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

BArrIErS TO dEvELOPMENT. 
Given the advantages of geothermal power, the question has to be 
asked why the level of its utilization today is not higher than it is. One answer is that geographically, 
hydrothermal resources suitable for power generation are not very widespread. Indeed, estimates 
are that geothermal resources in the form of hot steam or fluids are only available on 1/4 to 1/3 of the 
planet’s surface. Technologies and exploitation techniques that could increase this share are not yet 
fully available. Another answer is that from an investor’s standpoint geothermal projects are risky—with 
geological exploration risk (or resource risk) often considered the greatest challenge—and capital 
intensive, with a mid-range estimate of investment costs close to US $4 million per MW which further 
increases risk, since project returns become more sensitive to financing costs.
A more detailed review of the pros and cons of geothermal development reveals that many advantages 
of geothermal energy have their limitations. For example, while land and space resources are less of a 
constraint for geothermal power in achieving the needed scale than for most other power generation 
technologies, the maximum capacity of the plant is ultimately limited by the heat production capacity of 
the reservoir. Even the renewable nature of geothermal energy is not unconditional, as the capacity of 
a reservoir to replenish itself can be compromised by unsustainably high withdrawal rates or by failure 
to reinject the geothermal fluids.