P18
COST DRIVERS The major cost drivers in a geothermal project are listed below along with examples of actions that can be taken in order to reduce the heat price: • The interest rate By reducing the interest rate by 1 %, the heat price can be reduced by up to DKK 20 per MWh • Number of hours By increasing the number of hours in operation from 5,000 to 5,500 per year, the heat price can be reduced by additional DKK 20 per MWh • Lower temperature in the district heating network (increased COP) By increasing the COP from 6 to 7, the heat price can be reduced by approximately DKK 15 per MWh. • Reduced CAPEX If CAPEX is reduced by 10 %, the heat price can be reduced by approximately DKK 15 per MWh. The reduction cannot be calculated until an exploration well has been drilled. • Contracting If an organization has experience managing all of the complex aspects of a geothermal project, the price per MWh can be reduced by up to DKK 100. However, district heating companies in Denmark traditionally do not have experience managing all aspects of a geothermal project, such as evaluation of the subsurface and the design and drilling of wells. This is something a professional operating company would clearly do since they have the experience and competences to manage the contracts and interfaces between the various suppliers. An oil and gas operator would never choose a Build Own Operate model due to the price.
CONCLUSION The conclusion is that if district heating companies do not want to take on any of the risks associated with a geothermal energy project, then the heat price to the consumers will be too high. If district heating companies engages a professional partner to carry and manage the exploration risk and participate with some of the financing starting in the development phase, it is possible to end up with a heat price which is competitive with other green energy sources. The way to a successful geothermal project is through partnerships between district heating companies and experienced geothermal operating companies, thus ensuring the lowest cost financing and efficient risk and project management.
Lars Andersen, la@geoop.dk For further information please contact:
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