Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

Phase 4: Project review and Planning 
This phase includes the evaluation of all existing data by the developer, including new data from the 
exploratory phases. The results from the test drillings will enable the project developer to finish his 
feasibility study, including all financial calculations; the conceptual engineering for all components 
to be built; and the drilling program. In this phase, the project developer determines the most 
economically advantageous project size and the investments necessary. 
Costs for the feasibility study will have included all costs from Phases 1 to 3, plus a contingency for all 
financial, legal, and environmental negotiations, permits, desk-top and engineering work necessary to 
move the project into the construction phase.
Geothermal is different from other energy generation technologies, such as coal, gas, or hydropower, 
because it is not possible to do a power production feasibility study until the potential of the 
geothermal reservoir has been proven by drilling, and because the supply of fuel (geothermal energy) 
is linked intrinsically to the development of a power plant. The cost- and risk-intensive test drillings can 
be seen as part of the preparation of the project feasibility study, which explains the general reluctance 
of private companies to develop geothermal projects from the first phase. 
Having completed the financial and technical feasibility study for the power project, the developer 
usually enters into a PPA
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with the relevant utility company or other power consumers. The PPA and 
concession agreement will specify the revenue stream as well as obligations and risk allocation. The 
completed feasibility study and PPA then allow the developer to approach financiers. 
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PPAs for geothermal power usually address the same issues as PPAs for other power generation technologies. However, some issues 
unique to geothermal must be addressed, especially regarding operational risks which would prevent the operator from reaching the output 
as agreed upon. Issues include, for example, reservoir degradation and costs related to increased maintenance due to geological or chemical 
reasons, such as make-up wells and force majeure.

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G e o t h e r m a l H a n d b o o k : P l a n n i n g a n d F i n a n c i n g P o w e r G e n e r a t i o n