the PG&E System

Abstract

This study examines the merits of investment in geothermal efficiency improvements in the PG&E System. The study compares the cost, composed of the equipment investment cost and the increased payment to steam suppliers, with the benefits, composed primarily of displacing existing oil fired generation and cost savings due to geothermal fuel repricing. Two alternative oil cost real escalation rates were examines: 4.7 percent though 1987 and 3.0 percent thereafter, and a zero escalation rate throughout. The analysis found for the higher oil price escalation case that the present value of future savings was bout $17,000/KW of improved efficiency at a cost of $6,000/KW. Under the lower oil price escalation case, the percent value of future savings was less than the investment. Whether or not improving the efficiently of geothermal units is a profitable investment is almost totally determined by future oil prices, given the resource plan used in the analysis.