The United States and other governments are now investing billions in public money incentivising green power generation. Analysts at Credit Suisse turned their minds to the fundamental question: what is the most cost-effective source of electricity generation?
The winner by a wide margin: geothermal - 35% cheaper than coal.
That’s strange. Geothermal power remains a maginal player – less than 1%  of worldwide energy production. The public and investors hear much about solar, wind, and lately, carbon capture and storage related to coal fired power plants. Can geothermal really beat these high-profile power sources on price?
Credit Suisse used an analysis called “levelized cost of energy" to come up with an apples-to-apples comparison of generating costs. This considered:
Significantly, this analysis did not consider carbon pricing  such as cap and trade mechanisms, which will give renewables an increasing price advantage as time goes on.
Geothermal came in at 3.6 cents per kilowatt-hour, compared to 6.2 cents per kilowatt-hour for nuclear, 5.2 cents per kilowatt-hour for natural gas and 5.5 cents per kilowatt-hour for coal.
What About Clean Coal?
Coal has been in the news much lately – particularly around the prospect of using carbon capture and storage  (CCS) to limit greenhouse gas emissions. This will become more imperative as the US and other governments move towards a cap and trade systems of pricing carbon.
However CCS remains largely theoretical  without a single commercial example anywhere in the world. The main reasons are cost and liability.
Potential cost premiums remain largely unknown but the best guess is that CCS would add 30%-60%  to the operating costs of a coal fired generating plant. Using the figures arrived at by Credit Suisse, coal generation plus CCS might lead to electricity costs up to 8.8 cents per kilowatt hour. That is more than double their figures for the cost of geothermal.
"Any number of risks to life and property due to CO2 sequestration are imaginable. A geologic event that perforates the earth’s crust, such as an earthquake or a volcano, could allow extremely concentrated CO2 to rush to the surface, asphyxiating people or animals. Sequestered CO2 could interact with other compounds to eat away at rock far underground, eventually causing the collapse of structures on the surface. CO2 in storage could migrate into areas that supply drinking water, requiring costly cleanups".
How does this play out in the real world? Consider that a full scale carbon capture pilot plant has been built by General Electric in Polk County Florida, but has yet to be tested because the state refuses to indemnify GE for legal liabilities .
Like CSS, geothermal involves drilling a very deep hole into the Earth. But instead of pumping down CO2 from a surface generating facility, it taps into the ancient heat from the formation of the planet. Because it does not rely on burning fossil fuels, geothermal is virtually greenhouse gas neutral. As a result, carbon pricing through a cap and trade system would improve the economics of geothermal invstments as time goes on - becoming an asset instead of a liability.
Existing geothermal facilities also have a base-load capacity factor  of close to 90% . This is meets or exceeds conventional power generation facilities such as coal. This is also a major advantage over other alternative energy sources such as solar or wind that are intermittent.
In addition, geothermal facilities are insulated from long-term fluctuations in fuel costs that add risk to conventional power generation such as coal, oil and natural gas.
They also have much lower land requirements , typically 1-8 hectares per megawatt vs. 8-10 hectares per megawatt for nuclear and 19 per megawatt for coal.
What about capacity? A recent report from MIT  showed that emerging technologies such as enhanced geothermal systems  (EGS) allow heat mining to be expanded well beyond areas that have natural water circulation. They calculated this could realistically supply 200,000 exajoules of power in the continental United States alone.
According to the MIT panel , that is “2,000 times the annual consumption of primary energy in the United States in 2005. With technology improvements, the economically extractable amount of useful energy could increase by a factor of 10 or more, thus making EGS sustainable for centuries.”
If geothermal is cheaper, more reliable, and cleaner than its competitors, why isn’t this option receiving more attention from policy makers? Good question. The MIT report states bluntly:
Although geothermal energy has provided commercial base-load electricity around the world for more than a century, it is often ignored in national projections of evolving U.S. energy supply. This could be a result of the widespread perception that the total geothermal resource is often associated with identified high-grade, hydrothermal systems that are too few and too limited in their distribution in the United States to make a long-term, major impact at a national level. This perception has led to undervaluing the long-term potential of geothermal energy by missing an opportunity to develop technologies for sustainable heat mining from large volumes of accessible hot rock anywhere in the United States. In fact, many attributes of geothermal energy, namely its widespread distribution, base-load dispatchability without storage, small footprint, and low emissions, are desirable for reaching a sustainable energy future for the United States.
What the good folks at MIT don't mention is that conventional technologies such as coal are already capitalized to the tune of hundreds of billions of dollars. Like any business, they are not inclined to sit on the sidelines while the political landscape shifts beneath their feet. Their response? A $35 million public relations campaign  to promote the unproven idea of "clean coal" with almost $20 million earmarked for lobbying alone. It is difficult for proven but emerging technologies such as geothermal to compete with such a PR juggernaut.
Challenges that Remain
Market obstacles remain formidable for geothermal. High capital costs compared to gas and coal facilities mean accessing financing is difficult, even though geothermal plants are cheaper to operate in the long-term.
“In general, there is financing out there for geothermal, but it's difficult to get and it's expensive," Geothermal Energy Association  director Karl Gawell said recently . "You have to have a really premium project to get even credit card interest rates."
Other technical challenges such as improving deep drilling methods and exploring for the best generation sites will require significant public investment before the private sector moves towards geothermal in a big way.
Betting on the Wrong Horse?
The United States and other countries are investing billions of dollars toward developing green energy technologies. Are they betting on the wrong horse? Consider this: the Canadian government is committing $2 billion in public funding towards carbon capture and storage . That is one and a half times  the support provided for all other green energy technologies combined – including geothermal.
The stakes are enormous in this unprecedented public spending spree. Why? Because infrastructure drives public policy.
If we spend billions on CSS, we will be committing to decades of burning coal. If those funds are instead invested towards geothermal (which shares many of the technical challenges as CSS), we may instead buy a future of domestically-produced, emission-free energy that will remain productive for centuries. This technology will also be exportable to other countries, assuming it is developed here first.
While a green energy future is all very well and good, the market has its own sharp imperatives: Price counts. Risk matters. By those yardsticks, geothermal should be a market leader.
Now if only governments would take notice...