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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. Introduction

4.1 The DANCEE Programme

Established in 1991, as part of Denmark's environmental assistance to Central and Eastern Europe Countries (CEECs), the DANCEE programme is administrated by the Danish Environmental Protection Agency (DEPA) within the Danish Ministry of Environment. The overall objectives of the DANCEE programme are

	To contribute as much as possible towards protection of the environment and the nature in CEECs and to limit regional and global pollution
	To support democracy and market-based economic development in an environmental friendly manner
	To promote transfer of environmental knowledge and of environmental protection technology from Denmark to CEECs

In 2001 the total DANCEE programme budget was 600 million DKK (approximately 80 million USD), making Denmark one of the largest bilateral providers of environmental assistance to Central and Eastern Europe, both per capita and in relation to GDP. Currently DEPA, through the DANCEE programme, implements projects (investment or technical assistance projects or a combination of both) in twelve CEECs.

4.1.1 The Danish Model

An integrated part of the DANCEE programme support is to promote transfer of environmental knowledge and environmental protection technology from Denmark to CEECs. The effort and experiences generated by Danish geothermal experts have proved very useful in several CEECs, where GE sources have been integrated into CEEC district heating systems. Know-how and expertise from the Danish district heating sector has successfully been transferred to demonstrate new technologies and more efficient heating systems, - including geothermal energy technology for heating purposes.

Denmark developed this system, including its technologies and institutional requirements (building insulation standards, subsidies for renewable energy, high taxes on fossil fuels, energy planning of zones for use of natural gas, others zones for biomass, etc.) as a response to the energy crisis in 1970s. At that time Denmark was an energy importer, but has now turned to be a net exporter of energy through a targeted energy policy aiming for efficient energy production based of multiple sources, distribution and use.

While the temperatures of Denmark's underground water resource are moderate and the Danish geothermal experience focus on a single geothermal plant, the Danish geothermal expertise must be understood in this broader context, including a wide range of projects abroad. A handful of Danish companies have worked comprehensively with energy efficiency in geothermal energy planning and implementation. These companies made a pioneering effort in the geothermal plant in the Danish town of Thisted, and are now pursuing geothermal prospecting in Copenhagen.

The characteristics of the Danish concept of geothermal energy utilization, are the low temperature requirements achieved through absorption heat pump technology. Further cost efficiency is achieved by targeting a load segment (both over time and in a mix with other energy sources), where the geothermal energy complement waste incineration and substitutes gas. Finally, heat from the summer period is to be stored for use in winter.

This experience - and the continued verification of considerable reservoirs of hot water present in the underground of several CEECs - inspired DEPA to explore the idea that a strategic and targeted effort through the DANCEE programme could imply an increased utilization of the geothermal potential with positive economic and environmental impacts¹.

DEPA wants projects selected not only on the basis of technical and environmental data, but also as a result of a strategic process, involving policy, socio-economic and institutional analyses. In this context it is essential to what extent the political structures and the administrative, economic and legal systems of today's CEECs are conducive to development of GE. Further, questions regarding the possible complementary roles of private and public capital, of loans versus grants and the role of the state relative to the role of regional authorities and local governments are important.

4.2 Geothermal Energy Systems Assesment in the CEECs

DEPA commissioned Kvistgaard Consult (KC) to identify the most important features of the prevailing framework for geothermal energy development and to prepare a strategic assessment of economic, environmental, technical and institutional potentials of geothermal energy systems in the CEECs.

The Geothermal Energy Systems Assessment (GESA) in the CEECs was carried out by KC from April 2001 to December 2001. It included desk research, country and project evaluation and identification missions. The project did also include orchestration of an "International Workshop on the Future of Geothermal Energy in the CEECs", held in Copenhagen (Denmark), 8^th - 9^th October 2001.

The products of the GESA project can be listed as follows:

Further to these two Volume's, an Executive Summary of the Main Report has been prepared as a separate document and a Strategic Action Plan (unpublished) has been prepared for DEPA.

4.3 Methodology

Carrying out the GESA project, Kvistgaard Consult (KC) followed a methodology dividing the project into 4 basic components:

1) A retrospective study, including an evaluation of 8 geothermal investment projects (case studies). The case studies are in turn comprised of both on site evaluation during project visits and desk analysis of existing information on each project.

2) A prospective study, based on country missions to the five DANCEE focus countries (Poland, Slovakia, Russia, Ukraine and Romania) and desk research.

3) An international workshop on the future of geothermal energy in the CEEC.

4) A Strategic Action Plan (SAP), based on material collected from various sources, including some actual project proposals received during country missions.

In the process of carrying out the GESA project, some retrospective and prospective activities have been undertaken simultaneously. The outputs from the retrospective study in terms of lessons learned have provided the analytical and theoretical foundation for the establishing of a set of technical, economic, environmental and political-institutional assessment criteria. These criteria should in future be considered as a part of ex-ante analyses performed prior to approving allocation of donor funds for geothermal project activities in the CEECs. For the purpose of illustration, this set of criteria has been applied to visualize how a best practice geothermal project may look.

The same criteria have been applied in the process of producing a Strategic Action Plan (SAP). The SAP includes a long list, as well as a short list, of potential geothermal investment projects for DEPA to consider. From the short list three potential projects, proving particularly promising and ready to be implemented shortly, have been selected and Terms of Reference prepared.

While 12 Central and Eastern European Countries have been considered for this study, main attention has been given to analyse conditions in the five countries defined by DEPA as DANCEE focus countries: Poland, Slovakia, Russia, Ukraine and Romania. The remaining countries, the nonfocus countries are 1) already phased out of the DANCEE programme (Hungary), 2) currently in the process of being phased out (Czech Republic) or 3) subject to DEPA geothermal project funding (Bulgaria, Lithuania and Latvia) but to a lesser extent than the focus countries. Belarus has not been included in the study and Estonia has not been further considered due to the country's lack of geothermal potential.

As part of this GESA project, an International Workshop on "The Future of Geothermal Energy in the CEECs" was held on 8th and 9th October 2001 in Copenhagen. The workshop, hosted by DEPA, was attended by governmental representatives as well as project stakeholders from all 10 CEECs covered by this study. Moreover, delegates from main international financial institutions as well as from Danish Ministries, companies and investments funds attended the workshop.

Conclusions and recommendations from the workshop complemented the findings of the analytical work, and they have been fed into the overall process and formulation of a coherent and comprehensive approach to future development of GE potentials in the CEECs, building on concerted and strategic action. Workshop proceedings, including presentations, programme and participants list, have been prepared and handed out to the participants.

4.3.1 Methodological Note on Statistical Data

Most national and international organisations base their energy studies and surveys on data from the International Energy Agency (IEA) and use the same methods as the IEA for collecting and aggregating data and information. When it comes to geothermal energy data and the CEECs, the IEA datasets, however, are often yet to be completed or even provided. When dealing with energy related statistics, KC has therefore relied on data from a variety of sources, but still with an emphasis on the IEA.

During the data collecting period KC used, besides IEA statistics, articles, maps, books and the internet. KC has also compiled data material from visits to the CEECs. Data from such an array of different sources are not always comparable. It is important therefore, to note the difference between data/information from the well systematized IEA statistical publications and complementary data/information collected from unique and primary sources with focus on specialized knowledge within the field of geothermal energy.

4.4 Structure of this Report

This report is Volume I of the products prepared by KC as part of this assignment. The report is structured as follows :

After this brief introduction, a short general description of geothermal energy follows (Chapter 5). The chapter introduces some technical, institutional, economic and environmental issues of particular relevance for geothermal energy development.

Chapter 6 contains a Retrospective Analysis, based on experiences so far from DEPA funded geothermal projects as well as from other geothermal projects in the CEECs. A list of lessons learned from the projects are presented and transformed into a best practice project design, to be used as a guiding instrument for selection of geothermal projects for financing in the future.

A Prospective Analysis of the five DANCEE focus countries (Poland, Russia, Romania, Slovakia and Ukraine) is presented in Chapter 7 with a view to technical, institutional, economic and environmental potentials for future development of GE projects in these countries. A comparative analysis is done in order to determine similarities and differences between current conditions for project implementation in the five countries.

In Chapter 8 the report moves towards a strategic approach where concrete DEPA (DANCEE) action proposals are formulated to support future geothermal development in the CEECs. The proposals are formulated in view of DEPAs current and potential role as a strategic international key player in relation to geothermal energy development in the CEECs.

In Chapter 9 concluding remarks are presented.

It should be emphasized that this report does not necessarily express the opinions and viewpoints of the Danish Ministry of Environment.

Comments to the report should be forwarded to Kvistgaard Consult on one of the following email addresses:

Managing Director Morten Kvistgaard, MK@Kvistcon.dk
Senior Consultant Henrik Egelyng, HE@Kvistcon.dk
Consultant Carsten Schwensen, CS@Kvistcon.dk

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