Geothermal energy may need more policy support to successfully compete with solar and wind resources in western U.S. markets, according to a research paper by the Lawrence Berkeley National Laboratory.
Geothermal power has been “largely sidelined” during the ongoing energy transition of this century as many gigawatts of wind, and later solar, and most recently solar-plus-storage hybrid plants have been built instead, the Berkeley researchers said in the paper, Mind the gap: Comparing the net value of geothermal, wind, solar, and solar+storage in the Western United States.
“Relatively little new geothermal capacity” has been deployed in this century, the authors noted, adding that in the past decade, less than 0.5 gigawatts of new geothermal capacity has come online in the six western states that are home to geothermal power plants while more than 5 gigawatts of wind and 20 gigawatts of utility-scale solar have come online during the decade.
The Berkeley paper analyzed the development gap by gathering historical power purchase agreement prices for geothermal, wind, solar, and solar-plus-storage plants in the western United States and comparing them with wholesale market based energy and capacity prices to arrive at a net value for each resource, defined as the combined energy and capacity value of a resource minus its average power purchase agreement price.
The analysis showed that geothermal’s net value is lower than that of the other resources and has even been negative for much of the study period, which the authors said “largely explains the disparity in deployment rates seen over the last decade.”
The factors limiting geothermal deployment have not been physical potential or resource availability, but the economic viability, including higher resource risks, longer development timelines, and higher financing costs associated with geothermal development, the authors said.
In recognition that geothermal’s energy and capacity value is likely to remain “largely intact in future years,” while that of wind, solar, and solar-plus-storage will likely decline as their market share grows, the authors extended their assessment of relative net value through 2026, a date based on a California regulatory mandate.
In June 2021, California regulators mandated load-serving entities procure at least 1 gigawatt of new zero-emission, high-capacity-factor, non-weather-dependent resources – geothermal resources “in all but name,” the authors said – along with another gigawatt of long-duration, defined as at least eight hours energy storage by 2026.
California’s “mid-term reliability” procurement order injected new life into the geothermal industry, with several new power purchase agreements having been announced in its wake, the report’s authors said.
The extended analysis found “likely improvements in geothermal’s relative competitiveness based on net value—particularly relative to standalone solar and solar-plus-storage—though not enough to close the persistent gap with these other resources,” the report found.
“Such a scenario makes it hard to sustain a functioning, let alone improving, industry that will be ready to build new firm generating capacity when eventually called upon to do so,” the report’s authors said. “At risk are the many ancillary benefits and capabilities—besides firm energy and capacity—that geothermal can provide, including enhanced reliability and resilience, minimal land-use impacts (which is rapidly becoming an issue for solar in particular), the potential for valuable byproduct utilization” such as lithium extraction from geothermal brines.
“As such, additional interventions and policy support may be warranted to override the net value considerations examined in this paper and to ‘close the gap’ between geothermal and competing resources,” the authors concluded.