Geothermal Development Expands Globally

Tapping a long, successful track record and a growing urgency to increase renewables generation worldwide, geothermal project activity is escalating significantly after relatively slow growth over the past two decades. Attractive for its unique combination of baseload power, cost-competitiveness and zero-emissions, geothermal power is gaining increased attention from governments and the private sector as a renewable generation technology with scaling potential.

With a 40-year commercial track record and plants installed in over 20 countries, geothermal has established itself as a proven, bankable and cost-competitive renewable power generation technology for utility-scale applications. 

Even following the significant downturn in global energy prices during the second half of 2008 and early 2009, there remains great expectations for geothermal’s long-term cost-competitiveness as global demand for energy escalates.  In addition, the proliferation of carbon and renewable polices throughout key markets, technological advances, and developer forays into new markets indicate the next decade will be a far more sustained and substantial period of growth.  The global geothermal pipeline now exceeds 9 GW of projects under development.  This is equivalent to approximately 80% of total global installed capacity built up over the past three decades. 

According to EER’s market forecasts, the global geothermal industry will more than triple from its current installed base from 10.5 GW to over 31 GW by 2020.  In addition, according to EER, geothermal power plant investment could reach between US$13 billion and US$19.9 billion annually by 2020. 

Exhibit 1-1:  Global Geothermal Industry Evolution by Market, 1970–2015

Source: Emerging Energy Research

Geothermal Market Development Trends

There are over 215 commercial geothermal projects operating in 24 countries with a cumulative installed capacity of approximately 10.5 GW worldwide.  The vast majority of generation capacity is concentrated in a handful of countries: the U.S., the Philippines, Indonesia, Mexico, Iceland and New Zealand.  While these established markets will continue to account for the overwhelming majority of geothermal growth in the short term, several earlier-stage markets, including Chile, Argentina, Turkey, Russia, Central America and East Africa, are looking to exploit robust geothermal resource potential as power generation demand and global fuel price volatility escalates. (Exhibit 1-2).

Exhibit 1-2:  Global Geothermal Country Rankings by Installed Capacity and Pipeline

Note: Bubble size reflects MW resource potential  Source: Emerging Energy Research  

U.S. to Lead Global Geothermal Development Activity

The U.S. is currently the world’s top geothermal market, with approximately 3 GW of installed capacity.  With a pipeline of more than 4.4 GW of confirmed projects, the U.S. is poised to more than double existing capacity over the next five years. 

The backbone of the U.S. geothermal build-out resurgence is the confluence of multiple factors pointing toward increased renewables penetration in the US power generation market.  State Renewable Portfolio Standards (RPS) demand, increased natural gas price fluctuation and a rapid acceleration of pushback against the permitting of new coal-fired power plants have all opened a clear market opportunity for geothermal growth. 

Challenges lie ahead, as transmission build-out necessary to access increased geothermal resources remains uncertain, and the looming economic crisis limits capital expenditures and depresses natural fuel prices.  Nevertheless, the long-term outlook for U.S. geothermal market growth is extremely positive, with the U.S. geothermal market poised to triple over the next decade. 

U.S. geothermal activity is concentrated in a few western U.S. states, which are home to vast reserves of U.S. hydrothermal resource. Developers are focused on large, robust pockets of geothermal resources concentrated in two states: California and Nevada. 

Geothermal Activity in the Rest of the World

Outside of the U.S., project development momentum is building in regions with substantial geothermal resources.  Southeast Asian leaders Indonesia and the Philippines are poised to ramp-up their geothermal capacity in the near term. A decade after the Asian currency crisis brought geothermal development to a halt, the region has emerged with a growing thirst for power, and has prioritized geothermal as a key source of new build capacity. 

Outside of the U.S. and Southeast Asia, the markets of Japan, Iceland, Italy, and Mexico account for over 65% of remaining global installed geothermal capacity.  Although these markets have seen relatively limited growth over the past few years, greater urgency to advance low-carbon baseload power generation is helping re-ignite new capacity growth in these markets.  Moreover, attention is turning to new markets, with Chile, Turkey, Russia, Nicaragua, Germany, Australia, and East Africa all poised for growth, as greater attention is paid to renewables to diversify the energy mix and hedge against volatile natural gas.

Exhibit 1-4:  Installed and Pipeline Capacity in Key Markets

Source: Emerging Energy Research

The above information is based on EER’s market study – Global Geothermal Markets and Strategies 2009-2020, released in May 2009, which is now available on EER’s website.

Tim Stephure is an Analyst for EER’s Renewable Power Generation Advisory Group. His research focuses on industry strategy and market analysis for geothermal, biomass, and ocean power technologies. Prior to joining EER, Tim worked as an international project manager in several international markets including Malta, Cyprus, and Brazil and speaks French, Spanish, and Portuguese. He holds an MS in Sustainable Energy Development and a BA in Marketing from the University of Calgary.

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