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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 Volume II.D: Country Profile - Slovakia

4.1 General Background Information

Founded as an independent country only 8 years ago (1993), the Slovak economic output reached the pre-transition level for the first time in 1999. Indicators such as state finances, current account and balance of payments also developed favourably.

In terms of GDP (table 1), unemployment and inflation however, the situation remained bleak by the turn of the millennium. Adding to this dire situation was the fact that the Slovak crown was liberalised only recently, the exchange rate de facto floating by third quarter of 1999.

Table 1
GDP Growth Rate (Annual Per Cent) 1995-1999

Source: www.worldbank.org

While some complexity characterize the recent economic situation of Slovakia, the EU does overall regard the macroeconomic situation a 'stable', the legislative framework needed for business to be 'largely in place', price distortions as being eliminated and privatisation of public utilities to be progressing (EU Commission 2000).

Table 2 presents some energy-economic key figures for the Slovak Republic.

Table 2
Key Figures for The Slovak Republic

Source: A combination of statistics from various sources²²

4.1.1 Map of Slovakia

Source: www.countrywatch.com

4.2 The Energy Sector

While (only) 57 per cent of towns and villages are connected, about 90 per cent of the Slovak population lives in gasified areas, which means Slovakia has the second densest gas distribution network in Europe. The Slovak national gas company (SSP) is therefore the first among equals, in the energy sector with regard to distribution network. The SSP supplied 1.26 million residential users, through its gas network in 1999. This is an increase from the year before year, owing to 220 new sites being network-connected in 1998. There is a general marked tendency of individual or building heatingsources converting from solid fuels (coal) to natural gas. Gas sales tariffs in 2000 were between 6.4 SEK/m³ and 3.6 SEK/m³ for households.

4.2.1 Energy Supply and Consumption

By 2000 the Slovak Republic became a net exporter of electricity. It is estimated that the overcapacity - currently a gross production of 8286 MW minus a peak demand of 4330 MW - will last at least 10 years. Also Poland, the Czech Republic, Ukraine, Russia, Austria and the EU have overcapacity in electricity production.

Annual energy use per capita has dropped by 18.7 per cent on average over a 9-year period (1990-1999). From 1990 to 1994 the decrease was the greatest with the annual energy use dropping by 22.6 per cent per capita, but after 1994 it started to increase slowly (see table 3).

Table 3
Annual Energy Use (toe per Capita)

Source: IEA, International Energy Agency

Increase in energy use from 1994 and forward may reflect the growth in GDP, which the Slovak Republic experienced from 1993/1994 and onwards during the 1990's. In the beginning of the 1990's - a period characterised by a decline in GDP - the Slovak Republic saw a decline in energy use per capita. 1998, however, was characterized by a significant increase of 2.81 per cent in energy use per capita and 4.10 per cent in GDP (see table 1 and 4). Despite this periodic coupling between GDP and energy use - as exemplified above - the Slovak Republic generally experiences a relative decoupling between energy use and GDP. This is described in detail later in this chapter.

Table 4
Annual Growth Rate of Energy Use per Capita

Source: IEA, International Energy Agency
Example: ((1991-1990)/1990) * 100 = per cent change
Average • (1990-1999) / 9 = -2.19

The Slovak Republic has during the 1990's managed to cut down on import of energy by 4.41 Mtoe (see table 5) from 16.77 Mtoe in 1990 to 12.36 Mtoe in 1999. This is equal to inland production having gone up by 14.9 per cent during the same time, - except during the period from 1996 to 1999, where a more rapid increase of 21.6 per cent has taken place. Again this could be linked to GDP figures.

Table 5
Total Primary Energy Supply, Net Import and Electricity Consumption

Source: IEA, International Energy Agency
* Electricity consumption equals domestic supply less distribution losses.

4.2.1.1 Energy Supply and Consumption in Relation to GDP

As mentioned above, there is a periodic coupling between GDP and energy use. This can be further illustrated by table 6 and table 7, which both show that the Slovak Republic from 1990 to 1999 is undergoing a change concerning the coupling of GDP and energy use.

From 1992 to 1999 the TPES/GDP-ratio decreases with 27.6 per cent (Table 6) TPES - Total Primary Energy Supply decreases by 1.26 per cent from 1992 to 1999, and the 27.6 per cent decrease in TPES/GDP ratio is therefore based on an increase in GDP as well as a decrease in TPES.

Table 6
TPES/GDP (toe per Thousand 95 USD)

Source: IEA, International Energy Agency
*: Estimates

Table 7 illustrates changes in consumption of energy. Also here can a decoupling between energy consumption and GDP be observed, which gives an indication of changing consumer structure and needs.

Table 7
TFC/GDP (toe per Thousand 95 USD)

Source: IEA, International Energy Agency
e: Estimation

4.2.1.2 Energy Supply and Consumption Based on Energy Source

Changes in energy supply source are illustrated in table 8. The most significant change is a 29.1 per cent reduction in the use of coal and oil from 1990 to 1999.

Energy supply based on gas has gone up by 8.4 per cent and supply of nuclear energy by 8.9 per cent during the same period. Supply of hydro energy has increased by more than 140 per cent, also in the same period, but hydro energy still only accounts for a minor share of total supply of energy (2.17 per cent, 1999).

Table 8
Primary Supply²³ / Energy Source (Mtoe)

Consumption of natural gas has increased from 1995 to 1998, mainly due to a rising demand from retail consumers and households. The consumption by wholesale consumers on the other hand, dropped slightly between 1996 and 1998. Also in relative terms, did gas increase its share from 29.7 per cent in 1995 to almost 32 per cent in 1997.

4.2.1.3 Consumption of Electricity

Consumption of electricity decreased by 2.5 per cent during the period 1990 - 1999 (see table 9), but from 1993 to 1999 consumption of electricity increases by 12.6 per cent. About half of the total electricity production is based on nuclear energy.

Table 9
Final Consumption of Electricity (Mtoe)*

Source: IEA, International Energy Agency
* Nuclear energy delivers 47.7 per cent of the energy for electricity generation.

Reflecting the whole period back to 1992, - and taking into account the new requirements for thermal quality of new buildings by 1997 - , average energy consumption for heating has dropped significantly from 190kWh/m² (apartments) and 340 kWh/m² (houses) between 1983 and 1992, to 132 kWh/m² and 290 kWh/m² respectively in 1993-96 and to 109 kWh/m² and 126 kWh/m² in 1997-99.

By contrast has household electricity consumption been quite stable, with a 2 per cent annual increase in recent years, in absolute terms. In relative terms, per consumption unit, a slight decline indicates that rising prices, low incomes and energy campaigns have caused combined effect. As for solid fuels, only wood and other bio-fuels is seen to have a potential for increasing shares, provided new domestic technological devices find their way to Slovak households.

4.2.1.4 Energy Consumption Based on Sectors

District heating is the dominant heat supply solution. Almost 100 per cent of apartments are supplied from district heating plants, corresponding to 49 per cent of all Slovakian households. By 1996 district heating plants produced 116 PJ, of which 40 PJ was used for space heating in households. District heating supplies 25 per cent of the total energy consumption of the average household. In 1996 nearly 700 000 apartment building flats were connected to the district heating systems - about 84 per cent of all apartment building flats, and about 42 per cent of all flats. While only about 6.5 per cent of flats have individual heat sources, most family houses have an individual heat source. By contrast does 70 per cent of the 870 000 flats in family houses have central heating, the rest individual sources in each room.

Currently, there is a trend of flat owners disconnecting from district heating networks. Further liberalisation of prices and privatisation of heat plants cannot be expected to stop that. The absence of exact technical standards to regulate price calculation obscures payments for energy consumed, and consumers do not want to subsidize the producers' heat losses caused by the bad condition of the piping.

Energy use for the industry sector has been reduced by 34.2 per cent from 1990 to 1999. Changes in production and introduction of more energy efficient technology is the main reasons. This corresponds positively to the TFC-ration mentioned earlier (see table 7). The transport sector has experienced an increase in energy use by 38 per cent from 1990 to 1999. Moreover, the residential sector and the communal and public services sector are still significant consumers of energy (see table 10). Here fossil fuels are major sources of energy production.

Table 10
Annual Energy Consumption - Mtoe (TFC) per Sector

Source: IEA, International Energy Agency
* 'Communal and public services' and 'residential' sectors are main 'consumers'

4.2.1.5 Energy Supply and Consumption - Summing Up

The Slovak Republic has an energy supply, which for heating and electricity production, is based mainly on fossil fuel. For electricity supply, nuclear energy constitutes about half. The Slovak Republic imports 'energy', but has during the last decade reduced imports by approx. 25 per cent. Hydrobased energy is the only present renewable energy source of any significance.

While total primary energy supply has decreased, GDP has conversely increased, which signals that the Slovak Republic is in the process of decoupling energy use and GDP and thus moving toward a postindustrialised society with generation of GDP from the tertiary sector and other less consuming businesses.

The residential sector and communal and public services sectors consume about 40 per cent of total energy. In terms of consumption, the trend is a movement towards greater use of gas in both industry and households, and this applies for both heat and electricity. Solid fuels are expected to keep a stable share, or - as far as brown coal is concerned - to be slightly reduced. At the same time, the role of nuclear power is expected and planned to increase, as Mochovce Nuclear Power Plant is put into operation. Already, Slovakia generate 44 per cent of its electricity from Nuclear Power Plants (NPP), 38 per cent from conventional power plants (CPP) and 18 per cent from hydropower plants (HPP) (1998 figures). It is interesting to note that HPPs had an installed capacity of 2 393 MW by the end of 1999, corresponding to more than 30 per cent of total installed capacity for electricity production in Slovakia.

With an EU surplus production of electricity in the area of 40.000 MW in 2000, electricity prices in the international market may be expected to remain low.

By 1997 and 98 heat prices for households were still partly subsidized. Also the electricity and gas prices were (and remain) distorted. The result has been tendencies for consumers to disconnect from the district heating system, and to prefer individual heating based on gas or electricity.

Caused by more efficient energy technologies, implementation of the new building codes and industrial transformation, energy demands are generally expected to decrease until 2010. As far as electricity consumption is concerned however, the forecasts project that demand will increase due to more appliances. So far, such forecasts - at least one made in 1996 by the gas company SPP - have not been confirmed by real trends though. On the contrary, even electricity consumption has not increased, as could be expected based on increase in GDP²⁴.

4.2.2 Energy Efficiency

Energy efficiency in the Slovak republic remains by and large unchanged from 1990 to 1999. This indicates that the Slovak Republic has hardly improved the process for extracting, producing and distributing energy significantly during the last decade (see table 11). Nevertheless is Slovakia the most energy efficient CEEC, probably due to the fact that Slovakia has the second densest gas distribution network in Europe.

Table 11
TPES/TFC

Source: IEA, International Energy Agency

Geothermal energy is rated as one of the most energy efficient energy sources to exploit - using today's technology.

4.2.3 Energy Infrastructure

4.2.3.1 Energy Infrastructure in General

As of 2000, the installed capacity of nuclear power in Slovakia was 2640 MW or 32 per cent of total national capacity installed. In 1999 the Slovak government decided to shut down two old units of the NPP V1 Bohunice by 2006 and 2008 respectively²⁵. A Decommissioning Plan has been prepared and EURO 30 million committed to the shutdown, by the EU. Meanwhile, NNP V2 Bohunice is being upgraded (2001-2008), at a total budgeted cost of 8 billion SEK.

At the newly constructed NPP Mochovce, the first (and most likely by now also the second) of two nuclear reactor units are in operation. By 1998, more than 34 billion SEK was spent on building these units, - more than 5 billion over budgeted costs. Now, the completion of the planned 3rd and 4th unit of Mochovce is discussed. Only a foreign investor is expected to be able to provide the 51 billion SEK needed to complete these units. A 3rd and 4th unit will create difficulties for unit one and two to sell its electricity on a saturated market and since the Slovak Power Utility is burdened by interests on loans for these unit constructions (interest payments reportedly in the area of 7 billion SEK), this is a problematic situation. Simple maintenances of the construction costs 100 million SEK annually, and some analysts estimate that in order to be economically feasible, the production price of any NPP Mochovce 3 and 4 would have to be above 5 US cent/kWh - against the current market price of about 2 cent²⁶. New EU safety standards will complicate any use of the planned structure (or even make using the planned and partly constructed structure impossible).

4.2.3.2 Transmission Systems

By 1998 the Slovak Power Utility (SE) - with its three regional distribution companies (ZSE, SSE and VSE) covered 80 per cent of domestic consumption, operated 86 per cent of domestic capacity and covered a significant share of heat supply to the domestic sector. The Slovakian electricity transmission system is well interconnected with neighbouring countries and works with the CENTREL and UCTE framework²⁷.

4.2.3.3 Combined Heat and Power Plants

Combined Heat and Power Plants (CHPs) are expected to have an increasing role in Slovak electricity and heat supply. CHPs generated 5.615 GWh in 1999, or 24 per cent of total production. The production stems from by the Slovak gas company SPP. Interest for co-generation units have increased in recent years, partly due to new legislative support (Energy Act No.70/98). While, under market conditions, district heating and CHP are the most efficient, with the lowest prices for consumers, the current (distorted) prices remain a barrier to wider spread of CHPs and an incentive for individual gas boilers.

Most (80 per cent) of the households supplied by district heating plants are located in towns, where gas distribution is present. In Kosice, for instance, Heat Power Engineering Kosice supplies 80 000 apartments with heat and 500 GWh of the electricity per year. On the national level, are district heating systems fired by natural gas (71 per cent), coal (16 per cent), oil (7 per cent) and other fuels (6 per cent).

The central location of Slovakia's natural gas transit pipeline, makes Slovak Republic a key player in the European natural gas market. SPP plan to construct an additional (fifth) transit gas pipeline and as of 2000, about 200 kilometres of that new pipeline had been constructed.

4.2.4 State-Owned Energy Enterprises

The Slovak Republic and gas transit system is an integrated part of the European gas network, importing natural gas from Russia. Also 99 per cent of crude oil is imported, mainly from the Russian Federation. Privatisation (into a joint-stock company ownership with 51 per cent of shares remaining with the state) of the national gas company SSP has been approved. The national electricity company (SE) and oil company (Transpetrol) are being privatised as well, together with the distribution sector. Steps towards an independent regulatory authority have been taken.

4.2.5 Prices and Regulation

By 2000 (February) the Slovak Government approved price increases for electricity averaging at 40 per cent for households and 5 per cent for businesses, and increases of natural gas prices and heating price ceilings as well. Thus, for example, the ceiling prices for electricity by august 2000, was 2.3 SEK/kWh (normal rate, though also with a lower tariff at 0.6 SEK/kWh) for consumers with a 4 room dwelling. By contrast, "big" consumers above 25 000 kWh annually, pay 3.3 SEK/kWh (low tariff at 0.9). Both categories pay a monthly standard fee: SEK 300 for the 4-room dwelling and between SEK 195 and SEK 1 110 for big consumers, progressively increasing with volume of consumption. Tariffs thus display a progressive rate, where the price decreases with increasing consumption. Preparations are made for further opening up of the domestic energy market.

4.2.6 Environmental Issues

Among the many areas in which Slovakia strives to conform to EU standards, most environmental priorities have only been addressed to a very limited extent, according to the EU Commission (EU Commission 2000). However, a signatory to the Kyoto Protocol, Slovakia is committed to have reduced its emissions by 8 per cent in 2012, compared to the 1990 baseline level.

4.2.6.1 Main Sources of Air Pollutants

Energy consumption and production is one of the most severe sources of pollution in the country. Slovakia has been among the 20 countries with the highest amount of greenhouse gas emissions per capita in the world with 11 t/year. However, industry recession, decreasing energy consumption, installation of desulphurisation units at large power plants and fuel substitution (from solids to gas) brought a decline in air emissions in the 1987- 1994 period. These trends have continued: The annual reduction was marked for SO₂ (from 148 603 + 25 926 tonnes in 1994 to 130 425 + 12 087 tonnes in 1998) and NO_x (from 84 539 + 3 692 tonnes in 1994 to 51 877 + 5 177 tonnes in 1998). For CO and particulates, the picture was less pronounced (based on ECB 2001, tables 6.1 and 6.2, i.e. small and large sources, combined).

The central and district heating sector emits 22 per cent and the commercial and residential heating another 22 per cent of Slovakia's CO₂ emissions. Solid fuels are the main contributor to CO₂ emissions and also to ash material (from coal combustion).

The Slovak Republic has established a set of dynamic emission levels combined with economic Instruments, fining pollution in excess of certain emission limits, and reduction targets have been established for a range of substances.

Besides the European Energy Charter, the SR is a signatory to the Convention on Climate Change (FCCC) and the international agreement to control transboundary emissions, including the Helsinki and Sofia Protocols (Sulphur and NO_x reduction).

4.2.6.4 Emissions

The Slovak Republic has during the last decade reduced Carbon Dioxide emissions from consumption and flaring of fossil fuels by 15.8 per cent, which further has been accompanied by a reduction in SO₂ (67 per cent), NO_x (42.2 per cent) and CO₂ (35.7 per cent) emissions (see table 12 and 15). Still the Slovak Republic has a high emission rate of SO₂ per capita compared to other European countries.

Table 12
CO₂ Emissions from the Consumption and Flaring of Fossil Fuels

Source: EIA, Energy Information Administration
* Preliminary

CO₂ per capita emissions has from 1993 to 1998 dropped by about 5 per cent from 2 054 kg. to 1 952 kg. (see table 13). This corresponds to data (from table 14), where CO₂ emission per TPES, million tonnes oil equivalent also has dropped by approx.3 per cent. Inland energy production and imported energy has thus become more efficient concerning CO₂ emission per produced unit of energy.

Table 13
CO₂ (kg. of Carbon Equivalent) per Capita

Source: EIA, Energy Information Administration IEA, International Energy Agency
* Preliminary

Table 14
CO₂ (kg of Carbon Equivalent) / TPES (Mtoe)

Source: EIA, Energy Information Administration
IEA, International Energy Agency

Table 15
SO₂, NO_x, and CO Emission in Slovakia, 1990-2010 (in 1000 tonnes)

Look here!

The Slovak republic is situated in the area of Europe with the greatest atmospheric pollution and acid rain. Ninth among European states in Sulphur Dioxide emissions, Slovakia produces four times the SO₂ emissions of neighbouring Austria (See also table 15).

4.2.7 Renewable Energy

The Slovak Republic has declared in the state energy policy that a goal for the Slovak Republic, is to base 6 per cent of total energy production on renewables.

As shown in table 16, only 2.6 per cent (1999) of total primary energy supply is based on production from renewable energy sources, whereof the majority comes from hydropower. Also solid biomass contribute to this figure although solid biomass has been reduced from supplying 162 kilo tonnes oil equivalent of energy to 76 ktoe, a reduction of 53 per cent over a 9 year period. Biomass is in other Eastern European countries considered as being an alternative to hydro- and geothermal energy.

Table 16
Contribution From Renewable Energies and Energy From Wastes.²⁸

Source: IEA, International Energy Agency

4.2.8 Energy Situation

Defined as primary energy consumption relative to GDP, the Slovak energy intensity is still 2.3 times higher than the EU average. This is caused by a high share of energy intensive industry, since household consumption is low, compared to developed countries, and a 35 per cent decrease in total energy consumption in the agricultural sector, was evident by the first half of 2000. According to the EU Commission (EU Commission 2000), the energy efficiency in Slovakia is rather low and measures in favour of efficiency, energy saving and use of renewable energy needs to be undertaken rapidly. A low energy efficiency according to the EU Commission is contrasting to this report findings based on TPES/TFC figures, but of course, if split up on type of energy and technology, then some systems can be rated as inefficient - e.g. single household use of brown coal.

While Slovakia is a gas and oil importer, it is a producer of brown coal, which is the most utilised local energy resource. With a share of Primary Energy Supply (PES) of 29 per cent and overall consumption of 9 736 x 103 tonnes, coal is still the basic fuel. Of this, 5 376 x 103 was brown coal, 74 per cent of it mined locally and representing about 7 per cent of total PES consumption. In Slovakia, the department of coal mining, alone, employs more than 8 000 people, and brown coal is important since SR covers only 13.7 per cent of its PES domestically - the majority from brown coal. Staff reductions in the coal sector are expected in the magnitude of 3 600 to 7 160 people. From 2006 and due to the emission limits of new environmental legislation, the locally produced coal will only be possible to burn legally in special (wet gas desulphurisation or fluid combustion) boilers, of which Slovakia has only one at the moment. While the current decline in use of brown coal, is caused by a relatively high price compared to gas and the high coverage of the gas network, a new act (N0. 401/98) has been introduced, featuring environmental fees that will make brown coal economically ineffective as early as 2002. Another "disadvantage" for domestic SR brown coal is that the price is unregulated, while the regulated prices of electricity, gas and heat are probably still below market prices. While, since 1993, coal prices increased only 7 per cent, industrial commodities rose 39 per cent and consumer price index 70 per cent. This may explain why in 1999 SR imported brown coal from the Czech Republic. Coal market prospects are that by 2004, 62 per cent of small and medium sized coal costumers will convert go gas and - at 51 per cent - this also applies to consumers of dust coal.

Policies and Programmes

A 1992 state programme aim to reduce energy consumption among households. 10 937 flats were insulation between 1992 and 1997, and 158 projects improved efficiency of central heating sources, saving 1 331 TJ of heat and 466 MWh from 1993-98. More recently, as more and more flats have been bought by residents, private owners have proved less willing - or perhaps less able - to improve their buildings. While the new building code has contemporary requirements, an estimated 96 per cent of the Slovak dwelling stock does not have a satisfactory thermal quality.

4.3 Geothermal Energy in Slovakia

From archaeological findings in Slovakia it is known that, the use of GE in the form of thermal spring dates back to very early times, where the springs were a location factor for man. The use of GE proper dates back to 1879 where the first geothermal well was drilled in Ganovce, followed by a second in Kovacova 20 years later. In 1958 the first examples of direct use for space heating was seen (three different systems and several areas), followed by more extensive research. Slovakia's economy depends on energy import, which causes a tendency to use non-traditional renewable energy sources, of which geothermal energy represents 18 per cent. The Slovak Republic is one of the few CEEC where installed capacity is over 100 MW.

The use of GE in Slovakia today is for multiple purposes, including for 13 agricultural farms (about 27 ha of greenhouses and some soil heating), fish farming, space heating and recreational purposes. While the total use figure is 130.97 MW (and 846.4 l/s of Geothermal water) the total yield from the sources is 269.95 MW (and1 672 l/s of Geothermal water, respectively). The effectiveness and technological level is fairly low, due to seasonal use and low efficiency of the technical installations.

Today, 26 prospective areas and structures with exploitable geothermal energy potential have been identified, based on work carried out by the Dionyz Stur Institute of Geology in the 1980´s (now Geological Survey of the Slovak Republic). The potential resources represent 5 538 MW and are located at depths between 200 and 5 000 metres, with water temperatures ranging from 20 to 240ēC. In 14 of the prospective areas, further explorative work has been done. While the remaining 12 areas still await verification by drilling, 6 of these have been geologically assessed.

4.3.1 Areas and Projects

As per June 1999 8 counties in Slovakia had GE utilities, yielding and/or using geothermal water and thermal power. These were Trnava (11 localities), Nitra (9 localities), Zilina and Banska Bystrica (5 localities each), Trencin (3 localities), Presov (2 localities) and Kosice (one locality). Bratislava is included in this list, but based on potential only and with no use figures (see table 17).

Table 17
Distribution of Utilised Geothermal Energy Sources in Counties of The Slovak Republic

Source: (Fendek, Franko, Cavojova, 1999)

In spite of the high level of geological research and investigational studies in Slovakia, the effectiveness and technological level of geothermal energy utilisation is very low. The first reason is the seasonal utilisation, the second is the low efficiency of geothermal installations.

Geothermal water is used in 13 agricultural farms (greenhouse heating, soil heating), in four localities for heating of service buildings, in one locality for sport hall heating, in two localities for fish farming, in one locality for restaurant heating and on 30 localities for recreational purposes. Distribution of geothermal energy sources in districts of the Slovak Republic is shown on Fig. 1. The total amount of geothermal energy utilised in 36 localities represents thermal power of 130.97 MW and 846.4 l/s of geothermal water (Table 17).

Look here!

Figure 1
Geothermal Potentials in Slovakia

Utilisation of heat in agriculture provides great possibilities for early production of vegetables (cucumber, tomatoes, peppers, aubergines, etc.) and flowers. Use of fossil fuels is however too costly and geothermal water can provide an economic answer. The total area covered by greenhouses is about 27.36 ha. It follows from Table 4 that the highest amount of the utilised sources of geothermal waters is situated in Trnava County and represents 44.47 MW(Fendek, Franko, Cavojova, 1999). Slovakia does not use GE for electricity generation yet, but funds have been allocated for geothermal electricity production in the order of 6 GW/yr, projected for use by 2005. In northern Slovakia a company "Esgeoterm" is said to be involved in a Polish Slovakian collaboration on this front.

The geothermal energy potential does in many cases fulfil economic criteria for geothermal water exploitation. High temperatures and high heat flow are typical characteristics of both the so-called Neogene basins and the volcanic mountain ranges of the inner Carpathians. Up to 1995, 27 perspective geothermal areas have been identified whereof 22 are situated in the Inner West Carpathians. The remaining 5 are situated in Neogene basins (3) and in volcanic rock (2).

Table 17
Existing Geothermal Projects and Sites

The Danube basin is mainly characterized by Neogene clastic rocks and sand deposits. The aquifers have a high permeability, which determines the transmissivity of geological formations.

4.3.1.2 Inner Carpathians

The Inner Carpathians are characterized by limestone and quartz as top layer sediments and Mesozoic rock as underlying layer. Sub regions often have unique conditions due to geological activity, which can cause faults, depressions and ridges that require special prerequisites for utilisation of geothermal water.

The geothermal power plant supplies the town of Košice with geothermal heat in the amount of 100-110 MW is based on 8 production wells and 8 reinjection wells. The perspective for the utilisation of geothermal energy in this region is about 300 MW. Surveys also suggest a potential use of geothermal waters for production of electricity. The Košice basin is filled with Quaternary sediments on the surface and underneath is Neogene sediments, with a base layer of Mesozoic rock. Geothermal energy utilisation in Poprad, Liptov and Skorusina basins all have to complement the existing energy production in their respective regions, which mainly supply the tourist trade sector (hotels, spas, ski and water sport facilities etc.). Geothermal water in these areas is suitable for space heating of homes and other buildings, for the heating of ponds in which fish are raised, and for greenhouse heating.

4.3.1.3 Neovolcanites

Potential utilisation of geothermal energy in the Ziar basin is based on results from feasibility studies (1999) showing water temperature at around 100 °C in a depth of approx. 2 500 m. in Triassic dolomites and limestones. So far the water has not been extracted for energy use.

4.3.2 Organizations Responsible for Geothermal Energy Development in Slovakia

At the level of government, the Slovakian Ministry of Economy is the governments' regulatory and policy agency with overall responsibility for development and implementation of the energy policy in Slovakia. The ministry issues licenses for operation in the energy sector, approves construction, renewals and decommissioning of energy plants, or the change of their fuel basis, etc. Capacity-wise the ministry is challenged, at least in the area of electricity, where its role as regulator is changing. It is the Ministry of Finance, however, who regulates the energy prices. In contrast to the Czech Republic, Hungary and Poland, Slovak household electricity prices do not yet (as of early 2000) cover production costs. However, an independent regulatory body is scheduled to take over energy price regulation by 2003. The Slovak Energy Agency assists the Ministry of Economy in developing and implementing the energy policy in the country.

The Ministry of Environment is not only a regulatory agency for geological resources, but also a focal point for implementation of geothermal projects in the SR. Through one of its offices for international collaboration and EU accession, a local (DANCEE) project coordinator has had and will continue to have a pivotal role in coordinating geothermal initiatives (involving Danish funds) in the future. With project contributions in 1995, 1999 (Ziar nad Hronum) and 2000 (Kosice), Denmark (DANCEE) allocated a total of DKK 11.9 million for geothermal projects in Slovakia

At the regional level the most intense use of geothermal energy is in town of Galanta, where geothermal is the primary energy source for the district heating system.

The two most important private sector players in the geothermal energy field in Slovakia are Slovgeoterm and Galantaterm. (See also case studies of Kosice and Galanta). Currently, Houe & Olsen from Denmark, is participating in work on the geothermal project in Kosice city, Eastern Slovakia. Not so long ago, two companies formed a group Geoterm Kosice together with Slovak Gas Company and Kosice Municipality.

The Energy Centre Bratislava is a semi-official NGO operating in the field of energy and has already implemented and managed several energy projects and studies. The Geological Survey is carrying out studies, investigations and research on the geological resources of the country, including geothermal resources. The Atlas of Geothermal Energy of Slovakia, from 1995, is available from the Survey.

Based on analysis of this organizational "landscape" of organizations with capacity and experience in the field of geothermal energy planning, there is good reason to assume that in the case of geothermal energy, the prospects for efficient collaboration, between the central and local governments and the private and non-governmental sector in Slovakia, are excellent and very promising indeed.

4.3.3 Institutional Factors Governing Geothermal Energy in Slovakia

4.3.3.1 Laws and Regulations

Indirectly, the "Air Protection Law" will give GE a relative comparative advantage over other - more polluting - technologies. The law is founded on the principle of "best available technology" and determine emission quotas. These principles not only apply to newly built sources of air pollution, but also existing sources have assigned terms to fulfil stricter criteria and regulatory standards, with fees increasing every year to reach a high level set for 2004.

4.3.3.2 Policy Instruments in Place, Directly or Indirectly Promoting GE

It has been said that in Slovakia, there are few effective legislative, economic and fiscal instruments in place to influence energy consumption and to reduce the energy intensity of the national economy (ECB 2001). However, the following existing instruments can be mentioned:

	The 1999 Ministry of Economy programme for the Support of Energy Efficiency and the Use of Alternative Energy Sources.
	The Ministry of Agriculture programme for supporting RE sources use.
	Programme for insulation of domestic housing
	State fund for environmental protection, which is based on green taxes and from which municipalities can apply for funds.

Further, the concept of Energy Performance Contracting (EPC) has been introduced as one innovative financing mechanism. Finally, joint implementation or allowance trading is included in the available instrumentation²⁹. The funds allocated in the state budget for support of improved energy efficiency are relatively small, however, compared to Europe at large.

This mix of instruments may be too modest to induce energy efficiency as a feasible alternative to adjusting fuel and energy prices to market levels. However, numerous acts and directives do illustrate the increasing understanding of the necessity to be energy efficient. Thus, according to a new law from 1998, heat suppliers and electricity distribution companies are obliged to buy heat and electricity from environmentally justifiable sources (Law # 70 from 1998, § 33)³⁰. Also the income tax act (No. 286/92) imply some advantages to installation of RE in the first five years of operation. The air protection act also employ fines to unauthorized polluters, and these fines are progressively depending on the volume and nature of pollution.

4.3.3.3 Energy Policy and Strategy

The 1999 Slovak Energy Policy focus on preparations to enter the open EU energy market, and further defines safety of supply and sustainability as basic principles to follow. This means that the energy chapter of National Programme for implementation of the Acquis Communautaire is a central instrument. This, in turn focus on market liberalisation, including a schedule for energy price adjustment and tariff modifications, as well as regulation of monopolies and establishment of an independent regulatory body. In concrete terms, this means that in the future, anyone who fulfil standard technical requirements will be given access to the energy grid, and have the right to produce, buy and distribute power, gas and heat. State intervention in the sector is meant to be minimized. In effect, the new act implement all EC Commission (White Book) requirements, except full third party access to the Slovak energy market.

The policy will allow big energy consumers in Slovakia to trade directly with energy suppliers. The definition of "big" in this context is dynamic, scheduled to decrease from above 100 GWh by January 2002 to >20 GWh by January 2004. Further, the policy address energy conservation, announcing a programme for energy efficiency, wider use of renewable (and domestic) energy and R&D, and even a law on rational energy use. Finally, a programme of "Regulated Energy Price Adjustment" is part of the policy.

Energy price increases have triggered an increasing public awareness about energy issues, including environmental awareness of the effects of highsulphur, coal fired power plants. The new energy act is aimed at liberalising the energy sector in accordance with the European Energy Charter, ratified in 1995. The energy act replaces the 1957 electricity act, the 1960 gas act, the 1987 acts on energy inspection and the act on production, distribution and consumption of heat (also 1987).

The overall strategic aim of the SR energy sector policy is to satisfy national energy needs in a reliable, safe, effective and ecologically acceptable way, while fulfilling international agreements, reducing energy intensity to the EU level and increasing the share of RE in PES coverage. In general, renewable energy (RE) has been included in the energy planning documents of the Slovak Republic, according to which, RE has a potential of 4 per cent of the primary energy resources available for the 2005-2010 period - equivalent to 40 000 TJ/year. At 18 per cent, GE ranged the second most important source of renewable energy, to be relied upon to fulfil this strategy (of partly substituting fossil fuels). Still, the considerable potential of alternative fuels, particularly biomass whereof only about 30 per cent of the potential is currently used (1997 figure), may not be realized in the absence of direct or indirect support through energy legislation.³¹ It is planned though, to establish an "Energy Savings Fund" and make some amendments to the tax regulation, increasing the "excise tax" on fuels and energy, and exempting "non-traditional" energy sources and CHP from costumes regulation.

As for GE in particular, the Ministry of Environment and the Ministry of Economy of the Slovak Republic jointly prepared a "Conceptual proposal of geothermal energy utilisation in the Slovak Republic" in 1996. In response to this proposal the Government accepted a "Resolution" obliging the Minister of Environment to evaluate GE use in Galanta, the Poprad Basin, the Liptov Basin and the Skorusina Depression, as well as undertaking a hydrogeothermal evaluation of the Ziar Basin and study the feasibility of the socalled "hot dry rock" approach in Slovakia.

4.3.3.4 National Funding Sources for GE Development

The following sources for funding of renewable energy exist, in Slovakia:

	Programme for support of energy savings and exploitation of alternative energy sources by regional offices of Slovak Energy Agency (www.sea.gov.sk/projekty_source.htm).
	Support from the State Environmental Fond (www.zpnet.sk/sfsr.html).
	Support from National Agency for Development of SMEs, including a Supporting loan programme and a micro loan programme (www.nadsme.sk/financne.htm).

4.3.3.5 Status Vis-a-vis EU Assession

With Slovak exports to EU accounting for 60 per cent of all its exports, the Slovak economy is de facto highly integrated with the European Union. Politically, the Slovakian National Programme for the Adoption of the Acquit (NPAA), 2000 version, outlines a strategy for its accession. Financial assistance from EU to Slovakia planned for the 2000-2002 period reached a target figure of more than 100 million EURO (EURO 49 million from Phare, EURO 18.3 million from SAPARD and annually between EURO 36.4 and EURO 57.2 million from ISPA).

Slovak aspiration for EU membership is also shaping the course of its energy sector, and already in 1995, Slovakia accessed the European Energy Charter³². However, the approximation in this area, as in others, has been complicated by economic restructuring and its social impacts.

Achievements in Terms of Harmonizing Energy Sector Standards with the EU

The (amended, 2001) Energy Act will serve as the basis for the further implementation of the relevant EU Directives governing the internal energy and gas market and opening of the market to eligible customers. The key piece of legislation governing the field of energy efficiency will be the Act on Energy Efficiency. The Act will enter into force in 2002. With the adoption of this act, a legal framework for energy efficiency will be established and the Slovak legislation governing this field will be in compliance with the European Acquis Communitaire. An independent Regulatory Authority is expected to start its activity (licensing, price regulation and antimonopoly, competition) on 1 January 2002.

4.4 International Collaboration on Geothermal Energy Development in Slovakia

Danish companies in the field of geothermal energy have longstanding experience working with district heating in Slovakia, and in particular the company Houe & Olsen has extensive credentials in this regard. With three geothermal projects in the 1995-2000 period, Denmark and the Slovak Republic have a well established record of collaboration in the field of geothermal energy use and development.

Further to the projects already implemented, the international unit of the Slovak Ministry of the Environment has received several expressions of interest with regard to future geothermal projects, including one in Dolny Kubin, submitted by the independent expert Mr. Juraj Franko.

Besides city councils, government authorities and private companies with a record of making geothermal investments in Slovakia, a number of foreign companies and international finance institutions are already investing (or have shown interest in investing) in GE in Slovakia. So far demonstrated assistance from international finance institutions to geothermal energy has been given by the Nordic Environment Finance Corporation (NEFCO) and the Nordic Investment Bank.

It is yet unclear to what extent the EU may support GE in Slovakia under the SAPARD, where GE may be seen as contributing to sustainable rural development, increasing jobs opportunities, - both directly and indirectly (horticultural uses, etc).

The same does apply to ISPA, though ISPA has declared interest in the geothermal company Slovgeoterm, with an application for assistance in the order of EURO 20 million, for drilling an additional 7 + 6 wells in the Kosice geothermal area.

4.5 Summing Up

This analysis confirms that in Slovakia, actions are well underway to restructure the formerly state-owned, now partly privatised energy sector and implemente long-term policies, as well as provide more oversight and coordination of the sector. As a result, one can expect that within the next few years and certainly by the end of 2005 energy prices in the Slovak republic will have reached levels very close to the average European (EU) level, and that harmonisation of the Slovak energy legislation with the EU energy policy will have been completed.

Slovakia has an energy supply, which for heating and electricity production is mainly based on fossil fuel and nuclear energy. While total primary energy supply has decreased, GDP has increased, which signals that the Slovak Republic is in the process of decoupling energy use and GDP and thus moving toward a post-industrialized society with generation of GDP from the tertiary sector and other less consuming businesses.

Thanks to current surplus capacity and close integration with the European grid as well as a high density of gas network coverage, Slovakia will be in a position to meet the future demands for heat. Slovakia does however have an ambition that future demand should be met, increasingly, with less environmental costs and featuring an increasing share of renewable and environmentally sustainable energy sources.

An official policy goal in Slovakia is to have 6 per cent of PE production covered by renewables (4 per cent by 2005). If this goal is to be reached, geothermal energy is bound to play a critical role. Because of the administrative and other difficulties in providing state support for renewables, foreign technical and financial assistance seems an essential prerequisite for development and dissemination of RE in general and GE in particular.

Slovakia has a very significant and well documented technical potential for exploitation of geothermal energy. Slovakia also has a very high capacity for implementation of geothermal projects. The capacity to work successfully with international investors and donors is noteworthy, as proved in the case of the Galanta geothermal project and the efforts by Slovgeotherm to secure funding from the EU ISPA programme and international finance institutions.

Further to possessing a high volume and quality of proven geothermal resources, economic feasibility studies of the Galanta geothermal project show that while use of geothermal energy for heating purposes may not yet be very profitable per se, it may do well compared to existing heating systems using liquid fuel oil.

Within the last few years, the implementations of new Slovakian energy laws have somehow indirectly improved the conditions for geothermal project investors. The new laws have opened up to more market-based competition between the different energy sources, removing some of the indirect subsidies that were beneficial towards fossil fuels relative to renewable energy.

With the earlier (historical) investment in geothermal drillings in the country, Slovakia is well prepared for development by new actors, - be they private or public. Traditionally, the Slovakian municipalities have committed themselves financially to geothermal project investments. The municipalities, however, are struggling economically in these years with the existing, old district heating systems, and the same municipalities do have clear economic, if not environmental, incentives to change heating systems. In order to bring about a "take off" situation, external financial support and investments are needed. The existing government programmes and economical policy instruments (green taxes) are insufficient to trigger geothermal energy development, without such investments from outside Slovakia.

4.6 References

Franko et al. 1995. The Atlas of Geothermal Energy of Slovakia. Geological Survey of Slovak Republic. Bratislava.

Oldrich Vana, Otto Halas & Andrea Vranovska. Geothermal energy sources in eastern Slovakia. Slovgeoterm a.s. Bratislava.

Fendek, M and Juraj Franko. 2000. Country update of the Slovak Republic.
Proceedings of the World Geothermal Congress 2000. Japan.

DANCEE. 2001. DANCEE Country Programme for Slovakia 2000-2002.
Ministry of Environment. Bratislava.

Andrea Vranovska ,Vladimir Benovsky, Vladimir Drozd, Otto Halas and Oldrich Vana. Investigation for Geothermal Energy Utilisation in the town Kosice, Slovak Republic. Slovgeoterm a.s. Bratislava.

ECB. 2001. Energy Sector of Slovakia. Energy Centre Bratislava. Bratislava.

ECB. 2000. Annual Report. Energy Centre Bratislava. Bratislava

Dancee. 2001 forthcoming. Strategic Action Plan (Volume II, of the Strategic Assessment of the Potential of Geothermal Energy Systems in CEEC.
Copenhagen.

Fendek, Marian 2001. Geothermal resources OF The Slovak Republic .
Presentation to the international workshop on the future of geothermal energy in the CEEC, Russia and Ukraine.

4.7 List of Institutions Visited and Individuals met

Ministry of the Environment

Mr. Michal Deraj , Local Project Coordinator for Slovakia
Nam L. Stura 1, 812 35 Bratislava
Tel.: 00 421 2 5956 2181
Fax: 00 421 2 5956 2213
deraj.michal@lifeenv.gov.sk

Mr. Thomas H. Owen
Senior Coordinator and Policy Adviser
Nam L. Stura 1, 812 35 Bratislava
Tel.: 00 421 2 5956 2181
Fax: 00 421 2 5956 2213

Slovak Energy Agency (Ministry of Economy)

Mr. Miroslav Kucera, Director General,
Bajkalska 27
827 99 Bratislava
Tel.: 00 421 2 58248345
Miroslav.kucera@sea.gov.sk

Mr. Milan Gaspir
Bajkalska 27
827 99 Bratislava
Tel.: 00 421 2 58248345
(4854 1920 al. 4854 1922)

Mr. Martin Bella, Project Manager,
International Activities Dpt.
Bajkalska 27
827 99 Bratislava
Tel.: 00 421 2 5824 8325

Slovgeoterm
Mr. Vladimir Drozd, Hydrotechnology Manager
Slovgeoterm
Mlynske Nivy 42
821 09 Bratislava
Slovakia
Tel.: 421 2 5341 11 09
Fax.: 421 2 5341 11 09
e-mail: SLOVGEO@GTINET.SK

Oldrich Vana, Technical Manager
Slovgeoterm
Mlynske Nivy 42
821 09 Bratislava
Slovakia
Tel.: 421 2 5341 11 09
Fax.: 421 2 5341 11 09
e-mail: SLOVGEO@GTINET.SK

Andrea Vranovska, hydrogeological manager
Slovgeoterm
Mlynske Nivy 42
821 09 Bratislava
Slovakia
Tel.: 421 2 5341 11 09
Fax.: 421 2 5341 11 09
e-mail: SLOVGEO@GTINET.SK

Geothermal company, Galantha
Mr. Stefan Grell, Director
Vodarenska 1608/1
92401 GALANTA
031 780 4716

Energy Agency Bratislava
Mr. Vladimir Hecl.
Energy Centre Bratislava
Bajkalska 27
82799 Bratislava
Slovak Republic
Tel.:+421-7-58248 472
Fax:+421-7-58248 470
E-mail: (ecbratislava@ibm.net) (office@ecbratislava.sk)
www.exbratislava.sk

Geological Survey of Slovak Republic
Marian Fendek, Dr.
Mlynska Dolina 1
817 04 Bratislava 11
421/7-59375355, Fax 54771940)
email: fendek@gssr.sk

Independent Expert
Mr. Juraj Franco
Phone: 421 45523090
Mobile: 0905486081
Email: eurocol@kiwwi.sk or jurajfranko@hotmail.com

4.8 The Case of Kosice

People met during the mission: Representatives of Slovgeoterm, Bratislava

I. Project Background

In 1996/97 geotechnical tests investigated the potential for geothermal plants in Slovakia. Promising localities were found, including Kosice and Ziar nad Hronum and DKK 3.55 million were granted for geothermal projects in the country. The Kosice project was promising, but local politicians disagreed among themselves about the future of heat planning and the city administration followed several plans at the same time, one involving technical collaboration with and grants from Denmark and another with France. At the time, therefore, a decision was made from the Danish side to "pull out" of Kosice.

Four years later, in January 2000, the Danish Environmental Protection Agency granted its support to a project described in Houe & Olsens' application of December 1^st 1999, following earlier assistance to the implementation of geothermal district heating in Kosice, Slovak Republic.

In April 2001 a technical (geological and geophysical) test carried out by the company Slovgeoterm confirmed the technical viability of using GE in the Kosice basin (Slovgeoterm. 2001. The well testing in Durkov Geothermal structure. Bratislava). In brief terms, the test confirmed that the temperature, hydraulic and hydro-chemical properties of the reservoir were stable (the test enabled modelling reservoir conditions for 30 years ahead) and could thus supply the 60 000 dwellings to be served under the planned Kosice project.

II. Project Description

With SLOVGEOTERM as the beneficiary and Houe & Olsen the project holder, the project (phase I of two phases) covers equipment for erection of a pilot plant and technical assistance to the project. Phase I, completed in year 2000, included testing; elaboration of technical solutions; contracts with local stakeholders in order to ensure commitment; establishment of Geoterm Kosice (shareholders should be identified); investigation of existing installations; district heating systems and plants; and finally identification of investors. Phase II (year 2001-2004) included design; procurement; installation of equipment; drilling and test of new wells; financing; organizational set-up; contracts (heat price structure); and the first year of operation.

Main Projects Objectives

The main objectives is to establish a geothermal system in the city of Košice to exploit a local environmental friendly energy resource in order to decrease the emission of polluting elements from the existing coal fired boiler plants. In addition the geothermal project should demonstrate that geothermal energy can substitute fossil fuels and at the same time be cost effective.

The implementation of the project is divided in two phases (Phase I and Phase II).

The tangible objectives of Phase I (2000), was to:

	Provide equipment (worth 1476.000,00 DKK) for erection of a pilot plant and technical assistance to the project.
	Perform long term testing of the existing geothermal wells (GTD1, GTD-2 or GTD3).
	Elaborate technical solutions for exploitation of geothermal fluid with a high content of CO2.
	Contract with the local electricity company, district heating company, municipality etc. in order to obtain local commitment to a geothermal system.
	Establish the new shareholder company GEOTERM Kosice a.s. Shareholders shall be identified during Phase I.
	Investigate the existing district heating system, consumer installations and district heating plants located in the city of Kosice.
	Identify investors.
	Make conclusions and Recommendations.

The conclusions and recommendations formed in Phase I are considered as a milestone, which will determine if Phase II shall be initiated or not. The evaluation of different options will be based on both technical and economical criteria.

Phase II (year 2001 - 2004) comprises the following main activities:

1. Design, procurement, implementation of technical installations like pipe network, renovation of substations, new heat central, wellsite installations etc.
2. Drilling of new wells
3. Test of wells
4. Financing (international investors)
5. Organizational set-up (new heating company)
6. Contracts (heat price structure)
7. Commissioning of the different technical facilities in steps
8. First year of operation

Project Inputs

The Danish input is a grant of DKK 1 476 000 (Equipment only). According to Slovgeoterm Project Manager Vladimir Benovsky, completion of the project will require USD 60 million. A loan of USD 15 million is to be provided by the World Bank, with some resources to come from shareholders of Geoterm Kosice, and the rest to be covered by bank loans. EURO 15 million from the ISPA fund have also been allocated for the project.

III. Project Effectiveness

The environmental effects from the project (reduction in emissions) have not yet been quantified. Likewise, the economic/financial effectiveness in terms of cost/benefit or results versus resource inputs, has not been quantified.

IV. Project Results/Impact

The town of Košice has an extensive central heating system which supplies 60 000 households. The geothermal heat exchangers are connected to the heating system, and can replace more than 1/3 of the heat conventionally produced by coal and gas. The geothermal waters have a relatively high TDS (30 g/l) which has to be taking into consideration when drilling, extracting and distributing the geothermal water.

In terms of technology and transfer of "know how", on a competitive basis and locally delivered, much equipment delivered to the project was produced by Danish (daughter)companies. This was the case for instance for a Danfoss flow meter, Grundfoss surface pumps, calibration equipment and valves and transmitters so far totalling "Danish" equipment deliveries at a minimum of DKK 577 300. (Of course, in cases where more suitable equipment could be delivered from other suppliers these were chosen, e.g. the French made Heat Exchanger Unit).

Equipment for the pilot plant was purchased and delivered in early 2000 and by mid 2000 the pilot plant was in operation, with various technical tests being made. A high content of CO₂ in the geothermal fluid was one of the results found. Temperature and pressure changes in wells during reinjection was also monitored. By end 2000 the long-term test in Durkov location was successfully performed. The evaluation of well test data is in process at the moment, and in 2001 the plan is to perform the same test on GTD-3 as production well, GTD-1 as reinjection well and GTD-2 as monitoring well.

The following parameters of geothermal water utilisation were verified:

	Up to the re-injected water temperature 70 - 71°C the system worked regularly, the reinjection well absorbed both water and all of the dissolved gas.
	Above 70°C the system becomes labile and gradually the pressures at GTD-2 and GTD-1 wellheads equalize and flow rate decreases until a complete stop.

The long-term test proved that it is technically possible to solve the problems at Durkov with scaling and corrosion³³, as well as with the reinjection of geothermal water with a high gas/water ratio.

V. Project Sustainability

Financial/Economic Sustainability: Based on the April 1999 feasibility study of geoterm Kosice and new data from tests carried out in 2001 (Durkov), an application for ISPA (and NIB) funds in the order of EURO 20 million, have been prepared, using a updated version of the feasibility study³⁴. Output of the (complete) project is expected to be 100-125 MW.

Provided that this funding is secured, the following will be established:

	5 additional production wells
	6 additional reinjection wells
	A heating centre
	Field stations
	Heat exchanger
	Additional pipeline ( - the existing heat distribution network is OK)

The owner of TEKO is the electricity company, which has some very "bad" loans related to nuclear power, and will not likely be able to invest in renovating those parts of the TEKO plant, which is 30 years old and need some renovation.

In Kosice, some stakeholders with interests in gas fired heat plants do exist. Gas, however, has become increasingly expensive, from 2 SEK/m³ when the project began to 5 SEK now, and a planned price at 10 SEK/m³ within the next three years.

In terms of organizational sustainability, Slovgeoterm is assessed as a professional and solid geothermal company. Owned by one of Slovakia's major companies (the Gas Company SPP is a joint stock company owned by the Slovak Government, planning to sell 49 per cent of shares to the private sector), Slovgeoterm has a long record of geothermal projects - from Podajska (now used for greenhouses of 3 ha) and Galantaterm, which is now a separate company.

In terms of institutional and political sustainability, the (pilot) project has demonstrated its foundation on local commitment and stakeholder ownership by obtaining consent for prolonged mining and construction permits from a host of local authorities, including road administrations, water management authorities, district and municipal authorities, river basin authorities, etc. In addition, discussions with the local district heating producer, TEKO (owned by the Slovak electricity works), has been conducted in constructive fashion and include technical and economic analyses and prognosis of heat price development until 2005 and beyond. On 11 April 2001 the Slovak Government approved the "Plan and Process of Privatisation of Distribution Companies and Heating Company SE-TEKO Košice" to be realized by the end of 2001. A letter of intent have been signed between TEKO and Slovgeoterm, implying that based on the 2000 price of 150-200 SEK/gigajoule, the payments by TEKO for geothermal heat will follow the inflation. Currently, TEKO sells to consumers at 300 SEK and the production price for heat producers are generally about 350 SEK/gigajoule. Build as a demonstration project, TEKO is a state of the art CHP plant, the heat bought from geoterm Kosice can be used both for electricity and heat.

In terms of technological sustainability, between 1998 and 1999, geological and geophysical investigation and testing of "Durkov Geothermal Structure" [in the Kosice basin] was performed by the Company Slovgeoterm a.s. (Slovgeotherm. 2001. The Well Testing in Durkov Geothermal Structure. Bratislava). Three geothermal wells (GTD-1, GTD-2 and GTD-3) were tested, with the aim of simulating the operational conditions for adjustment of the pressure, temperature, hydraulic, and hydro-geochemical properties of the reservoir, and finally the technical properties of the warm water. Based on the test, reservoir conditions and temperature could be modelled and projected for a 30-year period. The result confirmed the probability of a free flow production from GTD2 and GTD3. During the test the wellhead temperature of GTD-3 increased to 134ēC. Based on the various technical results, the investigation foresee that by way of district heating.

60 000 dwellings in Slovakia's second biggest town can be heated by the project proposed. While the existing CO₂ problem is to be solved by reinjection, the high level of CO₂ in the water will remain a point requiring attention. Further modelling will be done to assess how long the warm water supply will be sustainable and to assess the advantage of reinjection.

In terms of technological risk, the main obstacle is the character of the geothermal fluid. It is absolutely necessary to solve the corrosion/scaling problems before any major investment.

VI. Lessons Learned

Contracts with the local electricity company, district heating company, municipality etc. must be signed in order to obtain and probe local commitment to a geothermal system.

4.9 The Case of Ziar Nad Hronum

People met during the mission: Lars Toft Hansen, Houe & Olsen

I. Project Background

In 1995 co-operation was initiated between ZSNP Aluminum Works a.s., the Municipality of Ziar nad Hronom and the Danish company Houe & Olsen, in order to investigate different heating strategies based on geothermal energy. In 1997 geophysical surveys were conducted and different scenarios were elaborated to prove the technical and economical viability of using geothermal energy in the Ziar nad Hronom area. The potential of the thermal resources located in the Ziar area was expected to be sufficient to meet base load demand of the town of Ziar nad Hronom, ZSNP aluminum work a.s. and small industries.

By 1997 the body of information available was substantial. In addition to the technical scenarios, a pre-feasibility study included detailed analyses of heat demand in the area (city and the ZSNP aluminium factory); the projected costs of the geothermal loop itself; the district heating circuit; and consumer installations and financial analyses of these total projected investments; and finally demonstrating different financial and economic rates of returns under different assumptions subjected to sensitivity analysis. These scenarios included a natural gas scenario, envisioning a gas fired boiler plant in the vicinity of the existing ZSNP coal fired boiler.

In 1998 a feasibility study was submitted to potential investors including the EBRD. To develop and implement the geothermal project, a project management team was established consisting of Slovakian experts, Polish experts and Danish experts who had co-operated for more than three years.

By april 1999 a project document was prepared, reflecting the project status after completion of the first production well; establishment of the new district heating company (ZSNP Geothermal s.r.o); and initial evaluation of the proposal by EBRD. The project document added new information on the existing district heating system in Ziar nad Hronom, from the coal fired plant by 47 substations to flat blocks. It is also mentioned that natural gas supply a small area through a small pipeline, which however is not expected to be enlarged in the future. Finally the report confirmed wishes by the City of Ziar nad Hronum to implement the geothermal project, based on both a letter of intent from the Mayor of the city and the formation of the geothermal district heating company.

II. Project Description

Drilling and construction of the first production well was completed at the beginning of 1999. The project received a grant of USD 600 000 for establishment of the first well. But in a Progress Report of AprilSeptember 2000, geologists concluded that the first well can be used neither as production well nor as re-injection well. The well has been drilled in a "chimney" and deviation of the well would not be possible due to the shape of the "chimney". Project financing of the entire project was temporarily stopped. The project team now focus on financing the "second production well", considered the most important objective for the moment.

The drilling company, Nafta Gbele, has from ZSNP received only around 25 per cent of the payment due for establishing the first production well. Due to the economical situation of the ZSNP and the municipality of Ziar, it is not likely to assume that Nafta Gberly will receive its outstanding debt if a second production well is not produced.

Output and Results (expected):

Establishment of a geothermal system was expected to generate the technical results presented in the following:

	Establishment of an environmentally friendly heating system to decrease the emission of polluting elements to surroundings.
	Introduction of a district heating system based on new equipment with a high efficiency
	District heating system based on a local renewable energy source
	Transferring of Danish know-how related to district heating systems (design, implementation, financing and operation)
	Introduction of a geothermal system based on the principle of reinjection
	Retrofitting of existing ZSNP heat installations and substations in Ziar nad Hronom to abate the heat losses

In terms of economic results, use of geothermal energy would decrease the dependence of fuel supply from foreign countries and international fuel prices, which will make the geothermal system even more economically viable.

Inputs (expected)

ZSNP established a new company named ZSNP Energy S.R.O. (limited responsibility) with the aim of investigating the possibility of implementing gas turbines for electricity production.

ZSNP has no funds for paying Nafta Gbely its outstanding debt for establishment of the first production well. At present it is hard to predict if Nafta will receive its outstanding debt from ZSNP Geothermal S.R.O.

Establishment of a new production well will cost approx. SEK 40 million. Assuming the new owner of Nafta Gbely request Nafta's outstanding debt to be paid, this claim can only be met if a second production well is established enabling ZSNP Geothermal S.R.O. to gain revenue in the future. Nafta Gbely could be offered shares in ZSNP Geothermal S.R.O. as payment for establishment of the two geothermal wells.

Main Project Objectives

1) To implement and operate a geothermal system in Ziar nad Hronom demonstrating that utilisation of an environmental friendly renewable energy resource can be technically possible and cost effective compared with conventional fossil fuels like coal, oil and gas.

2) To prove that geothermal energy will abate the emission of polluting elements to the surroundings, which in turn will benefit the local economy, lower mortality, improve the health situation, visibility and decrease dependence on foreign fuel supplier and world market fuel prices.

In terms of Environmental Benefits, exploitation of geothermal energy would generate a heat production up to 713 TJ/year and emission of CO₂ will decrease with approx. 72 000 tonnes/year. In quantitative terms and based on a coal reference the scenarios implied reductions up to perhaps as much as 101 800 tonnes of CO₂ per year.

III: Project Effectiveness and Impact

Economic/Financial

Depending on the scenario, the feasibility study forecasted a high economic viability with a financial rate of return (FRR) up to 15,3 per cent and an economic rate of return (ERR) of up to 36 per cent.

The price of natural gas is projected to increase from 3.6 SEK/Nm³ (August 2000) to 4.1 SEK/Nm³, which will make utilisation of the geothermal energy resources located in the Ziar nad Hronom area even more economical viable.

Environmental

The environmental benefits of the project (scenarios) were calculated and projected, in terms of CO₂, SO₂, and NO_x reductions. These reductions were then valued, at between USD 1.6 and 3.2 million per year, using a rate of 45 USD/t CO₂, 1 100 USD/t SO₂ and 2 200 USD/t of NO_x. (Houe & Olsen 1997. Ziar nad Hronom, Slovakia, Geothermal Project, Project Summary, Houe & Olsen. Thisted). In absolute terms, the following reductions in air emissions are achieved:

	CO2 100 000 t/year
	SO2 1 400t/ year
	NOx 270 t/ year

New Slovakian environmental legislation demands a reduction in polluting elements from the existing, coal fired ZSNP boiler plant.

IV. Project Sustainability

Organizational Sustainability

As far as the organizational sustainability of the Geothermal project organization is concerned, this was set up with a Project Management with Lars Toft Hansen, H&O as Managing Director, assisted by a Secretary of Management, as well as technical, geological and financing and economy subsections. The roles and assignments of the project management team were defined in details, with phases and milestones. In anticipating possible "pitfalls" for the project, the main emphasis was on managerial challenges and risks.

The Municipality and the ZSNP Aluminium works, formed a new district heating company in 1997, with the following participants (names in brackets):

	ZSNP Geothermal s.r.o. (recipient),(Jan Majersky)
	Mesto Ziar nad Hronom (Juraj Procka)
	Nafta Trade a.s. (Juraj Franko)
	Nafta Gbely (Jan Smetana)
	Geologiska Sluzba SR (Anton Remsik)

The project envisioned a reorganization of the heating supply organization and reorganization of the energy sector, locally. It was envisioned to create a "Ziar Heating Company" - a combined private and public joint venture, including public county and municipality owners in collaboration with a private company. The company was named ALGOTERM.

In terms of institutional and political sustainability, an institutional component was planned in order to strengthen financial management and reporting systems, and implement a "modern" tariff structure, adequate for the governments privatisation plans of phasing out energy subsidies. By September 2000 Nafta Gbely was expected to be taken over by SSP, - the Slovakian national gas company - , which was scheduled to be partly privatised by 2001 through international tender. At this time it appeared, that no initiatives regarding implementation of a gas turbine facility had been taken. However, by early October 2000 it was clear that ZSNP Geothermal S.R.O. was financially very weak or even bankrupt and not capable of financing further geothermal work, let alone pay for the drilling performed by Nafta Gbely. A new company - ZSNP Energia S.R.O. - had been formed, and on 18. October it was announced that the ZSNP Energia S.R.O. had signed a contract for establishing a CHP plant (gas turbine) for the production of 800 TJ heat per year, budgeted at SEK 160 million.

It is important to point out that the town of Ziar is not among the shareholders in Energia, which is owned by MVV (51 per cent), ZSNP (30 per cent) and by a company called "designers" (19 per cent). Energia delivers heat to ZSNP, and ZSNP in turn delivers heat to the town based on a 15 years heat purchase agreement. The heat sales price to town is 190 SEK/GJ + increases in exchange rate, gas price, inflation etc.

V. Lessons Learned

The most direct lesson of this project is perhaps the confirmation that geological risk is indeed real. The drilling of the first production well simply failed completely, despite all the technical precautions, data collection, tests and ex-ante preparations.

Secondly, and equally important, the project has demonstrated that "institutional risk" is real. Despite apparent commitment to the project, by the city of Ziar, in the end, the city decided to support a "competing" project. This outcome - a cancellation of the geothermal project - left the town of Ziar nad Hronum without influence on the new heating company. Whether it is the best and most feasible for the town and ZSNP is beyond this analysis to judge.

In most respects, the Ziar Geothermal Project - as far as it went - can be characterised in many ways as a best practice project. The preparatory work, stretching over several years, two phases and including thorough investigations in terms of technical analyses and pre-feasibility studies, has been extensive and of a high quality.

While close to a "take-off" situation, the project was finally cancelled. This happened not only due to the fact that the aluminium factory is a powerful and dominant economic and political player on the local scene, but also because the geothermal scenarios were not "the only game in town". Other foreign interests with other strategies in mind eventually persuaded the factory and other local agencies to invest in a gas driven combined heat and power plant. In a competitive world, such competition is a legitimate risk factor and suppliers of geothermal technologies do compete with suppliers of other technologies, both renewables and conventional energy suppliers

As far as lessons learned are concerned, one pressing question of course is whether and to what extent, the rather sad outcome of the Ziar geothermal project could have been foreseen. It is evident from the project documents that while in 1997 risk analysis focused on technical and managerial issues, in 1999 there was some attention to critical assumptions, including "risk beyond the control of the project". It appears that the project had perhaps sensed some such risk "in the Slovak public sector", but the project had then felt assured by the fact that the same public sector had donated money to the project. Based on two years of good performance, the project apparently did not see any relevant "killer assumptions", and was taken by surprise when informed in October 2000 about the contract between ZSNP and MVV.

The current strategy of the project is that the project financing of the entire project has been temporarily stopped. The project team is focusing on financing of the second production well, which is considered the most important subject for the moment. The first production well, established in 1999, can't be used as production well or re-injection well.

4.10 The Case of Galantaterm

People met during the mission: Mr. Stefan Grell, Director of Galantaterm and Ms Lydia (secretary and translator).

I. Project Background

With its wells drilled under a (1972-99) state programme, the Galantaterm plant and company is really a result of a complexity of "projects". Galantaterm, however, can officially be dated back to 1995, when the company was founded and 1997, when the heated water started flowing.

The possibility to obtain geothermal water for the purpose of power utilisation in Galanta was verified by the research geothermal borehole FGG-2 Galanta. The Dionyz Stur Institute of Geology Bratislava drilled the borehole in the years 1982 to 1983, in the framework of the research of geothermal power of the central depression of the Danube basin. Based on positive results from this borehole, a survey-exploitation borehole - FGG-3 Galanta - was drilled in 1984 by the Bratislava branch of the IGHP, s.p. Zilina company (Franko et al., 1985). The temperature of the rock environment in the depths of 1 000 m and 2 000 m was confirmed at 51 and 91°C, respectively. Water temperatures at the wellhead of the FGG-2 borehole with a free outflow of 27.3 l/s is 80°C and at a wellhead of the FGG-3 borehole with free outflow of 25.0 l/s amounts to 77°C.

In 1996 the first geothermal heating plant, with capacity of 8 MW, in Galanta town was put on line. Galantaterm Ltd. - a legal entity has been formed to supply the 1236 flats of the "Sever" residential area - together with its public service sector and the hospital of Galanta, which will be supplied with heat and hot service water (Fendek, Halas, 1997). Geothermal power is used to provide the heat and hot service water. A natural-gas boiler house is used to heat the water when average daily temperature drops below -2°C. The whole primary system and the secondary circuits of the heat exchanger station are equipped with a control system, which will enable gradual, future connection of particular boilers to the system: First the peak boiler, then the gas boiler and hospital exchanger stations and lastly, it is planned to interconnect the points of heat abstraction in the flats. Following the construction of geothermal Energocentre in Galanta the coal-based boiler station in town hospital was closed. This boiler station consumed 6 200 t yearly of coal and produced 330 t SO₂, 36 t NO_x, 159 t CO₂, 600 t breeze. The charges according to pollution was SEK 156 000. The consumption of gas in the boiler station on the habitation „Sever" was decreased from 3 million Nm³ to 1.2 million Nm³ gas, which in turn decreased the emissions with 60 per cent (Takacs - Grell, 2000).

Galanta-term is Co-owned by NEFCO and the Icelandic company Heitaveita (later Orkuveitor) and from 1995, Galantaterm is today owned by the following:

	Slovak Gas Company (SPP)
	Slovgeoterm
	City of Galanta35.
	Orkuveitor
	NEFCO

Further, Orkustofnun (Iceland) is a shareholder in Slovgeoterm.

II. Project Description

The Galanta power plant is based on two geothermal wells, which were both drilled during 1993 and 1994. Flow rate exceeds 25 l/s and the water has a temperature of approx. 78 °C. The salinity (TDS) is relatively low, ranging from 4.3 to 5.9 g./l

The power plant was build in 1996 and has a capacity of about 8 MW, which can supply 1236 flats, a district hospital and deliver domestic hot water for the housing quarters and the hospital.

Main Project Objectives

Substitution of conventional heating in an estate with 1 243 flats (earlier heated by gas) and a hospital (earlier heated by solid fuels - lignite).

Project Inputs

The Galanta geothermal project was carried out partly based on a loan from NIB, taken through THE GAS COMPANY SPP. Further, the NEFCO is a co-investor, and local sources of finance - from the city to local companies - has invested in the enterprise.

III. Project Results

With its 2 geo-wells of 20 MW from 78ēC hot water, Galantaterm today heat approximately 1 300 flats and a hospital.

In 2000, Galantaterm produced the Following:

V. Project Impact

In terms of environmental benefits, the two geothermal wells has proved sufficient to provide enough heat until outside temperature goes below +2ēC, in which case gas is used to add some heat to circulation water. The project therefore, has eliminated emissions from solid fuels and reduced emissions from gas.

On the potentially negative side, the following two aspects are relevant:

The so-called "inhibitors" used to protect geothermal equipment from corrosion and scaling, has been tested for possible impact on the environment. It was found, however, that the inhibitors used are classified as "non-toxic", and that they are only used in low concentration.

Classified as "waste water" 537 008 m³ of warm water (26 - 36ēC, depending on the season) flows into a "drain", and from there (at 9 - 16ēC) into the river. At this time, all "values" (in terms of temperature and dissolved minerals) of the water are in accordance with the decree of the environmental department of the regional office in Trnava.

As for emissions from the gas fired (supplement, when outside temperature is under 2ēC), they are as follows:

Solids:	0.0679 kg/tonnes of gas
SO2:	0.0081 kg/tonnes of gas
NO2:	1.4927 kg/tonnes of gas
CO:	0.5004 kg/tonnes of gas

The environmental fees for these emissions will amount to SEK 1 800 000.

VI. Project Sustainability

In terms of financial/economic sustainability, while the gas company SPP is paying back the loan to NIB, Galantaterm is not able to pay SPP, because in turn, the Galanta State Hospital does not pay the full amounts charged for supplying heat to the hospital. This situation, of course, represent a major problem to Galantaterm. Already, the State hospital has accumulated a large debt, and currently only pays SEK 600 000 of the SEK 1.5 million monthly billed. As 51 per cent of Galantaterms production of hot water (and some steam) goes to the Hospital, and 54 per cent of Galantaterm´s income comes from the hospital, this problem is significant.

So far, however, Galantaterm has been able to survive and function stably, because the city-owned flat-building enterprises do pay their bills. Galantaterm supplies heat to 1 243 households or 4 900 inhabitants.

In 1999-2000 Galantaterms' prices developed as shown in table 19:

Table 19

VI. Environmental Sustainability

The environment sustainability of the project is satisfactory. However, there seems to be an unexploited potential for further improvements, by way of reinjecting the warm water into the reservoir, instead of into the river Váh.

Galantaterms organisational set-up has proved stable and functional, and the company has demonstrated good working relations with both national and international project counterparts - the latter including the Nordic finance institutions and Icelandic companies.

In terms of institutional and political sustainability Galantaterm has initiated negotiations with the Ministry of Health, but has so far only been given "promises". The future of Galantaterm will very much rely on to what extent recent laws reforming the energy market will be enforced. For instance, by 1998 a law stipulated that if gas prices went up by more than 10 per cent, the government would be obliged to increase the prices charged to consumers. As for the year 2000, however, heat suppliers in Slovakia were not allowed to increase their prices charged to consumers, despite the fact that gas prices had increases over 1999.

In terms of technological sustainability, the company has been able to solve all technical issues so far. Interestingly, a potential has been identified for further improving the technological sustainability of the operation, by re-injecting the water now discharged.

In terms of dissemination, the Galantaterm enterprise seems to have good prospects for "replicating" the project in other areas within the Galanta region, which is renowned for its significant geothermal potential.

VII. Lessons Learned (Consultants findings, based on visit to Project)

The Galantaterm enterprise demonstrates that exploiting geothermal energy in Slovakia is indeed feasible, given the proper conditions. The project may be considered a "best practice" project. At the same time, of course, Galantaterm suffers from the general socio-economic conditions and developments currently affecting the Slovakian energy sector in general. These include the problem of customers currently not being willing or able to pay their heating bills.

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