Could Geothermal Plan Edge Out Utah’s Mini Reactors?

I recently posted about the increasing costs and delays cropping for proposed Small Modular Nuclear reactors (SMR).

Over the last few years, smart people that I have been talking to have increasingly mentioned geothermal energy, especially the newer, so called “deep geothermal” technologies, as potential dark horses in the decarbonization race. (see Daniel Cohan of Rice above, who says new geothermal could be “breathtaking”- below, Michael Webber of U Texas)

One of the more prominent SMR efforts is being built in Utah, backed by a consortium of utilities. Some of them have been getting a little wobbly as bad news about the project keeps piling up. Now, another developer is offering a potential alternative, using a combination of well-proven, standard geothermal technologies, and a very promising new tech.

Energypost:

The U.S. state of Utah is processing an agreement for a new Small Modular Reactor (SMR) to provide baseline and dispatchable power. The SMR bid quotes a price of $89/MWh. But cost overruns will tie the state’s consumers to whatever high prices entail, says Dennis Wamsted at IEEFA. Now a geothermal bid from NV Energy has been presented that offers the same capacity at around $70/MWh. Wamsted explains why the 140MW geothermal project would meet Utah’s needs sooner and cost less than the SMR. 120MW will use a proven geothermal solution, with the remaining 20MW using a new closed-loop system. Combined, it will provide round-the-clock capacity, and better integrate variable and intermittent resources like wind and solar. The geothermal sector also has the advantage of a pipeline of new drilling technologies and equipment that can operate at higher temperatures, and backing from the U.S. Department of Energy. Wamsted is advising the 27 members of the Utah Associated Municipal Power Systems (UAMPS) to back out of the SMR deal and look at renewable alternatives like geothermal.

Key Findings

• A Nevada geothermal proposal has the potential to be a less expensive, more certain option for a Utah utility than an unproven small modular reactor (SMR) with rising costs
• The costs of the geothermal proposal by NV Energy would be considerably cheaper than the SMR proposed by NuScale and based on proven technology
• The 27 members of the Utah Associated Municipal Power Systems (UAMPS) should consider backing out of contracts that require them to cover the rising costs of the NuScale SMR
• The 140 megawatts of geothermal projects proposed by NV Energy would meet UAMPS needs sooner and cost less than the SMR

Ballooning costs have thrown plans for the small modular reactor (SMR) proposed by NuScale and backed by members of the Utah Associated Municipal Power Systems into disarray. A recent proposal by NV Energy in neighbouring Nevada shows that less expensive, more certain options are available, adding more uncertainty to the SMR project.

NV Energy’s proposed 140MW geothermal plant

The company, a subsidiary of Berkshire Hathaway whose two operating units are Sierra Pacific Power and Nevada Power, asked state regulators last month to approve two geothermal power proposals that would provide it with 140 megawatts (MW) of new capacity for the next 25 years (2028-53). The first proposal, for 120MW of conventional geothermal power from Ormat Technologies, would be priced at a flat rate of $69 per megawatt-hour (MWh) for the term of the contract. The second proposal, a novel closed-loop process that could be built over a much wider geographic area, is for 20MW and would cost $70/MWh.

Cheaper by $20/MWh (or more?)

Both amounts are significantly less than the updated $89/MWh cost figure for the planned SMR just released by NuScale and the Utah utility, known as UAMPS. The discrepancy is likely to grow even larger, given that the geothermal proposals are flat-rate contracts while the NuScale SMR figure is simply the current estimate of final project costs, even though the reactor licensing process is not complete and construction has not begun.

The 27 UAMPS members that have signed on to the NuScale SMR project will be contractually bound to pay for their share of the final costs—no matter what that number is—if they remain involved. But the project includes off-ramps allowing participants to back out of the agreement at certain points. The latest off-ramp period has just started, and backers should use it or risk saddling their communities with potentially ruinous future power costs.

A key consideration in these exit discussions should be the availability of alternatives such as two new NV Energy contracts.

The need for reliable dispatchable power

UAMPS leadership, and NuScale, repeatedly invoke the need to secure reliable power sources in the current transition away from fossil fuels. The system’s 2021 annual report is typical of this attitude:

“Reliability requires firm, dispatchable energy that is instantly available whenever it is needed, especially to enable and back up intermittent renewable resources like wind and solar. The percentage of affordable renewable resources can be increased significantly in energy portfolios, as long as renewables are backed up by dispatchable carbon-free energy…”

That is exactly what NV Energy’s geothermal proposals offer, and precisely how the company justified them in written testimony to its state regulators:

• “The two geothermal (power purchase agreements) bring round-the-clock capacity to Sierra.”
• The projects “help close the companies’ open capacity positions, and provide other benefits … such as voltage support, load management and other system reliability benefits …”
• “[A]ll of these projects supply energy after solar resources drop off in the evening hours.”
• The geothermal resources will enable Sierra “to better integrate variable and intermittent resources.”
• The geothermal resources will help NV Energy retire the two-unit, 524MW Valmy coal-fired power plant “by providing around-the-clock renewable replacement capacity, energy and ancillary services.”

Proven geothermal track record

The risks, especially associated with the 120MW of capacity being developed by Ormat, are also exceedingly low. The Ormat portfolio includes 60MW of existing generation at four sites and 60MW of capacity at four new sites—all based on technology that has been in use for decades. In other words, it will get built and operate as advertised.

Together, NV Energy said, the Ormat projects will generate 1,050,346MWh annually. The 27 UAMPS NuScale backers are currently subscribed to purchase approximately 112MW from the planned nuclear reactor. Assuming the SMR achieves its projected 95 percent annual capacity factor, that would total 932,064MWh a year. So the Ormat projects could have met UAMPS’ needs, cheaper and sooner.

…plus a new closed-loop process

Although it carries slightly more risk, the second project, being developed by Canadian startup Eavor Inc., has much broader potential. It uses a closed-loop process that does not rely on the availability of hot underground water; instead, it simply harnesses naturally occurring underground heat. The system is “akin to a deep radiator or heat exchanger,” NV Energy said in its approval application.

Eavor’s project with NV Energy will be the first commercial test of the technology, but it has been successfully running a smaller demonstration unit near its headquarters in Alberta since 2019. Further, a recent analysis by the National Renewable Energy Laboratory showed that the company’s power cost estimates are attainable provided its facilities are built in areas with high underground heat gradients (which reduces the amount of drilling required), and its drilling speed and bit life estimates are realistic.

Goal of reducing geothermal energy system costs by 90% by 2035

As part of its geothermal development program, which has a goal of reducing geothermal energy system costs by 90 percent by 2035, the U.S. Energy Department awarded two contracts in December to test drilling technologies such as fracking and equipment that can operate at higher temperatures to “dramatically reduce drilling costs and help make geothermal cost competitive.”