Impact of regulatory/ incentive schemes fostering tgeothermal development

The impact of different !regulatory/ incentive schemes to foster development!An overview for geothermal development

ThinkGeoEnergy.com - @thinkgeoenergy GeoPower Global Markets, December 4, 2014

Incentive – something that incites or tends to incite to action or greater effort.

Regulation - a rule or directive made and maintained by an authority.

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Key elements of successful geothermal development •  Availability of sufficiently accurate geothermal

resource data and other relevant information •  Effective and dedicated institutions •  Supportive policies and regulations; and •  Access to suitable financing for the project

developer ESMAP – Geothermal Handbook (2014)


Data Effective InstitutionsSupportive PoliciesFinance

ESMAP – Geothermal Handbook (2014) 5 ThinkGeoEnergy - December 2014

Supportive PoliciesEffective InstitutionsDataFinance


Drivers of international development last 2-3 years

Economic situation

Energy demand

Industry

•  Interest vs. Capabilities •  Growth & standstill

•  Growing economies •  Policy & competitiveness

•  Technology, R&D •  Export initiatives

•  Feed-in-tariffs, risk mitigation •  IPP vs. Public utilities Policy support

•  Development Bank financing •  Export initiatives & vendor financing Availability of financing

7"

TGE Presentation in 2012

ThinkGeoEnergy"/"December"2014"

Policy tools

•  Renewable energy policies giving priority to development of certain resources

•  Financial incentive schemes or government subsidies •  Risk mitigation schemes or government subsidies •  Feed-in-tariffs •  Privileges regarding connection to grid, transmission &

distribution

Marietta Sanders, IGA

Enabling Framework Settings 8 ThinkGeoEnergy - December 2014

Top 10 Countries – installed capacity

Source: ThinkGeoEnergy Research (2014)

1,142

410

502

597

665

812

863

967

1,339

1,968

3,386

0 500 1,000 1,500 2,000 2,500 3,000 3,500

Other

Turkey

Japan

Kenya

Iceland

Mexico

Italy

New Zealand

Indonesia

Philippines

United States


Growth installed capacity 2000-2014

180

59

84

116

250

390

494

530

557

756

1,214

0 200 400 600 800 1,000 1,200

Other

Russia

Nicaragua

Italy

Mexico

Turkey

Iceland

New Zealand

Kenya

Indonesia

United States

10 ThinkGeoEnergy - December 2014 Source: ThinkGeoEnergy Research (2014)

United States

•  Portfolio Standards – setting demand, higher prices •  Production/ Investment Tax Credits – financing incentive •  Loan guarantees – financing incentive •  ARRA (Stimulus) – Research funding

Main drivers: Portfolio Standards, PTC

Main challenge: temporary nature PTC, competition, lack of early stage funding


Indonesia

•  Growing economy & huge energy demand •  Political will & legislation •  Feed-in-tariff

Main drivers: Energy demand

Main challenge: legal framework & uncertainties, pricing, guarantees, power buyer


Kenya

•  Economic growth & power demand •  Strong political will •  Institutional set-up •  Openness to foreign investors •  International funding

Main drivers: energy demand, political will and foreign funding (Risk mitigation to be a driver)

Main challenge: capacity building 13 ThinkGeoEnergy - December 2014

Iceland & New Zealand

•  Political will •  Favourable legal framework •  Research & training •  Power demand (now less)

Main drivers: energy demand & political will & framework, risk mitigation

Main challenge: decreased energy demand


Turkey

•  Political will & legislation •  Feed-in-tariff •  Energy demand •  Strong corporations

Main drivers: energy demand & feed-in-tariffs

Main challenge: resource security (size of concessions)


Financing


Financing

•  Equity (venture, private equity, strategic equity) •  Debt – mezzanine/ long term, availability/ steam

output •  Tax equity •  Risk mitigation/ insurance •  Development Bank financing •  Vendor finance


Financing geothermal projects

Start-up Exploration/ Pre-Feasibility

Feasibility/ Resource Verification

Detailed Design & Construction

Start of Operation

Venture Capital Development Equity Drilling

Equity Project Equity

Tax Equity

Mezz./ Bridge Debt, Const. Financing

Project & Vendor Financing

•  Developers •  IPPs (Development Pipeline) •  Resource Speculators

•  Venture Capitalists

•  Private Equity •  Public Markets •  Financial Partners

•  Private Equity •  Strategic Partners

•  Financial Players •  Large IPPs with

ability to monetize PTCs

Source: Islandsbanki 18"ThinkGeoEnergy"/"December"2014"

0%

10%

20%

30%

40%

50%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Financing of power plants

0%

10%

20%

30%

40%

50%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$4.8bn TOTAL!

Development bank !46%!

Commercial !lender !22%!

State-owned !entity!20%!

Pension fund 8%!Government 4%!

Annual new-build debt investment as proportion of total for past decade, 2002–2012!

Source: Bloomberg New Energy Finance 19"ThinkGeoEnergy"/"December"2014"

Current market drivers •  Growing economies & corresponding energy demand •  Availability of financing •  Supporting legal framework

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•  Global news •  Advisory Services •  Geothermal

Power Plant Map •  Social media •  iPhone app •  Marketing

21"ThinkGeoEnergy"/"December"2014"

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ThinkGeoEnergy - December 2014

Impact of regulatory/ incentive schemes fostering tgeothermal development

Presentations & Public Speaking

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