Geothermal Energy Systems Assessment - A Strategic Assessment of Technical, Environmental, Institutional and Economic Potentials in Central and Eastern European Countries
6. The Retrospective Analysis
6.1 DANCEE Geothermal Project Activities in the CEECs
During the past 9 years DEPA, through the DANCEE programme, has initiated and co-funded 6 geothermal energy projects in Central and Eastern Europe. A co-funded USD 12 million project in Pyrzyce, in the western part of Poland, was the first demonstration project. In addition, projects have been launched in Zakopane in the southern part of Poland, in Kleipéda (Lithuania), in Ziar nad Hronum and Kosice (Slovakia) and in Decin (Czech Republic).
In total, DEPA has invested more than USD 9 mill. in geothermal projects in the CEECs (see table 6.1.1). This investment, in turn, generated cofunding, adding up to a total of USD 148 million from international finance institutions and national sources. From an environmental point of view, these geothermal projects hold large potentials for reduction in emissions of, in particular, CO2.
Table 6.1-1
DEPA Investments in Deothermal Projects 1993-2001
6.2 DANCEE Projects
The following section presents a brief synthesis of each of the project evaluations performed under the GESA. These syntheses are based on case studies treated in full length in Volume II. In this presentation, the focus is limited to the effectiveness, impacts and sustainability of each project.
6.2.1 Zakophane, Podhale (Poland)
6.2.1.1 Effectiveness
Even though the Podhale project has just recently been commissioned, it can be concluded that the project activities so far have demonstrated efficient project management and planning. The local geothermal company, Geothermia Podhalanska S.A., has succeeded in attracting approximately 100 million USD to the project from different donors and institutions, national as well as international.
DEPA's support to the project is relatively small compared to the total budget (see table 6.1.1). The grant has, nevertheless, been of crucial importance to the project, due to its more flexible and complementary character. Moreover, visits by Polish project management and staff to the Danish geothermal plant in Thisted has been important in demonstrating technical issues, as well as Danish working mentality and efficiency.
As part of the initial project planning phase, consumer data was collected through a market survey. To estimate the economic fundament for the project, the data has also been used to develop a unique tariff model that can be adjusted according to market development. Moreover, sales and marketing functions have been established within Geothermia Podhalanska S.A., as well as tools for financial analysis.
6.2.1.2 Impacts
The success and impact of the geothermal project in Podhale has proved to be an important catalyst for further development of geothermal activities in Poland. In Southern Poland, the Malopolskie Voivodeship has now defined further development of geothermal energy sources as a main priority in the region. The Voivodeship has to this end initiated concrete geothermal project activities, and close working relations have been established with the Geothermal Laboratory in Podhale in order to prepare a more strategic regional approach to geothermal energy.
The impact of the projects technical and institutional/organisational experience, has already been very encouraging. Polish experts have shown capacity to support geothermal project development in Slovakia as well: First in Ziar Nad Hronum as sub-advisors on technical and organisational issues, and currently in supporting the development of a geothermal project in the town of Tvrdosin near the Slovakian-Polish border.
Finally, the potential environmental impact of the Podhale project is expected to be huge, due to the rich potential for geothermal energy in Poland and the current energy structure in Poland, based on coal-fired, private heating systems.
6.2.1.3 Sustainability
Early economic calculations showed that the project would be economically sustainable, based on current energy prices and consumer market penetration. The current liberalization process in Poland, and the country's upcoming accession to the European Union, means a relative price development that favours geothermal energy to conventional energy sources.
Institutional components were initially given much attention in the Podhale project in order to establish a sustainable local institutional and organisational framework. It is the impression that the Podhale project is very efficiently anchored institutionally through Geothermal Podhalanska S.A. The company must be characterized as a modern, competitive company, focused on achieving further development and efficiency. Through training and practical experience, the company seems highly capacitated and prepared for future challenges.
In conclusion, it is clear from the experience so far from Podhale, that geothermal heat has gained institutional and political acceptance in the region and is considered an important sustainable regional energy source for the decades to come.
6.2.2 Pyrzyce (Poland)
Pyrzyce, a town with 13 500 inhabitants, was formerly provided with heat from 68 coal-fired heating centres. However, some years ago the municipality launched a green profile and, as part of this, it was expressed as a wish, that the coal-fired heat was to be substituted by a more environmentalfriendly energy form such as geothermal.
6.2.2.1 Effectiveness
The Pyrzyce plant started operating in 1996 with two production and two reinjection wells. The plant is designed to extract up to 22 MW and produce 670 TJ/year, of which 368 TJ/year is geothermal heat and 302 TJ/year is gas. The consumers to be covered by geothermal heat were in first instance considered to be those living in flats with central heating systems. It has afterwards been learned that heat demand estimates based on coal production were too high, thus leaving the constructed plant in Pyrzyce with excess capacity. Therefore, an extension of the geothermal distribution area is currently being considered, where also private houses, industry and greenhouses are included.
For the extension of the project, funds have been applied from the Danish EKF (MKØ credit) to finance the purchase of pipes and heat exchangers for consumers. The extension is expected to commence shortly.
The Pyrzyce project had initially some re-injection problems related to uncleaned pipes, but these problems were temporarily solved through cleaning. Re-injection problems may recur within a few years and another cleaning will probably be needed.
All in all, the effectiveness of the Pyrzyce project is considered to be high. The technical advisory services have been very satisfying and the project plant is fully operational. Moreover, the geothermal company, Geotermia Pyrzyce, is considered to be functioning in a professional and efficient manner.
Finally, it should be noted that the Pyrzyce plant is fundamentally based on Danish know-how. The project has resulted in Danish export of more than 37 million DKK. The export include pipes, heat exchangers and boilers.
6.2.2.2 Impacts
The heat from the geothermal plant in Pyrzyce replaces heat formerly produced in 68 coal-fired heating centres with a total annual coal consumption of 60 000 tonnes. Thus, the environmental impact of the project is tremendous. When operating at full capacity, it has been estimated that the yearly saving in emissions will be as follows:
|
69 000 t/year | ||
|
1 158 t/year | ||
|
242 t/year | ||
|
241 t/year |
Moreover, the project, being the first on-line geothermal project in Poland, has been an influential and positive example for the implementation of further geothermal projects in Poland.
6.2.2.3 Sustainability
It is considered that the sustainability of the Pyrzyce project is rather strong. Opposite to other geothermal project investments in the CEECs, which are still in the implementation phases, the Pyrzyce project has now for some time been demonstrating its functionality and profitability.
Even though relatively low gas-prices have occasionally challenged the economy of the geothermal plant, the trend in energy price development is now in favour of geothermal energy and could further improve the economic foundation of Geothermia Pyrzyce. Moreover, the economic numbers are expected to improve when the planned extension of the consumer base, and thereby a more efficient use of the plant capacity, has been effectuated.
6.2.3 Kleipéda (Lithuania)
6.2.3.1 Effectiveness
The effectiveness of the Klaipéda geothermal project has so far been well below the anticipated. 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 now and it is still uncertain when, and if, the plant will be fully operational. A mix of economic, institutional and technical problems related to the project implementation has been the reason.
A signed "Take or Pay" contract is currently under dispute between the geothermal company, UAB Geoterma, and the local district heating company, Klaipédos Energija, due to unwillingness by the latter to comply with the conditions for payment pursuant to the contract. This dispute is seriously jeopardising the economic fundament and the opportunities for future Lithuanian geothermal development.
The Klaipéda geothermal plant has suffered from continuous technical problems and has only been able to work at half capacity. A serious, continuing problem for the project plant is that a gradual increase of the injection pressure is deteriorating the injection capacity. Delay and problems related to installation and use of equipment have also prolonged the project implementation process and caused abruptions in the plant functioning.
Implementation of the World Bank project loan and the GEF grant initially caused some delay, basically due to internal Lithuanian institutional factors. Moreover, a planned and confirmed EU Phare grant of 850 000 EURO was suddenly withdrawn in August 1999. Consequently, equipment had to be reprocured pursuant to World Bank conditions, which caused a 5-months delay in the implementation.
Finally, manuals for plant operation were delivered to the project site with significant delay, which in turn has made it more difficult for the local staff to operate the plant. Reportedly, practical training in plant operation have been insufficient in order for local staff to operate the geothermal plant efficiently.
6.2.3.2 Impacts
Lithuania possesses interesting potentials for geothermal heat. 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.
So far, no real positive impact can be registered from the Klaipéda Demonstration Project into other potential geothermal project activities in the country. Such demonstration impact will probably require that a more convincing and reliable functioning of the Klaipéda project can be demonstrated.
6.2.3.3 Sustainability
The sustainability of the Klaipéda project is threatened by a range of factors. First of all, the project lacks local (political) support. At the local level, the project is very much considered a governmental prestige project and not a project implemented to benefit the area. Obviously, Klaipédos Energija (KE) does not feel much incentive to buy the geothermal energy from the stateowned company, unless it is offered 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.
The economic/financial sustainability of the project will 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 does 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 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 (including 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 the anticipated prices. During the consultants' interviews it was emphasized by Klaipédos Energija that they will require guarantees that the geothermal project plant is a reliable energy supplier before they will consider relying on geothermal energy.
6.2.4 Kosice (Slovakia)
6.2.4.1 Effectiveness
The ongoing Kosice Project (Phase I) is found to be undertaken effectively. This assessment is based on a comparison of DANCEE inputs, project objectives and the results achieved so far. Full completion of the project as a whole, as currently designed and proposed by Slovakia, will require around USD 60 mill.
The project (phase one of two phases) covers equipment for erection of a pilot plant and technical assistance to the project. Phase I, completed in year 2000, includes testing, elaboration of technical solutions, contracts with local stakeholders, establishment of Geoterm Kosice investigation of existing installations, district heating systems and plants and identification of investors. The project design, based on extensive geological and geophysical tests carried out by the Slovak company Slovgeoterm, was examined and found to be thoroughly designed and timely performed.
The so-called "inhibitors", used to protect geothermal equipment from corrosion and scaling, has been tested for possible negative impact on the environment. It was found, that the inhibitors used are classified as "nontoxic", and that these are used in low concentration. In terms of temperature and dissolved minerals, the water is in accordance with the decree of the environmental department of the regional office in Trnava.
Studies under the project has confirmed that 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. 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. Equipment for the pilot plant was purchased and delivered in early 2000 and by mid 2000 the pilot plant was in operation, and various technical tests were being made.
6.2.4.2 Sustainability
In terms of financial/economic sustainability, the existing district heating company TEKO (the Slovak electricity company) has some expensive loans related to nuclear power. The electricity company, therefore, will not likely be expected to be able to invest in renovating the parts of the TEKO plant, which is 30 years old and needs, renovation.
Gas 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, thereby increasing the economic potential for substitution of gas with geothermal energy.
In terms of organisational sustainability, Slovgeoterm is assessed as a professional and solid geothermal company. Owned by one of Slovakia's major companies (the Gas Company, SPP, a Joint Stock Company owned by the Slovak Government, planning to sell 49 per cent of shares to the private sector), Slovgeoterm has a record of successfully concluded and currently operational geothermal projects such as the Galanta Geothermal Plant.
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. In addition, discussions with TEKO has been conducted in constructive fashion and have included technical and economic analyses and prognosis of heat price development until 2005 and beyond. 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.
Build as a demo project, the new part of TEKO is a state of the art CHP plant. While an existing CO2 problem is to be solved by reinjection, the high level of CO2 in the water will remain a critical point requiring attention. In terms of technological risk, a current technical obstacle is thus the character of the geothermal fluid. It has been deemed absolutely necessary to solve all corrosion and scaling problems before any major investment.
6.2.5 Ziar Nad Hronum (Slovakia)
6.2.5.1 Effectiveness
It is not possible, really, to assess the effectiveness of the project, since the project was closed down before it was ever concluded. The drilling of the first production well was completed at the beginning of 1999, but unfortunately, the drilling hit a so-called "chimney". Geologists concluded that the first well can be used neither as production well nor as re-injection well. Deviation from the well would not be possible due to the shape of the "chimney". The investment in the first production well, therefore, has been lost.
While financing and drilling another alternative production well remained an option for some time, a competing natural gas project, based on a gas fired boiler plant in the vicinity of the existing ZSNP coal fired boiler, won approval in the town of Ziar. This effectively stopped the geothermal project and left it without hope of a revival any time soon.
The feasibility study forecasted a high economic viability with a financial rate of return (FRR) of up to 15.3 per cent and an economic rate of return (ERR) of up to 36 percent. Since natural gas prices increased from 3.6 SEK/Nm3 (August 2000) to 4.1 SEK/Nm3, this would have made utilization of the geothermal energy resources located in the Ziar nad Hronom area further economically viable.
6.2.5.2 Impacts
The impacts of the Ziar nad Hronum geothermal project will not surface, since the project will not materialize. In terms of environmental impacts, the Ziar geothermal project was expected to generate a heat production up to 713 TJ/year, with emissions of CO2 decreasing with approx. 72 000 tonnes/year.
In quantitative terms based on a coal reference scenarios reductions imply between 7,816 and 101,800 tonnes of CO2 per year.
6.2.5.3 Sustainability
Despite an April 1999 project document, confirming wishes by the City of Ziar nad Hronum to implement the geothermal project including a letter of intent from the Mayor of the city, and the formation of the geothermal district heating company, the fate of the Ziar Geothermal project was determined when a competing project won the approval of the city administration.
By early October 2000 it was clear that the geothermal company (ZSNP Geothermal S.R.O.) was financially very weak or even bankrupt and not capable of financing further geothermal work, let alone paying for the drilling performed. A new company - ZSNP Energia S.R.O. - was formed, and on 18 October 2000 it was announced that ZSNP Energia S.R.O. had signed a contract for establishing a combined heat and power plant (gas turbine) for the production of 800 TJ heat per year, budgeted at SEK 160 million. The town of Ziar is not among the shareholders in Energia.
6.2.6 Decin (Czech Republic)
6.2.6.1 Effectiveness
From a "geothermal" point of view, the Decin project is an example of a composite project, where geothermal energy is integrated with other sources of energy into a single project. The DEPA input into the geothermal dimension of this project was in the form of an initial grant for technical exploration of the geothermal potential in the Czech Republic and a subsequent grant to the two Danish companies (DONG A/S and Bruun & Sørensen).
In partnership with two Czech companies, TERMO Decin and Aquatest, the two Danish companies performedproduction tests and then implemented and integrated the geothermal component into the gas fired CHP. The geothermal water has thus been utilized for improvement of the district heating and the hot domestic water supply to buildings serves approximately 1 600 flats. The quality of the geothermal water in Decin meets the requirement of the Czech standard for drinking water and serves as such.
The geothermal component substitutes prior use of lignite fuel. With the CHP plants, the distribution systems were modernized in different ways, including by means of a pre-insulated two piped system. The housing blocks were equipped with individual substations, which take care of the preparation of secondary district heating water and hot domestic water. This project includes both a CHP plant based on gas engines, peak load boilers, heat storage tank and a modernisation of the distribution network. And, of course, the project includes use of the geothermal energy available in the subsoil.
Based on the Decin case study as a whole, including the number and pace of analyses performed, all indications point to a geothermal project component that has been very effectively established and integrated into a CPH modernization project.
6.2.6.2 Impacts
The energy savings of the geothermal project component, compared to the old system are:
 | 12 300 GJ/year of heat savings due to utilization of geothermal water of 32 ºC instead of cold drinking water having a temperature of 10 ºC. |
| 6 900 GJ/year by eliminating heat losses in the hot domestic water circulation between the central heat exchanger units and the buildings. |
| 4 000 GJ/year are saved due to the individual temperature control in the compact heat exchanger units. |
| 260 MWh/year of power by eliminating hot domestic water circulation pumps. |
The total energy savings of the project are thus more than 50 per cent compared to the old system for preparation of hot domestic water from cold drinking water.
As far as the green house effect is concerned, it is only about 30 percent compared to the old coal fired sources, and regarding the three other environmental effects the improvements are even better. In terms of emissions, the following savings estimates apply:
| CO2 25 000 t/year |
| SO2 354 t/year |
| NOx 52 t/year |
| 545 tonnes particles/year |
| 5 000 t flying ashes/year |
6.3 Summing Up the DANCEE Project Expirience
Opposite to the Oil-Gas sector, where establishing a new project is a standard procedure, GE projects have tended to be a matter of starting from scratch each time. Partly, this difference is natural due to the variability in natural conditions from site to site. One may well argue, however, that a more "standardised" approach in exploring and implementing GE projects would be desirable. This part of the GESA report represents an ambition to provide a foundation for such an approach, building on lessons learned from geothermal projects already implemented in the CEECs.
Visits to project sites and interviews with project stakeholders have produced a series of lessons learned from the DANCEE projects implemented so far. These lessons are categorized and listed in the box below. Some of the lessons refer to several or all projects, but in cases where the lessons are more project specific, the particular reference project(s) is (are) indicated.
Box 6.3-1:
General Lessons Learned from DANCEE Projects
|
From the consultants' visits to geothermal project areas throughout this study, a general
experience is, that the most successful projects are typically implemented in regions
where local people were aware of GE and its potential prior to project implementation and
did support the general project idea. A second general point to be made is that, due to
the great complexity of geothermal projects, some flexibility is needed in order to carry
out a geothermal project in the most adequate way. This can be done through a division of
the project into phases, as it has already been done in some of the projects. Finally, but
important, the geothermal industry is still small and without really strong suppliers.
This, of course, is related to the fact that geothermal energy projects represent a rather
new market and that demand for project equipment still is limited.
6.3.1 Economic Lessons Learned from DANCEE Projects
In box 6.3-2 some central economic lessons from the DANCEE projects are listed. It has been quiet evident that the existence and availability of national co-funding mechanisms helps to attract international project financing. However, small projects, ranging typically between USD 1 and 5 million, are often very difficult to obtain funding for, since they are considered to be too big for local financing only and too small for major IFIs and donors to get involved. Moreover, CEEC stakeholders generally consider IFIs to be bureaucratic to co-operate with, and the process of obtaining IFI loans/grants is deemed to be extremely time consuming and a rather complex task. In this context, DEPA funding is praised for being much more flexible and "userfriendly".
Relative low cost of fossil fuels in general, and natural gas in particular, means that currently only the "best" geothermal resources can compete economically with existing, conventional, energy sources. The loss of hydrocarbon reserves and the emission of CO2 from burning of gas and/or other hydrocarbons, is not a prioritised environmental problem in all CEECs and, consequently, clear economic incentives for GE are lacking. In such CEECs it may be difficult to obtain significant private/national financial support for geothermal plants and international funding (donors, IFIs) is therefore needed in order to demonstrate opportunities for cost efficient CO2 reductions from geothermal plants.
Box 6.3-2:
Economic Lessons Learned From DANCEE Projects
|
The most suitable markets for GE are where district heating applications - including
horticulture and fish farming - are situated close to the reservoirs and plants, and in
areas where costumers in general can be expected to pay for their use of energy. The use
of geothermal Cascade Systems may further improve the economic efficiency of
geothermal plants. The need for new drillings often represents a significant economic risk
for the projects, particularly if the quantity and quality of the geothermal water
resources identified by the drillings shows up to be well below the expected levels.
6.3.2 Environmental Lessons Learned from DANCEE Projects
Box 6.3-3:
Environmental and Technical Lessons Learned from DANCEE Projects
|
In box 6.3-3 the main technical and environmental lessons are listed. Not all of the
DEPA-funded geothermal projects are fully operational yet, but significant reductions in
emissions of SO2, particles, and CO2 in particular have nevertheless already been
obtained. Geothermal projects have therefore so far shown to be good investments from an
environmental point of view.
On the technical side, it has been found that problems related to drilling and project equipment can delay project implementation significantly. In the case of demonstration projects, this can seriously affect local confidence in GE. Moreover, it is of crucial importance that geothermal plants will be dimensioned on the basis of expected future energy demand, taking possible implementation of energy efficiency and energy saving measures into consideration. Some geothermal plants today operate with excess capacity because they were dimensioned based on base-line rather than prospected energy demand.
Inputs from Danish sector experts have been an important factor in achieving successful geothermal project results so far. However, it must also be recognized that the CEECs have demonstrated high and increasing capacity to support project planning and implementation. It has also been found that comprehensive geological data for geothermal energy development is available in the CEECs, and much technical research has been done.
6.3.3 Political/Institutional Lessons Learned from DANCEE Projects
Box 6.3-4:
Institutional Lessons Learned from DANCEE Projects
|
Box 6.3-5:
Policy Lessons Learned from DANCEE Projects
|
In box 6.3-4 and box 6.3-5 the main institutional and policy lessons learned from the
DANCEE projects are listed. It is important to clarify institutional structures and
ownership rights prior to project implementation between state, regional/local
authorities and private companies to minimize risk for disputes and disagreements after
the project has begun. In the field of environmental protection and renewable (geothermal)
energy, responsibilities often overlap between Ministries and public institutions in the
recipient country.
National CEEC policies have generally not been very concerned about realising national GE potentials. Regions with proven geothermal resources, however, often demonstrate strong political interest in favour of GE. It is therefore deemed essential that local and regional levels will be involved early in the project process through financial and political responsibility and commitment by local authorities, institutions and consumers. The establishment of geothermal shareholder companies has shown to be an effective way of obtaining project commitment and sustainability.
DEPA (DANCEE) and the Danish experts contracted are well regarded in the CEECs, - both among local stakeholders and between international geothermal "players". In this regard, the Danish support on project management/organisational issues is considered essential in creating sustainable local capacity, but also in securing smooth project implementation on all levels. Additional focus is however 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.
6.4 Other Project Experiences
In addition to the DANCEE projects, two other geothermal projects in the CEECs, involving other sources of financing, have been visited and assessed through this study, namely the Galantaterm (Slovakia) project and the Mszczonów (Poland) project.
6.4.1 The Case of Galantaterm (Slovakia)
6.4.1.1 Project Investment and Feasibility
With its wells drilled under a (1972-99) state programme, the Galantaterm plant and company is in effect a result of a complexity of "projects". Coowned by NEFCO and the Icelandic company Orkuveitor (earlier known as Heitaveita), the Slovak Gas Company (SPP), Slovgeoterm, the City of Galanta5 and Orkustofnun (Iceland), the Galanta "project funding" is equally complex. Galanta was carried out partly based on a loan from NIB, taken through SPP. Further, the NEFCO is a co-investor, and local sources of finance - from the city to local companies - have invested in the enterprise. As a consequence, an assessment of "economic efficiency" is not attempted within this case study. Instead, other lessons are pursued.
As a result of the Galanta geothermal station, the conventional boiler station in the town hospital (coal based) could be closed. The conventional station consumed 6200 t of coal annually and produced 330 t SO2, 36 t NOx, 159 t CO2 and 600 t breeze. The charges in terms of pollution fees were 156 000 SEK. The consumption of gas in the boiler station, on the habitation „Sever", was decreased from 3 mil Nm3 to 1.2 mil. Nm3 of gas. This is equivalent to a decrease in emissions in the order of 60 per cent against the earlier situation in the state (Takacs - Grell, 2000). Thus, the project brought substitution of conventional heating in an estate with 1,243 flats (earlier heated by gas) and at a hospital (earlier heated by solid fuels - lignite).
6.4.1.2 Project Assessment
In 1996 the first geothermal heating plant, with a capacity of 8 MW, in Galanta town was installed. With its 2 geo-wells of 20 MW from 78º C hot water, Galantaterm today heats up approximately 1 300 flats and a hospital.
In terms of environmental benefits, the two geothermal wells have proven sufficient to provide enough heat until outside temperatures goes below +2°C, in which case gas is used to add heat to the circulation water. The project therefore has eliminated emissions from solid fuels and reduced emissions from gas. On the potentially negative side, the so-called "inhibitors" used, are classified as "non-toxic", and being instead classified as "waste water" (in accordance with the decree of the environmental department of the regional office in Trnava). 537 008 m3 of water at 9 - 16º C flows into a river.
In terms of financial/economic sustainability, SPP is paying back the loan to NIB. Galantaterm, however, is not able to pay SPP, because Galanta State Hospital does not pay the full amounts charged for supplying heat to the hospital. This situation, of course, represents 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 billed monthly. 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 stable, because the city-owned flatbuilding enterprises do pay their bills.
In terms of technological sustainability, it has been possible to solve all technical issues so far. Interestingly, a potential has been identified for further improving the environmental sustainability of the operation by re-injecting the water now discharged (there seems to be an unexploited potential for further improvements, by way of re-injecting 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 increased over 1999.
6.4.2 The Case of Mszczonów (Poland)
6.4.2.1 Project Investment and Feasibility
In August 1996, research and development was started in order to investigate the scope for development of a geothermal project plant in Mszczonbw by reconstructing an existing old, closed well. A 4.1 km well, drilled in the 1970s, was adopted for exploitation purposes. The geothermal aquifer is located in the Lower Cretaceous sandstone, which contains high quality drinking water (Total Dissolved Solids (TDS) are less than 1 g/1). The capacity of the geothermal gas plant was dimensioned to 7.5 MW, hereof 2.3 MW stems from the geothermal plant, the rest would be absorbed from heat pump and gas. The geothermal plant uses 40° C water discharged by a single well for both heating purposes and drinking water production.
Total project investment is 11 million Polish Zlothy (around 3 million USD). The shareholder company, Geothermia Mazowiecka S.A. (consisting of Mszczonbw Municipality, National Fund for Environmental Protection/Water Management (Polish) and some smaller funds) has provided 7 million Zlothy for the project. The remaining funding has been provided by the Polish EcoFund (grant, 2 million Zlothy) and by Polish Banks (loans, 2 million Zlothy)
From Denmark equipment (mainly economizers and controlling/electrical equipment) and training (on project site) have been provided. The total value of the Danish component is 1.6 mill. Zlothy. Locally, there is overall satisfaction with the performance of the Danish companies involved in this project.
The energy market in Mszczonów is composed by a mix of flats, public buildings and industry, including a significant tax-free industrial zone. The district heating network in Mszczonów covers around 60 percent of the potential consumers in the town, including approximately 1,200 flats and public buildings (schools, medical centre etc). Based on consultations with consumer groups, and calculations, it was decided to dimension the geothermal/gas plant for the whole area, also including consumers who were using other heating sources (coal).
6.4.2.2 Project Assessment
The geothermal/gas heating plant in Mszczonów is fully completed and has been operational since May 2000. The project has successfully demonstrated how to convert an old abandoned well into a well-functioning geothermal production well. This is a very important experience, taking into consideration that thousands of these abandoned wells exist in Poland and that some of them could represent interesting potentials for geothermal energy.
The thermal energy provided by the district heating company in Mszczonów is 37,000 GJ per year, including 40 percent geothermal and 60 percent gas. The change of heat source, from coal to gas/geothermal, has had significant environmental effects. CO2 has been reduced by 74.8 per cent, SO2 by 100 per cent and NOx by 82.9 per cent. Moreover, it has been possible to cover project costs through national (Polish) funding that in turn has made the project more smooth and flexible and has facilitated a more rapid project implementation.
Due to limited funding potential and unfavourable development in relative energy prices, Geothermia Mazowiecka S.A. currently faces some economic difficulties which have prevented an extension of the consumer base to more than the 60 per cent originally covered. Moreover, new pipes in the town have been installed, and financed, by Geothermia Mazowiecka S.A. and this puts additional pressure on the company's financial resources.
Given that socio-economic conditions in Mszczonów are different from those in the Southern Poland, local project impacts (for instance, employment effects and changes in energy prices) are relatively strong here. The staff of 30 persons formerly employed by the district heating company has now been reduced to only 3 persons working on the geothermal plant. Since the area is severely affected by unemployment this has naturally caused some social dissatisfaction at local level.
The institutional set-up of the geothermal company (with only one municipality involved but as major shareholder) gives the project a strong local anchoring. From the early stages of project development the Mszczonów Municipality has played an active role, also financially, and the urban environment of Mszczonów has been improved by the geothermal project. Nice green areas have been created in the town with water posts with drinkable geothermal water in the centre.
6.5 Summing Up other Project Experiences
The Galantaterm case study demonstrates that exploiting geothermal energy in Slovakia is indeed feasible, given the proper conditions. At the same time, Galantaterm suffers from the general socio-economic conditions and developments currently affecting the Slovakian energy sector. This includes a situation where local consumers are currently not willing, or able, to pay their heating bills.
The Mszczonów project has demonstrated important lessons with regard to the use of closed wells and how to obtain local project financing and anchoring for small scale geothermal projects in Poland. However, regional socioeconomic conditions, as well as national energy price policy, have to some extend affected the economic foundation of the project. As in other CEECs, the prospects (EU integration and further market liberalization) indicate more positive perspectives for future relative development of energy prices.
6.6 Selection Criteria for Best Practice Project Design
The experiences and lessons learned presented in the previous sections may be translated into a set of criteria to guide, govern and prioritize future efforts in the field of developing geothermal heat plants.
One may consider four different categories - technical, environmental, economic and institutional criteria (boxes 6.6-1-6.6-4) - which should all be carefully considered prior to GE project implementation. Technical project selection criteria's are shown in box 6.6-1.
Box 6.6-1:
Technical Selection Criteria for GE Projects
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The following factors (box 6.6-2) should be taken into account, in environmental analysis
of geothermal prospecting.
Box 6.6-2:
Environmental Selection Criteria for GE Projects
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One important and a major finding of this strategic assessment performed is that institutional
factors are of paramount importance for investments in geothermal projects to yield
successful results. Thus, among the remaining barriers for implementation of geothermal
projects are institutional problems, including some of regulatory and financial character.
The following factors (box 6.6-3) should be taken into account, in institutional analyses of geothermal prospecting.
Box 6.6-3:
Institutional Selection Criteria for GE Projects
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The following factors (box 6.6-4) should be taken into account when determining economic
potentials of geothermal projects.
Box 6.6-4:
Economic Selection Criteria for GE Projects
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The above lists should not be considered exclusive and other criteria might be relevant as
well, reflecting the specific project context. However, the criteria included in the four
boxes above have been identified through evaluation and assessment of DANCEE GE projects
and should represent a minimum set of criteria to apply in selection between and
assessment of project proposals.
The list of criteria and the lessons learned gives us the possibility to define a best practice project design. This design is presented in brief in the subsequent section.
6.7 Best Practice Project Design
Following the experiences with geothermal projects funded by DANCEE8, a best practice or ideal project design may be characterized by the following traits (box 6.7-1 - 6.7-4). The specific content of the preconditions depends on the project context and should always be qualified in accordance with this. Technical parameters to be included in a best practice project is outlined in box 6.7-1.
Box 6.7-1:
Best Practice concerning Technincal Issues
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Expected environmental benefits and impacts from geothermal projects are a crucial
parameter for obtaining of donor funding and loans for project implementation. Main
environmental parameters for best practice projects are listed in box 6.7-2
Box 6.7-2:
Best Practice concerning Environmental Issues
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Economic parameters to be considered when selecting best practice projects are listed in
box 6.7-3.
Box 6.7-3:
Best Practice concerning Economic Issues
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Institutional issues are considered to be of crucial importance for project sustainability
and impact and best practice projects should be based on issues listed in box 6.7-4.
Box 6.7-4:
Best Practice concerning Institutional Issues
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| 5 | According to law, the wells belong to the town of Galanta - thus the
ownership construction with the town as coowner |
| 6 | Risks should, in particular, include the risk related to first drilling. |
| 7 | Direct quantitative comparison between GE and other renewable energy (RE)
sources are complex, of course, both because of great variations between GE projects and
because other RE sources currently also undergo rapid developments. One attempt to do this
was done in the EU Blue Book (table 4.4 and/or 4.7, page 43,45). |
| 8 | The experiences of other projects than DANCEE projects have also been fed into the list of preconditions for a best practice project. |