Risk and Uncertainty in Geothermal Projects: Characteristics, Challenges and Application of the Novel Reverse Enthalpy Methodology

Roberto Gambini (), Dave W. Waters, Franco Sansone and Valerio Memmo
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Roberto Gambini: Geological Engineering Network Srl., Via Costantino 4, 00145 Rome, Italy
Dave W. Waters: Paetoro Consulting UK Ltd., Summerfield Road Loughton, Millbrook IG10 4JF, Essex, UK
Franco Sansone: Geological Engineering Network Srl., Via Costantino 4, 00145 Rome, Italy
Valerio Memmo: Geological Engineering Network Srl., Via Costantino 4, 00145 Rome, Italy

Energies, 2025, vol. 18, issue 15, 1-28

Abstract: A reliable geothermal risk assessment methodology is key to any business decision. To be effective, it must be based on widely accepted principles, be easy to apply, be auditable, and produce consistent results. In this paper, we review the key characteristics of a geothermal project and propose a novel approach derived from risk and uncertainty definitions used in the hydrocarbon industry. According to the proposed methodology, the probability of success is assessed by estimating three different components. The first is the geological probability of success, which is the likelihood that the geological model on which the geothermal project is based is correct and that the key fundamental geological elements are present. The second, the temperature threshold, is defined as the probability that the fluid is above a certain reference value. Such a reference value is the one used to design the development. Such a component, therefore, depends on the end use of the geothermal resource. The third component is the commercial probability of success and estimates the chance of a project being commercially viable using the Reverse Enthalpy Methodology. Geothermal projects do not have a single parameter that represents their monetary value. Therefore, in order to estimate it, it is necessary to make an initial assumption that can be revisited later in an iterative manner. The proposed methodology works with either the capital expenditure of the geothermal facility (power plant or direct thermal use) or the drilling cost as the initial assumption. Varying the other parameter, it estimates the probability of having a net present value (NPV) higher than zero.

Keywords: geothermal; exploration; development; geological risk; uncertainty; well deliverability; economics; investment decision (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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