Over the several decades of its use, geothermal power has proven its potential in playing a central role in the much-needed transition of the world to a sustainable energy future. The rising awareness regarding the fact that over 100 GW of geothermal capacity remains untapped across the globe has ramped up national and international efforts aimed at development of this high-potential, low-environmental-impact energy source.
The global geothermal power market witnessed an addition of about 310 MW of capacity on a global front in 2015. With this, the total world geothermal power generation capacity increased to more than 13.3 GW. Several promising projects, which are currently under construction across more than 80 countries worldwide, are expected to significantly add to this number and make geothermal power a key contributor to the global energy mix in the next few years.
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Transparency Market Research estimates that the geothermal power generation market will expand at an excellent CAGR of 23.58% over the period between 2013 and 2019. Rising at this pace, the market, which held an opportunity of US$2.5 bn in 2013, is expected to rise to US$8.9 bn by 2019.
What is the key challenge hindering the widespread development of geothermal power generation market?
The widespread development of geothermal energy, especially in developing countries, faces several investment-related challenges. A vast range of risks and high upfront costs are associated with the process of geophysical studies and geological drilling during the exploration phase in the development of a new geothermal power generation project. Owing to this, financing in the early stage of the project is mostly limited to only the investors that clearly understand and accept the potential risks of investing in geothermal projects.
Moreover, the uncertainty in results of an exploration activity means that the investor’s funds may be locked in for many years without the promise of sustained returns, holding back large-scale investments from reaching potential projects. This factor is a significant restraint for the overall development of the global power generation market, especially in many developing countries with excellent geothermal resources.
Are any attempts being made to overcome this challenge?
Yes, many proactive steps are being undertaken globally to mitigate exploratory risks and promote investments. The World Bank, for instance, has increased efforts to lower the risks associated with exploratory drilling in geothermal power generation plants through its Energy Sector Management Assistance Program (ESMAP). ESMAP’s Global Geothermal Development Plan is an initiative that focuses on reducing the cost and risks associated with exploratory drilling in low- and middle-income countries.
Through this program so far, the World Bank has mobilized funds worth over US$235 mn towards the cause of scaling up geothermal power generation in several countries across the globe. Many geothermal fields in Africa, Latin America, Southeast Asia, and Pacific where exploration has been done and additional financing is required to move the projects forward to confirm their commercial viability have already received funding from this program.
Meanwhile, in September 2014, the United Nations also formed a Global Geothermal Alliance – a coalition with more than 35 countries and over 20 partners presently, formed with the view of increasing the global share of geothermal energy in world’s overall energy mix. The alliance aims at promoting technological cooperation, mitigating conception-level barriers related to investment, and facilitating investments for the development of high-potential geothermal energy projects into viable energy markets.
