Estimating the Levelized Cost of Geothermal Electricity

Abstract

The Pacific Northwest geothermal assessment project uses a constant dollar levelized cost procedure to determine the costs of produced or conserved electricity from surveyed resources. This method is strictly based on the Bonneville Power Administration (BPA) costing procedures to consistently compare alternative resources (BPA,1984). Although such a method does yield important characteristics of the resource, it cannot take into account intangible factors in the economic process such as quality of resource (reliability and availability) or other factors outside the scope of the accounting process (such as environmental concerns). Despite these deficiencies, levelized cost probably provide the most compelling argument for resource development and are frequently used for comparisons. It is important to examine sensitivities to some of the uncertain elements in geothermal exploration and development process because the resource often is "blind" or unpredictable in its early stages.