Price

The main driver for future geothermal electricity developments is the need for future electricity generation at a competitive price. With a floating wholesale power price, commitment to new generation should happen when expected market price exceeds the long run cost of generation. If power prices rise as expected, and carbon charges have their intended influence on markets, then new geothermal projects will become more clearly economic. Gas has been favoured partly on price, but also because it does not suffer from the same local regulatory barriers to development. Constraints on transmission capacity through the North Island also reduce the value of geothermal generation in the central North Island relative to generation closer to Auckland.

At $3.5M to $5.0M/MW, geothermal electricity generation generally has lower capital costs than hydropower. Significant O&M costs are offset by there being no fuel cost and by load factors of more than 90%, resulting in competitive electricity prices. For new direct use projects, large thermal requirements with high load factors are needed to ensure profitable steam supply to counter the high cost of new well drilling.

Costs estimated for new geothermal electricity generation range from 7-9 c/kWh, with about 1000 MWe being available in this range. At average hydro inflows, wholesale electricity prices are currently around 8c/kWh, with carbon charges expected to add 1c/kWh. However, low hydro inflows result in much higher wholesale spot prices, which can reach 20c/kWh and exceed retail costs.

Unit Costs Of Electricity Generation 1989-2005

Unit Costs of Electricity Generation 1989-2005

NZES new build generation costs

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