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

F I g u r E 3 . 6
Models of Geothermal Power Development in International Practice
Private
Source | Authors.
Public
Yr 1 
Yr 2
Yr 3
Yr 4
Yr 5 
Yr 6
 
indicative timeline
exploration 
test drilling 
Field development Power Plant construction o&m
 
early Stage
middle Stage
late Stage
1
2 
3
4
5
6
7
8
Preliminary
Survey
A fully integrated single national public entity
•Public utility company. Examples: Kenya (KenGen at Olkaria), Ethiopia, Costa Rica
M
ultiple national public entities operate in the upstream and power generation sector respectively
• Exploration, drilling and field development etc. are in the hands of different public entities. Examples are Indonesia, 
New Zealand, and Mexico. In the Mexican OPF model a private company constructs the power plant to 
be owned and operated by public utility
National & municipal public entities
• Several public and (sub)national government owned entities performing across the value chain. 
Successful implementation in Iceland, supported by public insurance schemes to mitigate drilling risks.
Fully integrated JV partially owned by the government
• Joint venture approach in El Salvador, where the geothermal developer, LaGeo is co-owned by Enel Green Power from Italy
Public 
entities 
Private 
Developers
• Government offering fully drilled brown fields to the private sector. Examples are Japan, Philippines BOT model, Kenya with the new GDC 
strategy , Indonesia, and Guatemala. In the latter three countries, production and sale of steam is separated from power generation.
Public 
entities 
Private 
Developers
• Government
funding the exploration program and test drillings and offering the successful field for private development. 
The model is used in US and for new IPP projects in Turkey, New Zealand, Indonesia, and several other countries. 
Public entities
Private Developers
• Public entities perform limited exploration. IPPs share the risks of further exploration and construction with government. 
Examples are U.S., Nicaragua, and recently Chile.
Private Developers
• Vertically integrated IPPs performing geological survey, exploration drilling and plant construction. Examples are 
Philippines (upcoming Chevron project), Australia and Italy (Enel Green Power)

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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 
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Enel Green Power is the World’s largest renewable energy company (around 6,500 MW installed capacity in 2011), strengthened by being 
owned by the Italian public utility Enel (Enel Green Power 2011).
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The potential motivations for oil companies to undertake geothermal development projects include the diversification benefits for their 
portfolio, synergies with the core business, and new relationships established with the country. From the oil company perspective, these 
benefits may outweigh the significant upstream risks of geothermal development.
expenses and yield a profit. Risk is borne separately by the private companies and the government 
entities, the latter being supported by the national treasury. 
In addition, a fairly broad spectrum of structures has been found between Models 2 and 6. Sometimes, 
more than one state-owned company or more than one level of government is involved in the provision 
of funds for geothermal development, while the private sector plays a limited role. In other cases, PPP 
structures are utilized in which the private participant plays an active role, as in Models 4 through 7.
As can be seen, apart from Model 8, public funding has an important role to play in all cases, and it 
usually comes either as direct support to investments or through loan guarantees. A loan guarantee 
covers the risk of default on the loan. Insurance or guarantee schemes specifically covering resource 
risk for the private sector are rare. Although there is increasing interest in employing such schemes, 
their introduction will most likely require a substantial amount of support from donors and IFIs, at least 
initially. Today, state-supported geothermal drilling insurance exists mostly in Iceland. In the United 
States, a scheme of reservoir insurance has been tried but did not take off commercially due to steep 
cost of premiums—equal to between 2 and 5 percent per annum of the face value of the policy (World 
Bank/PPIAF 2010). 
From a government perspective, two key decisions have to be taken when choosing an approach to 
financing geothermal development. One is the level of participation by the private sector and the other 
is the level of vertical integration of geothermal development phases. 
Figure 3.7 maps the development models used historically in various countries when making these 
two decisions. The far left and far right extremes on the horizontal axis represent fully public and 
fully private development, respectively. On the vertical axis, the top side represents a fully vertically 
integrated business model, whereas the bottom side represents an unbundled value chain with 
different players in the upstream and power generation business.
The countries on top left of Figure 3.7 have chosen a vertically integrated, public sector led approach. 
In these countries, a national champion undertakes the geothermal development activities all along the 
value chain, from early upstream exploration to power plant construction and operation. The countries 
in the bottom left area have several public entities participating in the value chain at different stages. 
The governments of the countries on the right have taken a much less proactive stance, relying 
to a large extent on the private sector. On the top right, one private entity undertakes the activities 
across the value chain. Large international corporations such as Enel and Chevron can lead such 
development, taking significant resource risk. One example is the public-private LaGeo joint venture 
in El Salvador, in which Enel Green Power is the private investor.
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In the case of the Chevron project 
in the Philippines, an oil company with a strong balance sheet funds the entire project development 
cycle.
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C h a p t e r 3
• Ethiopia
• Costa Rica
• Kenya (at Olkaria)