Using innovative financial mechanisms and lessons learned from Costa Rica, Nicaragua, El Salvador, the United States, Kenya, Iceland, and Guadeloupe
There is great potential in Latin-America and the Caribbean (LAC) to develop geothermal power. However, this potential, estimated at 70GW according to the Geothermal Energy Association, remains largely underexploited. Only Mexico, Costa Rica, El Salvador, Guatemala, Nicaragua and Guadaloupe (in the Caribbean) have geothermal power plants currently in operation, with a total installed capacity of more than 1.6 GW. Meanwhile, no country in South America has started commercial operation using geothermal power yet.
Unlocking geothermal power: how the Eastern Caribbean could become a geothermal powerhouse presents a strategy for developing geothermal potential through public-private partnerships (PPPs) focused in the Eastern Caribbean but with clear applications for the rest of LAC.
This publication builds on lessons learned from experiences in key geothermal markets, such as Costa Rica, Nicaragua, El Salvador, the United States, Kenya, Iceland, and Guadeloupe. To this end, the document presents an overview of the country’s electricity sector, the way the geothermal project or projects were developed, and the factors that enabled geothermal development in each of these cases.
The publication then presents the strategy to develop geothermal projects through PPPs in the five Eastern Caribbean countries with geothermal potential: Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. Recommendations for the design of a PPP structure for the geothermal projects and the changes to the legal, institutional, and regulatory frameworks required to implement the proposed PPP structures are thoroughly assessed including the economic and financial viability of the geothermal projects.
These business models to develop geothermal power can be easily replicated in each LAC country and also in other regions of the world with geothermal power potential, adapted of course to the local rules and regulations of the local energy markets.
By reading this document, Governments in LAC and geothermal private developers worldwide may feel encouraged to use LAC’s geothermal potential to full advantage and avail themselves of the innovative financial structures and instruments that can help reduce geothermal resource risk in order to develop clean, renewable, baseload and affordable power, in other words geothermal energy.
The IDB been active in geothermal power since 1985 and it has financed geothermal projects in Costa Rica, El Salvador, Bolivia, Chile, Nicaragua, Mexico and the Eastern Caribbean. Currently IDB has 5 geothermal projects in execution and one more in pipeline for this year with more than US$ 1.3 billion in financing including IDB’s ordinary capital and co-financing from other donors.
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