At the Iceland Geothermal Conference held this week in Reykjavik, Iceland, several speakers addressed challenges of geothermal development in the context of attracting investor interest and speeding up development.
At least three presentations at the conference covered in one way or another the approach to use geothermal wellhead power plants to help speed up development. Several others actually highlighted their interest to apply smaller scale development, e.g. representatives from Kenya.
In a joint presentation by Rúnar Magnússon of Icelandic engineering firm EFLA and Dr. Tryggvi Thór Herbertsson of Taurus, it was looked at how investors could be attracted to invest into geothermal projects.
In their presentation, they looked at a 50 MW project and a 10 MW project, showing the dramatic decrease in time it takes to develop a smaller project compared to a larger project, often shaving off 3 years of the time it takes to complete a project.
Naturally, the issue of risk in geothermal development was discussed, highlighting the different risk profiles in geothermal project development and willingness of investors to start at what stages. Their presentation then described different risk mitigation strategies.
But then the presentation became rather interesting, as it was looking into the excessive capital expenditure risk, showing that “risk increases exponentially with the size of the project”, mostly based on the risk on the resource to be utilised actually being smaller than anticipated.
Therefore, so the presenters, the case of a “sliced project development” is seen as favourable. So while “it is more expensive to build in incremental steps, it though gives higher returns, due to the lower risk, and is thus preferable to the private investor.”
The basic message is that in order to increase involvement of private investors in geothermal power, use of soft-money for risk mitigation or tax benefits, need to be paired with a gradual development approach.
Essentially, a description of the staged geothermal wellhead power plant approach and solution offered by Green Energy Geothermal.