TODAY’S STUDY: GEOTHERMAL IN THE WORLD

2013 Geothermal Power: International Market Overview

September 2013 (Geothermal Energy Association)

Key Highlights

• As of August 2013, 11,765 Megawatts of (gross) geothermal power are operating globally in addition to several hundred MW in the final stages of construction. By the end of 2013 the global geothermal market is expected to reach 12,000 MW of geothermal capacity.

• Currently there is 11,766 MW planned capacity additions of geothermal power in the early stages of development or under construction in 70 countries and territories around the world. Additionally, developers are actively engaged with 27 Gigawatts of geothermal resource globally.

• Looking closer at projects in the pipeline the global capacity could approach 14,000 MW, adding several thousand megawatts, by the end of the decade with several hundred MW of new geothermal power becoming operational per year.

• This year some of the first demonstration Enhanced Geothermal System (EGS) projects provided electricity to grids in Australia and the United States.

• There are over 1,741 MW of geothermal power under construction. These potential capacity additions are located in 12 countries across the globe. GEA counted over 674 developing geothermal power projects globally, ranging from prospects to projects in the late stages of development.

• Counties such as Uganda, France, Tanzania, Chile, and Rwanda have geothermal projects under construction or in the latter stages of development and will have their first operational geothermal power plants within the next few years.

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Terms and Definitions

While projects in the GEA’s Annual U.S. Geothermal Power Production and development Report are defined by several phases of development (Prospect and Phase 1-4) as defined by GEA’s 2010 New Geothermal Terms and Definitions, this report uses much broader terms to define where a project tracks in its development because of the vastly different development models to construct geothermal power plants. These terms include Prospect, Early Stage, Under Construction, On Hold, Canceled, and Operational. The breadth and diversity of geothermal project tracking throughout the world makes labeling projects with specific phases incredibly difficult. Therefore, for the purposes of this report, projects are defined by much broader categories in order to maintain the integrity of the information regarding a project’s forward progress.

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Geothermal ‘Prospects’ are defined to be areas in which little exploration has taken place, and the country’s government has tendered the property to a private company, government agency or contractor to conduct further exploration. Although geophysical features or prior exploration might indicate the presence of a geothermal resource at the site, past exploration may not have determined the economic feasibility of a geothermal power plant at the property tendered.

‘Early Stage’ projects are defined to be projects where some aspects of a resource are present and the initial stages of explorations and construction are underway. This could mean but is not limited to, the first exploration wells drilled, project funding, and/or significant knowledge of the geothermal resource attained.

Projects ‘Under Construction’ are projects where physical work to build the actual power plant has begun. For the purpose of this report, this does not include production drilling. However, many definitions of ‘Under Construction’ do include production drilling. ‘Under Construction’ is roughly equivalent to GEA’s Phase 4 of a project’s development.

‘Operational’ plants are contributing electricity to a customer who agreed to purchase the power prior to the plant’s construction. ‘Under Construction’ and ‘Operational’ of power plant are determined by information reported publically on company websites, press releases, government or academic reports, or media articles, or other public sources of information.

Projects ‘On Hold’ are when forward progress on the projects has halted for any number of reasons not limited to land or religious disputes, loss of project funding, or an agreement that fell apart.

Projects ‘Canceled’ are projects where the government, project developer, or contractor decided to make no more forward progress on a geothermal project in the immediate future and withdrew from developing that geothermal prospect into a power plant. For this report, GEA collected two numbers for each project in cases where both were available. A “Resource Capacity Estimate” and a “Planned Capacity Addition” (PCA) estimate. At each project phase the geothermal resource capacity estimate may be thought of as the megawatt (MW) value of the total recoverable energy of the subsurface geothermal resource. It should not be confused with the PCA estimate, which is the portion of a geothermal resource that if the developer were to utilize the geothermal resource under its control to produce electricity, would be the power plants resulting estimated installed capacity. In other words, the PCA estimate is usually the expected power plant’s installed capacity. In the case of an expansion to a conventional hydrothermal geothermal plant, the PCA estimate would be the estimated capacity to be added to the plant’s current installed capacity.

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International Market Overview

The global geothermal power market continues to grow substantially, with exciting new opportunities arising around the globe. As of August 2013, the global geothermal industry reached 11,765 MW of installed geothermal capacity. Currently there are 11,766 MW of planned capacity additions of geothermal power in the early stages of development or under construction in 70 countries and territories around the world. Additionally, developers are actively engaged with 27 gigawatts of geothermal resource globally (Resource Capacity Estimate). In Figure 1, the “Global Installed Capacity” is a cumulative representation of the geothermal power plants still operating today.

“PCA of Plants Under Construction” is representative of the power projects under construction. If all power projects become operational by their publicly reported completion dates, the potential global capacity could reach 13,402 MW by 2017.

Looking closer at projects in the pipeline, the global capacity could approach 14,000 MW by the *end of the decade with several hundred MW of new geothermal power becoming operational per year. The leader in terms of megawatts under construction is Indonesia with roughly 425 MW, followed by Kenya with over 296 MW of geothermal power currently under construction. Some other countries to note are the Philippines with 110 MW, Iceland with 260 MW, New Zealand 166 MW, and the U.S. with 178 MW of geothermal power currently under construction. Germany is second following the U.S. with the most new power plants under construction with 8 new power plants and 47MW. However, they are smaller projects ranging from 1-6 MW each.

Figure 2 shows that single flash power plants are the most used technology for geothermal power, composing 39% (~4,557 MW) of Installed Capacity globally. Dry Steam follows at 25% (~3,005 MW) and double flash ranks third at 19% (~2,184 MW) of global installed capacity. Lastly, binary is 14% (~1,654 MW) of global installed capacity. The last 3% of power plants are triple flash, back pressure, flash/binary hybrid, EGS, or some other geothermal technology.

Figure 3 shows “Developing Geothermal Power Projects.” The United States is the world leader with 182 projects. However, many of these projects are progressing slower than their counterparts in countries with less developed geothermal power markets. Many projects in the United States have been trapped in the same phase of development for several years. The U.S. has nearly three times more developing projects than the closest counterparts – Indonesia and the Philippines – due in part to the U.S. being a geographically larger country and having built its first geothermal power plant over 50 years ago.

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The U.S. has also explored for geothermal resources much more extensively than other nations. Countries such as Chile and Indonesia are just beginning to explore their geothermal resources. In the future, GEA expects to see many more pieces of land tendered for exploration and development as the geothermal markets in countries like Japan, Chile, the Philippines, Indonesia, and others evolve.

Despite setbacks stemming from regulatory issues, religious or spiritual conflicts with geothermal resources on heritage sites, and/or a lack of knowledge about geothermal resources within their borders, countries in the developing world demonstrate noticeable forward progress on their projects. Specific examples will be discussed further in the “Country Narrative & Supplemental Information” section of this report. Developers in these countries continue to secure financing, PPAs, exploration permits and leases, and many are entering the construction phase of development.

While the U.S. leads in developing projects, Indonesia leads with a substantial number of MWs planned or under development. Many U.S. projects have progressed rather slowly due to an uncertain policy environment and problems attaining PPAs or financing. There could be a time in the foreseeable future when Indonesia leads in global installed geothermal capacity.

In Figure 3, countries with six or more developing projects are listed along with the respective number of geothermal MW planned in the country. Indonesia is the leader with almost 4,500 MW of developing resource, while the U.S. leads “Number of Projects” with 182 prospects and projects that are in some stage of completion. Figure 4 compares select countries’ 2010 energy consumption, as reported by the World Bank, to their Developing PCA. This graph reflects countries’ demand for electricity compared to how much geothermal capacity the respective country has in the pipeline.

Figures 5-7 show the current installed capacity for every country in the world with an operating geothermal power plant and a total installed capacity of at least 1 MW. They are divided into three categories: Established Markets, with more than 500 MW, Developing Markets, which range from 50-500 MW, and New Markets, with less than 50 MW of installed capacity.

Not shown in the Figures 3-7 above are counties such as Uganda, France, Tanzania, and Rwanda that have several geothermal projects under construction or in the latter stages of development and will have their first operational geothermal power plants within the next few years.

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Emerging Industry Trends and Highlights

Geothermal Power Technologies

There are three main types of geothermal turbines: binary, flash, and dry steam. In dry steam, the oldest power technology, steam is withdrawn directly from an underground geothermal reservoir and used to run the turbines that power the generator. In flash plants, high-pressure and high- temperature geothermal water begins to separate into steam and water as it rises to the surface. The two phase mixture of steam and liquid is separated (“flashed”) in a surface separator. The steam is delivered to a turbine that powers a generator and the resulting liquid is re-injected to the reservoir. In binary plants, geothermal water is used to heat a secondary liquid called a working fluid, which boils at a lower temperature than water. Heat exchangers are used to transfer the heat energy from the geothermal water to vaporize the working fluid. The vaporized working fluid, like steam in flash plants, turns the turbines that power the generators. The geothermal water is injected back into the reservoir in a closed loop that is separated from groundwater sources.

Interestingly, the distribution of power plant technology in the United States is not reflective of the rest of the world. Figure 8 separates U.S. installed capacity of geothermal power by technology type. The United States has mostly developed its high-temperature resource in flash and dry steam plants and very few new power plants with this technology are in the pipeline, favoring instead binary power plants. In fact, since 2007 all but one of the new power plants that came online in the United States was binary. This trend has not been replicated in the rest of the world, where many countries are beginning to develop their higher-temperature resources. Flash and dry steam plants are in the pipeline in many countries across South East Asia, South America, and Africa.

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Enhanced Geothermal Systems Power Projects

Enhanced Geothermal System (EGS) projects can be divided into three categories: Infield, Nearfield, and Greenfield projects. Infield projects are located within an unproductive portion of an operational hydrothermal field. Nearfield are EGS projects on the margins of an existing hydrothermal field and Greenfield projects are geothermal resources engineered where no geothermal development has occurred previously.

This year some of the first demonstration EGS projects added electricity to grids in Australia and the United States. Ormat Technologies, the U.S. Department of Energy, and GeothermEx successfully produced 1.7 additional megawatts from an EGS Infield project inside an existing well field in the U.S. Using innovative subsurface technologies, development teams stimulated an existing sub-commercial injection well, resulting in a 38 percent increase in power output from brine at Ormat’s Desert Peak 2 geothermal power plant in the Brady Complex in Churchill County, Nevada. Support for the project included $5.4 million in direct U.S. DOE funding, $2.6 in million investment from Ormat, and more than four years of collaborative work with partners including Lawrence Berkeley National Laboratory, U.S. Geological Survey, Sandia National Laboratory, University of Utah EGI, Temple University, and TerraTek.

At the Geysers geothermal field, Calpine Corporation successfully completed a Nearfield EGS project engineering 1.75 MW of geothermal power with the potential for 3.25 MW of more geothermal power. A pair of wells were completed as a production-injection well pair (respectively) into low-permeability rock with temperatures as high as ~400o C. As a result of the successful demonstration, Calpine expects that additional EGS targets are available in the Geysers geothermal fields.

In Australia, the commissioning of the Greenfield 1 MW Habanero Pilot Plant is a long anticipated and major milestone for Geodynamics. It marks a significant achievement for Australia and global geothermal exploration. The project is the first Enhanced Geothermal System (EGS) to derive power in Australia and the southern hemisphere.

The long term goal with EGS technology is to create geothermal resources from Greenfield projects. Conventional geothermal resources tend to cost $3-12M to drill, carry significant exploration risk with low success rates, and incur high costs for drilling equipment. However, using EGS technologies could build wells for $0.5-1.5M by eliminating the risks associated with permits, PPA, financing, financial risk, drilling, mechanical equipment, etc.

For example, AltaRock Energy, a U.S. EGS project developer, uses a thermo-degrading zonal isolation technology to block a stimulated fracture, diverting water deeper underground into hotter zones. No drill rig is needed and no chemicals are added to water, thus reducing engineering costs. Next, additional stimulation zones are built by pumping water from the surface at relatively low pressures to open new fractures. Lastly, a blocking agent is then easily removed through thermal degradation and multiple stimulated fractures allows for much higher flow rates to create more power production. Recently, with the help of the U.S. DOE and private funding, AltaRock created multiple stimulated zones from a single wellbore at the Newberry Enhanced Geothermal System (EGS) Demonstration site using this process.

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Global Funds & Initiatives for Geothermal Development

Bloomberg New Energy Finance released a white paper in May 2013 proposing the possibility of a $500 million rotating debt facility that could provide affordable financing to a global portfolio of geothermal projects for the first few deep exploration wells. Bloomberg estimated that a commercial financing approach using a 7% cost of capital would result in a 17% interest rate to developers. With public sector support and a 3.5% rate of return public sector contributors could offer loans at a 14% interest rate.

While these rates are high, they could be attractive, considering the notable lack of access to financing at this time for early-stage drilling. Additionally, Bloomberg believes a $500m fund would result in approximately $9.6bn of new investment in geothermal projects. This fund could directly finance drilling of 473MW across a portfolio of 24 projects. As a result, those confirmed resources would catalyze an additional 1,927MW, bringing the total impact of the fund to 2,400 MW.

Around the same time as Bloomberg’s paper was released, the World Bank announced a $500 million Global Geothermal Development Plan (GGDP) to better manage and reduce risks of exploratory drilling and help expand geothermal power generation in developing countries. The Global Geothermal Development Plan’s (GGDP) initial target is to mobilize U.S.$500 million dollars for geothermal projects.

The GGDP is to be managed by the World Bank’s longstanding Energy Sector Management Assistance Program (ESMAP). The Bank Group’s financing for geothermal development has increased from $73 million in 2007 to $336 million in 2012, and now represents almost 10 percent of the Bank’s total renewable energy lending.7

The U.S. Department of State and the U.S. Department of Energy will lead participation on a “U.S.-AsiaPacific Comprehensive Energy Partnership.” The Partnership will work closely with the World Bank and the Asian Development Bank to ensure a coordinated approach to maximize investment opportunities for geothermal and other renewable energy projects. The Partnership will provide up to $6 billion in funding from Overseas Private Investment Corporation (OPIC) and the Export Import Bank (Ex-Im Bank).

The Ex-Im Bank will launch a program to make available up to $5 billion in export credit financing to eligible countries in the Asian Pacific over the next four years to increase access to American technology, services and equipment for the implementation of energy infrastructure projects. OPIC will provide up to $1 billion in financing for sustainable power and energy infrastructure projects.

On June 30th, 2013 President Obama announced Power Africa, a new initiative to double access to electricity in sub-Saharan Africa. More than two-thirds of the population of sub-Saharan Africa is without electricity, and more than 85 percent of those living in rural areas lack access. Power Africa will build on Africa’s enormous power potential, including new discoveries of vast reserves of oil and gas, and the potential to develop clean geothermal, hydro, wind, and solar energy. Power Africa will help countries develop newly-discovered resources responsibly, build out power generation and transmission, and expand the reach of mini-grid and off-grid solutions. The United States will work with an initial set of Power Africa partner countries, including Ethiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania, many of which have substantial geothermal resources. The United States will commit more than $7 billion in financial support to these countries over the next five years for this initiative.

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Co-Production, Distributed Generation, & New Technologies

According to U.S. DOE estimates, 823,000 old wells in the U.S. produce hot water concurrent with oil and gas production. The water produced annually by oil and gas fields could generate up to 3 GW of clean, base-load power using binary geothermal units. In 2012/13 several projects successfully progressed to establish emission free, distributed generation, or co-production projects with low temperature geothermal resources.

ElectraTherm is a leader in geothermal small-scale, distributed power produced from waste heat. The company recently celebrated the successful commissioning of its 4100C Green Machine at the Florida Canyon Mine in Imlay, Nevada. This marks their second geothermal project utilizing low-temperature (77-116°C) geothermal brine to generate electricity, following the startup of a Series 4000 Green Machine in Romania. This unit is nearing its 500th hour of run time as of July 2013. The Romanian installation provides 50kW of electricity from the geothermal hot water (102°C) without any fuel or emissions, and has reached more than 3,862 hours of run time as of July 2013. To further increase the generator’s efficiency, once geothermal water has passed through the heat exchangers to pressurize the Green Machine working fluid, it continues on to heat nearby residential buildings in the winter.

In Surprise Valley near Cedarville, California, Cornerstone Sustainable Energy is using new technology that will recycle water flowing naturally from artisan formations at 850gpm and 93°C to generate about 1.5 MW of electricity. The technology behind CSE’s project, titled PwrCor, operates at notably lower temperatures (81°C) than Organic Rankine Cycle plants, providing fuel-free, 250 kW of electrical power using 150 gpm of water. This new type of technology uses liquefied CO2 as the working fluid and operates relatively silently as a compact modular system with off the shelf components. Additionally, the technology is a completely closed loop system, which means that the PwrCor emits zero emissions.

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Global Geothermal Development

Globally, there is a spectrum of development models used to build geothermal power plants to avoid the risks associated with drilling and the initial exploration of geothermal development. In some countries, the government funds the initial geothermal exploration and then leases already discovered resources to private developers or government entities to build geothermal power plants. In other countries, companies share the risks of the initial exploration by undertaking joint ventures and business agreements to search for the geothermal resource. Another approach is for a country to issue a longterm concession based on private companies completing all exploration, development, and operation in exchange for a fixed sales and agreement and other financial incentives. Below this spectrum is illustrated by Magnus Gehringer and Victor Loksha of the Energy Sector Management Assistance Program (ESMAP) in their “Geothermal Handbook: Planning and Financing Power Generation.”

Plants Under Construction

The following list is of geothermal power projects under construction. This information is gathered from publically available information. For the purposes of this report, a plant is deemed “under construction” when actual work on the geothermal power plants has begun. For further information, please see the terms and definition section. There are 1,741 MW of geothermal power under construction, or about one in ten projects globally. These potential capacity additions are located in 12 countries across the globe. These countries are located mostly in the western world and developed Asia as well as Kenya, Turkey, and Indonesia, which are likely to bring a substantial amount of geothermal power online in the next few years…

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