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

Pros and Cons of geothermal Energy
The benefits of geothermal energy are many. The most obvious advantage may be the environmental 
benefits due to its fossil-fuel-free nature, a common feature of practically all renewable energy 
technologies. 
There are several advantages that distinguish geothermal energy from other renewable energies. 
Geothermal power is ideally suited to operating around the clock as a stable source of base-load 
power, regardless of weather and other climatic phenomena. Such a resource helps utilities more 
accurately plan and schedule power generation to meet their load demand. Secondly, despite its 
relatively high investment costs per kilowatt installed, geothermal power has a fairly competitive cost 
per kilowatt hour produced as a result of its high availability factor
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and the absence of combustible 
fuel costs. Over the long life of a geothermal plant, these two factors compensate for the high upfront 
investment costs. Thirdly, geothermal power is a technically and commercially proven and mature 
technology, unlike many other renewable energy technologies that are still relatively new and that 
involve a significant degree of technological risk. Finally, geothermal plants are scalable to utility size 
(over 50 MW) without taking up much land or space. This is a valuable feature for a power system as 
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Geothermal power plants are extremely reliable and typically operate more than 95% of the time, with some plants at over 99%. This 
compares to availabilities of 60%-70% for coal and nuclear plants (Kutscher 2000). In this handbook, the availability factor of modern 
geothermal installations is generally assumed to be 90% when built and operated as intended. However, it must be noted that circumstances 
of specific geothermal projects built around the world vary widely. Many installations use outdated technology and some operate far below the 
originally intended capacity. The geothermal power output reported by IEA points to a world average capacity factor of less than 70% (WEO 
2011).

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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 
it allows economies of scale to be achieved. From an environmental standpoint, this is also a plus if 
geothermal plants are located in areas of high scenic value, as they often are. 
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. The short answer from a geographic standpoint is that hydrothermal 
resources suitable for power generation are not found in every country. It is estimated that 
hydrothermal resources in the form of hot steam or fluids are only available on one-quarter to one-third 
of the planet’s surface. Technologies and exploitation techniques that could increase this are not yet 
fully technically proven. The short answer from an investor’s standpoint is that geothermal projects are 
risky, with exploration risk (or resource risk) often considered the greatest challenge as will be detailed 
later in this handbook. On a more technical level, the explanation is that many of the advantages of 
geothermal energy have limitations or offsetting factors. 
The main advantages and downsides or challenges associated with geothermal power generation are 
summarized below as “pros” and “cons.”