Energy Transition Handbook - Flipbook - Page 24
Hogan Lovells
24
Geothermal
Geothermal energy is a key renewable energy source and supplies a significant share of
electricity demand in countries such as Iceland, El Salvador, New Zealand, Kenya, and the
Philippines and more than 90% of heating demand in Iceland. It has tended to be
geography specific, but where available, offers advantages over other renewable sources
in that it is not dependent on weather conditions and has very high capacity factors.
Indeed, this largely untapped renewable energy source offers the advantage of steady,
predictable large-scale power generation, in comparison to the higher variability of solar
and wind power. As such, unlike other renewable sources, generators can look to
negotiate full “take-or-pay” arrangements with offtakers.
The amount of heat within the Earth’s surface is
estimated to contain many times more energy than
all oil and gas resources worldwide. Geothermal
power, therefore, offers considerable potential for
growth. Increasing deployment and the opening
of new markets, meanwhile, should drive down the
technology’s considerable upfront developments
costs, further increasing the competitiveness of
geothermal power. Geothermal fields require
investors to explore and appraise those fields;
this concept in itself allows investors / generators
to negotiate arrangements whereby the planned
capacity of any particular project can be increased
in phases.
Case study
Hogan Lovells is currently advising the lenders to
the Tulu Moye 150MW geothermal power project
in Ethiopia. The project is the country’s largest
foreign direct investment. As such, a key part of
Hogan Lovells’ remit is to advise on Ethiopia’s
energy and public-private partnership (PPP)
laws. Hogan Lovells is therefore actively involved
in the drafting of new geothermal laws, and is
also involved in the creation of new fiscal and
foreign exchange regimes to facilitate the inflow
and outflow of US Dollars (for example, we are
advising the development finance and multilateral
finance institutions involved in this project on
the mechanisms which need to be put in place
by the Government of Ethiopia and the National
Bank of Ethiopia in order to allow US Dollars to
be repatriated).