Model for economic evaluation of closed-loop geothermal systems based on net present value

Abstract

Closed-loop geothermal systems (CGSs) represent an effective means of extracting low-grade thermal energy from hot dry rock (HDR). Thus far, there has been much debate on whether they can be profitable because no economic evaluation model has been available. This study highlights the profitability of geothermal projects by developing a techno-economic coupling model for economic evaluation of CGSs based on net present value (NPV) for the first time. The proposed model was applied and analyzed in the case of the Gonghe Basin, Qinghai, China. The results indicate the following conclusions. (1) The technical model was extremely accurate, and the results were consistent with experimental results and the results of calculations using other classical models (the relative errors were all less than 9.8 %). (2) In terms of the heat extraction effect, the heat extraction power of U-shaped closed-loop geothermal systems (UCGSs) is ∼ 1.3 times that of coaxial closed-loop geothermal systems (CCGSs). The heat extraction power for direct heating is ∼ 1.1 times that for electricity generation. (3) Increasing the rate of the one-off government subsidy to 30 %, increasing the heat price by 30 %, and reducing the drilling cost by 30 % can make a CGS profitable within a production time of 50 years. This study will serve as a theoretical foundation for policymakers and engineers to develop HDR resources using CGSs.