Case study 10.

1 Tongonan Geothermal Power Plant, Leyte, Philippines

2/27/12 2:43 PM







Case study 10.1 Tongonan Geothermal Power Plant, Leyte, Philippines

Case study 10.1 Tongonan Geothermal Power Plant, Leyte, Philippines
Source: ESCAP Environment and Development Series, Environmental Impact Assessment, Guidelines for Industrial Development, p. 52. Notes: The case can be used to show how environmental aspects have not been costed The complete case study, of which this is a part, was adapted by Somluckrat Grandstaff from materials prepared by Beta Balagot, and may be found in Dixon and Hufschmidt (1986). It presents the analysis of the cost-effectiveness of various options for disposing of wastewater from a geothermal power plant built on the island of Leyte in the Philippines. The decision to build the power plant and to tap the local geothermal energy had already been made; it was necessary to decide which means of wastewater disposal from the plant would protect the environment in the most cost-effective manner. Seven ways of disposing of wastewater are considered in the full case study; the costs of building and operating each are different and each has a different effect on the environment. The analysis examines each option in turn, determining its monetary values and, where possible, its environmental effect. Not all of the effects on the environment can be quantified and given a monetary value, but those which cannot be quantified should not be ignored in the analysis. These effects are listed in a qualitative manner and taken into consideration when the final decision is made. In this way the decision maker or project designer is presented with a range of information on the actual costs of construction and operation of each option as well as the various effects of each upon the environment. While each option is subjected to a complete benefit-cost analysis, a more complete presentation would include a benefit-cost analysis of the entire project including the differing options for design of the power plant as a whole as well as those for disposing of wastewater. In this way the economic worth of the entire project, not just one part of it, could have been explored and then compared with other ways of producing electricity. Background information In the past the Philippines has been highly dependent on imported crude oil to meet its energy requirements and so has adopted an energy policy which will promote various forms of domestic energy production. These include nuclear energy, hydroelectric power, coal, petroleum, natural gas, and geothermal energy. Geothermal energy is derived from the natural heat of the earth. With existing technology only geothermal reservoirs associated with recent hot intrusive rocks and with vulcanism can be harnessed for the generation of electrical power. High temperature geothermal energy is found in two forms: dry-steam fields, as seen in the geysers of the United States, and hot-water (wet) fields, as seen at Wairakei and Broadland in New Zealand. At present, the Philippines is exploiting only the;jsessionid=9C5058ADB… Page 1 of 6

1 Tongonan Geothermal Power Plant. Arsenic. A standby disposal system consisting of thermal ponds and other contingency structures would also be consultants to the Ministry of Energy and the Philippine National Oil Corporation. to minimize these. and lithium. geothermal fluids from separator stations would be piped to reinjection wells within the field. Reynolds. When the system is shut down for longer periods the stand-by scheme would permit the discharge of chemically treated waste fluids into the river. and the full case study examines these effects. and lithium in water from the Tongonan wells were found to exceed the limits recommended by the National Pollution Control Commission. At full capacity the 112. Exploration at Tongonan in Leyte started in 1973. Discharge at sea without treatment through an outfall at Biasong Point. Page 2 of 6 . and mercury all have known toxic effects on plants. and Allardice Limited (KRTA). our abbreviated version will outline the analysis of only four of them. Options 2 and 3 involve the direct discharge of waste fluids into the Mahiao River. Although the full case study examined the costs and benefits of all seven methods of disposing of the wastewater. Reinjection 2.greenstone. The fluids from the Tongonan wells contain more dissolved solids than those from most other geothermal fields. The data Seven options for disposal for the wastewater of the plant were proposed: 1. and in 1978 a potential productive capacity of 3000 MW of geothermal electricity was confirmed. these include Thom. These have chemical and thermal characteristics that may affect the environment adversely. Environmental dimensions An environmental impact report prepared by Kingston.jsessionid=9C5058ADB…13.s=ClassifierBrowse&p. Discharge into the Bao River after treatment for the removal of arsenic 6. Philippines 2/27/12 2:43 PM wet fields. Leyte. Discharge into the Mahiao River after treatment for the removal of arsenic 4. This case study considers Phase 1 of the Tongonan Geothermal Power Plant (TGPP) which has a capacity of 112. boron.5 MW. the analysis of the remainder may be found in Dixon and Hufschmidt (1986). boron. the degree to which they might do so depends on the rate and frequency of discharge and the method of disposal. In option 1. which produce a mix of steam and water. Discharge into the Mahiao river without treatment 3. silica. Before http://www. Concentrations of arsenic. indicated that the major adverse effects on the environment would be caused by the disposal of the geothermal waste fluids. Discharge at sea without treatment through an outfall at Lao Point 7.a=b&p. Discharge into the Bao River without treatment 5. boron. This power station relies on a wet-steam geothermal resource and produces residual liquids and gases. and people. The indiscriminate disposal of geothermal wastewater would have severe effects on health and productivity and. animals. They would be used while the reinjection system was temporarily shut down either for maintenance or for some limited emergency.Case study 10. the government has set limits to its discharge. lithium.5 MW power plant would need seven such wells.

High levels of arsenic and boron in the untreated waste fluids discharged into the river would affect adversely the productivity of 4. Such problems could be dealt with by adding chemicals to keep the solids in solution. and replacement (OM&R) costs.Case study 10. the consequence is a severe reduction in productivity.300 per year. the geothermal liquids at Tongonan contain large amounts of dissolved solids like silica which may clog the reinjection pipes.000 hectares. Production would also be reduced to one crop a year. In options 4 and 5 waste fluids would be discharged into the Bao River through a pipeline.s=ClassifierBrowse&p. the economic loss would be as follows: 4.1 Tongonan Geothermal Power Plant. Although reinjection is seen as the most ecologically sound method of disposal. They are briefly described here and 1980 prices are used in the analysis. Two possible sites have been studied: Lao Point and the Biasong Point.a=b&p. Reinjection may also lower the temperature and hence the potential energy of the sub-surface geothermal water. 1 Reinjection. Leyte. The construction of a system of pipelines for the separator stations to the reinjection wells will cost P20 Option 5 would entail treatment of the fluids in the pond in order to precipitate the arsenic. 2 Discharge into the Mahiao River without treatment. it is not yet a well-established technology. Irrigated rice fields yield an average of 61 cavans (1 cavan = 50 kg) per hectare against a yield of 37. or P70 million in all. The construction of seven reinjection wells and the stand-by waste disposal system will take two years. the nett return per hectare for irrigated rice was estimated at P346 and for unirrigated rice P324. The construction of a thermal pond would take one year and cost P7 million. it can safely be assumed that these changes in production will not affect local rice prices.9 cavans from unirrigated fields (NIA Region 8 Office.768. Philippines 2/27/12 2:43 PM being discharged. Based on the cost of production data for the area over the 1975-78 period. Operation and maintenance costs are estimated at P43.jsessionid=9C5058ADB… A thermal pond would also be required for cooling the fluids before releasing them into the river. The annual operation and maintenance costs will total P104 Page 3 of 6 .greenstone.000 http://www. 1980). An outfall at the former would involve 22 km of pipeline and at the latter 32 km. However. Options 6 and 7 involve the selection of an outfall at sea through which to discharge the wastes. If the irrigation waters are heavily polluted. In addition. but the effect of these chemicals may be to create other environmental problems. less if irrigation water were made unusable for the entire 4. it is important to know the local groundwater hydrology and to monitor carefully any effects of injecting geothermal wastewater.000 ha × P346 per ha × 2 crops = P2. as well as different effects on the environment. the fluids would be retained for a few days in a thermal pond where they may be treated with chemicals to remove arsenic.000 hectares of rice fields served by the Bao River Irrigation System. maintenance. The stand-by waste disposal system will involve another P17 million. Costs and environmental effects of the options Each of the seven options has different capital and operations. Each well will cost P10 million. as in the site of this project. since the rice produced in the Bao River Irrigation System is only a small part of the regional total. In areas where water supplies are drawn from underground aquifers. farmers will probably not irrigate their crops.

s=ClassifierBrowse&p.2 million a year.000 The annual loss.jsessionid=9C5058ADB…13. Operation and maintenance costs will be P6. the area of the Bao River Irrigation System will not be affected by the waste fluids. An added environmental cost of discharging untreated wastewater into the river system is the risk to human health and livestock. would be the Page 4 of 6 . 4 Discharge of untreated effluent into the Bao River. The construction of such a system would cost P50 million and cost P15 million annually to operate and maintain. Although the annual value of the fish catch varied from year to year depending on the actual size of the catch and on market prices. A water purification system will be needed to serve the residents along the reaches of the Bao River below the point of discharge.Case study 10. However. the cost of a water purification system that will render the river water safe for domestic use and for drinking was also estimated.4 million (P39. It is assumed that the capital equipment could be sold or shifted to other areas. but these are not identifiable. The annual cost of treating the waste fluids for arsenic is estimated at P4 million per producing well. another environmental cost which can be estimated will be the pollution of the delta. In addition to the regular operation and maintenance costs of the pond itself.1 Tongonan Geothermal Power Annual operation and maintenance costs are estimated at P4. Based on 1978 figures. a gross value of P39.5 million. Estimating the costs to the freshwater ecosystem is more difficult. therefore. The capital costs will be the same as in option 4. since there are no data on the economic value of the fishing along the river. A thermal pond will cost P7 yielding the following nett return: 4. which will affect the marine fisheries of the area. there will be further costs for the treatment of arsenic. The information on fishery productivity used in option 2 will be used in this option to estimate the costs to the marine environment. There may also be some residual effects on the aquatic ecosystems.a=b&p.4 million was taken as representative. The delta or mangrove area of Ormoc Bay plays an important role in sustaining productivity in the adjoining fishing grounds because it is the feeding and spawning ground of several species of fish. the operation and maintenance costs will be higher. These will amount to P4 million per year for each of the 15 producing wells. Its construction will take two years at a cost of P15 million. Fishing is an important industry in the Ormoc Bay and Camotes Sea area. A pipeline some 6 or 7 km long would take two years to build at a cost of P13 million.5 million. P1.296.000 ha × P324 = P1. If this fishery was lost as a consequence of heavy-metal contamination. However. the annual economic loss would be about P11.greenstone. Philippines 2/27/12 2:43 PM One crop of unirrigated rice could be grown. To evaluate this.47 million.29). Leyte. Since the point of discharge will be downstream from the diversion for irrigation. 3 Discharge to Mahiao River after treatment. but that the lost catch would not be replaced by additional fish catches elsewhere.4 × 0. 5 Discharge of treated effluent into the Bao River. There are no scientific studies of the interactive effects of boron and arsenic on a rice field: hence there is no basis at this point for determining whether or not the effects on productivity will be less severe if the arsenic is removed. the nett return from fishing was estimated at 29 percent of the gross return from the catch. Capital costs for a water purification system are estimated at P25 million and annual operating and maintenance costs at P7. The cost of http://www. A thermal pond will be constructed at a cost of P7 million and completed in one year.

http://www. then shadow prices would be needed. This scheme will need a 22 km pipeline which will take two years to build at a cost of P45 million. Leyte. Operation and maintenance costs would come to P60.Case study 10. and 4. in which untreated waste fluids are discharged into the Bao River. if major distortions like subsidies. Table 10. and 7 can be rejected because they are all relatively costly compared to options 1. is rejected because not only does it pollute.5 million. but it is also more expensive. individual effects are usually valued using direct productivity changes based on market prices. For this option a 32 km pipeline would be constructed. 5. In contrast. to quantify these effects. and 6. Analysis of the options There is enough information available to carry out an analysis of some of the major environmental effects of the various options.a=b&p. would have been chosen because it entailed the lowest direct cost. Option 4. This would take two years and would cost P65 million.8 million per year. the total direct and indirect measurable costs are obtained.1 Tongonan Geothermal Power presents the calculations of direct capital. Hence reinjection becomes the most desirable method. without including the values of environmental costs. like option 4. the least cost alternative.8 million. Not enough information is available. The assumption is therefore that market prices can be used to value agricultural and fishery production: that Page 5 of 6 . Its annual operating and maintenance cost will be P41. If the decision is based strictly on measurable costs. 6 Discharge into the sea with an outfall at Lao Point.greenstone.2 presents the calculation of environmental resource costs for the same options. however. both options 4 and 2 may seriously contaminate the marine ecosystem with unknown and unquantifiable results. The present value of the direct costs and the associated environmental costs for each of the proposed wastewater disposal schemes are calculated with a discount rate of 15 percent and an estimated project life for the geothermal power plant of 30 years. that there are no major distortions requiring the use of shadow prices. or capital rationing exist. The results of these calculations for all seven options are summarized in Table 10. 2. hydrological and dispersal patterns in Ormoc Bay and the Camotes Sea should be taken into account. 6. among which the choice would now seem to lie. In estimating the effects of options 6 and 7 on marine productivity.s=ClassifierBrowse&p. This may or may not be correct for the Philippines. Philippines 2/27/12 2:43 PM establishing a water purification system will be lower when the fluids are treated for arsenic. which calls for the discharge of untreated waste into the Mahiao River. OM&R costs for options 1.jsessionid=9C5058ADB…13. Again. foreign exchange but the time needed for construction remains the same. The capital cost is estimated at P7. Once the environmental effects are valued and added to the direct cost. 3. However. 7 Disposal at sea with an outfall at Biasong Point. The disposal of wastewater at sea may affect the productivity of coastal fishing as well as the commercial fishing in Ormoc Bay and the Camotes Sea. then option 4 is the cheapest scheme. the main non-quantifiable effect of option 1 is the possible loss of energy from the lowering of the steam temperature. although its total measured costs are slightly higher than for option 4. Option 2. Operation and maintenance costs of P2 million are expected. 2. but in this example no price adjustments are made. Table 10. Options 3. The productivity of marine fishing may be affected. A similar assumption is made in the case of imported capital equipment used in the disposal systems and for petroleum products used to power the pumps and other equipment involved. While the overall approach is that of cost effectiveness analysis. In this case a slightly larger measured cost in option 1 is preferred over the greater environmental uncertainty inherent in option 4.

sa= Page 6 of 6 .Case study 10. Economic Valuation Techniques for the Environment: A Case Study Workbook.a=b&p.. Dixon and 1986. A. powered by greenstone3 http://www. Johns Hopkins University Baltimore.1 Tongonan Geothermal Power Plant. Philippines 2/27/12 2:43 PM Further Reading J. Hufschmidt. eds.greenstone. Leyte. M.jsessionid=9C5058ADB…13.s=ClassifierBrowse&p.

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