MILLENIUM GOVERNING COUNCIL

1

• MILLENIUM GOVERNING COUNCIL
• of UNEP
• Nairobi, KENYA
• February 6, 2001
• A Companys Experience in Renewable Energy and
• Eco-Efficiency Implementation in Emerging Markets
• by
• David Citrin
• ORMAT International, Inc.
• INTRODUCTION
• The ORMAT case study
• 2.1 Technology
• 2.2 Costs
• 2.3 ORMAT experience in OECD countries
• 2.4 ORMAT experience in Emerging Markets
• Factors inhibiting implementation in Emerging
  Markets
• Need for Public Private Partnerships
• UNEP Role in Information Dissemination and
  Setting of Policy Agendas

P026
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1. INTRODUCTION
ORMATs Commitment to The Environment
Distributed Renewable Energy and Resource Recovery
700 MW of ORMAT Power Plants
THAILAND, since 1989
Since 1986 ORMATs power plants have already
avoided the emission of 12 million tons of CO2
and saved 4 million tons of fuel
Geothermal, Heat Recovery, Biomass, and Solar
1470
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ORMAT, Green Before it was Fashionable

MALI, Africa 1966 Village Power
Solar Water Pumping System of 40 m3/day
1541A
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1. TWO DIFFERENT RENEWABLE ENERGY MARKETS

• Industrialized Countries
• Slow growth of energy consumption
• Well-developed grid, renewable energy only a
  small part even in the future
• Clean energy appeal to the consumers
• Political interest to reduce CO2
• Subsidies or differentiation mechanism promoting
  renewables

• Emerging Markets
• Additional energy needed for 2 billion people
  currently without access to electricity
• Population and consumption growth higher than in
  industrialized countries
• Overload of the national grid and often lack of
  it
• Heavy dependence on imported fuel burdens the
  economy
• Distribution problems and costs hinder the
  development of rural areas and accelerate
  urbanization
• Lack of local financing
• Risks to foreign investors
• Necessity for public private/ partnership

1972
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IMPLEMENTATION HINDERED BY INSUFFICIENT AND
INCOMPLETE INFORMATION(plus institutional
obstacles)

• Lack of full awareness at policy making levels in
  governments and multilateral agencies of many
  relevant issues including basic data on long
  term environmental and economic benefits of RE
• Insufficient attention placed to details of
  mechanisms to ensure role for RE in deregulated
  markets

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CHARACTERISTICS OF MOST RENEWABLE ENERGY
PROJECTS

• Small projects up to several tens of MW
• Usually located in rural areas
• Often off-grid
• High initial costs
• to cover investment in lifetime fuel supply
• Often only multilateral agency financing, such as
  World Bank, can make projects feasible for
  developing countries

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BENEFITS OF SUSTAINABLE R.E.

• Clean, sustainable, cost-effective rural off-grid
  and grid-connected power
• Environmental reduction in GHG emissions
• Use of indigenous resources hard savings
  savings or earnings
• Rational energy mix diversification to protect
  against potential future high energy costs and
  create energy security

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2. ORMAT CASE STUDY
2.1 The ORMAT Technology
ORMAT Geothermal Combined Cycle
OEC Waste Heat Recovery System
ORMAT Closed Cycle Vapor Turbogenerator
1971
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2. GEOTHERMAL ENERGY
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GEOTHERMAL POWER GENERATION CAPACITY IN 2000
8086 MWe
NEW GENERATION ON LINE In 1997,
Total 766 MW ORMAT 152 MW
(20) In 1998, Total 233 MW
ORMAT 80 MW (34) In 1999,
Total 290 MW ORMAT 107 MW
(37) In 2000, Total 200 MW
ORMAT 72 MW (36)
USA 2,850 MW Kenya 57 MW The
Philippines 1,889 MW China 30 MW Mexico
854 MW Turkey 20 MW Italy 742 MW
Portugal (Azores) 17 MW Japan 530 MW
Russia 11 MW Indonesia 530 MW New
Zealand 490 MW France
(Guadalupe) 4 MW Australia
0.4 MW El Salvador 155 MW
Thailand 0.3 MW Costa
Rica 120 MW Nicaragua
70 MW Thailand 0.3 MW Iceland 50 MW
Areas where Geothermal Projects are in Operation
or Planned Geothermal areas where ORMAT plants
are in operation Geothermal areas where ORMAT
plants are planned
1392
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Geothermal Energy Utilization
OLD
NEW
1390
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Land Uses For Different Energy Technologies
Technology Land occupied ( m2 per GWh a
year for 30 years) Coal (incl. Coal mining)
3,642 Solar thermal 3,561 Photovoltaic
3,237 Wind (land wit turbines and
roads) 1,335 Geothermal 404
Relative CO2 Emissions For Different Energy
Resources
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Average Capital and Delivered
CostsSource SHELL INTERNATIONAL RENEWABLES and
ORMAT
22000
Capital Cost (US/kW)
Solar Photovoltaic
4000
Solar Thermal Power
Biomass - Energy Forestry Energy Crops
3000
Geothermal
2000
Nuclear
Land-based Wind Energy
Coal
Hydro Power
Wind
Waste Heat
1000
Cost of delivered energy (US/kWh)
Biomass - Landfill Gas from Wastes
Gas
0
0
0.02
0.04
0.06
0.08
0.10
0.14
0.16
0.12
0.86
0.18
0.88
0.20
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2.3 ORMAT Experience in OECD Countries
Geothermal and Recovery of Unused Heat

• ORMAT has built over 300 MW of geothermal and
  unused heat recovery plants.
• Thanks to the Carter Administration Program
  (Standard offer No. 4) including the geothermal
  and technology risk, except one Ormesa plant
• which initially enjoyed the DOE geothermal loan
  guarantee program but was refinanced within one
  year.
• Geothermal USA, Italy, New Zealand, Iceland,
  and Portugal.
• Unused heat recovery in process industries.
  Exhaust heat from a
• compressor station in Canada, a cement plant
  in Germany, a RDF
• incineration in Japan,a refinery in Spain
  and an USA paper mill in
• Holland

1970
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GEOTHERMAL POWER PLANTS
Wabuska, USA
Ormesa II, USA
1987
20 MW
1987
1.76 MW
1993
Imperial County, USA
Puna, HAWAII
40 MW
1993
1992
30 MW
1969
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2.4 ORMAT Experience in Emerging Markets

• Utilization of indigenous Geothermal Resources
  for Sustainable Electrical Energy Supply in Asia,
  Latin America, and Africa (The Philippines, P.R.
  of China, Thailand, Ethiopia, Kenya, Guatemala,
  Nicaragua)
• During the Nineties, ORMAT constructed over 250
  MW of geothermal power plants in Emerging
  Markets, including grid connected large power
  plants and off-grid local rural areas energy
  providers
• Part of these power plants were built on BOT
  basis, remained in ORMATs ownership and provide
  electricity to local utilities
• The Company has ownership portfolio of 560 MW of
  power plants in the Emerging Markets.

1967
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GEOTHERMAL POWER PLANTS
Fang, THAILAND
Upper Mahiao, The Philippines
1989
300 kW
1996
125 MW
Zunil, GUATEMALA
Olkaria, KENYA
1999
24 MW
2000
12 MW
1966
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INTRODUCTION
Why Is Use Not More Widespread In Emerging
Markets ?

• The differences between fossil and renewable
  projects are
• not well understood
• Because of smaller size and new technology, RE
  face
• additional hurdles in project finance
• In Private-Public Sector Partnerships, the
  review process
• is not adapted to the size and risks of
  renewable energy
• projects
• Environmental and societal benefits are not yet
  sufficiently valued and not taken into
  account

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3. HURDLES TO THE IMPLEMENTATION OF RENEWABLES
IN EMERGING MARKETS

• BARRIERS
• COMMERCIAL FINANCING due to small sizes and
  high up front cost
• CREDIT ISSUE risks of emerging markets, of
  technology
• INSTITUTIONAL fuel subsidies
• - no accounting for GHG emissions and societal
  costs of fossil fuels
• - lack of adequate legislation
• STRUCTURAL deregulation leading to merchant
  plants (pass through fuel costs,
  dispatchability

• REVIEW costly and time consuming because of
• - Often more stringent than for well defined
  large fossil fuel plants
• - Specifications often based on conventional
  plants
• - Financing Expenses are disproportionate to
  the small size

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4. NEED OPPORTUNITIES FOR PUBLIC-PRIVATE
PARTNERSHIP IN RENEWABLE PROJECTS IN EMERGING
MARKETS

• Industry needs to underwrite risks in
  technology innovation
• MFIs, and ECAs to help overcome credit risks
• Financial institutions to seek innovative FAST
  TRACK solutions
• - Streamline the review process
• - No micro management of small projects
• - One stop financing
• - Innovative technologies should be welcomed
• - One lead agency to act as financing
  coordinator and re-insure with others
• Legislation level the playing field
• - Recognize externalities WB Carbon Fund
• - Set asides (RPS)
• - Adapt deregulation to renewables

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CONCLUSION ACTING NOW!

• Renewable Portfolio Standard
• - Renewables
• - Eco-efficiency (cogeneration)
• - Waste Heat utilization
• Use of market mechanisms
• - Deregulation assure level playing field for
  renewables
• - Technology risks under written by private
  sector
• - Tradeable permits
• - Assessing economic value to renewables
  externalities

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• BENEFITS FROM ACCELERATED IMPLEMENTATION
• Project costs and POWER COSTS will be
  reduced
• ELECTRICAL POWER will accelerate local and
  regional economic development
• DEVELOPER RESOURCES may be focused on
  TECHNOLOGY improvements and the associated
  RISKS, rather than on the procedural aspects
• MORE RENEWABLE PROJECTS will be developed,
  when and where needed

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5. ROLE FOR UNEP IN INFORMATION
DISSEMINATION AND SETTING OF POLICY AGENDAS

• to create awareness of RE technologies
• of the structural and market barriers and
  imperatives that need addressing so as to enable
  any meaningful implementation of Renewable Energy
  (including geothermal) power projects and their
  contribution to national environmental and
  emission goals

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7 MAIN IMPERATIVES

• More awareness of different RE technologies and
  their comparative advantages
• More effective awareness RE environmental and
  socio-economic benefits
• Assessment of value of these externalities to
  assist in developing policies
• Fair power prices in relation to value of
  externalities
• Removal of the institutional and financing
  barriers facing RE
• Understanding of need for special place for RE in
  deregulated market structures (e.g. RPS)
• Multilaterals should ensure that long term tools
  are available which are required for long term
  solutions