As governments worldwide are unleashing initiatives to ramp up energy security and independence over the past three years, the global geothermal power markets have experienced high growth. Other factors spearheading growth in this market are escalating energy prices, volatile fuel costs, and government incentives on renewable energy. Low levelized cost of energy (LCOE) renders the cost of geothermal energy competitive compared to other sources of electricity generation. In most regions, energy from geothermal sources is less expensive than wind, solar and biomass power.
New analysis from Frost & Sullivan's (energy.frost.com) Global Geothermal Power Market research finds that the market earned revenues of more than $1.16 billion in 2010 and estimates this to reach $5.89 billion in 2017.
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"By the end of 2010, there were about 10,902 megawatts (MW) of geothermal installed capacity in the world, and the majority of this capacity was installed in the Asia-Pacific (APAC) region and represented almost 41.1 percent of the total market in 2010," said Frost & Sullivan Senior Industry Analyst Georgina Benedetti. "All the regions are expected to grow in the foreseeable future, with some showing stronger growth."
Europe and the rest of the world (ROW) are likely to be the fastest growing regions with a compound annual growth rate (CAGR) of 9.8 percent and 13.3 percent, respectively. In terms of investment, the global geothermal market saw investments totaling $1.16 billion in 2010. Investment is anticipated to grow at a CAGR of 26.1 percent from 2010 to 2017.
In North America, geothermal energy qualifies for inclusion under certain tax programs such as the U.S. Production Tax Credit (PTC) and the Canadian ecoEnergy for Renewable Power Program, and for regional incentives such as Renewable Portfolio Standards (RPS) and accelerated depreciation.
Europe, Germany and Spain, the world leaders in the wind and solar energy markets, have passed feed-in-tariffs for the geothermal energy sector. Other incentives, such as the Geothermal Finance and Awareness in European Regions (GEOFAR) project, are designed to develop and promote financing for geothermal projects as part of the Intelligent Energy Europe (IEE) program.
Although the prospects for the geothermal industry are bright, there are some issues negatively impacting the market. As it is very difficult to identify geothermal resources in a particular area and precise information is not available for most countries, the drilling risk for geothermal plants is high. A suitable area assumed to have hot water of a certain temperature can be drilled only to discover that there is no significant resource, or the resource is not as expected.
"This high risk has discouraged banks and international agencies from investing in geothermal energy at the drilling phase," said Benedetti. "However, some governments and banks are starting to offer drilling insurance risk packages to encourage new investment in geothermal projects."
Apart from this, the high initial cost for geothermal plants compared to other renewable energy sources is another factor restraining market momentum. The average investment cost for a geothermal plant depends on the type of technology installed and the number of wells drilled. In the future, advances in low-grade resources, improvements in drilling techniques, and increases in deployment are expected to significantly reduce the capital and LCOE of geothermal plants.
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Global Geothermal Power Market / N926