We are pleased to announce the recent publication of a new Berkeley Lab analysis — “Mind the Gap: Comparing the Net Value of Geothermal, Wind, Solar, and Solar+Storage in the Western United States” — in the journal Renewable Energy.
Studies show that a diverse portfolio of zero-carbon resources will be needed to decarbonize the U.S. electricity sector, and that high-capacity-factor renewable resources like geothermal could become particularly important in later stages of decarbonization as the capacity contribution of variable, weather-dependent resources like wind and solar declines with increasing market share. Yet while wind, solar, and — more recently — storage have all seen significant U.S. deployment in recent years, deployment of new geothermal plants has barely budged over the same period. We explain this disparity in historical deployment by analyzing empirical price data from wholesale energy and capacity markets (Figure 1A-1C) and power purchase agreements (PPAs, Figure 1D), which reveal that geothermal has historically offered a lower “net value” — i.e., energy value plus capacity value minus PPA price — than these other resources in the western United States (Figure 2).
Figure 1. Historical energy value (A), capacity value (B), combined energy and capacity value (C), and PPA prices (D) of PV, wind, geothermal, and PV+storage (PV+S) in the West. Energy value is the product of each resource’s hourly generation profile and the coincident hourly real-time wholesale energy prices at the nearest pricing node. Capacity value is the product of each resource’s capacity credit—which reflects its contribution towards resource adequacy requirements—multiplied by the prevailing capacity price. The “(100%)” or “(50%)” designation following “PV+S” refers to the assumed 4-hour storage ratio (aka battery:PV capacity). Courtesy of the Lawrence Berkeley National Laboratory
Figure 2. Historical net value of PV, wind, geothermal, and PV+storage (PV+S) in the West. The “(100%)” or “(50%)” designation following “PV+S” refers to the assumed 4-hour storage ratio (aka battery:PV capacity). Courtesy of the Lawrence Berkeley National Laboratory
Looking ahead through 2026 — the initial target year for the California Public Utility Commission’s “mid-term reliability” procurement order — continued growth in the market share of wind, solar, and storage should improve geothermal’s relative market value, yet perhaps not enough to overcome the persistent cost gap between geothermal and these other, lower-cost resources. In the face of this challenging market outlook, continued policy intervention and R&D investments may be warranted to sustain and amplify the geothermal industry’s contributions towards a reliable, decarbonized power sector.
We thank the US Department of Energy’s Geothermal Technologies Office for funding this work, and hope you find it to be of use.
Article and Graphs Courtesy of the Lawrence Berkeley National Laboratory
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