1. UNIVERSITY OF PENNSYLVANIA DEPARTMENT OF ELECTRICAL AND SYSTEMS ENGINEERING ABSTRACT There is great interest in the development of electric power generation using renewable sources of energy given the monetary and environmental costs associated with fossil fuels. Hot Dry Rock (HDR) technology generates electricity by pumping high-pressure water deep into the earth which is then extracted at very hot temperatures and converted into electricity. HDR technology provides a novel approach to geothermal energy production because, rather than using a pre-existing underground reservoir, the high-pressure water that is injected into the earth is able to fracture rocks and create new reservoirs. This technology provides immense promise in meeting the growing energy needs of the world while having zero emissions and drawing on a nearly ubiquitous resource. The team worked with a group of investors and experts in the field to model and assess the technical and financial feasibility of a five megawatt, $35 million HDR power plant. The plant will be installed in Fenton Hill, New Mexico and will utilize three wells, each at over 12,000 feet deep. After modeling the technical factors of the plant, the team built a complex financial model and performed Monte Carlo simulations to compute feasibility using repeated random variable sampling. Two feasibility measures are outputted, including internal rate of return and net present value of both the cash flows and the net income. The results indicate that a commercial HDR plant at Fenton Hill may be technically feasible, but the financial returns may not be attractive, given today’s environment. HOT ROCKS : H OT D RY R OCK G EOTHERMAL T ECHNOLOGY M ODELING AND A NALYSIS GROUP 10 AUTHORS Aaron Jungstein EE ’09 Dan Lindholm EE ’10 Kyle Wang SSE ’09 Jennie Xue SSE ’09 ADVISOR Dr. Tom Cassel DEMO TIMES Thursday, April 23, 2009 10:00, 10:30, 11:00, 2:30 HOT DRY ROCK TECHNOLOGY Hot Dry Rock technology is a type of geothermal power production that harnesses heat from super-hot rock several kilometers underground to produce electricity. Unlike traditional geothermal power production methods, which require a pre-existing underground reservoir, hot dry rock technology uses external water injected at high pressures to create reservoirs. The creation of the reservoir is a result of the differences in pressure and temperature between the hot rock and cool water. When the two come into contact, tiny cracks, or fractures, occur within the rocks, increasing the surface area of the rock that the water comes in contact with. Over time, given constant pressure, a large reservoir can be created that remains relatively constant in size. Hot Dry Rock technology involves a closed loop system so that the water used can be continually recycled (see diagram). The water is pumped deep into the ground through an injection well, and when the water comes into contact with the hot rock, it is heated to temperatures upwards of 200°C or higher. The water is extracted through one or more production wells, and then, when above ground, the geothermal fluid flows through a heat exchanger and is then injected back through the injection well. The main purpose of the heat exchanger is to transfer the thermal energy into a working fluid, such as ammonia, that immediately vaporizes upon being heated. This high-pressure ammonia steam is used to drive a turbine that produces electricity. The steam is then cooled down back into its liquid state thus completing the cycle of the working fluid (see diagram). Approximately 7% of the water is lost throughout this process; therefore, additional water must be injected from an external watery supply in order to make up for this difference. H ISTORY OF F ENTON H ILL The first full-scale attempt to explore Hot Dry Rock as a potentially viable heat extraction resource was undertaken at Fenton Hill, New Mexico in 1971 by the Los Alamos National Laboratories. Under the supervision of the Department of Energy’s (DOE) Geothermal Division, the Fenton Hill project lasted over 25 years and was partitioned into two main phases of field tests. A third phase of the project only reached preliminary status. During Phase I, which took place from 1974 – 1980, two wells were drilled to 3 km where the rock was 200°C. Phase II took place from 1980 – 1990 during which time two additional wells were drilled to more than 4 km, with the cost escalating from $1-2 million dollars to a range of $7-11 million. The Phase I and II wells were each two-well systems (one injection well and one production well), although the increased depth also increased the extraction temperature to 300°C. In 1990, a larger facility for long-term flow testing was constructed, including the addition of a heat exchanger and large capacity water and injection pumps. Unfortunately, however, by this time, the Fenton Hill project had became severely underfunded. As a result, the reduced funding meant that the HDR team couldn’t perform necessary upgrades and further testing. By the end of the 1990’s, support for the Fenton Hill project waned and was later decommissioned by 2000. H OT DRY ROCK FLOW DIAGRAM Source: Don Brown & Dave Duchane, Los Alamos National Laboratories, 1993 H OT DRY ROCK SYSTEM DIAGRAM Source: Geothermal Explorers Ltd., 2003 R ECOMMENDATIONS Based off of net present value (NPV) and internal rate of return (IRR) calculations, the investment in a 5 MW hot dry rock power plant in Fenton Hill, New Mexico does not yield strong positive results, especially given the experimental nature of the technology. Through the Monte Carlo simulations, a random variable sampling process was used to calculate NPV and IRR results. The net present value for the project centered around -$7.8 million, whereas the internal rate of return calculations averaged 3.6%. It is important to know the dynamic capabilities of the model can be adapted to different scenarios and sets of assumptions. The assumptions we used were based on extensive research and technical modeling performed by the team. We believe there is great potential for investors and for society as a whole, given more favorable externalities, such as government subsidies and easier access to sources of capital. Under these conditions, this financial model is one tool that will allow society to realize the prospects of this untapped energy source. F INANCIAL MODEL F INANCIAL M ODEL R ESULTS M ONTE C ARLO S IMULATION