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B O x 3 . 2
Multilateral and Bilateral Development Assistance for Geothermal
Energy
Multilateral bank funding has a major presence in geothermal development as more and more projects are
in developing countries; since 2005, US$ 3.8 billion or 57 percent of all geothermal project funding has
been released in developing countries. Multilateral banks such as the Inter-American Development Bank, the
European Investment Bank and the International Bank for Reconstruction and Development rank high in the top
15 debt providers for financing geothermal development. The German government-owned development banking
group KfW, the French Development Agency (AFD), and the Japan International Cooperation Agency are some
major bilateral organizations that are funding geothermal development worldwide. Lending operations of these
institutions typically have technical assistance components associated with them.
Source | Authors and IEA 2011b.
Grants from the GEF available through the World Bank Group, the United Nations Development
Progam (UNDP), and UNEP have long been a major source of technical assistance for geothermal
energy. Climate Investment Funds (CIF) have recently become a significant source of concessional
financing for investments in renewable energy, including geothermal power.
Apart from TA associated with lending, the World Bank’s Energy Sector Management Assistance
Program (ESMAP) has been providing funds for training and technical assistance to support countries
to develop plans to diversify their energy supply and switch to zero and low carbon technology
options, including geothermal.
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G e o t h e r m a l H a n d b o o k : P l a n n i n g a n d F i n a n c i n g P o w e r G e n e r a t i o n
The scope of technical assistance mobilized by these international institutions ranges from relatively
routine and location-specific project preparation work (see Figure 3.3 for a sample list of activities
undertaken in several countries by an experienced consulting firm from Iceland) to high-level policy
advice to governments, regulators, and utilities.
Encouraging evidence of the effectiveness of such assistance comes from the Philippines. Over
the years, the national geothermal development company PNOC EDC developed its expertise
in exploration and resource evaluation techniques by learning from other geothermal producing
countries, including New Zealand, Japan, Iceland, Italy, and the United States. This has helped build
confidence in PNOC EDC’s technical capability, and the company developed a series of geothermal
projects financed by loans from the World Bank. The company acquired necessary expertise and
technology in exploration, resource assessment, well drilling, reservoir management and steam
production, as well as expertise in environmental management, impact assessment and risk mitigation
from those advanced countries. The sector loans provided by the World Bank for the exploration and
delineation of prospective geothermal areas gave the necessary boost for the Philippine government’s
geothermal development program (Dolor 2006).
The Kenyan example is noteworthy in terms of TA for training and building an information base. The
country has made considerable investments in its human resources over the years. This has included
participation by key state-owned companies in short training courses given by the Geothermal Training
Program of the Iceland-based United Nations University (UNU-GTP). The first course was held jointly
by UNU-GTP and KenGen in 2005 and it has been held annually thereafter. UNU-GTP, KenGen,
and now GDC are discussing modalities for making the short course a permanent school for the
whole Eastern African Rift Valley region. Under the GEF-supported regional African Rift Geothermal
Development (ARGeo) Program, UNEP is supporting the Rift Valley countries in the critical task of
building up the information base on the countries’ geothermal resources. Supported by the regional
network of geothermal agencies, a package of technical assistance and finance will be provided to
bring the proposals to the pre-feasibility stage, and before exploration drilling. This will include surface
exploration to confirm the potential of priority prospects in each country and will address the barriers
related to resource confirmation (Mwangi 2010).
Some common areas of policy and regulatory support from international assistance in countries with
significant geothermal development prospects can be classified as follows:
•
The choice of policy instruments for supporting geothermal energy in the context of the
country and its electricity sector.
•
Pricing and cost recovery mechanisms for countries where geothermal energy is not the least
cost option when environmental externalities are excluded.
•
Application of available climate finance instruments to monetize GHG-related global
externalities.
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