2017/71 Supported by k nKonw A A weldegdeg e ol n oNtoet e s eSrei r e ise s f ofro r p r&a c t hteh e nEenregryg y Etx itcrea c t i v e s G l o b a l P r a c t i c e The bottom line Mobilizing Risk Capital to Unlock the Global Potential of Geothermal energy is a clean and reliable source of continuous Geothermal Power power. In an optimized generation mix, it can offset the need for Why is this issue important? small fraction of the carbon dioxide produced by burning fossil fuels. fossil-based options and, because When developed in line with industry standards, it can also provide For many developing countries, geothermal significant local environmental benefits by offsetting generation it is free from the volatility of international commodity energy has the potential to contribute clean, options such as coal or diesel, which produce more pollution. prices, help stabilize the cost reliable, and locally sourced power that can of electricity. It can enhance expand access to electricity, grow the economy, What is the key challenge? national energy security as well. create jobs, and boost prosperity Interventions are needed to remove—or at least Yet despite these advantages, only about 15 percent of Geothermal heat is increasingly being used around the world to reduce—barriers to private sector participation, known geothermal reserves are produce electricity in an environmentally friendly way.1 Current particularly the high geothermal resource risk producing electricity. technology could potentially produce more than 70 GW of power2 associated with greenfield development —but only about 15 percent of that capacity is currently developed and operating. There are several reasons for the slow pace of geothermal devel- Most of the high-temperature geothermal resources that are suit- opment in particular countries. Many governments have neither the Roberto La Rocca is an able for power generation are located in areas along the global Ring financial capacity nor the technical expertise to undertake large- energy specialist in the of Fire, a string of volcanoes and seismic areas that stretches 25,000 scale expansion of geothermal resources. World Bank’s Energy and Extractives Global Practice. miles across the globe. It extends from the Indonesian archipelago One major global obstacle is uncertainty about the steam resource through New Zealand, the Philippines, and Japan; along the western capacity at the early stages of development of a geothermal field, Peter Johansen is a coast of the Americas and the Caribbean; and through the Rift Valley which makes it difficult to mobilize the required risk capital. Given that senior energy specialist in the practice. in Africa, stretching toward Europe. the majority of geothermal sites being unexplored are greenfields (that Geothermal power can be very reliable. Because it is non-inter- is, new fields), it is imperative to address this challenge if the world’s mittent and has relatively low operational costs, it is an ideal option geothermal potential is to be unlocked. To address the challenge, Laura Berman is an for generating baseload power. Geothermal power can also serve varying degrees of public participation and global support will be energy specialist in the as a hedge against the volatility of commodity prices, stabilizing sys- required, even when the private sector is involved. practice. tems costs and improving generation mixes. Geothermal produces a Geothermal power is developed through a multistage approach that begins with surface-based exploration, followed by discovery Migara Jayawardena is and exploratory drilling to confirm the availability of the steam a lead evaluation officer 1 Geothermal energy can also be used for other purposes, such as heating. The focus here resource. The process typically takes two to three years. Before for infrastructure in the is power generation. 2 The 70 GW estimate is based on commercially proven technologies to extract fluids from operations can commence, another three to five years are required World Bank’s Independent Evaluation Group and a member of the the subsurface and produce power. It does not include other resource-extraction technologies, for additional drilling to build out the steam field and construct the such as Enhanced Geothermal Systems (EGS). If EGS were to become commercially feasible, the Energy and Extractives Global Practice. global geothermal potential would increase. power plant. Both the substantial up-front capital investment that 2 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r Figure 1. Risks and costs at different stages of geothermal development Downstream plant Upstream resource development construction/operations High 100 “A major global obstacle is uncertainty about the steam resource capacity at the early stages of development Risk level percent of a geothermal field, Moderate 50 Cumulative costs which makes it difficult to mobilize the required risk capital.” Risk Low 0 I II III IV V Stage Surface Exploratory Production SAGS + Operation + reconnaissance drilling drilling power plant maintenance ($1–2 million) ($20–30 million) (~$20–120 million) (~$20–200 million) Years 1–2 Years 2–3 Years 4–6 Years 6–8 Years 8+ Time Source: Authors’ adaptation from ESMAP (2012). Note: SAGS = steam above-ground system. is needed long before revenue starts coming in from electricity the geothermal fluids and to reinject the heat-depleted brine to sales and the high level of resource risk up to and during the early replenish the reservoir. Uncertainty is considerably reduced after stages of drilling can slow the pace of geothermal development and drilling and testing have confirmed the resource availability. Only sometimes prevent projects from proceeding. then can a full financial feasibility assessment be carried out to Figure 1 shows the stages of the geothermal power development determine the bankability of the project and whether to proceed with process, the changes in the level of risk, and the range of capital investments in later stages: development of the steam field (Stage investment typically required at each stage. The highest risks are III), and construction of the steam above-ground system (SAGS) and faced during the early stages of surface reconnaissance and explor- power plant (Stage IV).3 atory drilling (Stages I and II), when there is considerable uncertainty 3 The decision to proceed or not is typically made on the basis of the results of a feasibility regarding the flow capacity and temperature of the resource. This assessment (technical, financial, and economic) as well as an environmental and social impact uncertainty makes it difficult to know how much it will cost to extract assessment (safeguards). 3 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r A typical exploration campaign and initial test drilling program How is resource risk being addressed? consisting of three to five geothermal wells costs $20–$30 million or more. Although these costs are modest compared with the Public financing, either by itself or combined total cost of developing all stages of a large geothermal operation, with private funds, has played a major role in finding this capital can be challenging for developers, especially the expansion of geothermal energy “Many governments in the private sector. Exploratory drilling is typically funded with Very few geothermal developments have advanced without some that want to develop owner equity, which can be lost without chance of recovery if the government intervention or support from the international com- project turns out not to be feasible. The inability to raise adequate geothermal energy munity. Public sector funds are often in short supply, however. Cost funds for exploration and initial drilling can delay or sometimes lack sufficient technical sharing is therefore increasingly being considered, in order to shift even stall geothermal projects. For these reasons, real or perceived risk and catalyze greater private investment in development costs. capability, financing resource risk is a barrier to advancing geothermal development Three approaches to the financing and development of geothermal capacity, or strategic around the world. energy projects are illustrated in figure 2 and discussed below. interest in undertaking full development of the sector. In such cases, Figure 2. Illustration of approaches utilized to mobilize risk capital and financing to develop geothermal projects governments may look to the private sector Stages of development to carry the bulk of the I II III IV V Surface Exploratory/ Production SAGS + Operation + development burden.” reconnaissance test drilling drilling power plant maintenance a. Public sector as developer Source Public funding of financing Developer Public sector Public sector Public sector Public sector Public sector b. Public sector-led exploratory drilling Source Public funding Private funding of financing Developer Public sector Public sector Private sector Private sector Private sector c. Cost-shared exploratory drilling Source Public funding Private funding of financing Private funding Developer Private sector Private sector Private sector Private sector Private sector Note: SAGS = steam above-ground system. 4 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r The public sector as developer. The public sector has Table 1. Public sector–led development of geothermal generation been a major developer of geothermal capacity and resources. capacity, by country, 2014 Governmental (or quasi-governmental) entities undertook the entire project development of about a third of the installed geothermal Country Number of fields Installed capacity (MW) capacity around the world (table 1). In all of these projects, public Mexico 4 980 “Public sector entities entities financed all five of the stages of development shown in Iceland 6 664 mandated to carry out figure 2a. In Costa Rica, Iceland, Mexico, New Zealand, and the Philippines, the public sector successfully expanded geothermal Philippines 5 608 exploratory drilling should power. In countries where governments could not sustain a high Indonesia 5 417 have sufficient risk capital level of investment in geothermal development, as in Kenya and Kenya 1 290 for funding a robust drilling Indonesia during certain periods, growth in the industry was sluggish (140 more being developed) and sometimes stalled. New Zealand 2 220 plan and the technical The level of commitment was not the only factor affecting Costa Rica 2 177 capability to implement success. When geothermal development by the public sector involved El Salvador 2 149 it in line with industry multiple government agencies, bureaucratic procedures and turf Nicaragua 1 70 standards in order to gain wars sometimes slowed the pace of development, despite good France (Guadeloupe) 1 15 the confidence of potential intentions. In Indonesia, Kenya, and Nicaragua, for example, where Turkey 1 15 private developers.” few of the known resources have been drilled and developed, some Ethiopia 1 8 of these obstacles hampered public expansion programs. (All of these Total 31 3,613 countries are renewing their efforts to expand the geothermal sector.) When the public sector takes the lead in developing the sector, Sources: Sanyal and others (2016). it is important that it have well-coordinated policies, clear mandates, adequate multiyear financing, and access to necessary equipment, development rights to a private developer in conjunction with a in addition to the technical capabilities of the agency undertaking the financial scheme that shifts some risk for exploratory drilling away development. from the private developer. Both approaches seek to complete an Many governments that want to develop geothermal energy lack exploratory program and confirm resources, after which the private sufficient technical capability, financing capacity, or strategic interest developer is in a better position to mobilize financing and move in undertaking full development of the sector. In such cases, they through the remaining stages of development. Many countries have may look to the private sector to carry the bulk of the development used this approach, which has led to the development of significant burden. But the private sector often finds it challenging to mobilize geothermal capacity (table 2). risk capital, however, especially for investments in exploratory Public sector–led exploratory drilling. Under the scheme drilling. To advance geothermal development in such circumstances, depicted in figure 2b, the public sector retains the development rights governments need to consider ways to mitigate risks enough to to the geothermal field through exploratory drilling. This scheme uses attract qualified developers. public resources and technical capacity to undertake the surface This shifting or reallocation of risks to attract the private sector studies (Stage I) and exploratory drilling (Stage II) in order to confirm can be achieved through two broad approaches. In the first, the pub- the geothermal resource, in line with industry standards. Doing so lic sector undertakes some of the drilling itself and funds early-stage greatly reduces the risk of the project for subsequent investors. development before offering a more “derisked” project to the private Following resource confirmation, the government transfers the devel- sector to develop. In the second, the public sector provides the opment rights to a private developer, through either a competitive 5 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r process or a negotiated agreement.4 This reduced exposure can Table 2. Geothermal generation capacity resulting from cost- attract qualified developers willing to mobilize the financing needed sharing schemes, 2014 to complete development of the steam field (Stage III), construct the steam above-ground pipeline system and power plants (Stage IV), and Country Number of fields Installed capacity (MW) continue with commissioning and operations (Stage V). Under this Philippines 5 1,260a “The public-private scheme, the public sector bears all of the risk during initial exploration New Zealand 6 547 partnership approach (Stage II); it stands to lose its investment of $20–$30 million should exploratory drilling and resource confirmation results be unfavorable. Japan 15 534a offers an opportunity Public sector entities mandated to carry out exploratory drilling Turkey 5 215a for the public sector to should have sufficient risk capital for funding a robust drilling plan United States 6 150a rely on private sector and the technical capability to implement it in line with industry stan- Kenya 1 100 expertise while remaining dards in order to gain the confidence of potential private developers. Nicaragua 1 70 The private developer must be qualified and capable of efficiently at arms’ length from the Indonesia 1 60 developing the remaining stages and commissioning the power plant investment.” Guatemala 2 52 for operations up to industry standards in a timely manner. El Salvador 1 44 Several countries have used public resources to undertake Costa Rica 1 30 exploration before offering projects for private development: Total 44 3,062 • In Guatemala drilling by the government reduced risk and catalyzed private participation in geothermal development at the Source: Sanyal and others (2016). a. Estimated. Zunil and Amatitlan geothermal fields. • In Kenya a public power developer (KenGen) undertook initial exploratory drilling for the Olkaria III geothermal development for the public sector to undertake all upstream development (Stages before offering a development opportunity to a private developer I, II, and III), before offering development and operation of the power that subsequently developed 100 MW of installed capacity. plant to the private sector. In several instances—including the • In Nicaragua publicly funded exploratory drilling proved the development of geothermal fields in Costa Rica, Indonesia, and the geothermal resources at the San Jacinto-Tizate field before the development rights were awarded to a private developer that Philippines—the public sector continued to operate the upstream undertook production drilling, well field expansion, and construc- field and sold steam to a private power developer. Such initiatives tion of the power plant and associated facilities. can be challenging if the power is then sold to a third party, as was • In Turkey a government agency (the General Directorate of the case in the Philippines, because risk can be misallocated.5 Mineral Research and Exploration) explored and undertook early Better results were achieved in the Miravalles III project in Costa drilling in numerous geothermal fields that were later awarded to Rica, where the steam field operator and the power off-taker were private entities for further development through an auction. the same public utility (Instituto Costarricense de Electricidad [ICE]), which assumed the resource risk. The private power producer Even after exploration, there remains considerable risk during purchased steam from ICE, which operated the steam field, in order the development of the steam field. A case can therefore be made 5 Risk can be misallocated, for example, if the private developer is obliged to supply power 4 Given the small size of the geothermal sector globally, attracting a significant level of to the third-party off-taker but is dependent on the public steam field operator to meet that obli- qualified competition may be challenging, especially in small and nascent markets where the gation. Under such circumstances, the risk of disruptions in steam supply can percolate through investment climate is weak. the production chain. 6 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r to generate electricity and supply it back to ICE under a build, own, it may want to relinquish its operations to a private developer. and transfer agreement. In Indonesia the upstream and downstream In the process, the public sector can recoup the benefits of its developments were split between two public entities, which has investment, through either lower tariffs (as a result of reduced created some challenges in coordinating timely investments. risks) or compensation from the selected private developer when These challenges can have significant financial implications. The the concession is awarded. “Japan and the United Geothermal Development Corporation in Kenya is attempting such a Cost-shared exploratory drilling. As an alternative to the States have used cost- scheme, which initially attracted considerable interest from devel- public sector undertaking exploratory drilling to reduce risks, govern- opers but since has faced challenges that are leading to reconsider- ments can use financial mechanisms to reallocate risk and reduce shared exploration ation of the plan for development of the field. a private developer’s exposure in order to leverage investments schemes to catalyze Global experience with such schemes is mixed. If there is a and advance projects. Under this scheme, the public sector grants geothermal exploration need for the public sector to take on all upstream development, the rights to develop the field to a qualified private developer, who investments by the private sector that led Figure 3. Geothermal power generation capacity in Japan and the United States, 1960–2012 to substantial follow-on development.” 100 80 Japan United States Installed capacity (percent) 60 U.S. cost-shared drilling programs 40 20 Japanese cost-shared drilling programs 0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Time in years Source: Adapted from Sanyal and others (2016). 7 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r Box 1. Risk Insurance schemes for geothermal drilling Geothermal resource risk insurance schemes insure the productivity of a well. A private insurer sets the insurance premium, based on the likelihood of pay-outs. The developer purchases the insurance at the outset. No public funding is involved. “Public intervention is These schemes have found limited application in the geothermal sector, with just a few dozen MWs of capacity insured. The high uncertainty at the exploration stage, combined with the relatively small pool of projects, has made it difficult to diversify geothermal resource risk through a market especially important in mechanism without charging high premiums (Sanyal 2016). In addition, the actuarial process of preparing an insurance scheme can be complex and time consuming. reducing resource risk.” Although such schemes have not proven effective in scaling up geothermal during the high-risk exploration stage, they could help expedite production drilling and the full development of steam fields. These stages can be challenging to finance, although the risks are considerably lower than the risks of exploration. A scheme to insure against geothermal resource risk was recently tested in Turkey but discontinued after it proved unsuccessful. Efforts are under way to provide an insurance scheme for geothermal production drilling and steam field development in Mexico. undertakes all stages of development (figure 2c). The public sector In the United States, developers were able to confirm productive can provide some of the funding to cover surface reconnaissance conditions at several fields that were later developed, for a total capac- and exploratory drilling (Stages I and II). By reducing the amount ity of about 150 MW. In both countries the national geological survey of risk capital the private developer needs to raise, this approach initially identified the most promising fields that would be eligible for reduces the investor’s potential losses, especially in the event cost-shared drilling, but the private sector carried out the subsequent that the development does not proceed beyond exploration. This drilling and development. The government reviewed the drilling plans strategy shares the risks and reduces the loss that would need to be and confirmed the private developer’s ability to execute the program. absorbed by the public sector if the public sector took on full respon- Figure 3 illustrates the expansion in geothermal capacity several sibility for exploration. This public-private partnership approach offers years after establishing such programs. It also highlights how an opportunity for the public sector to rely on private sector exper- expansion slowed soon after these government-sponsored programs tise while remaining at arms’ length from the investment, something ended, indicating the importance of having consistent and long-term that can be useful when the government or its agencies have limited policies to strategically support geothermal development. In Japan experience in the sector and the private sector faces challenges several cost-shared programs were implemented in the 1980s, raising the necessary investment funding. If the results of exploration leading to a significant scale-up of geothermal capacity in the 1990s. are favorable and the project is determined to be bankable, the Expansion ended when the programs were halted in 2002. private sector can proceed to develop the subsequent stages (Stages In the United States, where a number of policies catalyzed invest- III and IV) on its own and continue with operations (Stage V). ments in geothermal, significant scale-up occurred from the 1980s Japan and the United States have used cost-shared exploration to the mid-1990s, when government cost-sharing schemes were on schemes to catalyze geothermal exploration investments by the offer. Activity slowed after these programs were rescinded. A new private sector that led to substantial follow-on development cost-sharing program in 2000–07 resulted in a subsequent uptick in (figure 3). Japanese developers benefitted considerably from a installed geothermal capacity. Other support for geothermal energy scheme that included a cost-share of up to 50 percent for explor- continued in the United States, encouraging further exploration. atory wells and 20 percent for production and injection wells. This The World Bank is supporting similar cost-shared exploration cost-sharing brought about the installation of most or all of the arrangements in Djibouti, Nicaragua, Turkey, and other countries. 536 MW of geothermal power operating in Japan today. 8 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r What lessons have we learned? Approaches to scaling up geothermal should be tailored to country-specific circumstances. Resource risk mitigation can Important lessons have emerged from international be catalytic in unlocking the potential for commercial development experience with geothermal development in geothermal fields. It is not, however, a panacea that ensures the Public support is central to geothermal development, successful installation of geothermal generation capacity; it is not “A new wave of geothermal especially for reducing project risks. Very few geothermal a substitute for addressing other potential impediments that could projects is under way. resources have been developed without public intervention, either undermine the investment climate in a given country. In some through investments or by regulatory means. Public intervention is instances, risk mitigation may determine that a project is not feasible. Launched in 2013, the especially important in reducing resource risks; early investments by Where a sufficient resource is confirmed, other country-, market-, Global Geothermal and sector-related barriers may impede projects from advancing or governments in surface reconnaissance and exploratory drilling have Development Plan (GGDP) been catalysts in advancing geothermal development. In many devel- undermine efforts to scale up geothermal development. Other factors is a World Bank initiative that could affect investments in the power sector could include the opments, the public sector has played a role beyond early-stage legal and regulatory framework; the approach to long-term offtake and that brings together resource confirmation, undertaking the full burden of development, pricing, including consideration of environmental impacts of the tech- multilateral and bilateral including ongoing operation for the duration of the project. In nology; the approach to engaging private developers and the conces- other cases public support has been in the form of concentrated development partners sion regime; the availability of transmission lines to evacuate power; investment where private participation and funding may be limited. to help diversify the the structure of capital markets and the availability of financing; the With more global financing becoming available for environmentally power generation mix need to comply with environmental laws; and social and stakeholder friendly technologies, governments have increased investments in concerns. Given its ability to support investments, policy reforms, and and transform the energy geothermal development. The result has been an uptick in geother- capacity building through a combination of financing instruments mal development activities, particularly in the developing world. sector in developing and technical assistance, the World Bank is often uniquely placed to Well-targeted public support can leverage private par- countries by scaling up the address such issues comprehensively. Its program to assist Indonesia ticipation. In instances where the private sector is willing to take use of geothermal power.” with its geothermal development is one example of comprehensive on some of the burden of geothermal development, targeted public support to a client. investments can be catalytic in harnessing private expertise. Full or partial investments by governments through the mobilization of risk capital in exploratory drilling can significantly reduce the risk of What lies ahead? geothermal operations. By limiting private developers’ exposure to Public funds are being mobilized from governments high risks, government support can help attract private developers and and the international community to address barriers financing for the larger-scale investments that follow. By “crowding in” the private sector to take on a significant share of the investment, that prevent expansion of the geothermal sector this approach can also free up scarce public resources that could be A new wave of geothermal projects is under way. Launched in 2013, used to mitigate the risk of other geothermal fields or address other the Global Geothermal Development Plan (GGDP) is a World Bank development priorities. Of course, this approach assumes that the initiative that brings together multilateral and bilateral development public sector has the technical and financial capacity to support its partners to help diversify the power generation mix and transform targeted intervention and that private markets will respond. Careful the energy sector in developing countries by scaling up the use of assessment of the conditions under which the relatively small global geothermal power. The initiative, part of the World Bank’s Energy geothermal industry might participate should be undertaken when Sector Management Assistance Program (ESMAP), focuses primarily designing approaches in which the public sector shares risks with the on mobilizing funds for the higher-risk stages of exploratory drilling private sector. and resource confirmation. With support from the International 9 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r Bank for Reconstruction and Development (IBRD), the International will cover 40–60 percent of the drilling expenditures incurred by Make further Development Association (IDA), the Clean Investment Funds, the a given license holder. Successful developers will be expected to connections Global Environment Facility (GEF), and various bilateral support contribute an additional 10 percent of the incurred expenditures mechanisms, the GGDP has helped mobilize risk capital that is diffi- as a service fee in order to reduce the depletion rate of the RSM Live Wire 2014/6. “Measuring cult for the private sector to raise on its own. Through these partner- capital and maximize the number of projects supported. A loan the Results of World Bank ships, the World Bank has channeled public support to geothermal facility for resource development will complement the RSM. Lending in the Energy Sector,” development projects that have the potential to leverage private • The Geothermal Resource Risk Mitigation Project, under by Sudeshna Ghosh Banerjee, capital as well. Such support has typically been comprehensive, preparation in Nicaragua, is expected to be financed by IDA Ruchi Soni, and Elisa Portale. combining the mobilization of risk capital with technical assistance to and the Scaling-Up Renewable Energy Program (SREP), one of strengthen capacity, so that projects meet industry and international the Clean Investment Funds. The proposed approach includes Live Wire 2014/17. standards. support for exploratory drilling for resource confirmation (Stage II) “Incorporating Energy from The Bank is supporting several geothermal development efforts: as well as for steam field and power plant development (Stages Renewable Resources into • The Djibouti Geothermal Power Generation Project is III and IV). The project is being designed to deploy a cost-shared Power System Planning,” supporting the government with exploratory drilling and resource exploration scheme through a public-private partnership by Marcelino Madrigal and confirmation in the Lake Assal region, with the assistance of arrangement, along with financing following resource confir- Rhonda Lenai Jordan. other international development partners, including the African mation and the feasibility assessment in order to expedite the Live Wire 2014/26. “Doubling Development Bank, the African Development Fund, the French construction and commissioning of the power plant by achieving the Share of Renewable Agency for Development, IDA, GEF, and ESMAP . Once risks are quick financial closure. Energy in the Global Energy reduced, the project will be developed by a qualified private • Three operations focus exclusively on upstream development: Mix,” by Gabriela Elizondo developer, initially to supply domestic power needs and eventu- the Armenia Geothermal Exploratory Drilling Project Azuela and Irina Bushueva. ally to trade electricity with Ethiopia. (under implementation), financed by a grant from SREP with a • The Technical Assistance for Geothermal Development in contribution from the government of Armenia; the Ethiopia Live Wire 2015/38. “Integrating Dominica and the Dominica Geothermal Risk Mitigation Geothermal Sector Development Project (under imple- Variable Renewable Project are under preparation. This small Caribbean island has mentation), supported by an SREP grant, IDA, and contributions Energy into Power System invested in drilling and confirming geothermal resources through from the borrower and the Icelandic International Development Operations,” by Thomas the public sector, with the support of development partners, Authority; and the Indonesia Geothermal Energy Upstream Nikolakakis and Debabrata including the World Bank. Technical assistance is supporting Development Project, financed by a grant from the GEF, a Chattopadhyay. preparation of the project and evaluation of the project’s feasibil- contingent grant from the CTF, and a CTF-matching contribu- Live Wire 2015/45. “Permitting ity assessment based on the confirmed resources. This technical tion by the government of Indonesia. The three projects are and Licensing Regimes for assistance helps ensure that the remaining development can be similar in packaging investment and technical assistance for Renewable Energy Projects,” completed while simultaneously securing a qualified, long-term government-sponsored drilling but differ in the scope of their by Elena Merle-Beral and partner for operating the facilities on an ongoing basis. support. The project in Armenia seeks to prove geothermal Katharina Gassner. • The Turkey Geothermal Development Project is being resources through slim-hole well drilling and, upon confirmation, funded by IBRD loans and the Clean Technology Fund (CTF). to support production drilling. The project in Ethiopia focuses Two financial intermediaries are providing contingent recovery on resource confirmation, with an emphasis on supporting the grants for a risk-sharing mechanism (RSM) during exploration government’s efforts to establish an institutional framework for (Stage II) and for financing for the follow-on stages (Stages III geothermal development conducive to building greater capacity. and IV) to cover steam field and power plant development. The The proposed scheme in Indonesia envisions setting up a facility project has established the RSM for resource validation, which to share the risks of exploration, co-financed 50/50 by the World 10 M o b i l i z i n g R i s k C a p i t a l t o U n l o c k t h e G l o b a l P o t e n t i a l o f G e o t h e rm a l P o w e r Bank and the government. Based on this scheme, successful *** developers are expected to repay the cost of exploration, plus a Which scheme would be best suited to the circumstances risk premium, to the facility so that support can be extended to of the country in which you work? For more information on the additional fields. World Bank’s strategy for geothermal development, contact Gevorg • Technical assistance activities are under way in St. Lucia and Sargsyan, global lead for clean energy (gsargsyan@worldbank.org), Chile. In St. Lucia grants from the GEF and the Small Island or Pierre Audinet, who leads the work on the Global Geothermal Developing States DOCK Support Program managed by Development Plan (paudinet@worldbank.org). ESMAP are helping implement the Geothermal Resource Development Project. In coordination with additional co-fund- References ing from other development partners, the grants will be used to ESMAP (Energy Sector Management Assistance Program). 2012. conduct surface-level reconnaissance, provide transaction and Geothermal Handbook: Planning and Financing Power financial advice and policy support, and ensure that environmen- Generation. ESMAP Technical Report 002/12, World Bank Group, tal and social safeguards work. The World Bank will be taking the Washington, DC. overall lead. These efforts are precursors to an exploratory drilling Sanyal, Subir K., Ann Robertson-Tait, Migara S. Jayawardena, Gerry campaign to be undertaken through a potential cost-shared risk Huttrer, and Laura Berman. 2016. Comparative Analysis of mitigation scheme with a qualified geothermal developer. The Geothermal Resource Risk Mitigation Mechanisms: A Global Bank and the government are currently discussing a financing Survey. Washington, DC: Energy Sector Management Assistance package. In Chile, where geothermal is a nascent industry, Program (ESMAP), World Bank Group. Available at http://www. the Technical Assistance for Geothermal Development esmap.org/node/56863. Project is focusing on improving geothermal energy market conditions by removing legal, social, and market barriers that are Most of the information in this Live Wire comes from “Comparative Analysis impeding the commercialization of geothermal resources. of Approaches to Geothermal Resource Risk Mitigation: A Global Survey,” by Subir K. Sanyal, Ann Robertson-Tait, Migara S. Jayawardena, Gerry Huttrer, Initiatives outside the World Bank are moving in a similar direc- and Laura Berman (www.esmap.org/node/56863). The authors thank Pierre Audinet, Thrainn Fridriksson, Subir Sanyal, and Gevorg Sargsyan, who peer-re- tion. The Geothermal Risk Mitigation Facility is applying a risk viewed this issue, and Maria Elisa Passeri and Brian White, who conducted mitigation strategy in Eastern Africa. With the support of international some of the research. development partners, 40 percent of the cost of up to three wells in a field will be shared. A similar Geothermal Development Facility that was recently launched will support geothermal exploration, drilling, and well testing to catalyze geothermal development in Latin America. Get Connected to Live Wire Live Wires are designed for easy reading on the screen and for downloading The Live Wire series of online knowledge notes is an initiative of the World Bank Group’s Energy and self-printing in color or “Live Wire is designed and Extractives Global Practice, reflecting the emphasis on knowledge management and solu- black and white. tions-oriented knowledge that is emerging from the ongoing change process within the Bank for practitioners inside Group. For World Bank employees: and outside the Bank. Professional printing can Each Live Wire delivers, in 3–6 attractive, highly readable pages, knowledge that is immediately It is a resource to relevant to front-line practitioners. also be undertaken on a customized basis for share with clients and specific events or occasions Live Wires take a variety of forms: counterparts.” • Topic briefs offer technical knowledge on key issues in energy and extractives by contacting GSDPM Customer Service Center at • Case studies highlight lessons from experiences in implementation (202) 458-7479, or sending a • Global trends provide analytical overviews of key energy and extractives data written request to cgsdpm@ • Bank views portray the Bank Group’s activities in the energy and extractives sectors worldbank.org. • Private eyes present a private sector perspective on topical issues in the field Each Live Wire will be peer-reviewed by seasoned practitioners in the Bank. Once a year, the Energy and Extractives Global Practice takes stock of all notes that appeared, reviewing their quality and identifying priority areas to be covered in the following year’s pipeline. Please visit our Live Wire web page for updates: http://www.worldbank.org/energy/livewire e Pa c i f i c 2014/28 ainable energy for all in easT asia and Th 1 Tracking Progress Toward Providing susT TIVES GLOBAL PRACTICE A KNOWLEDGE NOTE SERIES FOR THE ENERGY & EXTRAC THE BOTTOM LINE Tracking Progress Toward Providing Sustainable Energy where does the region stand on the quest for sustainable for All in East Asia and the Pacific 2014/29 and cenTral asia energy for all? in 2010, eaP easTern euroPe sT ainable en ergy for all in databases—technical measures. This note is based on that frame- g su v i d i n had an electrification rate of Why is this important? ess Toward Pro work (World Bank 2014). SE4ALL will publish an updated version of 1 Tracking Progr 95 percent, and 52 percent of the population had access Tracking regional trends is critical to monitoring the GTF in 2015. to nonsolid fuel for cooking. the progress of the Sustainable Energy for All The primary indicators and data sources that the GTF uses to track progress toward the three SE4ALL goals are summarized below. consumption of renewable (SE4ALL) initiative C T I V E S G L O B A L P R A C T I C E ENERGY & EXTRA • Energy access. Access to modern energy services is measured T E S E R I E S F O R T H EIn declaring 2012 the “International Year of Sustainable Energy for energy decreased overall A KNO W L E D G E N Oand 2010, though by the percentage of the population with an electricity between 1990 All,” the UN General Assembly established three objectives to be connection and the percentage of the population with access Energy modern forms grew rapidly. d Providing Sustainable accomplished by 2030: to ensure universal access to modern energy energy intensity levels are high to nonsolid fuels.2 These data are collected using household Tracking Progress Towar services,1 to double the 2010 share of renewable energy in the global surveys and reported in the World Bank’s Global Electrification but declining rapidly. overall THE BOTTOM LINE energy mix, and to double the global rate of improvement in energy e and Central Asia trends are positive, but bold Database and the World Health Organization’s Household Energy for All in Eastern Europ efficiency relative to the period 1990–2010 (SE4ALL 2012). stand policy measures will be required where does the region setting Database. The SE4ALL objectives are global, with individual countries on that frame- on the quest for sustainable to sustain progress. is based share of renewable energy in the their own national targets databases— technical in a measures. way that is Thisconsistent with the overall of • Renewable energy. The note version energy for all? The region SE4ALL will publish an updated their ability energy mix is measured by the percentage of total final energy to Why is this important ? spirit of the work initiative. (World Bank Because2014). countries differ greatly in has near-universal access consumption that is derived from renewable energy resources. of trends is critical to monitoring to pursue thetheGTF in 2015. three objectives, some will make more rapid progress GTF uses to Data used to calculate this indicator are obtained from energy electricity, and 93 percent Tracking regional othersindicators primary will excel and data sources that elsewhere, depending on their the while the population has access le Energy for All in one areaThe goals are summarized below. balances published by the International Energy Agency and the the progress of the Sustainab respective track starting progress pointstowardand the three SE4ALL comparative advantages as well as on services is measured to nonsolid fuel for cooking. access. Accessthat they modern to are able to energy marshal. United Nations. despite relatively abundant (SE4ALL) initiative the resources and support Energy with an electricity connection Elisa Portale is an l Year of Sustainable Energy for To sustain percentage of by the momentum forthe the population achievement of the SE4ALL 2• Energy efficiency. The rate of improvement of energy efficiency hydropower, the share In declaring 2012 the “Internationa energy economist in with access to nonsolid fuels. three global objectives objectives, andathe means of charting percentage of the population global progress to 2030 is needed. is approximated by the compound annual growth rate (CAGR) of renewables in energy All,” the UN General Assembly established the Energy Sector surveys and reported access to modern universalAssistance The World TheseBank and data are the collected International using household Energy Agency led a consor- of energy intensity, where energy intensity is the ratio of total consumption has remained to be accomplished by 2030: to ensure Management Database and the World of theenergy intium of 15 renewable international in the World Bank’s Global agencies toElectrification establish the SE4ALL Global primary energy consumption to gross domestic product (GDP) energy the 2010 share of Program (ESMAP) relatively low. very high energy services, to double Database. measured in purchasing power parity (PPP) terms. Data used to 1 t ’s Household provides Energy a system for regular World Bank’s Energy the global rate of improvemen and Extractives Tracking Framework Health (GTF), which Organization in the energy intensity levels have come and to double the global energy mix, Global Practice. (SE4ALL 2012). based on energy. of renewable The sharepractical, rigorous—yet energy given available calculate energy intensity are obtained from energy balances to the period 1990–2010 global reporting, Renewable down rapidly. The big questions in energy efficiency relative setting by the percentage of total final energy consumption published by the International Energy Agency and the United evolve Joeri withde Wit is an countries individual mix is measured Data used to are how renewables will The SE4ALL objectives are global, economist in with the overall from renewable energy when every resources. person on the planet has access Nations. picks up a way energy that is consistent 1 The universal derived that isaccess goal will be achieved balances published when energy demand in from energy their own national targets through electricity, clean cooking fuels, clean heating fuels, rates the Bank’s Energy and countries differ greatly in their ability calculate this indicator are obtained to modern energy services provided productive use and community services. The term “modern solutions” cookingNations. again and whether recent spirit of the initiative. Because Extractives Global rapid progress and energy for Energy Agency and the United liquefied petroleum gas), 2 Solid fuels are defined to include both traditional biomass (wood, charcoal, agricultural will make more by the refers to solutions International that involve electricity or gaseous fuels (including is pellets and briquettes), and of decline in energy intensity some t of those of efficiency energy and forest residues, dung, and so on), processed biomass (such as to pursue the three objectives, Practice. depending on their or solid/liquid fuels paired with Energy efficiency. The rate stoves exhibiting of overall improvemen emissions rates at or near other solid fuels (such as coal and lignite). will excel elsewhere, rate (CAGR) of energy will continue. in one area while others liquefied petroleum gas (www.sustainableenergyforall.org). annual growth as well as on approximated by the compound and comparative advantages is the ratio of total primary energy respective starting points marshal. where energy intensity that they are able to intensity, measured in purchas- the resources and support domestic product (GDP) for the achievement of the SE4ALL consumption to gross calculate energy intensity Elisa Portale is an To sustain momentum terms. Data used to charting global progress to 2030 is needed. ing power parity (PPP) the International energy economist in objectives, a means of balances published by the Energy Sector International Energy Agency led a consor- are obtained from energy The World Bank and the SE4ALL Global Energy Agency and the United Nations. Management Assistance agencies to establish the the GTF to provide a regional and tium of 15 international for regular This note uses data from Program (ESMAP) of the which provides a system for Eastern Tracking Framework (GTF), the three pillars of SE4ALL World Bank’s Energy and Extractives on rigorous—yet practical, given available country perspective on Global Practice. global reporting, based has access Joeri de Wit is an will be achieved when every person on the planet The universal access goal heating fuels, clean cooking fuels, clean energy economist in 1 agricultural provided through electricity, biomass (wood, charcoal, to modern energy services The term “modern cooking solutions” to include both traditional and briquettes), and Solid fuels are defined the Bank’s Energy and use and community services. biomass (such as pellets 2 and energy for productive petroleum gas), and so on), processed fuels (including liquefied and forest residues, dung, involve electricity or gaseous at or near those of Extractives Global refers to solutions that overall emissions rates other solid fuels (such as coal and lignite). with stoves exhibiting Practice. or solid/liquid fuels paired (www.sustainableenergyforall.org). liquefied petroleum gas Contribute to If you can’t spare the time to contribute to Live Wire, but have an idea for a topic, or case we should cover, let us know! Do you have something to say? We welcome your ideas through any of the following Say it in Live Wire! channels: Via the Communities of Those working on the front lines of energy and extractives development in emerging economies Practice in which you are have a wealth of technical knowledge and case experience to share with their colleagues but active seldom have the time to write for publication. By participating in the Energy Live Wire offers prospective authors a support system to make sharing your knowledge as easy as and Extractives Global possible: Practice’s annual Live Wire • Trained writers among our staff will be assigned upon request to draft Live Wire stories with series review meeting staff active in operations. By communicating directly • A professional series editor ensures that the writing is punchy and accessible. with the team (contact • A professional graphic designer assures that the final product looks great—a feather in your cap! Morgan Bazilian, mbazilian@ worldbank.org) Live Wire aims to raise the profile of operational staff wherever they are based; those with hands-on knowledge to share. That’s your payoff! It’s a chance to model good uroPe and cenT ral asia 2014/29 all in easTern e ble energy for “knowledge citizenship” and participate in the ongoing change process at the Bank, v i d i n g s u s Ta i n a ess Toward Pro 1 Tracking Progr where knowledge management is becoming everybody’s business. A KNOWLEDGE NOT E SERIES FOR THE ENERGY & EXTRACT IVES GLOBAL PRAC TICE rgy Providing Sustainable Ene Tracking Progress Toward Or 2014/5 1 U n d e r s ta n d i n g C O 2 emissiOns frOm the glObal energy seCt THE BOTTOM LINE ern Euro pe and Cen tral Asia where does the region stand ble for All in East based on that frame- on the quest for sustaina measures. This note is databases—technical updated version of energy for all? The region SE4ALL will publish an has near-universal access to WhyD is this important? ERGY PRACTICE work (World Bank 2014). E G E N O T E S E R I E S F O R T H E E N to of A K N O W L is critical monitoring the GTF in 2015. that the GTF uses to electricity, and 93 percent Tracking regional trends for All The primary indicators and data sources below. goals are summarized the population has access the progres s of the Sustainable Energy progress toward the three SE4ALL Understanding CO Emissions from the Global Energy Sector nonsolid fuel for cooking. track is measured to modern energy services THE BOTTOM LINE to Your Name Here t (SE4ALL) initiativ e Energy access. Access connection despite relatively abundan 2 population with an electricity the share “Internat ional Year of Sustainable Energy for by the percentage of the access to nonsolid fuels.2 hydropow the energy sector contributes er, In declaring 2012 the the population with objectives and the percentage of of renewables in energy established three global and reported about 40 percent of global All,” the UN General Assembly access to modern using household surveys Why is this issue important? 2030: to ensure universal These data are collected and the World Become an author has remained emissions of CO2. three- consumption to be accomplished by in in the World Bank’s Global Electrification Database high energy double the 2010 knowledge share of renewable energy of the Database. relatively low. very Mitigating climate change energy requires services, to 1 quarters of those emissions ent Household Energy rate of improvem global Figure 1. CO2 emissions Health Organiza Figure tion’s 2. energy-related CO2 energy come from six major intensity levels have come energy mix, and to double the share of renewable energy in the of CO s2 emissions sources the global 0 (SE4ALL 2012). Renewab le energy. The question to the period 1990–201 by sector emissions by country consumption down rapidly. The big economies. although coal-fired in energy efficiency relative setting d by the percenta ge of total final energy of Live Wire and countries global, with individual mix is measure LICs evolve les will opportunities to cut emissions of greenhouse aregases used to plants account for just are how renewab Identifying The SE4ALL objectives le energy resources. Data 0.5% picks up understanding of the main sources ofin those a way that is consistent with emis- the overall that is derived from renewab balances published 40 percent of world energy when energy demand requires a clear their own national targets in their ability Other this indicator are obtained from energy 80 percent of differ greatly Residential calculate production, they were again and whether Carbonrates sions.recent dioxide (CO2) accounts for more than spirit of the initiative. Because countries 6% sectors Other MICs Agency and the United Nations. will make more rapid progress by the International Energy China 10% 15% intensity gas emissions globally, 1 primarily from the burning s, some efficiency is contribute to your responsible for more than of decline in energy total greenhouse to pursue the three objective on their Other HICs . The rate of improvement of energy energy sector—defined toexcel elsewhere, depending include Energy efficiency 30% growth rate (CAGR) of energy will continue. of fossil fuels (IFCC 2007). The will 8% in one area while others by the compound annual Energy 70 percent of energy-sector as well as on 41% approxim and heat generation—contributed and compara tive advantages 41 ated Japan 4% energy the ratio of total primary Industry emissions in 2010. despite fuels consumed for electricity respective starting points 20% Russia energy intensity is of global CO emissions in 2010 (figure 1). Energy-related that they are able to marshal. intensity, where measure d in purchas- improvements in some percent 2 the resources and support 7% USA product (GDP) gross domestic practice and career! an at the point of combustion make up the m bulk for the such of achievem ent of the SE4ALL Other consumption to India 19% calculate energy intensity countries, the global CO2 CO Elisa 2 emissions Portale is To sustain momentu transport Road 7% EU terms. Data used to andin are generated by the burning of fossil is needed. global progress to 2030 6% transport fuels, industrial ing power parity (PPP) the International economist objectives, a means of charting balances published by emissions 11% emission factor for energy energy 16% EnergyandSector nonrenewable municipal waste to generate nal Energy Agency led electricity Internatio a consor- are obtained from energy The World Bank and the the waste, generation has hardly changed United Nations. ent Assistance venting and leakage to establish the emissions SE4ALL Global Energy Agency and the sector at the point and over the last 20 years. and heat. Black carbon and methane Managem tium of 15 international agencies Notes: Energy-related CO2 emissions are CO2 emissions from the energy from the GTF to provide a regional of the for regular This note usesanddata domestic provides a system bunkers, Program (ESMAP) presented in this note. of combustion. Other Transport includes international marine aviation for Eastern are not included in the analysis and Extractives Tracking Framework (GTF), which given aviation and available navigation, Other Sectors rail and pipeline transport; perspect include ive on the three pillars of SE4ALL commercial/public World Bank’s Energy on rigorous—yet practical, country and heat genera- global reporting, based services, agriculture/forestry, fishing, energy industries other than electricity Global Practice. not specified elsewhere; Energy = fuels consumed for electricity and Where do emissions come from? tion, and other emissions as has in the opening paragraph. HIC, MIC, and LIC refer to high-, middle-, access Joeri de Wit is an will be achieved when on the planet heat generation, every person defined The universal access goal of countries heating fuels, energy economistare Emissions concentrated in 1 in a handful to modern energy services provided through electricity, fuels, clean and low-income clean cooking countries. cooking solutions” to include both traditional biomass (wood, charcoal, agricultural The term “modern Source: IEA 2012a. Solid fuels are defined and briquettes), and the Bank’s Energy and use and community services. biomass (such as pellets 2 and come primarily from burning and energy coal for productive that involve electricity or gaseous fuels (including liquefied petroleum gas), near those of and forest residues, dung, and so on), processed Vivien Foster is sector Extractives Global refers to solutions overall emissions rates at or other solid fuels (such as coal and lignite). with stoves exhibiting or solid/liquid fuels paired emissions closely manager for the Sus- The geographical pattern of energy-related CO Practice. gas 2(www.sustainableenergy forall.org). liquefied petroleum middle-income countries, and only 0.5 percent by all low-income tainable Energy Depart- mirrors the distribution of energy consumption (figure 2). In 2010, ment at the World Bank countries put together. almost half of all such emissions were associated with the two (vfoster@worldbank.org). Coal is, by far, the largest source of energy-related CO2 emissions largest global energy consumers, and more than three-quarters globally, accounting for more than 70 percent of the total (figure 3). Daron Bedrosyan were associated with the top six emitting countries. Of the remaining works for London This reflects both the widespread use of coal to generate electrical energy-related CO2 emissions, about 8 percent were contributed Economics in Toronto. power, as well as the exceptionally high CO2 intensity of coal-fired by other high-income countries, another 15 percent by other Previously, he was an power (figure 4). Per unit of energy produced, coal emits significantly energy analyst with the more CO emissions than oil and more than twice as much as natural 2 World Bank’s Energy Practice. Gas Inventory 1 United Nations Framework Convention on Climate Change, Greenhouse 0.php gas. Data—Comparisons By Gas (database). http://unfccc.int/ghg_data/items/380