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Geothermal Energy Systems Assessment - A Strategic Assessment of Technical,
Environmental, Institutional and Economic Potentials in Central and Eastern European
Countries
4. Towards Strategic Development of Geothermal Energy Potentials in the CEECs
This study has identified barriers and risks, as well as opportunities and drivers, for
promoting geothermal energy projects in CEECs. It has also identified the need to focus on
characteristics, advantages and disadvantages of politics and funding sources, donors and
investors, within the CEECs.
From the Retrospective Analysis, and from the geothermal projects visited during
this study, it was clearly demonstrated that geothermal energy systems indeed represent an
interesting and promising opportunity for future energy supply to Central and Eastern
European countries and regions. A list of valuable lessons learned has been extracted from
the geothermal projects implemented so far. This experience has been mapped out through
this study and represents an efficient guiding tool for future selection of geothermal
projects for financing.
From the Prospective Analysis, it was concluded that all five DANCEE focus
countries (Poland, Russia, Romania, Slovakia and Ukraine) have strong geothermal
potentials. The technical and environmental potentials were deemed to be
high in all countries in question. With respect to socio-economic and institutional/policy
issues, however, the point of departure differed between countries and regions. Since
these latter issues are of crucial importance in order to attract investors and
demonstrate project sustainability, it is considered essential that future geothermal
project implementation in the CEECs will be based on not only technical and financial
parameters, but also on thorough analysis of socio-economic and institutional conditions
of relevance to the project.
Inputs from Danish sector experts have been an important factor in achieving successful
geothermal project results so far. Moreover, DEPA (DANCEE), and the Danish experts
contracted, is well regarded in the CEECs as well as among local stakeholders and other
international geothermal players. It is of paramount importance to acknowledge that the
reason why Denmark and the Danish Ministry of Environment has a high international
comparative advantage in achieving sustainable (environmental) results in the renewable
energy sector, is the system character of the Danish energy related products. It is
systemic in the sense that the institutional underpinning and context is often exported
along with the products, thus contributing to create positive institutional change and
more conducive environments for renewable energy in the recipient countries. An example of
this is when a geothermal project introduces not only components that improve the
insulation of the district piping network, but the institutional components of the project
also help to create institutional improvements at regional and national level.
From this assessment, questions may be raised on how international donors, bilateral
agencies and international finance organisations may best help to promote Geothermal
Energy in the CEECs, in cooperation with the national and regional partners and
institutions. A range of different international players are today involved in geothermal
project activities in the CEECs and others might have both interest in and potential to
get involved. In the past DEPA, through the DANCEE programme, has worked with
international financial institutions as well as with Nordic and national lending
institutions. Most of the support from the international society has, however, so far been
given on an individual and uncoordinated basis, thus leaving a clear need for more
coordination and cooperation within the field of geothermal energy development.
Main international players currently involved in geothermal project activities in the
CEECs include the World Bank, EU, EBRD, EIB, NEFCO/NIB, GEF /UNEP and GIA.
Owing to the experiences from the DANCEE programme, the Danish Ministry of Environment
is in a good position to continue and intensify its pivotal role as a promoter and
disseminator of renewable energy sources like GE in CEECs.
By commissioning a strategic study on GE, hosting an international workshop on the
future of GE in the CEECs and finally preparing a strategic action plan, DEPA has
contributed to achieving a high level of international coordination and collaboration in
promoting GE in these countries.
This strategic study provides DEPA with an instrument by which to steer, govern and
channel future investments in, and selections of, geothermal projects. Consequently,
future geothermal projects to be supported by DEPA should be selected according to a set
of economic, institutional, technical and environmental criteria (see 2.4). These criteria
will address prevailing political, institutional and regulatory conditions, including
policy initiatives and programmes to promote GE.
This study confirms that a new market is indeed developing, offering commercial
opportunities for pioneer companies. The market, however, is by nature dependent on
governments and international organizations cooperating to establish a stable and solid
framework for private investments. The involvement of industrialised countries in the GE
sector in CEECs is both necessary and desirable for this sector in order to develop its
full potential.
Through this study, it has been documented that a range of issues will need to be
addressed in order to create conditions for a real "take off" for future
development of geothermal energy potentials in the CEECs. Core challenges include the
following issues:
 | Strengthening of mechanisms and fora for international collaboration on support to
geothermal energy development in the CEECs. |
| Ensuring that future GE demonstration projects in the CEECs will be based on not only
technical, but also thorough economic, institutional and policy analysis in order to
ensure sustainability of these project activities. |
| Creation of attractive economic conditions and climate for GE investments in the CEECs,
also for smaller projects, for national as well as for potential international investors. |
| Better linking and coordination of geothermal projects with other energy and
environmentally related projects within the CEEC regions. |
| Improvement of institutional and regulatory support mechanisms within the CEECs for GE
project development. |
| Stronger involvement and commitment from CEECs in GE project development, involving both
national and regional levels. |
| Improvement of promotion, advocacy and information systems for geothermal project
development in, and between, the CEECs. |
Based on the analysis and experience provided by this study, a list of concrete and
strategic DEPA action proposals has been developed, taking into consideration comparative
advantages and the complementary role of the DANCEE programme. The initiatives proposed
should be considered with a view to common action involving international as well as
national key players related to geothermal energy development in the CEECs.
It is recommended that DEPA, through the DANCEE programme, will:
| Take active part in, and collaborate more closely with, relevant international
(European) fora promoting geothermal energy development. For instance, the GIA represents
a good opportunity for Denmark to be on the forefront of, and influence, the future
development within the field of GE. |
| Consider taking a supportive role in the creation of an insurance system for GE in all
CEECs. Either on a commercial basis in the form of a revolving fund, or a consortium
model. Overcoming the barrier of "first step risk" remains a key to development
of the geothermal sector, and creating an institution to cope with this risk is therefore
paramount to creating a take-off situation for GE. |
| Contribute to the creation of European consortia and joint ventures by giving priority
to projects with co-financing from European industrial partners, e.g. through the use of
advance/reimbursable project identification and pre-feasibility studies. |
| Seek closer collaboration between bilateral donors and International Financial
Institutions (including Nordic and Danish lending institutions) providing low interest
loans for GE, based on thorough analysis of the comparative advantages and complementary
roles of the different agencies involved in financing and supporting development of GE. |
| More systematic coordination of geothermal project activities with other relevant
(Danish) energy/environmental projects/programmes in the CEEC in question. This should be
done in order to achieve both maximal environmental/energy effects from the (Danish)
funds, but also in order to involve other potential (Danish) investors and funds that may
have an interest in the geothermal and district heating areas. |
| In policy dialogues with partner countries, promote the idea of creating a favourable
investment climate for GE through e.g. tax reductions for renewable energy products, tax
incentives for GE investments, soft loans and financial incentives for end users of RE/GE
sources. |
| Concentrate relatively more attention on management, institutional, policy and
socio-economic issues in relation to geothermal project implementation. Neglect of these
factors have in the past created unsound situations, even for projects with strong
technical potential. |
| Consider how decentralizing and regional development could be better linked to
geothermal projects, since geothermal potentials are often more of regional than of
national concern in the CEECs. This could create the basis for large scale geothermal
development at regional levels through development of comprehensive and coherent regional
business plans, addressing relevant issues of technical, institutional/political,
environmental, as well as of financial nature. |
| Support development of mechanisms that can ensure transfer of "best practices"
from geothermal development activities in one CEEC to other countries in the region. Best
practice could be either project specific or related to national/regional policy issues.
It could be transferred in the form of project visits, workshops, seminars etc. |
| Intend to link implementation of geothermal projects closely to solving other energy
related problems in the CEEC regions, such as energy inefficiency. Of particular
importance is that geothermal plants will not be dimensioned from current heat consumption
but from realistic expectations to future heat demand. |
| Continue technical and financial support for GE demonstration projects in countries
where geothermal potentials are substantial but undeveloped. Project implementation,
however, should be based on comprehensive analysis of not only technical, but also
economic, institutional and policy issues in order to minimize risks and ensure
sustainability of project activities. |
| Consider how to create efficient funding mechanisms to support implementation of smaller
geothermal investments projects. This could be in the form of institutional support to
regional authorities in areas with significant geothermal potential and where multiple
geothermal projects are feasible. |
| Support the CEECs in creating adequate institutional and regulatory infrastructure for
geothermal project development (national level) and to implement plans and projects
(regional and local level). |
| Support creation of a Central and Eastern European GEOHeat information centre, located
on a geothermal heated campus. Such a centre has been in operation for 25 years in the US,
providing information, data, publications, tours, lectures, training and user guides, and
could indeed be a useful platform for further promotion of GE in the CEECs. |
| Support promotion and media presentations in the CEECs on GE in general and its
potential for replacing coal and other hydrocarbons in particular. |
| Support an annual update of a "GE Best Practice Assessment" to be distributed
and used worldwide to strengthen the platform for geothermal project implementation. (The
best practice from this GESA study could serve as a point of departure for a first
update). |
| In general, nurture the international enthusiasm and optimism identified in this study
for the future of GE development in the CEECs by appropriate initiatives and action. |
It should be emphasized that although the above listed proposals for action focus on
DEPAs complementary role and advantages within the international context, DEPA should not
await actions taken by IFIs and/or other donors, but should be willing to act on its own
and take appropriate actions to support the future development of GE in the CEECs.
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