Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries (CIP)
by Valerio Micale and Padraig Oliver
Over the last year,
Climate Policy Initiative (CPI) has conducted analysis on behalf of the
Climate Investment Funds with the aim of helping policymakers and development finance institutions understand which policy and financing tools to use in order to enable fast and cost-effective deployment of geothermal for electricity. The research involved high-level dialogues between public and private sector stakeholders to share findings and promote discussion, and three case studies on geothermal projects in Turkey, Kenya and Indonesia. The projects studied varied in size (ranging from 13 MW to 330 MW – the largest in the world), and in terms of the public-private development models used.
Our case studies show that the increase in tariffs needed to provide sufficient returns to incentivize private investment can be entirely offset by public measures addressing specific risks. As a result, by enabling private investment, governments can achieve the same amount of electricity generation while providing only 15-35% of the financial resources they would have spent had they built and operated projects themselves.
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