methods to evaluate externalities from geothermal energy plants methods to evaluate externalities...

Methods to Evaluate Externalities from Geothermal Energy Plants

February 4, 2010

1 Externalities Fanney Frisbæk, Maria Maack, Guðrún Lilja Kristinsdóttir

INNOVATION CENTER ICELAND, ICELANDIC NEWENERGY, THE ICELANDIC CENTRE FOR

RESEARCH, NATIONAL ENERGY FUND


Estimating external costs of harnessing geothermal energy in Icelandic conditions

Fanney Frisbæk, María Maack, Guðrún Lilja Kristinsdóttir

2/4/2010


February 4, 2010



February 4, 2010


CONTENTS

CONTENTS .................................................................................................................................................................... 3

LIST OF FIGURES ............................................................................................................................................................. 7

LIST OF TABLES ............................................................................................................................................................ 10

FOREWORD TO THE STUDY ............................................................................................................................................. 14

ABSTRACT ................................................................................................................................................................... 17

ÁGRIP ........................................................................................................................................................................ 17

EXECUTIVE SUMMARY ................................................................................................................................................... 18

ACKNOWLEDGEMENTS .................................................................................................................................................. 23

STRUCTURE OF REPORT ................................................................................................................................................. 24

REPORT SECTION I - OVERVIEW AND INTRODUCTION

1 INTRODUCTION TO PROJECT ............................................................................................................................. 26

1.1 PROJECT PURPOSE ................................................................................................................................................. 28

1.2 MAIN CONCEPTS AND STRUCTURE OF THE EXTERNALITY ASSESSMENT .............................................................................. 28

2 INTRODUCTION TO GEOTHERMAL ENERGY ...................................................................................................... 32

2.1 ADVANTAGES AND DISADVANTAGES OF GEOTHERMAL ENERGY ................................................................................ 36

2.2 BACKGROUND EMISSIONS FROM GEOTHERMAL FIELDS ........................................................................................... 39

2.3 ENVIRONMENTAL IMPACTS FROM GEOTHERMAL ENERGY PLANTS ............................................................................. 42

2.3.1 Mitigation Measures.............................................................................................................................. 44

2.4 RENEWABILITY AND SUSTAINABLE USE ................................................................................................................ 44

2.4.1 Extension of Environmental Impacts in Time ......................................................................................... 47

2.5 INTRODUCTION TO THE GEOTHERMAL ENERGY PLANT PROCESS ............................................................................... 48

REPORT SECTION II - METHODS - METHODS, THEORIES AND TOOLS FOR EXTERNALITY EVALUATION

3 INTRODUCTION TO METHODS ........................................................................................................................... 54

3.1 ECONOMICS OF EXTERNAL COSTS ....................................................................................................................... 55

3.1.1 Basics of Ecological Economics .............................................................................................................. 57

3.1.2 The Effects of Scale ................................................................................................................................ 59

4 TOOLS TO QUANTIFY, EVALUATE AND TRANSFORM IMPACTS INTO MONETARY TERMS .............................. 63


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4.1 ENVIRONMENTAL IMPACT ASSESSMENT (EIA) ...................................................................................................... 64

4.2 TOOLS FOR CHARACTERISING AND QUANTIFICATIONS ............................................................................................. 66

4.2.1 Life Cycle Assessment (LCA) ................................................................................................................... 66

4.3 ASSESSING EXTERNALITIES................................................................................................................................. 72

4.3.1 Tools to Estimate the Value of Non-Marked Goods ............................................................................... 73

4.3.2 Discounting ............................................................................................................................................ 75

4.4 LIFE CYCLE ASSESSMENT (LCA) AND EXTERNAL COSTS ........................................................................................... 76

4.4.1 Integrated Tools: the NEEDS Framework ............................................................................................... 77

4.5 VALUES INHERENT IN QUALITY OF LAND .............................................................................................................. 80

4.5.1 Land Use Changes – Quantification of Biodiversity Losses .................................................................... 81

4.5.2 Land Use Changes –Valuing with Restoration Costs .............................................................................. 84

4.5.3 Airborne Emission – Quantification of Biodiversity Losses..................................................................... 85

4.6 PRICE OF EXTERNALITIES ACCORDING TO NEEDS PROJECT ...................................................................................... 88

4.6.1 Example of External Costs from Airborne Pollutants ............................................................................. 88

4.6.2 Costs of Greenhouse Gas Emissions ....................................................................................................... 92

5 SUGGESTED EXTERNALITIES EVALUATION TOOLBOX ....................................................................................... 94

REPORT SECTION III - IMPACTS, EXTERNALITIES AND COSTS - EVALUATIONS AND OUTCOMES

6 COST OF IMPACTS FROM CHEMICAL ASPECTS ................................................................................................ 100

6.1 AIR BORNE CHEMICALS .................................................................................................................................. 101

6.1.1 CO2 (CARBON DIOXIDE) ....................................................................................................................... 108

6.1.2 CH4 (METHANE) ................................................................................................................................... 109

6.1.3 N2O (NITROUS OXIDE) ......................................................................................................................... 109

6.2 OTHER AIR BORNE CHEMICALS ......................................................................................................................... 110

6.2.1 SO2 (SULPHUR DIOXIDE)....................................................................................................................... 110

6.2.2 NOx (MONO-NITROGEN OXIDES) ......................................................................................................... 112

6.2.3 NMVOC (Non-Methane Volatile Organic Compounds) ....................................................................... 113

6.2.4 VOC (Volatile Organic Compounds) .................................................................................................... 113

6.2.5 CO (CARBON MONOXIDE) .................................................................................................................... 114

6.2.6 NH3 (AMMONIA) ................................................................................................................................. 115

6.3 INTRODUCTION TO IMPACTS FROM H2S (HYDROGEN SULPHIDE) ...................................................................... 116

6.3.1 H2S Measurements in Reykjavik ........................................................................................................... 118


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6.4 ASSESSMENT OF H2S RELATED IMPACTS ACCORDING TO DEFINED VICTIMS CATEGORIES ............................................. 122

6.4.1 Human Well Being ............................................................................................................................... 122

6.4.2 Condition of Fauna, Flora and Microorganisms ................................................................................... 127

6.4.3 Land Quality and land use changes ..................................................................................................... 128

6.4.4 Assessment of biodiversity losses ........................................................................................................ 132

6.4.5 Manufactured Metal Assets................................................................................................................. 139

6.4.6 Total external Costs from H2S Air Emissions ........................................................................................ 153

6.5 CHEMICALS IN BRINE...................................................................................................................................... 155

6.5.1 SiO2 (Silicia Silicon Dioxide) .................................................................................................................. 157

6.5.2 As (ARSENIC) ........................................................................................................................................ 158

6.5.3 Al (ALUMINIUM) ................................................................................................................................. 158

6.5.4 Impacts from B (BORON) ..................................................................................................................... 159

7 PHYSICAL ASPECTS AND THEIR IMPACTS ..................................................................................................... 160

7.1 THERMODYNAMICS........................................................................................................................................ 160

7.1.1 Heat from Brine.................................................................................................................................... 160

7.2 KINETICS...................................................................................................................................................... 165

7.2.1 Brine ..................................................................................................................................................... 165

7.2.2 Mass Balance of Cold Ground Water System....................................................................................... 167

7.2.3 Soil ....................................................................................................................................................... 170

8 EXISTENCE ASPECTS AND THEIR IMPACTS ................................................................................................... 171

8.1 CHANGES IN NATURAL LANDSCAPES – VISUAL IMPACTS ........................................................................................ 171

8.1.1 The Intrinsic Value of Landscapes ........................................................................................................ 171

8.1.2 Impacts on Summerhouse Prices ......................................................................................................... 172

8.1.3 Special Relics of Natural Landscapes ................................................................................................... 174

8.1.4 Total External Costs from Changes in Natural Landscapes .................................................................. 174

8.2 FACILITATED ACCESS TO NATURE THROUGH NEW ROADS/TRAILS ........................................................................... 175

8.3 TOURISM AT NESJAVELLIR PLANT ..................................................................................................................... 177

8.4 NOISE POLLUTION ......................................................................................................................................... 178

8.5 OTHER SOCIO-ECONOMIC IMPACTS .................................................................................................................. 178

8.6 ARCHAEOLOGICAL- AND HISTORICAL REMAINS .................................................................................................... 180

9 TOTAL EXTERNAL COST FOR ENERGY HARNESSING AT NESJAVELLIR............................................................. 181


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9.1 COST-BENEFIT CALCULATIONS OF TOTAL EXTERNAL COST FIGURES ......................................................................... 184

9.1.1 Industrial scrubbing equipment ........................................................................................................... 185

9.1.2 Life time and discount rate .................................................................................................................. 186

9.2 NET PRESENT VALUE (NPV) OF THE ALTERNATIVES: WITH AND WITHOUT H2S ABATEMENT......................................... 187

REPORT SECTION IV - RESULTS

10 CONCLUSIONS .................................................................................................................................................. 189

11 DISCUSSIONS .................................................................................................................................................... 190

11.1 CRITICAL ISSUES ............................................................................................................................................ 191

11.2 UNANSWERED QUESTIONS AND SUGGESTIONS FOR FURTHER RESEARCH .................................................................. 192

BIBLIOGRAPHY ........................................................................................................................................................... 193

APPENDIX 1 – INDEX OF CONCEPTS AND ACRONYMS IN ALPHABETIC ORDER ......................................................................... 197

APPENDIX 2 – COST BENEFIT CALCULATIONS TABLE ........................................................................................................ 202


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LIST OF FIGURES

Figure 1: The relation between Life Cycle Assessments (LCA), Life Cycle Impact Assessments (LCIA), Life

Cycle Costs (LCC), External Cost (Externalities) and Total Costs. Only the contents of the dark oval are

discussed in this paper. (MMaack/FFrisbæk) ..........................................................................................................16

Figure 2: Aspects, effects and impacts, overview of the evaluation procedures (FFrisbæk) ...............................30

Figure 3: Outline of the context model approach to evaluate external impacts and costs at various levels,

aspects that cause impacts, aspect mediums and victim categories. (FFrisbæk) ...................................................31

Figure 4: Workers at the first geothermal power plant, Larderello, Italy (REUK 2007) .....................................32

Figure 5: Map of Iceland showing placements of geothermal power plants (Landmælingar Íslands, 2009 #214) 35

Figure 6: Emissions of two airborne compounds from unexploited geothermal areas and from power plants.

(Fridriksson Þ 2010) ..................................................................................................................................................40

Figure 7 .......................................................................................................................................................................40

Figure 8: Measured concentration of four elements in geothermal in Reykjanes fluids plotted for 3 years.

Each well has its own colour (Fridriksson Þ) ..........................................................................................................41

Figure 9: Flow chart of the geothermal fluid through Nesjavellir power plant. ...................................................49

Figure 10: Adapted from The five capital framework (Porrit 2007)p. 141) ..........................................................57

Figure 11: The four capital categories as presented by the Gunder Institute, University of Vermont (Roelof

Boumans 2002) ..........................................................................................................................................................58

Figure 12: Comparison of the economic system at the early stage of civilization as compared to the current

status. (MMaack after Goodland, Daly and Serafy 1992 as cited in (Costanza, Cumberland et al. 1997)).........61

Figure 13: Five types of capital values (MMaack based on Costanza)...................................................................62

Figure 14: Boundaries for the LCA study, Bagnore 3. ..........................................................................................68

file:///C:/Users/FANNEY/Desktop/NMÍ/LCC/04%20Úthrifs%20Skýrslur/Uthrif_til%20Rannis%20-%204_feb%202010%20-%20FAF%20-%20ver02.docx%23_Toc253085733


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Figure 15: Input and output for each Phase in the case of Nesjavellir Geothermal plant. The Pipe that carries

the hot water towards the market was not included in the LCA study (Kristjansdottir, 2006.) ..........................70

Figure 16: The relations between market prices and external cost ........................................................................73

Figure 17: Overview of methods to assess the value of nature (OECD 2009) ...................................................74

Figure 18: Ecosence Approach developed in NEEDS (Andrea Ricci 2009).......................................................77

Figure 19: Areas and issues that are fed into the main simulation framework to calculate external cost of

energy projects. ..........................................................................................................................................................79

Figure 20: Calculation procedures in the study (FFrisbæk) ...................................................................................95

Figure 21: Calculation procedures when price tags have not been set in other projects ....................................96

Figure 22: Measurements of H2S in the atmosphere in the capital area of Iceland from January 2006 till

August 2008. (Umhverfisstofnun 2006)................................................................................................................118

Figure 23: Monthly mean value of H2S as well as maximum 24hours and hour value in 2006 and the WHO

guideline for H2S, based on Böðvarsdóttir, (2006). ..............................................................................................119

Figure 24: Concentration isoclines indicating the dispersion of H2S from the geothermal system shown on

map (Umhversiráðuneytið 2009) ............................................................................................................................120

Figure 25: Location angles from the air quality measuring station in Reykjavik (Grensásvegur) to the different

energy plants in the vicinity of the capital area (east (Nesjavellir and Hellisheiði) and southwest Reykjanes and

Svartsengi).................................................................................................................................................................120

Figure 26: Measured H2S concentration in Reykjavik prior to (left graph) and after (right graph) the start-up

of Hellisheidi geothermal plant in the fall of 2006 ................................................................................................121

Figure 27: Relative frequency of people buying pulmonary medication correlated as days after maximum

concentration of H2S in the city of Reykjavik based on data for 2,5 years. (Carlsen 2009) ..............................126

Figure 28: example of land use around geothermal plants, picture from Hellisheiði (Orkuveita Rvik

2009) .........................................................................................................................................................................128


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Figure 29: Dead moss in the neighbourhood of Reykjanes energy plant about 300 m distance. (photo:

Sigurður H. Magnússon 17. September 2008). ......................................................................................................130

Figure 30: Results for moss chemical measurements (mg/kg, dryweight) at different locations (Bragason, o.fl.,

2009)..........................................................................................................................................................................131

Figure 31: Simplified valuation method ‗Assessment of biodiversity losses‘ from the NEEDS project, with

‗healthy‘ vegetation on the left (representing habitat type 1) and ‗damaged‘ vegetation on the right

(representing habitat type 2) {Kristinsdottir, 2010 #295} ...................................................................................132

Figure 32: Corine categories for the area around Nesjavallavirkjun (based on Corine application

(Landmælingar Íslands, 2010)). ...............................................................................................................................134

Figure 33: Metal roofs that are not maintained with paint will soon start to rust and after that leak. Rust on

Aluminium plates is white. ......................................................................................................................................140

Figure 34: Mixer in Studio Syrland (Studio Syrland, 2009) ...................................................................................151

Figure 35: A mapping of active earthquake centre areas, close to Nesjavellir energy plant. .............................166

Figure 36: Overview of flow of cold ground water near the geothermal energy plant at Nesjavellir. .............169

Figure 39: 3d view of installed WSA plant for treating acid gas .........................................................................185


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LIST OF TABLES

Table 1: Geothermal potential world-wide (IGA, 2001) ........................................................................................33

Table 2: Geothermal power plants in Iceland .........................................................................................................34

Table 3: Comparison of CO2 Emissions (Bloomfield et al. 2003) the value of 0.2 lbs CO2/kWh is the

weighted average of U.S. geothermal generation based on 2002 EIA data. Comparison of land requirements

for base load power generation (REPP 2008) .........................................................................................................36

Table 4: Advantages and disadvantages of using geothermal energy sources.......................................................37

Table 5: Environmental impacts from geothermal sources ..................................................................................42

Table 6: Mass energy flows and power at the Nesjavellir geothermal plant in 2002. ...........................................50

Table 7: Basic figures for the energy production of Geothermal energy plant Nesjavellir during 2002 ............71

Table 8: few examples of CORINE categories that are linked with expected number of species and PDF with

reference to Swiss Lowlands (based on a table from Deliverable D.4.2. - RS 1b/WP4, "Assessment of

Biodiversity Losses") .................................................................................................................................................82

Table 9: Biodiversity damage caused by deposition of airborne emission for the situation in the Netherlands

(Deposition Increase of SOx , NOx and NH3 (). .....................................................................................................86

Table 10: Impact categories for air borne polluting chemicals ..............................................................................89

Table 11: unit Damage costs of emissions set in Euro value of 2000 ...................................................................90

Table 12: Unit damage costs for land use in €2000/m² (source: NEEDS RS1b, Deliverable 4.2)........................91

Table 13: Marginal damage costs of greenhouse gas emissions in €/t (source: NEEDS RS1b, Deliverable 5.4)

(Values for average 1% trimmed, discounted to 2005, 1% pure rate of time preference, without equity

weighting and with equity weighting normalised to Western European average per capita income, 1.35 $ per

€) ..................................................................................................................................................................................94

Table 14: Marginal abatement costs (€) of CO2 emissions (Friedrich 2008) ........................................................94


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Table 15: Overview of types and amounts of chemicals emitted into the air during the 50 year life cycle of

Nesjavellir geothermal energy plant (construction and end-of-life emissions mainly occurring abroad and

once/over a short time, while operation emissions mainly occur locally/regionally and during the entire life time of the

plant, 50 years) ACCORDING TO THE LCA STUDY FROM 2006. (Kristjansdottir et al 2006) ..................103

Table 16: Overview of emissions amounts per Nesjavellir lifetime, price tags and estimated external costs

associated with CO2 .................................................................................................................................................108


associated with CH4 .................................................................................................................................................109


associated with N2O ................................................................................................................................................110


associated with SO2..................................................................................................................................................111


associated with NOx................................................................................................................................................112


associated with NMVOC ........................................................................................................................................113


associated with VOC ...............................................................................................................................................114


associated with CO ..................................................................................................................................................115


associated with NH3 ................................................................................................................................................115

Table 25: Health impacts of H2S according to concentrating (WHO). (Pineda 2007) ......................................124

Table 26: Measured concentration of selected air pollutants in Reykjavik (Grensás) .......................................125


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Table 27: Overview of assessed external costs related to H2S within the Human Well Being victims category,

in the capital area, and the related impact types, price tag type, total external costs and the Nesjavellir

proportion of the external costs. ............................................................................................................................127

Table 28: Information on CORINE categories linked with number of species (pr m2) and PDF (based on

report info from Deliverable D.4.2. - RS 1b/WP4, "Assessment of Biodiversity Losses". ..............................135

Table 29: Different restoration measures available associated with cost per hectare with everything included,

e.g. planning- and material cost (Landgræðsla Ríkissins, 2010). ..........................................................................137

Table 30: Cost for the appropriate restoration methods ......................................................................................137

Table 31: Cost of roof and wall coating plate maintenance replacement on the energy plant, with and without

H2S removal from plant emissions (Ingvason, 2009) ...........................................................................................142

Table 32: Cost of paint maintenance at the energy plant, with and without H2S removal from plant emissions

(Sigurdsson, 2009) ....................................................................................................................................................143

Table 33: Distances from plant to city based on LUKR (Þormóðsson 2009)...................................................144

Table 34: Cost of roof plate maintenance replacement within capital area, with and without H2S removal from

plant emissions (Olafsson, 2009) ............................................................................................................................145

Table 35: Presumptions of the cost of roof maintenance within the estimated capital area with and without

H2S pollution (Sigurdsson, 2010)............................................................................................................................145

Table 36: Overview of external costs arising from the Nesjavellir air ventilation system .................................147

Table 37: Total external costs due to tarnishing of silver within the capital area. Nesjavellir proportion of the

total external costs is 1/3 as previously mentioned. .............................................................................................149

Table 38: Overview of the total external costs due to corrosion of circuit boards and the Nesjavellir

proportion of this cost.............................................................................................................................................153

Table 39: Overview of total external costs from H2S air emissions ....................................................................154

Table 40: overview of the types and amounts of chemicals emitted through brine during the life cycle of the

Nesjavellir geothermal power plant. .......................................................................................................................157


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Table 41: Overview of external costs due to heat from brine..............................................................................161

Table 42: Overview of external costs due to balance disturbance of geothermal system caused by aggressive

production rates from geothermal system .............................................................................................................165

Table 43: Overview of External costs due to induced seismicity and subsidence..............................................167

Table 44: Overview of external costs due to balance disturbance of cold ground water system ......................170

Table 45: Overview of total external costs from changes in natural landscapes ................................................175

Table 46: Overview of external costs due to facilitated access to nature through new roads/trails .................177

Table 47: Overview of external costs due to tourism at Nesjavellir plant ..........................................................178

Table 48: Overview of external costs from other socio-economic impacts ......................................................180

Table 49: Overview of external costs due to archaeological- and historical remains disturbances ...................181

Table 50: Overview of the total external costs estimated for the Nesjavellir case study ...................................182

Table 51: Prices for various parts of the recommended equipment. The table is imported directly from the

source and the exchange rate is 1€ = 91 Ikr ..........................................................................................................186


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FOREWORD TO THE STUDY

In addition to the previous note, this foreword is simply an introduction to a few important concepts to

outline shortly for the reader what this study includes and what not. Other important concepts and acronyms

are explained in a separate list.

The purpose of this study is to propose evaluation methods of impacts caused from harnessing geothermal

energy, and to quantify external costs that they may incur. The goal is to test the suggested evaluation

methods by using examples from known geothermal plants and to establish tools to compare externalities of

this type of energy exploitation to other sources of energy.

The authors would like to state here, at the very beginning, the goals for this study:

It should enable the comparison of external costs from geothermal energy harnessing to other energy sources – since an externality study has not been performed for

geothermal energy.

To highlight the main impact factors causing external costs based on sound arguments, to give basis for prioritising possible mitigation actions.

To develop a tenable methodology for total externality cost calculations, since this is a relatively new scientific field, still in moulding, and to highlight factors that need to

be defined specifically for Icelandic contexts. This will form a basis for future externality studies.

Finally, this study on costs of externalities from geothermal energy is meant as a reminder of the virtues and possibilities of using geothermal energy, which is readily available in huge capacities, for various uses.

ATTENTION!

Sometimes the reaction to reports that aim to reveal environmental, social and other external effects of an activity is that the aim is to cast a shadow on the activity in question. That is by no means the intention of this project! The authors are convinced that the positive benefits of using geothermal energy outweigh the costs and externalities by far even though these are

not highlighted in the following document. It is our hope that this externality study will give a sound basis for comparison and insights into the phenomenon external costs.


February 4, 2010


External costs are costs that are not established on a normal market and generally have no established fiscal

marked value. These are usually related to use of or damage to common goods (e.g. clean air, water, soil,

unspoiled nature, etc.), human health, social patterns and other non-fiscal valuables but still result in costs,

usually not paid by the actor causing the damage or enjoying the service, but rather the society as a whole,

through e.g. the health care system and material deterioration due to air pollution or specific groups especially

vulnerable to a specific damage, e.g. farmers to acid rain pollution. Costs are also transferred to unborn

generations and other beings; fauna and flora. Defining external costs thus implies defining price estimations

of the damage to e.g. services from natural ecosystems, to human health and social patterns. Benefits to these

are also included as they unfold.

The External cost calculations methods suggested here are based on a Life Cycle approach. The externalities

derive from the choice and amount of materials and energy type used in the constructing phase, the

conditions on site during the operational phase and how the plant is dismantled and disposed of after its

functions are closed down. External costs estimations is an addition to an environmental Impact Assessment;

The impacts are not only listed but quantified and reverted to monetary amounts using specific price

allocations that are explained in detail.

Life Cycle Cost (LCC) is traditionally used e.g. within the construction industry, as a measure of all financial

transactions relating to a system, product, structure or service during its life time. These would include the

payments that are extended during the preparation, building, operation, maintenance, modification or repairs

and lastly its dismantling and disposal throughout the functional time, estimating expected financial charges

or foreseen cash flow within a project. It can therefore be used for financial planning and to select between

different designs in order to optimise the material and industrial design as related to cost and return on

investment within the accepted framework. Under this perspective, LCC does not include potential

environmental or social costs. This study does NOT give this kind of LCCs of an energy plant but shows only external

costs that may be added to “traditional” LCC schemes.

Instead, emphasis is placed on estimating external costs accumulating during the lifetime of a geothermal

energy plant. This cost should then be integrated into a ―traditional‖ LCC estimation, presenting the total of

all related costs: environmental, social and intergenerational costs.

This real price according to cost may act in two ways: Firstly Accumulate the financial mean to implement

needed preventive measures on behalf of the supplier and secondly to signal to the consumers that the service


February 4, 2010


is worth more than the former market price and urge it‘s sparingly use. Figure 1 shows the correlation

between the different analyses.

Total cost

LCC:

Preparation costs: Exploiration, testing

sources,design

Investment: Land preparation, roads,

transport, construction, financial cost

Operational costs: running costs, reapair,

maintenance,

End of life cost: Dismantling, waste

management, recycling

External costs

LCA

Inventory of all

material, all energy

used during the life

time of a project:

Input to the

Life cycle cost

LCIA:Impacts

from side effects derived

through-out the project

life time:

Output of the LCA: Quan-tified

External ities

Figure 1: The relation between Life Cycle Assessments (LCA), Life Cycle Impact Assessments (LCIA), Life

Cycle Costs (LCC), External Cost (Externalities) and Total Costs. Only the contents of the dark oval are

discussed in this paper. (MMaack/FFrisbæk)

The concept Energy Plant is used here as if not to state at this point whether the geothermal energy is being

used for power production, heating service or both. The efficiency of an energy plant depends highly on the

technology that is deployed and a combined heat and power plant would naturally be more efficient.

Therefore, please note that this study will not be authoritarian for all geothermal energy plants but a

suggested view on this renewable energy source that is readily available in many needing societies on earth.

The study suggests a method on how to compare this source of energy with other types that often have far

more yet different side effects to their exploitation.


February 4, 2010


ABSTRACT

The “Methods to Evaluate Externalities from Geothermal Energy Plants” project puts forth a

suggested methodology for estimating external costs of human ventures in general. The method is based on a

life cycle approach, bringing together tools from different disciplines such as environmental economy and

sociology, creating an interdisciplinary toolbox for externality estimations. The suggested methodology is

tested on the case study of harnessing geothermal energy at Nesjavellir energy plant in Iceland.

External costs are costs that are not established on a normal market and generally have no established fiscal

marked value, usually related to use of or damage to common goods (e.g. clean air, water, soil, unspoiled

nature, etc.), human health, social patterns and other non-fiscal valuables. Damage costs are usually not paid

by the actor causing the damage or enjoying the service, but rather the society as a whole.

Price tags are defined and used to appoint a fiscal cost to external environmental impacts accompanying

human venture, enabling the consideration of these impacts when assessing actual costs and comparing

different options and scenarios.

ÁGRIP

Úthrifsverkefnið (Externalities) setur fram hugmyndir um það hvernig hægt er að meta úthrifskostnað

(external costs) eða þann kostnað sem ekki er greiddur af kostnaðarvöldum eða notendum afurðanna er valda

kostnaðinum. Aðferðirnar eru byggðar á Lífsferilgreiningu sem fremur heyrir undir verkfræðilega nálgun, á

meðan mismunandi tæknilausnir eru metnar með kostnaðar- og nytjagreiningar. Efni og orka sem notuð er

við byggingu, rekstur og urðun virkjunar leiða af sér útblástur og annað umhverfisrask eins og að sumu leyti

er tekið fram í mati á umhverfisáhrifum en ekki metið til fjár. Hér eru leiddar fram aðferðir við að meta þessi

ásamt öðrum úthrifsáhrifum til fjár og aðferðirnar reyndar með því að beita þeim á mældan útblástur og aðra

kostnaðarþætti, á hverju lífsferilskeiði Nesjavallavirkjunar.

Bæði eru þróaðar nýjar aðferðir en í öðrum tilfellum eru notaðar aðferðir aðlagaðar úr

Evrópusamstarfsverkefnum er aðstandendur þessa verkefnis hafa komið að.


February 4, 2010


EXECUTIVE SUMMARY

Today, geothermal energy contributes by 62% of the total primary energy consumption in Iceland and will

increase in future years. Traditionally, geothermal energy is considered environmentally friendly, renewable

and sustainable and, for most parts, rightfully so.

Still, there are some environmental impacts caused by harnessing geothermal energy and additionally, there

are indirect impacts which are not traditionally credited on the account of this energy source (or any other

energy source for that matter). These are called External Costs or Externalities: costs that are not established

on a normal market and generally have no established fiscal marked value. These are usually related to use of

or damage to common goods, human health, social patterns and other non-fiscal valuables.

Additionally, there are of course also multiple external benefits that are not included in this assessment,

simply because, they are too far reaching for the possible scope of this project and it was not the initial

intention of the project to focus on external benefits. These external benefits would include e.g. access to

cheap hot water and district heating, access to high quality and cheap swimming pools bringing enjoyment,

leisure and enhanced health, the absence of coal, oil or other more polluting energy plants, a strong position

on geothermal research and technical know-how within the global research and energy arena, etc.

The project purpose:

1. Enable the comparison of external costs from geothermal energy harnessing to other energy

sources – since an externality study has not been performed for geothermal energy. The authors are

convinced of the positive benefits of geothermal energy in general and this externality study will give

a sound basis for comparison.

2. Highlight the main impact factors causing external costs, based on sound arguments, to give

basis for prioritising mitigation actions.

3. Develop a tenable methodology for total externality cost calculations, since this is a relatively new

scientific field, still in moulding, and to highlight factors that need to be defined specifically for

Icelandic contexts. This will form a basis for future externality studies.


February 4, 2010


4. Finally, this study on costs of externalities from geothermal energy is meant as a reminder of the

virtues and possibilities of using geothermal energy, which is readily available in huge capacities,

for various uses.

This paper is meant a basis for further moulding and should be considered as a first establishment giving a

logical overview and correlation between the aspects and impacts in question. The work is undertaken as an

effort to bring all costs under the same evaluation approach, a fiscal price, so that external costs and possible

mitigations can and will be included in project cost estimates.

The figure to the left presents an

outline of the context model approach

to evaluate the external impacts and

costs at various levels, aspects that

cause impacts, aspect mediums and

victim categories (FFrisbæk)

Impacts and external costs are

evaluated within this project from a

selected approach, mostly according to

the availability of data. Thus it is partly

based on the bottom-up procedure that

is inherent to LCA.

Emissions are traced through their assumed pathways from the origins to their end; the scope of their impact

is evaluated as well as the possible number of ―victims‖. On the other hand other costs are found from actual

measurements of the specified pollutant and /or actual reported impact. Justifications for estimations are

given in each case. The following figure gives an overview of the main methodology used for external cost

assessment and calculation procedures within this project. (FFrisbæk)


February 4, 2010


IMPORTANT NOTE: Data on the amount of chemicals emitted during the lifetime of Nesjavellir energy

plant is mainly based on the LCA study (Kristjansdottir, 2006), which is the only LCA for Nesjavellir available

at present.

When scrutinising the LCA outcomes, some discrepancy emerges between the LCA findings and the yearly

emissions measured by Reykjavik Energy (Orkuveita Reykjavikur, OR), the owner of Nesjavellir energy plant.

Thus, it is recommended that the used emission figures are revised when new LCA figures for Nesjavellir

become available. (Such a study is presently in process as a Ph.D. project within the Engineering Department

at the University of Iceland)

The chemical emissions measured yearly by OR specifically for Nesjavellir are CO2, CH4 and H2S emissions.

These measured figures are expected to be a more accurate representation of the yearly emissions during the

operational phase of the plant than the figures given by the LCA model. This becomes especially clear by the

H2S emissions since the only source of H2S during the operational phase is emissions from the boreholes,

which are the ones measured by OR. For CO2 and CH4 there would be a small additional amount of

emissions originating from maintenance, which mainly consists of sending equipment abroad once a year for

repairs. Here an additional 2% is assumed due to maintenance compared to the measured yearly CO2

emissions of the plant, which is approximately the CO2 emissions of a marine trip from Iceland to Europe.

Conclusions:

The report shows that external costs can be priced and present real costs that can be considered in the plant‘s

design phase. The estimated external costs can be compared with other costs categories of designing and

operating energy plants.

The attempt to calculate external cost along the lines presented in this report is feasible. Yet, the outcomes

are only as good as the quality of the available data that is fed into the proposed methods. The report


February 4, 2010


emphasises the means as being a right step in the right direction for internalizing the external cost when

appreciating the real cost of geothermal energy harnessing. The end figures can be more disputable.

A conservative estimation of the cost and the relevant benefit calculations for the external costs of H2S,

where a rather expensive but off-the-shelf scrubbing equipment is selected to compare values, suggests that

there is a Net Benefit for mitigating H2S emissions if the discount rate is set to 5.5% and with only a 5 year

payback time. When using lower discount rate (which is not far from real rates for state-bonds) then the

benefits are even higher.

Regarding the external cost findings for the Nesjavellir case study it is interesting to note that the absolute

highest cost factor is rooted in the H2S emissions.

It is assumed, according to experts within the field, that 10% of the H2S is converted into SO2. The external

costs due to SO2 is the highest emerging cost and 98,5% of that cost is due to SO2 presumably originating

from H2S. Additionally, the external costs due to SO2 transformed from H2S is approximately 50% higher

than the estimated costs stemming directly from H2S external impacts.

A Cost Benefit analysis performed only on the external cost estimated for H2S impacts shows that when

incorporating an off-the-shelf H2S scrubbing technology producing sulphuric acid, the benefits show up

already in the fifth year. If the external costs from SO2 originating from H2S would be taken into

consideration, this payback time would be even shorter!

On the whole, external costs originating from H2S present approx. 80% of the total external costs and CO2

emissions present approx. 13%. Thus, if the planned projects of Reykjavik Energy (Orkuveita Reykjavikur,

OR) for H2S scrubbing and CO2 capture and storage are fulfilled, that would decrease the total external costs

by 93%!

Suggestions for further research:

Set an acceptable proportion of H2S transforming to SO2 in the Icelandic climatic context

Actual impacts of H2S on Icelandic fauna and flora within the local and regional vicinity to

geothermal energy plants and a PDF (proportional disappeared fraction) set for the local fauna which

has unusually few numbers of species in the natural fauna).


February 4, 2010


More accurate information on the actual impacts on human health. Only the first indicators are

studies in the ongoing Masters‘ student project. The impacts of long term exposure to small

concentrations of H2S on human health should be dealt with

Price tags for an Icelandic context, of the impacts of other polluting chemicals than H2S (revising the

NEEDs price tags for an Icelandic context)

Fiscal value price tag for the intrinsic value of Icelandic nature and landscapes

Impacts of H2S on maintenance costs of vehicles within the capital area

Impacts of H2S on maintenance costs of computers within the capital area

Seismic impacts due to geothermal harnessing in Iceland

Impacts on microorganisms (shouldn‘t be any direct impacts, except through impacting natural

geothermal springs)

Studies on the flow patterns of reinjected brine and possible impacts on flora and fauna in nearby

lakes and streams

Where does the measured mercury in trouts in Lake Thingvallavatn come from?


February 4, 2010


ACKNOWLEDGEMENTS

This project was first outlined as a 2 year research project in 2004 but has taken a long time in incubation.

Since then geologists, geophysics, biologists, economists and sociologists from many countries have assisted

in many ways. First, the collaborators within the NEEDS project (EC 6th FP New Energy Externalities for

Developing Sustainability are mentioned for their endurance and insight. Within the NEEDS project LCA

inventories were compiled on renewable energy plants as well as those that use fossil or nuclear sources. The

set of approach to evaluate the available types of primary energy was essential for this study. Geothermal

experts at Orkugarður, Reykjavik were really helpful in finding and explaining relevant sources, not the least

helpful maps and explanatory drawings. Also thanks to the research funds, The Rannís (Icelandic Centre for

Research) and Orkusjóður (the National Energy Fund), that supported the work.


February 4, 2010


STRUCTURE OF REPORT

To facilitate an enjoyable reading and navigation through this report, an overview of the main report

structures is given below.

I OVERVIEW & INTRODUCTION to project and themes

II METHODS

• Chemical Aspects• Physical Aspects• Existence Aspects

III IMPACTS, EXTERNALITIES AND COSTS

IV CONCLUSIONS & DISCUSSIONS


February 4, 2010


REPORT SECTION I

- OVERVIEW AND INTRODUCTION

Report Section I is structured as follows:

• 1.1 Project Purpose• 1.2 Main Concepts and Structure of the Externality

Assessment

1 INTRODUCTION TO PROJECT

• 2.1 Advantages & Disadvantages• 2.2 Background Emissions of Geothermal Fields• 2.3 Environmental Impacts• 2.4 Renewability & Sustainable Use• 2.5 Intro to Geothemal Energy Plant Process

2 INTRODUCTION TO GEOTHERMAL ENERGY


February 4, 2010


1 Introduction to Project

Today, geothermal energy contributes by 62% of the total primary energy consumption in Iceland and will

increase in future years. Traditionally, geothermal energy is considered environmentally friendly, renewable

and sustainable and, for most parts, rightfully so.

Still, there are some environmental impacts caused by harnessing geothermal energy and additionally, there

are indirect impacts which are not traditionally credited on the account of this energy source (or any other

energy source for that matter). These are called External Costs or Externalities: costs that are not established

on a normal market and generally have no established fiscal marked value. These are usually related to use of

or damage to common goods, human health, social patterns and other non-fiscal valuables.

With the planned increase in geothermal harnessing, in Iceland and elsewhere, it is vital to have access to

information on the actual impacts and related costs of using this energy source (as with any other energy

source for that matter). This information both forms a basis for mitigation considerations as well as an input

into reasoning for future energy planning.

An important note worth mentioning here at the outset is, that previous LCAs and other studies have clearly

shown that the environmental impacts of geothermal energy are much less than energy production by fossil

fuels. This study is by no means an attack on the positive status of geothermal energy but rather a means to

produce figures by which geothermal energy can be soundly compared with other energy sources.

There are of course also multiple external social benefits that are not included in this assessment, simply

because, they are too far reaching for the possible scope of this project and it was not the initial intention of

the project to focus on external benefits. These social benefits would include e.g. access to cheap hot water

and district heating, access to high quality and cheap swimming pools bringing enjoyment, leisure and

enhanced health, the absence of coal, oil or other more polluting energy plants, a strong position on

geothermal research and technical know-how within the global research and energy arena, etc.

Here, firstly an attempt is made to form a model for assessing the total costs of harnessing geothermal energy

during the entire life cycle of a geothermal energy plant. This involves defining the relevant aspect pathways


February 4, 2010


and categorising the impact ―victims‖, enabling an overview of all related impact factors and still, counting

every factor only once.

Both, when estimating actual impacts and assessing a fiscal price tag for externalities, various methods have

been brought together to form a holistic approach. The paper is meant a basis for further moulding and

should be considered as a first establishment giving a logical overview and correlation between the aspects

and impacts in question. This work is undertaken as an effort to bring all costs under the same evaluation

approach, a fiscal price, so that external costs and possible mitigations can and will be included in project cost

estimates.

The developed methodology is tested by applying them to the case study of energy harnessing at Nesjavellir

geothermal power plant in Iceland. A preliminary assessment of externalities from the case study is put forth.

The study will shed light on which aspects of geothermal energy production are accountable for the highest

environmental and indirect fiscal costs and as such, which aspects should be given the highest priority in

mitigation and environmental focus within the geothermal energy sector. The conclusion will act as a support

for future mitigation strategies and a guide for decision makers who bear responsibility for future energy

planning, providing a possibility to compare geothermal energy harnessing with other types of energy sources

and technology.

Cost factors that need to be fine tuned to fit the Icelandic contexts are identified along the way, in parallel

with a clear statement of which price tags are being used in the absence of more appropriate ones. Thus, the

ground is laid for future studies to easily build upon this present one, readily identifying the calculation

conditions and price tags that need to be updated and substitute them with new ones, as they become

available. It is thus recommended as a theme for further studies to define these Icelandic calculation

foundations and price tags

The project was financed by the Icelandic Centre for Research, the National Energy Fund, Innovation Center

Iceland and Icelandic New Energy.

It was executed in cooperation between Innovation Center Iceland and Icelandic New Energy, along with

students from the University of Iceland.


February 4, 2010


1.1 Project Purpose

With the increasing interest in renewable energy and new energy technology, access to comparable

information on the external impacts and related costs of all energy sources is found relevant.

Hence, the project aims at shedding light on external costs of harnessing geothermal energy, the related types

of externalities, examples of their extent and suggestions of how to price them.

The project conclusions will:

5. Enable the comparison of external costs from geothermal energy harnessing to other energy

sources – since an externality study has not been performed for geothermal energy. The authors are

convinced of the positive benefits of geothermal energy in general and this externality study will give

a sound basis for comparison.

6. Highlight the main impact factors causing external costs, based on sound arguments, to give

basis for prioritising mitigation actions.

7. Develop a tenable methodology for total externality cost calculations, since this is a relatively new

scientific field, still in moulding, and to highlight factors that need to be defined specifically for

Icelandic contexts. This will form a basis for future externality studies.

8. Finally, this study on costs of externalities from geothermal energy is meant as a reminder of the

virtues and possibilities of using geothermal energy, which is readily available in huge capacities,

for various uses.

1.2 Main Concepts and Structure of the Externality Assessment

The report gives a thorough background and justifications to each issue that may give rise to externalities. A

simulation programme would be an appropriate tool to give calculated results, but this report is a prerequisite

to set up such technical tools. The work focuses on evaluation methods rather than exact numerical

outcomes, this approach is presented as to give as much transparency to all steps of the evaluation and

pricing as possible. Figure 2 gives an overview of the main concepts used within the project:

Aspects: The type of causes and origins of external effects

Effects: The potentials of the aspects to have external impacts


February 4, 2010


Impacts: Quantified assessment of actual impacts

Pricing or Price tags: assessed costs accompanying one unit of the different actual impacts

Costs: The cost due to an impact, that is, the assessed actual size of a certain incident or example

multiplied by the relevant unit specific price tag

Figure 3 gives is an overview of the assessment structure, i.e. the aspect pathways, impacted ―victims‖, etc.

30 LCC & Externalities Fanney Frisbæk, Maria Maack

Figure 2: Aspects, effects and impacts, overview of the evaluation procedures (FFrisbæk)


Figure 3: Outline of the context model approach to evaluate external impacts and costs at various levels,

aspects that cause impacts, aspect mediums and victim categories. (FFrisbæk)


2 Introduction to Geothermal Energy

Geothermal energy arises from the Earths magma layer, which can also reach to the surface in the form of

volcanic eruptions. Magma is a mixture of minerals, metals, gases etc. Its chemical composition differs widely,

depending on the geology and geographical location, the temperature and the frequency and magnitude of

outlets. Magma may also settle as hot intrusions on its way through the crust and affect water that silts

through the overlaying bedrock. Whereas the bedrock frequently originates in various ways it tends to form

layers one on top of the other but can break, tilt or move for various natural forces. Through the resulting

cracks, water mediates the heat energy in the bedrock to the surface, where water is present. Dry geothermal

areas exist, where water or another media has to be pumped down to extract the thermal energy.

Geothermal energy has been directly utilized for e.g. bathing and washing since the dawn of man. For

electricity production on the other hand, geothermal steam began its energy source history in the beginning of

the 1900s or on July 15th 1904 to be exact. On that day Prince Piero Ginori Conti lit five light bulbs by

electricity produced through steam emerging from vents in the ground at the Larderello geothermal field in

Italy. This experiment led to the establishment of the world‘s first geothermal power plant in 1914, see Figure

4 within the same area. (Geothermal Networks, 2008)

Figure 4: Workers at the first geothermal power plant, Larderello, Italy (REUK 2007)

Today, the exploitation approach depends highly on the information on the field that is gathered BEFORE it

begins and the geophysical reactions to the exploitation. Sophisticated studies with seismic measures,


February 4, 2010


magnetic mapping and geo-surveying, areal photographing, thermal and resistance measurements, are

therefore essential to estimate the size, refurbishment and possible extent of exploitation of each system.

These measurement techniques were revolutionised during the 20th century, but so has the technology to

exploit the energy source itself. (Gudmundur Palmason 2005)

In 2005 the reported installed geothermal electricity generating capacities worldwide amounted to 9064 MWe,

(lead by USA, then the Philippines and Mexico) distributed within 24 countries and meeting the total

electricity needs of some 60 million people - roughly the population of the United Kingdom (Geothermal

Energy Association 2009). Non-electric uses of geothermal energy in the world (2000) amounts to the

installed thermal power of 190700 MWt (lead by China, then Japan and Iceland). Assuming 90% of maximum

yearly production loads (allowing 10% for maintenance and other non-production time) this would amount

to approximately 70 TWh/yr, which is still much less than the assumed global potential given in Table 1

below.

Table 1: Geothermal potential world-wide (IGA, 2001)

HIGH TEMPERATURE resources suitable

for electricity generation

LOW

TEMPERATURE

resources suitable for

direct use

[mill. TJ/y of heat]

(lower limit)

Conventional

technology

[TWh/y of

electricity]

Conventional and

binary technology

[TWh/y of

electricity]

Europe 1830 3700 > 370

Asia 2970 5900 > 320

Africa 1220 2400 > 240

North America 1330 2700 > 120

Latin America 2800 5600 > 240

Oceania 1050 2100 > 110

World potential 11.200 22.400 > 1.400


February 4, 2010


In 2008, there were 7 geothermal power plants producing electricity in Iceland, of which 5 are combined heat

and power plants. The three that are not, give rise to hot brine in areas where the demand for heating has

been met. On the other hand the aim is to use the waste heat to drive low heat electric turbines to enhance

even further the efficiency of the power production. An overview of the Icelandic energy plants is given in

Table 2 and their locations shown on the map in Figure 5 .

Table 2: Geothermal power plants in Iceland

Sign on map

Plant type

Plant name Start-up year

Electrical power

Heat power

Owner

CHPP Bjarnarflagsvirkjun 1969 3 MW 4,4 MW (17 l/s)

LV

PP Kröflustöð 1978 60 MW LV

CHPP Svartsengi 1978 75 MW 150 MW (240 l/s)

HS

CHPP Nesjavellir 1989 120 MW 90MW

300 MW (1640 l/s)

OR

CHPP Húsavík Power Plant – A low heat power plant

2000 2 MW (95 l/s)

OH

PP Reykjanes 2006 100 MW HS

CHPP Hellisheiðarvirkjun Nov 2007 When completed

2006 123 MW 300 MW

400 MW

OR

NOTE:

An LCA was made on the Nesjavellir power plant in 2006 based on figures from 2004. Quoted

figures of emissions from Nesjavellir within this report, builds on the conclusions of this

study and therefore refers to the installed electrical power at that time or 90 MWe and thermal

capacity of 200 MWth. Currently though (2010), the size of the plant has grown to 120 MWe

and 400 MWth.


February 4, 2010


According to energy statistics (Orkustofnun 2009) installed geothermal electrical power in Iceland totalled

483 MW in 2009 and increases to 660 MW when Hellisheiðavirkjun is completed and to 790 MW if the

existing extension plans follow through. Geothermal energy fulfils approximately 65% of the total Icelandic

primary energy consumption - 110.000 TJ in 2006.

The electricity production from geothermal power plants is about 2630 GWh per year, which is roughly 27%

of the total electric energy production in Iceland (Orkustofnun, 2007).

Figure 5: Map of Iceland showing placements of geothermal power plants (Landmælingar Íslands, 2009 #214)


February 4, 2010


2.1 Advantages and Disadvantages of Geothermal Energy

Geothermal energy is defined within the European Union directive 2009/28/EC with EEA relevance

(European Parliament 2009) as a renewable energy source and is grouped together with solar, wind, biomass

and other alternative energy resources because the source of the heat is considered to last as long as the Earth

itself; nuclear reactions inside the planet are the ultimate source.

Furthermore, it is labelled as environmentally friendly, based on the relatively low land use and low emissions

of greenhouse gases compared to fossil fuels (see Table 3 and Error! Reference source not found.). Still

there have been some disputes about the validity of these definitions (See report section 2.4 Renewability and

Sustainable Use and (Gudmundur Palmason 2005) and (Jón G Kristjánsson 14th May 2009).

Table 3: Comparison of CO2 Emissions (Bloomfield et al. 2003) the value of 0.2 lbs CO2/kWh is the weighted

average of U.S. geothermal generation based on 2002 EIA data. Comparison of land requirements for base load

power generation (REPP 2008)

Power Source CO2 Emissions (lb/kWh)

Power Source versus Land Requirement (Acre/MW)

Geothermal 0.20 1–8

Natural gas 1.321

Oil 1.969

Coal 2.095 19

Nuclear 5–10

The obvious advantages and disadvantages of geothermal energy utilization, with regards to environmental

impacts, are presented in Table 4.


February 4, 2010


Table 4: Advantages and disadvantages of using geothermal energy sources

Advantages Disadvantages Double dividends

No road transportation of energy

needed from energy production site

to users

Exploitation brings minerals from

the earth crust up to the surface;

these minerals sometimes interfere

with the biosphere as pollutants.

Lost natural springs on surface; less

attraction for nature tourism.

Geothermal power plants have

attracted energy interested tourists

Can be used sustainably for centuries

(Gudni Axelsson 2005).

Can cause heat pollution from waste

water (if water is not re-injected)

Roads leading to geothermal spots in

context with power plants open

access for tourism or other activities

Established energy technology and

exploitation possible without high

tech installations

Needs very tight monitoring and

stepwise approach if exploitation is

to be kept sustainable

The technology that has been

developed and used with geothermal

sources is useful also with heat

pumps and other heat sources

Small land area needed as compared

to hydro dams yet similar to wind

farms

Where geothermal spots have been

overexploited or mismanaged the

geothermal system is no longer suited

for use (see experience from New

Zealand)

The success of reinjection depends

on the temperature of the injected

brine. The more brine that is

reinjected the longer the pressure can

be maintained. But the hotter the

reinjected brine the less efficiency is

gained from the energy installation.

Reinjection could hinder natural

inflow of brine into the geothermal

system and since the reinjected fluid

is usually colder than the inflowing

brine, it could cool down the system.

Facility can be integrated with

landscape

Possible seismic effects (from re-

injection or land subsidence).


February 4, 2010


Possibility of co-generation of

electricity and thermal energy for

cascade use.

High heat availability bound to

geothermal, often volcanically active

regions.

Generates continuous, reliable

―baseload‖ power when well

managed

Emissions increase and spread

further as compared to natural

emissions

High energy concentration; Cheap,

compared to many natural sources

Odours from escaping gases.

Immune from weather affects, i.e.

vagaries of rainfall, wind, sunshine

Possible land subsidence.

Independent of season

Low emissions of greenhouse gases

compared to fossil fuel

NOTE:

Chemical emissions during operational phases of geothermal power plants are not caused

by combustion of any kind. Emissions of CO2, H2S and other emerging compounds

naturally accompany the geothermal steam and fluids, and can vary substantially in types

and amounts from one location to another, depending on geology. Emissions of these

compounds also occur naturally from unharnessed geothermal areas to some extent

(existing quantity measurements inconsistent) and the impacts of harnessing a geothermal

area on the total emissions (natural and through boreholes) is a matter not yet agreed upon

within geothermal research circles. (See further information in report section 2.2

Background Emissions from Geothermal Fields)


February 4, 2010


2.2 Background Emissions from Geothermal Fields

Even from natural unharnessed high temperature geothermal areas a considerable amount of geothermal

gasses seep into the atmosphere, due to the permeability of the ground layers. Also, natural geological activity

can give rise to similar emissions and heat impacts even if they are not exploited for energy service.

Measurements of the background concentration from natural activity are rare.

Different opinions have been set forth on how much harnessing these areas change the natural outlet of

gasses but most experts agree that the free flow of geothermal steam through boreholes increases these

emissions. This is due to higher release rate of the gasses through the ready outpouring of geothermal steam

and gasses through the boreholes but also because some of the natural geothermal gasses are quite reactive

and are either bound in the strata or transformed into less harmful substances on their way through the

natural crust.

Halldor Armannsson reports that within the high temperature geothermal area at the Reykjanes peninsula

natural flow of CO2 from the surface has been approximately 16% of the emissions existing after the energy

exploitation began. In the Krafla area, North Iceland, on the other hand natural emissions exceed those from

the respective energy plant. It is eventually the change in magnitude, the distribution, faster accumulation,

change in the disposal area and the life time of the sources that can be allocated to the human exploitation.


February 4, 2010


Figure 6: Emissions of two airborne compounds from unexploited geothermal areas and from power plants.

(Fridriksson Þ 2010)

Figure 6 compares the emissions from a geothermal field in the natural state and after harnessing. In this case

the measurements show decreases of the natural emissions from a field when the area is harnessed, but on the

other hand a substantial amount of emission is added through ducts and mediums. That can lead to the

assumption that when geothermal areas are harnessed the selected gasses (CO2 and H2S) have easier escape

routes through the wells and other structures than through the soil/gas channels.

Also when an area is harnessed there is a certain pressure release so there will be less pressure on the gasses

to push up through the soil. In this case the total emission of the two compounds is substantially increased.

Hrefna Krismannsdottir along with a team of Icelandic scientists estimated both natural H2S emissions and

emissions from energy plants at various geothermal fields in Iceland in 1996. They concluded that at

Nesjavellir the proportion between natural and plant emissions was 140 t/year of natural emissions and 1880

t/year from the energy plant, that is a proportion of approximately 7% of the total emissions are natural

emissions from the geothermal field. (Kristmannsdottir et al 2000)


February 4, 2010


Þrainn Fridriksson et al have followed the rate of emissions and concentration of elements in geothermal

fluids in the Reykjanes area between 2006 when the power plant was established and throughout 2009. The

concentration of many non-volatile constituents in deep fluid generally increased in the first few samples after

May 2006 but the trend reversed in most cases.

Figure 8: Measured concentration of four elements in geothermal in Reykjanes fluids plotted for 3 years. Each

well has its own colour (Fridriksson Þ)


February 4, 2010


The emission patterns are still poorly defined; each well displays different pattern for a given constituent and

the concentrations of different elements within a given well do not seem to fluctuate in sync with each other.

The observed changes in the fluid chemistry may result, to some degree, from analytical uncertainty but other

factors such as boiling, inflows of cold seawater or freshwater, changing temperature in feed zones, different

water/rock ratios that the fluids have experienced may also play a role. (Fridriksson Þ)

The point here is to realise that concentrations of elements in the geothermal brine that flows through the

plant may change with time as well as the airborne emissions.

2.3 Environmental Impacts from Geothermal Energy Plants

Generally, the environmental impacts of geothermal power generation and direct use are minor, controllable,

or negligible. (Rybach 2003). In a lecture (21st of April, 2009) on the environmental impact of geothermal

utilization at the United Nations University Geothermal Training Programme, Halldór Ármannsson

addressed the issues as shown in Table 5.

Table 5: Environmental impacts from geothermal sources

Issues Examples Mitigation

Surface disturbances

Excavation

Construction

Roads

Landslides

Scenery

Changes in surface activity

Untidiness

Keep to a small area and confine the usage area to the same spot as was used as drill site

Test holes usually disappear shortly after use

Abandoned boreholes can be hidden with material from the area

Good housekeeping at site

Physical impacts,

Subsidence, the area Slower excavation


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fluid withdrawal

sinks

Lowering of groundwater table

Changes in surface manifestation

Steam pillows

Seismicity

Reinjection

Natural seismicity needs to be taken into account in design and during construction

Should be measured and controlled.

Induced seismicity occurs when fluid is withdrawn, not very serious

Fluid injection. Problematic if injected into fault with significant level of shear stress at pressure exceeding critical faulting level.

Thermal pollution

Heat lost into environment means loss of energy efficiency

Direct disposal means changes in ecological balance

Use in cascade manner

Evaporation most economic means of dissipating heat from plant

Use waste water in fish farming

Reinjection

Chemical pollution

Chemicals diffused to air

CO2, H2S major offenders

CH4 (methane), Hg (Mercury), Rn (Radon), NH3 (ammonia), B (Boron) are minor offenders with different level of toxicity and lethal doses. Elements and chemicals vary much between sites, depending on reservoir bedrock, temperature and amount of brine

Removal of H2S is based on oxidation. This reaction is used to eliminate oxygen in the heating service system to prevent corrosion and scaling.

Chemicals can be accumulated in ponds that become sealed by silica so that it grows out of accepted size. Such slush can be hazardous to life.

Flocculation in water removes most constituents but the condensed material needs to be disposed of.

Reinjection solves most pollution problems. Needs monitoring

The extent of mitigation depends on the nature of the impacts, the gravity and urgency of the impacts, diffusion and weather condition, previous natural activity, smell, closeness to densely populated areas and agricultural activity,

Chemical pollution

Chemicals to be found in soil

CO2 accumulates in soil in area near energy plant

CO2 can bind to minerals in the bedrock and precipitate in carbonates. CO2 that is dissolved in fresh water will induce pH 3-4 and dissolve rock and release Ca+2 and other ions to form new minerals.

The reservoir will gradually clog up by the secondary minerals that can be subject of changes by different pH status. Note: The steps in this procedure or the Carbon sequestration project (OR 2008) is still under study


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2.3.1 Mitigation Measures

Mitigation actions can vary and some societies have set more strict regulations concerning allowed emissions

and mitigation actions. Reinjection of the geothermal brine is becoming more common.

Advantages of reinjection of brine:

Stops most pollution from brine

Avoids fluid depletion and may ensure longer lifetime of reservoirs

Prevents temperature changes at surface

No formation of large brine ponds.

Difficulties:

Clogging of wells and pores by deposition

Can cause cooling of reservoir

Energy production in a geothermal power plant emits less CO2 than energy generation from fossil fuel types

(oil, coal, natural gas) and becomes similar to that of PV and hydropower in vegetated areas. Still, there are

some chemical compounds in the emission and wastewater of these plants that characterises the use of

geothermal heat. These emissions come from either the steam phase and become airborne or they are

dissolved in the brine and are distributed according to its fate.

Factors such as field temperature can influence the ratio between the compositions of gases and there is

much variation in ratio between geothermal areas. Airborne emissions of gaseous compounds from high

temperature geothermal areas are considered to be much more than emission from low temperature

geothermal areas (Ármannson, 2002).

2.4 Renewability and Sustainable Use

A debate has been going on within the global geothermal arena regarding a definition of sustainable use of

geothermal energy and its renewable nature. An example much quoted for non-sustainable use is Rotoruea


February 4, 2010


New Zealand, which currently gives 20% of the energy it gave in 1985. Out of the 750 boreholes that were

drilled many were closed and in 1990 reinjection of brine started and the use capacity was set at 20% of the

original plant size. The geothermal energy plant at Lardarello has been operated for more than 100 years

which is the longest history of exploitation. Since the 1950's the steam pressure from the Valle del Diavolo

site has fallen by 30% (REUK 2007).

Some scholars claim that this life span is concurrent with mining, just as coal reserves may last for a few

centuries. In his Geothermal book (Jarðhitabók), Guðmundur Pálmason, former head of the geothermal

department at the Icelandic Energy Authority, states (page 76, transl. by Maria Maack):

“It is normal understanding that renewable should mean that the source should replenished

at the same speed as it is used or at least that the source is replenished on the same time

scale as it is used”(Gudmundur Palmason 2005)

The Icelandic Energy Authority has been active in the discussion on renewability and sustainable use. G.

Axelsson et al have published various papers on the issue pointing out the following: Firstly, a note on the

concepts of renewability and sustainability: Often these two concepts are intermingled and wrongly so.

Renewability of an energy source has to do with the intrinsic characters whereas sustainability has to do with

how this source is being utilised. (Gudni Axelsson 2005).

For geothermal energy the renewability issue is twofold:

1. Mass extraction. Thermal energy is drawn from the geothermal system by extracting high

temperature brine from the ground. This decreases the water level in the system and thus, the

pressure. The sustainability level of a given geothermal system is then dependant on the permeability

of the ground layers and the availability of hot ground water, and hence how readily new geothermal

liquid replaces the removed brine (mass flux). Properly planned reinjection of brine can be of benefit

here.

2. Thermal energy extraction. Geological circumstances and the brine-thermal source interaction

determine the thermal energy content of the inflowing brine, which is replacing the extracted fluid.

Usually, the thermal extraction is more rapid than the energy flux from the heat source to the

replacing brine. In such cases, the energy reserve is affected such that the reservoir temperature will


February 4, 2010


decrease. Consequently, the thermal energy content per unit of extracted brine will decrease and

added mass of brine will be needed to produce the same amount of electrical energy.Renewability is a

measure of the speed of replenishment of the source, but sustainable use means to use no more than

the replenishment can refill, for prolonged episodes. Geothermal systems must therefore be studied

closely before they are exploited in order to establish the capacity. Close monitoring of the

geothermal source, and measurements including temperature, pressure etc assist in following up any

changes.

The main debate concerns which reference time frame is acceptable. Life time of energy plants are set to 30-

50 years, but this may concern the useful life of the equipment and payback time of the relevant investments

rather than the possible period of exploitation. Other authors extend sustainable use to a period of 100 or 300

years. The National Energy Authority in Iceland has put forth the following definition of sustainable use of

geothermal sources and this will be the one referred to within this project:

For each geothermal system and for each mode of production there exists a certain level of

maximum energy production, E0 below which it will be possible to maintain constant

energy production for a very long time (100 – 300 years). If the production rate is greater

than E0 it cannot be maintained for this length of time. Geothermal energy production

below or equal to E0 is termed sustainable production while production greater than E0 is

termed excessive production. (Gudni Axelsson 2005)

Grimur Björnsson, geothermal expert, describes an approach where the speed of exploitation can be selected

according to intended use, intensively for a shorter period of time or on a low impact scale for a longer time.

The replenishment takes place after the exploitation has been withdrawn. The fast use can be economically

viable ((Grímur Björnsson 2008). According to this understanding, two more definitions are added here from

the Environmental Impact assessment for the power plant of Bitruvirkjun which is in the planning and design

phase:


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Reversible exploitation1: The use of geothermal energy where the natural unharnessed state of the

geothermal system can be restored by ceasing the exploitation and wait for the mass and energy to

return to the original level.

Excessive Exploitation2: Geothermal exploitation that uses mass and heat from a geothermal

system faster than its natural replenishment and increased inflow provides. (VSÓ 2008) (transl. by

Maria Maack):

If an energy plant is used for 50 years then the source should hold the same capacity 50 years after the plant‘s

dismantling and in the same spot. S. Arnórsson, professor of geology at the University of Iceland often

quotes G. Pálmason and insists that all uses of geothermal energy is a form of mining. Other experts agree

that careful monitoring of the system is essential and that exploitation can only be sustainable if the source is

used according to its capacity and natural replenishment. A normal precaution is to plan the usage in a

stepwise fashion and only enlarge energy plants in accordance with a generated system‘s model and eventual

model simulation.

2.4.1 Extension of Environmental Impacts in Time

In view of the section before it is evident that life time of plant and the life time of geothermal source differ.

Power plants are discounted in 30 - 50 years as investments. External impacts and costs accrue throughout

the preparation phase, life time of plant and during dismantling a period of 50 100 years. If a geothermal

source is used sustainably the life time should be 100 – 300 years. Based on the National Energy Authority

definition environmental impacts will be set and evaluated in this document as reigning for 100 years, or three

generations.

1 Jarðhitavinnsla þar sem endurheimta má ótruflað ástand jarðhitakerfisins með því að stöðva vinnslu og bíða jöfnunar á massa- og orkuforða. 2 Jarðhitavinnsla sem gengur hraðar á massa- og varmaforða jarðhitakerfis en náttúruleg endurnýjun og aukið aðstreyma gefa.


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2.5 Introduction to the Geothermal Energy Plant Process

Depending on temperature and the system characteristics, geothermal energy can either be used for heating

purposes only or both heat and power production. Most commonly high temperate fields are harnessed

through combined heat and power generation, first separating steam from the geothermal fluids, to generate

electricity in turbines and then the ―leftover‖ steam and the separated brine, for heating.

If merely the geothermal steam is used for electrical power generation, the total efficiency of the power plant

is approximately 10 – 20%, between the incoming energy in the steam and the outgoing separated brine and

waste water. When both steam and brine are used for combined heat and power production the efficiency

rises to 60 – 90%, depending on the temperature in the outgoing medium at the last step in the cascade.

The following process outline is based on the type of power plant at Nesjavellir, which is a combined heat

and power plant. A process overview is given in Figure 9.


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Figure 9: Flow chart of the geothermal fluid through Nesjavellir power plant.

The main process steps (referring to Figure 9 ) at a binary power plant such as Nesjavellir are:

Pumping of geothermal fluid and cold ground water from wells (1)

Separation of the steam and water (2, 3)

Steam flows to the turbine which turns the generator (11)

Brine and cold ground water go through heat exchangers and the heated groundwater then to district

heating. The condensed steam is either reinjected into the geothermal system or disposed off on

surface

Pumping of water to district heating service storage (9)

Geothermal steam and water from the production wells are gathered in a central separator station where they

are separated. The geothermal fluid (brine) is either reinjected into the geothermal system or disposed of on


February 4, 2010


the ground surface, where as the steam is transported through pipes to the power generating turbines. On the

way, moisture separators are installed to remove any moisture that could be left in the steam. At Nesjavellir,

each turbine has a rated capacity of 30 MW and requires around 2 kg/s of steam at a pressure of 12 bars to

produce 1 MWe (Gislason, 2000).

Fresh, cold groundwater is first used in the condensers to cool down the exhaust steam from the turbines and

to preheat the fresh water. After passing through the condensers, the fresh water is transported to the heat

exchangers where it is heated up with the brine that was separated from the steam. This combined heat and

power utilization releases less heat to the atmosphere than conventional geothermal power plants and

increased the total plant efficiency. (Ballzus et al., 2000).

Table 6 shows the mass and energy flow for different phases using the same numbering as the process steps

in figure 9.

Table 6: Mass energy flows and power at the Nesjavellir geothermal plant in 2002.

Kg/s MW

1.Geothermal fluid from wells 316,5 568,6

2. Steam I 152 427,3

3. Geothermal water 164,6 141,3

4. Excess steam II 9 19,2

5. Excess water from wells 57,5 49,2

6. Steam to turbine 143 408,1

7. Water to heat exchangers 107,1 92,1

8. Cold ground water 1434,5 61,3

9. Heated water 668,1 237,2

10. Heated cooling water 771,4 193,5

11. Degassing - -

12. Electricity produced - 73,8

Information from Orkuveita Reykjavikur

Process


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In 2002 geothermal fluids were pumped at Nesjavellir from 14 holes (1000-2200 m deep)with temperatures

ranging between 270−360°C, pressure between 10-40 bars, and enthalpy in the range of 1500-2600 kJ/kg for

the different wells. (Mailänder, 2003). Wastewater, with temperatures from 46-100C° is either pumped back

into the ground through shallow holes or disposed of into the Nesjavellir stream. (Snorrason et al., 2004)


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REPORT SECTION II -

METHODS

METHODS, THEORIES AND TOOLS FOR EXTERNALITY EVALUATION

Report Section II is structured as follows:


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• 3.1 Economics of External Costs

3 INTRODUCTION TO METHODS

• 4.1 Environmental Impact Assessment (EIA)• 4.2 Tools for Characterising and Quantifications• 4.3 Tools to Assess Externalities• 4.4 Life Cycle Assessment (LCA) and External Costs

4 TOOLS TO QUANTIFY, EVALUATE & TRANSFORM IMPACTS INTO MONETARY TERMS

5 SUGGESTED EXTERNALITIES EVALUATION TOOLBOX


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3 Introduction to Methods

This chapter is intended to outline the basic ideas behind the evaluation of external costs in general. It is

meant to give meaning to new concepts that have entered the professional‘ scene of engineers, economists,

evaluators and planners, energy development and decision makers. Various disciplines are bound together to

form a holistic approach to evaluate the different external costs and present a useful tool kit for externality

studies.

In the cases where assumptions may be questionable, the study rather gives substantiation and references to

these instead of skipping the aspects in question. The suggested approaches may therefore benefit from

discussions, further development and adaptations.

This study will not highlight all the benefits of geothermal energy resources that provide huge

valuable societal service, namely clean power and central heating. It goes without saying that the

benefits are much higher than externalities. The usefulness is seen for example in the form of local

income; know how, energy savings, bathing pleasure, fresh image and steam, heating and pressure

for industrial processes prolonged for generations. The indirect benefits of geothermal energy could

probably give rise to a similar study, but these are left out of this evaluation of external costs from

geothermal energy plants, simply due to time and fiscal restrictions.

First an overview will be given as to why pollution or other infringement in the natural habitat is considered

at all to be an economic dilemma. As the work unfolds, substantiation for the pricing of environmental and

social costs of specific aspects for this service will be described. Examples will be put forth for the case study

of the Icelandic geothermal energy plant Nesjavellir, only to show how monetary values can be set in context

with results from Life Cycle Analysis. An attempt will be made to put price-tags on all kinds of eventual

impacts and justifications made on how to evaluate them both in quality and quantity from a selected

example.

As the main goal of this work is to raise awareness of the eventual evaluation methods and introduce how

aspect categories can be handled and included in costs the methods will be substantiated first in theory, then

the tools will be explained, and lastly some new approaches will be suggested and substantiated and tested

with examples. Hopefully people will be tempted to suggest comments, suggest modifications and apply them


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to similar problems. The overall outcome should be an attempt to harmonize the comparability of all energy

sources.

3.1 Economics of External Costs

The global economy is losing more money from the disappearance of forests than through the

current banking crisis. "So whereas Wall Street by various ca lculations has to date lost, within the

financial sector, $1-$1.5 trillion, the reality is that at today's rate we are losing natural capital at

least between $2 and $5 trillion every year." (Quotation I: Pavan Sukhdev, Managing Director in the

Global Markets division of Deutsche Bank AG, BBC, 10th Oct 2008)

Economic theory considers individuals as rational consumers that will maximise their benefits from each

transaction while allocating their scarce income between all choices on offer, putting their basic needs first.

The public is used to discuss value in terms of prices and a free market where information on products and

services is free and accessible. The accepted norm is to look at the market as a reliable mechanism to settle

prices. IN this way market transactions are the most efficient way we have found to allocate scarce resources

for acceptable price. The drawback is that some assets, often essential public goods are not normally

exchanged on a market and carry accordingly no price tags.

It is considered good policy to keep constant economic growth. This is according to both growth of

populations and more people that enter the work market, but wellbeing is highly dependent on the economy,

and raised income is set in context with raised social welfare. But in the 20th century signs, began to emerge

showing that there are limits to economic growth. During centuries the natural resources and waste from

human activities that are disposed into the natural cycles have been ignored as these were not considered

limiting, only the economic income.

Resources are limited and cleaning mechanisms of ecological systems that provide clean water and air, bind

carbon dioxide, prevent ultraviolet light to reach the earth surface, etc have reached their limits in certain

locations. This ecological disturbance and the decreasing capacity for diluting harmful emissions that are

essential for all live forms have are reaching the planetary scale (as with global warming and rupture in the

ozone layer) while the human undertakings have reached most biotopes on Earth.


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Regulations that apply for the allocation of public funds have been set to avoid influences of this sort and

unethical use of public assets. When negative external impacts are not inherent in the price of the good or

service it is called a market failure, but beneficial external impacts only add to the social benefits and

consumer surplus. (Boardman 2006)

The vast social impacts from the human economy is currently forcing economists to rethink their theories

and influences to a high degree the way we evaluate our common capital. The latest Nobel price laureate,

Elinor Ostrom was for example rewarded 2009 for her analysis of the economic governance, especially the

commons.

According to Jonathon Porrit at Earthscan, UK, values fall into five main categories which all are within the

boundary of the planet we live on. These are: the Natural capital, the Financial and Manufactured capital,

Social and Human capital. Referring again to the economic concepts of allocating scarce means to selected

ends it should not be overlooked that humans do have different goals in life and their means vary across

society, continents and hemispheres. Porrit shows the ultimate and intermediate means that are available to

achieve intermediate and ultimate ends.

From societal discourse and analysis on proposed energy projects (Sólnes Júlíus 2003) and their costs and

benefits, we know that people refer to sentiments plus scientific facts when supporting their view. Some may

have religious reasons to support or decline ideas others refer to economic costs and benefits. Can one value

be discarded and another given full dominance?

Figure 10 shows which tools are used to describe and analyse each level, and the type of value that is

accepted in various societal niches. Whether or not these are scientifically proven values there are other ideas

that fit better the social niches and these values have to be at least considered when a broad coalition is to be

formed for supporting new schemes. If we agree on this categorisation, governance bodies need to apply

policies that consider and account for them and steer common development towards the goals of respecting,

saving and adding to these values; in other words keep within the frames of sustainable development.

Therefore the evaluation should be adopted.


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3.1.1 Basics of Ecological Economics

Quotation II

No-one can predict the consequences of climate change with complete certainty; but we now

know enough to understand the risks. Mitigation - taking strong action to reduce emissions - must

be viewed as an investment, a cost incurred now and in the coming few decades to avoid the risks

of very severe consequences in the future. If these investments are made wisely, the costs will be

manageable, and there will be a wide range of opportunities for g rowth and development along

the way. For this to work well, policy must promote sound market signals, overcome market

failures and have equity and risk mitigation at its core. (Executive summary of the Stern report)

Economy

Society

Human capital

Social capital

Manufactured capital

Financial capital

Natural capital

Natural capital Ultimate means: Solar energy, biosphere services, raw materials, biophysical cycles, soil fertility etc

Intermediate means: Finance, tools factories, prcessed raw materials, communication systems

Intermediate ends: Health, leasure, mobility konwlede community consumer goods wjattlh employment

Ultimate ends: Happiness, harmony, identity, fulfillness self respect,wellbeing, transcendence, enlightment

Political Science

Theology and Ethics

Science and technology

Figure 10: Adapted from The five capital framework (Porrit 2007)p. 141)


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External costs and un-marketed goods have been a topic within Environmental Economics; it suggests to

internalize the externalities and put price tags on all aspects that market transactions imply. Currently a new

paradigm is emerging within economic theory, one that claims that the global economy should rightfully be

termed ‗Ecology of Humans‘ whereas it evidently is rooted and will only grow according to the dynamics of

in the Earth‘s ecosystems‘ boundaries (Costanza, Cumberland et al. 1997) The prevailing economics in

industrialized societies, whether socialistic or capitalistic in their form have so far ignored natural resources

and natural sinks for processing waste as a limiting factor for the economy. Natural services that dilute

pollution to supportable doses and provide clean air, water and soil are valuable public goods that cannot be

bought but industrial activities depend on these same processes without adding the cost to the price of their

product or marketed service. But should these services become scarce or the processes become infringed, the

value may grow to extremes: The price for clean life supporting air or water would become so highly desired

that all means would be allocated to these natural

services. The sensible thing to do is to avoid a

situation by mitigating the problem before it

strikes. But whereas the changes are not so evident

to each individual and the most convenient way is

to keep business as usual, and ignore the call for

action to save the environment. But most societies

are starting to head the call.

Figure 11: The four capital categories as presented

by the Gunder Institute, University of Vermont

(Roelof Boumans 2002)

A way to put a price on natural services has been developing. Scientists have monitored changes and drawn

up eventual consequences that may strike the next generations and the costs of either letting these changes

occur on one hand and on the other to mitigate the impacts on the environment and prevent problems. This

is done by first realizing the real costs of products and services, and to use parts of the income to mitigate the

expected impacts at the source. Environmental Economics recommend that governments should introduce

different taxations and environmental charges to steer the demand and supply according to the carrying


February 4, 2010


capacity of the environment and urge recycling. This includes looking at growth as an increase in quality of

life rather than quantity of growth and consumption.

The Stern review (Stern, Treasury et al. 2006), a benchmarking report that analysed studies that show that the

environment is becoming impaired because of the accumulation of Carbon dioxide in the atmosphere. The

review verifies the prognosis and puts the damage in economic terms. Then the review compares what would

be the less costly option: to either start acting now to mitigate the climate change in the current situation with

the costs that the impacts on the economy would have if the climate is allowed to unfold as predicted.

Even thought the marginal damage from the consumption or service provided to each consumer, the mere

size of the accumulated human activities is already having an impact on the global biosphere. The difficulty is

to find the exact point of when mitigation costs equal the supportable damage cost and the amount of

damage which is tolerable for each aspect. According to the principles of the Agenda 21 it should be the

polluter that pays and therefore the external impact on common values should be incorporated in the price

that the producer and the consumer exchange in their negotiated price; the charge for external costs should

by principle be used to mitigate the damage, restore the lost value or add to the value of the (natural) capital

that provides the services. If each unit of service pays for the full cost of that service, the size of the capital

should be kept unchanged and the flow of service intact. The problem is to find the exact cost of the service

and the marginal damage from each unit and decide how to allocate this amount to the right service, or

combined functions. That issue is the core ingredient of the following sections, but first the effect of

economic growth and scale.

3.1.2 The Effects of Scale

A major difference between the old and new economy - paradigms are speculations on the scale of the human

economy. In (neo)classic economics no limits to either size of resources or speed of the throughput of

materials and energy were considered because the wellbeing of humans was attached to alleviating poverty

and increase economic growth. Growth has been used similarly as the word development.

In Ecological Economics on the other hand the size and growth is put in context with limiting ecological

factors and a difference is made between quantitative and qualitative development. A basic prerequisite for


February 4, 2010


sustainable development is to find an optimal or appropriate scale and limit economic growth to qualitative

growth rather than quantifiable growth. Figure 12 shows the main idea of the scale dilemma.

In 1972 the famous Roma-club drew attention to the foreseen depletion of non renewable resources and the

limits this poses to the exponential growth of human population and industrial output (Donella H.

Meadows 1972) the emphasis has currently shifted to the sink limits. Increasing concentration of CO2 in the

atmosphere and decreasing availability of landfill sites are well known cases. A problem that has been

acknowledged and tackled according to indicators of this kind is the Montreal Convention and the phasing

out of CFC to prevent breakdown of the Earth‘s protective ozone layer. Countries have also set management

schemes to prevent over-exploitation of renewable sources such as fish stocks and re-plantation has often

become a prerequisite for felling forests for wood cropping.


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Figure 12: Comparison of the economic system at the early stage of civilization as compared to the current

status. (MMaack after Goodland, Daly and Serafy 1992 as cited in (Costanza, Cumberland et al. 1997))

How large is the human economic system as compared to the earth‗s ecological system? Common practice

has been to use fossilized, limited energy sources wastefully, and in the process to override the carbon-

binding capacity of the Earth‘s flora. Raw materials have been concentred from mines using this same energy

source rather than from dispersed often life-threatening waste dumps whereas toxins have been set free.

Neoclassic economics – the accepted modern trend- have moreover spread the idea that money grows from

money and eventually natural resources have been less respected as assets or treated less respectfully than

private goods or financial capital. At the same time Economic transactions and human activities may already

have overridden the speed of natural processes that replenish renewable resources.


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Figure 13: Five types of capital values (MMaack based on Costanza).

In 1997 a groundbreaking article in Nature (Costanza 1997) the value of world‘s ecosystem services is

articulated and natural capital describe, d as well as the concept service flow. The authors laid out 17

categories of eco-functions and services that are valuable to human life and health and fall under renewable

natural resources. These are: Gas composition and regulation in the atmosphere, climate regulation,

disturbance regulation and resilience against turbulence, water supply, water regulation, erosion control, soil

formation, nutrient recycling waste treatment and degradation, pollination, biological control of populations,

refuge, food production, raw material replenishment, genetic resources, recreation and cultural aspects that

we use in aesthetic creations, education, spiritual and scientific functions. Not only life functions but also

industrial process depends on these functions that are in other terms called service flows from the Natural

Capital (see Figure 11 and figure 12). The larger the capital the more service it can provide. The limits to

growth and replenishment of life lie within the boundary of the Natural Capital. Damages to that will

decrease total value.


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How much would the service of the ecological system be worth in economic terms if technology were to

substitute the natural functions? Their response was that at that stage the ecologic services were on the same

scale in economic terms as the entire human economy. If the limits of ecosystems‘ sinks were to be reached

then it would cost economic input from the human economy to provide the same services. In other terms,

external costs from human undertakings would cost more than it takes to protect the environment that

provides the same essential services. This view is repeated in the Stern report when describing the damage

expected from changed climate and the cost of mitigating these changes. Ecological sinks have moreover

resilience to change until their full capacity has exceeded and then the effects can cross into different

ecological functions that are not so easily returned to normal. This is the case of increased carbon dioxide

leading to higher temperatures that lead to thaw of permafrost and the escape of methane from stored

vegetative waste which leads to more emissions and still higher temperatures.

It is therefore considered more cost effective to prevent damage to the ecological system services rather than

to deal with the harm when it is already done. Earlier, manufactured capital was limiting, but with the

expanding scale natural capital and its process flows is becoming the limiting factor. Man made capital cannot

replace natural capital. Or, what good are power plants if the flow of geothermal heat is spoilt by

overexploitation, or what is the value of trawlers if the fish stock is gone? Therefore there must be limits to

the transferability between the capital types and how large infringements can be supported as externalities

from the development of manufactured capital onto the other types.

4 Tools to Quantify, Evaluate and Transform Impacts into

Monetary Terms

The approach to evaluating and pricing externalities exploits tools from the engineering, biological,

geographical and economic disciplines. Some of these tools are used extensively on an international basis and

have been next to standardized, while others are new and still undergoing tests and development. These tools,

their approach and assumptions and the appropriate contextualization will be described here very briefly and

appropriate sources quoted. Later these will be used to price externalities from geothermal energy plants and

examples given from case studies, mostly from Iceland and Italy.


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4.1 Environmental Impact Assessment (EIA)

Icelandic approach to manage the use of natural resources is bound by the Contract on the European

Economic Area, and follows EU directives on Environmental Impact Assessment (EIA).

On 6 June 2000, the EEA Agreement: Annex XX of Directive 85/337/EEC and 97/11/EC took effect in

Iceland and was amended by Act no. 74/2005 (effective from 1 Oct. 2005). According to the act, the

interpreted, main objective of the EIA is to take a proactive approach by investigating and minimizing

significant impacts of a certain project on the natural environment. Under Icelandic law, the scope of the EIA

extends into Icelandic territorial waters, air space, and Iceland‘s pollution zone. The costs of EIA procedures

must be met by the party responsible for the development project (including the costs of investigating

environmental impacts, publishing the reports and outcomes of the EIA, hearings etc).

In this framework and In the Directive, a project is defined as, ―Any type of new construction or alteration to

an existing construction and the concomitant activities.‖ The developer of a project is responsible for

conducting an EIA, more specifically and applied to this report, any power plant (geothermal) and other

thermal power installations with a heat output of 50 megawatts or more and other power installations with an

electricity output of 10 megawatts or more (art.18). Based on these definitions and framework, EIA

procedures begin when the party responsible for a development project (usually a private company or a local

authority) submits their own initial EIA to the Icelandic National Planning Agency. Within in this document,

the developer describes, relevant to the case presented in this paper, the geothermal project and alternatives

and how the project will comply with development plans (see Article 89. The report, to be termed an initial

environmental impact statement, shall be compiled by the developer, and its form and content shall be

consistent with the scoping document.. The report shall specify the impacts, cumulative and synergic,

direct and indirect, which the proposed project and concomitant activities may have on the environment

and the interaction of individual environmental factors.

When screening the foreseen impacts a few points are highlighted, these are to be considered

Indirect Impacts: Impacts on the environment, which are not a direct result of the project, often

produced away from or as a result of a complex pathway and sometimes referred to as second or

third level impacts, or secondary impacts.


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Cumulative Impacts: Impacts that result from incremental changes caused by other past, present or

reasonably foreseeable actions together with the project.

Impact Interactions (synergies): The reactions between impacts whether between just one project

or ones between the impacts of other projects in the area.

Based on these different categories of impacts, the EIA report shall explain upon what premises the

assessment is based. It shall describe the aspects of the proposed project which are regarded as most likely to

have an impact upon the environment, including its scale, design and location, compliance with accepted

planning, proposed mitigating measures and proposals for environmental monitoring where appropriate. The

main alternatives shall be considered and their environmental impacts shall always be explained and

compared. A non technical summary shall be prepared describing the report‘s main findings. The report‘s

findings shall include classification and criteria for the environmental impact of individual aspects of the

project, based upon guidelines issued by the Icelandic National Planning Agency, (art 8).

Afterwards the Icelandic National Planning Agency has two weeks to review and then publicises the report in

the legal gazette (Lögbirtingablaðið). During this period, the Planning Agency may also get other expert

opinions and comments on the initial EIA. As part of his responsibility, the developer must take notice of

comments and thereafter produce a final impact statement on the basis of the initial environmental impact

statement.

Although these guidelines are followed for a EIA report, there are a number of factors which will influence

the approach adopted for the assessment of indirect and cumulative impacts and impact interactions defined

earlier. Tools of assessment should be practical and suitable for the project given the data, time and financial

resources available. Key points to consider when choosing the method(s) include:

· the nature of the impact(s) can the area be resorted or are changes irreversible)

· the availability and quality of data

· the availability of resources (time, finance and staff)of each of the methods contained in the

Guidelines.

In the case of Iceland, changes to the scenery, not only scars or changes in the landscape and geological

formations but changes in the ―land of distant views‖ as denominated in the local language (Thora


February 4, 2010


E.Thorhallsdottir 2002) have been a particularly difficult phenomenon to evaluate. This is likely because of

the particular features in the uninhabited land which for the most part host no forests that hide eventual

changes that are imposed by human projects. Natural phenomena that are very rare in other countries are also

almost common in Iceland examples are lava fields and areas coloured with geothermal deposits.

The EIA is done is site specific and done in context with each area that will be affected by project without a

general quantification. A master plan for the land planning that looks to energy harnessing and natural

protection is expected in 2010 but no attempt is made to set prices for the different types scales or

classification of land.

4.2 Tools for Characterising and Quantifications

This chapter outlines how descriptions in former sections can be quantified or described in units that later

constitutes price – units for external cost.

4.2.1 Life Cycle Assessment (LCA)

Life Cycle Analysis (LCA) describes and assesses the potential effects on the surroundings from a production

or service system. LCA allows for the identification of key impact processes and providing a basis for

environmental improvement. Thus LCA outcomes can be a good tool to help tot adapt industrial and process

design as to minimise the external impacts and optimise the system efficiency according to the desired

functions. LCA is a costly and tedious procedure whose quality depends highly on the accuracy of the data

that is fed into the modelling process. A few software versions are used widely, amongst them GaBi, the one

used to make the first LCA on the Nesjavellir geothermal power plant that is referred to in later chapters. An

extensive European project, NEEDS, which aims at setting prices on external impacts of energy technologies

(including nuclear, coal based, solar towers and wind plants) uses LCA as project data base that is

synchronised in a classification system called Ecospold. Ecosense is software that is used to interpret the

dataset into impacts (Andrea Ricci 2009).

LCA is used as a tool as a basis for externalities‘ evaluation because:


February 4, 2010


LCA is a systematic approach to identify key environmental impacts of projects throughout their

preparation, operation and dismantling

Provides a basis for environmental categorisation,

Gives opportunities to compare and improve systems or products

Is attached to units and therefore adapted to scale

The usefulness of such an approach should be to influence the process design and lead the decision making

towards evaluating external costs in their cost benefit analysis before realizing projects. The results should be

an opportunity to take both economic and environmental performance — and their trade-off relationships —

into account in product/process design decision making but in a systematic and scheduled way.

The LCA method allows for a comparison of the same unit of service and the environmental performance

between different sources. In the case of energy services it would be 1kWh.

4.2.1.1 THE MAIN STEPS IN LCA

To follow the procedures of a life cycle analysis (LCA) please refer to the 14000 ISO standard family

(Standardization 2010). Two LCA studies are quoted frequently in this report for reference. The former LCA

is on Nesjavellir energy plant (Kristjansdottir, 2006), at the size 90MWe which is a combined heat and power

plant and the second for Bagnore3 power plant in Italy (Orsucci Paolo 2005). The phases are separated into

A) the construction phase, B) the operation phase and C) the end of life phase.

1. Goal and scope are defined for the study.

2. Inventory analysis: Detailed data is collected on all inputs and outputs during all phases of the energy

plant. These inventories show type and quantity of material and energy during the entire lifetime,

including disposal. The quality of the outcome rests to a high extent on the quality of the data and

this phase of an LCA can be tedious and time consuming. The database that forms during this step is

valuable for later references.

3. Impact assessment is the software output. It is a compilation of the type and quantity of external

potential effects that arise from the inventories. The use of certain grades of steel in the construction

for example would eventually have both health and environmental impacts during its manufacturing


February 4, 2010


and its transportation to the building site. The natural geothermal activity may also have had impacts

before the plant comes into realisation, and these should be subtracted from the impacts after the

construction. The potential effects are classified into preset categories that give insight into

environmental relevance of the inputs and output.

4. The Evaluation and interpretation stage describe the extent of impacts.

Figure 14: Boundaries for the LCA study, Bagnore 3.


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The goal and scope section describes why the study is being carried out, how detailed it should be and how

the results should be presented. In the goal and scope section the functional unit, reference flow and the

system boundaries are defined.

4.2.1.2 BOUNDARIES

The system boundaries follow the energy and material needed to construct, run, maintain and dismantle the

energy plant. The material is quantified and its origin and processing of each unit is added up to find the main

environmental potential effects of that unit from the cradle to the grave. The boundaries could also have be

set at the plant gate as to stress which potential effects arise only on the site but the processing of the

materials during the mining and refinery may cause global impacts such as the release of carbon dioxide or

acidifying impacts locally at that process plant. Therefore the just comparison takes to the whole life cycle and

is based on an inventory of materials, their origin and transport to the plant under evaluation as well as the

process itself.

Currently ISO standards for LCA are used to harmonize the effort which is applied for all systems that

provide similar services worldwide and help to make such studies more comparable. These are: ISO

14040:2006.


February 4, 2010


Figure 15: Input and output for each Phase in the case of Nesjavellir Geothermal plant. The Pipe that carries

the hot water towards the market was not included in the LCA study (Kristjansdottir, 2006.)

4.2.1.3 FUNCTIONAL UNIT

The functional unit is a measure of the function or service supplied from the studied system. It provides a

reference to which the input and output can be related. This makes comparison of two different systems

possible whereas they provide the same service although they make use of different resources. In LCA of

energy plants, typically the functional unit is 1kWh of energy produced, that may also be acquired from a coal

fired energy plant.

However, there are two variations of what kind of energy the 1kWh from a geothermal plant may imply.

1kWh electricity

1kWh of thermal energy.

Processing of raw materials

for the contruction of the

power plant, holes and

transport pipes from holes to

power plant and hot water

transport pipe to Reykjavik.

End of life of power plant,

transport and recycling of

metals other waste materials

to landfill (simplified phase)

Transport of raw materials to

Iceland/Nesjavellir

Construction of power plant at

Nesjavellir

Operation of power plant

Input of raw materials and

energy

Input of oil

Input of oil and electricity

Input of geothermal steam

and material for operation

and maintenance of the

power plant

Emissions to soil, air and

water, solid waste


water


water, solid waste


water, solid waste


water, solid waste

Output of electrical and

thermal energy

Input Emissions


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Obviously the energy has different quality and cannot be used in the same service. The potential

environmental effects of the co-generation geothermal energy plant are the total potential effects of the

electrical and thermal production divided to the total energy units produced. Reykjavik‘s Energy issues a

separated report for the heat service and the power production whereas the power market is subjected to

competition.

In the reference year 2002 for Nesjavellir plant, the average production was 237 MW of thermal energy and

73.8 MW of electric energy, even though the labelled capacity of the plant was 90 MWe and 200 MWth. Some

basic figures for the power plant Nesjavellir are presented in Table 7. Should the energy only be used for

power generation the efficiency of the plant drops eventually from 80% down to about 10 – 20% and the

environmental impacts would therefore all be allocated (see section below) only to 1kwh of electricity and the

unit for marketing as well as the external cost.

Table 7: Basic figures for the energy production of Geothermal energy plant Nesjavellir during 2002

Heat and power services Heat production Power production Total

Average 237 MW 73,8 MW

Total energy production 1,986,476,993kWh 618,034,368kWh 2,604,511,361 kWh

Proportional 76,3% 23,7% 100

4.2.1.4 ALLOCATION

An LCA identifies not only the overall environmental impact, but also where it is generated in the production

chain. This information can help the energy producer to minimize the overall environmental impacts from

the production and be of help in future decision making.

Most energy plants using geothermal heat in high temperate areas are combined heat and power plants. The

power either goes on to the national grid or is transmitted to specified users. The heat is used for other


February 4, 2010


purposes, such as drying and heating. According to a new act on competitive activities a separation needs to

be defined between competitive service and monopolised areas.

This project uses the companies division of output to allocate the total impacts. But external cost is rather

estimated as total cost from the energy plant, which is bound to emissions during a set time. Therefore the

functional unit will not be used here unless for giving examples on how they can apply to each unit.

4.3 Assessing Externalities

The bibliographical definition of ‗Externality‘ is generally along the lines of ―an un-priced benefit or cost

directly bestowed or imposed upon one agent by the actions of another agent‖ (Söderholm 2003) sometimes

referred to as neighbourhood effects (neighbourhood being from local to global in outreach) see Figure 16.

Thus externality that is derived from using geothermal heat as an energy source would be any negative impact

on the natural capital and escapes mitigation. This may be accumulation or releases of harmful chemicals to

the atmosphere or soil or groundwater, that may affect the ecosystem services, or any value that humans may

consider as damage, visible or not. Human health, flora, fauna or landscape may be affected from the project

and in some cases at least either society as a whole, individuals such as property owners or future generations

may carry the cost of repairing or mitigating this impact. According to the ―polluter pays principle‖ the costs

of preventing or mitigating these external impacts should be carried by the producer that is responsible for

the externalities. The problem lies in quantifying the hidden costs and the accurate allocation of these into the

price of the service. The following sections describe methods that deal with these evaluation approaches.


February 4, 2010


Figure 16: The relations between market prices and external cost

4.3.1 Tools to Estimate the Value of Non-Marked Goods

Many attempts have been made to set a value to externalities, but more than often the damage occurs to

public good or other non-marketed commodities. One approach is to create an imaginary market transaction.

These approaches are made in public enquiries that ask for peoples‘ willingness to pay, either for avoiding the

changes or how high compensations they would require for their alleged damage. Methods like contingency

value obtained from respondents in questionnaires, is based on individual value which are then added up to

show the total value. Hedonic prices of private property may change if a large project is undertaken in the

neighbourhood. But in pristine areas or resorts that are not developed extensively market transactions occur

so rarely that price tendencies cannot be reported for decades. An example of this would be how prices rise in

areas where nature reserves are established and the opposite if a resort area becomes too crowded.


February 4, 2010


Figure 17: Overview of methods to assess the value of nature (OECD 2009)

These methods have been applied for example for undeveloped areas in Iceland, by asking tourists about the

worth of this area and calculate how much money tourists spend in order to enjoy it in the current status and

compare this to the value after changed land use. (Lienhoop 2007) There are four major drawbacks to these

evaluations‘ approaches:

1) They would always be site specific and not applicable in any other cases because of the manifold

personal reasons that people use for reasoning their price which may not apply for a different yet

similar areas.

2) The evaluation is not quantified and attached to units. That makes computing in numbers difficult.

The allocated values are not related to the size of area in question, time span etc and therefore

difficult to use for comparison.


February 4, 2010


3) As individuals feel more at ease to work out reasoning and solutions such as common value within a

social group the compilation of individual values may not be applicable in human terms even though

the economic equation might be used.

4) Many influential parameters may be lost in this approach

An overview of the indirect marketing assessment methods can be found in textbooks on environmental

economics, but as these are not the basis of the methods presented here will not be discussed further.

(Turner, Pearce et al. 1994)

4.3.2 Discounting

To invest in cost effective abatement, some thought must be given to future investment rates. (Richard

Newell 2001). How could monetary capital spent now be evaluated for its future worth if benefits continue to

accrue over centuries? In general the discounting rate is set high when there is risk involved and the project

may fail. Projects that have a long live time and are not prone to risk tend to have lower discount rates. Also

if the project is undertaken by large entities such as public institutes the rates are lower than for private

investors. Discount rate for a bridge, road and hydro-power plants tend to be in the range of 2,5 – 5%.

Discounting rates are difficult to settle between these who claim that investments should pay off within a few

years and those who state that every cost aspect must be paid to behold the most value in the long term and

sustain resources for generations. The conventional approach is to calculate the present value of future costs

and benefits. If the discount rate is high, future costs and benefits are not as valuable as the upfront

investment cost and weigh less in the present value. The inherent assumption is that humans prefer to have

money now rather in a distant or near term future.

From ecological economics it can be derived that financial capital cannot substitute natural capital but it can

pay for its restoration. The Stern review and the PEW centre who look into discounting the cost of mitigation

against climate change discuss discount rates in context related to the topic of this report. Discounting is used

in constext with the cost benefit analysis ( see chapter 9).


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4.4 Life Cycle Assessment (LCA) and External Costs

An LCA quantifies the ―side-effects‖ that arise from a project. The calculations are most advanced for

chemical emissions to the environment, and results are connected to their toxicity and impacts on human

health and/or ecological functions. The results give an overview of the impact of the calculated quantity of

external potential effects of each unit of energy in a local, regional and global context.

A few additional external impacts will be included as well in this evaluation, namely from the impacts of

changing the land use, and that of affecting biodiversity as well as some physical and social aspects. Since the

1980s several European research and co-operational projects have been run to establish methods and

approaches that can turn environmental and social external costs attached to energy into monitory values.

Probably the most effort in modifying methods to evaluate external costs has been within the ExternE

projects series (Bickel P 2005) of which the NEEDS session is the most recently published and accessible on

the internet (Ricci A 2009). These assessment approaches have undergone much discussion and

harmonization in order to draw the most relevant impacts into the assessment and by no means have they

been accepted as being flawless.


February 4, 2010


Figure 18: Ecosence Approach developed in NEEDS (Andrea Ricci 2009)

4.4.1 Integrated Tools: the NEEDS Framework

As a continuation of the ExternE methodology a team of 63 participants has added more environmental and

social aspects into the LCA and evaluation of external work. The pathway is shown on Figure 18.

The LCA integration tool is accessible on the Internet at www.ecosenseweb.ier.uni-stuttgart.de and is

described as following:

‘EcoSenseWeb is an integrated atmospheric dispersion and exposure assessment model

which implements the Impact Pathway Approach developed within ExternE. It was designed

for the analysis of single point sources (electricity and heat production) in Europe but it can

also be used for analysis of multi emission sources in certain regions.

EcoSense was developed to support the assessment of priority impacts resulting from the

exposure to airborne pollutants, namely impacts on human health, crops, building materials

and ecosystems. The current version of EcoSenseWeb, covers the emission of ‘classical’

pollutants SO2, NOx, primary particulates, NMVOC, NH3, as well as some of the most

important heavy metals. It includes also damage assessment due to emission of

greenhouse gases. Impacts of ‘classical’ pollutants are calculated on different spatial scales,

http://www.ecosenseweb.ier.uni-stuttgart.de/

http://www.externe.info/


February 4, 2010


i.e. local (50 km around the emission source), regional (Europe-wide) and (northern)

hemispheric scale. The version EcoSenseWeb has a web-based user interface and was

developed within the European Commission projects NEEDS and CASES.

The methods are based on LCA inventories on classic and emerging energy technologies such as coal plants,

nuclear power plants and high heat solar thermal towers, marine energy, as well as future outlook for the

development of fossil and nuclear technologies. These reports are to be found at the project website:

www.NEEDS-project.org. Included in the simulation of externalities of future policies are social criteria

that weigh into the individual preferences. These were compiled in multi-dimensional social surveys. Also the

NEEDS project suggests methods to include prices of land use changes due to energy quantified approach is

used to set price on land area that will change because of energy project

The research approach is described in the section on methods. From the sections above it becomes obvious

that the complications are multiple. The ecological impacts are used to simulate all the threads into a

comprehensive model of the externalities and their price using TIMES /MARKAL as the main framework.

The NEEDs project resulted in a model that connects multiple aspects, which are shown schematically in

Figure 19. In the simulation positive and negative feedback loops interact for the overall outcome. They were

set according to negotiated and agreed criteria, in cooperation by the project participants.

The data fed into the model handle mostly the chemicals that are borne in air, but emission to water and soil

and changes in land use are also accounted for, even though these aspects are not fed to the programs. The

goal of the simulation is to offer a framework that gives the opportunity to compare power technologies and

different energy sources in different places.

http://www.needs-project.org/


February 4, 2010


MARKAL-MACRO

ECO

NO

MY

AN

D S

OC

IETY

ENERGY AND ECONMY

ENVIRONMENT

RESO

UR

CES A

ND

TRA

DE

Availability of technologies

Ecological effectsEnvironmental limits

GDP &capital requirements

Usefu

l Ene

rgy d

em

and

Min

ing

limit

s &

tra

de

, (i

ncl

ud

ing

IET)

Figure 19: Areas and issues that are fed into the main simulation framework to calculate external cost of

energy projects.

The compounds that the TIMES- model accounts for are the following:

NOX, SO2, NMVOC, particles (total particles, PM 10 and PM2,5) and the greenhouse gasses CO2,

CH4, N2O SF6, CxFy. Other substances that are dealt with in a different way are the following: Cd,

CO, Hg, Ni, Ar, Pb, Cr6, PAH, benzene, BaP, PCDD/F formaldehyde and radioactive substances.

Changes in land use are evaluated according the status and the areal size of the land in the beginning

and foreseen usefulness or cleanliness after the dismantling of the power plant.

Times has a representation of the damage cost induced by one unit of each substance emitted in each country,

the form of damage cost coefficient /function. For instance the damage cost due to one ton of SO2 emitted

in France. The damage in Icelandic conditions is set here as if the conditions are same as in other Nordic

countries. That is coherent with the regional classification within NEEDS, which may be disputable whereas

the chemistry of the bedrock is quite different and therefore the chemical impacts and other responses seen


February 4, 2010


in ecological dynamics may either be similar or different. Still this is set as the basic approach for now to

support the presentation of the method.

The damage factors or functions for the local and regional pollutants are derived specifically according to the

following:

A) Source-sectors like residential/commercial and industry and where necessary subdivided into specified steel/iron production.

B) Energy (power plants, refineries, gas distribution, electricity transmission etc.

C) Transport, which is subdivided into urban and rural transport routes.

The regional dimensions are national within the simulation handling, but can be different in the other

functions that are evaluated differently. The substances that are not explicitly calculated in Markal and Times

are not all a construction of technologies or the extraction and transport of fuels outside the EU27. The

damage generated abroad because of the import of a fuel within the EU can also be taken into account

through the –association of a damage figure to the import category considered.

4.5 Values Inherent in Quality of Land

Pristine land has been hard to price when it has not entered the market. The prerequisite for the method used

here is the argument is that land and natural habitat types have specific quality from which valuable service

may be derived. These ecosystem services are for example cleaning and retaining water, binding CO2, hold

soil against erosion etc (Costanza 1997). Also, generally the richer the biological habitat in the area the more

services and more resilient to damaging impacts it becomes, therefore is the inherent biodiversity on the land

refers to the quality of the land.

Researchers or those who undertake environmental impact assessment (EIA) use either no evaluation or

other methods such as restoration costs or hedonic pricing. With regard to the valuation of biodiversity losses

or land quality, hedonic price method also offers limited applicability. For further justification and theoretical

establishment of the presented evaluation approach please turn to reported outcomes of the NEEDS-project

(Andrea Ricci 2009).


February 4, 2010


The restoration cost approach looks at the cost of replacing or restoring a damaged asset to its original state

and uses this cost as a measure of the cost of restoration from one type of quality, described as type of

habitat. There is a pitfall in this rhetoric; the quality of the land may or may not be equal to this cost, but what

is useful in this case is the reference to both former quality of land and unit restoration price. Restoration

costs are the investment expenditures required to offset any damage done to the environment by any human

activity (Ott 2006) and reset it to the original state. The approach is widely used since it is relatively easy to

find estimates of such restoration costs.

One part of the NEEDS – project method formulation is intended to quantify and estimate the impacts on

land that is either used as building site or may be affected by emissions from the energy plant. A report called

‗Assessment of biodiversity losses‘ describes a development of a new methodology which is meant to

combine elements of restoration cost and dose-response approach. The method is based on quantifying

biodiversity losses (reduction of species richness) using concepts developed by Eco-indicator (1999) and

Koellner (2001). The monetary valuation is then based on restoration costs for different habitat changes. The

two main focus points of this method are explained in this chapter and will then later be applied in chapter

6.4.3.

4.5.1 Land Use Changes – Quantification of Biodiversity Losses

The method introduced in ‗Assessment of biodiversity losses‘ looks at the changes in the ecosystem and the

indicators to evaluate changes to biodiversity before and after construction/operation of a particular power

plant.

The concept of Potentially Disappeared Fraction (PDF) is introduced to measure changes in numbers of

species in a particular land use type relative to a reference state. This is done in order to transform an absolute

number into a relative number by using regional species richness of a particular area.


February 4, 2010


In the NEEDS project the Swiss Lowlands are used as a basis for all reference and the land use types are

categorized by using CORINE3 land cover classification method, see Error! Reference source not found..

he CORINE land cover types are thus correlated with information of number of vascular plant species in the

land types, in that way a particular land cover type represents a particular number of species (which in a way

can be an indicator for biodiversity).

The positive PDF values in Error! Reference source not found. Error! Reference source not found.can

interpreted as a decline in species richness caused by land use change, whereas the negative numbers

3 CORINE (Coordination of Information on the Environment) is a methodology that was developed in order to obtain consistent localized geographical information for countries within the European Union

𝑃𝐷𝐹 = 1 −𝑆 𝑢𝑠𝑒

𝑆 (𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒)

Equation 1: PDF calculations, where S(use) represents number of species (richness) of an occupied or

converted land use type and S(reference) is the number of species in a reference area type.

Table 8: few examples of CORINE categories that are linked with expected number of species and PDF with

reference to Swiss Lowlands (based on a table from Deliverable D.4.2. - RS 1b/WP4, "Assessment of

Biodiversity Losses")

Corine No. Type Number of

Species per m2

Potentially Disappeared Fractions (PDF) with

Reference to Swiss Lowlands

10 Built up land 1 0,97

322 Heath land 18 0,56

412 Peat bog 19 0,53

3112 Semi-natural broad-leafed forest (arid) 23 0,43

2115 Agricultural fallow 43 -0,09

Swiss Lowland (reference site) 40 0,00


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represent an increase in species richness. For example a 97% decline can be expected because of a land use

changes from Swiss Lowland to ‗built up land‘. Thus the PDF fractions are always a percentage of the species

richness to the Swiss lowlands first and then later the chages can be followed up as relative changes to what

was the natural state of the land as compared to what it becomes at later stages in time when the energy plant

has been operated for a specified time period.

In order to calculate resulting PDF‘s for land conversion from one land use type to another following

equation is used:

In order to calculate PDF for land conversion (i.e. one type of land use shifted to a different one) is used

which comprises both local and regional effects. The local effect refers to change in number of species but

then again does the regional effect refer to changes that occur further away from the converted land areas.

This regional effect is accounted for by introducing the ‗species accumulation factor b‘ for natural areas. It is

proposes to use an average of b=0,2 for the species accumulation factor b for natural areas.

Different types of land use can have either negative or positive effects on ecosystem quality, thus creates land

transformations changes in ecosystem quality (Koellner, o.fl., 2007). Ecosystem quality is calculated with

following equation:

PDF (Land conversion) = (b + 1) ∗ (PDF2 − PDF1)

Equation 2: PDFLand conversion (PDF use1 -> use2) calculations, where b represents species accumulation factor

for natural areas, PDF1 corresponds to PDF of land area before land use changes, and PDF2 represents PDF of

land are after land use changes.

𝐸𝑄 = 𝑃𝐷𝐹 ∗ 𝐴𝑟𝑒𝑎 ∗ 𝑇𝑖𝑚𝑒

Equation 3: Ecosystem quality calculations


February 4, 2010


PDF expresses percentage of disappeared species in a particular area due to some kind of environmental load

and land use changes. In order to obtain the ecosystem quality, PDF must be multiplied with the time period

and the area size.

4.5.2 Land Use Changes –Valuing with Restoration Costs

Monetary valuation of PDF changes is here based on restoration costs for different land use categories. This

cost is derived from the cost of restoring damaged habitats to more valuable habitats (that is habitats with less

PDF) interpreted as statue in the natural succession of ecosystems, mainly plant species richness.

When a habitat is restored from a specific land use that is not natural anymore to a specific habitat,

restoration costs are in general divided into two cost components:

Unsealing costs basically mean the expenditure associated with preparing a sealed land or built up land. Since

the monetary valuation is of the vegetation changes (PDF changes with restoration), unsealing costs are not

believed to be relevant since it does not affect the vegetation change directly but rather the restoration

measures employed after unsealing.

Restoration costs focuses on a starting biotope and valuates necessary measures that need to be taken in order to

reach a particular target biotope. Example of restoration cost (cost/m2) for theoretically restoring a specific

habitat can be seen in following example from Germany.

Exemplification:

Starting biotope: ‟arable land‟/‟meadows‟

Target biotope: ‟broad-leafed forest‟

Package of measures:

Deep tilling of the soil (0,2 DM/m2), afforestation (3,7 DM/m2), maintenance (0,6 DM/m2)

𝑅𝑒𝑠𝑡𝑜𝑟𝑎𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡𝑠 = 𝑟𝑒𝑠𝑡𝑜𝑟𝑎𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡𝑠 𝑜𝑓𝑡𝑎𝑟𝑔𝑒𝑡 𝑕𝑎𝑏𝑖𝑡𝑎𝑡𝑠 (+𝑒𝑣𝑒𝑛𝑡𝑢𝑎𝑙 𝑢𝑛𝑠𝑒𝑎𝑙𝑖𝑛𝑔 𝑐𝑜𝑠𝑡)

Equation 4 restoration cost calculations, eventual unsealing costs are excluded in this method().


February 4, 2010


Other cost components: planning costs (10%)

Calculations:

Restoration costs (‘arable land‘ --- > ‘broad-leafed forest‘) =

(0,2 DM/m2 + 3,7 DM/m2 + 0,6 DM/m2)*1,1 = 4,9 DM/m2= 2,53 €/m2(1998) ---> 2,89 €/m2 (2004)

These costs are an indicator for PDF changes and the species lost by converting a particular habitat. It is

important to keep in mind that when building a power plant on a former natural area the PDF loss is one-off

(not annual). Division of restoration costs as expressed with PDF changes leads to a restoration cost per PDF

and m2. It is assumed that costs due to restoration with the intention of increase species richness can be

interpreted as the costs of the loss of species when converting the biotope back.

4.5.3 Airborne Emission – Quantification of Biodiversity Losses

The method ‗Assessment of biodiversity losses‘ investigates mainly three air emitted compounds SOx, NOx

and NH3. For quantifying effects caused by acidification and eutrophication by airborne emissions on

vegetation a concept developed by Eco-indicator 99 is used.

Number of species does not only decrease when faced with environmental stress factors but their number

can also increase from time to time. Because of that dilemma target species are used, these are species which can

be assumed to appear in a certain type of ecosystem. Example is shown in table below how deposition of

airborne emission affects PDF values in the Netherlands where e.g. 1 kg of SOx deposited on 1 m2 natural

land results in a PDF change of 1.73 etc.


February 4, 2010


When the emission is valuated average cost per PDF per m2 is linked with PDF per kg deposition of airborne

emission per m2 (table 2) yields costs of biodiversity losses due to a certain amount (kg) of airborne emission

deposited per m2. In the case of deposition due to airborne emission the restoration cost method is not

relevant.

When built up areas are restored into areas with high biodiversity then it is not relevant to value the impact of

acidification and eutrophication because the areas that are mostly affected by deposition are natural areas.

Therefore is average cost/PDF/ m2 calculated by looking only at costs of PDF changes due to land use

changes from unsealed natural areas with relatively low biodiversity (e.g. high intensity agriculture) into

natural areas with high biodiversity (e.g. broad leafed forest).

4.5.3.1 EXAMPLE OF CALCULATION FOR THE NETHERLANDS :

Table 2 shows biodiversity damage as expressed by PDF change caused by a deposition increase of 1

kg of three compounds per m2 of 100% natural land in the Netherlands.

Table 9: Biodiversity damage caused by deposition of airborne emission for the situation in the Netherlands

(Deposition Increase of SOx , NOx and NH3 ().

Air Pollutant Deposition Increase in

kg/m2 * year on Natural Land (10 mol/ha)

Average PDF of natural land for the Netherlands

with/without deposition increase

PDF*m2*year per kg Deposition

Reference Value (background level) -- 0,746429 --

Sox 6,4 * 10-5 0,74654 1,73

Nox 4,6 * 10-5 0,7468 9,52

NH3 1,7 * 10-5 0,74687 25,94


February 4, 2010


The costs of these PDF changes are then calculated as follows:

PDF changes due to deposition of the three airborne compounds (column 4, table 2) are

multiplied with the restoration costs per PDF

Restoration costs per PDF for Germany have to be corrected for other countries by using

PPS (Purchasing Power Standard): 0.49 € / (PDF*m2) for Germany is equal to 0.48

€/(PDF*m2) for the Netherlands.

Since biodiversity loss only occurs due to deposition on natural land the share of natural land

in the Netherlands needs to be included in calculations. This is calculated from CORINE

data set according to ten Brink et al. (2000). The share of natural land in the Netherlands

amounts to 25%

Detailed calculation of external costs for the deposition of 1 kg of the 3 airborne emission

compounds:

1.73 (PDF * m2 total area)/1 kg deposition * 0.48 €/(PDF * m2 natural area) * 0.25 (m2 natural area

/ m2 total area) = 0.21 €/kg SOx deposition

9.52 (PDF * m2 total area)/1 kg deposition * 0.48 €/(PDF * m2 natural area) * 0.25 (m2 natural area

/m2 total area) = 1.14 €/kg NOx deposition

25.94 (PDF * m2 total area)/1 kg deposition * 0.48 €/(PDF * m2 natural area) * 0.25 (m2 natural

area /m2 total area) = 3.11 €/kg NH3 deposition

In order to calculate these same external costs of cost per kg for those three compounds and for

different countries certain assumptions must be made.

The PDF change per kg of pollutant (PDF/kg deposition per m2) is the same for all

European countries, as derived from the Netherlands.

Marginal costs calculated for Germany (0.49€/PDF*m2) only need to be corrected by

purchasing power (PPS) of the respective country.

Cover of natural land (%) has to be calculated for each country from CORINE data.


February 4, 2010


Background level of acidification and eutrophication of each particular country since it

influences the impact of additional deposition on biodiversity and therefore the

consequential external costs.

4.6 Price of Externalities according to NEEDS Project

The quantification of external costs is based on the ‗impact pathway‘ methodology which was deve loped in

the series of ExternE projects, and was further improved within the mentioned NEEDS and other related

projects. The impact pathway analysis aims at modelling the causal chain of interactions from the emission of

a pollutant through transport and chemical conversion in the atmosphere to the impacts on various receptors,

such as human beings, crops, building materials or ecosystems. Welfare losses resulting from these impacts

are transferred into monetary values based on the concepts of welfare economics.

4.6.1 Example of External Costs from Airborne Pollutants

Several models are available to quantify impacts of various airborne pollutants on different receptors. Error!

eference source not found. summarises the pollutants and impacts covered by the methods used for

external cost assessment within NEEDS. Work in NEEDS contributed to improve dispersion and fate

modelling of pollutants in the environment, to improve exposure-response relationships that are used to

describe the response of receptors to an increased level of exposure, and to improve monetary valuation.

The impacts resulting from the emission of a pollutant partly depend on the location of the emission source,

the release height, and the concentration of other pollutants in the environment. Taking these different

parameters into account, based on detailed model runs RS1b/RS3a produced a set of unit damage costs

(damage costs per tonne of pollutant emitted) which differ by the emission source country (all European

countries, EU27 average), by release height (average release height, low release height, high release height),

and by the year of the background emissions (2010 and 2020). As it is a key objective of RS1a to provide

information on the long run dynamics of technology development and its implication on environmental

performance, RS1a aims at calculating ‗average‘ external costs for typical configurations. For the

quantification of external costs RS1a thus uses unit damage costs from RS1b that refer to the EU-27 average


February 4, 2010


and to the average release height. To reflect potential time dynamics, RS1b unit damage costs for the

emission year 2010 are used for the calculation of external costs from ‗current technologies‘, while the RS1b

unit damage costs derived for the emission year 2020 are used to estimate external costs of future technology

configurations (2025 and 2050). The unit damage costs used for quantifying externalities from airborne

pollutants are summarised in Table 11.

The assessment of external costs and evaluation methods for all the included categories are presented in the

following documents, reports from the NEEDS project (www.needs-project.org ):

RS1b-D5.4 ―Report on marginal external damage costs inventory of greenhouse gas emissions‖

RS1b-D4.2 ―Assessment of biodiversity losses‖

RS1b-TP7.4 ―Description of updated and extended draft tools for the detailed site-dependent assessment of external costs‖

RS3a-TP1.4 ―Report on marginal costs – preliminary results‖

RS3a-TP1.4 ―Report on marginal costs including Excel spread sheet: ―ExternalCosts_per_unit_emission_080821.xls‖.

Final version of description: Rs3a, WP1: D1.1 ―Report on the procedure and data to generate averaged/aggregated data‖ (M45)

Table 10: Impact categories for air borne polluting chemicals

Impact Pollutants

Human health fine particles, NOx, SO2, NMVOC, NH3, Cd, As, Ni, Pb, Hg, Cr, Formaldehyde, Dioxin, several radionuclides

Loss of biodiversity NH3, NMVOC, NOx, SO2

Crop yield SO2, NOx

Material damage SO2, NOx

The unit cost of each pollutant according to the NEEDS project suggestions is listed in table 9 for airborne

emissions throughout the life cycles of an energy plants. are presented in Table 11. Whereas the NEEDS

project was designed to compare the various types of current power generating technology and suggested

changes due to future design the cost of externalities is shown in two columns, representing the 2010 and

http://www.needs-project.org/


February 4, 2010


2020 figures. Eventual changes in emissions are due to changes in design, material use and composition on

the market.

Table 11: unit Damage costs of emissions set in Euro value of 2000

Emissions in 2010 Emissions in 2020

health biodivers

ity crop yield

material damage

health biodiver

sity crop yield

material

damage

Emissions to Air

NH3 €/t 9485 3409 -183 5840 3440 -183

NMVOC €/t 941 -70 189 595 -50 103

NOx €/t 5722 942 328 71 6751 906 435 131

PPMCO (2.5-10 µm)

€/t 1327 1383

PPM2.5 (< 2.5 µm)

€/t 24570 24261

SO2 €/t 6348 184 -39 259 6673 201 -54 259

Cd €/t 83726 83726

As €/t 529612 529612

Ni €/t 2301 2301

Pb €/t 278284 278284

Hg €/t 8000000 8000000

Cr €/t 13251 13251

Cr-VI €/t 66256 66256

Formaldehyde

€/t 200 200

Dioxin €/t 37,0 E09 37,0 E09


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Aerosols, radioactive

€/kBq 2,57E-04 2,57E-04

Carbon-14 €/kBq 1,40E-03 1,40E-03

Tritium €/kBq 5,10E-07 5,10E-07

Iodine-131 €/kBq 2,61E-03 2,61E-03

Iodine-133 €/kBq 3,76E-07 3,76E-07

Krypton-85 €/kBq 2,75E-08 2,75E-08

Noble gases, radioactive

€/kBq 5,53E-08 5,53E-08

Thorium-230 €/kBq 3,86E-03 3,86E-03

Uranium-234 €/kBq 1,03E-03 1,03E-03

Uranium-235 €/kBq 8,40E-04 8,40E-04

Uranium-238 €/kBq 9,01E-04 9,01E-04

Emissions To Water

Carbon-14 €/kBq 9,38E-06 9,38E-06

Tritium €/kBq 1,09E-07 1,09E-07

Iodine-131 €/kBq 8,17E-03 8,17E-03

Krypton-85 €/kBq 2,75E-08 2,75E-08

Uranium-234 €/kBq 2,55E-05 2,55E-05

Uranium-235 €/kBq 9,20E-05 9,20E-05

Uranium-238 €/kBq 2,53E-04 2,53E-04

Table 12: Unit damage costs for land use in €2000/m² (source: NEEDS RS1b, Deliverable 4.2)

LAND USE IMPACT €/M²

TRANSFORMATION, FROM ARABLE, UNSPECIFIED 0,1700

TRANSFORMATION, FROM FOREST, UNSPECIFIED 2,6600


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TRANSFORMATION, FROM PASTURE AND MEADOW,

UNSPECIFIED 0,5500

TRANSFORMATION, FROM PASTURE AND MEADOW, EXTENSIVE 0,7600

TRANSFORMATION, FROM PASTURE AND MEADOW, INTENSIVE 0,3400

TRANSFORMATION, FROM UNKNOWN 1,5200

4.6.2 Costs of Greenhouse Gas Emissions

Estimates of the damage costs of greenhouse gas emissions differ not only because the underlying integrated

assessment models represent key climate and socio-economic relations differently, but also because there are

a number of assumptions to be made to which these estimates are highly sensitive, which cannot easily be

resolved. Examples include the choice of discount rate and the use of equity weighting. Due to this structure

of the problem, one can generate a large range of social cost of carbon estimates even from a single model, by

just changing a few key assumptions for different model runs. NEEDS RS1b provides a set of new model

results from the integrated assessment model FUND 3.0, and reviews implications of different assumptions

with respect to key parameters like discount rate or equity weighting. (based on (Watkiss 2005) {Anthoff,

1997 #150}

The FUND climate impact module includes the following categories: agriculture, forestry, sea level rise,

cardiovascular and respiratory disorders related to cold and heat stress, malaria, dengue fever, schistosomiasis,

diarrhoea, energy consumption, water resources, and unmanaged ecosystems (Tol 2002a, b). There has been

discussion of other damage categories in the literature (see e.g. Watkiss and Anthoff, 2005), but neither have

they been modelled in a quantitative way, nor can one even say whether they will be damages of benefits.

Such damage categories are not included in FUND.

The NEEDS RS1b work provides estimates of marginal damage from an extra ton of greenhouse gas

emissions (CO2, CH4, N2O, SF6) based on FUND model runs. The set of results from this model exercise is

fairly large. The NEEDS report (Anthoff 2007) in a very helpful way categorises the results along various


February 4, 2010


dimensions, explains the parameter choices made for each dimension, and gives recommendations on what

values should be considered for policy decisions in what way.

Key parameters affecting the greenhouse gas damage costs are discounting and equity weighting. Discounting

is related to the adequate representation of a preference order that fits a decision maker‘s intertemporal

substitutability of consumption. Equity weighting takes into account the attitude towards inequality in average

per capita income between different world regions. To give an indication of the potential range of damage

cost values, in this report we use a ‗low‘ and a ‗high‘ value for quantifying technology specific external costs.

The ‗low‘ value is based on damage costs derived without equity weighting, which is close to represent the

view of a regional or national decision maker. The ‗high‘ value includes equity weighting and rather represents

the perspective of a benevolent global decision maker. Although decision makers‘ current revealed

preferences do not too much support this perspective, one might argue that successful global climate

protection negotiations will be impossible without moving into this direction. As the NEEDS external cost

estimates are derived to support European energy policy strategies, the equity weighted results are normalised

to Western European average per capita income.

The damage cost values used for assessing external costs of greenhouse gas emissions are summarised in ―A

more detailed discussion on methodology and assumptions‖ is available from NEEDS Deliverable D5.4

RS1b (Anthoff 2007).

Because of the large uncertainties of climate change damage costs, marginal abatement costs for reaching

given CO2 reduction targets are sometimes considered as a surrogate for uncertain or not quantifiable

damage costs. The marginal abatement costs depend on the underlying CO2 target, and on the measures

taken to achieve the target. Within NEEDS, a set of marginal abatement costs were suggested by Friedrich

(2008) (Table 14. The lower range of abatement costs refers to a European target of reducing CO2 emissions

by 20% until 2020, the upper values refer to the long term target of global CO2 reduction that result in a

stabilisation of atmospheric CO2 concentration at 365 ppm (to limit global average temperature rise to 2°C

compared to pre-industrial level).


February 4, 2010


Table 13: Marginal damage costs of greenhouse gas emissions in €/t (source: NEEDS RS1b, Deliverable 5.4)

(Values for average 1% trimmed, discounted to 2005, 1% pure rate of time preference, without equity weighting and

with equity weighting normalised to Western European average per capita income, 1.35 $ per €)

2005 2025 2045

CO2 without equity weighting 7 7 5

CO2 with equity weighting 98 86 52

CH4 without equity weighting 310 238 193

CH4 with equity weighting 3562 2648 2080

N2O without equity weighting 12014 9997 8581

N2O with equity weighting 129680 102955 81333

Table 14: Marginal abatement costs (€) of CO2 emissions (Friedrich 2008)

2010 2025 2050

Marginal abatement costs low (20% CO2 reduction

in Europe by 2020)

23.5 32 77

Marginal abatement costs – high (2°C target) 23.5 51 190

5 Suggested Externalities Evaluation Toolbox

Impacts and external costs are evaluated within this project from a selected approach, mostly according to the

availability of data. Thus it is partly based on the bottom-up procedure that is inherent to LCA. Emissions are

traced through their assumed pathways from the origins to their end; the scope of their impact is evaluated as


February 4, 2010


well as the possible number of ―victims‖. On the other hand other costs are found from actual measurements

of the specified pollutant and /or actual reported impact. Justifications for estimations are given in each case.

The following actions are used as they fit the specific cases: Unit specific price-tags are chosen, and

updated according to the Euro rates when the total costs have been defined in other currency types. Or if

price tags are not yet defined they are calculated from information obtained through reports on

emissions, measured concentration and reported impacts. (see Figure 20) This mixed approach is shown in

every step by following the case study for Nesjavellir CHP plant.

Figure 20: Calculation procedures in the study (FFrisbæk)

Finally the costs are put up in a Cost/Benefit timeline to give Figure 21 an overview of how the costs

incur throughout the assumed life time of the plant.

The case plant is assumed only to carry a fraction of the total impact and therefore the external costs from

that source are allocated according to its proportional emissions as compared to others in the same area.


February 4, 2010


Top to bottom approach

Compiled costs

Present value for all categories Comparison with mitigation options

Cost estimation

Investment during lifetime of plant Maintenance work and spareparts

Impact description

Category 1 Category 2 Category 3

Figure 21: Calculation procedures when price tags have not been set in other projects


February 4, 2010


REPORT SECTION III

- IMPACTS, EXTERNALITIES AND COSTS

EVALUATIONS AND OUTCOMES

Report section III is setup as follows: (see next page)


February 4, 2010


• 6.1 Air Bourne Cemicals• 6.2 Chemicals in Brine

6 Impacts from CEMICAL ASPECTS

•7.1 Thermodynamics

• Heat Pollution• Energy Balance of Geothermal System

• 7.2 Kinetics• Mass Balance of Geothermal System• Cold Groundwater System Balance• Dislocation of Soil

7 Impacts from PHYSICAL ASPECTS

• 8.1 Changes of Natural Landscapes• 8.2 Enhanced Access to Nature• 8.3 Tourism• 8.4 Socio-economics• 8.5 Archaeological and Historical Remains

8 Impacts from EXISTANCE ASPECTS

9 TOTAL EXTERNAL COSTS of Nesjavellir case study


February 4, 2010


Next sections in the report present quantified external costs, which do not represent the total costs

related with useful energy generation but a method that can be amended further to include all costs to the

monetary investment of the power plant, running and dismantling cost, also called Total Cost or Real Cost.

The following outline of the context model approach to evaluate the external costs shows the

position of the subsequent impact chapters within the context model.

6.1

.1 –

6.1

.9

6.1.10.2

6.1

.10.5

6.1.10.6

6.2

7.1

.1

7.1

.2

7.1

.3

8


February 4, 2010


6 Cost of Impacts from Chemical Aspects

NB! – An important note on the basic emissions data used:

Data on the amount of chemicals emitted during the lifetime of Nesjavellir energy plant are

taken from the LCA study (Kristjansdottir, 2006), which is the only LCA for Nesjavellir

available at present.

When scrutinising the assumed yearly air borne emissions during the operational phase,

some discrepancy emerges between the LCA findings and the yearly emissions measured by

Reykjavik Energy (Orkuveita Reykjavikur, OR), the owner of Nesjavellir energy plant. Thus,

it is recommended that the used emission figures are revised when new LCA figures for

Nesjavellir become available. (Such a study is presently in process as a Ph.D. project within

the Engineering Department at the University of Iceland)

The chemical emissions measured yearly by OR specifically for Nesjavellir are CO2, CH4

and H2S emissions. These measured figures are expected to be a more accurate

representation of the yearly emissions during the operational phase of the plant than the

figures given by the LCA model. This becomes especially clear by the H2S emissions since

the only source of H2S emissions during the operational phase is emissions from the

boreholes, which are the ones measured by OR. For CO2 and CH4 there would be a small

amount of emissions originating from maintenance, which mainly consists of sending

equipment abroad once a year for repairs. Here an additional 2% is assumed due to

maintenance, which is approximately the CO2 emissions of a marine trip from Iceland to

Europe, compared to the measured yearly CO2 emissions of the plant.

The measured OR figure for H2S and the measured figures plus 2% for CO2 and CH4 will

therefore be used in the following external cost calculations.


February 4, 2010


6.1 Air Borne Chemicals

Time frame integration of emission figures:

Data on the amounts of emitted chemicals, which are used for calculating the external costs of the

Nesjavellir case study, are based on a LCA study (Kristjansdottir, 2006) as previously mentioned.

This study presents emissions figures for a Nesjavellir plant size of 90 MWe and 200 MWth,

according to the year 2002, which consequently is the reference year of this study.

External costs of emitted chemicals are based on price tags from the NEEDs project (unless other

vice stated), except for H2S emissions, which mainly has local and regional impacts.

Hence, the external costs of H2S are calculated for impacts within the capital area. These

assessments in contrast, need to be based on measurement figures, since reliable dispersion

modelling of H2S from Nesjavellir does not yet exist. Measurements of H2S in Reykjavik did not

start until January 2006 however.

H2S measurement data shows that the concentration of H2S within the capital area tripled after the

start-up of Hellisheidi in the fall of 2006. Since the following external cost estimations for the

impacts of H2S are performed during 2008-2009, these costs would naturally be at least three times

higher than they would have been in 2002. Additionally, since no prominent concentration tops

show up in wind directions from the Reykjanes peninsula, an approximation of the external costs

due to H2S credited to Nesjavellir in 2002 will be 1/3 of the costs estimated during 2008-

2009.


February 4, 2010


During the life cycle of a geothermal energy plant chemical emissions occur in all life phases; during the

industrial processing of materials for the plant, the transport of building materials from their manufacturing

location to the plant building site, the construction phase, the operational phase and the end-of-life phase

including dismantling and recycling.

Within and between these phases though, the time and space scope varies vastly. Emission can occur one

time/over a short time or during the lifetime of the energy plant (here estimated as 50 years). Similarly the

emissions can spread only locally or have global impacts such as those that add to the Green house impact.

Time frame integration of external cost calculations:

External costs of emitted chemicals are based on price tags from the NEEDs project (unless

other vice stated), except for H2S emissions.

The NEEDs price tags (presented in Error! Reference source not found. and Table 12),

represent 2000 € values. Since the reference year used within this study is 2002, the NEEDs

price tags are updated to 2002 € values, using the Harmonised Index of Consumer Prices

(HICP) for the Euro area 2000-2002 (Annual average rate of change). (Price changes associated

with mandated pollution control measures have been treated as increases in the Consumer Price

Indexes (CPI) since 1999. The changes mean that air quality will be treated consistently with

changes affecting the quality of other public goods.)

The external cost figures for the H2S related costs within this project are worked out within the

time frame of this project, January 2008 to January 2010.

All cost figures worked out for H2S are therefore rectified to 2002 levels by the appropriate

Icelandic cost indexes based on data from Statistics Iceland (Hagstofan) and then transferred to

€ figures by the mean 2002 yearly € value of the Icelandic krona. The original calculated cost

figures are presented in a parenthesis following the € value.


February 4, 2010


Thus emissions may impact the local environment in China or Germany during the production of building

materials, transport emissions can escape either at sea or at the construction or during the operation. The

same type of emission is always compiled in the same category within a Life Cycle Impact Analysis (LCA), i.e.

categories such as acidification potential and Global Green house potential. But in this paper the emitted

amounts of chemicals are used, since this is the cost unit of the price tags within the NEEDS project, which

is used as a basis for many of the price tags.

Information on the assessed emitted amounts of chemicals during the 50 years life time of the Nesjavellir

energy plant, is based on the findings of a LCA study performed within the Technological Institute of Iceland

(ICETEC) 2004-2006. This LCA study was performed using the GaBi4 LCA computer model, and findings

are presented for chemicals analysed by the computer program as the being the most significant ones in

relevance with environmental and other impacts. (Kristjansdottir et al 2006)

Table 15 gives an overview of the emitted chemicals during the plant life cycle and in what life cycle phase

they are emitted (incl. the district heating pipe from Nesjavellir to the capital area). Regarding the

geographical and time dimensions, the rule of thumb is that emissions occurring during the

construction and end-of-life phases mainly occur abroad and once/over a short time, while

emissions occurring during the operation phase are mainly emissions occurring locally/regionally

and during the entire life time of the plant, 50 years.

Table 15: Overview of types and amounts of chemicals emitted into the air during the 50 year life cycle of

Nesjavellir geothermal energy plant (construction and end-of-life emissions mainly occurring abroad and

once/over a short time, while operation emissions mainly occur locally/regionally and during the entire life

time of the plant, 50 years) ACCORDING TO THE LCA STUDY FROM 2006. (Kristjansdottir et al 2006)

AIR BORNE CHEMICAL ASPECTS

Type of Chem.

Construction [tonns]

Operation [tonns]

End-of-life [tonns]

Total Mass

[tonns] CO2

(OR) 132.991 683.196 1.608 817.795

CO2

(LCA) 132.991 1.600.243 1.608 1.734.842


February 4, 2010


CO 433 247 3,79 684

H2S (OR)

1,20 431.800 0,00 431.801

H2S (LCA)

1,20 864.071 0,00 864.072

NOx 216 161 22 399

N2O 3,23 0,63 0,04 3,90

SO2 510 1164 6,41 632

NMVOC 46 42 4,79 93

CH4

(LCA) 300 1.275 1,37 1.576

CH4

(LCA) 300 106 1,37 407

VOC 385 163 6,16 554

NH3 3,04 0,73 0,00 3,77

As 0,00 0,00 0,00 0,00

Hg 0,00 0,00 0,00 0,00

The results of the conducted LCA show that the environmental impacts from Nesjavellir co-generating

energy plant is mainly due to the emission of the gases hydrogen sulphide (H2S) and carbon (CO2) dioxide

from the geothermal steam during the operational phase.

Most of the chemicals listed in the inventory have been allocated a price tag in the list of pollutants within the

NEEDS project. Here, these price tags are used to calculate the external costs from almost all the involved

compounds emitted during the life phases of our Nesjavellir case study, as long as the mean values are

acceptable for the local conditions at the plant site. Thus, the external cost related to each chemical is found

in Table 11: unit Damage costs of emissions set in Euro value of 2000, and

4 This figure is assumed not to include the 10% of H2S presumed to transform into SO2 (see next page)


February 4, 2010


Table 13: Marginal damage costs of greenhouse gas emissions in €/t (source: NEEDS RS1b, Deliverable

5.4) (Values for average 1% trimmed, discounted to 2005, 1% pure rate of time preference, without

equity weighting and with equity weighting normalised to Western European average per capita

income, 1.35 $ per €)in chapter 4, include the Needs price tags for the involved chemicals.

The NEEDS price tags for each chemical compound are varying for different time periods. For calculating

the total external cost per chemical over the 50 year life time of our Nesjavellir case study plant, the initiating

year of the plant life time is set at the year 2002. This is the year the 90 MW capacity was established, which

the basis LCA information apply to, even though the production of thermal energy started in 1990 and

electricity production in 1998. In 2002 Nesjavellir was a co-generating power plant with a capacity of 90 MW

of electricity and about 200 MW of thermal energy in the form of hot water.

NEEDS does not, on the other hand, contain a price tag for H2S, which is generally considered to transform

a 100% into SO2, when assessing impacts of chemical emissions.

This is not the case for the Icelandic context, though. The conversion proportion of H2S into SO2 is greatly

dependent on the local atmospheric and weather conditions, temperature, humidity and interference of other

compounds, and this conversion proportion is highly debated for Icelandic conditions. According to

Ármannsson et al. (2001), research scientist at ISOR(Icelandic GeoSurvey), who participated in long-term

measurements of the concentration of H2S and SO2 at all the high temperature geothermal utilization sites in

Iceland 1994-1996, the conversion factor of H2S to SO2 is maximum 10% in Iceland. Hence, within this

project we assume a conversion proportion of 10% of the emitted H2S during the operational phase,

converting to SO2. (Kristjansdottir et al 2006) It is clear by the scale of estimated H2S and SO2 emissions

during the operational phase, that this 10% conversion of H2S into SO2 is not included into the given SO2

LCA figure for the operational phase. This is therefore calculated separately.

For H2S, therefore, measured concentration on a local and regional scale, taking into account emissions from

other geothermal plants, as well as the natural background emissions of H2S from Nesjavellir geothermal

field, is used to follow up on the eventual damage traceable to the compound, to establish viable externality

price tags. In addition, 10% of the emitted amount of H2S, will be assumed to transform into SO2, according

to Ármannsson et al. (2001), accordingly bearing the SO2 price tag.


February 4, 2010


Consequently, the main bulk of this chapter will deal with estimating the impacts from H2S and defining

relevant price tags for calculating the associated external costs. But we start with Impacts from gas types that

have global warming potential or the green house gasses (GHG).


February 4, 2010


Price tag time intervals and equity weighting for global warming (GW) gasses:

Time intervals:

The global warming chemicals CO2, CH4 and N2O have NEEDs price tags given for three time

intervals and are either presented with or without equity weighting.

Regarding the time intervals, during the 50 year life time of the plant, the 2005 price tag is used for

the yearly emissions for the years 2002-2024 (23 years), the 2025 price tag for the years 2025-2044

(20 years) and the 2045 price tag for the years 2045-2051 (7 years).

Equity weighting:

Additionally, the NEEDs global warming gasses price tags are presented with and without equity

weighting. In calculations within this project, the equity weighted price tags are used, based on the

following arguments presented by Anthoff et al, 2009.

Economic theory assumes a declining marginal utility of consumption, i.e. the same absolute

consumption change results in a smaller welfare change for a rich person than a poor person.

Equity weighting of global warming marginal costs is bringing this effect into the global warming

damage assessment. Thus, equity weighting takes different income levels in different world regions

and at different times into account when calculating marginal damage figures for greenhouse gas

emissions.

―Beckerman and Hepburn (2007) argue that ignoring the equity implications of climate change is inappropriate

because: the „project‟ of large-scale emissions mitigation is non-marginal; compensation from the distant future to the

present is difficult, if not impossible; and the classic „swings and roundabouts‟ argument cannot apply

intergenerationally because losers in the present generation cannot be winners in any subsequent generation.

Additionally, equity-weights are used in the academic literature (Azar and Sterner, 1996, Fankhauser et al.,

1997), as well as by the German government (Umweltbundesamt, 2007), the UK government (Clarkson and Deyes,

2002), and the European Commission (Commission of the European Communities, 2005). So, the question is now

what equity-weights to use, rather than whether to use them. And not using equity-weights simply amounts to

employing an equity weight of unity.‖

(Anthoff et al, 2009)


February 4, 2010


6.1.1 CO2 (CARBON DIOXIDE)

The external costs due to CO2 are mainly connected with its impacts as a greenhouse gas, thus a global

impact.

Naturally occurring greenhouse gases have a mean warming impact of about 33 °C. The major greenhouse

gases are water vapor, which causes about 36–70% of the greenhouse impact; carbon dioxide (CO2), which

causes 9–26%; methane (CH4), which causes 4–9%; and ozone (O3), which causes 3–7%.

Table 16 gives an overview of the estimated amount of CO2 emission over the entire lifetime (50y) of the

Nesjavellir plant, the CO2 Needs price tags and the resulting external costs related to CO2.


associated with CO2

CO2 (CARBON DIOXIDE)

Emissions

during 50y lifetime

according to LCA

[tons]

Price tag according to Needs (see Table 12)

[€ (2002)5/t]

Related

lifetime external

costs

[€ (2002)]

2005 2025 2045

With equity weighting With equity weighting With equity weighting

817.795 (OR) 101 89 54 With weighting 73.290.788

1.734.842 (LCA)

101 89 54 With weighting 155.476.540

5 NB! The NEEDs € price tags from the year 2000 are updated to 2002 prices using the Harmonised Index of Consumer Prices for the Euro area 2000-2002. This is done for all NEEDs price tags presented and used within this Section III of the report.


February 4, 2010


6.1.2 CH4 (METHANE)

The external costs due to CH4 are mainly connected with its impacts as a greenhouse gas, thus a global impact.

Considered over a 100 year period, it has 21 times more impact per unit weight than carbon dioxide, i.e. 1kg

of methane has the same Global Warming impact as 21kg of carbon dioxide. Methane is not poisonous if it is

inhaled and there are no air quality guidelines for methane. Table 17 gives an overview of the estimated

amount of CH4 emission over the entire lifetime (50y) of the Nesjavellir plant, the CH4 Needs price tags and

the resulting external costs related to CH4.


associated with CH4

CH4 (METHANE)

Emissions during 50y

lifetime according

to LCA [tons]


[€ (2002)/t]

Related lifetime

external costs

[€ (2002)] 2005 2025 2045


1.576 (OR) 3645 2710 2129 With weighting 4.820.606

407 (LCA) 3645 2710 2129 With weighting 1.244.915

6.1.3 N2O (NITROUS OXIDE)

The external costs due to N2O are mainly connected with its impacts as a greenhouse gas, thus a global

impact.

Considered over a 100 year period, it has 298 times more impact per unit weight than carbon dioxide.

Table 18 gives an overview of the estimated amount of N2O emission over the entire lifetime (50y) of the

Nesjavellir plant, the N2O Needs price tags and the resulting external costs related to N2O.


February 4, 2010



associated with N2O

N2O (NITROUS OXIDE)


lifetime according

to LCA [tons]


[€ (2002)/t]

Related lifetime

external costs

[€ (2002)]

2005 2025 2045


3,90 129.680 102.955 81.333 With weighting 447.734

6.2 Other air borne chemicals

6.2.1 SO2 (SULPHUR DIOXIDE)

The external costs due to SO2 are mainly connected with its potential for causing acid rain, and effect human

health as well as other parts of the bio systems (fauna and flora). Within the Needs price tag for SO2 these

impacts are included within the categories of health, biodiversity, crop yield as well as impacts in the form of

material damage.

Price tag time intervals for air borne polluting gasses, other than GW chemicals:

The NEEDs price tags for other air borne pollutants than the global warming gasses are divided into two

time intervals. For the 50 year life time of the plant, the 2010 price tag is used for the yearly emissions for

the years 2002-2019 (18 years) and the 2020 price tag for the years 2020-2051 (32 years).


February 4, 2010


Acid rain is rain or any other form of precipitation that is unusually acidic. It has harmful impacts on plants,

aquatic animals, and infrastructure and according to the World Health Organisation, man-made emissions of

SO2 is one of the greatest environmental concerns in Europe is (WHO, 2000). The impacts of SO2 on human

health occur through direct inhalation of the air polluting compound.

SO2 is not directly emitted from geothermal plants themselves in general. Direct SO2 emissions though, can

arise from various activities within the construction and end-of-life phases, and also parts of the direct H2S

emissions contained in the geothermal gas emitted during the operational phase of a geothermal plant will be

transformed into SO2.

The conversion proportion of H2S into SO2 is greatly dependent on the local atmospheric and weather

conditions, temperature, humidity and interference of other compounds, and this conversion proportion is

highly debated for the Icelandic context. According to Ármannsson et al. (2001), research scientist at ISOR

(Icelandic GeoSurvey), who participated in long-term measurements of the concentration of H2S and SO2 at

all the high temperature geothermal utilization sites in Iceland 1994-1996, the conversion factor of H2S to

SO2 is maximum 10% in Iceland. Hence, within this project we assume a conversion proportion of 10% of

the emitted H2S during the operational phase, converting to SO2. (Kristjansdottir et al 2006). External cost

assessments for H2S, based on measured concentrations of H2S within the capital area, are not decreased by 10% due to this

transformation, since the H2S measurements are actual measured concentrations, regardless of the 10% transformation of H2S

into SO2.

Table 19 gives an overview of the estimated amount of SO2 emission over the entire lifetime (50y) of the

Nesjavellir plant, the SO2 Needs price tags and the resulting external costs related to SO2.


associated with SO2

SO2 (SULPHUR DIOXIDE)

Emissions

during 50y lifetime

according to LCA


[€ (2002)/t]

Related

lifetime external

costs

[€ (2002)] 2010 (SUM price) 2020 (SUM price)


February 4, 2010


[tons] 632

6.908 7.243

4.501.357

The 10% transforming to SO2 from H2S

43.180 307.545.232

Total external costs due to SO2 312.046.589

6.2.2 NOx (MONO-NITROGEN OXIDES)

The external costs due to NOx are connected with its potential for forming smog particles when reacting

with other chemicals, causing acid rain, its involvement in the formation of ozone pollution and various

forms of toxics. All these functions can cause severe impacts on human health as well as damage to other

parts of the bio systems (fauna and flora). There are also indications that NOx can have direct negative

impacts on plants.

Within the Needs price tag for NOx these impacts are included within the categories of health, biodiversity,

crop yield as well as impacts in the form of material damage.

Table 20 gives an overview of the estimated amount of NOx emission over the entire lifetime (50y) of the

Nesjavellir plant, the NOx Needs price tags and the resulting external costs related to NOx.


associated with NOx

NOx (MONO-NITROGEN OXIDES)


lifetime according to

LCA


[€ (2002)/t]

Related external

costs



February 4, 2010


[tons] 399 7.226 8.413 3.186.286

6.2.3 NMVOC (Non-Methane Volatile Organic Compounds)

NMVOC is a generic term for a large variety of chemically different compounds, e.g. benzene, ethanol,

formaldehyde, cyclohexane, 1,1,1-trichloroethane or acetone. Here NMVOC is used as a sum parameter for

emissions, where all NMVOC emissions are added up per weight into one figure as a parameter for pollution,

e.g. summer smog or indoor air pollution.

Within the Needs price tag for NMVOC the related impacts are included within the categories of health,

biodiversity, crop yield.

Table 21 gives an overview of the estimated amount of NMVOC emission over the entire lifetime (50y) of

the Nesjavellir plant, the NMVOC Needs price tags and the resulting external costs related to NMVOC.


associated with NMVOC

NMVOC (Non-Methane Volatile Organic Compounds)

Emissions

during 50y lifetime

according to LCA


[€ (2002)/t]

Related

external costs


93 1060 648 74.058

6.2.4 VOC (Volatile Organic Compounds)

There are millions of different compounds which may be classified as VOCs. The compounds the nose

detects as smells are generally VOCs. Modern industrial chemicals such as fuels, solvents, coatings, feedstock,

and refrigerants are usually types of VOCs.


February 4, 2010


VOCs may have health consequences, but this is depending on the specific chemicals that are part of the

umbrella definition "VOC". Human exposure to VOCs can be through contact with the solid, liquid, or

gaseous forms, inhalation of the gaseous form, or ingestion of the liquid form or solutions containing the

VOC.

Table 22 gives an overview of the estimated amount of VOC emission over the entire lifetime (50y) of the

Nesjavellir plant, a price tag according to the study “Estimates of Marginal External Costs of Air Pollution in Europe”

(Holland et al, 2002), based on EU-15 average, and the resulting external costs related to VOC.


associated with VOC

VOC (Volatile Organic Compounds)

Emissions

during 50y lifetime

according to LCA

[tons]

Price tag according to (Holland et al, 2002)

[€ (2002)/t]

Related

external costs

[€ (2002)]

554 2,100 1.163.400

6.2.5 CO (CARBON MONOXIDE)

Carbon monoxide (CO) is colourless, odourless and tasteless, but extremely toxic to humans and animals and

CO poisoning is the most common type of fatal air poisoning in many countries. Additionally, carbon

monoxide may have severe adverse impacts on the fetus of a pregnant woman. (Omaye, 2002)

Since no cost estimate price tag of CO was found for Europe, an USA average damage cost from 1989

isused, according to the study “Methods of Valuing Air Pollution and Estimated Monetary Values of Air Pollutants in

Various U.S. Regions” (Wang et al, 1994). The price tag was upgraded to a 2002 price using the US CPI 1989-

2002 (Federal Reserve Bank of Minneapolis, 2010) and converted to Euros by the average annual exchange

rate 2002, 1 $ = 0,9454 € (Federal Reserve Statistical Release, 2010).


February 4, 2010


The used price tag is then 3.722 € (2002)/t. (Orig. cost 2.714 $ (1989)/t)

Table 23 gives an overview of the estimated amount of CO emission over the entire lifetime (50y) of the

Nesjavellir plant, the used price tag and the resulting external costs related to CO.


associated with CO

CO (CARBON MONOXIDE)

Emissions

during 50y lifetime

according to LCA

[tons]

Price tag according to (Wang et al, 1994)

[€ (2002)/t]

Related

external costs

[€ (2002)]

684 3.722 2.545.938

6.2.6 NH3 (AMMONIA)

When inhaled ammonia is irritating and corrosive. Excessive exposure to ammonia affects eyes, lung, nose,

skin and throat. Ammonia is very toxic to aquatic organisms and vegetation may also be harmed by high local

concentration of ammonia from animal excreta. Although ammonia is an alkaline gas, it contributes to

acidification of soil through nitrification.

Within the Needs price tag for NH3 the related impacts are included within the categories of health,

biodiversity, crop yield.

Table 24 gives an overview of the estimated amount of NH3 emission over the entire lifetime (50y) of the

Nesjavellir plant, the NH3 Needs price tags and the resulting external costs related to NH3.


associated with NH3


February 4, 2010


NH3 (AMMONIA)



LCA [tons]


[€ (2002)/t]

Related external

costs


3,77 12.711 9.097 39.201

6.3 Introduction to Impacts from H2S (HYDROGEN SULPHIDE)

The airborne chemicals discussed in section 6.2 are all listed and allocated a price tag in Table 12. The

calculations for those was therefore rather straight forward and transparent. Hydrogen sulphite is not

included in the table and therefore needs special approach which will be described in the following section.

Thousands of tons of H2S are released into the atmosphere in Iceland every year from natural geothermal

fields and geothermal energy plants. H2S released into the atmosphere can often be smelled (odour similar to

rotten eggs).

Even though the odour is not dangerous to humans it can cause discomfort and decrease certain standards of

living. In some countries the odour is not tolerated and for example in Japan an odour monitoring system is

obligatory in urban areas. In fact, most countries harnessing geothermal energy do not allow any releases of

H2S into the atmosphere due to the risks of acid rain and other environmental degradation (Bödvarsdottir,

2006).


February 4, 2010


Price tags for H2S are set by using the following assumptions:

1. The regional impacts are estimated from measurements on site rather than from outcomes of

the LCA for Nesjavellir.

2. Cost of corrosion on site is allocated all to emissions from the plant, but the showing corrosion

could be caused by other factors but are dealt with as if they are inherent with the effects of

hydrogen sulphide.

3. The impacts are estimated from information with those who have studied or experienced the

impacts rather than the cause of the effects and sources.

4. H2S measurement data shows that the concentration of H2S within the capital area tripled after

the start-up of Hellisheidi in the fall of 2006. Since the following external cost estimations for

the impacts of H2S are performed during 2008-2009, these costs would naturally be at least

three times higher than they would have been in 2002. Additionally, since no prominent

concentration tops show up in wind directions from the Reykjanes peninsula, an approximation

of the external costs due to H2S credited to Nesjavellir in 2002 will be 1/3 of the costs

estimated during 2008-2009.

5. In the cost-benefit setup a comparison is made with ONE mitigation technology. This type of

scrubber is selected whereas it processes the sulphur compounds into sulphuric acid that can be

used in industrial processes and sold off. The intention is to suggest a solution on site that is a)

available technology b) a solution rather than shift from one type of emission (H2S) to another

type: solid sulphur.


February 4, 2010


6.3.1 H2S Measurements in Reykjavik

There are four geothermal energy plants in the vicinity of the capital area, Nesjavellir and Hellisheiði to the

East and Reykjanes and Svartsengi to the Southwest.

In January 2006 the city of Reykjavik adopted new measuring equipment to follow concentrations of H2S and

SO2 at the air quality monitoring station at Grensásvegur in Reykjavik (approx. 23 km from Nesjavellir). The

main purpose of this equipment is to monitor possible airborne compounds and differentiate the sulphur

compounds from geothermal origin (H2S), from those emerging from traffic (SO2) within the city

(Böðvarsdóttir, 2006).

Figure 22 shows these H2S measurements from January 2006 (when H2S measurements began within the

capital area) till August 2008. In the spring of 2006 the new Reykjanes geothermal energy plant was started up

and the new Hellisheiði plant in the autumn of the same year.

Figure 22: Measurements of H2S in the atmosphere in the capital area of Iceland from January 2006 till August

2008. (Umhverfisstofnun 2006)

H2S


February 4, 2010


The graph shows clearly the rise in H2S emissions correlating to the start up of the Hellisheiði plant and

comparing the measured amounts of H2S in the atmosphere in Reykjavik before and after the start up, the

average hourly measure increased by 3 times.

Figure 23 shows the monthly mean value of H2S as well as maximum 24hours and hour value in 2006 and

the WHO guideline for H2S.

Figure 23: Monthly mean value of H2S as well as maximum 24hours and hour value in 2006 and the WHO

guideline for H2S, based on Böðvarsdóttir, (2006).

In October 2009 the Icelandic ministry of Environment published a status report on resources and the

environment. It is emphasised that even though concentrations of H2S have been measured to increase in the

capital city they are still well below recommended maximum exposure.


February 4, 2010


Figure 24: Concentration isoclines

indicating the dispersion of H2S

from the geothermal system shown

on map (Umhversiráðuneytið 2009)

Comparing the measured H2S concentration in Reykjavik before and after the start-up of the Hellisheidi

geothermal plant in the fall of 2006 (based on wind directions), the following graphs emerge, see Figure 26.

The location of Nesjavellir relative to the

H2S measuring station in Reykjavik is

approx. 95° and Hellisheidi approx. 110°.

The Svartsengi and Reykjanes plants are

located at approx. 230° compared to the

measuring station.

Figure 25: Location angles from the air

quality measuring station in Reykjavik

(Grensásvegur) to the different energy plants

in the vicinity of the capital area (east

(Nesjavellir and Hellisheiði) and southwest

Reykjanes and Svartsengi).


February 4, 2010


Figure 26: Measured H2S concentration in Reykjavik prior to (left graph) and after (right graph) the start-up of

Hellisheidi geothermal plant in the fall of 2006

A clear correlation appears between the amounts of H2S emitted and the tops that emerge when the wind

directions are from Nesjavellir and Hellisheiði. No such tops appear in wind directions from the Reykjanes

peninsula, where both Reykjanes and Svartsengi are located.

The topography could also play an effective role in the high tops appearing after the start-up of Hellisheidi

power plant. The plant lies higher than the capital area with no topographical hindrances on the way between

them.

H2S measurement data shows that the concentration of H2S within the capital area tripled after the start-up of

Hellisheidi. Since the following external cost estimations for the impacts of H2S are performed during 2008-

2009, these costs would naturally be at least three times as high as they would have been in 2002.

Additionally, since no prominent concentration tops show up in wind directions from the Reykjanes

peninsula, an approximation of the external costs due to H2S credited to Nesjavellir in 2002 will be 1/3 of the

costs estimated during 2008-2009.

Nesj

avellir

Svart

sen

gi

/

Reyk

jan

es

Nesj

avellir

Hellis

heið

i

Svart

sen

gi

/

Reyk

jan

es


February 4, 2010


The following sections will estimate the impacts of H2S on the different victims categories as defined within

the assessment context model setup. (See Figure 3)

6.4 Assessment of H2S Related Impacts according to Defined Victims

Categories

6.4.1 Human Well Being

This cost category is due to the symptoms that humans suffer from exposure to Hydrogen Sulphide. No

maximum concentration allowances have been set for H2S within the EU but the World Health Organisation

(WHO) recommends highest limits of concentration to be 10 µg/m3 over a 24 hour period in confined

spaces. The emission maximum concentration (measure every half hour) in the city reached 60 µg/m3 in Jan

– August 2006, but after the addition, the concentration maximum can reach 190 µg/m3 when the wind

blows from the east and often measures over 100 µg/m3. A clear correlation appears between the amounts of

H2S emitted and the tops that emerge when the wind directions are from the east where Nesjavellir and

Hellisheiði energy plants are situated. The air quality monitoring station at Grensásvegur has the distance of

Proportion of estimated external costs due to H2S, accredited to Nesjavellir in 2002

H2S measurement data shows that the concentration of H2S within the capital area tripled after the

start-up of Hellisheidi. Since the following external cost estimations for the impacts of H2S are

performed during 2008-2009, these costs would naturally be at least three times as high as they would

have been in 2002. Additionally, since no prominent concentration tops show up in wind directions

from the Reykjanes peninsula, an approximation of the external costs due to H2S credited to

Nesjavellir in 2002 will be 1/3 of the costs estimated during 2008-2009.


February 4, 2010


23, 5 km from the latter one but the outskirts of the city of Reykjavik is 17km from that plant (Þormóðsson

2009).

6.4.1.1 ESTIMATION OF HEALTH IMPACTS

The concentration values are far below the local health safety and environment agency‟s limits

(Vinnueftirlitið) (an average of 14.000 μg/m3 over an 8 hour period and a maximum limit of 20.000 μg/m3)

and the health guidelines limits set by the World Health Organisation, which is 150 μg/m3 for 24 hours

period, refer to Figure 23. The highest 24h mean in Reykjavik measured 46,3 μg/m3 in August 2006 and the

highest hour/month mean was also recorded at this time. It is even believed that serious health impacts will

not appear until the level of H2S is around 100 times more than the guidelines from WHO (Böðvarsdóttir,

2006).

In 2002 researchers published an article on the issue of long term exposure to H2S from Rotorua in New

Zealand. The authors state: Results showed exposure-response trends, particularly for nervous system

diseases, but also for respiratory and cardiovascular diseases. Data on confounder were limited to age,

ethnicity, and gender. The H2S exposure assessment had limitations and therefore was continued and further

results are expected later in 2009. Poisson regression was used to confirm results and careful analysis of other

causes were examined but still the results suggest that there are chronic health impacts from H2S exposure for

genders, all ethnic background and age groups (Bates, Garrett et al. 2002) but do not give the exposure

concentration in figures. The disease groups were selected on the grounds of listed potential effects of H2S on

the human body. These are displayed in Table 25 (Pineda 2007).


February 4, 2010


Table 25: Health impacts of H2S according to concentrating (WHO). (Pineda 2007)

To establish information about health impacts in Reykjavik that might be traced to H2S emissions people in

the following units were interviewed. In all instances numerical information and actual registration was set as

the priority source of information.

An interview was conducted with the responsible spokesman of the pharmacy in Hveragerði

A telephone interview was made with the physicist in charge at the medical centre in Hveragerði to

ask for eventual frequency of purchases of eye irritation reliefs or medication to treat respiratory

organs

The environmental agency was contacted for interpretation and corrected measurements for the H2S

concentration.

Contact was made to the public health unit at the University of Iceland,

Interview was conducted and written questions sent to head of department of the import company

Lyfjaver to obtain prices and types of medication that are used to treat respiratory diseases.

The relevant names appear in the list for communication.


February 4, 2010


6.4.1.2 DATA FROM HEALTH CARE

While the evidence of the impacts may be found in registers from other sources, no accessible data was found

on eventual impacts in Iceland. Interviews were made with staff in the health care living or working in the

Hveragerði area, the township closest to the energy plants. Their answers coincided perfectly: there is no

indication of more purchase of eye irritation relievers and inhabitants do not complain about

symptoms during days when emissions can be smelled.

A research team for public health at the University of Iceland had been using reports from the health care

and sales figures for medication to establish numerical epidemic information linked to the frequency and

concentration of polluting emissions. Ongoing research by Hanne Krogh Carlsen revealed that databases on

the purchase of respiratory medication correlate with measured peaks in emission concentration in Reykjavik.

The study will be published early year 2010 from the Institute of public health at the University of Iceland.

Some descriptive statistics are shown in Table 26.

Table 26: Measured concentration of selected air pollutants in Reykjavik (Grensás)


February 4, 2010


The results show that there is a correlation between the purchase incidents and higher concentration levels of

H2S in the city of Reykjavik allowing for 2-3 days delay after each top (harvesting effects, - if patients run out

of medication or want to be prepared for the next episode the purchase occur right after an incident). Many

precautionary steps were taken in the correlation procedures to eliminate systematic faults such as other

airborne pollutants with similar impacts, season, etc and the advisors are trained for research in public health

and pulmonary diseases (Unnur Valdemarsdóttir and Þórarinn Gíslason). Without going into too much detail

the study it is taken here into account as describing one of potential externalities of H2S. The outcome is that

3% more purchase of respiratory medication is confirmed to occur in the predicted period.

The mediation in question is used to treat asthma syndromes and belongs to the most common respiratory

facilitating compounds. There are many brands on the market that belong to the relevant R03A and R03B

classes that act to facilitate breathing. Cost could be calculated on the basis of changes in ddd (descriptive

daily dose) descriptions and number of wind frequencies. Figure 27 shows the relative frequency of people

buying pulmonary medication correlated as days after maximum concentration of H2S in the city of Reykjavik

based on data for 2,5 years.

Figure 27: Relative frequency of people buying pulmonary medication correlated as days after maximum

concentration of H2S in the city of Reykjavik based on data for 2,5 years. (Carlsen 2009)


February 4, 2010


Yet, to simplify matters we state that 3% of the total cost of these medications is induced by the impacts of

H2S in the city and that 50% of this type of patients live in the region. In 2008 the total cost for this type of

medication was 6.598.402 € (2008 € rate) (orig. 841 million Ikr 2008 costs). That figure had risen by 1.639.793

€ (2008 € rate) (orig. 209 million Ikr) in a year mainly because the medication is mostly imported and the rate

of the Icelandic krona had fallen considerably between these periods. Therefore 3% of the comparable cost in

2007 and 50% of that is set to be caused by impacts of the air pollution within the capital area. The three

percent as indicated by the public health raised frequency of purchase and the 50 % because almost 50% of

the population lives in the capital city area. This indicates 73.595 € (2008 € rate) (orig. 9.38 million ISKR 2008

cost calculations) annually as external costs from the total measured amount of H2S within the capital area.

Thus, Table 27 gives an overview of the H2S related price tags and external cost within the Human Well

Being victims category (taking into account the Icelandic Consumer Price Index (CPI) 2002-2008 and the

2002 € rate).

Table 27: Overview of assessed external costs related to H2S within the Human Well Being victims category, in

the capital area, and the related impact types, price tag type, total external costs and the Nesjavellir proportion

of the external costs.

H2S related External Costs within the HUMAN WELL BEING category

Impact type External cost price

tag type/field

Total assessed

external costs

Nesjavellir

proportion of external costs

Annually [€ (2002)]

50 y lifetime [€ (2002)]

Annually [€ (2002)]

50 y

lifetime [€ (2002)]

Health impacts – respiratory deceases

Respiratory facilitating medication within the R03A and R03B classes

76.780 3.839.002 25.338 1.266.871

6.4.2 Condition of Fauna, Flora and Microorganisms

The land quality method suggested within the NEEDS project uses impacts on flora and fauna as indicators

for changes in the ecosystem due to changed land uses. These are explained in section Impacts on fauna and


February 4, 2010


flora is used as an indicator for the impacts on the ecosystem. The impacts microorganisms is not included in

this study.

6.4.3 Land Quality and land use changes

During construction phase of power plants certain impacts on the surrounding area are bound to occur.

Icelandic legislation set in 2000() regarding environmental impact assessment (EIA) requires developers to

undertake an EIA for geothermal power plants of the magnitude of 50MW and larger. There is a substantial

lack of information in the Icelandic literature both with regards to impacts due to emission as well as direct

land use transformations caused by construction and operation of geothermal power plants. The information

available is mostly associated with EIA reports. Nesjavallavirkjun was constructed before the EIA laws were

set in Iceland, however the power plant had to undergo an EIA in 2000 for the enlargement of the plant from

76MW to 90MW (VGK, 2000).

A few species of vascular plants grow in areas around hot springs, but specific species of moss are the

characteristic flora in the vicinity of hot springs and geothermal areas.

Figure 28: example of land use around geothermal plants, picture from Hellisheiði (Orkuveita Rvik 2009)


February 4, 2010


Following is a short description to possible impacts the flora and fauna in Nesjavellir area and research

regarding geothermal emission impacts is also introduced.

6.4.3.1 FAUNA

The hot springs in the Nesjavellir area are 43-86°C and have a pH of 3-7,4. These hot springs have many

various types of micro-organisms, such as germs and bacteria. Most of these organisms are common in

Iceland, but on the other hand impacts of geothermal exploitation on these organisms are not known and the

effects might be more than estimated. This is unfortunately not in accordance with the objective of the

‗Convention on Biodiversity‘ that Iceland has already agreed to honour. (Þoroddson 2010)

Some reports exist; mapping and accounting for other organisms such as birds, insects, and mammals but

direct impacts on these species are to this day not known.

6.4.3.2 FLORA

According to Þóroddsson (2009) the Nesjavellir development area has 90% vegetation, with dominance of

moss and grass. During the construction phase organisms are mainly disturbed by manmade structures

(buildings, pipelines etc) as well as extraction of soil for construction of roads. During research drilling and

later operation of the power plant vegetation close to blowing wells is directly affected and can be considered

to be under stress. Where geothermal energy is extracted there is a risk of increased geothermal activity on

the surface of the area, this can too result in a negative impact on vegetation.

It seems that most research regarding impacts of geothermal power plants and their emission on organisms

(excluding humans) focus mostly on vegetation. The two most potentially phytotoxic substances released by

geothermal power plants are boron and hydrogen sulphide (H2S). Boron seems to exert its toxic action

primarily on the soil, but scientists‘ do not seem to agree about the damaging level of boron in the tissues of

plants (ranging from 30-100ppm). On the other hand, reports have shown boron to cause macroscopic

damage in trees growing nearby geothermal power plants. The damage is primarily reflected in leaf yellowing

and necrosis on the edge of leafs. The damage seems to be local and only affecting trees growing within

twelve meters distance of the power plants.


February 4, 2010


Hydrogen sulphide (H2S) is known to give rise to a phenomenon called root asphyxia, but in the atmosphere

no damage has been reported at concentration below 0.1 ppm (cited in Bussotti, Cenni, Cozzi, & Ferretti,

1997). Results have shown that concentration of H2S in the atmosphere is dependent on rain volume because

it dissolves very easily in water (both rain and snow). As stated previously in this report we assume that 10%

of H2S from Nesjavellir power plant is converted to sulphur dioxide (SO2) during the operation phase. There

have been certain predictions that the sulphide dioxide is oxidized in water and sulphur (S), and when it falls

to the ground it might even have beneficial fertilizer impact on flora in the area. Vegetation needs 5-15 kg of

sulfur pr. hectare pr. year. Some amount is carried to the ground with rain, as sulphuric acid (acid rain), but in

Iceland there is a scarcity regarding sulphur in the soil, especially in dry areas (VGK, 2000). In Iceland there

only exists yearly and winter guidelines for flora protection, and that is 20 μg/m3 (Böðvarsdóttir, 2006).

In the fall of 2008 news spread that the vegetation covering lava field around a geothermal power plant

(Hellisheiðarvirkjun) in Iceland was highly damaged. Concerns arose that the impact of geothermal power

plants had been underestimated and was H2S believed to be the culprit.

Reykjavík Energy therefore employed researches to investigate these damages. Their report concluded that

moss damage was apparent in a radius of about 700m away from Hellisheiði power plant, especially in the

prevailing wind direction. Certain indications implied that H2S is is at least partly to blame for the vegetation

damages (Bragason, o.fl., 2009).

Figure 29: Dead moss in the neighbourhood of Reykjanes energy plant about 300 m distance. (photo: Sigurður H.

Magnússon 17. September 2008).

http://www.ni.is/media/grasafraedi/mosar/DSC_3709.jpg

http://www.ni.is/media/grasafraedi/mosar/DSC_3710.jpg


February 4, 2010


Results from the report (Figure 30) show significant difference between the concentration of sulphur in moss

around geothermal power plants and the reference area (Bláfjöll), which indicates that sulphur is accumulated

in the area around the power plants. The concentration of sulphur in vegetation around Nesjavellir is much

higher than around other geothermal power plants, it is thought to be because of lack of measures to

diminish pollution from spreading and/or because Nesjavellir has been running for 20 years, from 1990. In

addition the mean concentration of mercury (Hg) was significantly higher in Nesjavellir than in other research

sites (Bragason, o.fl., 2009).

Moss has been used as an indicator for a long time, for example have heavy metals been monitored here in

Iceland (Magnússon, 2002) since moss and other non-vascular plants obtain needed nutrition from the air

and are therefore one of the first organisms to be affected by pollution (Egilsson, 2010).

Figure 30: Results for moss chemical measurements (mg/kg, dryweight) at different locations (Bragason,

o.fl., 2009).


February 4, 2010


6.4.4 Assessment of biodiversity losses

Following chapters on Fauna and Flora the following section features the method ‗Assessment of biodiversity

losses‘ developed in Switzerland 2006.

The method will be applied in an attempt to valuate vegetation changes, in Icelandic conditions, that occur

when one land use type is transformed to another. This method is based on data for vascular plants, and has

two main focus points:

1. Land use changes

2. Changes due to air borne emission

Figure 31 is intended to simplify and give an overview of the method ‗Assessment of biodiversity losses‘

developed by the NEEDS project.

Figure 31: Simplified valuation method „Assessment of biodiversity losses‟ from the NEEDS project, with

„healthy‟ vegetation on the left (representing habitat type 1) and „damaged‟ vegetation on the right (representing

habitat type 2) {Kristinsdottir, 2010 #295}


February 4, 2010


6.4.4.1 QUANTIFICATION OF BIODIVERSITY LOSSES (VEGETATION CHANGES) DUE TO

LAND USE CHANGES

In this chapter the method introduced earlier will be used in order to attempt quantification of vegetation

changes. As stated before there is a significant lack of information in the Icelandic literature and therefore will

certain preconditions be made:

- The effects of land use changes and land transformation are based on available empirical data and

hypothetical information.

- The area in question is surrounded by several CORINE categories: CLC6; 333, 322, 324, 231 (Figure 32 ,

Table 28). Due to lack of information regarding number of species per m2 both before and after

construction of the power plant numbers from NEEDS report will be used.

- The assumptions will be made that the area within the CLC 121 zone (Figure 32) was previously (before

construction of the power plant) category CLC 322.

- As mentioned earlier, Nesjavellir is categorized CLC 121, but since the method does not contain information about

species number in CLC 121 (but only for ‗Industrial area part, with vegetation‘ CLC 1212, which actually results in

higher number of species than for 323 and is therefore not suitable) it was assumed that 50% of the CLC 121 area is

‗built up land‘ (CLC 10)7.

Potentially disappeared fraction (PDF) is expressed as the relative difference between the number of species

(S) in reference conditions and the conditions created by the land use change. PDF calculated by using {Ott,

2006 #149}. The assumed species number of a specific land use type is standardized for 1 m2. This absolute

species number is then transformed into a relative number using the regional species richness of the Swiss

Lowlands as a reference.

6 CLC - CORINE Land Cover

7 more detailed information regarding exactly how many square meters are sealed by manmade structures (buildings, roads, pipelines etc) is not available.


February 4, 2010


Example for PDF calculations for Heath land (CFC 322) using Swiss Lowland for reference.

𝑃𝐷𝐹 = 1 − 𝑆 𝑢𝑠𝑒

𝑆(𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒)

= 1 − 18

40

= 0,55

This outcome can be interpret as the relative decline in biodiversity because of a land use change from Swiss

Lowland to Heath Land, i.e. through the conversion 55% of species potentially disappear.

Figure 32: Corine categories for the area around Nesjavallavirkjun (based on Corine application (Landmælingar

Íslands, 2010)).


February 4, 2010


The surroundings of Icelandic geothermal power plants are more than often barren lava with some moss

coverage, heather, low bushes, grass and some flowering plants. There is no doubt that the diversity of

vegetation in Iceland is significantly different from mainland Europe, and it is therefore debatable whether it

is appropriate to use numbers of species per square meter adjusted to mainland Europe for the special

conditions that occur around geothermal areas in Iceland. For the sake of displaying this method the numbers

from the NEEDS report will be used, since there is such a significant lack of data available for the Icelandic

conditions. In this case calculations will be displayed for PDF land conversion from ‗Heath Land‘ (CLC 322)

to ‗Built up Land‘ (CLC 10), information is to be found in Table 28:

PDF (Land conversion) = (b + 1) ∗ (PDF2 − PDF1)

= (0,2 + 1) ∗ (0,55 – 0,97)

= 0,2 + 1 ∗ 0,97 – 0,55

= 0,5

The PDF of land conversion from ‗Heath Land‘ to ‗Built up Land‘ is therefore 0,5. This means essentially

that there is 50% reduction of species when the ‗Heath Land‘ is transformed.

Table 28: Information on CORINE categories linked with number of species (pr m2) and PDF (based on

report info from Deliverable D.4.2. - RS 1b/WP4, "Assessment of Biodiversity Losses".

Corine No. Type Number of species

per m2 PDF with reference to

Swiss lowlands

333 Sparsely vegetated areas* - -

322 Heath land 18 0,55

324 Transitional woodland/shrub* - -

231 Pasture/meadow* - -

10 Built up land 1 0,97

Swiss lowlands 40 0,00

* information not available in NEEDS report


February 4, 2010


6.4.4.2 MONETARY VALUATION OF BIODIVERSITY LOSSES DUE TO LAND USE CHANGES

Since restoration costs are not based on individual preferences, these costs will only provide a valid measure

of cost if society is collectively willing to pay for the mitigation, rather than suffer the damage. Otherwise

whether the costs are actually higher or lower than the WTP is not known.

In some cases, the energy derived from power plants are earmarked for one private user and it is uncertain

how the ,,victims‖ of the external effects would sympathise with paying for mitigating emissions of one

private user, but this is not the case in Nesjavallavirkjun.

A limitation of the approach is that the proposed interventions may not be a perfect substitute for the loss

ecosystem service, e.g. existence values of certain ecosystems are not replaceable. Most studies dealing with

the valuation of biodiversity so far have measured the economic value of biological resources rather than their

diversity (Frischknecht, o.fl., 2006)

Here below is information given by Soil conservation of Iceland (Landgræðsla Ríkissins, 2010).

a) Enhancement of vegetation by distributing fertilizer on previously vegetated land.

b) Distribution of grass seeds and fertilizer; a blend of different seeds distributed in addition to

fertilizer.

c) Sowing Lyme grass seeds with fertilizer; this method is the most expensive approach and is only used

when no other measurements apply. It is not appropriate for this example.

d) Lupine seeds distributed along with microorganisms; these microorganisms live in its root system and

capture nitrogen from the air, no additional nourishment is therefore needed. This method is the

cheapest, but at the same time very conflicted among scientists since lupine is a very aggressive

specie.


February 4, 2010


It is assumed, after investigating detailed land-use plans for the Nesjavellir area and other relevant data, that

ca. 50% of the CLC category ‗Industrial and commercial area‘ marked as 121 in (Figure 32) needs to be

restored, which amounts to approx. 372 hectares. The total costs of different restoration methods for

restoring the relevant area is shown in Table 30.

In the further external cost calculations, option b in Table 30 is used. This is the traditional method used in

Iceland and also well suitable for valley locations, as in the case of Nesjavellir.

Table 29: Different restoration measures available associated with cost per hectare with everything included, e.g.

planning- and material cost (Landgræðsla Ríkissins, 2010).

Option Measure ISKR (2009) per hectare

€ (2002) per hectare

a Distribution of fertilizer 65.000 468

b Distribution of fertilizer and mixed grass seeds 90.000 648

c Distribution of fertilizer and Lyme grass seeds 150.000* 1.080

d Distribution of lupine seeds 50.000 360

*this method excluded, since it is not appropriate in this context

Table 30: Cost for the appropriate restoration methods

Option Measure

Total costs of restoring 50% of the

CLC 121 area [ISKR (2009)]

Total costs of restoring 50% of the

CLC 121 area [€ (2002)]

a Distribution of fertilizer 24.180.000 174.174

b Distribution of fertilizer and mixed grass seeds

33.480.000 241.165

d Distribution of lupine seeds 18.600.000 133.980


February 4, 2010


6.4.4.3 MONETARY VALUATION OF BIODIVERSITY LOSSES DUE AIR BORNE EMISSIONS

(EXAMPLE)

The changes in vegetation due to airborne pollutants will not be calculated here for two reasons. There has

not been set reference as to how the vegetation should be on a restored land. Reference vegetation is also far

from the European mainland standards for which price tags are defined within the NEEDs project. Hence, a

price tag for the specific Icelandic context needs to be defined.

A theoretical example from the Netherlands will be shown instead.

Table 9 shows biodiversity damage as expressed by PDF change caused by a deposition increase of 1 kg of

three compounds per m2 of 100% natural land in the Netherlands.

The costs of these Potentially disappeared fraction (PDF) changes are then calculated as follows:

PDF changes due to deposition of the three airborne compounds (column 4, table 2) are multiplied

with the restoration costs per PDF

Restoration costs per PDF for Germany have to be corrected for other countries by using PPS

(Purchasing Power Standard): 0.49 € / (PDF*m2) for Germany is equal to 0.48 €/(PDF*m2) for the

Netherlands.

Since biodiversity loss only occurs due to deposition on natural land the share of natural land in the

Netherlands needs to be included in calculations. This is calculated from CORINE data set according

to ten Brink et al. (2000). The share of natural land in the Netherlands amounts to 25%

Detailed calculation of external costs for the deposition of 1 kg of the 3 airborne emission compounds:

1.73 (PDF * m2 total area)/1 kg deposition * 0.48 €/(PDF * m2 natural area) * 0.25 (m2 natural area / m2

total area) = 0.21 €/kg SOx deposition

9.52 (PDF * m2 total area)/1 kg deposition * 0.48 €/(PDF * m2 natural area) * 0.25 (m2 natural area /m2

total area) = 1.14 €/kg NOx deposition

25.94 (PDF * m2 total area)/1 kg deposition * 0.48 €/(PDF * m2 natural area) * 0.25 (m2 natural area /m2 total area) = 3.11 €/kg NH3 deposition


February 4, 2010


In order to calculate these same external costs of cost per kg for those three compounds and for different

countries certain assumptions must be made.

The PDF change per kg of pollutant (PDF/kg deposition per m2) is the same for all European

countries, as derived from the Netherlands.

Marginal costs calculated for Germany (0.49€/PDF*m2) only need to be corrected by purchasing

power (PPS) of the respective country.

Cover of natural land (%) has to be calculated for each country from CORINE data.

Background level of acidification and eutrophication of each particular country since it influences the

impact of additional deposition on biodiversity and therefore the consequential external costs.

6.4.5 Manufactured Metal Assets

The cost of four types of impacts on metal assets will be included in the evaluation:

1) Impacts on roof and wall coating plates of Nesjavellir geothermal energy plant (material exchange

and paint maintenance)

2) Impacts on roof material in chosen part of capital area (material exchange and paint maintenance)

3) Higher initial and operational costs of plant air ventilation system due to sustaining higher indoor

pressure than atmospheric pressure, and H2S scrubbing equipment

4) External costs due to tarnishing silver

5) Impacts on circuit-boards in sound studios

To establish signs of impacts on metals coatings in buildings the following actions were taken:

Interview with experts at the innovation Center Iceland on material selection and corrosion of roof

material as well as coating systems for preventional actions

Interviews with head of sales at Husasmiðjan, utility shop

Interview with sales manager at paint factory Slippfélagið

Interview with management at Nesjavellir plant

Interview with experts at the Icelandic Geo-survey

Questions sent to the manager of the National Land Survey of Iceland


February 4, 2010


In 1995 the impacts of corroding gasses in geothermal steam from three geothermal plants on steel of various

grades was tested in a laboratory. Various alloys are mixed into steel to make it flexible, harder or resistant to

exposure to a range situations. The chemicals in geothermal steam react with the steel and can make it brittle.

The tests revealed that different types of steel respond to the corroding geothermal gasses in different ways.

The most potential impacts were allocated to chlorine (Cl), which can be found in geothermal brine of marine

origin. Hydrogen sulphite (H2S) was also shown to have potential impact on the steel. The structural form of

the steel also showed to be of importance (Þorbjörnsson 1995).

The building department at the Innovation Center Iceland informed that also aluminium plates need to be

painted in geothermal environment in order to keep them in good shape and prevent damage, first with an

initial coating and then maintenance of the paint after that. Both steel and aluminium plates are treated with

special alloys to prevent corrosion. Wind from the sea carries salt that also have impacts on the plates, and

pre-treatment against that has been developing for decades.

According to the interviewed sources, geothermal emissions add significantly to metal corrosion, which is

mainly allocated to Sulphur containing compounds. Areas with geothermal emissions experience similar

impacts as are seen on roofs near fish smelting factories that emit Sulphur and Nitrogen containing

compounds. The interviewees use the concept Hydrogen Sulphite as a term for geothermal emissions, but

this may be a mixture of gases.

Figure 33: Metal roofs that are not maintained

with paint will soon start to rust and after that

leak. Rust on Aluminium plates is white.


February 4, 2010


Metal coating plates for buildings (steel and aluminium) need to be coated from the start, whether in

geothermal environments or not. Therefore there is only a difference in the needed maintenance, as plates in

higher H2S concentration environments need to be painted every 2 years but every 5-6 years in less polluted

areas. This is still mostly done due to the visual impacts of rust and the maintenance therefore usually merely

a touch up. Aluminium plates get white rust while steel rust is red. The paint becomes matte in a shorter time

in polluted areas and water based paints are not recommended.

6.4.5.1 CORROSION OF ROOF AND WALL COATING PLATES AT NESJAVELLIR PLANT

During the design and building phase of an geothermal energy plant, building material must be selected

carefully as to fit the geothermal environment that the building and the energy plant equipment itself is

exposed to.

In the Life Cycle Assessment of Nesjavellir however, no specific information is fed into the software for the

different grades of steel used in the construction of the plant; the most significant impacts from the

construction phase is the carbon dioxide emission inherent in the steel manufacturing. Emissions from

various alloys mixed into the steel, whichever type is selected for this role, do not appear in the results; the

impacts from the various mixtures are considered an insignificant detail in the main outcomes. An LCA for

more recent energy plants is in the making and may reveal different information on this matter.

The embrittlement or other type of corrosion-impacts from the emissions during the operation phase would

show up in the needed maintenance effort and life time of the various parts of the plant. Description of the

chemical impacts of H2S indicates that it could react with steel in the power equipment, steel frame in

building, as well as with the metal roof and wall plates. This is not estimated here.

In 2009 the Nesjavellir plant replaced roof and wall coating plates after 20 years, which under normal

conditions should have lasted for 40-50 years. The total replacement costs will amount to 1.080.487 € (Orig.

150 million ISKR 2009 costs). (Ingvason, 2009)

A normal economic approach is to set cost figures of this kind up for two different situations as in a

cost/benefit analysis. The second situation in this case is a theoretical setup where the emissions were to be

prevented. As follows from earlier chapters the emissions can eventually be mitigated by pumping down the

brine along with all emissions from the geothermal plant. There is also a technical solution to this, one that


February 4, 2010


traps hydrogen sulphite and either turns it to pure sulphur or sulphuric acid. These mitigation approaches are

described in a thesis by Kristin Vala Matthiasdottir and one option is discussed shortly in a later section. The

relevance here on the other hand is to stress that maintenance is needed also even in areas where geothermal

emissions are not intense. Therefore the costs in the following tables are shown as a comparison between a

mitigated situation and one where emissions are let out of the plant as the situation is today. The external

costs due to the H2S emissions is then the difference between the two scenarios.

Thus, Table 31 gives an overview of the related roof and wall plates replacement costs as they would occur

during the 50 year life time of the plant, firstly with current H2S emissions and then as they would occur if the

H2S was remove from the emitted gasses.

Table 31: Cost of roof and wall coating plate maintenance replacement on the energy plant, with and without

H2S removal from plant emissions (Ingvason, 2009)

Roof & wall plate maintenance replacement at Nesjavellir

Cost figures in [€ (2002]

Local at the plant

With H2S With mitigation

Difference (External costs)

Cost pr maintenance replacement (Ikr)

1.080.487 1.080.487

Frequency /50y 2 1

Total 2.160.973 1.080.487 1.080.487

In addition to the replacement maintenance, the roof and wall plates need to be painted every year. This

requires 4 summer staff members to work full time for 4 weeks every summer. The estimated work cost per

person per month is estimated as 2.420 € (2002) (Orig. 328.680 ISKR 2009 cost) or a total of 9.678 € (2002)

for the summer. (Sigurdsson, 2009) Paint material costs are approximately 1.080 € (2002) (Orig. 150.000

ISKR 2009 costs). Table 32 gives an overview of the related costs, also with and without H2S removal.


February 4, 2010


Table 32: Cost of paint maintenance at the energy plant, with and without H2S removal from plant emissions

(Sigurdsson, 2009)

6.4.5.2 CORROSION OF ROOF MATERIAL IN THE CAPITAL AREA

Given the local impacts at the plant the impacts on roofs within the capital area is described here according to

shortened life time of the paint coatings in proportion to distances from the emissions source. Consider

distances presented in Table 33.

Paint maintenance at Nesjavellir

Cost figures in [€ (2002)]

Local at the plant

With H2S With mitigation Difference

(External costs) Times /50 y 50 10 40

Paint 1.080 1.080

Work 9.678 9.678

Each time 10.758 10.758 0

Whole period 537.900 107.580 430.320


February 4, 2010


Table 33: Distances from plant to city based on LUKR (Þormóðsson 2009)

From To Distance

Hellisheiði - Grensás air quality

station

23,5 km

Hellisheiði - East limits of city

Norðlingaholti

17 km

Hellisheiði - Reynisvatnsás (shortest

distance)

16,5 km

Within the 23,5 km radius from the plant there are 16.468 houses with 2.997.338 m2 of socket areal which is

close to equal to the area of the corresponding roofs and is set here as 3.000.000m (Þormóðsson 2009) . Walls

are also occasionally covered with the same material but this is left out here. It is assumed that the roof plates

need to be changed for maintenance every 30 years in the H2S affected region, but only every 50 years

otherwise. Note that sea born salt is also considered to have corrosion impacts, therefore houses near the

shore suffer from similar attacks and no attempt is made to adjust figures here for the combined impacts at

this stage. {Olafsson, 2010 #296}

Following Table 34 gives an overview of corrosion related costs of roof material replacement within the

considered capital area region, during the 50 year life time.


February 4, 2010


Table 34: Cost of roof plate maintenance replacement within capital area, with and without H2S removal from

plant emissions (Olafsson, 2009)

Roof material maintenance replacement within capital area


Regional within 23,5 km


(Tot. external costs)

Nesjav. prop. of external costs

Roof material & work cost /m2

62 62

Times /50 y 1 0 1

m2 2.997.338 2.997.338

Total 184.565.424 0 184.565.424 60.906.590

Within the assumed H2S impacted area, roof painting maintenance is supposed every 4 years on the eastern

outskirts of the city. Presumptions for painting costs during the 50 year life time period are presented in Table

35.

Table 35: Presumptions of the cost of roof maintenance within the estimated capital area with and without

H2S pollution (Sigurdsson, 2010)

Paint maintenance within capital area


Regional within 23,5 km


(Tot. external costs)

Nesjav. prop. of external

costs

Paint + work /m2 MIN 8 8

Paint + work /m2 MAX 12 12

Paint + work /m2 Average

10 10

Times /50 y 10 5 5

m2 2.997.338 2.997.338

Cost each time MIN 23.978.704 23.978.704


February 4, 2010


Cost each time MAX 35.968.056 35.968.056

Cost each time Average

29.973.380 29.973.380

Cost TOTAL MIN 239.787.040 119.893.520 119.893.520 39.564.862

Cost TOTAL MAX 359.680.560 179.840.280 179.840.280 59.347.293

Cost TOTAL Average 299.733.800 149.866.900 149.866.900 49.456.077

6.4.5.3 ADDED COSTS FROM AIR VENTILATION SYSTEM

The air ventilation system at Nesjavellir is especially designed to protect computers and other electrical

equipment that is sensitive to H2S corrosion, within the plant buildings.

Two measures are taken to obtain this:

1. Sustaining higher indoor pressure than the outdoor atmospheric pressure in needed parts of the plant

to prevent H2S from entering the facilities

2. Installing H2S scrubbing equipment within the ventilation system

External costs of the air ventilation system thus arise from the higher initial and operational costs of this

system, than of traditional ventilation systems.

Initial costs for the plant ventilation system are approximately 40% higher than that of a traditional system

and the electricity need for operation is approx. 30%8 higher, since the system needs to maintain a higher

indoor pressure than the outdoor atmospheric pressure to prevent H2S from entering the buildings.

{Adalsteinsson, 2009 #297}Material costs for operation of the ventilation and cleaning system is approx.

8 When calculating the costs of electricity use, the general electricity price to firms is used, excluding all taxes as well as transfer and distribution costs (0,03 €/kWh (2002) (Orig. 3,94 ISKR/kWh 2009 costs)). It is unlikely that Nesjavellir energy plant is paying itself for the electricity it uses, but this price is used here to be able to put a price tag on the external costs due to the higher electricity need of the ventilation system


February 4, 2010


3.602 €/yr (2002) (Orig. 500.000 ISKR/year 2009 costs) and work costs due to service is approx. 258 €/yr

(2002) (Orig. 35.000 ISKR/year2009 costs). {Ingvason, 2009 #278}

Table 36 shows an overview of the external costs arising from the Nesjavellir air ventilation system.

Table 36: Overview of external costs arising from the Nesjavellir air ventilation system

External costs from Nesjavellir air ventilation system

Type of external cost External cost [€ (2002)]

Higher initial costs 270.473

Operational material costs of scrubbing system (tot 50 yr)

180.100

Work due to service of scrubbing system (tot 50 yr)

12.900

Higher electrical operational costs of tot. System (tot 50 yr)

969.601

TOTAL 1.433.074

6.4.5.4 TARNISHING OF SILVER ASSETS

Silver is the most lustrous of all the metals and it tarnishes readily. Black silver sulphide forms when the metal

has even the slightest exposure to any sulphur compounds found in the air or water or sulphur dyes often

found in cloth or paper. Thus, a well known impact of H2S, at least in Iceland, is the tarnishing of silver.

In order to evaluate the economic impacts of silver tarnishing due to the H2S emissions from Nesjavellir two

factors were estimated:

1. The costs of goldsmiths within the capital area, of preventing or cleansing the occurring tarnishes

(work time and material costs)

2. The costs of tarnishing cleansing agents bought by the public per year


February 4, 2010


6.4.5.5 COSTS OF GOLDSMITHS WITHIN THE CAPITAL AREA

To estimate the external costs borne by goldsmiths within the capital area, a survey was sent out to all

jewellers in Iceland in the beginning of 2008. They were asked to comment on how, in their opinion, the rate

of tarnishing has evolved over the last years and what costs are associated, for them, with preventing or

cleansing the occurring tarnishes.

The findings showed an explicit difference between the rate of tarnishing within the capital area and

elsewhere. Also the consensus of most jewellers within the capital area, was that there had happened a

noticeable change in tarnishing rate approximately 2 years earlier. The tarnishing rate outside the capital area

has remained approximately 5-7 weeks over the last decades, while the rate has gone from 3-5 weeks within

the capital area two years prior to the survey, to approximately 1-2 weeks in 2008 when the survey was sent

out. Thus, tarnishing occurs approximately 3 times faster in the first part of 2008 than two years earlier.

This timing of change in tarnishing rate within the capital area correlates with the start up of the Hellisheiði

and the Reykjanes geothermal power plants, located only approximately 30-40 km from the capital area, in

opposites directions. Interestingly, comparing the measured amounts of H2S in the atmosphere in Reykjavik

before and after the start up of the new geothermal power plants, the average hourly measure indeed

increases by 3 times.

Since the H2S external cost estimates are based on 2006 figures, as well as the Nesjavellir proportion of the

external costs, the cost prior to Hellisheidi will be used for 8 months of the per year estimate and the after

start up cost for 4 months (Nesjavellir start up was in Septermber 2006)

According to the survey mentioned above, the costs due to tarnishing of silver for jewellers in the capital area

(material and work hours) before Hellisheidi start up was approx. 229.194 €/yr (2002) (Orig. 28 mill. ISKR/yr

2008 costs). This rose to approx. 687.582 €/yr (2002) (Orig. 84 mill ISKR/yr 2008 costs) after the Hellisheidi

start-up in the fall of 2006. Thus, the total estimated external costs of goldsmiths within the capital area per

year is 382.263 €/yr (2002) (Orig. 46,7 mill ISKR/yr 2008 costs).

6.4.5.6 COSTS OF THE PUBLIC DUE TO TARNISHING OF SILVER

Estimating the cost of the public within the capital area due to the tarnishing of silver (import and sales

figures for tarnish cleansing agents. It amounts to approx. 8 millj. ISKR per year before Hellisheidi and rose


February 4, 2010


to approx. 9 mill. per year after Hellisheidi start-up. Thus, the estimated external costs of the public within the

capital area per year is 67.940 €/yr (2002) (Orig. 8,3 mill. ISKR/yr 2008 costs).

Table 37 shows an overview of the external costs due to tarnishing of silver within the capital area.

Table 37: Total external costs due to tarnishing of silver within the capital area. Nesjavellir proportion of the

total external costs is 1/3 as previously mentioned.

External costs due to tarnishing of silver within the capital area

Type of external costs External costs [€ (2002)] Nesjav. prop. of external

costs

Costs of goldsmiths within the capital area per year

382.263

Costs of public within the capital area per year 67.940

Total per year

450.203

TOTAL during 50 year life time of plant

22.510.150 7.428.350

6.4.5.7 CORROSION OF METALS IN CIRCUIT–BOARDS

Copper, zinc, silver and a range of other metals are used extensively in electrical equipment. Predominately

the metals are kept insulated and not exposed to the atmosphere when possible. Still during use heat is

formed and therefore many utilities are equipped with fans that draw in air stream for cooling.

Particular attention is given to electric equipment and measurement tools that are used in geothermal areas

where high concentration of hydrogen sulphite is expected. Equipment such as computers and digital meters

used in geo-surveying are made specifically for that role and protected thoroughly from the expected

corrosive impacts. This equipment is normally more expensive than their counterparts used outside

geothermal areas. Preventing metal - embrittlement due to H2S this must be considered in materials‘ selection

and design for this role. A problem where circuit boards in power plant management operation was reported


February 4, 2010


for example in the Krafla power plant that was constructed in the North of Iceland in the 1970s. This is

relevant in closed spaces inside the plant and monitoring equipment must be protected. (Sigurbjornsson, pers

comm. 2009.) Otherwise the life time of computers, printers and electronic management equipment may be

shortened. One example of disturbed circuit boards potentially came up in Hellisheiði during the first

operational years before the air ventilation was installed. Sound equipment of the guest reception showed

failure. Crcuit boards in printers have also been investigated for similar impacts at the research laboratory at

the Icelandic Innovation Centre.

If impact from geothermal emissions on digital equipment used by the public is detectable it may pose a large

cost to society. Circuit boards are very common parts of modern home utilities and cars but usually coated in

resin or plastics. A first attempt was made to establish some information by discussion with managers and

experienced staff in large repair workshops that maintain personal computers. Their replies about eventual

incidents of signs of metal fatigue in personal computers or the circuit boards has not been noticed

(Fridriksson Pers commun. 2010).

Most of their reparation concern problems related to software. Also, personal computers have been

considered to have a useful life time of about 2-3 years and the technical development has been so fast as to

form the general rule in companies at least to renew computers according to demands for capacity set by

software rather than the hardware. The situation might change when companies need to use their equipment

for longer time.

Eventual impacts on electric systems in cars was not pursued.

6.4.5.8 INTERVIEWS WITH SOUND STUDIOS

Sound studios rely on sound mixers, complicated rather uncovered circuit boards made of wires and contacts.

The equipment is tuned to be extremely sensitive towards tones and therefore is delicate in structure and

sensitive towards any type of interference or dirt. It is a general statement that the equipment shows tarnish,

black plaque especially at contact points. The impact interferes with the sound and makes cracking noise

mixed with the tone that should come through.

In 2009 interviews were conducted with three sound studio professionals both at the state broadcasting

service and a private studio, and an experienced repair person with a long professional history. Their


February 4, 2010


responses gave rise to a list of questions that were sent to the spokesman for the national association of

studios. The following questions were posed:

1. In your line of work do you notice tarnishing of metals in your equipment?

2. If so, can you describe the signs of this tarnish and the impact of the equipment

performance?

3. Do you have an explanation for these signs?

4. How do you deal with problems of this kind?

5. Measured in time and cost of spare parts, how much effort is put into correcting the

problem?

The intention was to collect some estimation of costs of the impacts described during the first interviews, but

no responses were obtained through this extensive way.

Figure 34: Mixer in Studio Syrland (Studio Syrland, 2009)

The maintenance shop at the state broadcasting service (RUV) stated that 75% of their time is dedicated to

clean off tarnishing metals (Hauksdottir 2009 Pers. comm.). The metals in the contacts are mostly copper,

silver and gold and about 100 contacts need to be replaced every year. The contacts are specially made for

studios and those who are made of chrome are more resistant but cost more. The staff needs to be on

constant guard to prevent tarnishing.

In the private studio the most experienced member of staff stated that tarnishing of the metals in their circuit

board means that they need to have an expert clean up of their mixer every second year. The cost of this is


February 4, 2010


20.169 €(2002) (Orig. 2,8 mill ISKR (2009)) every year. This studio also has a similar unit in Denmark and the

tarnishing is not a problem there. The staff has good contacts with their fellow professionals in other

countries such as in Scandinavia and the UK. They claim that this problem is not known from their

surroundings. The information, which is of course rather coarse and should be substantiated further, will be

used in the following way to set a hypothetical external price borne by sound studios.

6.4.5.9 EXTERNAL COSTS BORNE BY SOUND STUDIOS

There are estimated 50 large sound studios (in recording studios, theatres, concert halls, community centres,

film studios etc) but many musicians have smaller equipment within the capital city that is allegedly reported

susceptible to the hydrogen sulphite. Each of these has one mixer that costs from 1.441 to 36.016 €(2002)

(Org. 0.2 to 5 million ISKR (2009)). This equipment needs to be maintained or replaced. As a rule of thumb

the circuit boards need to be maintained constantly whether they are new or old. With good maintenance they

can be used for 25 years if they are kept in a clean state. It is assumed that without the effect of tarnishing the

life time would amount to 50 years. The maintenance is done in the studio by sound-experts themselves but

sometimes mixers are sent to workshops to trained electronic technicians. Institutes like the National Broad

casting service (RUV) keeps their own team of electricians and two out of three are occupied all year around

to keep the equipment free of disturbance. Private sound studios sometimes send the equipment off to the

UK for example and the maintenance costs can reach the same amount as the purchasing price of a new one.

Table 38 shows the external costs due to corrosion of circuit boards.


February 4, 2010


Table 38: Overview of the total external costs due to corrosion of circuit boards and the Nesjavellir proportion

of this cost

External costs due to corrosion of circuit boards

Circuit boards in sound studios within

the capital area, according to interviews

Calculatioins for 150 cuircit boards [€ (2002)]

Cost per unit [€ (2002)]

Yearly maintenance cost per unit [€ (2002)]

Total Yearly maintenance cost [€ (2002)]

Total maintenance cost

during 50 year lifetime of plant

[€ (2002)]

100 Small units 720 2.521 252.114 63.028.384

50 Large units 10.805 20.169 1.008.454

Life time of units with

H2S 25

Assumed life time wiht mitigation

50

Needed replacements during 50 year life time of

plant

1

Total replacement costs during 50 year life tima

612.276

Total external costs during 50 year life time

63.640.660

Nesjavellir porportion of

external costs (1/3)

21.213.553

Findings from all the sections assessing external impacts of H2S emission are used in the Cost Benefit section

and compared with the cost of one mitigation technology solution, an available sulphur scrubber. (See

chapter 9)

6.4.6 Total external Costs from H2S Air Emissions

Table 39 gives an overview of the total external costs assessed as arising due to H2S air emissions from the

Nesjavellir geothermal energy plant.


February 4, 2010


Table 39: Overview of total external costs from H2S air emissions

H2S (HYDROGEN SULPHIDE)

Victims category Types of price tags Total external costs

[€ (2002)]

Nesjavellir proportion of external costs (1/3)

[€ (2002)]

Human well being Data from health care 3.839.002 1.266.871

Fauna Included in land quality price tag

- -

Flora Included in land quality price tag

- -

Land quality Biodiversity losses due to land use changes

- 241.165

Biodiversity losses due air borne emission

Icelandic price tag needed

-

Manufactured assets

Corrosion of metals:

Roof & wall plate maintenance at Nesjavellir

- 1.080.487

Paint maintenance at Nesjvellir

- 430.320

Roof maintenance in capital area

184.565.424 60.906.590

Paint maintenance in capital area (Average)

149.866.900 49.456.077

Nesjavellir air ventilation system

- 1.433.074

Tarnishing of Silver 22.510.150 7.428.350

Corrosion of metals in Circuit–boards

63.640.660 21.213.553

TOTAL EXTERNAL COSTS

RELATED TO H2S [€ (2002)]

424.422.136 143.456.487


February 4, 2010


6.5 Chemicals in Brine

There are actually two types of wastewater emitted from a geothermal plant:

1. Brine, which is separated from the steam/brine mixture extracted from the boreholes, before the

steam is lead to the power generating turbines, during the operation phase. The brine is either

emitted on the surface or re-injected into re-injection holes. The brine contains various kinds of

chemicals.

2. Condense water, which is the part of the steam that has condensed after the steam has gone through

the power generating turbines. This waste water is then also released either into surface pathways or

re-injection holes. Condense water contains much less chemicals.

Brine is emitted from a geothermal power plant in both the construction and operation phase. During the

construction phase boreholes are being drilled and various research holes are all ready emitting steam and

brine.

The brine can contain various chemicals. The higher the temperature of the field the more chemicals can be

dissolved in the extracted brine but the specific chemical composition relies to a high extent to the geological

origins of the bedrock.

Each geothermal site has specific characteristics according to multiple variable factors and therefore the

preparation phase is extremely important in giving indications to as how much and in which way the resource

can be used.

Considerable amount of wastewater, with temperatures from 46-100C°, is produced during the energy

production at Nesjavellir. In 2002, this wastewater was either pumped back into the ground through shallow

holes or disposed of into the Nesjavellir stream. (Snorrason et al., 2004) This stream found its way some 3.8

km through lava fields into Lake Thingvallavatn.

Today though, most of the waste water is re-injected into carefully planned reinjection holes, thus, decreasing

potentials for impacts due to chemicals contained in the water.

The brine from Nesjavellir contains elevated concentrations of SiO2, As, Al and B.


February 4, 2010


However, according to Wetang‘ula and Snorrason (2005), the concentration of the chemicals is diluted before

the water reaches the lake and there is no detectable rise or accumulation of trace elements in the sediments,

vegetation in the water or fish at the geothermal influenced sites. With increased power production, waste

water increases. It is important to follow the destination of the waste water and monitor its impact on the

surrounding environment.

As mentioned above, most of the waste water is now re-injected into the ground, which in addition minimises

the contact of the contained chemicals with the surface environment. But it is still important so monitor the

movements and destinations of the re-injected fluids, in order to establish that they are not causing impacts

through underground interactions with cold ground and surface water systems.

Guðjón Atli Auðunsson, at Innovation Center Iceland (ICI), applied for a grant in 2008 to monitor mercury

(Hg) in lake trout in Lake Thingvallavatn and other lakes in Iceland. Larger trouts have been found to

contain relatively high concentrations of mercury in Thingvallavatn but little information is available for other

lakes in Iceland, especially regarding large trouts. The reasons for this elevation in large trouts in

Thingvallavatn are not known and it is an interesting conclusion from the LCA study findings used within this project, that

no Hg is emitted from Nesjavellir, neither through air or water emissions.

Still an overview of the emitted chemicals is given in the following sections, even though no price tags or

external costs are assigned to them. Only chemicals emitted during the operation phase are shown.

Presently, there do not exist any price tags for SiO2, As, Al and B emitted to water. Seeing that

available research indicates that there cannot, at least not yet, be detected any impacts from these

emissions, there are not allocated any external costs to these emissions within this project.

The impacts of these emissions (especially As and Al) need to be closely monitored and taken into

account, if impacts emerge at a later stage


February 4, 2010


Table 40: overview of the types and amounts of chemicals emitted through brine during the life cycle of the

Nesjavellir geothermal power plant.

CHEMICAL ASPECTS IN BRINE

Type of Chem.

Construction [tons]

Operation [tons]

End-of-life [tons]

Total Mass

[tons]

SiO2 394.583 394.583

As 20 20

Al 1.078 1.078

B 1.057 1.057

6.5.1 SiO2 (Silicia Silicon Dioxide)

Silicon dioxide, also known as silica, is the most abundant mineral in the Earth's crust and is commonly

found in nature as sand or quartz.

Silica is used as raw material in many products and industries, such as glass, crystal, optical fibres, ceramics

and even as an additive in the production of foods.

Health impacts of silica only occur when inhaling silica dust, which can over time lead to bronchitis or (much

more rarely) cancer. In other respects, pure silicon dioxide is inert and harmless or even beneficial. A study

following subjects for 15 years found that higher levels of silica in water appeared to decrease the risk of

dementia. The study found that for every 10 milligram-per-day intake of silica in drinking water, the risk of

dementia dropped by 11%. (Rondeau 2009)

SiO2 (Silicate)



LCA [tons]

Price tag

Related external

costs

394.583 - -


February 4, 2010


6.5.2 As (ARSENIC)

Arsenic is notoriously poisonous and is used in pesticides, herbicides, insecticides and various alloys.

Studies indicate a dose dependent connection between chronic arsenic exposure and various forms of cancer.

Studies also indicate effective removal of dissolved arsenic in water by co-precipitation with either iron or

aluminium oxides, which could be interesting in this case since the brine from Nesjavellir also contains

aluminium (Al).

As (ARSENIC)

Emissions during 50y lifetime according to LCA [tons]

Price tag

Related external costs

20 - -

6.5.3 Al (ALUMINIUM)

Aluminium is the most abundant metal in the Earth's crust but is too chemically reactive to occur in nature as

a free metal. Al is an important raw material in structural components within transportation, building and

aerospace industries.

Its toxicity can be traced to deposition in bone and the central nervous system. In very high doses, aluminium

can cause neurotoxicity, and is associated with altered function of the blood-brain barrier. Al has

controversially been implicated as a factor in Alzheimer's disease but this does not hold scientific consensus

{Ferreira PC, 2008 #294}{Stevanovi , 2009 #293}

Al (ALUMINIUM)

Emissions during 50y lifetime according to LCA [tons]

Price tag

Related external costs

1.078 - -


February 4, 2010


6.5.4 Impacts from B (BORON)

Elemental boron is used in the semiconductor industry, glass and ceramics.

Boron is an essential plant nutrient and lack of boron results in deficiency disorder, where as high soil

concentrations of boron may also be toxic to plants. Elemental boron is non-toxic to humans and animals

(approximately similar to table salt). Fish have survived for 30 min in a saturated boric acid solution and can

survive longer in strong borax solutions. {Garrett, 1963 #291}

B (BORON)

Emissions

during 50y lifetime

according to LCA [tons]

Price tag

Related

external costs

1.057 - -


February 4, 2010


7 PHYSICAL Aspects and their Impacts

This chapter will investigate the possible impacts of physical aspects (thermodynamic and kinetical) related to

the life cycle of geothermal power production. This aspect group mainly comes into play through the thermal

energy in the brine pumped up out of the geothermal system, the shifting of cold groundwater from

groundwater reservoirs to the surface for use in the geothermal power production process and dislocation of

soil during construction of the geothermal power plant itself and connected roads etc.

7.1 Thermodynamics

The heat from the source is the energy that is being harnessed. The medium that carries it is water. Water that

has met hot substance on its course in the bedrock will dissolve chemicals but the heat itself is also forgeign

in most ecosystems at the surface. The following section studies the impacts of heat.

7.1.1 Heat from Brine

In 2002, some parts of the Nesjavellir waste water was still disposed of on the surface into the Nesjavellir

stream, with outflows into Lake Thingvallavatn. (Snorrason et al., 2004)

According to Wetang‘ula and Snorrason (2005), water temperature at the major outflow sites has increased by

15-17°C since the start of electricity production in 1998. During calm weather tongues of warm water float

atop the cold, dense lake water and during cold winter periods the outflow sites are ice-free, in contrast to the

rest of the lake. The spread of floating warm water is expected to break down quickly due to wave action and

wind cooling. Also efficient water mixing causes temperature to drop to normal lake temperature short

distance away from the outflow sites.

On the whole the Wetang‘ula and Snorrason study does not anticipate any large scale impacts of elevated

temperature at outflow sites, on the Thingvallavatn ecosystem. Still, the nearest environment could start to

favour species that tolerate a wider range and large short term fluctuations in temperature.


February 4, 2010


Today though, most of the waste water is re-injected into carefully planned reinjection holes, thus, decreasing

potentials for temperature pollution impacts. In conclusion, no external costs are assigned to thermal

pollution due to energy harnessing at Nesjavellir.

Table 41: Overview of external costs due to heat from brine

External costs due to heat from brine

Types of impacts Price tag type External costs [€]

0 - 0

TOTAL external costs during 50 year life time of plant 0

7.1.1.1 ENERGY BALANCE OF THE NATURAL GEOTHERMAL SYSTEM

The issue of reservoir engineering or the balance of a natural geothermal system, which is being harnessed, is

very much connected to the issues of renewability and sustainable utilisation.

Firstly, a note on the concepts of renewability and sustainability: often these two concepts are intermingled

and wrongly so. Renewability of an energy source has to do with the intrinsic characters of the source,

whereas sustainability has to do with how this source is being utilised. (Axelson et al. 2001)

The characteristics of geothermal power, which are relevant regarding whether or not it should be defined as

renewable, are twofold:

1. Mass reserve (brine), which is constantly renewed at a rate depending on the geothermal system (the

availability of brine fluid and the crust permeability).

2. Thermal energy reserve, which is usually renewed extremely slowly (heat transfer from deeper crust

layers or other thermal source).

Which one of the two has the weightiest relevance differs between geothermal systems.


February 4, 2010


This intrinsic twofoldness of geothermal reserves makes the classification of this energy source as renewable

more complex than otherwise, which again affects the task of determining what sustainable utilisation looks

like. (Axelson et al. 2001)

Discussions on a definition of sustainable geothermal utilisation have been ongoing since the concept of

sustainability was first coined in the Brundtland report 1987. Yet, a clear and standardised definition has not

as yet been agreed upon. This report uses a definition proposal from the National Energy Authority of

Iceland from 2001: Sustainable geothermal utilisation is defined as utilisation that can be maintained

for 100-300 years. (Axelson et al. 2001)

Thus, the sustainable utilisation of geothermal power is governed by the production process9, production

technology and can in some cases also be enhanced by reinjection of the brine. Additionally, hopes are that

deep drilling will enhance the energy per unit of brine and hence, advance future prospects of sustainability

within geothermal harnessing. (Axelson, G. 2008)

Based on its twofold characteristics, harnessing geothermal power has a twofold impact on the natural

geothermal system:

3. Mass extraction. Thermal energy is drawn from the geothermal system by extracting high

temperature brine from the ground. This decreases the water level in the system and thus, the

pressure. The sustainability level of a given geothermal system is then dependant on the permeability

of the ground layers and the availability of hot ground water, and hence how readily new geothermal

liquid replaces the removed brine (mass flux). Properly planned reinjection of brine can be of benefit

here.

4. Thermal energy extraction. Geological circumstances and the brine-thermal source interaction

determine the thermal energy content of the inflowing brine, which is replacing the extracted fluid.

Usually, the thermal extraction is more rapid than the energy flux from the heat source to the

9 Quote from (Axelson, G., 2008): ―Methods of sustainable geothermal utilization 1. Constant production below the sustainable l imit [not often a realistic option] 2. A step-wise increase in production up to the sustainable limit 3. Periods of intense/excessive production with intermittent breaks in production of comparable length [Based on assumption that following a period of excess ive production geothermal systems mostly recover to their pre-production state, i.e. effects are reversible] 4. Greatly reduced production following a shorter period of excessive production‖


February 4, 2010


replacing brine. In such cases, the energy reserve is affected such that the reservoir temperature will

decrease. Consequently, the thermal energy content per unit of extracted brine will decrease and

added mass of brine will be needed to produce the same amount of electrical energy.

Utilisation of the Nesjavellir geothermal system began in 1990 by 100 MWt thermal energy for district

heating, increasing in 1998 to a thermal production of 200 MWt and adding 60 MWe electricity production.

In 2000 the electricity production rose to 90 MWe. The mass extraction (from approx. 2000m) to sustain

such a production (200 MWt and 90 MWe) is approximately 440 kg/s (≈ 440 l/s).

Measurements have shown that this harnessing history had resulted in a pressure drop of 7 bar in 2005

(compared to 1985 pressure) (Axelson et al. 2005) and an energy per unit drop from approx. 2000 kJ/kg in

1990 to approx. 1500 kJ/kg in 2000. (Ballzus, C. et al. 2000)

Computer model calculations suggest the prospects of additional decrease of energy content to 1250-1300

kJ/kg over a 30 year period of a constant 90 MWe and 200 MWt production. (Ballzus, C. et al. 2000) Pressure

draw-down at the end of such a period would be approximately 26 bar. (Axelson, G. 2003)

The fact remains then, that such a production rate is not sustainable but excessive, since it cannot be kept

persistent, with the same technology, for a period of 200 years, due to continuous pressure decrease within

the geothermal system. (Axelson et al. 2005)

Note, that the current production level at Nesjavellir is 120 MWe and 400 MWt (as of 2006), demanding

approx. 540 kg/s (≈ 540 l/s) of brine. Such production during a 30 year period, would likely cause a pressure

draw-down of the order of 30 bar and a temperature drop at the end of the 30 year period of 4-5°C, which is

about 1,5% of the reservoir temperature. (Axelson et al. 2005)

Principal results, though, of the model calculations are that the impacts of such excessive production during a

30 year period would most likely be reversible. Pressure would recover to pre-production levels over a time-

scale comparable to the time-scale of production. (Axelson et al. 2005) Temperature on the other hand shows

the interesting trend of continuing cooling even though production would cease after the 30 years. According

to the calculations this cooling would not turn around until approximately the year 2300 when cooling had

reached 10-15°C compared to the year 2000 and would need more than a 1000 years to recover to pre-

production levels. It should be noted here though, that the temperature part of the calculation model has not


February 4, 2010


been evolved as far as the mass part and therefore needs further development to produce as reliable

conclusions as for the mass. (Björnsson, G. 2006)

In 2004 re-injection of parts of the brine into upper parts of the geothermal system (600-800m) was started to

counter the pressure draw down. Today approx. 90% of the separation water (containing most of the

chemicals from the brine) is re-injected into the upper parts of the geothermal system (approx. 800m) and

approx. 30% of the condensation water (causing mostly heat pollution). Such re-injection has to be conducted

based on careful experiments and strategy as not to cool down the geothermal system by heading off the

original, high energy geothermal brine influx. Studies are ongoing into the possible prolonging effects of this

re-injection on the basis for continued excessive harnessing.

According to Dr. Einar Gunnlaugsson at Reykjavik Energy (the owner company of the Nesjavellir plant),

then despite the noted pressure and energy decrease within the Nesjavellir system, as described above, it has

only been necessary to bore one additional hole in order to maintain production levels during the last 20 years

of harnessing history at Nesjavellir (1990-2010). All other new holes have been added due to capacity

increases.

In his expert opinion it is viable to assume that in continuance one new hole is needed every 5 years to

maintain production levels, and it is not likely that a new plant is needed at the end of the defined 50 years life

time, to take over productions.

As a price tag for the external costs of aggressive production rates at Nesjavellir therefore, the

costs of adding a new hole every 5 years is used, presuming the first being added 2010.

NB! :

Our supposed life time starting year is 2002 but up until 2010 only one hole has been needed to

maintain productions which started in 1990. The cost of this one hole will still be accounted to

our 50 years life time starting at 2002.

Also one hole every 5 years is needed to maintain a higher production capacity (120 MWe and

400 MWth) than the 90 MWe and 200 MWth assumed within this project.

These biases will though partly be levelled out by presuming the same cost of a borehole

throughout the 50 year life time, or 2.900.097 € (2002)/hole (Orig. 250.000.000 ISKR/hole to be

used throughout the entire life time. In actuality, this will not be the case, since the cost of

boreholes usually increases with inflation over time.


February 4, 2010


Table 42: Overview of external costs due to balance disturbance of geothermal system caused by aggressive

production rates from geothermal system

External costs due to balance disturbance of geothermal system

(aggressive production rates from geothermal system)

Type of external impact Decrease of production capacity of geothermal

system

External costs price tag

One additional borehole needed every 5 years to maintain production levels

Number of new holes needed during 50 year life time 9

Cost per hole [€ (2002)]

2.900.097

TOTAL external costs during 50 year life time of plant [€ (2002)]

26.100.875

7.2 Kinetics

Under this chapter there will be discussed several physical aspects that describe impacts on mass flow of

material. The most important factors are water and material in the neighbourhood of the plant.

7.2.1 Brine

The brine is the medium that carries the heat (energy) from the system through the energy plant. The

characteristics of the mass has a different effect than the heat, the mass disclocation has impact on the

pressure of the system and by moving the hot water away, colder water may flow in and disturb the heat flow.

Geophysical movements are monitored carefully in the area as if to manage the geothermal sysem and

maintain the balance.


February 4, 2010


7.2.1.1 MASS BALANCE OF NATURAL GEOTHERMAL SYSTEM

This impact is included in section 7.1.1.1 ENERGY Balance of the Natural Geothermal System.

7.2.1.2 INDUCED SEISMICITY AND SUBSIDENCE

According to Dr. Einar Gunnlaugsson at Reykjavik Energy, seismic activity is to be an expected associate in

geothermal systems, probably related to the flow of water through subsurface channels. Increased flow during

exploitation can therefore increase seismic activity. Re-injection of fluids into deep formations has also been

recognized as a cause of seismicity.

The Nesjavellir energy plant is located close to a number of active earthquake areas. On Figure 35 the closest

areas of active earthquake zones of origin are marked with black quadrangles. Within the last decades several

earthquakes have taken place within the area, the largest rated up to a little over 6 on Richter. Nesjavellir

energy plant and other buildings and structures within the area, are designed to withstand such seismic

activities.

Figure 35: A mapping of active earthquake centre areas, close to Nesjavellir energy plant.


February 4, 2010


Also, geothermal areas with low rock strength can experience some subsidence sue to the withdrawal of

geothermal fluid from the ground. Subsidence can bring implications, e.g. for the stability of pipelines, drains

and well casings within the geothermal field (Bessason 2006)

At Nesjavellir a levelling survey has been ongoing the last 15-20 years. This survey has shown that some

subsidence occurred prior to 1994 (thermal production was initiated in 1990) while the last years have actually

seen an elevation in land level.

In conclusion, no external costs are assigned to either seismic activity or subsidence, as a result of geothermal

harnessing at Nesjavellir.

Table 43: Overview of External costs due to induced seismicity and subsidence

External costs due to induced seismicity and subsidence

Types of impacts Price tag type External costs [€ (2002)]

0 - 0


7.2.2 Mass Balance of Cold Ground Water System

Cold groundwater is used at Nesjavellir energy plant mainly as cooling water and for district heating (heated

by brine in heat exchangers).

The groundwater is considered pure as it percolates through lava fields and it constitutes a resource used by

communities in the region. Therefore mixing the geothermal brine and the fresh water couches is avoided in

the plant design.

An overview of the relevant ground and surface water flow within the Nesjavellir area is given in Figure 36.

The arrows display the amount and direction of fresh water around the energy plant. The cold ground water

originates as precipitation either in the area or flows from afar. A low nutrient cold lake is in the close vicinity


February 4, 2010


and the area forms a national park. The lake itself is a tourist attraction and supports special life forms that

are considered quite unique.

Given 90MWe and 200MWt production at the Nesjavellir plant the following cold ground water flows occur:

1.700 l/s of cold groundwater are pumped up at Grámelur. It mainly comes from lake

Þingvallavatn.

o 500 l/s of that water leaves the area as water for district heating in Reykajvik. It does not

mix with the geothermal brine but goes through heat exchangers

The remaining 1.200 l/s are

o partly re-injected into shallow ground water reservoirs flowing towards lake Þingvallavatn

(Ballzus et al., 2000)

o and the remainder (40%) flows into Þingvallavatn as surface water (Ívarsson, 2008)

The in and out-flow of lake Þingvallavatn is roughly:

Groundwater flowing in from the Glacier Langjökull approx. 100.000 l/s (Kjaran, 2008)

Surface water from the drainage and catchment area of Nesjavellir, approx. 50-100 l/s (Ballzus et al.,

2000)

Groundwater from other catchment areas is assessed as approx. 9000 l/s (Ballzus et al., 2000)

Outflow is through the river Sogið, approx. 106.000 l/s. (Ballzus et al., 2000)

As a reference, the margin of error in the flow measurements of Sogið is 5-10% or 5.300-10.600 l/s so it is

clear that the quantity of cold ground water removed from the system due to Nesjavellir operations is

neglectable in view of the total system flows.


February 4, 2010


Figure 36: Overview of flow of cold ground water near the geothermal energy plant at Nesjavellir.


February 4, 2010


As it is deemed clear that the Nesjavellir operations is not disturbing the balance of the natural

ground water system in view of the total system flows, there are not assumed any external costs from

this factor.

Had any external cost impacts emerged, suggested price tag definitions could involve e.g. replacement costs,

since downstream in Sogið there are three hydropower stations together called The Sog Stations

(Sogsstöðvar: Ljósafossstöð, Írafossstöð and Steingrímsstöð). The cold groundwater sent to Reykjavik is (in

this case neglectable) deduction from the hydro flow through these hydro power stations and could thus, be

calculated as a decrease in power output from these stations.

Table 44: Overview of external costs due to balance disturbance of cold ground water system

External costs due to balance disturbance of cold ground water system

Types of impacts Price tag type External costs [€ (2002)]

- - 0


7.2.3 Soil

7.2.3.1 DISLOCATION OF SOIL DURING CONSTRUCTION OF POWER PLANT

This impact is included in the Land Quality factor.

7.2.3.2 DISLOCATION OF SOIL DURING CONSTRUCTION OF ROADS

This impact is included in the Land Quality factor.


February 4, 2010


8 EXISTENCE Aspects and their Impacts

This chapter investigates possible existence impacts of Nesjavellir geothermal power plant, that is, the

impacts resulting from the mere fact of the power plant being and existing in the location and environment

that it does.

The methodologies of assessing such often subjective issues differ with the different characters of the impact

that are being assessed. Thus, some can be fairly easily estimated based on data and facts, where as others are

very subjective and i.e. based on surveys measuring the opinion of both stakeholder groups and the public in

general.

In the following sections, both cases occur.

8.1 Changes in Natural Landscapes – Visual Impacts

An extensive Icelandic project is presently in implementation, evaluating the uniqueness and value of

Icelandic natural landscapes. Thus, this project will not present such an evaluation of its own. This factor

therefore needs to be updated when conclusions from the Icelandic project become available.

8.1.1 The Intrinsic Value of Landscapes

Buildings, boreholes, pipes – all are visual landmarks of geothermal power plants.

The method for assessing a price tag for this factor would be the Contingent Valuation Method (CVM), a

non-market-based technique that elicits information concerning environmental preferences from individuals

through the use of surveys, questionnaires, and interviews. A scenario or hypothetical market is constructed

involving an improvement or decline in environmental quality. The scenario is posed to a random sample of

the population to estimate their willingness to pay (e.g., through local property taxes or utility fees) for the

improvement or their willingness to accept monetary compensation for the decline in environmental quality.


February 4, 2010


8.1.2 Impacts on Summerhouse Prices

Another impact of visual changes in the natural landscapes due to the Nesjavellir energy plant is on the

development of prices for summerhouses in visual range from the plant. (this valuing method is called

hedonic price method)

Historically, price development of summerhouses in close proximity to geothermal energy plants shows that,

view to such plants does not have negative impacts on prices. Rather, proximity to geothermal power plants

have a positive impact on pricing since Icelandic power companies have put much emphasis on building up

trails, markers, signs, information and maps of the nearby area, making it much more attractive for hiking and

other outdoor activities. (Leopoldsson, 2008)

Masts and pipelines in visual range can impact negatively approximately 20-30% in summer house pricing,

though. (Leopoldsson, 2008)

The pipeline from Nesjavellir does not cross any summer house area and thus cannot be calculated as a

negative impact in this respect. (Grimsnes, 2008)

All electric cables from Nesjavellir are under ground. High voltage electricity cables do cross some of the

summer house areas near Nesjavellir geothermal power plant, however, but these cables are due to hydro

power stations owned by the National Power Company Landsvirkjun and are not due to Nesjavellir (owned

by Reykjavik Power Company). Thus, negative impacts due to electric cables over ground cannot be credited

to Nesjavellir. (Grimsnes, 2008)

Also, forest planting has been one activity geothermal energy companies have attended to in Iceland making

their local areas more attractive to summer house owners. Looking back through approx. a 100 years of

summer house history, lush vegetation has been much more important and weighty on price development of

summer houses than view. (Leopoldsson, 2008)

One more issue, making proximity to geothermal energy plants attractive to summer house owners is the

access to warm water and district heating. (Leopoldsson, 2008)


February 4, 2010


There are three summer house areas with visual range to the Nesjavellir energy plant: Nesjar (F1, 407 ha of

land quality A and B10, with ca 25011 houses when fully built up), Nesjavellir (F2, 49 ha of land quality A and

B, with approximately 15 houses) and Hagvík (F3b, 25 ha of land quality A, B and C, with 30-40 houses when

fully built up), according to the detailed land-use plan of the Nesjavellir area. (Grimsnes, 2008 / Grimsnes,

2008 B) Thus, a total of 305 houses.

The average size of summer houses in Grímsnes and Grafningshreppur is approx. 100m2.

For the current calculations the average m2 price of summer houses used is: 1.414 - 1.767 € (2002) (Orig.

200.000-250.000 ISKR/m2 2008 costs).

Popular areas (including the three mentioned above: 2.121 - 2.828 € (2002) (Orig. 300.000-400.000 ISKR/m2

2008 costs). (Leopoldsson, 2008)

The positive impacts of proximity to a geothermal energy plant are an approximate 20-30% increase

in the m2 price.

Note that the beneficial impacts do not actually arise from visual impacts, since it surfaced that view in

general and specifically view to a geothermal energy plant is not a highly important factor for Icelandic

summerhouse owners. Instead, the impacts stem from various beneficial factors resulting from proximity to

the energy plant and a range of actions taken by the energy company to improve its surroundings, such as

access to hot water and district heating, forest planting, building up trails, markers, signs, information and

maps of the nearby area, making it much more attractive for hiking and other outdoor activities, as previously

mentioned.

Thus, the positive external value creation of the Nesjavellir energy plant through an increase in summer house

prices in its proximity is 26.962.000 € (2002) (Orig. 3.812.500.000 ISKR/m2 2008 costs) when using the

average figure.

10 Land quality definitions: A – protected area / reservation, B – pristine nature and landscapes of a certain conservative value, C – areas with little conservative value (Grimsnes, 2008)

11 An approximation based on the size of the land as well as the planned density of houses in F3b and the current density in F2 (which should already be fully built up)


February 4, 2010


8.1.3 Special Relics of Natural Landscapes

A detailed land-use plan of the Nesjavellir area, maps out special natural landscapes within the area. None of

these different relics of natural landscapes are directly affected or disrupted by the Nesjavellir power plant.

On the contrary, the area has been even more thoroughly mapped than it would have been otherwise and all

special natural landscapes marked out and will be especially protected. Additionally, these areas have been

made accessible by new trails, so that the public can enjoy them more readily than ever.

Therefore, there are not assumed any external costs from this factor. Probable beneficial impacts from

this factor is included in the Facilitated Access to Nature through New Roads/Trails, see section 8.2. Had any

external cost impacts emerged, suggested price tag definitions would involve contingent valuation.

8.1.4 Total External Costs from Changes in Natural Landscapes

An overview of the total external costs arising from changes in natural landscapes factor is given in Table 43.


February 4, 2010


Table 45: Overview of total external costs from changes in natural landscapes

External costs due to changes in natural landscapes – visual impacts

Types of impacts Types of price tags External costs [€ (2002)]

The intrinsic value of landscapes

Price tag under development - needs to updated when price tag

available

- (not included – needs to be updated in

future studies)

20-30% increase in m2 price of summerhouses (These emerging impacts are actually benefits and thus presented as negative figures)

707 higher m2 price External costs

MIN - 21.563.500

1.061 higher m2 price External costs

MAX - 32.360.500

884 higher m2 price External costs AVERAGE

- 26.962.000

Special relics of natural landscapes - 0

TOTAL external costs during 50 year life time of plant [€ (2002)] - using the AVERAGE figure

- 26.962.000

8.2 Facilitated Access to Nature through New Roads/Trails

As mentioned in the previous chapter, good land management near geothermal power plants has lead to

rising prices of summer houses in their proximity. Icelandic energy companies have hired youngsters to lay

trails, markers, signs, information and maps of the nearby area to facilitate access to local areas, as well as for

forest planting. The public has made more use of the geothermal areas for leisure than before the energy

plants were established.

A survey regarding the impacts of geothermal energy plants within the Hengill area (where Nesjavellir is

located) on tourism and outdoor life was carried out in 2001. (Gudmundsson, 2003) The survey indicated a

definite increase in attraction for hiking and other outdoor activities.

68-74% of the respondents claimed that a geothermal energy plant in the area would not affect their use of

the area, 17-27% indicated that it would increase their use of the area and 5-13% that it would decrease their


February 4, 2010


use of the area. Thus, a geothermal energy plant rather attracts people than decreasing the appeal of the area.

(Gudmundsson, 2003)

A majority had positive sentiments towards steam columns, boreholes, plant buildings and, to a lesser degree

though, towards cooling towers and borehole rims/bases. Generally, most agreed that pipelines and especially

noise and high-voltage transmission lines had negative impacts. (Gudmundsson, 2003)

Mostly, people use the Hengill are for shorter hiking trips (16%) but apparently the area attracts visitors for

multiple other reasons as well such as longer hiking trips (5%), gathering berries and herbs (4,2%), skiing

(4%), jeep trips (3,7%), photographing (3,7%) and visiting cultural sites (3,3%). (Gudmundsson, 2003)

In consequence it can be assumed that the impacts of an extended access to nature together with the signs,

information and hiking maps will affect approximately 36% of the current use of the area and in total the

number of visitors increase by approximately 12-14%. The year 2001 saw approximately 180.000 visits to the

Hengill area, which then would increase to approximately 203.000 visits. Thus, 23.400 visits can be accredited

to the energy company initiatives.

Assuming an average stay of 3 hours for all types of uses, except for longer hiking trips, which is assumed as

5 hours, the total hours amount to 72.540 hours. A defined value per leisure hour can be used to assess the

external costs (benefit actually) of this impact factor. Value per leisure hour is calculated as half the average

hourly salary, after tax deductions, which would amount to approximately 23 € (2002)/hour (Orig. 1.950

ISKR/hour (2002 figures)). Consequently, the external benefits from this impact factor is 1.640.910 €

(2002)/yr (Orig. 181.350.000 ISKR per year, based on 2002 salary figures).


February 4, 2010


Table 46: Overview of external costs due to facilitated access to nature through new roads/trails

External costs due to facilitated access to nature through new roads/trails

Types of impacts Type of price tag External costs [€ (2002)]

Increased attraction of area for outdoor leisure (These emerging impacts are actually benefits and thus presented as negative figures)

Value per leisure hour

23 €/hour

- 1.640.910 / year

TOTAL external costs during 50 year life time of plant [€ (2002)] - 82.045.489

8.3 Tourism at Nesjavellir Plant

Nesjavellir data show that on average approximately 16-17.000 visitors visit the energy plant guest facilities

every year. On the other hand, visitors visiting the plant area without using the plant‘s visitors service is on

the rise and the total number of visitors would be much higher. (OR, 2008) According to a survey performed

in 2001 80.000 Icelandic visitors visited Nesjavellir that year, as well as approximately 40-45.000 international

tourists, that is approximately 125.000 visitors in one year. Additionally it is estimated that around 200.000

Icelanders have visited Nesjavellir power plant since its opening in 1990 (NB. One individual can represent

more than one visit, making the actual number of visits substantially higher. (Gudmundsson, 2003)

Assuming 16.500 visitors per year and approximately 1 hours stay at the Nesjavellir guest facility, and using

the leisure hour value defined in the previous chapter, tourism at Nesjavellir would produce an external

benefit of 379.500 € (2002)/yr (Orig. 41.250.000 ISKR per year, based on 2002 salary figures).


February 4, 2010


Table 47: Overview of external costs due to tourism at Nesjavellir plant

External costs due to tourism at Nesjavellir plant


Guests visiting the Nesjavellir guest facility (These emerging impacts are actually benefits and thus presented as negative figures)


23 €/hour

- 379.500/ year

TOTAL external costs during 50 year life time of plant [€ (2002)] - 18.975.000

8.4 Noise pollution

If there are any impacts from this factor is assumed to come into play, within facets affecting the outcome of

both the Facilitated Access to Nature through New Roads/Trails and Tourism at Nesjavellir Plant factors.

Therefore, this impact factor is not assessed separately.

8.5 Other Socio-economic Impacts

Other potential socio-economic impacts, in addition to the ones previously assessed within this Existence

section, are: (MHA/OIT, 2008)

Substantially altering of the location and distribution of populations

Changes in populations at a rate that exceeds historic rates

Decreases in jobs so as to raise the regional unemployment rates or reduce income generation

Substantial affects on local housing market (other than summer houses, which ar included in section

8.1)

Preclusion of the use of resources from other economically viable enterprises


February 4, 2010


Needs to construct new schools or medical facilities

Disturbance of the delivery of emergency and other community services

The character of activity as well as the location of Nesjavellir energy plant away from densely populated areas

(approximately 20 km in bird range from the closest village, Hveragerði and app. 30 km from the capital area)

concludes in no negative impacts from the listed issues.

The need for staff is only around 20 so the size is not large enough to have substantial positive impacts on

employment rates either. (Pétursdóttir, 2009)

Therefore, there are not assumed any external costs from this topic.

There are of course also multiple external social benefits that are not included in this assessment, simply

because, they are too far reaching for the possible scope of this project and it was not the initial intention of

the project to focus on external benefits. These social benefits would include e.g. access to cheap hot water

and district heating, access to high quality and cheap swimming pools bringing enjoyment, leisure and

enhanced health, the absence of coal, oil or other more polluting energy plants, a strong position on

geothermal research and technical know-how within the global research and energy arena, etc.

Table 48 gives an overview of the external costs from other socio-economic impacts.


February 4, 2010


Table 48: Overview of external costs from other socio-economic impacts

External costs due to other socio-economic impacts

Types of impacts Type of price tag External costs

Alteration of location and distribution of populations

- 0

Changes in populations at a rate - 0

Increases in regional unemployment - 0

Affects on local housing market (other than summer houses – included in section 8.1)

- 0

Preclusion of the use of resources from other economically viable enterprises

- 0

Needs to construct new schools or medical facilities

- 0

Disturbance of the delivery of emergency and other community services

- 0

TOTAL external costs during 50 year life time of plant [€ (2002)] 0

8.6 Archaeological- and Historical Remains

A thorough mapping of archaeological- and historical remains within the Nesjavellir geothermal area has been

carried out in relation to further energy planning within the area. This mapping shows that no known remains

are within the area or is being affected by the geothermal utilisation there. So, within the Nesjavellir case

study no external costs are ascribed to this concern.


February 4, 2010


Table 49: Overview of external costs due to archaeological- and historical remains disturbances

External costs due to archaeological- and historical remains disturbances


- -

0

TOTAL external costs during 50 year life time of plant [€ (2002)] 0

9 Total External Cost for Energy Harnessing at Nesjavellir

The following table shows the total external costs estimated for the Nesjavellir case study.

Since the original goal was to present only the external cost, not assessing external benefits, a figure is given

for the costs excluding the emerging benefits from the existence aspects. During the course of the project

however, the existence aspects showed to produce only benefits so hence, these benefits were estimated.

Additionally, there are multiple other benefits, not mentioned within this project, such as the eradication of

needs for polluting coal and oil power plants, the access to inexpensive district heating and electricity, the

access to inexpensive warm water for pools and spas, beneficial health effects, the developed academic and

practical expertise on geothermal power and more.


February 4, 2010


Table 50: Overview of the total external costs estimated for the Nesjavellir case study

TOTAL EXTERNAL COSTS FOR NESJAVELLIR CASE STUDY

CHEMICAL ASPECTS

AIR BOURNE CHEMICALS

Type of Aspects Types of impacts Type of price tag External costs [€

(2002)]

CO2 Global warming NEEDS

MULTIPLE With weighting

73.290.788

CO MULTIPLE ÷ 2.545.938

H2S MULTIPLE

Defined within project

MULTIPLE

143.456.487

NOx MULTIPLE NEEDS

MULTIPLE 3.186.286

N2O Global warming NEEDS


447.734

SO2 MULTIPLE NEEDS

MULTIPLE 312.046.589

NMVOC MULTIPLE NEEDS

MULTIPLE 74.058

CH4 Global warming NEEDS


4.820.606

VOC MULTIPLE ÷ 1.163.400

NH3 MULTIPLE NEEDS

MULTIPLE 39.201

CHEMICALS IN BRINE


February 4, 2010


SiO2 0 ÷ 0

As 0 ÷ 0

Al 0 ÷ 0

B 0 ÷ 0

PHYSICAL ASPECTS

THERMODYNAMICS

Heat from brine 0 - 0

Energy balance of natural geothermal system

Decrease of production capacity of geothermal

system

One additional borehole needed every 5 years to

maintain production levels – 2.900.097 €

(2002)/hole

26.100.875

(9 holes in total)

KINETICS

Mass balance of natural geothermal system

Decrease of production capacity of geothermal

system

Included in costs regarding Energy balance of natural geothermal system

-

Induced seismicity and subsidence

0 - 0

Balance of cold ground water system

0 ÷ 0

Dislocation of soil during construction of energy plant

Disturbance of soil surface Included in Land Quality price tag

-

Dislocation of soil during construction of roads

Disturbance of soil surface Included in Land Quality price tag

-

TOTAL EXTERNAL COSTS [€ (2002)] 567.171.962


February 4, 2010


EXISTENCE ASPECTS

Changes in natural landscapes – visual impacts

MULTIPLE MULTIPLE - 26.962.000

Facilitated access to nature through new roads/trails

Increased attraction of area for outdoor leisure


23 €/hour - 1.640.910

Tourism at Nesjavellir Guests visiting the

Nesjavellir guest facility


23 €/hour

- 18.975.000

Other Socio-economic impacts

0 ÷ 0

Archaeological- and historical remains

0 ÷ 0

TOTAL EXTERNAL COSTS – incl. Benefits

[€ (2002)] 519.594.05

9.1 Cost-benefit Calculations of Total External Cost Figures

Geothermal energy plants can be equipped with technology that cleans sulphur emissions for the indoor

environment. The atmospheric pressure is also kept higher indoors than outdoors so that emissions are kept

out and the staff kept from high exposure. This means that the station buildings need to be constructed

carefully and air conditioners need more powerful motors. Larger scrubbers are available on an industrial

scale and in the following sections information is from Vala Matthiasdottir‘s Master thesis on the Nesjavellir

power plant.(Kristín V. Matthíasdóttir 2006). Removal of Hydrogen sulphide from non condensable

geothermal gas at is obligatory in some countries that use this resource.


February 4, 2010


9.1.1 Industrial scrubbing equipment

Four processes for hydrogen sulphide removal were studied. The technology was designed to process non-

condensable gas stream at the design-premise, Nesjavellir power plant. The most promising design was one

that would produce sulphur and hydrogen and sell these on one hand to a fertilizer plant and on the other

hand as fuel for transport. An interview with the author revealed that this process never went into the design

phase; the hydrogen market has not established properly and sulphur supply is in excess and no fertilizer

plant to make use of the process.

Instead an off-the-shelf technology is selected here for cost related calculations. Haldor Topsoe produces

many types of chemical industrial cleaning modules. WSA, or wet gas sulphuric acid management that

produced sulphuric acid instead. These are used in metallurgy and oil refineries but need to be adapted to the

capacity. One such module would easily service geothermal plant during its life but is often set to 30 years,

whereas the capacity is developed for much greater emission streams in coal fired plants and more varied

sulphur compounds. A valuable by-product is sulphuric acid which is used in chemical industry such as pulp

and paper production. The capital and operating expenses are presented in Table 51.

Figure 37: 3d view of

installed WSA plant for

treating acid gas


February 4, 2010


Table 51: Prices for various parts of the recommended equipment. The table is imported directly from the

source and the exchange rate is 1€ = 91 Ikr

Purchased equipment € 6 500 000 591 500 000 ISK

Purchased equipment installation € 1 625 000 147 875 000 ISK

Instrumentation and controls € 1 690 000 153 790 000 ISK

Piping (installed) € 2 600 000 236 600 000 ISK

Electrical systems (installed) € 1 300 000 118 300 000 ISK

Fixed Capital Investment € 13 715 000 1 248 065 000 ISK

Operational cost pr year 43 205 000 ISK

Yearly revenue to sold H2SO4 141 000 000 ISK

Income – Revenue 97 759 000 ISK

9.1.2 Life time and discount rate Geothermal energy plants can be designed to use their resource fast and generate income for a short time. Or,

they can be constructed stepwise according to the registered capacity of the resource and developed for less

intensive use for a longer time. This is relevant to set an acceptable life time of the plant, and the discount

rate. Life time of energy plants are set to 30-50 years, but this indicates rather the life time of the equipment

and payback time of the relevant investments rather than the possible period of resource exploitation.

(Grímur Björnsson 2008). Other authors extend sustainable use to a period of 100 or 300 years (Gudni

Axelsson 2005). Here the period under study is set to 40 years. The discount rate is first set to 2,5% as is

recommended for equipment that will benefit in the long term (Richard Newell 2001) but a comparison is

also made with figures if the discount rate is set to 5,5% as is usual within the energy business when sales

agreement are made over 30 -40 years (Kristín V. Matthíasdóttir 2006).


February 4, 2010


9.1.2.1 PRESENT VALUE (PV) OF THE PROJECT

A time line was constructed using all categories and frequency of the mitigation actions. Each cost category is

set into the timeline at the foreseen point in time according to replacement frequency but maintenance under

―normal‖ conditions subtracted. Each year the costs are added up and their present value found. The cleaning

equipment is discounted at the same rate. Appendix V contains all figures.

9.2 Net Present Value (NPV) of the alternatives: With and without

H2S abatement

According to Boardman it does not matter if the Net present value is calculated by finding the difference of

the costs and benefits each year or if they are summed up and the difference found from the total figures.

The Impact evaluation is set as the eventual benefits from mitigating the impacts. The investment cost plus

the yearly running cost is added to the capital investment. On the other hand the income from selling

sulphuring acid may not be as lucrative as is set up in Table 51. Therefore the income is set equal to the

running cost and therefore omitted from the benefits side. Ikr pr year (rate 2009) so that benefits from the

mitigation do not make too much income difference.

The benefits of mitigation show up already in the fifth year when income is set to equal operational cost of

the cleaning equipment. In the Cost Benefit timeline the prices presented are updated to the US$ rate for

2009.


February 4, 2010


REPORT SECTION IV -

RESULTS

Report section IV is setup as follows:

10 CONCLUSIONS

11 COMPARISON OF EXTERNAL COSTS OF DIFFERENT ENERGY SOURCES

• 12.1 Critical Issues• 12.2 Unanswered Questions and Suggestions for further

Research

12 DISCUSSIONS


February 4, 2010


10 Conclusions

The report shows that external costs can be priced and present real costs that can be considered in the plant‘s

design phase. The estimated external costs can be compared with other costs categories of designing and

operating energy plants.

The attempt to calculate external cost along the lines presented in this report is feasible. Yet, the outcomes

are only as good as the quality of the available data that is fed into the proposed methods. The report

emphasises the means as being a right step in the right direction for internalizing the external cost when

appreciating the real cost of geothermal energy harnessing. The end figures can be more disputable.

Life Cycle Assessment is a tedious task but still the best available approach to make comparison of resource

management, emissions and external impacts quantifiable. Now that software is available to speed up this task

and data banks inherent in these models can make them more accurate than ever, using LCA as basis for

further impact assessment and cost of externalities seems only appropriate.

The external impacts and therefore external costs from energy usage is comparable through the proposed

approach whether the natural resources are of various geothermal origins, other renewable energy sources or

nuclear and fossil origin. The further this approach is used and developed, hopefully all the more appropriate

and accurate it may become.

There are several ways that the proposed method can be used for comparison purposes or to bring forth

methods to incorporate all cost categories to find Life Cycle Cost or the Total cost of energy projects and

services. External costs can also be used to estimate the appropriate size of mitigating actions, such as is done

here for hydrogen sulphide scrubbing. These estimated external costs can be kept in mind and accounted for

in the plant design process, hopefully leading to cleaner production and prevention actions.

A conservative estimation of the cost and the relevant benefit calculations for the external costs of H2S,

where a rather expensive but off-the-shelf scrubbing equipment is selected to compare values, suggests that

there is a Net Benefit for mitigating H2S emissions if the discount rate is set to 5.5% and with only a 5 year

payback time. When using lower discount rate (which is not far from real rates for state-bonds) then the

benefits are even higher.


February 4, 2010


Regarding the external cost findings for the Nesjavellir case study it is interesting to note that the absolute

highest cost factor is rooted in the H2S emissions.

It is assumed, according to experts within the field, that 10% of the H2S is converted into SO2. The external

costs due to SO2 is the highest emerging cost and 98,5% of that cost is due to SO2 presumably originating

from H2S. Additionally, the external costs due to SO2 transformed from H2S is approximately 50% higher

than the estimated costs stemming directly from H2S external impacts.

A Cost Benefit analysis performed only on the external cost estimated for H2S impacts shows that when

incorporating an off-the-shelf H2S scrubbing technology producing sulphuric acid, the benefits show up

already in the fifth year. If the external costs from SO2 originating from H2S would be taken into

consideration, this payback time would be even shorter!

On the whole, external costs originating from H2S present approx. 80% of the total external costs and CO2

emissions present approx. 13%. Thus, if the planned projects of Reykjavik Energy (Orkuveita Reykjavikur,

OR) for H2S scrubbing and CO2 capture and storage are fulfilled, that would decrease the total external costs

by 93%!

11 Discussions

The methods on externalities‘ calculation presented here must be considered only a first attempt in the

specified area. The authors hope to see constructive criticism and suggestions to amend the methods in the

near future. The following areas should draw specific attention:

A way of dealing with mitigating the external cost is to find out the public‘s willingness to pay for the cleaning

process because eventually the energy price from the geothermal plant would increase. The method would

eventually also be applicable but a twist in the situation arrives if the main user of the services from the

station is not the same population as suffers the impacts. If for example the main purchaser for the energy is

one industrial plant then instead of asking the public if they were willing to pay for the mitigation the

formulation of the question should rather be around willingness to accept compensation for their suffering.


February 4, 2010


No attempt will be made to discuss the accuracy of the figures used in the exercise due to the mentioned

discrepancy between the available LCA data and the yearly emissions measured by Reykjavik Energy

(Orkuveita Reykjavikur, OR), the owner of Nesjavellir energy plant. Again, it is asserted that this basic data

needs to be revised when new LCA figures for Nesjavellir become available. Such a study is presently in

process as a Ph.D. project within the Engineering Department at the University of Iceland.

The categories selected for the calculations are considered of importance but there may be other costs that

have been overlooked. Some interviewees pointed out eventual links to corrosion on road vehicles. Due to

uncertain impact allocation (i.e. what is impact from salt on the streets, chemicals that are torn from asphalt

etc) this category is deliberately omitted. According to Runólfur Ólafsson at The Icelandic Automobile

Association (Félag Íslenskra Bifreiðaeigenda) the standard rust protection of vehicles has improved in such a

way in the last years that rust maintenance in general has decreased in Iceland. On the other hand, there are

indications that higher maintenance is needed on silver relays in vehicles electrical equipments in Reykjavik

than in areas where geothermal regions. This is an example of a category that is not addressed.

Also, as stated earlier, there are multiple external benefits, in addition to the ones mentioned within this

project, which would most likely undermine the external costs. Examples of such external benefits are i.e. the

eradication of needs for polluting coal and oil power plants, the access to inexpensive district heating and

electricity, the access to inexpensive warm water for pools and spas, beneficial health effects, the developed

academic and practical expertise on geothermal power and more.

11.1 Critical Issues

For the external cost of Nesjavellir it is essential not to use the cost estimations until the cost can be

recalculated with new figures from an LCA that may become available in the year 2010.

The proportion of H2S transforming to SO2 has large impacts on the external cost conclusions.

In order to be able to calculate external costs for a specific geothermal energy plant in the vicinity of

Reykjavik it is necessary to have more accurate data on H2S dispersion and the proportion of each plant‘s

emissions in the measured concentrations within the capital area.


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Specific Icelandic price tags are needed for the intrinsic value of landscapes and loss of land quality due to air

pollution. Also, it would be a worthy task to further scrutinise the preconditions behind the NEEDs price

tags, to decide whether these conditions would need to be defined specifically for an Icelandic context.

11.2 Unanswered Questions and Suggestions for further Research

It is highly recommended that a study is undertaken that looks at the aspects handled within this project in

context with economic flows. But whereas the report focus was on methods to estimate externalities this task

was set out of the scope of this report.

The following list suggests further questions that have not been addressed and might be cause for attention:

Set an acceptable proportion of H2S transforming to SO2 in the Icelandic climatic context

Actual impacts of H2S on Icelandic fauna and flora within the local and regional vicinity to

geothermal energy plants and a PDF (proportional disappeared fraction) set for the local fauna which

has unusually few numbers of species in the natural fauna).

More accurate information on the actual impacts on human health. Only the first indicators are

studies in the ongoing Masters‘ student project. The impacts of long term exposure to small

concentrations of H2S on human health should be dealt with

Price tags for an Icelandic context, of the impacts of other polluting chemicals than H2S (revising the

NEEDs price tags for an Icelandic context)

Fiscal value price tag for the intrinsic value of Icelandic nature and landscapes

Impacts of H2S on maintenance costs of vehicles within the capital area

Impacts of H2S on maintenance costs of computers within the capital area

Seismic impacts due to geothermal harnessing in Iceland

Impacts on microorganisms (shouldn‘t be any direct impacts, except through impacting natural

geothermal springs)

Studies on the flow patterns of reinjected brine and possible impacts on flora and fauna in nearby

lakes and streams

Where does the measured mercury in trouts in Lake Thingvallavatn come from?


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BIBLIOGRAPHY

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Reykjanes Geothermal System to 100 MWe Power Production:

Fluid Chemistry and Surface Activity. Proceedings World Geothermal Congress 2010 Bali, Indonesia, 25-29 April

2010 Bali, Indonesia.

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Reykjavik UNU.

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R. N. agency. Iceland, Icelandic State Broadcasting Service RUV: 14th May 2009 at 18.00.

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Geothermal Power Plant, Idntaeknistofnun (IceTec), Reykjavik, Iceland, December 2006

Kristmannsdottir, H., Sigurgeirsson, M., Armannsson, H., Hjartarsson, H., Ólafsson, M., “Sulfur

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APPENDIX 1 – INDEX OF CONCEPTS AND ACRONYMS IN

ALPHABETIC ORDER

Note: an extensive list of concepts in Icelandic, used in context with geothermal energy and environment is to

be found in the reference Frummatsskýrsla um Bitruvirkjun (VSÓ 2008)

Aspect: The act of looking at, regard, respect, side (isl: hlið, atrið, viðfang)

Assets belongings. Anything tangible or intangible that one possesses, usually considered as applicable to the

payment of one's debts is considered an asset. Simplistically stated, assets are things of value that can be

readily converted into cash including itself. It is money and other valuables belonging to an individual or

business. Tangible assets contain various subclasses, including current assets and fixed assets. [Intangible

assets are nonphysical resources and rights that have a value and give advantage in the market place.

Examples of intangible assets in financial capital are goodwill (or trust derived in the social field) copyright or

patent and computer program derived from human capital. In terms of Natural capital examples of tangible

assets are potable water and wood. Intangible assets can be management procedures or practice. Products

and services are also either complementary or substitutable and ownership can either be private or

public. The market economy is efficient in negotiating unit prices when all relevant information is accessible.

Public goods are on the other hand so essential that we expect them to be priceless (public good and non-

substitutable) and freely accessible for all. It is not until this public good is damaged or becomes scarce that

we realize that their worth is much higher than nil. As long as they are plentiful and the ecological services

provide enough of them they are not priced. After the damage has set in the view may change, but who

should pay for its restoration when the ownership is public? There is a limit to the Substitutability between

capital types. Earlier, manufactured capital was limiting, but with the expanding scale, natural capital and its

process flows is becoming the limiting factor. Manufactured capital and infrastructure cannot replace natural

capital. For example: A power plant is manufactured capital, if the flow of geothermal heat (natural capital)

seizes the plant is worthless as well. Or, what is the value of trawlers if the fish stock is gone?

Biodiversity: The number of species living in a certain area the richness of the species diversity.


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Biotope

Brine: Brine in general terms is sea water that due to evaporation or freezing contains more than the usual

amount of dissolved salts. Geothermal Brine: Brine that is overheated with respect to its observed depth as a

result of association with anomalous heat source, such as heat transferred from a fault zone. Geothermal

brine is used here as the liquid that carries the heat that geothermal energy plants use in their processes. The

geothermal brine is usually a water solution, rich in dissolved compounds, including gas types. The

dissolution has been facilitated by the heat and pressure and the types of compounds are coherent with the

chemical composition of the surroundings. The geothermal brine can have ‗originated‘ in sea water.

Capital is considered to be a stock of assets made of materials or information that exist at a point in time.

Each form of capital stock generates a flow of services that may be used to enhance the welfare of humans.

This happens either autonomously (grazed land recovers before the next season) or in conjunction with

services from other capital stocks (monitoring, maintenance). Human use of flow of services may or may not

leave the original capital stock intact; Fish stocks that are exploited faster than they can regenerate will

decrease in size, but the stock continues to be a renewable resource.

Capital types have been conceptualized as follows: Natural capital: natural environment and its living

systems, defined in terms of a stock of environmentally provided assets (soil, atmosphere, forests, minerals,

water, fauna, wetland). These provide the useful materials that represent the raw input or consumable

products of human production including stock of natural ecosystems that yield a flow of valuable goods or

services into the future, such as mechanisms to clean air and water. Manufactured capital refers to

infrastructure, equipment, distribution systems, roads, transport systems etc. Social capital encompasses

societal ability to address, organize, and succeed in the implementation of projects using networks and

communities of people in a coherent way. Human capital is the number and availability of skilled operators

on all levels and the capacity to hand over these skills to others by training or education. Financial capital

(shares, bonds, notes, coins) reflects the productive power of the other types of capital.

Cost Benefit Analysis When a public project has been suggested, many direct and indirect impacts can be

described from the project, either accruing on the best side or as increase in wellbeing of the consumers. An

improvement in public transportation may lead to an increase in bus usage, while simultaneously reducing car

usage. In return, less greenhouse gases are emitted, indirectly reducing downtown pollution and less traffic

makes less noise. These impacts occur in primary markets. However, such impacts as less cars being repaired


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because less is driven would occur in a secondary market. According to Boardman (2006) this last group of

impacts, referred to indirect impacts, or secondary, should not be accounted for in a CBA, but externalities,

hidden costs should otherwise the benefits or costs are not correctly evaluated.

District heating service: a system for distributing heat generated in a centralized location for residential and

commercial heating requirements such as space heating and water heating. District heating plants can provide

higher efficiencies and better pollution control than localized boilers.

Effect (n): something caused or produced, consequences, drift, an outward manifestation, something

attained or acquired by an action, operative influence. (v) to bring about (isl: verkun, eðli, áhrif). See also

Impact.

Environment: The combination of elements whose complex inter-relationships make up the settings, the

surroundings and the conditions of life of the individual and of society as they are or as they are felt

(European Commission). According to the Icelandic environmental act: Environment is a collective term for

human beings, fauna, flora and other life forms, soil, geological formations, water, atmosphere, landscape;

Society, health, culture and cultural artefacts as well as assets and valuables.

External cost = Externality: In economics an externality or spill over of an economic transaction is an

effect that has an impact on a party that is not directly involved in the transaction. In such a case, prices do

not reflect the full costs or benefits of production and consumption of the product or service. A positive

impact is called an external benefit, while a negative impact is called an external cost. Producers and

consumers in a market may either not bear all of the costs or not reap all of the benefits of the economic

activity. For example, process that causes air pollution imposes costs on the whole society in terms of public

health care, while fire-proofing a home improves the fire safety of neighbours as well as inhabitants. (Icel:

útlægur kostnaður, úthrif).

Fuel: Any material that is capable of releasing energy when its chemical or physical structure is altered.

Geothermal gradient: The rate of increase of temperature in the Earth with depth. The gradient near the

surface of the Earth varies from place to place depending upon the heat flow in the region and on the

thermal conductivity of the rocks. The approximate average geothermal gradient in the crust is about 25°C.

In geothermal areas the temperature can be much higher.


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Geothermal heat: Heat in the Earth that is above the measured heat at its surface. Sources of hot water and

hot steam are evidence of geothermal heat along with associated chemical deposits at the surface.

Geothermal power: Electricity generated from heat sources and heat reservoirs in the Earth‘s surface.

Geothermal reservoir: is formed when rising hot water/brine and steam is trapped in permeable and porous

rocks under a layer of impermeable rock. In this way an exploitable pocket of energy is formed

Geothermal system: Common term used in geothermal studies similarly as eco-system is used in biology. It

is a confined space plus all factors that influence the behaviour and functions of the geothermal reservoir or

three dimensional area in question. The dynamics of a geothermal system can be described or plotted with

tools such as resistivity, seismicity, geo-thermometers, etc.

Impact: (n): collision, hit. From verb impinge: to fasten or fix (forcibly) to something, to strike, dash, hurl a

thing, to collide with, or to come into (violent) contact to encroach or infringe upon (isl: afleiðing, áhrif,).

Life Cycle Assessment: Systematic tool that evaluates the rations of material and energy that are used

throughout a product‘s or process‘s life cycle, producing a ―holistic‖ view of the potential impacts from its

production, useful life and after it has been discarded.

Life Cycle Cost: There is a discernable difference between the way that LCC is used as a term in Europe and

North America. LCC is used either as the total of all monetary costs relating to a system, product, structure or

service during its life time excluding External costs (Europe). Researchers have been suggesting integrating

LCA and LCC and setting a price tag on each category of external effects of all categories of inputs and

outputs. This is called Full Cost Accounting in Europe but Life Cycle Cost in the US or societal costs. The

goal of looking at these systems in an overarching view is to monitor the process and lead the decision

making towards evaluating external costs in product and service design

Lindal diagram: This diagram shows the possible uses of geothermal fluids according different temperatures

(Lindal, 1973)

Mitigation: Actions designed to prevent, decrease, offset or ameliorate negative environmental effects and

impacts.


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NMVOC: Non-methane volatile organic compounds, or carbon containing airborne compounds other than

methane.

Pareto improvement: Given a set of alternative allocations of, say, goods or income for a set of individuals,

a change from one allocation to another that can make at least one individual better off without making any

other individual worse off. Pareto efficiency: An allocation is Pareto efficient or Pareto optimal when no

further Pareto improvements can be made.

Pigouvian tax: A classic incentive-based alternative to regulation of pollution is a tax, fee, or charge per unit

of pollution emitted after A.C. Pigou (1920). This price should have the effect of decreasing the rate of the

charged activity or item. An example would be specific charge for gasoline containing lead (Pb) because users

tend to avoid taxation and rather select a substitute when available. P. Improvements describe a change from

one allocation to another that can make at least one individual better off without making any other individual

worse off given a set of alternative allocations of, say, goods or income for a set of individuals.

Potentially Disappeared Fraction (PDF): unit nominator for loss of biodiversity, the proportion of species

disappearing. The PDF of vascular plants (and perhaps microbes in geothermal context) is the number of

species growing after any infringement on the flora divided by the number of species originally found in those

or ideal yet comparable conditions.

Significant effect / Significant environmental impact: As defined for students in geothermal training

((Halldórsson 2009) Not defined in the Icelandic act; in the end it becomes that collective judgement of

officers, elected persons and the public. Substantial, irrevocable environmental impact or substantial damage

to the environment which cannot be avoided or remedied through mitigation measures.

Thermal capacity: The quantity of heat needed to warm a collector up to its operating temperature.

Wilderness (as defined in the Nature Conservation Act (44/199, 140/2001, here quoted from

(Thorhallsdottir Thora E 2002)) ...at least 25km2 or such that solitude and nature may be enjoyed without

disturbance from man –made structures or motorized traffic, lies at a distance of at least 5km from manmade

structures including power lines, power stations, reservoirs and roads, and where a direct influence of man is

absent and nature may develop without stress imposed by human activity. Wilderness has no status of legal

protection.


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APPENDIX 2 – COST BENEFIT CALCULATIONS TABLE

methods to evaluate externalities from geothermal energy plants methods to evaluate externalities...

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