Development of Bankable Geothermal Power Projects
This IRENA webinar on the development of bankable geothermal power projects discussed the challenges and opportunities in the development of bankable geothermal power projects. Experts in the field discussed best practices to assist project developers in developing bankable geothermal power projects. The discussion was followed by questions from participants.
Addressing project uncertainties and challenges, the IRENA Project Navigator supports and guides project developers in the development of geothermal power projects in a manner that can be understood and audited by financiers to facilitate the access to renewable energy financing.
The newly released geothermal guidelines describe bankability requirements in nine progressive stages to develop, finance, construct, and operate a geothermal power plant.
Even though natural resources can be found virtually everywhere, geothermal power projects face specific challenges, as specific project costs are highly site-sensitive, with typical costs for geothermal power plants ranging from 1.8 USD to 5 USD per MW. As such, identification of a bankable geothermal site can only be assured after an exploration drilling campaign has been successfully completed.
Therefore, deciding if a project is promising enough to continue investing in it, will require a comprehensive overview of the project. This includes
- a desk study to assess the geothermal resource potential at the site;
- a checklist of national policy and regulatory frameworks;
- a country-specific risk assessment;
- reliable information on the feasibility and time frame of exploration licensing and permitting procedures;
- availability of performance guarantees from technology providers;
- a base study of market conditions;
- an evaluation of bankability requirements and financing options.
Geothermal power projects rely on sustainable access to the Earth crust's natural heat to pump hot water or steam up from deep wells to generate base load or flexible power.Supporting the development of capabilities of various stakeholders along the geothermal value chain, the Global Geothermal Alliance's (GGA) mission is to increase the share of geothermal energy in the global energy mix through both geothermal power generation and direct use of geothermal heat.
The Project Navigator, one of IRENA’s project facilitation tools, contributes to the GGA’s Action Plan endorsed by Members and Partners in 2016 by supporting the development of effective enabling frameworks and associated mechanisms to achieve national objectives for geothermal energy deployment (Action 3).
High upfront costs represent a steep barrier given that significant investments are required before project risks can be mitigated in a way that project developers can convince investors and lenders that their project is bankable.In a global competitive energy landscape where geothermal levelized cost of electricity (LCOE) ranges from 4 USD cents to 14 USD cents per kilowatt-hour, geothermal project developers need to set realistic expectations and quantify project goals by conducting a thorough analysis of the project environment.