Identification of Geothermal Reserves and Estimation of Their Value

Abstract

This paper discusses a procedure for estimating the value of a hot water geothermal property from a resource owner's point of view. Two methods make up the procedure: a "conservative" method of estimation and an "optimistic" one. Value of a property by both methods is estimated to equal the present value of future income less the cost of resource extraction. The two methods share a common set of assumptions (e.g., that the price of hot water at the start of cash flow from a project will be the same). However, the methods differ in important ways. The optimistic method, for example, allows for future increase in price that in turn offsets discounting of future income. Together the methods define a range of values that might reasonably be assigned to a property.