Geothermal Power Plant Development

1 Situation The country in which Megapolis is located, has been experiencing severe power shortages due to stagnating generation capacity and rising demand across the country. In response to the shortages, the Government recently entered into some build-operate-transfer (BOT) contracts with the private sector for traditional thermal (coal and oil-fired) power plants. However, going forward the Government wants diversify its power generation mix and take advantage of its vast geothermal potential. The country has one of the largest geothermal resources in the world. Currently, the country has 1900MW of installed geothermal capacity. 2 Proposal

The proposal is to further develop the countrys largest geothermal resource, on Geohaven island. So far GeoCo, a state-owned corporation and geothermal steam operator, has developed part of the resource. GeoCo is now interested in contracting with a private firm to increase power generation capacity by 587 MW. They plan to involve the private sector in: Tapping the geothermal resource by drilling new wells in three new locations on the island Using the geothermal resource tapped to generate electricity, by constructing in three new power plants, one at each well location. Combined, the plants are expected to have a capacity of 587MW Upgrading the transmission lines to deliver power from a remote geothermal source to growing urban areas. Transmission lines are needed to connect each of the three power plants to the transmission grid, which will carry power to the urban areas. The project has already received environmental and social clearance assuming certain conditions will be met by the developers. 3 Expected Benefits Addressing growing demand for power with clean, renewable, and indigenous power sources
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If successful, there are several benefits that can flow from this project:

 Geothermal generation is expected to be cheaper than the alternatives on a $/KWh basis Upgrading national electricity transmission and distribution infrastructure to allow access to sources far from urban centers Diversifying the countrys power generation mix, reducing risk of exposure to increases in fuel (coal and oil) prices. 4 Expected Costs

It is estimated that the project will cost US$1.3 to US$1.5 billion, inclusive of building the generation and transmission assets. The generation component is estimated to be US$620 million. 5 Previous Public Private Partnership (PPP) Experience in the Sector

Private participation in the energy sector has been limited. A handful of BOT contracts for traditional thermal resources have been implemented recently. However this will be the first geothermal project involving the private sector. PowerCo, the Government owned power company, is the majority generator of electricity in the country. PowerCo also owns and operates all transmission and distribution assets. 6 Issues Identified at Concept Stage The generation assets are dependent on the transmission assets and vice versa. Any delays can prove costly It is possible there will not being enough steam in the wells to generate sufficient electricity Resettlement of around 106 households affected by project construction The cost and quality of the geothermal resource (steam capacity) may vary from initial project estimates.

Some potential issues include: