Report: Geothermal Could Be Cheap as Coal in 3 Years for $3 Billion

Wind and geothermal power have generated a lot of buzz. Government research and development funding to boost them? Not so much.

That's unfortunate, because these clean energy technologies have exhibited far higher cost efficiency than fossil fuels, a new report from the NYU Stern School of Business says.

"Renewable energy sources (particularly wind and geothermal) have been significantly underfunded relative to their potential payoffs," the authors write.

The potential payoffs would be huge, with major climatic impacts, energy security and little upfront costs, especially for geothermal. In fact, for a total investment of about $3 billion in new spending, clean electricity from geothermal sources could be as cheap as coal in a couple of years, says NYU Stern Professor Melissa Schilling, a co-author of the report.

"The regressions in the paper suggest that geothermal could be cheaper than fossil fuels with approximately $3.3 billion in investment, so if fossil fuel R&D were redirected to geothermal, it is conceivable that geothermal could be cheaper than fossil fuels in just over three years — faster if fossil fuel costs go up," Schilling told SolveClimate.

The problem is this: R&D investment in fossil fuel technologies by governments remains "excessive," which doesn't make economic sense given their poor returns.

"Fossil fuel technologies do not appear to be reaping performance improvements from R&D investment, and in fact are experiencing declining performance despite the significant investment," the report says.

Fossil fuels were already mature by the 1990s. Coal's biggest advances in both performance and use occurred between 1875 and 1925, and petroleum and natural gas experienced their biggest advances between 1920 and 1970.

Meanwhile, geothermal and wind are on the brink of breakthrough capabilities.

And yet, among the nine nations examined by the NYU study, the United States, Norway, Japan and Canada are still pumping more cash into R&D for fossil fuel technologies than for all of the renewable energies combined.

The primacy of fossil fuels in the R&D sector is the result of years of collosal government investment.

"The collective government R&D investment in wind energy and geothermal energy by the nine countries considered here totaled just over $2.6 billion and $4.1 billion, respectively, over the 1974–2005 period. Over that same period, the same governments spent almost $38 billion on fossil fuel technologies," the report says.

Good news exists. Spain, Sweden, Switzerland and the UK are now spending more R&D on clean energies than on fossil fuel technologies.

And clean energy financing is soaring among private global investors. A recent report from the UN Environment Program, 2009 Global Trends in Sustainable Energy Investment, found that renewable sources accounted for 56 percent of total energy investment dollars in 2008, marking the first time renewables snagged a dominant piece of the world's energy funding.

To date, solar power, particularly photovoltaic (PV) technologies, has received the lion's share of governments' clean energy dollars. That may be misguided, suggests the NYU study:

"Significantly more has been spent on photovoltaics than on the other renewables, yet it has thus far achieved a much lower performance, at least in terms of kWh per dollar."

The study, Technology S-curves in Renewable Energy Alternatives: Analysis and Implications for Industry and Government, tested five major clean technologies for their cost effectiveness — hydroelectric power, geothermal, solar, wind and biomass energy. Each was analyzed through the lens of what are dubbed technology improvement "S-curves," models used to plot the performance of a given technology against the amount of effort and money poured into it.