REFF Germany, Feb. 29, 2012

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Presentation given at the Renewable Energy Finance Forum (REFF) Germany 2012 in Berlin, Germany on February 29, 2012

It was given in a panel on Solar, Biomass and Geothermal at this all-renewable finance conference. It was my third time presenting at this forum (2x in London and in Berlin)

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REFF Germany, Feb. 29, 2012

  1. 1. GEO(THERMAL)POWER & HEAT… the sleeping potentialAlexander RichterCanadian Geothermal Energy Association (CanGEA)ThinkGeoEnergy.com@thinkgeoenergy29 February 2012 – REFF Germany, Berlin
  2. 2. Heat pumps"Geo-"Exchange
  3. 3. Geothermal heatBlue Lagoon, Iceland
  4. 4. Geo(thermal) power Wairakei Geothermal Power Plant, New Zealand
  5. 5. Land  use  –  Based  on  Acres/  1GWh  
  6. 6. What geothermal offers•  Base-load capacity of 90% and more•  No fuel cost•  Long running time•  Heat & power•  Little land use – visibility•  Utility returns over long period of time
  7. 7. Geothermal systemsDepthIn km 1 2 3 4 5 6 Hydrothermal/ Conventional Geothermal EGS
  8. 8. Heat map Temp.at Depth 3.5 km
  9. 9. Heat map Temp.at Depth 5.5 km
  10. 10. Heat map Temp.at Depth 7.5 km
  11. 11. Heat map Temp.at Depth 9.5 km
  12. 12. Exploration risk•  Exploration risk = Drilling risk•  Finding sufficient water (as carrier of heat)•  Finding sufficient heatRisk mitigation•  Better resource data •  More initial studies, e.g. temperature gradient drilling, slim hole drilling•  Exploration risk insurance (private or governmental)
  13. 13. MARKETS
  14. 14. Global potential 74,300 43,000 665 4,300 4,100 1,060 28,600 4,200 3,900 510 14,000 16,100 174 0 640 9,000 Current installed capacity in region Potential capacity in region
  15. 15. Geothermal power generation capacity United States 3,093 2,307 Indonesia 1,197 2,303 Philippines 1,970 530 New Zealand 628 612 Mexico 958 182 Italy 843 77 Iceland 575 225 2010 Japan 536 Kenya 167 363 Additional capacity planned till 2015 El Salvador 204 86 Other 611 674 0 1,000 2,000 3,000 4,000 5,000 6,000
  16. 16. concessions. And beyond the red tape, the incentives being pushed by the Indonesiangovernment – the drilling risk fund, relaxed import duties, pending $120–130 feed-in tariff (FiT),and others – are all steps in the right direction to encourage investment.Figure 2: Historical and expected global capacity additions by country, 2006–15 (MW) Capacity additions by country -46% 12% -21% -8% -21% 72% 18% 51% -5% 751 715 •  ….. 701 Rest of world 497 Philippines 427 421 Mexico 381 337 Kenya 310 245 New Zealand US Indonesia 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance
  17. 17. FINANCINGGEOTHERMALPROJECTS
  18. 18. Financing geothermal projects Start-up Exploration/ Feasibility/ Detailed Design Start of Pre-Feasibility Resource & Construction Operation Verification Mezz./ Bridge Project & Vendor Debt, Const. Financing Financing Venture Development Drilling Project Tax Capital Equity Equity Equity Equity•  Developers •  Private Equity •  Private Equity •  Financial Players•  IPPs (Development Pipeline) •  Public Markets •  Strategic Partners •  Large IPPs with•  Resource Speculators •  Financial ability to Partners•  Venture Capitalists monetize PTCs Source: Islandsbanki
  19. 19. Key concerns by investors/ banks•  Natural resource exploration vs. energy finance•  Experience & know-how•  Creditworthiness of smaller firms•  Exploration risk•  Technology
  20. 20. Approach by developers•  Experienced teams & partners•  Portfolio (geographical diversification)•  Portfolio (additional technologies)•  Portfolio different project stages (EDC, buy-ins) •  Regional focus with availability for carbon credits, development bank money and excellent resources
  21. 21. •  German answer: –  Drilling/ exploration risk insurance (SwissRE, Marsh, MunichRE) –  Vendor investment & finance (Daldrup, Wasabi Energy)
  22. 22. New finance market emerging•  Vendor and/ or EPC contractor financing•  Bridge loans •  Operator JVs•  IPP JVs•  Tax monetization
  23. 23. Geothermal Reporting Code•  Background Mining Reporting Codes & Security Commissions, listed companies mining firms•  Confidence in geothermal investment decisions•  Establish growth and/or income investment potential (stage of project)•  Understand the significance of the results•  Assist with comparable analysis!•  Understands risks and limitations of the data•  Confidence in those who prepared the technical information (“Qualified Persons”)•  Other efforts: European Geothermal Energy Council
  24. 24. Germany’s Renewable Energy FIT•  Erneuerbare-Energien Gesetz – Einspeisetarife•  Guaranteed payments per generated kWh EUR/ kWh USD/ kWh Base (combined heat & power, early start-up bonus) 25 cents 33.6 cents Technology bonus (petro-thermal) 5 cents 6.7 cents Total possible: ! 30 cents! 40.3 cents! Price to developer U.S. 7-10 cents Price to developer Philippines 3-5 cents Annual degression of 5% from 2018•  Germany: 5 MW installed/ 90% capacity – ~EUR 11.8m/ year
  25. 25. ContactAlexander RichterCanadian Geothermal Energy Association (CanGEA)alexander@cangea.caThinkGeoEnergy.comalex@thinkgeoenergy.comFollow me: Twitter: @thinkgeoenergy LinkedIn Group: ThinkGeoEnergy Flickr.com/thinkgeoenergy YouTube.com/thinkgeoenergy Slideshare.com/thinkgeoenergy

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