Ms. Marietta Sander, International Geothermal Association, IGA Iceland Geothermal Conference 2013 March 5-8, 2013, Harpa, Reykjavík

1. Marietta Sander
Executive Director of the IGA
c/o Bochum University of Applied Sciences, Germany
Iceland Geothermal Conference, 7 March 2013
Geothermal Incentive Schemes in Germany, Kenya, New
Zealand, Philippines and the USA

2. Policy targets exist in at
least 118 countries. Targets
include road maps, annual
RE share increases of 0.2-
1.5% in electricity generation
or heat supply.
Power policies exist in at
least 109 countries, half of
these are developing
countries. Policy instruments
include feed-in-tariffs (FIT),
Renewable Portfolio
Standards (RPS), grant
allocations, etc.
FIT policies were in place in
at least 65 countries and 27
states worldwide by early
2012.
Renewables 2012, Global Status Report

3. Policy support schemes & instruments
• Financial incentive schemes, government subsidies
• Risk mitigation schemes, insurance facilities
• Renewable energy policies giving priority to the development of certain
resources (Feed-in-tariffs - FIT, Renewable Portfolio Standards - RPS)
• Privileges regarding the connection to the grid network, transmission and
distribution
Analysis on regulatory frameworks for geothermal electricity
generation in 5 countries:
1. Germany,
2. Kenya,
3. New Zealand,
4. Philippines
5. USA
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013

4. Germany
German Feed-in-Tariff System (Erneuerbare Energien Gesetz, EEG):
• Basic principles of the FIT are that electricity operators who supply grids are obliged to
give priority to electricity provided by RE sources and to pay a minimum price stipulated
by law for a 20-year period. Additional costs arising for grid operators are ultimately
borne by the consumer in accordance with an apportionment system.
• Tariffs range from 3.5 € cents/kWh for large hydroelectric plants to 43 € cents/kWh for
smaller solar power systems on buildings
• FIT allocates 0.25 € per kWh for a geothermal plant with a capacity up to 10 MW
+ additionally heating-use bonus of 3 € cents/kWh
+ petrothermal technology bonus of additional 5 € cents/kWh are granted
Market incentive Program (MAP)
• Pure geothermal heat generating systems are eligible for a repayment subsidy of up to
€ 2 million for construction and expansion, and up to € 2.5 million per borehole.
• For shallow geothermal, subsidies of up to € 1,500 per residential unit are available for
new buildings, and up to € 3,000 per residential unit in existing buildings.
• Loan scheme provides a loan to the developer to finance up to 80% of the drilling
costs. In case the reservoir is dry the loan does not need to be paid back.
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013

5. Germany
• In 2011 about 17% of gross electricity consumption came from RE sources
• In 1990s German feed-in-tariff system (EEG) promoted power generation from RE
• About 13 district heating plants in operation with approx. 100 MW thermal capacity
• Geothermal heat is considered to be a natural resource, which means that the
same legal provisions apply to the exploitation of geothermal energy as for the
extraction of crude oil. Per claim exploitation + exploration rights are granted by
state authorities.
Policies, incentive programs:
Renewable Energy Heat Act (EEWaermeG)
• Obligation for new houses to generate 10% of
heat demand from RE sources
Source: Quick et al, 2010
Heating/ cooling system of House of
German Parliament, Berlin
Different (seasonal) storage techniques:
1) Underground tank; 2) Heat pump; 3) Artificial reservoir; 4) Natural reservoir

6. Germany
• Germany is on 5th position globally in geothermal heat production (after the US,
China, Sweden, Norway)
• Shallow geothermal systems for heating/ cooling of buildings dominate: i.e. open
groundwater usage, groundwater heat storage, fields of borehole heat exchangers;
estimated 165,000 installations in private/ public buildings
Source: GNS Science

7. Republic of Kenya
History:
• Since 1981 geothermal electricity generation at the Olkaria geothermal field
• 14 high temperature prospects; 6 med and low temp prospects; estimated
potential of 7,000 MW
Today:
• Kenya vision 2030 envisages to develop 4,000 MW
(includes drilling of 20 wells annually; operating 15 rigs)
• Strategic ranking of sites with clear dev. priorities
• GoK contributed US$ 399 million; development partners
US$ 1.343 billion (Ngugi, 2012)
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013
Source: Omenda., 2010
Source: Omenda, 2001

8. Republic of Kenya
Government incentives, regulatory framework:
• Initial Government funding in resource exploration and appraisal phase is crucial
• Strong support from multilateral and bilateral financing partners such as the WB,
AfD, KfW, ADB, EIB, UNDP, etc.
• Sound legal base and standards: Geothermal Resources Act of 1982, the Lakes
and Rivers Act, the Electric Act of 1997, EIA and Audit Regulations, standards and
safeguard policies of donors and international treaties
• Least Cost Power Development Plan of
2008-2028 indicates that geothermal plants have
the lowest unit cost, provide base load power
and are recommended for expansion
• Favorable returns for private investors with steam
price of 3.5 US cents/ kWh; a fixed FIT
of >8.5 US cent/kWh for 20 years is guaranteed
• Institutional set-up was restructured in 2009
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013
Source: Ngugi, 2012

9. New Zealand
History:
• Maori have used geothermal heated waters for cooking, washing, bathing,
ceremonial uses, healing, as paint, wood preservatives,...
• 1958 first geothermal power plant installed at
Warakei
Today:
• 628 MW of installed geothermal capacity
(= 10% of total electricity generation)
• 3 out of 12 regions have high temp. geothermal
resources: Bay of Plenty, Northland, Waikato;
Whakarewarewa geothermal field near Rotorua
is the most visited tourist attraction
• Moratorium on building of new thermal power
stations has been imposed (now legislated)
unless for security of supply reasons
• Growing national interest in heat pumps and
space heating/ cooling systems
• Globally renown geothermal expertise, research
and training facilities
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013
Source: GNS Science

10. New Zealand
History:
• Maori have used geothermal heated waters for cooking, washing, bathing,
ceremonial uses, healing, as paint, wood preservatives,...
• 1958 first geothermal power plant installed at
Warakei
Today:
• 628 MW of installed geothermal capacity
(= 10% of total electricity generation)
• 3 out of 12 regions have high temp. geothermal
resources: Bay of Plenty, Northland, Waikato;
Whakarewarewa geothermal field near Rotorua
is the most visited tourist attraction
• Moratorium on building of new thermal power
stations has been imposed (now legislated)
unless for security of supply reasons
• Growing national interest in heat pumps and
space heating/ cooling systems
• Globally renown geothermal expertise, research
and training facilities
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013
Source: GNS Science

11. New Zealand
National strategies:
• New Zealand Energy Strategy to 2050 (2007) & the New Zealand Energy
Efficiency and Conservation Strategy (2001) set out a coordinated energy strategy
with specific action items, a pipeline with new power projects and regard
geothermal as a significant resource to contribute to its 90% target of renewable
power by 2025
• Resources Management Act (RMA), 1991 is NZ’s principal legislation for
environmental management: integrated framework that replaced many previous
resource-use acts, regulations and orders which had been fragmented between
agencies and sectors, such as land use, forestry, pollution, traffic, water and air
• Regional council policies for geothermal resource use in Waikato, Bay of Plenty
Marietta Sander – Geothermal-friendly regulatory frameworks
Source: Ministry of Business, Innovation and Employment;
http://www.med.govt.nz/sectors-industries/energy/energy-
modelling/data/renewables
Percentage of New Zealand electricity generation from Renewables
Electricity generation in 2025
under emissions pricing
and efficiency measures
Source: New Zealand Energy Strategy to 2050

12. Philippines
History:
• Oil crisis in early 1970s led to research into geothermal resources and
development of the Tiwi and Makban geothermal fields on Luzon island (Chevron)
• Creation of the Philippine National Oil Company-Energy Development Corporation
(PNOC-EDC) in 1976 – Task to develop indigenous resources for power gen.
• First geothermal power plant in 1977
• Various presidential decrees, laws, issuances that promoted geothermal dev. since
1973 – since 1987 the privatization (national, foreign investors) of the power sector
is promoted through regulations, fiscal incentives, systematic capacity building
Today:
• 2nd largest geothermal electricity generator globally with an installed capacity of
1,904 MW (=12% of country’s installed capacity) in 2010
• EDC is now a fully integrated geothermal power company (privatized corporation)
generating power since 1996; manages 60% of national steam fields and has 700
geothermal experts
• Fiscal incentives were enhanced when the geothermal industry was declared a
priority investment sector. It will regularly form part of the Philippine investment
priority plan
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013

13. Philippines
Regulatory framework
I) Philippine Geothermal Service Contract Law (Presidential Decree No. 1442):
provides incentives to geothermal developers:
• Exemption from payment on the import of equipment; no taxes are charged, except income tax
• Entry of foreign technical specialized personnel
• Repatriation of capital investment and earnings
II) Renewable Portfolio Standards:
• An obligation is placed on the mandated electricity supply company to distribute
a certain percentage of their electricity from RE sources
III) Renewable Energy Act of 2008:
Promotes the purchase, grid connection and
transmission of electricity generated from RE sources
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013

14. Marietta Sander – Geothermal-friendly regulatory frameworks – GRC 2012
Source: Department of
Energy of the Philippines;
http://www.doe.gov.ph/ER/G
eoLaws%20&%20Issuances
.htm

15. Philippines
Financial and fiscal incentives
I) Financial support schemes:
• RE Trust Fund (RETF) finances research, development, demonstration projects
• Project Preparation Fund (PPF) managed by the Land Bank of the Philippines
• Loan Guarantee Fund (LGF) ….
II) Fiscal incentives:
• Income tax holidays (ITH) for 7 years
• Duty-free import of RE machinery, equipment, materials
• Corporate tax rate of 10% on net taxable income after 7 years of ITH
• 0% VAT rate
• …..
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013

16. United States
Highlights of geothermal acts, incentives, loan and research programs:
• California Geothermal Resources Act of 1967
• In mid 1970s Federal Congress enacted legislation to foster research and dev and
reduce risks (Federal Geothermal Research, Development and Demonstration Act
of 1974)
• Passing of tax incentive programs through the Energy Security Act of 1989 and
Public Utility
• Regulatory Policies Act (PUPRA) in 1970: Provision of fiscal incentives, reduction
of risks, enabled the private power industry to evolve and produce power even
though they were not utilities
• Geothermal Loan Guarantee Program (GLGP) facilitated stimulating loan
guarantees to be granted
• Adoption of Renewable Energy Portfolio Standards by many US states
• As fiscal support scheme Production Tax Credits (PTC) were granted from 2004
onwards and included 1.8 USD cents/ kWh
• Since 2009 almost 400 million USD were made available through the American
Recovery and Reinvestment Act (ARRA) aiming to initiate innovative exploration
and drilling projects (EGS, GSHP,..)
Marietta Sander – Geothermal-friendly regulatory frameworks – March 2013

17. Conclusions
1. Governments are decisive in geothermal development in setting the legal,
financial, policy and institutional framework stimulating research, technology
advancements and partnerships between industry-academia
2. FIT secure rate of return for the private sector
3. Renewable Portfolio Standards and Power Purchase Agreements ensure offtake,
set rules, standards and determine responsibilities and processes
4. Roadmaps provide a clear vision
5. Planning, monitoring and priority setting instruments
6. Risk mitigation schemes/ insurances
7. Capacity building
8. Institutional set-up
Marietta Sander – Geothermal-friendly regulatory frameworks