Key Elements in Geothermal PPA's
- Timothy Beggans
- Sep 15, 2024
- 2 min read
Updated: Nov 16, 2024
When considering a Power Purchase Agreement (PPA), it's essential to understand how the energy source impacts the contract structure, risks, and costs. The primary differences between an electricity PPA, which covers various renewable and non-renewable sources, and a geothermal PPA revolve around the energy source's characteristics, reliability, and associated risks.
Energy Source:
Electricity PPA: This broad term includes agreements for electricity from multiple sources such as solar, wind, hydro, and non-renewables.
Geothermal PPA: Specifically deals with electricity generated from geothermal heat, requiring unique geological conditions.
Resource Availability:
Electricity PPA: Solar and wind, for example, depend on environmental factors like sunlight or wind speed, making them intermittent.
Geothermal PPA: Provides baseload power, meaning it generates continuous, stable electricity, unaffected by weather or time of day.
Infrastructure & Investment:
Electricity PPA: Simpler infrastructure, particularly for wind and solar projects.
Geothermal PPA: Involves significant upfront costs due to drilling and plant construction, reflecting in longer contracts to recoup investment.
Contractual Risks:
Electricity PPA: Risks arise from source variability (e.g., cloudy days for solar, low winds).
Geothermal PPA: Greater exploration risks. The resource's viability (underground heat) can result in higher financial risk if expectations aren’t met.
Pricing:
Electricity PPA: Prices may fluctuate with the energy market and the intermittency of sources.
Geothermal PPA: Typically, stable pricing due to the continuous energy supply but higher due to development costs.
In summary, geothermal PPAs are more complex, driven by the need for specialized infrastructure, higher upfront investment, and exploration risks. However, they offer the advantage of a constant power supply, unlike more intermittent renewable energy sources.
Learn more in the Geothermal Handbook.
Explore Texas' legislative support for geothermal energy:
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