BALDVIN BJÖRN HARALDSSON, BBA LEGAL
IGC 2018 - Breaking the Barriers
The 4th Iceland Geothermal Conference will be hosted in Iceland in April 2018. The conference offers an in-depth discussion of the barriers that hinder development of the geothermal sector and how to overcome them. It also focuses on the business environment through three separate themes: vision, development, and operations. Having established itself as an important regular conference of the international community, IGC 2018 brought together more than 600 participants from 40 countries from around the world.
The 4th Iceland Geothermal Conference will be hosted in Iceland in April 2018. The conference offers an in-depth discussion of the barriers that hinder development of the geothermal sector and how to overcome them.
2. Data collection/best practices is vital for governments/municipalities, to be able to:
• Estimate its geothermal resources;
• Facilitate access to the resource and increase investment in geothermal;
• Protect its natural resources and the environment;
• Protect the interests of landowners/indigenous peoples;
• Avoid delays in the harnessing of resources;
• Avoid claims/court proceedings based on insufficient or non-transparent regulations
3. Data collection/best practices is vital for developers, to be able to:
• Determine the feasibility of investing in exploration/exploitation in a given country;
• Determine how the resource can be used;
• Reduce delays/costs in the exploration/exploitation phase;
• Ensure the bankability of a project;
• Avoid claims/court proceedings based on misunderstanding regulatory provisions
4. We need to stop talking and start acting
• Industry leaders need to take action. More conferences than megawatts
• A good example:
• The Florence Declaration, followed by:
• IRENA (GGA) / World Bank / IGA cooperation on a resource data gathering in order
to harmonize how geothermal resources are estimated and classified;
• Such database would serve to reduce risk, increase the number of resources utilized,
save time and increase the bankability of projects
5. More action is needed
• The Industry and Governments must cooperate in providing, within GGA and/or other
associations:
• Model regulations on geothermal (to be adapted to local standards);
• Model Licenses, Licensing Procedures, PPA’s, PA’s, PPP’s; Environmental Standards;
• Model Risk Mitigation Systems;
• We are all affected by environmentally unfriendly production of power/heat
• We must therefore cooperate
6. Geothermal Transparency Guide – updated online form
• Database with information on regulatory issues
• The aim is to provide information on regulatory issues in all GGA countries
• Annual updates of rules/regulations
• Statistical information
• New questions concerning f.ex. whether licenses can allow for a multi-use of the
resource
• www.geothermal.bba.is
8. Regulatory Frameworks have an impact on bankability
• Regulatory frameworks in respect of geothermal licensing procedures (terms of
application, information on the applicant, criteria for granting a license etc.) are in
many respects similar between countries
• However:
• the structure of public decision making varies considerably
• technical regulatory requirements and lack of legal clarity are making geothermal
projects less bankable
9. The structure of public decision making in geothermal regulations is a problem
• In certain countries, no particular public body is granted authority to deal with
geothermal projects
• Different ministries are involved in the application procedure
• This reduces transparency and creates a risk of overlapping requirements between
public authorities
10. Developer
Ministry for Mining
Ministry for Land
Ministry for Transport
Ministry for Energy
Ministry for Environment Ministry for Finance
Ministry for Agriculture
Ministry for Employment
Landowner(s)
Municipality/ies
11. General regulatory requirements affecting the financing of projects:
• General terms of licenses; term, pre-emptive right for production, revocation etc
• Tax issues
• Environmental issues
• Incentives for investment
• Terms of PPA’s and Transmission Agreements, to the extent regulated
12. Example 1:
• Restriction on (i) transfer of shares or (ii) change in board members, in the license
holder
• Financing parties must be able to assume control of the license holder in case of
defaults in the financing agreements, either through share transfer or control through
board members
• Solution: Two-tier system of license holder, Parent and Subsidiary, where the shares of
the Parent are transferable and board members can be changed
• Solution: „Direct Agreement“ between Public Authority and Financing parties
13. Example 2:
• Guarantees to be submitted to the Public Authority in charge, before exploration
drilling or exploitation
• If guarantees are required for drilling or exploitation, the amounts in question must be
sufficiently clear in the application process
• Financing parties must be able to assess the nature and impact of such guarantees and
evaluate the costs involved
14. Example 3:
• “Peer review” of the project prior to exploration drilling or exploitation
• If Public Authorities are transferring the decision process to a Peer Review process,
such process needs to be clearly defined in the application process
• Financing parties need to understand the potential impact of such Peer Review and the
authority of such review to require changes in the project schedule
15. Example 4:
• Duration and terms of land lease agreements
• If the land under the project is leased, Financing parties will be concerned with:
• a sufficiently long term of the land lease agreement
• provisions for renewal – whether the License Holder has a unilateral option to extend the term
• whether the License Holder needs to remove all assets at the end of the term
• whether the Public Authority can terminate the land lease agreement
17. Can the harmonization of regulatory frameworks and model agreements be reached?
• Well....
• ... if industry leaders / governments / associations, are in fact interested in incresing
the utilization of geothermal resources world-wide, then yes !
• The capital invested in such efforts will be returned, both directly and indirectly.