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What Factors Contribute to Geothermal Energy Cost?

By C. Martin
Updated May 17, 2024
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The main factors that contribute to geothermal energy costs are usually geographical exploration to identify a suitable site, subsequent development of the site, and construction of the power plant. As such, geothermal energy cost tends to be heavily front loaded, with the upfront development costs accounting for the majority of the costs that the plant will accrue over its lifespan. The subsequent operating geothermal energy cost tends to make up a relatively small percentage of the overall cost, although this depends on the country and location in which the plant is situated.

Given the significant advantages of geothermal energy, in particular the sustainability of this power source and the low environmental impact in terms of air pollution, the geothermal energy cost may be considered a long term investment in the energy plan of a country. This tends to be particularly true for countries or locations that have certain geographical traits that may enable them to take cost effective advantage of geothermal energy. Some examples include Alaska, California, Oregon, and Iceland.

In terms of costs, geothermal energy advantages include relatively low ongoing costs. There is usually no requirement to burn any expensive fossil fuels as part of the operation, and a significant geothermal energy cost advantage, which may be attractive to investors, is the stability and predictability of the ongoing costs once the geothermal power plant is in operation. This contrasts with fossil fuel power facilities, where the ongoing costs tend to be high and to fluctuate with the price of fuel.

Geothermal energy costs therefore tend to be quite predictable once a geothermal power plant is up and running. The effect on the local economy is often regarded as positive, providing a long term supply of jobs, which are often quite well paid. One economical concern that is sometimes raised is whether the presence of a geothermal power plant will have a negative effect on tourism in the local area. Existing data suggests that most geothermal power plants do not usually impact tourism negatively, however. Some may even become a tourist attraction.

Disadvantages of geothermal energy costs, on the other hand, may include the relatively high costs that are usually incurred during the exploratory phase of geothermal plant projects. The costs of exploration may vary significantly depending on the accessibility or otherwise of the area under investigation. A further cost which may be extremely high during investigation is that of exploratory drilling. Drilling can be a very significant contributor to geothermal energy costs, and this cost may rise dramatically if the price of cement and steel increases.

About Mechanics is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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