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        FIEK360 Series|Development of Geothermal Resources in Taiwan by Learning from the Experience of Other Countries
        IEK360系列|借鏡全球地熱開發模式 發展台灣地熱資源
        • 2020/04/16
        • 3045
        • 42

        Geothermal energy is capable of power generation around the clock and hence one of the few renewables that can serve as a baseload energy source. Climate change does not have much influence on geothermal power generation. Compared with other renewables, geothermal boasts the advantage of higher capacity factors and relatively lower costs.  

        Unfortunately, the investment in geothermal has been relatively conservative. According to statistics by BNEF (Bloomberg New Energy Finance), the global investment in renewable energies in 2018 totaled $518 billion or so, out of which $215.2 billion was in wind and $202.5 billion in solar. Geothermal only attracted an investment of $3.3 billion. The CAGR (compound annual growth rate) of investments in geothermal over the past 15 years was 6%, much lower than 21% for solar and 15% for wind. Debt financing can be as high as 94% for wind, 87% for distributed solar, but only 67% for geothermal.

        The conservatism in geothermal investment is due to a lack of geological investigation data and the uncertainty of drilling success. The initial risks with geothermal projects are much higher than with other renewable energies. This reduces the willingness for market entry, causes funding difficulties and increases the threshold for geothermal development.

        According to the statistics from IRENA(International Renewable Energy Agency), the cumulative installation of geothermal generation capacity in the world was 13,329MW in 2018, with a CAGR of 2.8% in 2000-2019. The top 10 countries with the largest installed bases are the U.S., Indonesia, the Philippines, Turkey, New Zealand, Mexico, Italy, Iceland, Kenya and Japan.

        There are currently three models in the world in terms of geothermal development. The first one is an integrated development and operation model. Governments initiate the process by assigning or establishing development organizations, nationalizing geothermal resources and acquiring development sites. All the risks and returns are borne by the governments. This model is built on strong commitment and long-term economic support from the governments. This is the model run in the Philippines and Iceland.

        The second model is for the governments to assume most of the risks by leading the process of resource investigation and development. National institutions are responsible for geological exploration, drilling, extraction and geothermal well construction. After the elimination of uncertainties, the governments foster national electricity companies and auction off geothermal resources to the private sector. In Kenya, the state-owned developer KenGen undertakes the preliminary exploration and development before selling the pipelines to private companies. This approach takes the bulk of the development risks from investors.  

        The third model is for governments to provide funding guarantees and subsidies. Developers assume the costs associated with land acquisitions and legal compliance. Governments set up service windows for the match making of technology providers and developers and facilitating the formation of syndicated loans. These measures reduce the burden of developers and encourage participation of private capital. This is the model adopted in Japan and the U.S. despite slight differences in their approaches. The U.S. government asks the companies who receive subsidies to disclose geothermal information regardless of the exploration results. The Japanese government does not have such a requirement.

        It is worth noting that the three models are not mutually exclusive. Some governments start with the first model and migrate to the second model when the market evolves and matures, and they consider it is the right time to privatize utility companies. These governments eventually withdraw from the market and move into the third model when the industry has secured its footing.

        The geothermal industry in Taiwan is still in a fledgling stage. In terms of the whole value chain activities from resource investigation, drilling, geothermal plant construction to operations & maintenance, the bulk of the companies in Taiwan are still busy with resource exploration and well drilling. The high uncertainties in the early stage of the projects hinders the willingness of Taiwanese investors. The development of generators is focused on small models, rather than large-scale systems. Given the geological conditions, the key technology required for the geothermal sites in Taiwan is controlled by foreign vendors. Examples are acid-resistant pipes and nickel-alloy pipes over 500 meters for volcanic geothermal fields. Metamorphic rocks are also challenging for the integrity of pipe structures and the assurance of energy outputs. New technologies are required to tackle these issues.

        It is suggested that the second and the third models should be adopted in Taiwan. Third-party certification mechanisms should be established in the immediate future. Comprehensive data on geothermal energy should be made available. It is also necessary to reduce the red tape for developers by making the procedures transparent and contact windows accessible. In the medium term, the government can select promising sites for geothermal resources for exploration and drilling. Demo power plants should be constructed. Project finance, debt guarantees, and insurance tools should be offered to encourage investment. In the long run, it is a prerequisite to revisit laws/regulations and conduct a strategic review of the environmental impacts by zoning for project developments and resource protection. The government in Taiwan should continue to subsidize drilling and exploration in order to share the risks of geothermal developments, as well as offering economic incentives such as wholesale price adjustments, self-consumption and feed-in-tariffs, and tax credits in order to attract private-sector participants.

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