LONDON — A proposed $500 million fund to help developers of geothermal power explore new sites for projects may leverage about $9.6 billion of new investment, unleashing as much as 2,400 megawatts of capacity, a report found.
A geothermal exploration drilling fund, pooling money from either private investors and banks or government entities and development banks, would help finance about 473 megawatts across 24 projects, London-based researcher Bloomberg New Energy Finance said today. This would encourage another 1,927 megawatts, it said.
“It is $5 million to $9 million to develop each well, and so it costs about $10 million to $36 million just to know whether or not a particular resource merits development, since any developer would need to drill between two and four wells per site,” Jessica Thompson, president of Rinova International, which worked with BNEF on the report, said.
The high costs and high risks associated with drilling exploratory wells mean developers find it difficult to raise equity or debt. Only about six percent of the world’s estimated geothermal potential has been tapped, according to BNEF. The fund would offer debt financing to exploration-phase projects at rates that would be attractive enough to make geothermal projects viable, it said.
Geothermal energy harnesses steam or hot water from underground to generate electricity. Unlike other renewables, geothermal technology is proven and it provides constant power at a cost close to that of fossil-fuels, Mark Taylor, lead geothermal analyst at BNEF, said in the statement.
Copyright 2013 Bloomberg
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