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 • > ENGINE, along with other coordinating initiatives (European Commission, IEA-GIA, MIT expert panel, IGA, EGEC…) can • • > > Identification of bottlenecks and prioritisation of research needs 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 >2 Coordination action breakdown structure: http://engine.brgm.fr/ ENGINE: ENhanced Geothermal Innovative Network for Europe A scientific and technical European Reference Manual for the development of Unconventional Geothermal Resources and Enhanced Geothermal Systems An updated framework of activities concerning Unconventional Geothermal Resources and Enhanced Geothermal Systems in Europe WP3 Investigation of Unconventional Geothermal Resources and EGS - The scientific and technological challenges of the exploration phase - Gaps, barriers and cost effectiveness WP4 Drilling, stimulation and reservoir assessment Publications - state-of-the-art - proceedings of conferences - definition and analysis of bottlenecks and solutions Publications - state-of-the-art - proceedings of conferences - definition and analysis of bottlenecks and solutions - Drilling technology, reservoir modelling and management - Gaps, barriers and cost effectiveness WP5 Exploitation, economic, environmental and social impacts - Integrated economic approach for costeffectiveness - Policy makers and public awareness - Gaps and barriers holding back development Publications - state-of-the-art - proceedings of conferences - definition and analysis of bottlenecks and solutions Best Practice Handbook and innovative concepts WP9 Risk evaluation for the development of geothermal energy Report on the integration of results in a Decision Support system WP8 Expertise on exploitation, economic, environmental and social impacts Synthesis on best practices, barriers holding back development and possible solutions WP7 Expertise on drilling, stimulation and reservoir assessment Synthesis on best practices, barriers holding back development and possible solutions WP6 Expertise on investigation of unconventional Geothermal resources and EGS Synthesis on best practices, barriers holding back development and possible solutions WP2 Information and dissemination system - General information - Information on training and education - Reports and results, publications - Data management - Publication policy - Connection with media Deliverables - a web site - access to databases, models and opensource software - on-line access to articles and reviews WP1 Project Management - 1 co-ordinator and secretary - follow up time / quality / cost - 1 executive Group - 1 steering committee - Connection with international agencies, national programmes, industrial partners Deliverables - quarterly reports to EU - stronger links with potential partners for new projects 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 Launching Conf. (France 2/2006) Mid-term Germany (11/2206) Conference Italy (04/2007) WP6. Expertise on investigation of UGR and EGS WP4. Drilling, stimulation and reservoir assessment Mid-term Switzerland Conference (06/2006) Iceland (07/2007) WP7. Expertise on drilling, stimulation and reservoir assessment WP9. Risk evaluation for the development of geothermal energy Final Conference The Netherlands (Lithuania, 02/2008) (11/2007) WP5. Exploitation, economic, environmental and social impacts France (9/2006) Mid-term Conference (Germany 01/2007) Greece (09/2007) WP8. Expertise on exploitation, economic, environmental, social impacts Specialised workshops Beginning of contacts with the Stakeholder Committee Identification of bottlenecks and prioritisation of research needs EGS technology Priority A Impact of innovation Priority B Impact of innovation Priority n Impact of innovation Resource investigation Topic 1 x% Topic 2 y% Topic n z% Drilling, stimulation and reservoir assessment … … … Exploitation, reservoir management and monitoring … … … Economic, environmental and social impacts … high … medium … low … ENGINE, Workshop 7, Leiden, 8-9 November 2007 >5 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 >6 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 >7 Geothermal Learning Curve Specific costs Exploration forecast Reservoir engineering R&D Exploration forecast Reservoir engineering System reliability System reliability Time ENGINE, Workshop 7, Leiden, 8-9 November 2007 >8 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 2000 2000 1179 X 1650 X 2010 ENGINE, Workshop 7, Leiden, 8-9 November 2007 2000 2020 >9 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 2000 2000 1179 X 1650 X 2010 ENGINE, Workshop 7, Leiden, 8-9 November 2007 2000 2020 > 10 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 2000 2000 1179 X 1650 X 2010 ENGINE, Workshop 7, Leiden, 8-9 November 2007 2000 2020 > 11 The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 Innovation 4: Reduction of drilling investment by 50% 4000 Innovation 3: reproducible 3D thermal modelling of the 1st 5 km, with an error bar on t°C estimation < 10°C 4000 Innovation 2: reproducible 100% increase in permeability after stimulation The R&D input 2000 2000 1179 X 1650 X 2010 2000 2020 The Soultz Innovation: The Gross schönebeck Innovation: non connectivity at depth reversible increase in permeability in between wells sedimentary basin, sustainability of t°C ENGINE, Workshop 7, Leiden, 8-9 November 2007 > 12 Site Screening Petrography, Petrophysics, Mineralogy Geochemistry, fluid geochmistry Hydraulic properties Stress Field Borehole Geophysics (Acoustic Borehole Imaging, VSP,...) Surface Geophysics (gravimetric, EM, Seismic) Resource analysis Geology, Hydrogeology Heat Flow Tomography Lithosphere Strength Moho Depth Continental Regional Local/Concessional ENGINE, Workshop 7, Leiden, 8-9 November 2007 Reservoir > 13 Regional reconnaissance Prospect identification Steps to delineating a geothermal resource 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 > 17 Risk assessment 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 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 Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au Insulating strata Hot Rock reservoir Source of Heat Access to this figure was kindly provided by Jeff Tester – MIT 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 reservoir x P heat flow rate P heat trap = 90% = 90% P heat reservoir = 50% = 20.25% estimated chance of economic success P heat flow rate = 50% x 90% x 50% x 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 Expected Value Estimate for a Hot Rock Test Well (An Example) 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) Decision-tree for a hypothetical Hot Rock target = (P heat source x P heat trap x P heat reservoir) P success = 20.25% = 90% x 90% x 50% 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 = 40.5% • the chance of geologic inadequacy is the complement of Pg = 100% - Pg = 100% - 40.5% P geologic success 20.25% = 59.5% • the chance of a technical success (i.e. a geologic success with inadequate flow rate) but < economic flow rate = Say cost of unsuccessful fracture stimulation is $2 million = (1- P heat flow rate) x Pg = (100% – 50%) x 40.5% = 20.25% • P Geologic Inadequacy = 59.5%. the chance for an economic success (i.e. the probability of economic success Ps) Say cost of failure is $10 million = (P heat source x P heat trap x P heat reservoir x P heat flow rate) = 90% x 90% x 50% x 50%) Chance of economic failure = 20.25% + 59.5% = 79.75% = 20.25% = Ps Sum of probabilities = 100% The chance for economic success (Ps) for this Hot Rock Play NPV = Net Present Value = (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%) Visit: www.pir.sa.gov.au/geothermal goldstein.barry@saugov.sa.gov.au = $560,000 Expected Net Present Value This is << than the expected value of the play tested by a single well 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 How Much Is Enough Research & Demonstration? An example Assume 3 distinct Hot Rock play-trends to explore with geologic factor adequacies as follow. Portfolio: Play A Play B Play C Chance of Adequacy Chance of Inadequacy Chance of Adequacy Chance of Inadequacy Chance of Adequacy Chance of Inadequacy P heat source 90% 10% 90% 10% 50% 50% P heat trap 90% 10% 90% 10% 90% 25% P heat reservoir 50% 50% 75% 25% 50% 50% P heat flow rate 50% 50% 25% 75% 25% 75% Factors Play A Play B P geologic success(Pg) = (90% x 90% x 50%) = 40.50% P geologic failure (1-Pg) = (1 - 40.50%)= 59.50% P economic success (Ps) = (40.50% x 50%) = P economic failure (Pf) = (1 – 20.25%) = = (90% x 90% x 75%) = 60.75% = (50% x 90% x 50%) = 22.50% = (1 - 60.75%) = = (1 - 22.50%) 39.25% = 77.50% = 60.75% x (1 – 25%) = 45.56% = 22.50% x (1 – 25%) = 16.88% 79.75% = (1- 45.56%) = 54.44% = (1- 16..88%) 20.25% = (60.75% x 25%) = 15.19% = (22.50% x 25%) = 5.63% 79.75% = (1 – 15.19%) = 84.81% = (1 – 5.63%) = 94.38% P technical success = 40.50% x (1 - 50%) = 20.25% P technical failure = (1- 20.25%) = Play C = 84.22% 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 B x 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 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 > 26 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 > 27 Pantelleria 1.1 Geothermal resource Organisation Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 1.4 Actual Field capacity 8.1 Entity in charge of the management 4 7.3 Local hostile institutional entities 7.2 Local hostile environmental groups 1.4 Long term Field capacity 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 1 Conflicts 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 0 5.2 Lack of knowledge 2.3 Operation costs 5.1 Misleading opinions 2.4 Maintenance costs Sociological Economy 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 . 3.2 Competitivity of Alternative energy 4.4 Normative for reinjection 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 Demand Nisyros 1.1 Geothermal resource Organisation Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 1.4 Actual Field capacity 8.1 Entity in charge of the management 4 7.3 Local hostile institutional entities 7.2 Local hostile environmental groups 1.4 Long term Field capacity 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 1 Conflicts 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 0 5.2 Lack of knowledge 2.3 Operation costs 5.1 Misleading opinions 2.4 Maintenance costs Sociological Economy 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 . 3.2 Competitivity of Alternative energy 4.4 Normative for reinjection 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 Demand Bouillante 1.1 Geothermal resource Organisation Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics 1.4 Actual Field capacity 8.1 Entity in charge of the management 4 7.3 Local hostile institutional entities 7.2 Local hostile environmental groups 1.4 Long term Field capacity 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 1 Conflicts 6.1 Adequacy of legislation 2.2 Exploitation Investment cost 0 5.2 Lack of knowledge 2.3 Operation costs 5.1 Misleading opinions 2.4 Maintenance costs Sociological Economy 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 . 3.2 Competitivity of Alternative energy 4.4 Normative for reinjection 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 Demand What should a good opportunity look like ? 1.1 Geothermal resource Organisation Resource 8.2 Roles of different entities possibly 1.2 Well productivity 8.2 Interest of different entities possibly 5 1.3 Fluid characteristics Don’t worry to much about 1.4 Actual Field capacity resource uncertainty and 1.4 Long term Field capacity economy 8.1 Entity in charge of the management 4 7.3 Local hostile institutional entities 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 But have an attentive look to policy makers awareness Conflicts Adequacy ofacceptance legislation and6.1public 6.2 National, regional, EU supports 2.1 Exploration Investment cost 1 2.2 Exploitation Investment cost 5.2 Lack of knowledge 2.3 Operation costs Sociological If those barriers are strong, you’ll have to work hard on them Economy … provided some financial tools are implemented, and 2.5 Economic attractiveness demand exist 5.1 Misleading opinions 2.4 Maintenance costs 4.7 Visual Impact 4.6 Noise pollution 2.6 Financial parameters 4.5 Normative for Air emission 2.7 Financial supports and incentives 3.1 Energy demand . 3.2 Competitivity of Alternative energy 4.4 Normative for reinjection 4.4 Normative for outside water reject 4.1 Normative for wells 4.3 Normative for plant operation Average :1 4.2 Normative for plant construction Environment Demand 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 > 32 The R&D contribution to the learning curve of Geothermal Energy MWe MWe 8000 8000 Innovation 4: Reduction of drilling investment by 50% 4000 Innovation 3: reproducible 3D thermal modelling of the 1st 5 km, with an error bar on t°C estimation < 10°C 4000 Innovation 2: reproducible 100% increase in permeability after stimulation The R&D input 2000 2000 1179 X 1650 X 2010 2000 2020 The Soultz Innovation: The Gross schönebeck Innovation: non connectivity at depth reversible increase in permeability in between wells sedimentary basin, sustainability of t°C ENGINE, Workshop 7, Leiden, 8-9 November 2007 > 33 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 > 34