Countries worldwide are increasingly turning to feed-in tariffs as a mechanism to develop geothermal energy.
In the wake of the disaster at the Fukishima nuclear reactors, for example, Japan’s civil society has suggested expanding the countries limited fee-in tariff to include geothermal energy. See Japan May Tap Geothermal Power to Offset Atomic Loss and Japan’s Geothermal Resources Get a Closer Look.
Similarly, renewable energy advocates have proposed expanding Great Britain’s new feed-in tariff program to include geothermal development.
As with feed-in tariffs for solar and wind energy, most of the activity is taking place in Europe.
While not widely known outside the geothermal industry, Europe, and specifically Italy were pioneers in generating electricity with geothermal energy.
Italy with more than 800 MW in operation is fifth in geothermal capacity installed worldwide and its Larderello field in Tuscany is a “must see” on any renewable energy “grand tour” of Europe.
Low Project Caps Limit Development
Unfortunately, Italy has not chosen to emphasize new geothermal development. While Italy has an attractive feed-in tariff for geothermal, €0.20/kWh ($0.29/kWh), the tariff has been assigned to a small power ghetto along with small wind turbines. Italian policy limits the tariff for geothermal to projects less than 1 MW in size. This size limit is likely too small for any commercial projects.
Higher Tariffs Higher Limits
On the other side of the Adriatic Slovenia may be more attractive than Italy for generation. While Slovenia’s tariff is lower, €0.15/kWh ($0.22/kWh), projects can be larger than those in Italy, up to 10 MW.
Similarly, both Slovakia and France limit project size to less than 12 MW, but their tariffs are also as good as Italy’s at €0.20/kWh.
Neither Switzerland nor Germany limits project size. Germany–at least through 2011-has two size tranches for geothermal: one for less than 10 MW, and another for projects greater than 10 MW. Switzerland, on the other hand, uses four different size classes.
For projects less than 5 MW, Switzerland pays nearly €0.31/kWh ($0.45/kWh). This may be a typical project size for continental Europe outside of “hot spots” like Italy’s Larderello field. For example, many of the geothermal projects under development in Germany are less than 5 MW each.
Africa & Asia
Outside of Europe, Africa and Asia has seen budding interest in using feed-in tariffs for geothermal.
Taiwan recently revised its geothermal tariff to the equivalent of €0.12/kWh ($0.17/kWh).
Kenya and Uganda both have tariffs for geothermal energy, though Kenya’s program doesn’t offer a true feed-in tariff. The tariff in Kenya is a price ceiling rather than a minimum price. The final payment per kilowatt-hour in Kenya is negotiated.
Uganda, on the other hand, places a cap on annual geothermal development to control program costs. Geothermal development in Uganda is limited to 75 MW by 2014.
Some countries, notably France and Germany, use a system of bonus payments or adders to encourage certain kinds of geothermal development, for example, district heating.
In France, geothermal projects receive a bonus payment for using the heat content in addition to the generation of electricity. The payment rate is on a sliding scale relative to the proportion of heat used. The maximum payment of €0.08/kWh ($0.12/kWh) is on top of the base rate.
Interestingly, France pays less for geothermal in its island territories where the electricity is far more valuable than in continental France. Many of France’s overseas territories are volcanically active, for example Martinique, and the cost to develop geothermal energy is less as a high-temperature resource is close to the surface.
Successful feed-in tariffs are typically based on the “cost” to generate electricity and not on its “value”.
Germany uses a multiple bonus system. There is a bonus payment for project completion before 2016, another bonus for district heating, and a third for developing Enhanced Geothermal Systems, such as hot dry rock.
Geothermal projects developed in Germany within the next five years can expect payments from a low of €0.14/kWh ($0.20/kWh) for those greater than 10 MW in size to as much as €0.27/kWh ($0.38/kWh) for a power plant that also provides district heating from a deep geothermal resource.
Germany is currently debating new tariffs beginning in 2012 and geothermal tariffs are likely to be increased substantially.
Current feed-in tariffs for geothermal generation worldwide are not too dissimilar to those proposed in a 2008 study for the California Energy Commission. For projects without federal or state subsidies, the tariffs necessary ranged from a low of $0.10/kWh (€0.07/kWh) to a high of $0.30/kWh (€0.21/kWh). See Distributed Geothermal in California Can Add 7% of Supply.
This is the second of a series of articles on geothermal energy.