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Wednesday, April 18, 2018

Finance: Report Identifies Key Barriers and Highlights Policy Options to Boost Geothermal Energy Deployment

Renewable Energy Policies in a Time of Transition (IRENA)

This report, prepared jointly by the International Renewable Energy Agency (IRENA), the International Energy Agency (International Energy Agency (IEA) and the Renewable Energy Policy Network for the 21st Century (REN21), identifies key barriers and highlights policy options to boost renewable energy deployment.

After reviewing current policies and targets worldwide, it examines sector-specific policies for heating and cooling, transport and power, as well as measures for integrating variable renewables. An updated policy classification and terminology list can serve as a global reference for renewable energy policy instruments.

Supporting Geothermal Power by Reducing Risk

Global potential for geothermal energy is estimated at 70 to 80 GW. However, because of several barriers, only 15% of the potential capacity is being harnessed globally. One key challenge relates to the high risks and upfront costs associated with exploration, as well as overall project development costs, which occur over a relatively longer period of time.

To reduce the risks associated with geothermal development, several policy approaches and instruments have been successfully applied globally, including: full government development of the resource; cost-sharing between the government or donors and the private sector to mitigate risk; use of insurance instruments and loan guarantees; and application of other fiscal incentives (e.g. tax and import duty exemptions). Key features enabling successful implementation of geothermal projects under various policies include: sufficient capacity within the private sector to implement projects through a multistage (and time-consuming) process; development of transparent and clear criteria to select project development partners; and provision of clear information
on risk capital to be mobilised.

Kenya, Turkey and Nicaragua have been successful in reducing risk through government-supported early-stage drilling with project development undertaken by the private sector. The Geothermal Risk Mitigation Funds for Africa and the Geothermal Development Facility for Latin America are supported by several
donors and providing co-funding for early-stage exploration and certain project development costs. The facility also provides further risk mitigation through allowing for conversion of the co-funding into a full grant (with no further financial obligation) in cases where drilling is unsuccessful.

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