Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

development and Financing Models used Internationally
International experience shows that there has been no single model for development of geothermal 
resources. Even within a single country, various development models have been adopted, either 
consecutively nationwide, or at the same time in different fields (World Bank/PPIAF 2010). 
Figure 3.6 shows eight different models that have been utilized in the international practice of 
geothermal power development. As the figure shows, the upstream phases of geothermal project 
development rely heavily on public sector investments, while private developers tend to enter 
the project at more mature phases. The project development cycle (and sometimes the broader 
geothermal market structure) may be vertically integrated or separated (unbundled) into different 
phases of the supply chain. 
In an unbundled structure, more than one public entity or more than one private developer may be 
involved in the same project at various stages. It should be noted that the involvement of the private 
developer can take a number of different forms. For example, a BOT scheme may be used (the model 
historically used in the Philippines before privatization of PNOC EDC), or the role of the private sector 
may be limited to constructing the power plant to be owned and operated by the public utility (the 
Mexican OPF model). 
The financing structures and the corresponding risk allocations can vary widely. On one extreme is 
Model 1, where a single national entity performs all functions, including exploration, drilling, wellfield 
development, power plant design and construction, and operation of the wellfield and power plant. 
This is financed either by the national government and state-owned utility, or by government in 
conjunction with grants from donor nations and loans from international lenders. In this model, risk is 
borne almost entirely by the national government, through its treasury or by sovereign guarantees of 
loans. The burden on the public finances is reduced only by revenues earned from sale of electricity 
and by grants from donor nations if available.
The other possible extreme is Model 8, exemplified by the case of the fully private development led by 
the international oil company Chevron in the Philippines (Chevron 2011). Chevron has agreed to fund 
the project using hydrocarbon revenue and takes the full risks from exploration to power generation. 
Similar private developments can be found in Australia and in Italy where Enel Green Power develops 
the project. 
However, most private investors shy away from taking the full resource risks in geothermal projects. 
Thus, Model 7 is a more typical case for a privately led development. In this model, government 
entities perform limited exploration, the data being in the public domain and accessible by developers. 
Then both public and private companies independently and competitively continue to explore, drill 
wells, and, if successful, build and operate power plants, selling electricity either within a service 
district or competitively into a national grid at market price. Revenues are expected to cover all 

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