proposal for a transition in the risk mitigation schemes · 2 |d (3.4) proposal for a transition in...

The sole responsibility of this publication lies with the author. The European

Union is not responsible for any use that may be made of the information

contained therein. This project has received funding from the European

Union’s Horizon 2020 research and innovation program under grant

agreement No [818232 — GEORISK]

Proposal for a transition in the Risk

Mitigation Schemes Deliverable number: (D 3.4)

Author(s): Ferid Seyidov, Thorsten Weimann

Author'(s') affiliation: gec-co Global Engineering & Consulting GmbH

Reviewer(s): EGEC, PASMEERI, TSKB

1 |D (3.4) Proposal for a transition in the Risk Mitigation Schemes

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List of Contents

Proposal for a transition in the Risk Mitigation Schemes ................................................... 0

Executive Summary ........................................................................................................................................ 2

Introduction.................................................................................................................................................... 3

1 Gathering Background Information............................................................................................................. 4

1.1 Support Types ...................................................................................................................................... 4

1.2 Market Maturity ................................................................................................................................... 6

2 Commercial Readiness Index ....................................................................................................................... 8

2.1 Introduction to CRI System .................................................................................................................. 8

2.2 Adjustment of CRI to Geothermal Industry ......................................................................................... 9

2.3 Evaluation of the Market Situation in Partner Countries................................................................... 12

2.4 Partner Country Evaluation of the CRI (RMS) .................................................................................... 14

3 Transition of the Risk Mitigation Schemes ................................................................................................ 20

3.1 Risk Mitigation Mechanism and their relevance ................................................................................ 21

3.2 Market Maturity and Risk Mitigation Schemes ................................................................................. 25

3.3 Transition Criteria .............................................................................................................................. 29

4 Numerical Simulation ................................................................................................................................ 35

4.1 Simulation structure and prerequisites ............................................................................................. 35

4.2 Case Simulation .................................................................................................................................. 36

4.3 Simulation outcome ........................................................................................................................... 43

5 Conclusion ................................................................................................................................................. 45

5.1 Summary ............................................................................................................................................ 45

5.2 Discussion........................................................................................................................................... 46

References .................................................................................................................................................... 48


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Executive Summary

In the frame of GEORISK project, the task about reviewing the existing and innovative

financial tools: public and private (task 3.1), observed the success rate of various risk

mitigation schemes (RMS) for deep geothermal across European countries and time frames.

It was then determined that not all of these financial schemes had an equally positive effect.

This issue was previously noticed by geothermal stakeholders in various studies notably

those conducted in Horizon 2020 projects on deep geothermal. The outcome has concluded

that in the course of risk mitigation schemes development one of the essential parameters

deciding success rate is its relevance to the market maturity and conditions. No matter how

thought out the structure of the RMS may be, if it is being applied in an inappropriate market

situation, or without complementary tools as financial operational support schemes, its

positive effect could be either completely negated or it may have negative influence on the

market development.

The primary objective of this working package was to gain understanding of the correlation of

the RMS to the market situation, thereby developing a transition system, which would enable

an effective support scheme application. During this project it was determined that although

the market situation was roughly known, there was no clear method or system to assess it.

The initial part of this GEORISK working package on risk mitigation tools was devoted to

studying the geothermal market maturity and its evaluation methods. As result of this effort,

the Commercial Readiness Index (CRI) system developed by Australian Renewable Energy

Agency was taken and adapted to the aspects intrinsic to geothermal market.

On the basis thereof, the geothermal market could be divided into 6 distinctive levels of

maturity. During the consequent refinement, the RMS Transition Matrix was developed,

designating a more precise boundary to each Market Maturity.

Lastly, the correspondence of the Market Maturity to the RMS was confirmed via financial

stimulation model, providing the comparison between various starting conditions and

influence of the RMS on the project development and financial outcome up to 20 years of

project operation time.


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Introduction

Starting from the knowledge basis gained during GEODH and GEOELEC projects, this

GEORISK report has set a goal to further deepen the understanding of the transition

between one Risk Mitigation Scheme (RMS) into another, thereby creating a framework that

would enable these changes with higher effectiveness and positive impact.

The cause that has driven this study was based on the high level of discrepancy in the

success rate of different RMS implemented across the world. The main source of the

background information was derived from the GEORISK projects results and considered

within the frame of the report D 3.1 on Report reviewing existing insurance schemes for

geothermal and the report D 3.2 on Proposal on how establishing an insurance scheme,

presenting the framework conditions. Reports reviewing existing insurance schemes for

geothermal, in addition, a supplementary literature that focused on detailed analysis of the

lessons learned from other types of support mechanism was used.

It must be noted that although cultural aspects may have a considerable influence on the

development and implementation of the support schemes, this topic was not considered in

the analysis, giving the primary focus on examination of political, regulatory, technological

and financial component.

The next step after completion of the study on the RMS would be development of the

framework with the list of criteria that would ensure increased rate of success. This required

understanding of the conditions that had a considerable influence on the application of the

support schemes.

Lastly, the report includes the numerical simulation, which would test the transition of RMS

within the boundaries on newly developed framework and demonstrate its impact of the

project development.


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1 Gathering Background Information

After receiving large amount of information from GEORISK partners, and especially the

AFPG, with data collection on different RMS, gec-co has started the analysis on the criteria,

which have impact on the success rate of the support schemes. In order to improve the

broad understanding of the various factors present in market at the time of support scheme

introduction, literature review was initiated.

1.1 Support Types

The results of the literature review have shown that support schemes could be differentiated

based on the type of support they are proving and could be divided into following types

(ESMAR, 2016):

a) Direct investment supports in form of Grants and Repayable Grants (loans)

b) Damage mitigation supports in form of Insurance and Risk Mitigation Funds

c) Market stimulation supports in form of Feed in Tariffs and Subsidies.

Although all three types are representing a viable support option, the targeted results of each

is different and have distinctive influences on the economy. Due to their similarity in meaning

some terms are often being used interchangeably, however each type of support have

corresponding consequences and should be applied when a specific result is needed.

Direct investment supports are aiming to increase the investment sum, thereby ensuring

necessary funding to a project that is accompanied with high degree of uncertainties. This

support mechanism is especially needed when the level of uncertainties prevents banks from

giving large amount of loans. The grants provide a foothold and much needed starting capital

for geothermal project and drilling operations, which reduces the share of risks faced by

investors and banks.

A support in form of risk insurance is viable when the initial capital for the project is already in

place and the project execution is ensured. It must be noted that in case of high uncertainties

insurance agencies refuse to take on impendent risks and either set an extremely high

insurance premium or refuse to insure the project all together. This type of support is

possible for the cases when the risk is clear, quantifiable and predictable. It creates a


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protection to the project against devastating consequences of the risk occurrence, thereby

ensuring its safe completion and operation.

The last type of support in form of subsidies does not have a direct influence the project

construction face and comes into force when it in operation phase. Its primary target is to

increase the monetary gain from the project, thereby increasing the attractiveness of the

project for investors and banks. However, since it does not mitigate or prevent risks, its full

potential could be only harvested when danger of the project failure has been managed via

one of the previous types of support.

Since securing the geothermal resource comprises up to 80% of overall geothermal project

costs, in the scope of GEORISK project should from here on focus on two first types of

support. The parallelly performed study on present RMS in the course of task 3.2:

Framework conditions for establishment of insurance scheme (SFOE, 2019) as well as study

of existing and innovative financial tools were of high relevance to overview of RMS and

evaluation the market in which they were implemented (AFPG, 2019).

Further research of this topic has indicated that there are various ways to structure a support

system (Kai Imolauer, 2015). Overall 7 funding instruments were determined.

1) Insurance solutions

2) Grants

3) Contingency Grants

4) Guarantee for commercial loans

5) Concessional Loans

6) Loans with redemption grants

7) Loans with indemnification clause

These instruments present additional options of the risk mitigation mechanisms and provide

additional alternatives to suit the market conditions. However, in order to be able to

effectively apply these instruments, determination of market maturity level is essential.


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1.2 Market Maturity

The next topic that required a thorough understanding of the market maturity. From the short

overview on this topic, it became clear that although the term “market maturity” is widely

used, its definition in case of geothermal industry was lacking the precise description.

Consequently, level of maturity of the geothermal market was covered in high level of

obscurity.

It was clear, that the countries that have few geothermal plants (being for power and/or heat)

are on the early stages of the market maturity and it was believed that countries such as

France, Turkey, Netherlands, Germany, Iceland and Switzerland were on the more advanced

stages. As result of this, undeterminable situation, the application of the RMS systems at the

beginning stages was rather jumbled up.

Knowing the market conditions at national level, some partners of the consortium had a

considerable reluctance in accepting such classification. This especially concerned the case

with Switzerland and Germany. This objection created all more reasons to rethink the

approach in evaluating the Market.

In order to rectify this situation a short study on suitable evaluation system was made. The

first step in increasing the understanding was setting a clear definition. In order to find a

suitable one, various alternatives were sought out:

A market is mature when it has reached a state of equilibrium. A market is considered to be in a state

of equilibrium when there is an absence of significant growth or a lack of innovation. When supply

matches demand the price decided by those market forces is called equilibrium price". Equilibrium

price prevails in the market for a substantial period, which may be from one day to one week or

several months. (Investor Words, 2020)

The stage in product development at which the product is so far developed in terms of quality, price

and technology that its design corresponds to the wishes of the consumer and can therefore be

brought onto the market after the requirements for its production and distribution have been met in a

manner that is in line with the market have been. (Wirtschaftslexikon, 2020)


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These are two definitions that could be used to define the market maturity, however the

second one presents higher degrees of clarity and interconnection behind the terms, which is

more suitable to the current state of geothermal market. The formulation of the first one, is

better suited to define a more mature market.

As industry from which the market evaluation system could have been borrowed, oil industry

was used, due to having many similarities and sharing the core procedures such as drilling,

and production equipment. However, the study of the oil industry has proven it to be an

unsuccessful model for geothermal industry, due to following main differences:

a) The risk/gain ratios in oil and geothermal industries were extremely different.

Thereby, the operations, which were acceptable to be made in oil industry had a far

greater failure tolerance than those in geothermal industry. This bring a high degree

of distortion in criteria evaluation.

b) The fact that repayment period of the investments was also extremely great, putting

the project duration completely apart.

c) Due to high profit in oil industry, the support scheme introduction had different

economic start and end point and did not face the same challenges as in geothermal

industry.

Thereby, it was concluded that comparison to the oil industry model was relevant for the

representation of the mature market conditions in geothermal branch. Based on this premise,

it was decided to direct the further study on the industries that have not yet reached the full

maturity, thereby providing more assessment criteria.

Thus, the focus was directed on developing industries and the field of renewable energies

was the main subject of the study. Here, the system developed by the Australian Renewable

Energy Agency (ARENA) in the field wind and solar energy use was encountered.

ARENA has faced a similar challenge when dealing with other renewable energies and had

difficulty structuring the market, after the Technology Readiness Index (TRL) has moved

beyond last, ninth level. As result, they have developed a Commercial Readiness Index

(CRI) which would provide an adequate evaluation of the market situation.


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2 Commercial Readiness Index

2.1 Introduction to CRI System

The Technology Readiness Level (TRL) is a universally accepted system for evaluation of

the newly developed technologies, firstly devised by NASA, and used by the European

Commission for its programmes such as Horizon 2020. It allows to structure the development

stages of the product from the basic idea (level 1) to the commercially ready product (level

9). (ARENA, 2014)

However, once the technology has arrived at the level 9, the next expected step of

commercialization does not happen without major challenges. Therefore, the technologies

which attempt such course of actions, have to take into considerations many intricacies of

the market before being able to be fully integrated. In order to structure the path of the

technology, the Commercial Readiness Index was created.

Just like the geothermal industry, other renewable technologies face similar obstacles on the

way to full market integration and market development. One of the main among them is the

funding. The objectives of CRI in that perspective align with the goal settings of GEORISK

project and provides a system, which would guide the effective application financing

instruments. (See Figure 1)


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Figure 1: TRI and CRI Correlation representation on Technology Development Chain.

Source: ARENA CRI - Renewable Energy Sector

In the Figure 1 it could be seen that according to TRL-CRL system, the technology must be

supported up the 4-th level, only then becoming capable to be commercially competitive with

other players in the energy market. This structure is in line with the results achieved at the

end of GEO-ELEC project, thereby it became the base of Market maturity evaluation system.

2.2 Adjustment of CRI to Geothermal Industry

According to the paper provided by ARENA the evaluation of CRI Level was based on two

components: Indicators and Status Summary.

The first is a set of aspects of the market that are being evaluated from 1 to 6, based on the

level of its advancement in the market. The indicators presented in the paper are following:

1) Regulatory Environment – Represents the maturity of the planning, permitting and

standards relating to the technology.

2) Stakeholder Acceptance – Represents the maturity of the process for evidence-based

stakeholder consultation linked to renewable energy integration into the energy

markets.

3) Technical Performance – Represents the availability of discoverable technical

performance information.

10 |D (3.4) Proposal for a transition in the Risk Mitigation

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4) Financial Performance/Cost and-

5) Financial Proposition/Revenue – together represent the availability of robust,

competitive financial information linked to capital and operating costs and forecast

revenues allowing investors to take increasing levels of future market and project risk.

6) Industry Supply Chain & Skills – Represents the development of a competitive and

efficient industry product and skills supply chain required to support a commercially

viable sector.

7) Market Opportunities – Represents the development from a hypothetical commercial

plan to the demonstration of a viable market (local and/or overseas) via competitive

channels to market and sustainable business models.

8) Company Maturity – Represents the development of the sector to include established

companies with strong credit ratings and established performance records.

The indicators and their descriptions are completely relatable to ones in geothermal industry;

therefore, no further adjustments were needed.

The second, represents CRI six Levels, which would then represent the mean value for the

evaluation target. In order to better adjust their description to the GEORISK objectives, a

parallel to the geothermal market is also presented:

1) Hypothetical commercial proposition ~ corresponds TRL 7-8

Technically ready – commercially untested and unproven. Commercial proposition

driven by technology advocates with little or no evidence of verifiable technical or

financial data to substantiate claims.

– Represents the state in the target Market, where the geothermal Potential has been

identified, yet no projects been completed.

2) Commercial Trial ~ corresponds TRL 9

Small scale, first of a kind project funded by equity and government project support.

Commercial proposition backed by evidence of verifiable data typically not in the

public domain.

– Represents the state in the target Market, where pilot projects have been

conducted and feasibility of geothermal plants proven.

3) Commercial scale up


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Occurs driven by specific policy and emerging debt finance. Commercial proposition

being driven by technology proponents and market segment participants – publicly

discoverable data driving emerging interest from finance and regulatory sectors.

– Represents the state in the target Market, where public support schemes attract

increased number of stakeholders and project developers into the industry

4) Multiple commercial applications

Becoming evident locally although still subsidised. Verifiable data on technical and

financial performance in the public domain driving interest from variety of debt and

equity sources however, still requiring government support. Regulatory challenges

being addressed in multiple jurisdictions.

– A period of an industry growth, where although public support is still present, its

share is gradually being transferred to private entities.

5) Market competition driving the widespread deployment

In the context of long-term policy settings. Competition emerging across all areas of

supply chain with commoditisation of key components and financial products

occurring.

– At this point, the public supports steps out from direct interaction with the projects

and in its turn various public-private partnerships take place.

6) Bankable Grade Asset Class

Driven by same criteria as other mature energy technologies. Considered as a

"Bankable” grade asset class with known standards and performance expectations.

Market and technology risks not driving investment decisions. Proponent capability,

pricing and other typical market forces driving uptake.

– The geothermal market has achieved a complete maturity and can successfully

compete with other energy industries on par. The public support has been

successfully replaced by the private companies.

After preparation of the first draft structure of the Commercial Readiness Index for the

geothermal industry, it was presented to project partners, consortium members and various


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stakeholders during the workshops, project meetings. Based on their feedback few

adjustments had to me made.

These mainly touched the distribution of the CRI Summary Levels and support scheme

allocation prepositions. One of the main objections was provided was concerning the

description of the higher levels of CRI: according to experience of partners, the achievement

of completely publicly unsupported levels of geothermal market maturity is not to be

expected in the upcoming years due to the considerable competition from other energy

industries. To these there were also comments provided by other partners that even if not

possible right now, the end goal must remain in achieving such level. Consequently, one

suggestion was to combine the levels 5 and 6, which would indicate high level of market

development.

2.3 Evaluation of the Market Situation in Partner Countries

The next step after the adaptation of the system to geothermal industry would be to devise

an evaluation method. The evaluation system presented in CRI for Renewable Energy

Sector has provided a Table, where the corresponding levels of Indicators could be input.

(See Figure 2)


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Figure 2: Example of Evaluation Sheet. Source CRI for Renewable Energy Sectors ARENA,2014

However, unlike the evaluation calculation method provided with the chart, in the scope of

GEORISK project it should have been adjusted. The adjustment concerned the prioritisation

of the indicator, which carry higher value in relation to resource security. As such, instead of

calculating the mean average of each indicator values, it was decided to use a factor, which

would indicate the relevance of indicator to the CRI Level for RMS evaluation. In the

following Table 1 the factors could be seen. The Evaluation then complies the following

formula:

Summarized CRI RMS Leve = (∑ (𝑥𝑖8𝑖=1 ∗ 𝑦𝑖))/8

Where,

xi – is an evaluation of the given to indicator, from 1 to 6 based on CRI Evaluation Sheet.

yi – is a factor of the indicator relevance


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Table 1: Table of the Indicator Value Relevance

Indicators Relevance Factor (yi) Evaluated Value (xi)

1 Regulatory Environment 5% X1

2 Stakeholder Acceptance 15% X2

3 Technical Performance 20% X3

4 Financial Proposition Cost 10% X4

5 Financial Proposition Revenue 5% X5

6 Industry Supply Chain and Skill 15% X6

7 Market Opportunities 10% X7

8 Company Maturity 20% X8

It has then been, similarly to observations in the report D 2.2 on Risk Matrix, noticed that

district heating (DH) evaluations should be separated from power generation (CHP) market.

Although sharing several indicators, such as Industry Chain Supply and partially Technical

Performance, the majority of indicators have different values. For this evaluation, the

indicator level interpretation has been borrowed from Appendix A: Description of Indicators

(ARENA, 2014).

2.4 Partner Country Evaluation of the CRI (RMS)

In the scope of international comparison, evaluation of the country geothermal markets is

made as whole, however, it must be noted that for more precise evaluation, each region

must be taken separately. Although the regulatory environment could be similar across all

regions of a country, the indicators such as technical performance, acceptability and market

opportunities vary from location to location greatly.

Due to the difference in condition and requirement DH and Power Cogeneration, these two

systems were separated from one another. Additionally, since the conditions for Power

generation and CHP are similar and the heat delivery is an optional addition, the market

maturity for these two systems will be considered as the same. Thereby, Red Circles are

representing the evaluation for CHP market and Blue is representing the evaluation of DH

systems market.


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Germany

As a first example of the CRI (RMS) evaluation, the German geothermal market has been

taken. The evaluation for whole Germany is made, which means that the values have been

averaged between three different basins: Northern German, Molasse and Upper Rhine

Valley. (See Figure 3).

Figure 3: Evaluation Results of German geothermal Market. (Source gec-co)

As it could be seen from the chart, the values for CHP and DH vary. Here DH has CRI (RMS)

value of 3,3 and CHP 2,8. The highest divergence could be observed under Stakeholder

Acceptance and the reason lies in direct benefit of DH plant, in contrast to CHP plants. In

addition, the negative experience with micro-seismic activity in immediate vicinity the CHP

plant further deteriorates the readiness level of the community to accept this technology.

France

The evaluation of France is mainly based on market maturity in the region of Paris Basin

(See Figure 4). As it could be seen in the chart, France has highly developed DH system,

with CRI RMS value being equal to 4,8 could be deemed as reaching the full maturity of the

geothermal market. In contrast to that the CRI (RMS) value for CHP market has scored only

2,4, thereby indicating the vast difference present between these two systems.


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Figure 4: Evaluation Results of French geothermal Market (Source: AFPG)

Turkey

Unlike the evaluations, received from Germany and France, in case of Turkey, due to the

climate conditions, the geothermal energy is primarily used for Power generation. As one of

the reliable sources of electricity, the government has promoted its utilization, thereby the

CHP CRI evaluation are highest among all the partner countries (See Figure 5). The CRI

RMS value for Aegean Region is equal to 3,7.


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Figure 5: Evaluation Results of Turkish geothermal Market

(Source: TKB)

Poland

The situation in Poland is opposite to one in Turkey. Due having middle to low enthalpy

reservoirs the primary geothermal application is district heating. The evaluation has indicated

still early stages of geothermal market development (See Figure 6). The evaluated CRI

(RMS) values is 2,4.


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Figure 6: Evaluation Results of Polish geothermal Market (Source: IGSMiE PAN)

Greece

In case of Greece, it would again be a summary of the geothermal markets of three different

regions: Aegean Volcanic Arc, Cyclades Region with shallow reservoirs and Deep

Reservoirs. As it could be seen from Figure 7, the geothermal market in Greece is at the

early stages of development. The CRI RMS of CHP market has the value of 1,9 and the one

for DH is 2,3.

Figure 7: Evaluation Results of Greek Geothermal Market (Source CRES)


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Switzerland

Although the history of application of RMS in Switzerland could be deemed as relatively long,

the evaluation of the market indicate that the Geothermal Market is still at the early stages of

development. Due to the low level of geological exploration of the subsurface area, the level

of risk, even with the coverage 60% expenses through the support scheme from the public

entities, remain high. The overall evaluation of the CRI (RMS) has resulted at 2,3.


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3 Transition of the Risk Mitigation Schemes

With clarification of Market Maturity and ability to evaluate the level of its development, now it

would be possible to associate the RMS to each of the market development levels. In this

section the main focus will be devoted to development of an understanding of needs in each

stage of market maturity.

In order to deepen the background information and achieve a market understanding from the

perspective of a private insurance company, a feedback round from Münich RE

representative - Mattias Tönnis, from former AXA Insurance expert - Christian Müller-Wagner

and an interview with the representative of NW Assekuranz Global Insurance Broking -

Achim Fischer-Erdsiek was conducted. The summary of the received information clearly

stated one thing: the difference between the reality of German geothermal market maturity

and presumed one is extremely high.

In the interview, Mr. Fischer-Erdsiek has shared the assumption that the German geothermal

market has been evaluated as “mature” based on the presence of private insurance

companies. However, according to his observations, the presence of private insurance

companies was only out of necessity, due to absence of other reliable risk mitigation

schemes, and, the situation requires increased support of public schemes.

According to the feedback from private insurance companies, the public support must

continue until the geological risks become predictable and manageable. This requires a large

amount of data collection of subsurface environments and detailed interpretation thereof.

Concordantly, with increased number of projects, the information of subsurface geology will

increase. However, in order to reach the point, when private companies would be ready to

step in, the number of projects with doublet model in one reservoir must exceed at least 50.

The other comments were devoted to regulatory environment and transparency of the permit

acquisition procedures. The higher is the level of its standardisation, the faster it will be,

thereby making negotiations with banks and insurance companies less complicated.


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3.1 Risk Mitigation Mechanism and their relevance

As it became clear from the feedback of the private insurance companies, there should be a

certain level of maturity reached before the private companies will be willing to enter the

market. This implies that the goal of public support schemes is to ensure achievement of this

maturity level.

In the chapter 1.1 Support Types, various types and mechanisms of supports were

presented. Their effectiveness varies depending on the conditions they are introduced in.

According to market development structure, one of the most essential indicators, on which

the feasibility of the projects is based on, is the technical performance. Its success is highly

dependent on understanding of the subsurface structure of the geothermal region. Therefore,

the focus of the initial support schemes should be on promoting the development of

subsurface map.

For this purpose, application of grants is the most suitable support mechanism. The target

here would be to promote the subsurface survey and data collection. At this point the level of

risks does not allow construction of an independent business model due to unpredictable

outcome of the drilling operations. The government should sponsor the survey procedures,

thereby becoming of one the main investors into geothermal projects and carrying most of

the risks.

Under the Grant it is understood a financial support in form of investment, without

consequent reimbursement in any form or redemption. This is a form of direct market

stimulation, yet very cost-heavy and inefficient, thereby on limited number of projects could

be supported with this.

Once the understanding of the underground has been improved along with number of

successful projects, the support scheme may transform into the next mechanism –

Convertible Grants.

Convertible grant – is a support scheme, where a financial support is provided in form of

financial investment or coverage of a concessional loan and in case of project success would


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require a partial refunding through either monetary or any alternative means. In case of

failure, the scheme will carry costs, thereby overtaking the risks.

This is a very effective support scheme at the later stages of the geothermal market starting

point. Its main advantage over the Grants lies in partial replenishment of the costs, thereby

making it more efficient and enables a support of higher number of projects.

Once the quantity of data become sufficient for adequate drilling operations success

prognosis, a more efficient support mechanism can be introduced – Loans with

Indemnification clause or Repayable Grants. At this stage, the projects are receiving a

financial support in form of investment, which in case of project success must be refunded.

Unlike convertible grants, the repayment sum is usually greater and must be provided mainly

in monetary form. Since the conditions of repayment must be thoroughly inspected, such

schemes may require an application fee.

Once the investment support has been ensured, the public support scheme should become

more efficient and move from investment aid to Contingent grants and Public Insurance

schemes. Contingent grant is a support mechanism, which covers project excessive costs

that originated due to risk encounters, such as lost hole, prolonged drilling time or side-

tracks.

Due to its high advantage, it can be applied parallel to repayable grants or become a main

support public scheme, when loan guarantees are introduced. On the later stages of the

geothermal market development, it should be effectively replaced by Public Insurance

Scheme.

Here, the focus of the support scheme would be on occurred damage coverage. Although

following different mechanism, contingent grant and public insurance schemes provide

financial support in case the risk occurs to cover the damage. Since the funds would be

provided only after the damage has taken place, scheme would be able to cover higher

number of projects and the insurance premium would ensure replenishment of the scheme

budget.

The increased number of successful projects would improve the reservoir data, which would

further reduce the uncertainties, thereby increasing the attractiveness of the market to the


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private companies. At this stage, aside from Loan Guarantees, a Joint Insurance Schemes

can immerge. Due to still high risks, the insurance premium of the private companies would

be high, yet they can be subsidized through the governmental support scheme.

Additionally, at this stage a basis for Loan Guarantees should be made, thus encouraging

commercial entities to provide loans to the project developers. In case of failure, the support

scheme would overtake the risk and pay back the loan. Based on Loan Guarantees various

Private-Public-Partnerships (PPP) could be established. This is a transitional stage, from

where the participation of private entities starts to gradually replace the support of public

schemes.

The product of public private partnership schemes would be bringing the market to full

mature state, where the support of the public support schemes would no longer needed. The

level of risks is predictable and the means to their prevention are standardized. The data on

underground geological structure of the region allows construction of accurate 3D models,

which allow simulation of various development cases and calculation of most optimal

solutions. At this rate, Public-Private-Partnership (PPP) can be fully replaced with Private

Insurance schemes, the insurance premiums of which would be proportionally comparable

with other mature industries.

The last and not the least, latest research in German geothermal market, which is around

CRI level 3,5, has identified an additional risk mitigation mechanism, which could be

summarized as Private-Private Partnership. Here, one side, comprised of one or more

companies take on the risk present at the current market thereby presenting the second side

the conditions of contract with reduced risks. An example, the drilling service company –

Daldrup & Söhne AG, has provided an option of overtaking the drilling and partly finding the

resource risks in return improving the contracting conditions for Bank Loans or Project

Insurance conditions.

To summarize the information in this chapter, the following table with support schemes

definition and examples is presented (See Table 2).


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Table 2: Summary of RMS Mechanisms

Support Scheme Definition Example Schemes

Grants

The subsidy is provided in

form of investment to mitigate

risk damage. Fund

reimbursement is not

expected.

Switzerland - Geothermie-

Garantien

Hungary - EU financed

operative programs.

Convertible grants

The subsidy is provided in

form of investment to mitigate

risk damage. In case of

success the funds should be

reimbursed under agreed

conditions.

COLUMBIA – Exploration

Scheme

Mexico – Mexican Geothermal

Financing Program.

Subsidized Loans

Repayable Grants

The Subsidy is given in a

form of Loan with favourable

repayment conditions. In

case of project failure the

loan debt is annulled.

Turkey - EBRD Credit Program

Poland - “Geology and Mining

Part I Recognition of Geological

Structure of The Country And

The Management Of Mineral

Deposits And Underground

Waters”, Polska Geotermia +

(from 2019)

Contingency Grant

The grant is payed only in

case there are deviations

from the plan, due to risk

occurrence.

GERMANY – Kfw 272/282

Erneuerbare Energie Premium

Public Insurance

An Insurance scheme that is

sponsored by public entity

with commercially feasible

insurance premium

Turkey- WB RSM Program.

French risk mitigation schemes.

Private-Public

Partnerships Schemes

Support scheme that is

sponsored by joint entity.

FRANCE - Short- and Long-

Term Geothermal Fund


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Loan Guarantees Combined scheme may have

different distribution of

investments from 20 %

Private 80 % Public to vice

versa.

Germany - Kfw 228 (Not Active)

Private Insurance

Private Loans

The support scheme has

been completely privatized

and does not have support of

the government.

Germany - HDI Gerling; R&V;

AXA, NW Assekuranz.

(With Reservation)

3.2 Market Maturity and Risk Mitigation Schemes

At the end of the GEOELEC project, various types of risk mitigation schemes have been

identified to best facilitate the development of the geothermal heat and power market

according to market maturity has been devised. The purpose of tailoring the derisking

scheme to the degree of market maturity is to avoid establishing an ineffective scheme by

proposing one to developers that meet their needs in terms of financial derisking, while

having as little an impact on public finances as possible. For instance, in an emerging

market, project developers might not be able to attract private capital at all without public

support, in particular for derisking. Grant financing of the riskiest project development stages

allows to lower risk at a moderate cost for public finances considering the small overall

number of projects. In a very liquid market however, the large portfolio of projects renders

this approach unsustainable financially. Moreover, the amount of data, the depth of the

portfolio and the maturity of the market allows some form of risk insurance (public, mixed or

private depending on the degree of maturity) to be established.

The resulting chart could be presented as following (See Figure 8)


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Figure 8:Original RMS Market Maturity Relationship (EGEC)

The chart developed by EGEC provides a certain level of guidance in understanding the

sequence of the RMS application in geothermal market. Based on the acquired information,

the chart could be improved.

Here the 6 level of the market according to Commercial Readiness Index would comprise a

foundation of the new system. One of the simplest ways to illustrate the correspondence,

would be indicate a waterfall system of gradual market situation improvement (See Figure 9).

Where circles represent the relevant RMS at the given CRI level.

I. Grants

II. Convertible grants

III. Repayable grants

IV. Public insurance scheme

V. Public-Private Partnership

VI. Private RMS

Additionally, following auxiliary mechanism could be present in the market:

• Blue Circle represents a zone, where Contingency Grants is represented.

• Green Circle represents a zone, where Loan Guarantees is represented.

• Purple Circle represents a zone, where Private-Private Partnerships is represented.


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Figure 9: Waterfall structure of CRI and RMS dependency

Since the CRI level 1 corresponds to mainly research and development stage, its commercial

market representation corresponds to the conduction of preliminary exploration procedures

the market as it is at this stage is non-existent. Therefore, in the chart its range is combined

with CRI level 2, which represents pilot- and small-scale projects. When the market lies in

these regions, the only means of support and market stimulation would be the application of

grants and convertible grants.

Once the pilot tests are successfully completed and can demonstrate commercial feasibility,

the stage of Commercial Scale Up starts, where successfully projects although still

struggling with high level of uncertainty, in case of success can be expected to provide a

reimbursement in one form or another. From here on out the support scheme could be

shifted from simple grants and convertible grants into the subsidized loans and later on

supplemented by Contingency Grants and Public Insurance Schemes. Additionally, from

here on a start of Private-Private Partnerships RMS could be observed.


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When the CRI (RMS) level reaches 4, the necessity of a direct public loans should be

replaced by private loans supported by Loan Guarantees and the Public Insurance scheme

becomes main support mechanism. It is assumed that here, with the help of public insurance

scheme, it would be possible to minimize the level of risk and thereby ensure the acquisition

of loans, however, since the market situation varies considerably, it is not unusual to still

have some supports in obtaining capital for the project.

With the development of the market, the pure public schemes, be that insurance, subsidized

loans or loan guarantees, transition from pure public entities to public-private partnership.

This encourages the private companies to play a part in the market development and

ensures the creation of the competition, thereby shifting the market stimulation from artificial

drive to dynamic one.

The last but not the least, in case when, the market is fully developed, private entities can

completely overtake the risks via risk mitigation services. At this stage the market will be

completely autonomously regulated and would not require any type of public support. It must

be noted that such level of market development has not been achieved by any of target

GEORISK partner and according to members of advisory board is not achievable in nearest

future.

As it can be seen there is a clear division in support mechanisms. CRI RMS levels from 1 to

3 correspond to 1-type of RMS support schemes, which focus on raising sufficient capital

and its coverage in case of failure, whereas the levels from 4 to 6 are focusing on insurance

of the operations. Such division is based on the level of uncertainty the market has at each

corresponding level.

The lower levels represent high level of uncertainty, thereby investors are reluctant to provide

high amounts of capital and should be supported via public support schemes. The level of

support is highly dependent on geology and may vary significantly. In cases, where the

geology is simple or known to some extent grants covering 45-60% of the drilling costs could

be sufficient, however in cases with complicated stratigraphy and deep reservoirs, 60%

coverage could not be sufficient. The determination of the percentage of the investment


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coverage through grants, must consider the level of available developer expertise and

technology.

On the later stages, starting from CRI RMS level III, the support schemes may shift from

providing the investment to providing insurance. This shift is facilitated by introduction of loan

guarantees, easing the process of receiving loans. Presence of insurance scheme even

ensures the safety of the investments even further, thereby attracting the private companies

into the market.

3.3 Transition Criteria

Based on the gathered information, a summarized criteria of RMS transition could be

comprised. Since CRI RMS 1 and 2 as well as 5 and 6 are merged there are three core

transitions:

• Transition I from CRI RMS 1-2 to 3

• Transition II from CRI RMS 3 to 4

• Transition III from CRI RMS 4 to 5

• Transition IV (optional) from CRI RMS 5 to 6

In the following part, each transition would be explained in detail and criteria for achievement

would be presented. Although development of each and every given indicator is highly

important, the core driving force in transition is ensured through the improved understanding

of the underground, whereby the level of uncertainties would reduce.

Transition I Grants Schemes to Loans Schemes

Criteria for Transition are presented in Table 3. In order to ensure this transition basic

requirements must be met, most of which are focused on clarification of dependencies and

responsible parties. Achievement of these requirements would ensure simplification of

project initiation procedures as well as create a clear structure of the project stages.


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Table 3: Transition I from Grants Schemes to Loans Schemes

ID Criteria

Specifications

RE Clarification of responsible public

agencies

- Steady operation permissions

- Clarification of public agency jurisdictions and

responsibilities

- Developed of Legal Security

SA Providing sufficient evidence for

stakeholder trust to take on risks

- Investors: Presence of RMS to transfer significant

damage

- PD: Presentation of future possibilities in the branch

- Population: Information about the Branch and its

benefits

- Politics: Maintaining course towards Renewable Energies

TP Improvement of Technical

Background

- Improvement of Geological Data

- Presence of corresponding technical resources

- Monitoring Systems of the equipment

FPC

Improvement of understanding of

the Developed costs.

(Trial of various cost calculation

models)

- Deviation of planned and actual costs are ca. 25-30%;

- Deviation of costs from original plan due to extra

expenses

FPR

Increase in predictability of project

revenue

(Trial of various revenue prediction

models)

- Stable prices and stable contractor partners

- Contracted purchase quantity

-Currency Stability

SC Adjustment of the supplier market - Presence of suitable products and services

- Improved relevant skill sets

MO Development of Market

Opportunities

- Limited trade of the projects in different development

stages

- Case based Business Models

CM

Establishment of companies with

minimal experience in

development of the geothermal

plant

- The local companies are still in the phase of know-how

gathering and development of skill


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Transition II from Loans Schemes to Public Insurance Schemes

As the technical performance rises, the probability risks diminish. As this point predictability

of operation outcome must be ensured. Following the development process of the Transition

I, here the standardization of the processes must be introduced, with which increases the

transparency of the processes. (See Table 4)

Table 4:Transition II from Loans Schemes to Public Insurance Schemes

ID Criteria

Specifications

RE Improvement of the Licencing

Procedures I

- Standardization of required licences

- Predictability of the permit issuing time and its durations

- Predictability conditions for PPA

- Predictability of fees and taxes

- Improvement of Legal Security

SA Providing sufficient evidence for

stakeholder trust to take on risks

- Investors: Assurance of possible benefits

- PD: Prove of benefits in involvement into the branch

- Population: Proven benefits of the Branch in the region


TP Improvement of Geological

Databases I

- Preliminary Model Developed (Heat and Flow)

- Predictability of ESP lifetime

- Improved Monitoring Systems of technical equipment

(Including Scaling and Corrosion)

- Access to underground Data

FPC Increase of prediction precision of

the Developed costs.

- Deviation of planned and actual costs are ca. 20%;

- Additional expenses become more predictable.

- Deviation of OPEX from plan becomes quantifiable


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FPR Standardization of contracts

- Standardized PPA

(power purchase agreement)

- High predictability of revenues

SC Market Specialization

- Developed specialized products and services

- Developed specialized skills

- First Innovations stimulating the market

MO Improvement of Market

Opportunities

- Increased trading of the projects in different development

stages

- Region Based Business Models

CM Developer Specialization - Introduction of core competences

- Presence of companies with track records

Transition III from Public Schemes to Public-Private-Partnership

The last core transition denoting the end of public schemes and their substitution by PPP.

The main requirement here would be increasing the efficiency of standardized procedures,

through which the organizational, commercial, technical and economical processes can be

accelerated. The predictability of outcome must be increased and suffice for private

companies from other energy branches to take interest in the geothermal industry. Fulfilling

these requirements would support the growing involvement of private entities and allow large

infrastructure investors the investment into the geothermal market and create a competition

within the market, which would gradually become the driving force of the market. (See Table

5)

Table 5: Transition III from Public Schemes to Public-Private-Partnership

ID Criteria Specifications

RE - Improvement of the Licencing

Procedures II

- Standardization of the licence acquisition conditions

- Ensuring long periods of the licences

- Securing conditions for PPA

- Standardized fees and taxes

- Proven Legal Security System


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SA

Providing sufficient evidence for

stakeholder to involve or support the

Developed of projects

- Investors: Assurance of possible benefits

- PD: Proven benefits in excelling the service quality

- Population: Agreement to permit development


TP Improvement of Geological Databases

II

- Developed Databases and review of Reservoir Model

- Extended ESP lifetime

- Proven Monitoring Systems of equipment

- Access to detailed underground data

FPC Increase of prediction precision of the

Developed costs.


- Additional expenses became roughly predictable and taken

in contingency budget buffer

FPR Actualization and improvement of

contract standards (Region/Country/Market Specific)

SC Market Competition

- Emergence of alternative suppliers

(Increase of supplier competition)

- Significant amount of innovations

MO Business Models Standardization

- Business Models are stabilized and standardized

- Standardized trading of the projects in different

development stages

- Country Based Standard Business Models

CM Increased number of competent

developers

- Start of competition between developer companies (project

acquisition stage)

- Standardized company procedures

Transition IV from Private-Public-Partnership to Private Scheme

This transition is an optional transition, which represents the conditions, after reaching which

the market will be considered completely mature. The main objective here would be bringing

the condition of the geothermal market to the corresponding standing of the other matured

industries. One of the key achievements for geothermal market at this point would be

creation of 3D subsurface map with reservoir model, which would bring the geology

associated risks to the minimum. (See Table 6)


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Table 6: Transition IV from Private-Public-Partnership to Private Scheme

ID Criteria Specification

RE Adjustment of law and regulations to

the geothermal market

- Adjustment of working hours law

- Water utilization rights

- Mining Laws

- Ensured Legal Security System

SA

Providing sufficient evidence for

stakeholder to involve or support the

Development of projects

- Investors: projects become a common practice in the

region

- PD: Benefits from further development in the branch

- Population: Active interest and support of the branch


TP Improvement of Geological Data

Bases and 3D Reservoir Models

- Validation of Reservoir Model

- Proved artificial circulation technologies

- Calculable ESP lifetime

- Monitoring enabling a preventive maintenance for

equipment

- Public Availability of Underground Data

FPC Increase of prediction precision of the

Development Costs.


- Additional expenses became predictable and taken in

contingency budget buffer

FPR Actualization and improvement of

contract standards (Region/Country/Market Specific)

SC Mature Supplier Market

- Stabilization of prices for products and services

- Reduced amount of Innovations

(Improved quality and developed technology)

MO Market is Saturated

- Multiple project opportunities are in healthy competition

with one-another

- Possibility to invest in Project portfolios aside from single

project

CM Companies are Mature - Exchange of knowledge for market improvement (project

development stage)


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4 Numerical Simulation

4.1 Simulation structure and prerequisites

The numerical simulations were created on the basis of proven simulation software, which

was adapted to the special requirements of this project. (See Figure 10)

Figure 10: Simulation software Renewalyzer representation

For the investment decision and for the risk assessment different scenarios are generally

considered in the context of the preparation of a business plan: worst case, business case

and best case. If the financial ratios used for the worst- and best-case scenarios are far

apart, it becomes clear that the project is associated with higher risks.

With the help of the simulations, it was examined to what extent the existing RMS have a

positive influence on the three scenarios mentioned above and where exactly this is visible in

the respective business plans. The real worst case scenario for projects in general is the

termination of the project. This was not used for calculation here, but only a (very)

unfavourable course of the project, which however led to production and thus to positive

revenues.


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36

It should become apparent with increasing market maturity that the volatility of the best case

and worst-case scenarios decreases.

The input data for all scenarios were kept the same in order to ensure comparability.

Depending on the scenario, the risks and the risk protection were undertaken differently.

4.2 Case Simulation

The input data for all scenarios have been kept the same in order to achieve comparability.

Depending on the scenario, the risks and risk mitigation were carried out differently.

The main inputs for the simulation were provided by different partners and would represent a

typical district heating project:

• True Vertical Depth 3.500 m

• 2 Production Wells

• 2 Injection Wells

• Flow Rate 240 l/s

• Total Dissolved Solids 0,8 g/l

• Temperature Well-Head 125 °C, Temperature Injection 53°C

• Thermal Power 70,17 MWt

• Electric Power (gross) 9,70 MWe

• Pump pressure 60 bar

• Availability 8.322h

Based on these input parameters, an assumption relative to cost estimations on the basis of

German Market prices were made.

• CAPEX: 89,8 Mio. €

• Total CAPEX Well 40 Mio. € (Number of wells 4 (2+2))

• OPEX: 1,5 Mio. €/a plus inflation

• Inflation rate: 1-2%

• Power Sales Price Electricity: 227,43 €/MWhe

• Power Purchase Price Electricity: 170,00 €/MWhe


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The following case scenarios will be constructed upon the CRI and market maturity

development. As a result, throughout the simulation scenarios several variables will be

subject to change due to market development:

1) Project Construction time – With an increase of market level, the material, equipment

as well as planning and construction services will increase efficiency and become

standardized, thereby reducing its costs and production time.

2) Risk Cost – Represent the lost funds to the damage when the risks take place.

Starting with 40% in the scenario 1, e.g. being equal to 35,9 Mio. €, with an increase

of market level, the degree of uncertainties faced by the developers will decrease,

due to gathered experience pool.

The scenario outcomes will be represented in form of Interest rate chart, depicting the overall

profitability of the project relative to one of three simulated cases.

4.2.1 Simulation Scenario 1 Grant

The first case scenario has been constructed to represent the hypothetical feasibility, where

a risk occurrence would cost 40 % of complete Capex. Due absence of the market as a

whole at this level, the average project construction duration has been assumed to be 6

years.

The simulation cases are following (See Table 7)

Table 7: Simulation Scenario 1 Outcomes

Cases Outcomes

NPV without risk occurrence 118.813.146

IRR 11,3%

NPV with risk occurred 75.142.195

IRR 5,4%

NPV with risk occurred without RMS 46.301.968

IRR 2,9%

The scenario could be represented by the following chart see Figure 11.


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Figure 11: Scenario 1 Representation

4.2.2 Simulation Scenario 2 Convertible Grant

The scenario represents a time period, when the commercial feasibility of the geothermal

projects has been proven, however the scale up has not yet begun. The project construction

duration is still 6 years, but the risk cost has been reduced to 30%. (See Table 7)

Table 8: Simulation Scenario 2 Outcomes:

Cases Outcomes


IRR 7,3%


IRR 6,4%


IRR 4,2%

With a shift to convertible grants and introduction of a repayment conditions, the main shift

could occur in perspective of investor IPR, whereas project IPR remains relatively

untouched. (Figure 12)


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4.2.3 Simulation Scenario 3 Repayable Grant

In the scale up stage, the construction period is reduced to 5 years and the risk cost

becomes 20 % of the project capex. The simulation outcome could be seen in Table 9.


Cases Outcomes


IRR 7,2%


IRR 6,6%


IRR 5,6%


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40


4.2.4 Simulation Scenario 4 Public Insurance

With achievement of the CRI Level 4, the major shift in support schemes occur, i.e. the prior

loan schemes are now substituted by Insurance schemes. The project construction duration

is reduced to 4 years and maximal detrimental risk cost is at 10%. The insurance will be for 4

wells with 10 Mio. each and premium of 10% thereof.


Cases Outcomes


IRR 7,2%


IRR 7,2%


IRR 6,4%


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41


4.2.5 Simulation Scenario 5 Public Private Partnership

By reaching the CRI level of 5, the project construction period lies by 3,5 years. In case of

risk occurrence, only 5% of Capex will be endangered. (See Table 11)


Cases Outcomes


IRR 7,1%


IRR 7,1%


IRR 6,4%


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4.2.6 Simulation Scenario 6 Private Insurance

The scenario 6 was taken in the scope of this simulation frame as an ideal case with

complete absence of financial risks. (See Table 12 and Figure 16)

Table 12: Scenario 6 Outcomes

Cases Outcomes


IRR 7,1%


IRR 7,1%


IRR 6,4%


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43


4.3 Simulation outcome

Two simulation rounds were created, as it became apparent after the first round that the

software adjustments were not yet sufficient. The second simulation showed target-oriented

results, which are only shown here qualitatively.

In the calculations of the business plans it could be shown that the existing RMS, which were

assigned to the different CRI levels, led to positive effects. In the further course of the

project, further simulations based on the newly developed RMS will be carried out and the

simulation program will be further adapted if necessary. Only at this point in time does it

make sense to present quantitative results that can then be compared in their entirety.

On the other hand, the results of simulation have presented a potential for a second market

evaluation tool. Since GEORISK focuses on geothermal resource, the project construction

period is of high relevance here. For the evaluation of the market maturity level, range

difference between own and borrowed capital could be taken. (See Figure 17)


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Figure 17: Market Maturity Evaluation Tool

The difference of this tool from the CRI level is in its evaluation of the financial development

of the project, which in its turn would represent an effectiveness of the applied RMS.

However, the development of such tool requires extensive project data collection and

comparison, which was outside the scope of this task.

I•Market Maturity Evaluation

with the CRI tool

II•Based on the CRI Level selection of suitable

RMS suppot

III

•By evaluation the project development, monitor the effectiveness of support system.


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5 Conclusion

5.1 Summary

The clear goal setting provided at the start of the GEORISK project has led to an extensive

research during the task 3.3, led by gec-co, on conditions for a transition in the insurance

schemes, according to market maturity. In the first stage of the work a thorough analysis of

the background information was made, during which several hinderances, such as lack of

clear definitions, lack of market information and lack of the counter perspective were faced

and studied.

The clear definition of the market maturity and adjustment of the CRI market evaluation tool

developed by ARENA, has provided an ability to assess the market conditions within the

countries of partner members. The understanding of the market maturity levels has promoted

the comprehension of the challenges that each market level was facing. Additionally, the

partner countries have provided a general country wise geothermal market evaluation,

thereby giving an overview of the geothermal market development in Europe.

The study of the support schemes applied throughout the world has given an understanding

of their advantages and disadvantages, thereby allowing to select most suitable conditions

for their most effective application. Process mechanisms of the support schemes enabled

division into two types based on their support: Investment support and Insurance support.

Although both serve risk mitigation purpose, their application condition and outcome vary.

By corresponding the market maturity and the requirements thereof with support

mechanisms, waterfall structure has been prepared. Hereby, a sequence of risk mitigation

schemes was defined, which would promote further market development. The sequential

structure has enabled definition of the key criteria, based on which a transition table was

created.

Overall there were three core RMS transitions perceived, each one of which represents a

significant change of the support scheme, which would promote the market development.

The transitions have a defined set of criteria, the specification of which however may vary

depending of the country and market conditions.


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Lastly, to test the findings during the course of this task a number of numerical simulations

were executed. The objective was to stimulate various market maturity conditions and see

the changes in case of successful application. Hereby, the difference in financial outcome

could be seen, illustrating and confirming the advantage of the application of each given

RMS in the specific market maturity.

5.2 Discussion

The work completed during this project has provided a solid tool for the definition of the

geothermal market maturity and assessment of its development stage. During the project

various generalized market evaluation have been made, however, to maximize the

advantages of the tool, the evaluation must be conducted for each reservoir/region. Thereby,

the results will not be averaged across different geological formations, thus representing

more accurate state of the local market.

The further activities of the GEORISK project would contain an adaptation of acquired results

to the new geothermal markets. This would represent a good opportunity to assess the

market conditions and import them in a numerical simulation for further enrichment of the

result diversity of this study, thereby increasing the applicability of the RMS transition

structure in various conditions.

Although the RMS transition structure has been created and tested via numerical

simulations, during the application an adjustment to the local market conditions still must be

made. Here various changes and optimization opportunities could be presented, which would

comprise a topic for a further research.

However, an effective market stimulation structure could be comprised only when the

position of the private companies is taken into consideration. This topic was not a part this

task, yet the gathered background information strongly implies the critical importance of this

step. Failure to do so could cost a significant misplacement of the financial resources, with

minimal to no positive progress. Consequently, development of an effective communication

tool would suggest a topic for the next study.


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In the end, it must be noted that the simulation performed during the work package 3 on risk

mitigation tools, represents only one method of financial simulation, which was made using

assumed values and hypothetical conditions. It could be concluded that in order to increase

the validity of the framework, a simulation with real market data must be performed.

Therefore, it is be suggested to redo the simulation during the future activities of GEORISK

(work package 4 and 5), when the additional data about real market situations would be

available.


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Bankgruppe, K. (2017, November 30). Evaluierung der inländischen KfW-Programme zur

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Ernerbare Energien "Premium". (2019, 01). Merkblatt. Germany: KFW.

ESMAR. (2016). Comparative Analysis of Approaches to geothermal Resource Risk

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Fischer-Erdsiek, A. (2019, May). Marktreife des geothschen Markts. (T. W. Ferid Seyidov,

Interviewer)

Framework, E. a. (2009). ARGeo- Africa Rift Valley Geothermal Development Program.

IEA-RETD. (2017). Commercial Readiness Index Assessment: Using the Method as a tool in

renewable energy policy design. IEA.

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Investor Words. (2020, 02 05). Retrieved from

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Rybach, L. (2009). IX REGULATORY ASPECTS TO ATTRACT INVESTORS. Istanbul,

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S.M.Lensink, J. (2017). Final Advice on Base Rates SDE+. The Netherlands.

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Wierheim, A. (2019). De-Risking Geothermal Development. Frankfurt: IGC .

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The sole responsibility of this publication lies with the author. The European Union is not

responsible for any use that may be made of the information contained therein. This project has

received funding from the European Union’s Horizon 2020 research and innovation program

under grant agreement No [818232 — GEORISK]

proposal for a transition in the risk mitigation schemes · 2 |d (3.4) proposal for a transition in...

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