Where public policy should go from here?

Gunter Siddiqi, Section – Energy Research

Swiss Federal Office of Energy, 3003 Berne, Switzerland

Workshop on EU-Iceland-Japan Cooperation in Geothermal Issues – Brussels 8 March 2012

41 285 km2

~7.9 million inhabitants Nominal 2010 GDP (US$ ~76 000 per capita)

2

Elektrizitätsangebot Bundesratsvariante 2 Variante D & E (Fossil-dezentral und Erneuerbar), Szenario „Neue Energiepolitik“, hydrologisches Jahr, 2000 - 2050, in TWhel/a

After the Major Incident at Fukushima in March 2011: Development of a new Swiss Energy Policy (after 2014/2015)

1. Demand down via energy efficiency & savings 2. Grow hydro, new renewables, CHP (and CCGT) 3. Maintain imports 4. Upgrade grid 5. Energy R&D

Geothermal Electricity: 0 TWh (2011) -> 4.4 TWh (2050)

- Maintain ability to meet greenhouse gas emissions targets - Future heat supply not perceived as a significant challenge

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Swiss Energy Strategy 2050: a role for geothermal

EGS

+ 10 % per annum after 2020

Source: Swiss Federal Office of Energy

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IEA – Geothermal Energy Roadmap (2011): Policy Recommendations

I. Regulatory framework and support incentives 1. Set long-term targets for geothermal electricity and heat. 2. Introduce economic incentive schemes for both electricity and heat until geothermal has

reached full competitiveness. 3. Introduce (innovative) economic incentives for geothermal heat use.

II. Market facilitation and transformation 1. Introduce streamlined and time-effective permit procedures for geothermal development. 2. Develop and use protocols for good-practice implementation in EGS. 3. Consider introduction of policies to cover the financial risk involved in geothermal

exploration. 4. Enhance training, education and awareness for skilled workforce.

III. Research, development and demonstration support 1. Increase public RD&D funding. 2. Ensure sustained RD&D funding in the long term.

IV. International collaboration and deployment in developing economies 1. Expand international R&D collaboration, making best use of national competencies. 2. Develop mechanisms to support geothermal deployment in developing countries. 3. Expand the targeting of clean energy deployment.

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Switzerland: regulatory framework and support incentives

1. Set long-term targets for geothermal electricity and heat.

Period: 2010 – 2020 No specific targets for geothermal energy, but for renewable energy* Electricity target: + 500 GWh between 2000 and 2010 2000: 847 GWh 2010: 1 395 GWh (+ 548 GWh actual)

Heat target: + 3 000 GWh between 2000 and 2010 2000: 8 913 GWh 2010: 13 344 GWh (+ 4 431 GWh actual) Period 2010 – 2020 no hard quantitative goals • General reduction of end use of energy through efficiency gains (fuels and electricity) • By 2020 reduce CO2 emssions & fossil fuel consumption by at least 20% compared to 1990. • By 2020 increase renewables share of total energy consumption by 50% compared to 2010.

Increased electricity consumption should be met by supply of electricity from renewables. (2010: Total energy consumption 911 550 TJ of which renewables 177 240 TJ)

* excluding hydro

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Switzerland: regulatory framework and support incentives

2. Introduce economic incentive schemes for both electricity and heat until geothermal has reached full competitiveness.

Feed-in tariffs for electricity from geothermal energy, but none for

heat

Installed Capacity (Pel) Feed-in tariff (Rp./kWh)

≤ 5 MW 40.0

≤ 10 MW 36.0

≤ 20 MW 28.0

> 20 MW 22.7

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Switzerland: regulatory framework and support incentives 3. Introduce (innovative) economic incentives for geothermal heat use.

Building technology support for energy efficiency and renewables

Source: http://www.geothermie.ch/data/dokumente/miscellanusPDF/Publikationen/GeothermiestatistikCH_2009.pdf & Geowatt AG

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Market facilitation and transformation

I. Regulatory framework and support incentives 1. Set long-term targets for geothermal electricity and heat. 2. Introduce economic incentive schemes for both electricity and heat until geothermal has

reached full competitiveness. 3. Introduce (innovative) economic incentives for geothermal heat use.

II. Market facilitation and transformation 1. Introduce streamlined and time-effective permit procedures for geothermal development. 2. Develop and use protocols for good-practice implementation in EGS. 3. Consider introduction of policies to cover the financial risk involved in geothermal

exploration. 4. Enhance training, education and awareness for skilled workforce.

III. Research, development and demonstration support 1. Increase public RD&D funding. 2. Ensure sustained RD&D funding in the long term.

IV. International collaboration and deployment in developing economies 1. Expand international R&D collaboration, making best use of national competencies. 2. Develop mechanisms to support geothermal deployment in developing countries. 3. Expand the targeting of clean energy deployment.

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3 deep hydrothermal projects are in construction

or in final stages of permitting – 26 Cantonal procedures

Lavey (VD) Heat and Power

St Gallen (SG) Heat and Power

Schlattingen (TG) - Heat

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GEOBEST: “Good Practice"– surveillance and risk assessment of induced seismicity in (deep) geothermal energy projects

Swiss Seismological Service develops practical guidelines on (1) planning and operating seismic surveillance systems, and analyzing data and (2) how to perform a fit-for-purpose, location-dependent seismic hazard and risk assessment.

Permitting and regulatory authorities (Cantons and Federal) need to establish guidelines for deep geothermal energy projects

Source: Swiss Seismological Service: 5 Hz 475 year hazard map and Swiss Fed. Office of Energy

Swiss Seismological Service will develop open-source software for planning and assessing seismic monitoring systems and for risk assessment.

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Switzerland’s subsurface is largely unexplored – matching exploration risk with public support

Value of cashflow may be expressed by its Net Present Value

(NPV) at a certain company-dependent cost of capital

Estimated Monetary Value of a Project EMV

=

Probability of Success POS * NPVsuccess

+

Probability of Failure * NPVfailure

EMV

= POS*NPVsuccess

+ (1-POS)*NPVfailure

Federal and Cantonal R&D and Pilot and Demo.funds - Swiss Fed. Office of Energy (dominant) - Swiss Nat. Science Foundation - ETH - CTI Comm. for Tech. & Innov.

Risk guarantees Federal: CHF 150 million Up to 50% of sunk subsurface project development cost may be reimbursed! Also ‘ad-hoc’ cantonal: Thurgau

Feed-in tariffs

Source: Swiss Federal Office of Energy

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IEA – Geothermal Energy Roadmap (2011): Policy Recommendations

I. Regulatory framework and support incentives 1. Set long-term targets for geothermal electricity and heat. 2. Introduce economic incentive schemes for both electricity and heat until geothermal has

reached full competitiveness. 3. Introduce (innovative) economic incentives for geothermal heat use.

II. Market facilitation and transformation 1. Introduce streamlined and time-effective permit procedures for geothermal development. 2. Develop and use protocols for good-practice implementation in EGS. 3. Consider introduction of policies to cover the financial risk involved in geothermal

exploration. 4. Enhance training, education and awareness for skilled workforce.

III. Research, development and demonstration support 1. Increase public RD&D funding. 2. Ensure sustained RD&D funding in the long term.

IV. International collaboration and deployment in developing economies 1. Expand international R&D collaboration, making best use of national competencies. 2. Develop mechanisms to support geothermal deployment in developing countries. 3. Expand the targeting of clean energy deployment.

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Funds for RD&D are limited: will geothermal be allocated

the requisite funds to enable the conversion of resources to reserves?

Source: IEA - http://wds.iea.org/WDS/ReportFolders/ReportFolders.aspx

- No or highly patchy data on Belgium, Czech Republic, Denmark, Finland, Greece,

Hungary, Ireland, (Italy), Luxembourg, the Netherlands, Norway, Poland, Spain

- EC spends between € 6 – 12 million per FP (about € 2 million per year)

CH

CH

CH

CH CH

CH

CH

CH

CH

CH

F

D

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Essential for success is close cooperation and leveraging scarce resources

Long term cooperation with Australia, Iceland, New Zealand and USA on Enhanced Geothermal Systems

Deeply rooted in the International Energy Agency’s Geothermal Implementing Agreement

and working with the European Union as a partner in Research and Development - Geothermal ERANET - European Energy Research Alliance EERA - Research and Development Framework Programs

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IPGT membership

5 Countries:

Australia, Iceland, New Zealand, Switzerland and the United States with a portfolio of around 280 funded EGS and EGS-relevant R&D projects

Purpose:

Accelerate the development of geothermal technology through international cooperation.

Focus on EGS to develop effective methodologies and practices.

7 Working Groups:

• Lower Cost Drilling • Zonal Isolation/Packing

• High Temperature Tools • Stimulation Procedures

• Modeling • Exploration Technologies

• Induced Seismicity

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IEA-GIA membership

13 Countries:

Australia, France, Germany, Iceland, Italy, Japan, Mexico,

New Zealand, Norway, Republic of Korea, Spain,

Switzerland and the United States

European Union

5 Industry/Organization Members:

CanGEA, Geodynamics, Geothermal Group-APPA,

Green Rock Energy, ORMAT Technologies

Annex I: Environmental Impacts of Geothermal Energy Development

Annex III: Enhanced Geothermal Systems (EGS)

Annex VII: Advanced Geothermal Drilling

Annex VIII: Direct Use of Geothermal Energy

Annex X: Data Collection and Information (new)

Annex XI: Induced Seismicity (new)

www.iea-gia.org Chairperson: Chris Bromley (New Zealand) ‘c.bromley@gns.cri.nz’ And Secretary: Mike Mongillo (New Zealand) ‘mongillom@reap.org.nz’

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Participation in Geothermal European Research Area Network (Geothermal ERANET – starting in 2012)

Initially 9 European countries but growth is key success factor:

Iceland (Lead), The Netherlands, Italy, Germany, France

Hungary, Turkey, Slovakia and Switzerland

Purpose:

- Deepen the cooperation of European geothermal R&D programs,

- Develop a coherent European geothermal R&D program, and

- Speed up the deployment of geothermal projects.

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Implementing the Energy Strategy 2050 (phased exit from nuclear) will lead to a major overhaul of the policy framework …

I. Regulatory framework and support incentives 1. Set long-term targets for geothermal electricity and heat. 2. Introduce economic incentive schemes for both electricity and heat until geothermal has

reached full competitiveness. 3. Introduce (innovative) economic incentives for geothermal heat use.

II. Market facilitation and transformation 1. Introduce streamlined and time-effective permit procedures for geothermal development. 2. Develop and use protocols for good-practice implementation in EGS. 3. Consider introduction of policies to cover the financial risk involved in geothermal

exploration. 4. Enhance training, education and awareness for skilled workforce.

III. Research, development and demonstration support 1. Increase public RD&D funding. 2. Ensure sustained RD&D funding in the long term.

IV. International collaboration and deployment in developing economies 1. Expand international R&D collaboration, making best use of national competencies. 2. Develop mechanisms to support geothermal deployment in developing countries. 3. Expand the targeting of clean energy deployment.