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

System Planning Challenges
The previous analyses show how geothermal electricity broadly compares with other power generation 
options. Determining the actual size and sequence of geothermal power plants to be developed 
as part of a country’s electricity generation expansion plan is usually based on the results of more 
sophisticated models which take into account different sources of uncertainty. One of the earliest 
electricity generation expansion optimization models, developed by the International Atomic Energy 
Agency and known as Wien Automatic System Planning package, takes into account reliability 
considerations when operating a power system, and is applicable mainly to thermal systems. 
When the source of uncertainty stems from operating considerations, such as hydropower or wind, 
additional detailed simulations based on the probability distributions of specific operating factors 
allow an evaluation of expected operation costs for different configurations of power plants. This 
is accomplished with detailed simulation programs which are commercially available, such as the 
Stochastic Dual Dynamic Programming (SDDP) model.
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In the case of geothermal, the main source of 
uncertainty lies in the investment cost, mostly reflecting the uncertainty of the exploration and drilling 
cost. Computer models which take into account this source of uncertainty to quantify the tradeoffs with 
competing resources have yet to be developed.
Geothermal electricity may entail further additional investment costs for the system compared to 
other sources of electricity generation. These costs need to be factored in power expansion planning. 
For example, additional investment in transmission lines may be required since a geothermal power 
plant cannot be built too far from the source of the fuel supply (geothermal energy). Typically, areas 
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SDDP is a model used for medium and long term planning of electric power generation and transmission systems.

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C h a p t e r 1
promising a viable geothermal resource will not coincide with electric load centers. Cities with large 
populations are not generally built on geological faults that are active enough to support large scale 
geothermal power plants such as flash plants. This introduces the additional risk of finding geothermal 
reservoirs of sufficient size to build power plants large enough to justify the cost of transmission lines to 
the load center.

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