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

B O x 3 . 1 0
World Bank Experience: Shifting Resources to the Most Productive 
Geothermal Resources in the Philippines
Two major investment lending projects supported geothermal power development on the Philippine islands 
of Luzon and Leyte in the 1990s. In the case of Luzon, PNOC-EDC, the company in charge of the geothermal 
components of the projects, tended to be overly optimistic, both in planning for the number of wells to be drilled 
at geothermal sites and in estimating the power capacity from the geothermal steam these were to provide. The 
original program had to be revised drastically downwards midway through the project cycle and the geographical 
focus had to be shifted to Leyte, which proved a fruitful move.
Source | World Bank 1996.
In principle, a few large installations (or even just one) built in the right location(s) may end up being 
superior to many installations built in different locations. However, given the inherent uncertainty of 
geothermal resource exploration, there are several factors that need to be considered in striking the 
balance between concentrated and distributed strategies to plant capacity allocation.
A country endowed with geothermal resources will typically have several potentially exploitable 
geothermal fields (or reservoirs), making the following questions relevant.
If the country decides to allocate a certain budget to geothermal power development over the next few 
years, it will need to decide whether it should: 
• 
allocate the budget entirely (or mostly) to one field that appears the most promising; 
• 
allocate the budget across all known fields (e.g., in proportion to their estimated steam
generation capacity) and proceed with the project development phases in all fields in parallel;
or
• 
try to use a combination of the two options, for example, develop all fields in parallel until
their relative merits become clearer, and then shift the resources to the most productive or
promising fields.
The first option does have certain advantages (such as economies of scale) and may be preferable 
in some cases (for example, if the country has reliable information that suggests that it has only 
one exploitable geothermal field or that one particular field is far superior to the others). However, 
absent such exceptional circumstances, this approach will suffer from a number of shortcomings. 
First, allocating all the available capital to one field may unreasonably concentrate the resource risk. 

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Second, this approach can lead to oversizing the plant capacity in relation to the production capacity 
of the field. Third, and partly as a result of efforts to determine the optimal size of the plant in relation 
to the field, this approach tends to increase the period of time between the investment in drilling and 
the start of production. This is because many wells must be drilled and tested early on to minimize the 
estimation risk of the generating capacity of the geothermal field (Stefansson 2002).
The second option, in which several fields are developed more or less in parallel but the initial plant 
size is relatively small in relation to the potential of the field, should be preferable to the first option in 
most cases. In a simple case of five geothermal fields available in a country, of which two are selected 
for further development, the approach is illustrated by the schematic in Figure 3.8.
In this schematic, the project development process leading to production drilling in each of the two 
selected geothermal fields has the objective of installing a plant capacity of 50 MW, well below the 
150 MW estimated production capacity of the field. This dramatically reduces both the number of 
production wells to drill per field and the time it takes to reach the targeted production capacity. 
Furthermore, this greatly reduces the risk of pushing the geothermal field beyond its natural limits of 
sustainability.