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After two years, 6 workshops and 2 conferences…

Technical and socio-economic risk evaluation for the development of the geothermal energy in Europe P. Ledru. After two years, 6 workshops and 2 conferences…. ENGINE, a scientific exchange platform : a R&D task force for defining research projects

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After two years, 6 workshops and 2 conferences…

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  1. Technical and socio-economic risk evaluation for the development of the geothermal energy in EuropeP. Ledru

  2. After two years, 6 workshops and 2 conferences… • ENGINE, a scientific exchange platform: a R&D task force for defining research projects • Identification of bottlenecks and prioritisation of research needs • ENGINE, along with other coordinating initiatives (European Commission, IEA-GIA, MIT expert panel, IGA, EGEC…) can • contribute to the construction of an international strategy • consolidate the available information systems • Economic and environmental constrains have changed as a result of the increase of the energy price and of the threats of global warming as a consequence of greenhouse gas concentration in the atmosphere • Several major geothermal projects have been developed, especially in Germany (Gross Schönebeck, Landau, Unterhaching…) and Iceland, and the interest for unconventional geothermal energy worldwide has been renewed (Australia, US) ENGINE, Workshop 7, Leiden, 8-9 November 2007

  3. Coordination action breakdown structure: http://engine.brgm.fr/

  4. Extension of the network to Third countries (Mexico, El Salvador, Philippines) WP1, Project Management WP2, Information and dissemination system WP3. Investigation of UGR and EGS Italy (04/2007) Mid-term Conference Launching Conf. (France 2/2006) Germany (11/2206) WP6. Expertise on investigation of UGR and EGS WP9. Risk evaluation for the development of geothermal energy WP4. Drilling, stimulation and reservoir assessment Iceland (07/2007) Mid-term Conference Switzerland (06/2006) Final Conference (Lithuania, 02/2008) WP7. Expertise on drilling, stimulation and reservoir assessment The Netherlands (11/2007) WP5. Exploitation, economic, environmental and social impacts Mid-term Conference (Germany 01/2007) Greece (09/2007) France (9/2006) WP8. Expertise on exploitation, economic, environmental, social impacts Specialised workshops Beginning of contacts with the Stakeholder Committee

  5. Identification of bottlenecks and prioritisation of research needs ENGINE, Workshop 7, Leiden, 8-9 November 2007

  6. What is now missing? • For starting up new ambitious projects, to rally industrial partners and get support form politics at the national and European level? • The European Strategic Energy Technology Plan defines a target of 20% renewable market penetration in 2020. However, if prospects for market penetration are presented for biofuels, photovoltaics or wind energy, reference to geothermal energy is still missing. ENGINE, Workshop 7, Leiden, 8-9 November 2007

  7. Milestones for achieving ENGINE… • Identification of bottlenecks and prioritisation of research needs • Defining concepts for qualifying and quantifying geologic technical and environmental risk • Examples from US, Australia and Europe ENGINE, Workshop 7, Leiden, 8-9 November 2007

  8. Geothermal Learning Curve Exploration forecast Reservoir engineering Specific costs Exploration forecast R&D Reservoir engineering System reliability System reliability Time ENGINE, Workshop 7, Leiden, 8-9 November 2007

  9. The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 4000 4000 Innovation 1: non reproducible A 100% increase in permeability after stimulation The R&D input Business as usual 1650 X 2000 2000 1179 X 2000 2020 2010 ENGINE, Workshop 7, Leiden, 8-9 November 2007

  10. The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 4000 4000 Innovation 2: reproducible 100% increase in permeability after stimulation The R&D input Business as usual 1650 X 2000 2000 1179 X 2000 2020 2010 ENGINE, Workshop 7, Leiden, 8-9 November 2007

  11. The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 Innovation 3: reproducible 3D thermal modelling of the 1st 5 km, with an error bar on t°C estimation < 10°C 4000 4000 Innovation 2: reproducible 100% increase in permeability after stimulation The R&D input Business as usual 1650 X 2000 2000 1179 X 2000 2020 2010 ENGINE, Workshop 7, Leiden, 8-9 November 2007

  12. The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 Innovation 4: Reduction of drilling investment by 50% Innovation 3: reproducible 3D thermal modelling of the 1st 5 km, with an error bar on t°C estimation < 10°C 4000 4000 Innovation 2: reproducible 100% increase in permeability after stimulation The R&D input Business as usual 1650 X 2000 2000 1179 X 2000 2020 2010 The Soultz Innovation: connectivity at depth between wells The Gross schönebeck Innovation: non reversible increase in permeability in sedimentary basin, sustainability of t°C ENGINE, Workshop 7, Leiden, 8-9 November 2007

  13. Site Screening ENGINE, Workshop 7, Leiden, 8-9 November 2007

  14. Regional reconnaissance

  15. Prospect identification

  16. Steps to delineating a geothermal resource

  17. Evaluation of risk in US • The level of risk for the project must account for all potential sources of risk • technology, scheduling,finances, politics, and exchange rate. The level of risk generally will define whether or not a project can be financed and at what rates of return • Current hydrothermal projects or future EGS projects will, in the near term, carry considerable risk as viewed in the power generation and financial community. • Risk can be expressed in a variety of ways including cost of construction, construction delays, or drilling cost and/or reservoir production uncertainty. • In terms of “fuel” supply (i.e., the reliable supply of produced geofluids with specified flow rates and heat content, or enthalpy), a critical variable in geothermal power delivery, risks initially are high but become very low once the resource has been identified and developed to some degree, reflecting the attraction of this as a dependable base-load resource. ENGINE, Workshop 7, Leiden, 8-9 November 2007

  18. Risk assessment ENGINE, Workshop 7, Leiden, 8-9 November 2007

  19. Risk assessment ENGINE, Workshop 7, Leiden, 8-9 November 2007

  20. Risk assessment ENGINE, Workshop 7, Leiden, 8-9 November 2007

  21. Oil & Gas Methods for the Assessment Risk & Uncertainty of Hot Rock Plays (Let’s move to Australia…) • Generalisations: • If 3 geologic factors are at least adequate – a hot rock play is prospective. • Source of heat Ex. Radiogenic, high heat-flow granites; • Insulating strata to provide thermal traps; • Hot Rock reservoirs Ex. Permeable fabrics within insulating and heat source rocks that are susceptible to fracture stimulation. • The serial product of key geologic factor adequacy is the chance for geologic success. Where P = the probability of a geologic factor being at least adequate (for a viable hot rock resource to exist) - the chance all 3 factors are at least adequate is: • Chance of Hot Rock Adequacy = • P heat source x P heat trap x P heat reservoir Insulating strata Hot Rock reservoir Source of Heat Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au Access to this figure was kindly provided by Jeff Tester – MIT

  22. Generalisations taken a step further • The estimated chance for a geothermal well to flow hot fluids at an initial rate (defined as litres per second at an initial oCelsius) deemed at least adequate (prospective) to underpin break-even outcomes is proposed as the key additional ingredient to define practical prospectivity. • This Hot Rock heat flow rate factor (Pheat flow rate) is integrates physical and economic criteria and is analogous to global best practice for pre-drill estimates of ‘expected’ (risked) petroleum targets – which entail estimates of minimum economic pool-size (Pmeps) for local conditions • Example Calculation. Very certain granites at > 210oC below insulating strata in stress field known to be conducive to naturally occurring horizontal fractures: • P heat source = 90% P heat source x P heat trap x P heat reservoirx P heat flow rate • P heat trap= 90% = 90% x 90% x 50% x 50% • P heat reservoir = 50% = 20.25% estimated chance of economic success • P heat flow rate = 50% This enables risk-ranking of plays, expected value estimates, value of information estimates and a portfolio approach to managing risk and uncertainty, analogous to best practice in the petroleum E&P business. Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au

  23. Expected Value Estimate for a Hot Rock Test Well (An Example) Decision-tree for a hypothetical Hot Rock target P success = 20.25% Say NPV of mean success case is $50 million for a single play trend. The NPV for the mean success case for the entire play trend is $500 million P geologic success but < economic flow rate = 20.25% Say cost of unsuccessful fracture stimulation is $2 million P Geologic Inadequacy= 59.5%. Say cost of failure is $10 million Chance of economic failure = 20.25% + 59.5% = 79.75% Sum of probabilities = 100% The chance for economic success (Ps) for this Hot Rock Play = (Ps x NPV of Hot Rock Play) – ((1- Ps) x full-cycle NPV to prove post-frac flow > economic threshold rate) = {20.25% x $50,000,000} - {$12,000,000 79.75%) = $560,000 Expected Net Present Value This is << than the expected value of the play tested by a single well • Four outcomes are possible from the drilling and flow testing of a Hot Rock target. • Geologic success (rock properties are at least adequate to justify flow tests) • Geologic failure (rock properties are insufficient to justify flow tests) • Technical success (flow tests undertaken but outcome is not competitive in foreseeable markets) • Economic success (flow tests demonstrate a resource is at least 50% certain to be competitive in foreseeable markets) • Example calculations for the chance for these four outcomes follows: • the chance for geologic success in a hot rock play (Pg) • = (P heat source x P heat trap x P heat reservoir) • = 90% x 90% x 50% • = 40.5% • the chance of geologic inadequacy is the complement of Pg • = 100% - Pg • = 100% - 40.5% • = 59.5% • the chance of a technical success (i.e. a geologic success with inadequate flow rate) • = (1- P heat flow rate) x Pg • = (100% – 50%) x 40.5% • = 20.25% • the chance for an economic success (i.e. the probability of economic success Ps) • = (P heat source x P heat trap x P heat reservoir x P heat flow rate) • = 90% x 90% x 50% x 50%) • = 20.25% = Ps • NPV = Net Present Value Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au

  24. Value of Information (VoI) Estimate for a Hot Rock Play (An Example) • Say the first ‘play-maker well was successful – and demonstrated economic flow rates are credibly more certain for a the entire Hot Rock play (worth NPV of $500 million). The implications of that successful ‘proof-of-concept’ test well could be that: • Pheat reservoir to move from 50% to 75%; and • Pheat flow rate to move from 50% to 75%. • In this example: • the chance for Hot Rock play geologic success (Pg) = 90% x 90% x 75% = 60.75% • the chance of geologic inadequacy is the complement of 60.75% i.e. 39.25% • the chance of technical success = Pheat flow rate x Pg = (100% – 75%) x 60.75% = 15.19% • the chance for economic success = Pg x Pheat flow rate = (60.75% x 75%) = 45.56% • the VoI gained from a successful proof-of-concept flow test is the additional expected value • The VoI gained in this Hot Rock play is estimated as follows: • Pre-drill Expected Net Present Value (NPV) for the Hot Rock Play = • {20.25% x $500 million NPV for the Play} - {$12 million x 79.75%) = $91.68 million • Post drill Expected NPV for the Hot Rock Play = • {45.56% x $500 million NPV for the Play =} - {$12 million x 54.44%) = $221.27 million • The value of information ($129.59 million) from the successful proof-of-concept flow tests is the difference between the pre- and post-drill expected net present values expressed above Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au

  25. How Much Is Enough Research & Demonstration? An example Assume 3 distinct Hot Rock play-trends to explore with geologic factor adequacies as follow. • Estimates of the chance that testing all 3 play trends will result in the discovery of at least one: • Technically adequate Hot Rock play: 1 – {Pgeologic inadequacy for A x Pgeologic inadequacy for Bx Pgeologic inadequacy for C} • Economically attractive Hot Rock play: 100% – (79.75% x 84.81% x 94.38) = 36% • Funding exploration through demonstration of an independent fourth Hot Rock play would inevitably increase the chance of demonstrating at least one economically attractive resource Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au

  26. A benchmark of case studies in Europe • Methodology of GE-ISLEBAR • Classification of the barriers • Each barrier has been considered as a criticality • a "criticality index" has been assigned to each criticality in proportion to its ability to obstacle or hinder the implementation of the project : From very low…to very high ENGINE, Workshop 7, Leiden, 8-9 November 2007

  27. A classification of the barriers • Resource • Geothermal resource, Well productivity, Fluid characteristics, Actual Field capacity, Long term Field capacity, Implementation of the plant, Earthquakes-Volcanic Activity • Project economy • Exploration Investment cost, Exploitation Investment cost, Operation costs, Maintenance costs, Economic attractiveness, Financial parameters, Financial supports and incentives • Demand • Energy demand, Competitivity of Alternative energy • Environment • Normative for wells, for plant construction, for plant operation, for outside water reject, for reinjection, for Air emission, Noise pollution, Visual Impact • Sociological aspects • Misleading opinions , Lack of knowledge • Conflicts of interest towards the project • Adequacy of legislation, National, regional, EU supports, Local hostile economics operators, Local hostile environmental groups, Local hostile institutional entities • Organisation of the project • Lack of entity in charge of the management, competition between different entities, confusion among the roles of different entities) ENGINE, Workshop 7, Leiden, 8-9 November 2007

  28. Organisation 1.1 Geothermal resource Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 8.1 Entity in charge of the management 1.4 Actual Field capacity 4 7.3 Local hostile institutional entities 1.4 Long term Field capacity 7.2 Local hostile environmental groups 1.5 Implementation of the plant 3 7.1 Local hostile economics operators 1.6 Earthquakes-Volcanic Activity 2 6.2 National, regional, EU supports 2.1 Exploration Investment cost Conflicts 1 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 0 5.2 Lack of knowledge 2.3 Operation costs Sociological Economy 5.1 Misleading opinions 2.4 Maintenance costs 4.7 Visual Impact 2.5 Economic attractiveness 4.6 Noise pollution 2.6 Financial parameters 4.5 Normative for Air emission 2.7 Financial supports and incentives 3.1 Energy demand . 4.4 Normative for reinjection Demand 3.2 Competitivity of Alternative energy 4.4 Normative for outside water reject 4.1 Normative for wells 4.3 Normative for plant operation 4.2 Normative for plant construction Environment Pantelleria

  29. Organisation 1.1 Geothermal resource Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 8.1 Entity in charge of the management 1.4 Actual Field capacity 4 7.3 Local hostile institutional entities 1.4 Long term Field capacity 7.2 Local hostile environmental groups 1.5 Implementation of the plant 3 7.1 Local hostile economics operators 1.6 Earthquakes-Volcanic Activity 2 6.2 National, regional, EU supports 2.1 Exploration Investment cost Conflicts 1 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 0 5.2 Lack of knowledge 2.3 Operation costs Sociological Economy 5.1 Misleading opinions 2.4 Maintenance costs 4.7 Visual Impact 2.5 Economic attractiveness 4.6 Noise pollution 2.6 Financial parameters 4.5 Normative for Air emission 2.7 Financial supports and incentives 3.1 Energy demand . 4.4 Normative for reinjection Demand 3.2 Competitivity of Alternative energy 4.4 Normative for outside water reject 4.1 Normative for wells 4.3 Normative for plant operation 4.2 Normative for plant construction Environment Nisyros

  30. Organisation 1.1 Geothermal resource Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 8.1 Entity in charge of the management 1.4 Actual Field capacity 4 7.3 Local hostile institutional entities 1.4 Long term Field capacity 7.2 Local hostile environmental groups 1.5 Implementation of the plant 3 7.1 Local hostile economics operators 1.6 Earthquakes-Volcanic Activity 2 6.2 National, regional, EU supports 2.1 Exploration Investment cost Conflicts 1 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 0 5.2 Lack of knowledge 2.3 Operation costs Sociological Economy 5.1 Misleading opinions 2.4 Maintenance costs 4.7 Visual Impact 2.5 Economic attractiveness 4.6 Noise pollution 2.6 Financial parameters 4.5 Normative for Air emission 2.7 Financial supports and incentives 3.1 Energy demand . 4.4 Normative for reinjection Demand 3.2 Competitivity of Alternative energy 4.4 Normative for outside water reject 4.1 Normative for wells 4.3 Normative for plant operation 4.2 Normative for plant construction Environment Bouillante

  31. Don’t worry to much about resource uncertainty and economy But have an attentive look to policy makers awareness and public acceptance … provided some financial tools are implemented, and demand exist Average :1 What should a good opportunity look like ? Organisation 1.1 Geothermal resource Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 8.1 Entity in charge of the management 1.4 Actual Field capacity 4 7.3 Local hostile institutional entities 1.4 Long term Field capacity 7.2 Local hostile environmental groups 1.5 Implementation of the plant 3 7.1 Local hostile economics operators 1.6 Earthquakes-Volcanic Activity 2 6.2 National, regional, EU supports 2.1 Exploration Investment cost Conflicts 1 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 5.2 Lack of knowledge 2.3 Operation costs If those barriers are strong, you’ll have to work hard on them Sociological Economy 5.1 Misleading opinions 2.4 Maintenance costs 4.7 Visual Impact 2.5 Economic attractiveness 4.6 Noise pollution 2.6 Financial parameters 4.5 Normative for Air emission 2.7 Financial supports and incentives 3.1 Energy demand . 4.4 Normative for reinjection Demand 3.2 Competitivity of Alternative energy 4.4 Normative for outside water reject 4.1 Normative for wells 4.3 Normative for plant operation 4.2 Normative for plant construction Environment Average

  32. Milestones for achieving ENGINE… • Identification of bottlenecks and prioritisation of research needs • Defining concepts for qualifying and quantifying geologic technical and environmental risk • Examples from Australia and Europe • An evaluation of the investment and the expected savings on cost operation at the 2020 horizon for each R&D initiative and industrial project ENGINE, Workshop 7, Leiden, 8-9 November 2007

  33. The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 Innovation 4: Reduction of drilling investment by 50% Innovation 3: reproducible 3D thermal modelling of the 1st 5 km, with an error bar on t°C estimation < 10°C 4000 4000 Innovation 2: reproducible 100% increase in permeability after stimulation The R&D input Business as usual 1650 X 2000 2000 1179 X 2000 2020 2010 The Soultz Innovation: connectivity at depth between wells The Gross schönebeck Innovation: non reversible increase in permeability in sedimentary basin, sustainability of t°C ENGINE, Workshop 7, Leiden, 8-9 November 2007

  34. Milestones for achieving ENGINE… • Identification of bottlenecks and prioritisation of research needs • Defining concepts for qualifying and quantifying geologic technical and environmental risk • Examples from Australia and Europe • An evaluation of the investment and the expected savings on cost operation at the 2020 horizon for each R&D initiative and industrial project • Data available from the updated framework of activities and expertises performed must converge to select discrete and significant parameters for the risk analysis. • The use of Decision Support Systems that will integrate the critical parameters defined. From this modelling, a definition of the most favourable contexts for the development of Unconventional Geothermal Energy in Europe is expected. ENGINE, Workshop 7, Leiden, 8-9 November 2007

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