DoE: Geothermal gets $250-M de-risking cover
‘The concept paper is already okay, but of course, we are still looking for who will be the fund manager. The Energy Secretary has initiated a meeting with various financing bodies so that we can come up with an agreement’
By Maria Bernadette Romero – Sep 26, 2024, 01:55
from Daily Tribune
PNA
Geothermal energy, while a reliable and renewable resource, is among the riskiest to develop due to the uncertainties in exploration and drilling.
To mitigate these risks, the Department of Energy (DoE) is considering providing a financial cushion to cover about half of the costs associated with early-stage activities.
In an interview with reporters at the sidelines of the 5th Philippine International Geothermal Conference, Energy Assistant Secretary Mylene Capongcol revealed that the DoE is nearing completion of a framework for a de-risking fund in collaboration with the Asian Development Bank (ADB).
“The concept paper is already okay, but of course, we are still looking for who will be the fund manager. The (Energy) Secretary has initiated a meeting with various financing bodies so that we can come up with an agreement,” Capongcol said.
Capongcol noted that the de-risking facility, projected at $250 million, will be accessible to eligible geothermal developers.
It is a tool designed to provide assurance, enabling projects to proceed with geothermal exploration confidently.
“There will be qualification before they are eligible for availing, which will be assessed by a team composed of ADB, DoE, DoF (Department of Finance) and the facility manager,” she explained.
Likewise, Capongcol noted that state-run banks will play a crucial role in managing the fund, as the DoE lacks the necessary expertise for fund administration.
In 2022, the DoE enlisted the ADB to help develop a geothermal de-risking roadmap for the Philippines.
The program aims to identify, assess and propose strategies to reduce risks during the pre-development stages of geothermal projects.
It will also assist in evaluating and prioritizing policies and regulations to advance geothermal energy development in the country.
The DoE emphasized the importance of a de-risking tool for geothermal projects, given the significant financial investments required and the lengthy development timeline, which ranges from four to six years.
In a separate interview, Marvin S. Bailon, vice president and head of the Business Development Group at Energy Development Corp., stated that the drilling and exploration phase typically demands an investment of around P1 to P2 billion.
“First you do a surface study, then a 3D seismic study before the drilling where the big investment comes. You put a rig and sometimes you have to build roads and paths. Usually, either we end the project or we continue as we become confident of the resources,” Bailon said.
Bailon also expressed confidence that financial institutions would back the government’s initiatives, particularly given the increasing momentum toward clean energy development.
“It’s worldwide. There is a de-risking fund provided in Latin America. In Africa, there are even full subsidies. Some institutions will support it mainly because they want to support RE and geothermal which is a stable source,” he said.
Government data showed that only 59 percent of drilled geothermal wells have sufficient resources for power generation.
By the end of 2023, the Philippines’ total on-grid geothermal capacity stood at 1,952 megawatts, accounting for approximately 6.9 percent of the country’s total installed capacity.
The Philippines ranks third in the world for geothermal power production, trailing only the United States and Indonesia.
