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Cost adjustment factor so well cost = .96M including 5% indirect costs
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‎docs/Fervo_Project_Cape-4.md

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@@ -8,7 +8,7 @@ Financial results are calculated
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using
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the [SAM Single Owner PPA Economic Model](https://softwareengineerprogrammer.github.io/GEOPHIRES/SAM-Economic-Models.html#sam-single-owner-ppa).
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Key case study results include LCOE = $76.3/MWh and CAPEX = $4340/kW.
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Key case study results include LCOE = $75.5/MWh and CAPEX = $4300/kW.
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[Click here](https://gtp.scientificwebservices.com/geophires/?geophires-example-id=Fervo_Project_Cape-4) to
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interactively explore the case study in the GEOPHIRES web interface.
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### Economic Parameters
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| Parameter | Input Value(s) | Source |
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|-----------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
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| Economic Model | SAM Single Owner PPA | The SAM Single Owner PPA economic model is used to calculate financial results including LCOE, NPV, IRR, and pro-forma cash flow analysis. See [GEOPHIRES documentation of SAM Economic Models](https://softwareengineerprogrammer.github.io/GEOPHIRES/SAM-Economic-Models.html) for details on how System Advisor Model financial models are integrated into GEOPHIRES. |
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| Inflation Rate | 2.3% | US inflation rate as of April 2025 |
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| PPA Price | Starting at 9.5 cents/kWh, escalating to 10 cents/kWh by project year 11 | Upper end of ranges given in 2024 NREL ATB (NREL, 2024). Both PPAs 'firm for 10 years at less than $100/MWh' estimate given in a podcast. |
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| Well Drilling Cost Correlation & Adjustment Factor | Vertical large baseline correlation + adjustment factor = 0.84 to align with Fervo claimed drilling costs of <$4M/well | Akindipe & Witter, 2025; Latimer, 2025. |
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| Reservoir Stimulation Capital Cost Adjustment Factor | 2.66 | Estimated cost of ~$2M per well. Typical range for Nth-of-kind projects may be $0.5–2M. |
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| Capital Cost for Power Plant for Electricity Generation | $1900/kW | US DOE, 2021. |
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| Discount Rate | 12% | Typical discount rates for high-risk projects may be 12–15% |
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| Inflated Bond Interest Rate | 5.6% | Typical debt annual interest rate |
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| Fraction of Investment in Bonds (percent debt vs. equity) | 60% | Approximate remaining percentage of CAPEX with $1 billion sponsor equity per Matson, 2024. Note that this source says that Fervo ultimately wants to target "15% sponsor equity, 15% bridge loan, and 70% construction to term loans", but this case study does not attempt to model that capital structure. |
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| Exploration Capital Cost | $30M | Estimate significantly higher exploration costs than default correlation in consideration of potential risks associated with second/third/fourth-of-a-kind EGS projects |
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| Investment Tax Credit Rate (ITC) | 30% | Same as 400 MWe case study (Fervo_Project_Cape-3) |
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| Inflation Rate During Construction (additional indirect capital cost) | 15% | Estimate high indirect capital costs in consideration of potential risks associated with unforeseen engineering challenges or construction delays |
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| Parameter | Input Value(s) | Source |
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|-----------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
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| Economic Model | SAM Single Owner PPA | The SAM Single Owner PPA economic model is used to calculate financial results including LCOE, NPV, IRR, and pro-forma cash flow analysis. See [GEOPHIRES documentation of SAM Economic Models](https://softwareengineerprogrammer.github.io/GEOPHIRES/SAM-Economic-Models.html) for details on how System Advisor Model financial models are integrated into GEOPHIRES. |
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| Inflation Rate | 2.3% | US inflation rate as of April 2025 |
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| PPA Price | Starting at 9.5 cents/kWh, escalating to 10 cents/kWh by project year 11 | Upper end of ranges given in 2024 NREL ATB (NREL, 2024). Both PPAs 'firm for 10 years at less than $100/MWh' estimate given in a podcast. |
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| Well Drilling Cost Correlation & Adjustment Factor | Vertical large baseline correlation + adjustment factor = 0.8 to align with Fervo claimed drilling costs of <$4M/well | Akindipe & Witter, 2025; Latimer, 2025. |
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| Reservoir Stimulation Capital Cost Adjustment Factor | 2.66 | Estimated cost of ~$2M per well. Typical range for Nth-of-kind projects may be $0.5–2M. |
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| Capital Cost for Power Plant for Electricity Generation | $1900/kW | US DOE, 2021. |
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| Discount Rate | 12% | Typical discount rates for high-risk projects may be 12–15% |
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| Inflated Bond Interest Rate | 5.6% | Typical debt annual interest rate |
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| Fraction of Investment in Bonds (percent debt vs. equity) | 60% | Approximate remaining percentage of CAPEX with $1 billion sponsor equity per Matson, 2024. Note that this source says that Fervo ultimately wants to target "15% sponsor equity, 15% bridge loan, and 70% construction to term loans", but this case study does not attempt to model that capital structure. |
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| Exploration Capital Cost | $30M | Estimate significantly higher exploration costs than default correlation in consideration of potential risks associated with second/third/fourth-of-a-kind EGS projects |
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| Investment Tax Credit Rate (ITC) | 30% | Same as 400 MWe case study (Fervo_Project_Cape-3) |
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| Inflation Rate During Construction (additional indirect capital cost) | 15% | Estimate high indirect capital costs in consideration of potential risks associated with unforeseen engineering challenges or construction delays |
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### Technical & Engineering Parameters
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| Metric | Result Value | Reference Value(s) | Reference Source |
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|------------------------------------|----------------------------------------------------------|--------------------------|---------------------------------------------|
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| LCOE | $76.3/MWh | $80/MWh | Horne et al, 2025 |
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| Project capital costs: Total CAPEX | $2.67B | | |
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| Project capital costs: $/kW | $4340/kW (based on maximum total electricity generation) | $4500/kW, $3000–$6000/kW | Horne et al, 2025; Latimer, 2025. |
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| Well Drilling and Completion Cost | $3.96M/well (before 5% indirect costs) | $<4M/well | Latimer, 2025. |
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| LCOE | $75.5/MWh | $80/MWh | Horne et al, 2025 |
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| Project capital costs: Total CAPEX | $2.64B | | |
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| Project capital costs: $/kW | $4300/kW (based on maximum total electricity generation) | $4500/kW, $3000–$6000/kW | Horne et al, 2025; Latimer, 2025. |
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| Well Drilling and Completion Cost | $3.96M/well (including 5% indirect costs) | $<4M/well | Latimer, 2025. |
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| WACC | 8.3% | 8.3% | Matson, 2024. |
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| After-tax IRR | 30.8% | 15–25% | Typical levered returns for energy projects |
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| After-tax IRR | 31.5% | 15–25% | Typical levered returns for energy projects |
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### Technical & Engineering Results
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