3-2. Policy Success Factors for Geothermal Electricity Development in the APEC Region

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APERC Wrkshp The 48 th APEC Energy Wrking Grup and Assciated Meetings Prt Mresby, Papua New Guinea, 17 Nvember, 2014 3-2.

1 APERC Wrkshp The 48 th APEC Energy Wrking Grup and Assciated Meetings Prt Mresby, Papua New Guinea, 17 Nvember, Plicy Success Factrs fr Gethermal Electricity Develpment in the APEC Regin Chrisnawan ANDITYA Senir Researcher, Asia Pacific Energy Research Centre (APERC)

2 Outline f Presentatin APEC Energy Challenges APEC s Actin Why Gethermal? Benefits Uptake Challenges Gethermal Electricity in APEC Regin Plicy Success Factrs fr Gethermal Electricity Develpment in the APEC Regin What a Gethermal Develper Needs? The Success Factr in Six APEC Ecnmies (the US, the Philippines, Indnesia, Mexic, New Zealand, and Japan) Plicy Infrastructure Resurces Access Envirnmental & Other Develpment Permitting Gvernment Supprt fr Gethermal Industry Electricity Market Access Cnclusin 2

APEC Energy Challenges Dependence n fssil fuel APEC primary energy supply Envirnmental deteriratin APEC CO 2 emissins 35% Oil price increase and vlatility Internatinal crude il prices 1.1% 1.

3 APEC Energy Challenges Dependence n fssil fuel APEC primary energy supply Envirnmental deteriratin APEC CO 2 emissins 35% Oil price increase and vlatility Internatinal crude il prices 1.1% 1.4% Arund 80% f APEC s energy demand is supplied by fssil fuel. APEC s CO 2 emissins have been increasing since 1990 and are prjected t rise by abut 32% between Surce: APEC Energy Demand and Supply Outlk 5 th Editin (2013) and BP (2012) Oil price vlatility has been high in recent years due t geplitical events. 3

4 APEC s Actin t prmte, develp, and deply lw-emissin energy supply including clean and renewable energy Ykhama Declaratin: Grwth Strategy includes prmtin lw-carbn plicies as well as develping a lw-carbn energy sectr by intrducing lw-emissin pwer surces and assesses the ptential f renewable energy ptins Fukui Declaratin: the deplyment f lw-emissin pwer surces shuld be prmted and the develpment f renewable energy technlgies shuld be cntinued t further reduce their csts. The APEC Energy Ministers als instructed the EWG t cntinue its assessment f renewable energy ptins fr reducing carbn emissins, spurring investment and creating new jbs Hnlulu Declaratin: called n ecnmies t speed up the transitin twards a glbal lwcarbn ecnmy in a way that enhances energy security and supprts APEC's aspiratin t reduce aggregate energy intensity by 45 percent by Vladivstk Declaratin: t prmte technlgy develpment and deplyment f a lwemissin energy supply including carbn capture, strage and use, and renewable energy surces Bali Declaratin: t invigrate wrk in develping clean and renewable energy Beijing Declaratin: t reinfrce the trends tward lw-carbn and clean energy prductin and cnsumptin; develp renewable energy; dubling the share f renewables in the APEC energy mix, including in pwer generatin frm 2010 levels by The APEC Energy Ministers als instructed the EWG t develp the rad map fr the aspiratinal gal f dubling the share f renewables. 4

Why Gethermal? Gethermal is a renewable energy surce. The APEC regin aligns almst perfectly with the Pacific Ring f Fire. The technlgies are already prven and mature.

5 Why Gethermal? Gethermal is a renewable energy surce. The APEC regin aligns almst perfectly with the Pacific Ring f Fire. The technlgies are already prven and mature. Gethermal pwer generatin has advantages. Surce: APERC The estimatin f APEC s gethermal ptential is mre than 17,000 GW. (nt included Brunei Darussalam and Hng Kng) 5

6 Benefits (1) Energy Security. Small Land Ftprint. Psitive Impact n Ecnmic Develpment. Near Zer Emissin. Land Use based n the Anticipated State f Technlgy in 2030 Cmparative Jb Creatin between Gethermal and Natural Gas in the US Gethermal Pwer Cal Slar Thermal Natural Gas Slar Vltaic Petrleum Hydrpwer Pwer Surce Cnstructin Emplyment (Jbs/MW) O&M Emplyment (Jbs/MW) Ttal Emplyment fr 500 MW Capacity (persn-years) Gethermal ,050 Natural Gas ,460 Surce: Matek et.al., 2013 p.13 Estimated Emissin Levels by Pllutant f Gethermal Pwer Plant based n Technlgies (lbs/mwh) Flash Dry Steam Binary Natural Gas Cal Wind 72.1 Bimass km 2 /TWh - year Surce: Matek et.al., 2013 p CO ,200 CH PM PM SO Surce: Matek et.al., 2013 p.15 N2O

7 Benefits (2) Reliable and Flexible Pwer Surces. A Cmpetitive amng ther pwer plants. Capacity Factrs fr Pwer Plants Entering Service in the US 2019 The US Average Levelized Csts (2012 USD/MWh) fr Plants Entering Service in 2019 Surce: EIA, 2014 Surce: EIA,

8 The resurce is stred in the earth. Uptake Challenges Explratin and drilling needs t be undertaken (USD 1-7 millin per well). Definitin f gethermal resurce can lead significantly different appraches in legal framewrks and resurce management regulatins. The envirnment impact assessment needs t be mitigated where the prcedures can be time cnsuming. The resurce is generally lcated in remte areas such as in the muntain. The necessary infrastructure needed t develp. Cnnectin t transmissin netwrk can be an issue, especially if thse cmpanies that develp gethermal pwer plant are different frm the cmpany that perates the transmissin netwrk. The resurces might be fund in several types f areas. Develpment might be limited r prhibited in restricted areas. It might be get resistance frm existing r ther pssible land uses. Develpment may require several regulatry requirements frm varius agencies with time cnsuming permitting prcess. 8

9 +2.0% +0.2% Gethermal Electricity in APEC Regin +6.2% -0.4% +5.8% -0.6% Ecnmy United States 2,771 3,386 Philippines 1,931 1,968 Indnesia 735 1,339 Mexic New Zealand Japan Russia (Kamchatka) Papua New Guinea 4 56 China Australia 0 1 Thailand 0 0 7,339 8, % +31.3% -1.5% Surce: BP Statistical Review f Wrld Energy (June 2013) (MW) Only 11 ut f APEC s % 0.0% ecnmies have develped gethermal electricity. The ttal installed capacity was 8,939 MW in The APEC regin cntributed t 78% f the wrld s gethermal installed capacity which was abut 11,446 MW in The US, Philippines and Indnesia are the wrld s leading ecnmies in terms f installed capacity f gethermal. APEC s installed capacity is still small cmpared t its ptential. 9

Plicy Success Factrs fr Gethermal Electricity Develpment in the APEC Regin The Main Objectives: T assess current gethermal develpment prcess in the APEC regin.

10 Plicy Success Factrs fr Gethermal Electricity Develpment in the APEC Regin The Main Objectives: T assess current gethermal develpment prcess in the APEC regin. T identify plicy success in the gethermal electricity develpment prcess. T evaluate hw each APEC ecnmy rates against the success factrs by prviding an example matrix. T prpse a set f recmmendatins fr gethermal electricity in each APEC ecnmy and in the APEC regin as a whle. List f APEC Methdlgy Ecnmies Assessed Indnesia Japan Mexic New Zealand Philippines United States Chinese Taipei (new cmer) 10

transmissin netwrks withut discriminatin (Transmissin netwrk) Lng-term cntract fr electricity

database (Database) Adequate funding fr R&D (Research and develpment) Sufficient f prfessinal

incentives) Clear and certain legislatin and/r regulatin (Legal basis) Well-defined strategy

gvernment cmmitment t investr) Gd institutinal capacity fr plicy and regulatin (Institutins)

Resurces Envirnmental and Other Permitting Prcess Open and cmpetitive basis fr all players

resurces that develpers have invested in (Secure and exclusive rights t resurces) Reasnable

11 What a Gethermal Develper Needs? (Plicies fr Successful Gethermal Electricity Develpment) Streamlined prcedures t access transmissin netwrks withut discriminatin (Transmissin netwrk) Lng-term cntract fr electricity price with reasnable price structures (Electricity sales cntracting) Gd quality public database (Database) Adequate funding fr R&D (Research and develpment) Sufficient f prfessinal persnnel in quality & quantity (Human resurces and develpment) Financial incentives (Financial incentives) Clear and certain legislatin and/r regulatin (Legal basis) Well-defined strategy fr prmting gethermal (The gvernment strategy) Keeping previus cmmitments t investrs (The gvernment cmmitment t investr) Gd institutinal capacity fr plicy and regulatin (Institutins) Electricity Market Access Gvernment Supprt Plicy Infrastructure Key Factrs Assessed Access t Resurces Envirnmental and Other Permitting Prcess Open and cmpetitive basis fr all players with reasnably simple prcedure (Access t gethermal resurces) Apprpriately secure access t resurces that develpers have invested in (Secure and exclusive rights t resurces) Reasnable time limits fr permitting (Permitting time limits) Crdinate all aspects f permitting in ne ffice ( One-stp shpping ) Gd crdinatin amng gvernmental agencies at all levels (Inter-agency cperatin) 11

12 Plicy Infrastructure (1) The assessed ecnmies have implemented gethermal electricity develpment regulatin. The regulatin prvide clarity and certainty fr resurce wnership, legal definitins, permitting prcesses r ther resurce access methds. Hwever, under these regulatins, the wner f surface land is different frm the wner f the undergrund resurce, except in New Zealand. The develper als needs t cmply with several ther regulatins such as frestry, natural park, and indigenus land rights laws. The assessed ecnmies, except fr Mexic and New Zealand, have mechanisms t help develpers reduce the risk f early stage develpment thrugh database, cst sharing, and fiscal incentives; and t help develpers raise capital thrugh lans, RPS/FIT, and financial assistance. In Mexic private sectr participatin is limited. In New Zealand there are n financial incentives, nly a relatively lw price n carbn. 12

13 Plicy Infrastructure (2) All assessed ecnmies gvernments except fr the United States and New Zealand have histrically prvided incnsistent cmmitments t investrs. The Philippines: changed the risk sharing mechanism t fiscal incentives; RPS/FIT issue Indnesia: see the Karaha Bdas Cmpany, and Himpurna Califrnia Energy cases; and the annulment f the new Electricity Law f Mexic: limited participatin frm the private sectr as the Federal Electricity Cmmissin (CFE) has preferential rights. Japan: stpped gethermal R&D in 2002; and RPS issue. All assessed ecnmies, except fr Japan, have established a specific agency, which is respnsible fr gethermal plicy and regulatin Japan: the Ministry f Ecnmic, Trade and Industry (METI) and the Ministry f Envirnment (MOE) have jint respnsibility fr gethermal plicy and regulatin. Lcal gvernment and/r indigenus peple are als key players in gethermal develpment. 13

14 Resurces Access In the United States, the Philippines and Indnesia, gethermal resurce develpment is available t all develpers n an pen and cmpetitive basis. In New Zealand and Japan, gethermal develpment is pen t all develpers n a first cme, first served basis. In Mexic gethermal develpment is nt pen t the private sectr. Develpers must g thrugh cumbersme prcedures t btain permits and licenses frm varius agencies as well as land wners (either public, private r indigenus wners) In the United States, the Philippines and Indnesia, develpers are given cncessin based n field r area fr sme f perid years. This prvides develpers with mre security fr their investments as they are given an exclusive right t the resurces, even where there is a sanctin (suspended r terminatin). In Mexic, and Japan, cncessin fr gethermal resurces are granted by well and in New Zealand, it depends n permissin frm the landwners; nt by field r area. This means that investments are nt prtected during explratin and explitatin phases. 14

15 Envirnmental & Other Develpment Permitting (1) It is hard t predict the cmpletin time fr permits in all assessed ecnmies, except fr New Zealand, as the develpers must btain permits frm varius gvernment agencies, bth central and lcal. In New Zealand the permitting prcess t btain Resurce Cnsent is clsed with One-Stp shpping which prvides reasnable time limits within which a permitting decisin must be made. Only New Zealand has One-Stp shpping, fr permits ut f the assessed ecnmies. Hwever, the United States is currently determining whether t establish a Gethermal Crdinating Permit Office. 15

16 Envirnmental & Other Develpment Permitting (2) Inter-agency cperatin has been gd established in the United States thrugh the Renewable Energy Crdinating Offices. in New Zealand and Japan, inter-agency cperatin between the central and the lcal gvernment have been gd t reach decisins n resurces cnsents and envirnmental prtectin. Other ecnmies, there are still duplicatin f respnsibilities and plicy cnflicts. The Philippines: cnflicting between envirnmental and sci-cultural Indnesia: verlapping duties and respnsibilities between central and lcal gvernments. Mexic: duplicatin f the permitting prcedures amng agencies. 16

17 Gvernment Supprt fr Gethermal Industry (1) The majrity f the assessed ecnmies prvide develper with access t gd quality public data n the ptential f gethermal resurces. By a natinal database: the United States and the Philippines; r thrugh thers gvernment agencies: New Zealand and Japan. Indnesia: the gvernment s data is nt bankable and develper needs t cnduct re-survey. Mexic: CFE hlds all data, and it cannt be easily accessed by the public. All assessed ecnmies, except fr Indnesia have prvided adequate funding fr gethermal research and develpment. Enhanced Gethermal System (EGS) is ne f the activities under R&D fr sme ecnmies (the United States, the Philippines, and Japan). Even thugh the Indnesian Gvernment has allcated mdest funding fr R&D, fr develpers, hwever, the lack f technlgy, research and develpment supprt is still ne f the majr challenges fr renewable energy develpment in Indnesia. 17

18 Gvernment Supprt fr Gethermal Industry (2) All assessed ecnmies have at least sme level f trained persnnel frm tertiary training prgrams. In Indnesia the numbers f prfessinal persnnel is nt enugh t meet near future demand In Japan the numbers f prfessinal persnnel has declined as n new gethermal plants have been cnstructed since All assessed ecnmies, except Mexic and New Zealand prvide develpers with financial supprt t reduce the risk f early stages develpment (e.g. data, cst sharing, fiscal incentives) and t help develpers raise capital fr prjects (e.g. lan guarantees, RPS/FIT, financial assistance). In Mexic there are n financial incentives fr gethermal develpment. It cmpetes n the same basis as fssil-fuel, cnventinal hydr and nuclear energy. In New Zealand there are n financial incentives, nly a relatively lw price n carbn. 18

Electricity Market Access All assessed ecnmies (except Mexic) have regulatins t ensure that transmissin services are pen and n a nn-discriminatry basis and prcedures fr transmissin cnnectin (e.g. grid cde).

19 Electricity Market Access All assessed ecnmies (except Mexic) have regulatins t ensure that transmissin services are pen and n a nn-discriminatry basis and prcedures fr transmissin cnnectin (e.g. grid cde). Mexic has n private gethermal develpers, hence there is n need fr regulatin fr access t transmissin netwrk. Sme f the assessed ecnmies have gd regulatry mechanism fr electricity sales, that enable prducers/develpers t sell gethermal pwer t utilities and/r retail cnsumers/end users thrugh lng-term cntracts at reasnable prices: RPS in the same states in the United States. FIT in Japan. In Indnesia, selling price needs t be negtiated between prducers/develpers with the State Owned Electricity Enterprise-PLN, which is time cnsuming withut clearly standard f cntract. In Mexic there is n electricity sales cntracts between private develper and CFE, except EPC cntact r well drilling cntract. 19

20 Cnclusin As part f APEC s actin, each APEC ecnmy shuld cnsider prmting, develping and deplying gethermal electricity. In rder t reduce the risks f early stages develpment and t increase the ability f develpers t raise capital fr prjects, interventin frm the gvernment thrugh its public plicy develpment is much needed. In particular: Plicy infrastructure; Resurces access; Envirnmental and ther develpment permitting; Gvernment supprt fr gethermal industry; and Electricity market access. The plicy success factrs in the 5 APEC ecnmies can be a benchmark fr develping gethermal electricity in each APEC ecnmy. Cperatin n gethermal electricity amng APEC ecnmies as well as reginal and internatinal rganizatin in the fields f infrmatin exchange, technlgy transfer, human resurces/capacity building, and financing needs t be strengthened. 20

21 Thank yu fr yur kind attentin 21

22 New Regulatin n Gethermal in Indnesia Issues Old Gethermal Law f 2003 New Gethermal Law f 2014 Are gethermal activities defined as mining? Are activities in frest areas limited/prhibited under the Frestry Law? Which gvernment authrity issues the Gethermal Wrking Area (GWA)? Which gvernment authrity issues gethermal permit/license Hw wide is the cncessin? What is the perid f cncessin Yes. Gethermal Mining Permit. Yes. Limited and/r frbidden in prtected and cnservatin frest areas under the Frestry Law. The Minister f Energy and Mineral Resurces (MEMR) r Gvernrs r the Regents/Mayrs in accrdance with their respective jurisdictin. The Minister f Energy and Mineral Resurces (MEMR) r Gvernrs r the Regents/Mayrs in accrdance with their respective jurisdictin. Maximum 200,00 hectares with a maximum area f 10,000 hectares fr explitatin. A Larger area is subject t apprval frm MEMR r Gvernrs r the Regents/Mayrs in accrdance with their respective jurisdictin. Maximum perid f 35 years (3 years fr explratin with tw extensins f up t 1 year per extensin and 30 years fr explitatin). Pssible t btain further extensins. N. Changed frm Gethermal Mining Permit t Gethermal Permit. N. Gethermal develpment are allwed as lng as they adhere with frestry regulatins. Develper shuld have Permit f Envirnmental Service Use frm the Ministry f Frestry. The MEMR. The MEMR. GWAs will be determined based n assessing the capacity f individual gethermal system. Maximum perid f 37 years (5 years fr explratin with tw extensins fr up t 1 year per extensin and 30 years fr explitatin). Pssible t btain anther 20 years each time an extensin is apprved. 22

23 New Refrm n Gethermal in Mexic Issues Befre Energy Refrm After Energy Refrm Is private sectr participatin encuraged? Which authrity ffer cncessins. What are the types f cncessins Surces: SENER, 2013 (indicated by *) ) N. It is very limited and nly fr drilling cntractrs r a EPC cntractr (under the Public Electricity Service Law). The Natinal Water Cmmissin (Cmisin Nacinal del Agua - CNA). Water cncessin by well (under the Natinal Water Act). *) Hw wide is the cncessin? Per m3 f water *) 150 km2 Yes. Any interested party may participate either in explratin and/r explitatin (Under the Gethermal Energy Act). The Ministry f Energy (the Secretaria de Energia SENER) thrugh tender, except fr hydrthermal reservir, which needs t have water cncessin frm CAN. Gethermal cncessin by area (under the Gethermal Energy Act). What is the perid f cncessin 5-30 years *) Maximum perid f 36 years (3 years fr explratin with ne extensin fr 3 years and 30 years fr explitatin). This can be extended. 23

24 Gethermal Develpment in Chinese Taipei (1) Est. Ptential: 714 MW Gegraphical Distributin and Explitatin Ptential f Gethermal Resurces in Chines Taipei (ITRI, 2013a) Current Status and Future Plan The estimated Ptential is abut 714 MW. As f December 2013, there was a 50 kw demnstratin plant in peratin with anther 1 MW under cnstructin. Target fr gethermal installed capacity: Resurces Access The system: The Ht Spring Act is the legal instrument fr gethermal develpment. Gethermal heat (steam) is defined as ne ht spring by-prducts. It is wned by the state. The Water Act r the Mining Act is als the legal instrument since a develper wh wants t develp ht spring must btain the water right pursuant t the Water Act r the mining right pursuant t the Mining Act. Evaluatin f the system: The gvernment needs t draft regulatins that guide gethermal develpment, as neither the Water Act nr the Mining Act clearly refer t gethermal as a prducts t be regulated. Year Installed Capacity Surces: ITRI, MW 66 MW 150 MW 200 MW 24

25 Gethermal Develpment in Chinese Taipei (2) Envirnmental Permitting The system: The ht spring develpment permit will be given by the lcal gvernment after the develper secures the right t use land frm the landwner (public, private r indigenus peple), prvides plan f develpment and use f resurces (nt cnflict with the lcal gvernment s ht spring administratin), and the resurce is nt lcated at area f the ht spring utcrp *). Obtaining the water right pursuant t the Water Act r the mining right pursuant t the Mining Act. The basis fr accessing gethermal resurces is first cme first serve Evaluatin f the system: Unclear which agency decided whether a develper shuld get a water right r mining right. The permitting prcess frm varius agencies usually takes times. N One-Stp Shpping. *) Ht spring utcrp means a site where ht spring is gushed ut naturally. Gvernment Supprt fr Gethermal The system: Database fr gethermal ptential, FIT scheme; subsidy up t 50% f explratin cst r nt exceed NT$ 50 millin; fiscal incentives, and R&D have been prvided. Evaluatin f the system: Capability and capacity f gethermal industry still need t be created. Capability and capacity f prfessinal persnnel in gethermal need t be established by prviding enugh public training. Electricity Market Access The system: The transmissin peratr cmpany must prvide grid integratin; the pwer lines cnnecting the gethermal pwer plant equipment and the grid must be cnstructed, installed and maintained by gethermal prducer r develper. A fixed lng-term price guaranteed up t 20 years. Evaluatin f the system: Securing the right t use land fr transmissin line can be time cnsuming fr the develper. The develper still needs t negtiate with Taiwan Pwer Cmpany fr cst f transmissin. 25

26 Plicy Success Factrs fr Gethermal Electricity Develpment Plicy Infrastructure Clear and certain legislatin and/r regulatin. Well-defined strategy fr prmting gethermal electricity including mitigatin f high risk f the develper. Keeping previus cmmitments t investrs. Gd institutinal capacity fr plicy and regulatin. Resurces Access Open and cmpetitive basis fr all players with reasnable and simple prcedure. Prvide develpers with apprpriately secure access t resurces that they have invested in. Envirnmental and Other Develpment Permitting Establish reasnable time limits within which permitting decisin are reached. Establish One-Stp Shpping t crdinate all aspects f permitting and t mnitr the licenses. Gd crdinatin amng gvernmental agencies at all levels t avid duplicatin f respnsibilities and plicy cnflicts. Gvernment Supprt fr Gethermal Industry Establish a gd quality public database. Prvide adequate funding fr R&D n a cntinuing basis. Prvide sufficient f prfessinal persnnel in quality and quantity by establishing enugh public training. Prvide financial incentives t reduce the risk f gethermal develper in the early stages and t increase the ability f the develper t raise capital fr gethermal prject. Electricity Market Access Prvide standard and streamlined prcedures fr develpers t access transmissin netwrks withut discriminatin and within reasnable time frames. Establish lng-term cntracts fr electricity price with reasnable price structures. 26

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