We’ve known about geothermal energy and the benefits it can provide for many, many years. But despite all of its advantages, many of the same development challenges have held it back.
Geothermal, though, is now on the rise. Countries around the world now have substantial geothermal capacities that can assist them in meeting their energy demands, while keeping costs and environmental impact low.
The United States still has the most installed geothermal of any country, but Kenya, Indonesia, and other nations follow closely behind it.
In 2016, according to the Geothermal Energy Institute’s 2016 International Market Update, countries across the globe started various new geothermal projects and put others into service. Several plants, including Kenya’s Olkaria Park, also got expansions.
Some Carribean islands, such as Montserrat and St. Lucia, are even considering plans to meet the entirety of their energy needs with geothermal. Many countries are also looking to use abandoned or functioning oil wells to produce geothermal power.
Why is this rise in geothermal power development occurring? Part of it may be the recent global commitments to reducing carbon emissions, such as the Paris climate accord and the United Nations Sustainable Development Goal on energy (SDG7).
Other reasons include efforts to reduce the financial risks of early-stage geothermal development and increased recognition of the many benefits this resource can provide.
According to data the Geothermal Energy Institute (GEI), 44 new geothermal projects started development between March and September 2016. These projects, which are taking place in 23 countries, will add approximately 1,563 megawatts of capacity — a substantial global increase.
The GEI 2016 International Market Update reveals that the rate of growth for geothermal projects had more than doubled, and also that the increase for this six-month period is more than that of the two years prior.
Geothermal capacity is now at approximately 13 gigawatts (GW). If the current rate of growth continues, total production could increase to 23 GW by 2021. Many of the recently announced projects could also discover increased capacity as they move forward.
Countries around the world have set ambitious goals and come up with development to support the geothermal industry.
India’s geothermal energy development framework, for example, sets a target of developing 1,000 megawatts by 2022 and 10,000 MW by 2030.
China is aiming for 530 MWh from geothermal plants by 2020, which would be enough to offset around 72 million tons of coal and 177 million tons of carbon dioxide emissions. The development of these facilities will likely concentrate around Beijing, Hebei and Tianjin.
In December 2015, we also saw the formation of the Global Geothermal Alliance, a coalition of nations, industry leaders, banks and other businesses and stakeholders worldwide. The alliance has set an aspirational goal of a five-fold increase in installed global capacity for geothermal power production and about two-fold growth in geothermal heating by 2030.
The benefits of geothermal energy include the following four items.
Geothermal energy is a clean energy resource that can help countries reduce their greenhouse gas emissions. If it were to account for 3.5 percent of worldwide electricity production — as the International Energy Agency (IEA) projects it will by 2050 — it would reduce carbon emissions by 760 million tons annually.
Geothermal heat pumps are also highly efficient — as much as 50 to 70 percent more efficient than other types of heating. They also perform approximately 20 to 40 percent better than standard air conditioners when it comes to cooling.
A typical coefficient of performance, which measures the amount of energy used to the amount of power generated, for a geothermal heat pump is between three and five.
Geothermal systems may require a high upfront investment, but they pay for themselves rather quickly. Homeowners can typically recoup their investments in five to 10 years, in part because of the low maintenance costs and operating costs.
Using a readily available water source, such as a pond or lake, could help lower installations costs and the time to recoup investments, as can taking advantage of federal, state and local incentive programs.
Geothermal systems also last for a long time. Indoor components have a lifespan of about 25 years, while underground versions typically last around 50 years.
The temperature underground, which geothermal systems utilize, stay at a relatively stable temperature year-round.
One of the primary challenges to the growth of the geothermal industry is the high costs of initial exploration, development, and installation.
Homeowners must be able to make a relatively high upfront investment to reap the future benefits of reliable, clean and affordable energy. They also need to have a sufficient amount of land available. Because geothermal is less common than other heating and cooling systems, it may also be challenging to find an installer.
The high costs and risk of early-stage development have long been a significant obstacle to private sector investment in geothermal electricity production.
Governments, industry leaders, businesses and coalitions around the world have been exploring ways to support further growth in the geothermal sector. Two solutions, risk mitigation and using approaches customized for different regions, may be the most helpful options.
Taking steps to lessen the costs and risks of exploration and drilling can spur significantly increased development and unlock substantial investment.
The Global Geothermal Development Plan (GGDP), which the World Bank’s Energy Sector Management Assistance Program (ESMAP) started in 2013, collaborates with various partners to gather concessional funding for upstream development. This funding can lead to significant investment across the whole of the value chain.
In five years, the GGDP has achieved $235 million in concessional funding through the Clean Technology Fund (CTF). Multilateral development banks (MDBs) like the World Bank have been able to use this funding to support upstream geothermal activities and drive a remarkable shift in the industry.
From 2013 to 2017, multilateral financing for upstream activities reached approximately $100 million annually, according to the World Bank, across projects in 30 countries.
This amount is around four times the proportion of early-stage development financing from MDBs from just 6.7 percent from 1978 to 2012 and 29.2 percent of MDB geothermal investment from 2013 to 2017.
Ongoing projects, the World Bank said, are projected to make available another $1.5 billion from other sources.
Other efforts to reduce risk and attract developers come from federal governments. Indonesia, for instance, is working with ESMAP and other partners to create a Geothermal Risk Mitigation Facility, which would mobilize billions in private sector funding.
If Indonesia is going to add 5.8 gigawatts of geothermal over the next eight years, as it hopes to do, it will need to fill a $25 billion investment gap.
In 2012, the World Bank provided the Indonesian government with a grant from the Global Environment Facility (GEF) — $125 million of concessional financing from the CTF and other support. In 2017, the World Bank supported Indonesia’s Geothermal Energy Upstream Development Project with $55.25 million in grants.
The approach to funding, however, tends to differ from country to country, according to an analysis of all global geothermal power projects from before 2014. ESMAP funded the study.
Countries including Kenya, Mexico, El Salvador and Costa Rica, for example, have used almost exclusively public resources in developing more than 3.6 gigawatts of geothermal. The governments in these countries had made firm commitments to geothermal development.
The trend seems to be moving more toward private funding, however, in recent times. Often, the public and private sectors share the costs and risks of development.
Turkey, for instance, has taken measures to reduce risks associated with geothermal fields through the use of public funding. A recent $350 million project in the country included a $40 million risk-sharing mechanism.
This mechanism is designed to cover a portion of the cost of failed exploration wells for projects that are forecasted to identify about 210 MW of geothermal capacity. These projects will likely spur around $200 million in private capital investment and encourage further exploration outside the most highly developed regions.
St. Lucia provides another example of public-private cost sharing. In St. Lucia, concessional financing will help to carry out a high-prospect exploration drilling campaign. If the campaign confirms the resource, the government will partner with a private company to develop the field fully.
Geothermal has expanded significantly over the last several years and is poised to continue to do so for years to come. This growth has been spurred on by new investments, technological advancement and international cooperation.
If the geothermal sector can get past the initial hurdles that confront it, the power source may be able to one day reach the prevalence of other clean energy resources, like wind and solar.
Businesses, governments, advocates, and communities will all play a hand in the future of geothermal, an energy resource that provides clean, reliable energy at an affordable cost.
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