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The main driver for future geothermal electricity
developments is the need for future electricity
generation at a competitive price. With a floating
wholesale power price, commitment to new generation
should happen when expected market price exceeds
the long run cost of generation. If power prices
rise as expected, and carbon taxes have their
intended influence on markets, then new geothermal
projects will become more clearly economic. Gas
has been favoured partly on price, but also because
it does not suffer from the same local regulatory
barriers to development. Constraints on transmission
capacity through the North Island also reduce
the value of geothermal generation in the central
North Island relative to generation closer to
Auckland.
At $2.8M to $4.5M/MW, geothermal electricity
generation generally has lower capital costs than
hydropower. Significant O&M costs are offset
by there being no fuel cost and by load factors
of more than 90%, resulting in competitive electricity
prices. For new direct use projects, large thermal
requirements with high load factors are needed
to ensure profitable steam supply to counter the
high cost of new well drilling.
Costs estimated for new geothermal electricity
generation range from 2-9 c/kWh, with between
400 MWe and 600 MWe being available
in this range. At average hydro inflows, wholesale
electricity prices are currently around 7c/kWh,
with carbon taxes expected to add 1c/kWh. However,
low hydro inflows result in much higher wholesale
spot prices, which can reach 20c/kWh and exceed
retail costs.
Unit Costs Of Electricity Generation
1989-2005
See Also Other Investment Climate
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