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

Further Options for Enhanced Private Sector role
After proving the commercial viability of its geothermal sector through a series of successful PPP 
contracts with the government taking the resource risk, the country may consider transitioning to 
models that allocate more of this risk to the private developer. Two basic options can be considered: 
(a) inviting proposals from private companies to develop new geothermal sites through concessions 
or PPPs in which more of the resource risk is taken by the private investor/developer
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; and (b) 
introducing attractive off-take prices through a FIT policy (or setting quantitative targets through RPS), 
while phasing out public support in the upstream phases. 
The first approach (inviting bids for concessions to explore new sites at private investor’s risk) has 

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been difficult to implement in international practice without first going through the initial development 
of the industry based on public support for exploration. The example of Indonesia has shown that 
private investors are reluctant to take on the exploration risk even when they already hold the right 
(concession) in a relatively well known geothermal field, let alone taking such risk in a greenfield area 
(Box 3.7). Understandably, the developer/investor in a riskier area requires compensation for the 
extra risk through a higher off-take price of electricity or through other means of remuneration. Many 
countries have preferred to directly fund the risky upstream phases due to this trade-off. Indeed, the 
developing countries actively involving the private sector in geothermal development today (e.g., 
the Philippines) have previously deployed large volumes of public funding and official development 
assistance to finance geothermal resource exploration.