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Geothermal Energy Systems Assessment - A Strategic Assessment of Technical, Environmental, Institutional and Economic Potentials in Central and Eastern European Countries

6 Volume II.F: Non-Focus Country Profiles

6.1 Bulgaria

The Bulgarian energy sector was reorganized in 2000 as called for in the Energy Efficiency Act of July 1999. The state-owned electricity company (NEK) was transformed and is now the grid operator, the single buyer of electricity from the six Independent Power Generators, and the only supplier of electricity to the seven distribution companies.

Bulgaria's primary domestic energy resources are coal and hydroelectric power, but with regard to supplies of oil and natural gas, Bulgaria is heavily dependent on imports. Bulgaria has one nuclear power station, which in 1998 generated 40.3 per cent of all electricity produced.

A national energy policy is under development by the Bulgarian State Energy Agency. The government's latest energy strategy from 1998, "National Strategy for Development of Energy and Energy Efficiency Till 2010" was recently updated with a forecast till 2015.

6.1.1 Geothermal Energy in Bugaria

6.1.1.1 Areas and Projects

Bulgaria has more than 137 geothermal sources. More than 50 geothermal sources, interesting from a thermal energy point of view, have been registered and the total thermal capacity freely flowing geo-thermal waters is estimated to about 488 MW. Currently, Bulgaria's geothermal waters are used mainly for health and recreative applications, though bottling and household heating use of some sources take place in Kyustendil, Sapareva Bania, Momin prohod, Velingrad and Varna.

In the 80´s investigations and developments were conducted for the use of geothermal energy in the town of Velingrad, the town of Kyustendil, the city of Varna (resort " St. Konstantin and Elena") and the resort ' Golden Sands" (Nevestino). In this period, 17 geothermal installations for the use of geothermal energy with total installed capacity of 35 MW were designed and installed for the following use:

	160 health care units
	41 swimming pools
	47 public and 45 companies laundries
	Heating of 232 000 green houses
	54 buildings and 3 chicken incubators
	4 wool textile and 4 linen factories.

The highest capacity of geothermal water is found in one source near Varna - 478 l/sec - and the lowest capacity in Kumaritza ( Sofia) - 0.5 l/sec. The average capacity in the country per source is about 28 l/sec. As for the chemical composition, Bulgarian geothermal waters are weak in mineralisation, with contents of soluble mineral substances under 1 gr/l. The highest rate of mineralisation is found in the water from Dolni Dubnik, with 26 gr/l. The lowest rate of mineralisation is in the water of Gorna Bania deposit. Bulgarian geothermal water contains most hydro carbonates, sulphates, chlorides, sodium, potassium, calcium, and magnesium. Besides this, some water contains gas- nitrogen and noble gases, fluorine, CO₂, sulphur hydrate and methane.

6.1.1.2 Laws and Regulations

In Bulgaria, geothermal waters are under the jurisdiction of the Constitution and the Waters Law. The use of geothermal waters for energy purposes depends directly on the following laws:

The Waters law stipulates the rules for use of water and water objects. It states that the sole right for use of water is fully owned by the State, and that the state may provide the water for generation of hydro electricity and geothermal energy.

The Concession Law, which regulates the conditions and order for delivery of concessions states that concessions may be delivered for the use of waters, including mineral ones - which are exceptional state property.

The Energy and Energy Efficiency Law envisages that the transmission or proper distribution company are purchasing electric and thermal energy, produced by RES and by CHP plants in amounts and of preferential prices, defined by order and terms of a Regulation, accepted by Council of Ministers (Regulation for formation and application of prices and tariffs of electric energy - published in State Gazette vol. 37/ 5.5.2000, enforced since 01.01.2002). Art.41, items 1, 2 and 3 state out that no issue of licenses is required in the following cases - generation of electric energy of power below 5 MW, thermal energy production of power up to 1 MW and generation of thermal energy for own needs. The law on energy and energy efficiency from July 1999 treats the problems of the independent electricity producers and promotes accelerated development of all kinds of renewable energies, incl. geothermal energy.

Territorial Structure Law includes the rules for construction of energy supply networks and equipment- thermal pipelines, subscriber stations and indoor heating installations.

6.1.1.3 Energy strategy - Perspectives for Energy Use of Geothermal Energy

The state policy on energy saving and development of renewable energy sources, incl. geothermal energy is implemented by the State Energy Efficiency Agency (SEEA). The SEEA has developed a draft of a national RES programme, which includes 38 projects for geothermal energy use at a total value of USD 384 million. Out of these, 4 projects at a value of USD 231 million has already been approved by relevant ministries and 34 projects at a value of USD 153 million has been approved by regional governments of the country.

In 1997 the PHARE project 'Feasibility study on RES in Bulgaria" was finalized. Within the frames of this project a pilot geothermal installation for the schools Hristo Botev, was constructed in the town of Velingrad.

6.1.1.4 National Funding Sources and Activities for GE Development

Bulgaria has a long tradition for national funding supporting the development of geothermal energy, and plan to invest as much as USD 1 400 million in geothermal energy by 2010 (forecasts). This figure, however, includes both the forecasted local investments and expected foreign investments, from Phare, ALTENER, SAVE-II, ESCO, performance contracting, joint implementation and the GEF. Further, fiscal support in terms of a VAT reduction by 2 per cent a profit tax reduction by 3 per cent and expected reduction of taxes in general, is being discussed in the context of renewable energy.

There are a significant number of companies and institutions working on the geothermal energy field, which are delivering investigations, design, installations, operation and service of geothermal equipment and installations. Bulgarian technologies for geothermal installations include heat exchangers, thermal pumps and pipelines.

Bulgaria has domestic capacity to carry out investigations with different type of heat exchangers at different geothermal springs in order to clarify the processes of corrosion and the efficiency of the anti-corrosive plating at real operational conditions. Locally available are different types of thermal pumps with capacities of 25 - 250 kW, and there is also a local production of enamelled tubes with small length that may be used at some geothermal sources. For the small geothermal systems (up to 100 kW) the local production share of equipment may reach 90 per cent. However, at large geothermal systems or for systems with thermal pumps, the local production share is more limited, at about 10 per cent.

6.2 Czech Republic

The energy policy of the Czech Republic is based on a number of strategic targets. One of the main targets is to determine the energy sector's basic policy of long-term development. Moreover it is seen as important to determine the essential legislative and economic environment in which electricity utilities and distributors may be encouraged to act environmentfriendly.

Focusing on the consumption side, the state wishes to support new production technologies and efficiency in use of energy and raw material. Importantly, it is a target to reduce the energy demand by supporting energy saving programmes that lead to energy savings and increases the use of alternative energy and raw material sources.

6.2.1 Geothermal Energy in Czech Republic

6.2.1.1 Areas and Projects

Data used for estimating the geothermal potential for the Czech Republic has been collected from 498 measured bore holes on the whole territory of the Czech Republic. The geothermal potential is primarily based on temperature measures.

In contrast to the vast geothermal potential of neighbouring Slovakia, the Czech republic has only few proper geothermal water reservoirs. These few reservoirs have water temperatures above 60ºC at a depth of 1 500 metres, and a geographical location that has not prompted immediate or major interest in their development. In contrast to geothermal energy proper, the Czech Republic does have a confirmed potential for exploitation of heat pumps. However, development and dissemination of heat pumps are beyond the scope of this particular study.

It is in the northern part of Bohemian Massif and West Carpathian Fore deep that the largest potential for utilizing the geothermal energy is found. Of course, local anomalies of warm and hot waters occur and these areas have conventionally been used as spas.

Up until now, the geothermal potential of the Czech Republic has not been exploited on a larger scale. This is because the geothermal resources are of low enthalpy character for most parts and, therefore, are not really interesting when looking at geothermal energy with intentions of mass consumption application.

6.3 Hungary

Hungary is a producer of all types of energy; the country produces coal, oil and gas, and was in the past a producer of uranium. Domestic production has been able to cover a large part of the (declining) coal demand, but has also increased the degree of import dependence in oil and the growing degree of import dependence in gas since 1977. One major reason for increasing import of oil and gas is due to the shock of adaptation to a market regime, total Hungarian energy production fell below its 1970 level in 1994. The outlook for coal, oil and gas production is a decline: for coal because of the scarcity of economic resources, for gas and oil because of depletion of reserves. The Government expects the reduction in domestic production to be replaced by greater imports of all three fossil fuels. This should be a strong incentive for Hungary to investigate further in development of renewable energy.

6.3.1 Geothermal Energy in Hungary

The use of geothermal energy in Hungary is significant. Due to abundance of low and medium enthalpy geothermal energy source, present utilization is mainly for agriculture, bathing, space heating, industrial use and drinking. Albeit resent studies show that geothermal sources with temperatures above 160° C exists (SE part of Hungary) and utilization for power generation therefore is possible. No electricity has been generated yet.

In Hungary geothermal energy utilization is economically profitable. Compared to prices for natural gas, geothermal energy is much cheaper to produce energy from. With an average price of approx. 1 USD /GJ on geothermal energy (depending on type of source and technology applied) it is possible for geothermal energy to compete with prices for natural gas, which is about 3.5 times more expensive. This comparison only accounts for heat energy since no generation of electricity produced from geothermal waters takes place in Hungary at the present stage. Looking at data for 1995 Hungary is fifth in the world, when it comes to utilization of geothermal heat. Concerning specific utilization Hungary is third - and first in utilizing geothermal energy for agricultural purpose.

While Hungary has a good quantitative utilization, the efficiency lacks behind caused by a number of circumstances. First of all, the necessary unambiguous legal basis isn't present, the thermal water production and direct use are of extensive nature and the efficiency of the seasonal type of geothermal heat utilization is low. Moreover no reinjection is applied.

Geothermal energy utilization in Hungary is estimated to 179.1 MW of geothermal capacity. Geothermal heat pumps represent 4.0 MW of installed capacity. The quantity of the produced thermal water for direct use in 1999 was approximately 15.63 million cu.m. with average utilization temperature of 31ºC.

The main consumer of geothermal energy is in agriculture (67 per cent). The proportion of geothermal energy utilization in the energy balance of Hungary, despite the significant proven reserves, is low (0.16 per cent). According to results of the different assessments (Boldizsár, 1967 and Bobok, 1988) of the geothermal reserves, Hungary has the biggest underground thermal water reserves and geothermal energy potential of low and medium enthalpy in Europe.

The number of geothermal heat use organizations was 70 in 1999, the number of the settlements using geothermal energy was 44, and the number of spas utilizing geothermal heat for direct use was 4 in 1999.

6.4 Latvia

The geothermal energy potential in Latvia was mapped in connection with the exploratory exercise known as the "Baltic Geothermal Energy Project" that lead to a geothermal project in Lithuania (Klaipéda), where the Danish Oil and Natural Gas (DONG) is involved. This initial mapping study reported in 1992, was followed by feasibility studies, the final reports of which were issued in March 1994.³⁹

The initial study mapped geo-scientific and heat demand data from 51 wells and 14 urban areas in Latvia and Lithuania. While the geological data of the study is likely to be valid today, the results of the heat demand and economic investigations may be much less useful, because of the political, economic and legal-institutional transformation in the Baltic countries since 1992. What is important, therefore, is that the feasibility study that followed, in 1994, identified Klaipéda and Liepaja (Latvia) as the most interesting "Baltic" potentials to pursue all things considered, including geothermal heat production potential, expected heat demand, existing district heating networks and calculated heat production costs.

In the case of Liepaja, the geothermal potential was demonstrated in the "Liepaja Geothermal Pilot Project" initiated in 1996 by DONG, funded by the DEPA with DKK 3.5 mill. A "Proposal for Appraisal and Development" of the Liepaja Geothermal Pilot Project, was submitted to the DEPA in May 2000 by Petroleum Geology Investigators (PGI). PGI wishes to use experiences gained in the implementation of the Klaipéda project, to "optimise" inputs (in terms of capital expenditures and time) in the proposed project. These experiences have just been published: DONG E&P A/S. 2001. "Klaipeda Geothermal Demonstration Project: Implementation Phase", Danish Technical Assistance Component, Final Report. Copenhagen. August 2001.

6.5 Lithuania

Lithuania is continuing to rely primarily on nuclear power for its electricity, and the state-owned Ignalina nuclear power plant is being upgraded. Except for Ignalina, Lithuania has pursued a gradual path toward privatisation of energy, with the formation of joint stock companies for the electric grid (Lithuanian Energy Company) and various oil and gas companies. The Vilnius Power Station and other local combined heat and power plants were recently placed under municipal control and separated from the Lithuanian Energy Company. Lithuania imports crude oil and natural gas. It exports gasoline from the Mazeikiai refinery and electricity from the Ignalina power plant.

One of the overall objectives of Lithuania's energy strategy is to diversify the energy production structure in the country. An integrated part of this strategy is to continue the institutional reforms, which have led to implementation of market economic mechanisms. This has raised energy prices in the country and brought them closer to market levels and real production costs. A concrete objective of the national energy strategy in Lithuania is to develop and increase utilisation of local energy resources, including hydropower, biogas, wind power, sun energy and geothermal energy.

In 1992, DEPA financed (DKK 7 million) a Baltic Geothermal Energy Project. Danish consultants carried out a comprehensive study to determine size and quality of geothermal resources in Lithuania and Latvia and to assess the potential for utilizing geothermal energy to replace currently used fossil fuel for heat generation. The study, which focused on areas where central heating networks were already established, confirmed that substantial geothermal aquifers occur within the Devonian and that the largest and most promising storage areas are located in Lithuania.

It is conceivable that the experiences that are currently gained in the auspices of the Klaipéda Geothermal Demonstration Project (see case study), may lead to other projects in the same region, either on the Latvian or Lithuanian side. However, taking into consideration the difficult process experienced in Klaipéda, it is also considered that further geothermal project implementation in Lithuania may await the outcome and solving of the problems discovered during project implementation in Klaipéda.

6.6 The Case of Kleipéda

People met during mission to Klaipéda, 21-23 May, 2001:

UAB Geoterma:
Vytautas Kropas, Project Manager
Alfonsas Bickus, Plant Manager
+ technical staff

Klaipéda District Heating Company (Klaipédos Energija):
Vytautis Valutis, General Director
Juozas Kregzdys, Deputy General Director
Leonardas Jokubauskas, Head of Supply and Sales Department
Andrius Misiunas, Foreign Relations Executive
Vidmantas Picturna, Deputy Chief of Consumers Unit

Klaipéda Municipality:
Antanas Balsys, Director of Energy and Infrastructure Unit

Klaipéda County Govenor's Administration:
Vidas Karolis, Vice-Governor
Kestutis Vaitiekunas, Administration and Regional Development Department, Director
Dalia Makuskiene, Regional Development Department, Chief Specialist of Foreign Relations Office

I. Project Background

In 1992, DEPA financed (DKK 7 million) a Baltic Geothermal Energy Project. Danish consultants carried out a comprehensive study to determine size and quality of geothermal resources in Lithuania and Latvia and to assess the potential for utilizing geothermal energy to replace currently used fossil fuel for heat generation. The study, which focused on areas where central heating networks were already established, confirmed that substantial geothermal aquifers occur within the Devonian and that the largest and most promising storage areas are located in Lithuania.

DEPA was requested by the Government of Lithuania to extend the Baltic study to include the preparation of a feasibility study for construction of a geothermal demonstration plant in Klaipéda, which was identified as being the best location for a demonstration project. In Klaipéda (population: 210 000), the district heating company provides heat to 98 per cent of the inhabitants.

The feasibility study indicated that a suitable size of a project plan should provide approximately 530 TJ annually, or around 10 per cent of total heat demand in Klaipéda. During summer time, the geothermal plant should have a capacity to cover all heat demand to the city.

A World Bank/GEF identification mission for the geothermal project was made in February 1994, plus a pre-appraisal mission in September 1994 and an appraisal mission in March 1995. In between, a number of preparatory field visits were made to review specific issues. These missions and visits have also included representation from the Danish Ministry of Environment. The World Bank and GEF approved funds and grant for the project in June 1996.

II. Project Description

Main Project Objectives

Demonstrate the feasibility and value of using low temperature geothermal water as a renewable indigenous energy source for use in district heating systems.

Reduce emission of greenhouse gasses and SO2 by replacing gas and heavy fuel oil (mazut).

Promote sustainable management and development of environmentally sound and non-polluting geothermal resources.

The project is expected to contribute to energy security, highlighted as a priority in the National Energy Strategy. The project implementing agency in Lithuania is UAB Geoterma, a joint stock company, with the Lithuanian Government as main shareholder.

Project Financing

The project consists of two components:

1. A Technical Assistant and Training Component (DEPA grant)
2. An Investment Component (World Bank/GEF/EU Phare)

Total budget: 18 mill USD

World Bank (5.9 mill USD)
GEF (6.9 mill USD)
Local Contribution, Government of Lithuania (GOL) (2.6 mill USD)
EU Phare (0.1 mill USD)
DEPA (2.5 mill USD)

The Danish support comprises four major fields of activities:

1. Project steering, coordination and supervision of the start-up of the project plant
2. Engineering and specifications with regard to the aquifer development and surface demonstration plant
3. Procurement and contracting with regard to required goods and services
4. Training of UAB Geoterma staff and associated personnel

The Danish TAC is provided by DONG E&P and it's subcontractors, Petroleum Geology Investigators and Houe & Olsen I/S. The magnitude of the Danish TAC has been revised upwards from 32 000 man-hours initially to 35 000 man-hours, due to problems related to the injection capacity.

Feasibility (Economic/Financial)

According to World Bank economic estimates, the proposed demonstration plant would not be economic viable without taking into account related environmental benefits. However, grants from the DEPA and GEF should allow the project to meet its recurring costs and debt-service obligations under the expected circumstances. If global and national environmental benefits are included, the Economic Rate of return is calculated to 11.7 per cent. The projects' economic viability will be sensitive to development in energy prices and to the quantity of heat extracted and the price at which it will be sold.

Given the high investment costs for the geothermal plant, a "take or pay" contract for a period of 25 years was signed in April 1996 between UAB Geoterma and Klaipéda District Heating Company, at that time owned by the Lithuanian Power Company (later on, the heating company was sold to the Municipality of Klaipéda and renamed to Klaipédos Energija). The contract should ensure that UAB Geoterma, upon project completion, would have a ready buyer for its geothermal heat and at prices already agreed upon.

Environmental Benefits

The DEPA-financed feasibility study in Klaipéda showed that geothermal energy, compared to other indigenous energy resources, had a much larger development potential and a lower heat generation cost based on a production capacity of 530 TJ.

Annual Reductions (tonnes) in Consumption and Related Emissions of Mazut/Natural Gas in The Klaipéda Heating System when Substituted by Geothermal Energy (530 TJ)

Source: World Bank

As it can be seen from the table above, the potential global environmental effect from the geothermal energy use is considerable in this project. Substitution of gas and mazut will result in significant reductions in CO₂ emission. Moreover, in the case of mazut, the substitution will also have positive local environmental effects through savings in SO₂ and NO_x emissions. Since the geothermal water is re-injected into the aquifer, there are no reverse environmental effects from using the geothermal energy.

Technology and Transfer of "Know How"

According to the original project schedule, the geothermal plant should be working under full capacity (55.7 MW) from January 1999, delivering around 530 TJ annually. It was anticipated that 600 m³/h geothermal water of 42ºC would be pumped up from about 1 200 metres depth and circulated via a closed geothermal loop, utilizing heat exchanger and heat pumps for retrieval and subsequent supply of heat into the existing district heating system in Klaipéda. The geothermal water would be extracted from two production wells and returned with reduced temperature to the same depth.

The technical risks related to the project were mainly defined as: 1) Suitable level of geothermal water that can be extracted and, 2) Temperature of the geothermal water extracted. To reduce impact of these risks, the feasibility study was based on an energy extraction, 30 per cent less than anticipated maximum.

III. Project Effectiveness

Economic/Financial

The project still has not provided the expected economic returns due to a range of factors, - some of which are closely interrelated.

The signed Take or pay Contract is currently under dispute due to Klaipédos Energija's unwillingness to comply with the conditions for payment pursuant to the contract. This dispute could seriously jeopardise the economic fundament and the opportunities for future Lithuanian geothermal development.

Due to continuing technical problems (see below) the geothermal plant is currently only working at half capacity. During summer time (2001) the plant would supply the produced heat to Klaipédos Energija according to a special, provisional agreement, where KE will buy the geothermal heat from UAB Geoterma but at a price less than the one calculated in the "take or pay" contract. However, according to Klaipédos Energija, geothermal heat still has not proven to be a reliable source of energy supply for the company, as originally anticipated.

Institutional arrangements required for the World Bank loan and the subsequent effectiveness with regard to the loan and GEF grant, caused initially some delay, basically due to internal Lithuanian institutional factors. Moreover, a planned and confirmed EU Phare grant of 850 000 EURO, was suddenly withdrawn on August 1999 without any further explication from the EU. Consequently, equipment had to be re-procured pursuant to World Bank conditions, which caused a 5-months delay in the implementation.

Environmentally

Since the geothermal project plant just recently has started to supply energy to the district heating system in Klaipéda, and at reduced capacity, the direct environmental effects from the project are still very limited and far from the expected levels.

Technology and Transfer of "Know How"

One out of 23 contracts (tenders) for this project was won by a Danish company (HECO) (water filters).

Compared to the planned schedule for project implementation, the start-up of the geothermal plant under full capacity has been delayed for more than two years and it is still unsure when and if the plant will be fully operational as originally predicted. Several technical issues have influenced this delay.

It was found that the temperature of the geothermal water was 38-39ºC instead of the originally anticipated 42ºC. It was however concluded that there was opportunity to increase the production of geothermal water from 600 m³/h to 700 m³/h. This would result in the same amount of heat produced.

During 1998 it was deemed necessary to drill a second injection well since the injection capacity in the first one was insufficient for the injection of all the geothermal return water (700 m³/h). Delay and problems related to installation and use of equipment have also prolonged the project implementation process and caused abruptions in the plant functioning.

A serious, continuing problem for the project plant is that a gradual increase of the injection pressure has been deteriorating the injection capacity. Experts are currently working on how to resolve this problem and it is hoped that the problem could be solved shortly. Heat exchangers and economizers are being installed in order to enable the plant to provide heat even if there should be a temporary problem with the absorption heat pumps and to extract more heat from the boilers.

Manuals for plant operation were delivered to project site with significant delay and this has made it more difficult for the local staff to operate the plant. Moreover, the project staff in Klaipéda claimed that practical training in plant operation had until now been insufficient in order for them to operate efficiently the geothermal plant.

IV. Project impact

Economic/Financial

The DEPA study carried out in 1992 showed a significant potential for geothermal heat in Lithuania if technical and economic exploitation of resources could be confirmed. It was expected that geothermal heat could be expanded to eighteen larger urban areas with existing heating networks. The savings, if all these 18 sites were to use geothermal energy, would be equivalent to around 300 000 tonnes mazut annually, or an import value of around 29 mill. USD.

Moreover, it is expected that subsequent geothermal plants could be build at a lower capital cost by maximizing local engineering and other technical skills developed through transfer of technology under the Klaipéda Demonstration Project. This would probably also be required since new plants cannot be expected to receive similar amounts of grants.

Although Klaipédos Energija was unable to provide figures on the employment effects from implementation of geothermal energy supply, it was admitted that an adverse effect could be expected. Taking into consideration that employment opportunities in Klaipéda are scarce, rationalisation in the district heating company must be expected to be a difficult social task.

Environment

Continued development of Lithuanian geothermal resources, according to the DEPA 1992-study, could produce an inherent reduction in the CO₂ emissions related to the heat production in the order of 750 000 tonnes and in SO₂ emission of around 22 000.

Technology and Transfer of "Know How"

It is expected that the new technology and technical skills developed at the geothermal demonstration project in Klaipéda could be used for future geothermal projects in the country.

V. Project Sustainability

Financial/Economic

The economic/financial sustainability of the project in Klaipéda will first of all depend on the outcome of the dispute between UAB Geoterma and Klaipéda Municipality/Klaipédos Energija. Project delay has already limited income generation for UAB Geoterma and put pressure on the economic balance. If UAB Geoterma might not receive revenue for the provided heat the company will move into a serious financial situation and its future would depend on economic support from the Lithuanian Government.

Another factor that will influence on the economic sustainability is the recent development on the energy market in Klaipéda. The delay of the geothermal project has allowed other, competitive energy suppliers to enter the market (f.ex. one company offering heat from wood burning). Therefore, obviously there is a risk that UAB Geoterma in the future will not be able to sell produced heat at prices anticipated. During the Consultants' interviews it was emphasized by Klaipédos Energija that they will require a guarantee that the geothermal project plant is a reliable energy supplier, before they will consider relying on geothermal energy.

Environmental

The future environmental effect from the project will of course depend on how much geothermal energy the project plant will be able to supply to the heating system in Klaipéda. As already explained above, this is still pending resolving of some technical, economic and political/institutional issues.

The relative environmental benefits will also depend on the alternatives to geothermal heat. The calculated savings of CO₂ and SO₂ in the project are based on substitution of mazut respectively coal. However, if these fuel sources can be partly or totally substituted by cleaner energy sources in the future (e.g. wood) the relative savings will be less than anticipated.

Finally, implementation of complementary energy initiatives in Klaipéda could influence future effects from the geothermal plant. For instance, in 1997 the Danish Energy Agency financed a demonstration project on Energy Savings in buildings in Klaipéda. One central argument for implementing this project was, that it would increase the effect of the geothermal plant through lower return temperature of the geothermal water and thereby a more efficient energy use. The energy equipment and the energy saving concept is now being installed in more buildings in Klaipéda and is thereby strengthening the potential impact of geothermal energy in the area.

Organizational/Institutional

It was the general impression from the Consultants meetings with local and regional representatives in Klaipéda, that the geothermal project is lacking local (political) support. At the local level the project is very much considered as a Governmental prestige project and not as a project implemented to benefit the area. Obviously, Klaipédos Energija does not feel any incentives to buy the geothermal energy from the state-owned company unless it is offered them at competitive prices. From an isolated, local point of view KE would prefer to buy energy from local suppliers and not from the state, in order to support local development and employment.

Continuing technical problems on the project plant and considerable delays in project activities have added to local frustrations regarding the geothermal project. During the Consultants' consultations with local representatives it was criticized that the geothermal project plant had been developed without including adequately the physical and organizational integration with the Eastern Boiler House in Klaipéda, placed right next door to the geothermal plant. Visually, it is obvious that the new, very modern equipped office facilities for the geothermal, State-owned, project, represents a sharp (psychological) contrast to the old, poor-equipped Municipality-owned Eastern Boiler House in Klaipéda.

Techology

For the time being, the technologic future of the project is still unsure and will depend on further investigations on project site.

Dissemination

Before and during project start-up, the project was presented in Lithuanian Television as well as in newspapers and journals. These presentations added to creation of general high expectations to project performance.

Lately, articles published in local medias have mainly dealt with remaining technical problems related to the project plan and the dispute between UAB Geoterma and Klaipéda Energija regarding payment conditions. Naturally, this has influenced negatively on the opinion regarding the project and the related investments.

VI. Lessons Learned (Consultants findings, based on visit to Klaipéda Geothermal Demonstration Project)

1. Stronger focus should be put on institutional issues, as well during the preparation phase as during project implementation. This should include analysis of legal aspects, institutional structures and capacity, both at the national and at the local level, and recommendations and support on institutional project set-up. In particular, it must be emphasized that local project involvement is of utmost importance, including financial and political responsibility. In the Klaipéda project, it is evident that the local anchoring of the project is not very strong, and this is indeed threatening the sustainability of the whole project.
             
2. More attention should be paid to obtain general local support and "acceptance" for these kinds of projects that represent new technologies and big-money investment. This should include information campaigns, seminars, workshops etc, at the local level where project concept and, in particular, related environmental benefits could be explained and discussed. In the case of Klaipéda, it must be questioned if the local area actually has been "mentally prepared" and geared for implementation of this kind of project (compared to the situation in e.g. Poland).
                 
3. Technical analysis' and project design should be more carefully prepared in order to avoid significant delays, unreliability and insecurity. Especially, when it is a demonstration project, as this one in Klaipéda, it is of utmost importance to have a positive case presented since the project is expected to be a catalyst for further development of geothermal energy potential in Lithuania,
              
4. More efficient support on management/organisational issues should be given both in order to create sustainable, local capacity but also to secure smooth project implementation at all levels. More focus is required on how to establish a supportive relation between the local project office (project plant) and foreign firm(s) contracted for project management/organisational support. (The Klaipéda project staff explained that they often had felt "left alone" with the problems on the project plant and in disputes with foreign companies. They felt that their (Lithuanian) "voice" did not weight as much as would have done an interfering "voice" from "an EU member company").
          
5. More transparency and improved training/preparation facilities should be provided to the local project staff in order to make them comfortable with the new technologies and working procedures. This could include early visits/practical training on already functioning project plants and early provision and instruction of relevant manuals and material.

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