Note: This article was written for Independent Energy Magazine. The date indicated was January 3, 1980. I can’t remember when I wrote it, but I know I didn’t have a computer in 1980. Likely the battery in the clock died and the date stamp reverted to the date the software was written. I remember interviewing Carl Austin at the Naval Weapons Center in Ridgecrest and visiting the site before any plant was in operation. The article was most likely written sometime around 1985 to 1986 as production from the field began in 1987. The topic remains relevant today. See Wikipedia’s entry on Larderello, Italy and the Geysers.–Paul Gipe
While California utilities grapple with a resource that could loose six billion kWh per year by the year 2000, operators wonder who’s going to eat $1 billion in lost revenues.
Plummeting generation at the Geysers in Northern California is shaping up as a”Tragedy of the Commons” not unlike Garret Hardin’s ecological parable where private interest, privately pursued, leads all to catastrophe. There’s just “too many straws in the soda bottle,” explains geologist Carl Austin, “and we’re not sure the soda jerk’s pouring more into the glass.”
At current withdrawals the Geysers is not a renewable resource. The state’s Oil and Gas Division states simply that the field is finite and is being overproduced. With 4% of the state’s electricity generated at the Geysers, resolving the problem quickly is at the top of the agenda for the California Energy Commission–and the geothermal industry.
The 2,050 MW of capacity at the Geysers, a dry steam reservoir covering thirty square miles in Sonoma and Lake counties about 100 miles north of San Francisco, is the world’s largest geothermal development. But operators in the past two years have derated the field 25%–400 MW–because of the falling steam supply. Over the entire field plants are delivering only 50% of their capacity. Even with current declines and those now expected, the Geysers will still lead second-ranked Philippines. That is little consolation to the bankers and developers whose careers may be on the line. Some are sanguine. “It’s not a disaster yet,” according to Donald Finn of the Geothermal Energy Institute. Finn adds, in a note of understatement that could haunt him if the situation worsens further, “but it will significantly reduce profits.”
PG&E
Pacific Gas & Electric Co., who produces 13% of its electricity at the Geysers, and their steam supplier, Unocal-Thermal Power Co., stand to lose the most. The giant utility operates two-thirds of the generating plants at the Geysers while Unocal provides the steam to most of PG&E’s plants, accounting for more than one-half of the Geysers’ steam withdrawals.
PG&E estimates that generation across the entire field could drop more than 50% from the 1987 peak of 13 billion kWh to 6 billion kWh by the year 2000. The staggering loss is greater than the output from one of PG&E’s controversial reactors at Diablo Canyon. This year production declines could reach four 4 billion kWh at a cost of $60 million in lost revenues. If prices rebounded to their pre-1986 levels of 3.9 cents per kWh, 1990 losses alone would top to $150 million.
Falling Steam Revenues Contribute to Decline
At one time PG&E thought the decline was due to falling steam prices. Payments to McCullough Oil Corp. by the state’s Department of Water Resources illustrates the straits in which steam suppliers, like Unocal, find themselves. Steam production fell rapidly after DWR’s plant went on line in 1985. By last year McCullough’s output had fallen more than 50%. That was only part of the bad news. Steam prices, based on a formula devised by PG&E, had fallen 60% during the same period. Revenues plummeted to one-sixth those in 1985. Greater than expected declines in steam from each well meant McCullough had to drill more wells than planned–and budgeted. With low steam prices it wasn’t profitable to do so. McCullough became the Geysers’ first victim when DWR took over the steam field feeding their plant from in 1988. The 55 MW plant now produces only 20% of its potential.
Steam supplied by Freeport-McMoRan followed a similar pattern. Output fell 50 MW from 250 MW. Freeport estimated that steam from their wells would fall gradually at one MW per year, allowing for orderly replacement. But the wells were declining six times faster than expected despite their drilling successes. Since reducing steam deliveries 50 MW, the near free-fall in capacity has slowed to three megawatts per month.
The Northern California Power Agency suffered even greater losses: production has fallen 100 MW–from 250 MW to 150 MW–since 1986.
Though low steam prices play a role, PG&E now admits that there is also a geological basis for the Geysers’ decline. Production at other dry steam fields have declined in Italy, geothermal’s birthplace, and in New Zealand. How this determination will affect the costly ongoing litigation between PG&E and Unocal remains unclear. But in testimony before the CEC the San Francisco utility assumes they will reach some kind of agreement with their steam suppliers on contractual changes.
Affect on Supply
Though the Geysers decline will surely hurt those directly involved, it may be a boon to others. The problem couldn’t have come at worse time for PG&E–in the midst of hearings on the CEC’s 1990 Electricity Supply Report (ER-90)–who has been trying to stave off new contracts to qualifying facilities. “Coupled with (the closure of) Rancho Seco, PG&E will be hard pressed to argue that there’s surplus capacity,” says the Independent Energy Producers’ Jan Smutny-Jones. With the hearings set on a fast track, PG&E doesn’t have much time to resolve the problem before the CEC makes a determination. Problems of the Geysers’ size, “certainly could increase the need,” says Smutny-Jones somewhat tongue-in-cheek. A host of potential cogenerators and small power producers are waiting to fill the breech. To get a grip on the problem in time for ER-90 and to foster cooperation among the competing interests, the CEC has launched a Technical Advisory Committee. But the going has been slow. With only one meeting under their belt the TAC has yet to even agree on the work that needs to be done by contractors to forecast the Geysers steam supply. It is cooperation ultimately that may be the key to salvaging the Geysers.
Cooperative Operating Agreements Possible
The Geothermal Institute’s Finn and many others agree that one solution is controlling the rate of extraction like that practiced in the oil industry. Freeport-McMoRan suggests that capacity at the Geysers must be reduced across the board to most economically use the remaining resource. They estimate that no more 70% of the capacity in the Southeast Geysers should be used. NCPA calls for all operators to limit production.
Since the 1920s–the days when derricks stood cheek-by-jowl to one another–states have regulated the amount of oil that can be extracted from each field. Regulators treat the entire oil-bearing formation as one unit and limit the amount that can be withdrawn from any parcel. This maximizes total recovery to everyone’s benefit.
Unitization, as it is called in the oil industry, is the prescribed remedy for Hardin’s “Tragedy of the Commons.” “Unitization,” says Austin, “ensures cooperation, but it doesn’t necessarily guarantee success.” State regulation is not a must; cooperation is. Operators and landowners can achieve the same ends through cooperative operating agreements. But the mix of ownership — private, state, and federal — and competing interests inhibits collective management of the Geysers.
The question for those involved is how to share the lost revenues and whether to limit withdrawals to an amount sustainable indefinitely, or to accept more rapid extraction that ultimately exhausts the resource. To preserve the resource Austin and other geologists say it’s a matter of matching extraction to replenishment of the water moving into the reservoir. “Extracting the fluid too fast doesn’t mean you’re out of heat,” says Austin. “You’re just running out of the heat transfer fluid.” The challenge for geologists is verifying the resource so operators know how much they can produce, and how long. Testimony at CEC hearings on the problem indicates most view the Geysers as a minable resource and expect steam to be withdrawn at a rate that pays off the capital investment most quickly while assuring an orderly drawdown.
In light of the growing interest in paying for the social benefits of “clean” generation, this may be short sighted. The CEC, in ER-90, is already considering the thorny question of what is reducing air pollution worth. Testifying on behalf of Independent Energy Producers, Bill Marcus of JBS Energy has argued that the air quality benefits from clean sources alone are worth at least 2-3 cents/kWh.
Other Remedies
There is a a consensus that measures must be taken to maximize the value of the Geysers’ remaining resource. One proposed remedy is increased injection of steam condensate back into the reservoir. Another is to use the Geysers to follow PG&E load instead of providing base load generation as is now the case.
Operators currently recover only 24% of the fluids extracted from the Geysers. Unlike other geothermal fields, the rest is vented to the atmosphere. It is the dry, relatively clean steam that makes the Geysers unique. It is also the steam that makes the Geysers more fragile. “Hot water fields,” like that at Coso Hot Springs, “are more predictable,” says Dave Anderson of the Geothermal Resources Council in part because “everything you take out, you have to put back in.”
Rather than venting waste steam into the air as at present all plants could eventually be converted to dry cooling towers freeing up more water for injection. But the towers are not cheap. At today’s low prices it costs too much to build the dry cooling towers needed to inject more water. Some propose supplementing injection water from a new dam on Big Sulphur Creek, or from Santa Rosa’s treated sewage. “Given sufficient water,” for injection the state says, operators can stop the exponential decline of the past four years.
Other technical fixes include “forced retirements.” Abandoning less efficient plants, and modifying the remainder to use lower pressure steam will extend the life of the field. Unocal estimates that improving efficiency 5% could produce 380 million kWh. Such an improvement, about the output from a 55 MW plant, could boost revenues $6 million at today’s prices.
If turbines are not adapted to use lower pressure steam, there’s a danger of mass abandonment of wells as pressure continues to drop. Steam pressures have fallen from a high of 500 psi when the Geysers was first explored to 200 psi today. Since all turbines in the Geysers now require a minimum of 100 psi, the precipitous fall in pressure across the field seriously threatens continued operation.
In a system swimming in base load plants, the future value of the Geysers may well lie with changing their role. Cycling the plants rather than running them full bore all the time gives better value, says Unocal. Though they may generate fewer kWh, those that they produce are worth more because they are there when needed. Cycling Geysers’ production to meet medium and peak loads in this way would resemble operation of hydroelectric plants with large storage reservoirs. But load following, like area wide reductions of steam withdrawal, requires extensive contract renegotiations.
None of these fixes will return the Geysers to its original capacity says Unocal. But they will optimize use of the remaining resource. The lesson in this, if there is one, is that “anyone can build geothermal plants,” according to the outspoken Austin, “the trick” to averting tragedy on the commons “is knowing the resource.”
