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)

1. GEO(THERMAL)
POWER & HEAT
… the sleeping potential
Alexander Richter
Canadian Geothermal Energy Association (CanGEA)
ThinkGeoEnergy.com
@thinkgeoenergy
29 February 2012 – REFF Germany, Berlin

2. Heat pumps"
Geo-"
Exchange

3. Geothermal heat
Blue Lagoon, Iceland

4. Geo(thermal) power
Wairakei Geothermal Power Plant, New Zealand

5. Land
use
–
Based
on
Acres/
1GWh

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. Geothermal systems
Depth
In km
1
2
3
4
5
6
Hydrothermal/ Conventional Geothermal
EGS

8. Heat map
Temp.
at Depth
3.5 km

9. Heat map
Temp.
at Depth
5.5 km

10. Heat map
Temp.
at Depth
7.5 km

11. Heat map
Temp.
at Depth
9.5 km

12. Exploration risk
• Exploration risk = Drilling risk
• Finding sufficient water (as carrier of heat)
• Finding sufficient heat
Risk mitigation
• Better resource data
• More initial studies, e.g. temperature gradient drilling,
slim hole drilling
• Exploration risk insurance (private or governmental)

13. MARKETS

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. 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. concessions. And beyond the red tape, the incentives being pushed by the Indonesian
government – 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 2015
Source: Bloomberg New Energy Finance
Source: Bloomberg New Energy Finance

17. FINANCING
GEOTHERMAL
PROJECTS

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. Key concerns by investors/ banks
• Natural resource exploration vs. energy finance
• Experience & know-how
• Creditworthiness of smaller firms
• Exploration risk
• Technology

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. • German answer:
– Drilling/ exploration risk insurance (SwissRE, Marsh,
MunichRE)
– Vendor investment & finance (Daldrup, Wasabi
Energy)

22. New finance market emerging
• Vendor and/ or EPC contractor financing
• Bridge loans
• Operator JVs
• IPP JVs
• Tax monetization

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. 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. Contact
Alexander Richter
Canadian Geothermal Energy Association (CanGEA)
alexander@cangea.ca
ThinkGeoEnergy.com
alex@thinkgeoenergy.com
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