The construction and development cost of geothermal power plants is expected to remain high in the coming years compared to other renewable sources like wind and solar because of the “equipment-intensive procedures” needed to install them.

In a report, Fitch Solution said the installation of a geothermal plant needs a significant amount both of equipment and investment.

“This includes field preparation and well constructions, which require heavy drilling equipment that other non-hydropower renewables sectors do not,” the report read.

The technological developments in place that will help enhance the sector have also been limited as it is smaller in capacity compared to other non-hydropower renewables. In 2021, geothermal capacity was only 14 gigawatts (GW), significantly smaller than 827GW wind and 836GW solar.

Installation cost of geothermal plants rose from $2,620 per kilowatt (kW) in 2010 to $4,468 per kw in 2020. This is the second most expensive type of renewable by installation cost, following solar power at $4,581 per kW in 2020, Fitch said, citing data from the International Renewable Energy Agency.

Fitch added that spending for geothermal plants also plays a “significant contribution” to their levelised cost of electricity (LCOE), because of the nature of its operation “which is not subject to changes in fuel feedstock costs for electricity generation.”

With this, the LCOE of geothermal power also rose from $0.049 per kilowatt-hour to $0.071.