This document summarizes financing challenges and solutions for geothermal market growth, with notes from Indonesia. It discusses the World Bank's support for geothermal development through projects in various countries totaling over $1 billion. Key challenges include securing upstream financing due to resource risk, and private sector engagement needed for capital-intensive drilling. Current solutions involve risk allocation/mitigation models and improving regulatory frameworks. Indonesia's Geothermal Resource Risk Mitigation Facility would leverage $4 billion in investments by reducing risk. Future solutions may include more resource risk mitigation as markets evolve and technology advances to reduce costs. Practical cooperation with development finance institutions is important to reduce risks and spur private participation tailored to country contexts.

1. Financing Geothermal Market Growth:
A Development Perspective with Notes from Indonesia
IGC 2018 | April 25, 2018
Roberto La Rocca
Energy Specialist
+ 1 (703) 774-6257
rlarocca@worldbank.org

2. Key Areas of Focus
• World Bank and Geothermal Development
• Project Pipeline
• Financing Challenges
• Current Solutions
• Indonesia: Geothermal Resource Risk Mitigation Facility
• Indonesia: GREM Facility – Expected Results
• Future Solutions
• Medium Term
• Time Warp
• A Recap of Past, Present and Future – Indonesia
• Practical Advice on Cooperation w/ DFIs/IFIs
2

3. World Bank and Geothermal Development
• WB is bullish about growth prospects and contribution to SDGs
• ESMAP’s GGDP has breathed new life into the sector
• Examples from last five years:
- Turkey GDP, US$ 312.5 million
- Ethiopia GSDP, US$ 218.5 million
- Indonesia GEUDP, US$ 104.25 million
…MFD: from millions upstream to billions downstream
3

4. Turkey
$312.5M GDP
Indonesia
$582M GCEI
$104.25M, GEUDP
$660M, GREM (under preparation)
Armenia
$10.7M GEDP
Ethiopia
$218.5M GSDP
Djibouti
$25.9M GSDP
Dominica
$48.2M GRMP
(under preparation)
St Lucia
$22.8M RESDP
(under preparation)
Nicaragua
$47M GRRMP
(under preparation)
Mexico
TA:
Opportunities for
Geothermal
Development
El Salvador
TA (with Iceland):
Assessment of
Feasibility Reports
Chile
TA for
Sustainable
Geothermal
Development
Kazakhstan
TA (w Iceland): Assessment
of Geothermal Resources
Kenya
TA: Development
of National
Geothermal
Strategy
Fiji
TA: Surface
Exploration and
Conceptual
Modeling
Note: Amounts refer to total project cost including financing from IBRD, IDA,
other IFIs, CIFs, bilateral donors and borrowers
Countries with ongoing geothermal operations are shown in dark blue
Countries with geothermal projects under preparation are shown in light blue
Countries with active TA engagement in FY18 are shown in orange
4
Project Pipeline

5. Financing Challenges
• Securing upstream financing
• Resource risk calls for risk capital, which is limited
• Notes from Indonesia: goal of +5.8 GW by 2026; from GCEIP to GEUDP/GREM
• Private sector engagement
• Expected to bear the lion’s share of investment
• Notes from Indonesia: (very) capital intensive drilling (up to US$8 M/full-sized well
+ supporting infrastructure) calls for deep pockets and exacerbate risk
• Regulation and market sentiment
• An inadequate regulatory framework can tip the scale
• Notes from Indonesia: downstream uncertainties re. tariff regime can heighten real
and perceived risks
5

6. Current Solutions
6
• Risk allocation and mitigation
• Risk allocation: who is best placed to take on resource risk?
• Risk mitigation/sharing: various models, with climate finance taking a risk
position
• Notes from Indonesia: As a byproduct, increased focus on financial
intermediation for higher leverage and impact at scale
• Regulatory framework and doing business: getting it right
• Focus on improving institutional governance and the investment climate
• Notes from Indonesia: TA support to key geothermal stakeholders, e.g. PLN
and MEMR (GREM), PT SMI (IA of GREM/GEUDP), PGE (GCEIP)

7. Indonesia: Geothermal Resource Risk Mitigation Facility
7

8. IBRD
US$ 325 M
Climate
Funds (CF)
US$ 175 M
Govt. of
Indonesia
US$ 150 M
Leverage US$4
billion in
investments by
2030
Avoided GHG Emissions
5.5 MtCO2e/year
Additional Geothermal
Power Capacity
1,000 MW
8
Indonesia: GREM Facility - Expected Results

9. Future Solutions – Medium Term
• More resource risk mitigation
• Risk mitigation models may change as market evolves
• Notes from Indonesia: need for enhanced sustainability (e.g. success
fees for revolving funds, carbon markets, etc. – what if climate finance
dries up?)
• Technology advancement/cost reduction
• Still feels like a fragmented/niche market – high costs
• Technology/research may bring about new, cheaper ways of sinking
wells
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10. Future Solutions – Time Warp
10

11. A Recap of Past, Present and Future - Indonesia
11
Preliminary Survey Exploration Drilling Delineation Drilling Production Drilling
& Power Plant
Construction
GCEIP
GEUDP / GREM
GREM
US$
300 M
US$ 660 M
XUS$
104.25 M
X
Risk

12. Practical Advice on Cooperation w/ DFIs/IFIs
12
Takeaways
• Public sector can help reduce project risks and spur market growth
• Well-targeted public support can leverage private participation
• Approaches to geothermal should be tailored to country context
• Let‘s Talk
• Private sector dialogue/market soundings are paramount
• GGDP Session @ IGC
• April 26 13:30 – 15:30, Conference Room D4-Rima Hall
• Frankfurt I4C
• May 24 – KfW‘s De-Risking Climate Investments: The Case for Geothermal

13. 13
Thank You