geothermal power plant projects in central america - Orkustofnun

The internal rate of return is offset by the volume of Certificated Emissions Reductions produced. TheClean Development Mechanism that allows developed countries to continue emitting greenhousegases, developing countries with high baseline emission factors can benefit from this mechanism,producing a higher volume of CERs than countries with low baseline emission factors. In CentralAmerica, Costa Rica has a lower baseline emission factor of 0.15 tCO 2 -eq/MWh, and the rest of thecountries are between 0.555 and 0.771 tCO 2 -eq/MWh. For geothermal power plant projects thatreduce emissions from lower emission sources (such as Costa Rica), the potential impact of CDM onIRR of equity is between 0.3 and 0.6%. For projects that reduce emissions from medium emissionsources (such as Guatemala, El Salvador and Honduras), the impact of CDM on IRR of equity isbetween 1.0 and 1.7%. For projects that reduce emissions from higher emission sources (such asNicaragua and Panama), the impact is between 1.6 and 2.6 %.Incentive laws of tax exemption for the development of renewable energy projects do not give largeenough exemptions to enhance the internal rate of returns required by investors when small sizedpower plant projects are conducted: in a case of flash technologies, power plant size smaller than orequal to 20 MW; and for ORC technology, power plant sizes smaller than or equal to 10 MW. Whencomparing the Central American countries, Nicaragua and Guatemala tax incentive laws are morefavorable to the profitability of geothermal development.The study shows that in Central American countries, the development of geothermal projects is limitedby the internal rates of return demanded by private investors, common values for risk investments indeveloping countries. The final goal for the country governments is a wealthy foundation; hence,regulations of the energy sector could be reviewed. Important factors where the government couldhelp to generate a positive impact on profitability and risk of the investment are: energy price, taxes,and steam development costs. Numerous alternatives could be evaluated such as: improved taxincentive laws, large period energy contracts, and public funds for exploration and confirmationphases.Lack of integration of geothermal energy data from Central America is the main limitation of thisstudy. Central America is a small geographic region divided politically into many territories, and thereis a concentration of companies and institutions related to geothermal research. Hence, initiatives fordeveloping the interconnection of companies and institutions in the Central American countries mustbe an important agenda for their governments. Based on recent experience of developed countries, asIceland, with geothermal resources, one proposal to analyze could be the creation of a CentralAmerican Geothermal Cluster.Further research done by geothermal developers in Central America would improve the accuracy ofresults. Further studies might consider particular geothermal reservoirs and well properties such asfluid chemistry and well production curves from a specific geothermal field. Additionally, real marketcosts of components could be used for estimation processes, more easily obtained for geothermaldevelopers.63