Geothermal Power Plants

Transcription

1 Geothermal Power Plants Capital Investments and Risk Insurance Sig. Lárus Hólm Mannvit Budapest, 15.NOV.2013

2 The Geothermal Project Lifecycle VALUE IDENTIFICATION DECISION GATE 1 DECISION GATE 2 RECONNAISSANCE PRE-FEASIBILITY FEASIBILITY DECISION GATE 3 Concept Screening Concept Definition Project Definition VALUE REALISATION DECISION GATE 4 DECISION GATE 5 TENDER DESIGN CONSTRUCTION OPERATION Baseline and decision to construct Detailed design and Construction Operation and Production System Optimization

3 Cost Characteristics of Geothermal Projects Long Project Lifecycle Patient investment High upfront investment Cost of sub-surface systems subject to high uncertainty Cost of surface systems managed with low uncertainty Acceptable LCoE

4 RET comparison LCOE Information source: NREL

5 CAPEX Breakdown* Cost Category Approximate percentage of CAPEX Preparation & drilling 54% Turbine-generator & auxiliary systems 13% Steam supply system 10% Design & supervision 11% Buildings & ancillary systems 7% Roads & camps 3% Electrical, control & protection systems 2% * Example from a 5MW low enthalpy binary Power Plant in Central-Europe

6 Geothermal Cost Development

7 Geothermal Risks Characteristics Risk factors / Project Phase Reconnaissance Pre-feasibility Feasibility Tender Design & Construction Operation Geological risk Exploration risk Drilling risk Reservoir decline risk Geological hazard Legal & regulatory risk Developm. & constr. risk Economical risk Operational risk

8 Geological Risk as significant financial barrier Risk of not finding an economically sustainable geothermal resource after drilling: Short-term risk during Exploration and Drilling Risk of the geothermal resource naturally depleting rendering the long-term investment unprofitable Long-term risk during Operation

9 Geological Risk Breakdown

10 Geological Risk Breakdown Reduced Mitigated by experience Reduced Mitigating measures Present Mitigating measures Reduced close to elimination

11 Geothermal Cost / Risk Development

12 Geothermal Cost / Risk Development

13 Risk Management and Mitigation All Risks addressed and managed with Project and Risk Management methodologies Life-Cycle management approach with decision gate milestones Risk Assessment / Risk Mitigation EPC / Turnkey contracting(?) Geological Risk mitigated (transferred) by insurance policies

14 Existing insurance for geothermal projects Private insurance policies: the German exception tailor-made National insurance funds post-damage guarantee (France, the Netherlands, Switzerland) guaranteed loan (Iceland and Germany)

15 Towards a risk insurance scheme at European level

16 Risk insurance scheme at European level: why? Shortage of insurance policies Limited current market size No statistical basis to assess the probability of success Allow the technology to progress along its learning curve (EGS) Pooling of the resource risk at a European level Not a competitor to national insurance policies When mature: replaced by private schemes

17 What type of insurance? The exploration phase: a repayable advance No clear success or failure criteria To be reimbursed in case of production A classical interest rate + a bonus depending on the estimated risk The short term risk: a post-damage guarantee To cover a significant amount of projects Fee depending on the estimated risk The long term risk: a post-damage guarantee Be cautious to prevent unsustainable reservoir management Annual fee

18 Short-term risk : 1 st option 90% Total expenses Ceiling 70% Insurance coverage by the EU Fund A homogeneous and generous rate for all EU developers A potential competition with existing national insurances

19 Short-term risk : 2 nd option Countries without insurance Eligible expenses/drilling Countries with insurance Eligible expenses/drilling Total expenses 50% 60% Ceiling Insurance coverage by the EU Fund 90% Additional national coverage 10% top up from the EU Fund Insurance coverage by the EU Fund A lever for the development of national insurances A differentiated treatment between countries

20 What governance? An exclusive management by an EU institution or a shared management with a national institution A secretariat and a board (shareholders, geothermal professionals, experts, for some applications a representative of the national insurance system) A rapporteur and the use of experts A seed capital of Mio The obligation to disclose the data collected

21 The geological risk must be managed and mitigated Conclusion Insurance concepts have been developed in several countries in Europe European geothermal resources better harnessed thanks to European insurance scheme GEOELEC proposes how such a structure could be established and managed European RES funding mechanisms aligned to special characteristics of geothermal projects

22 Q & A

23 KÖSZÖNÖM A FIGYELMET!