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History of geothermal energy research in Peru and implications for the future

Miraflores, province of Arequipa, Peru (source: flickr/ zug55, creative commons)
Alexander Richter 2 Oct 2020

In a recent article, Roberto Carlos Tamayo Pereyra, Former Director of Electricity at the Peruvian Ministry of Energy and Mining, shares insights into the history of geothermal exploration and ambitions in Peru, as well as what is holding back development.

In an article shared by Roberto Carlos Tamayo Pereyra, Former Director of Electricity at the Peruvian Ministry of Energy and Mining, he provides interesting insights into the history of geothermal exploration in Peru. The following is a translation of key elements of his article.

For the full article see link below.

[..] In the 1970s, preliminary studies and evaluations of Peru’s geothermal resources were carried out by various institutions such as Electroperú, INGEMMET, Proyecto Especial Tacna (PET), Instituto Peruano de Energía Nuclear (IPEN), with the support and collaboration from international organizations. One of the most relevant studies was carried out by INGEMMET between 1997 and 2003, in which more than 500 superficial manifestations of more than 20ºC were sampled throughout the country. But also, more than 300 geothermal manifestations have been identified between 40 ° – 89 °, preferably located along the Western Cordillera and to a lesser extent in the inter-Andean valleys and the eastern zone; which has allowed to define six (6) geothermal regions, which are: 1) Cajamarca, 2) Huaraz, 3) Churín, 4) Central, 5) Chain of Volcanic Cones and 6) Puno – Cusco.

Thus, the evaluation of the geothermal potential in Peru began in the 70s, with the first inventories of thermal sources throughout the Peruvian territory. These studies were carried out by the Geological Service of Peru, INGEOMIN later INGEMMET, then several specific works related to the evaluation of the geothermal potential of Peru were undertaken, both by private and public initiative and through international technical cooperation, as detailed below :

In 1975, MINERO PERU carried out preliminary exploration studies of the Calacoa and Salinas geothermal manifestations in Moquegua.

In 1976, Geothermal Energy Research of Japan, carried out preliminary exploration work in the Vilcanota basin in Cusco.

In 1977, the INIE carried out the first census of geothermal manifestations.

In 1978, INGEMMET prepared an inventory and geographic grouping of geothermal outcrops by region.

In 1979-1980, INGEMMET and AQUATER from Italy carried out geothermal reconnaissance studies of Region V.

In 1980, Geothermal Energy System Ltd. made geothermal studies of the Calacoa, Tutupaca and Las Salinas areas in Moquegua.

Between 1983 and 1985, INGEMMET and the British Geological Survey carried out a partial inventory of geothermal manifestations in Region VI, departments of Cusco and Puno.

Between 1983 and 1986, ELECTROPERÚ and CESEN of Italy carried out a geothermal reconnaissance study of Regions I to IV.

In 1986, ELECTROPERÚ, with technical assistance from the IAEA and the UN, carried out geochemical investigations in Region V.

In 1994, INGEMMET, commissioned by ELECTRO PERÚ, carried out the Geovolcanological Study and Systematic Inventory of Geothermal Manifestations of the Tutupaca Block.

In 1997, CENERGÍA and the IIE of Mexico carried out the evaluation of the information, available studies, carried out by INGEMMET, ELECTROPERU, CENERGÍA, Proyecto Especial Tacna, IPEN and International Cooperation.

As of 2006, at the initiative of the Ministry of Energy and Mines (MINEM), the studies for the Evaluation of the Geothermal Potential of Peru began, in consideration of the economic growth that Peru was experiencing at that time and which in turn led to significant growth in the demand for electricity by the mining, industrial and construction sectors, among others, and due to the fundamental importance of diversifying the country’s energy matrix. In that year, INGEMMET, as a Specialized Technical Public Agency of the Energy and Mines Sector, was entrusted to carry out the GA-21 Project “Evaluation of the Geothermal Potential of Peru”, through its Directorate of Environmental Geology and Risk Geological, conducting geological and geochemical exploration studies of geothermal manifestations. The studies began in the Tacna region, followed by Moquegua, Arequipa, and so on until the entire national territory was completed.

In 2007, through APCI, MINEM obtained support from the Government of Japan for the purpose of developing geothermal energy in the country, entrusting two banks with non-reimbursable financing to establish two pilot projects in the geothermal fields of Calientes and Borateras in the Tacna region, where the Japanese Bank for International Cooperation (JBIC) financed the Calientes project and the Japan Foreign Trade Organization (JETRO) the Borateras project. That same year, JBIC and JETRO appointed the experts from the International Consultant WEST JAPAN ENGINEERING CONSULTANTS, to carry out pre-feasibility studies in the Borateras and Calientes fields. Works that consisted of geological, geochemical and geophysical explorations, as well as the engineering evaluation of both fields. In these studies, INGEMMET participated, as it is the institution trained on the subject and has geochemical (National Inventory of Thermal Sources) and geological information (geological maps, at 1: 100,000 and 1: 50,000 scales), as well as with previous work on the subject (Geothermal Map of Peru, studies on hydrothermalism in southern Peru, Kallapuma, among others).

In 2009, MINEM signed a Technical Cooperation Agreement with the Government of Japan, in order to carry out the studies of the Master Plan for the Development of Geothermal Energy in Peru, with the aim of formulating a master plan that indicates the roadmap for the development of geothermal energy in Peru, to collect information on the geothermal resource by preparing a database on said resource for the evaluation of its potential, economic evaluation, as well as the planning of its optimal development for the generation of electricity , and to transfer technical skills and knowledge to counterpart staff.

Starting in 2010, MINEM and INGEMMET worked intensively on the technical reports of the files of authorization requests for the exploration of geothermal resources in Peru, requested by various Peruvian and foreign companies. In 2011, the Itinerant Geothermal Workshops were started led by these two institutions, with the participation of the Regional Directorates of Energy and Mines (DREM) of Tacna, Moquegua and Puno, the Regional Governments, the local authorities, the community and the private companies in the sector. The objective was to promote, inform, educate and empower authorities on geothermal energy in order to train people capable of making agreements, commitments, and decisions in the process of applying the Prior Consultation Law.

In 2010, the government of Peru and the Japan International Cooperation Agency (JICA) began a collaboration with the objective of forming a Master Plan for the development of geothermal energy, in order to promote and accelerate geothermal energy development and exploitation programs in Peru.

In June 2012, I had the opportunity, together with MINEM officials, to approve the Final Report of the Master Plan presented by the JICA mission and the International Consultant WEST JAPAN ENGINEERING CONSULTANTS. The results of this study estimated that there is a considerable potential of geothermal resources suitable for electricity generation in Peru that could exceed 3,000 MW. However, at present there is no undertaking to exploit this resource in the country, given that the country has not consolidated the technical knowledge and experience necessary for the exploration, development and exploitation of geothermal resources.

From the normative scope, for the promotion of the development of geothermal resources, the Organic Law of Geothermal Resources (Law 26848) was enacted in July 1997, through which the use of geothermal resources from the soil and subsoil of the national territory, and its respective Regulation of the Organic Law of Geothermal Resources approved in 2006 by Supreme Decree 072-2006-EM. In 2008, Supreme Decree 016-2008-EM was published, which in addition to modifying the Regulations of the Organic Law of Geothermal Resources, also incorporated the possibility of using measures to promote private investment through PROINVERSIÓN. The new Regulation of Law 26848 (2010) introduced promotional signals for the participation of private investment in the development of this energy source and reduce the risk in them. Likewise, through Ministerial Resolution 191-2007-PCM, a Multisectoral Technical Commission was established.

In the field of economic analysis, there is much discussion about the zero variable costs attributed to RER technologies, and other benefits that they can bring, such as being able to be located close to load centers, because it is logical or reasonable to think that the generation it must be close to demand, and having “zero” cost energy is the best from a social and national perspective. RER technologies offer this at “zero” cost, but their reach may be limited by a radio system like the Peruvian one. Then, in Peru there is geothermal potential, which is a renewable energy resource also at “zero” cost, with the same operational qualities of a conventional technology, the potential of this unfortunately not yet exploited. Geothermal energy, which is also where it is most needed, in the south of the country.

So far, it is appropriate to note the thesis of fellow engineers Julio Apaza and Juan Olazabal, called “Geothermal energy as an economic and sustainable alternative to solve the deficit of electricity generation in the southern part of Peru”, which earned them to opt for the Academic degree of Master in Engineering with a mention in energy, degree issued by the Faculty of Mechanical Engineering of the National University of Engineering, which I share with your permission [5], a thesis that has deservedly gained space in social networks. In the referred Thesis, the impact of a 100 MW geothermal power plant connected to the 138 kV Toquelapa bus was simulated in the SEIN with the SDDP model, the results are very suggestive for the 2015/2016 period; They estimated that significant savings would be achieved in the operating cost of the SEIN. The situation in 2015 was that, if projects did not materialize, given the projection of a very optimistic demand from the Transmission Plan, they would dispatch cold reserves in the South, a very expensive situation. This obviously did not happen; However, with the same methodology proposed in the Thesis, new scenarios can be explored more fully, which would be useful for future decisions, whether through auctions or not.

As we have always stated, Peru must give itself an opportunity in the development of projects with technologies such as geothermal energy, since these can not only provide sustainability to the electricity supply or energy matrix, but also contribute to the solution of problems in other disciplines or sectors (housing, health, among others) whose benefit / cost quantification is more complex. Regardless of the fact that Peru has the regulatory framework that would allow its insertion in the market, an aspect that has recently been evaluated by the pre-publication of a draft Supreme Decree that modifies several regulations, and that the restrictions in financing due to high risk in its early stages, it would be important to take into account – according to the experts – that this type of investment requires significant political will and decision and the participation of guarantees by the State.

The advantages of geothermal energy can be described as follows: (1) it produces energy that is friendly to the environment; the conversion of geothermal energy into electricity involves a clean process with low CO2 emissions, (2) it becomes a highly reliable source of energy; Within renewable energies, it is one of those that offers a high plant factor, giving stability to the supply day and night and throughout the year, which makes it a very reliable supply source, (3) it can be referred to as a source of autochthonous energy, since it contributes the opportunity to reduce the import of fossil fuels that are affected to the movement of the international price, generating stability in the economic balance; in addition, it is an energy resource independent of economic fluctuations (4) local development, because the resulting steam can be used to supply water for agriculture or human consumption, or as a heat source in agriculture or aquaculture or for drying cereals and wood, among others.

But taking into account the relatively high amount of investment and the risk of developing geothermal resource exploitation, it makes it difficult to consider the possibility of the private sector investing in geothermal exploration activities from an early stage. From the geothermal experience in Latin America (Mexico, El Salvador, Costa Rica, Nicaragua, Guatemala, Chile) it can be observed that the governments have taken the initiative to fully implement the projects, reducing the risk of resources and investment.

During my tour of MINEM, I was given the opportunity to participate in a technical training related to geothermal energy, assisted by JICA; In order to disseminate the concepts of geothermal development, I have been able to compile the academic notes given by prominent professors who are knowledgeable about JICA in the field of geothermal in Japan [6], as well as the references of an Action Plan for Peru , which was raised in 2012 for this purpose [7]. The central debate was based on the importance of supporting the minimum necessary to reduce the risk of exploration. The Action Plan formulated that time can be summarized as follows:

  • Establish technical criteria that must be taken into account for the evaluation of geothermal projects.
  • Train the professionals who will be in charge of evaluating requests for exploration and exploitation of geothermal resources.
  • Manage the compatibility of geothermal projects that are located in regional conservation areas or protected areas.
  • Systematize the prior consultation process to do it in the shortest possible time.
  • Manage before the environmental authority the definition of environmental instruments for geothermal activities.
  • Manage before the Central Government the loan request to develop a pilot geothermal project.
  • Introduce geothermal projects in the Renewable Resources Auction (RER).
  • Carry out high-impact workshops and presentations to regional and local authorities on the benefits of geothermal energy and the potential estimated in the Master Plan.

But it is to be expected that difficulties will always arise, and those formulated are described below:

  • The technical evaluation criteria have not been established with respect to the applicable methodology, parameters and standards.
  • Lack of specialist professionals in the exploration and exploitation of geothermal resources.
  • Location of geothermal fields in national parks or protected areas that prevents their development.
  • Application of the right to prior consultation with indigenous peoples for geothermal projects.
  • The environmental instruments that must be applied to geothermal projects are not defined.
  • The allocation of resources for exploration involves significant risk.
  • Investment in the exploration and drilling phase is very high.
  • Lack of knowledge of the Central, Regional and Local Government authorities of the benefits of geothermal energy for the development of the country.

With a large and valuable information related to geothermal energy (which includes a Master Plan), many times we allow ourselves to neglect the proposals for its development, which date back to the last century. For this reason, experience tells us that we should think about proposing not only technical, economic, financial, legal arguments, but also geopolitical arguments, and it even occurs to me about the trade balance. That is to say, the advantages should not only come from the fact that it emits little CO2, or has an excellent plant factor, or a useful life in practice that can exceed a century; Rather, its development would allow, among others, to explore and progress national engineering, the development of complementary infrastructure and services, which would allow more manpower per MW installed than conventional or non-conventional ones.

In relation to its costs. In 2016, the IDB stated that, (…) “in a world that increasingly needs more clean energy options, geothermal energy draws attention for the benefits it provides when it is properly developed. You can generate electricity with less environmental impact and at a lower cost than that required by fossil fuels such as oil and coal. And because it is a renewable source, it helps improve the security of the electricity supply. Despite all these benefits, the complexity and cost of starting operations are great ”(…), he also explains that, (…)“ the global exploration potential is between 70 and 80 GW. However, after more than 100 years, only 15% of the known geothermal reserves in the world are exploited for the production of electricity, and they generate only 12GW ”(…).

It is known that the initial cost of exploring and drilling between three and five geothermal wells ranges between 20 and 30 million dollars (as of 2016). It may be considered a small sum compared to the total cost of a geothermal development, but difficult to come up with, given the risk of operations. These costs have already been assumed by the companies that hold concessions and that have advanced their superficial studies. Likewise, many references lead us to point out, and I add to this, that the public sector continues to be the largest investor in this type of energy due to its ability to take risks. The IDB refers that in LATAM there are nine fields that received state support, and five with shared investments (government and private sector).

Regarding the situation of the geothermal resource in the region, in Latin America there are 22 geothermal plants located in six countries (Mexico, El Salvador, Costa Rica, Nicaragua, Guatemala, Chile) with a capacity of approximately 1,300 MW. Just for reference, Japan has 17 geothermal power plants totaling 540 MW, I had the opportunity to visit the 110 MW Hatchobaru geothermal field.

In this sense, some time ago, I commented on the news regarding the “First geothermal plant in South America: Enel and the National Petroleum Company of Chile (Enap) inject energy into the system with Cerro Pabellón”, of 50 MW. We must remember that Peru enacted its Law on geothermal energy in 1997 and Chile did the same in 2000; the second has already completed the challenge.

Looking for some background information, we found that in 2012 Chile had already developed the project, and in 2015 it finalized its financial closure with a PPP held between Enel (51%) and Enap (49%). That is, it took them 15 years to mature, project and build, we are going in a little more than 20, and the most important thing is that these ventures seem to be proving to be profitable.

For more information regarding a theoretical analysis of investment and operation and maintenance costs, we can refer to the one made by Professor Hugh Rudnick.

The drilling stage was and is always the main obstacle due to its high investment risk. Then, it would be necessary to inquire what was the participation and contribution of Enap. Why not think then for our case in Petroperú (or Electroperú), there is a Master Plan that was concluded in 2013 with the support of JICA, under the technical direction of WEST JAPAN ENGINEERING CONSULTANTS in charge of Professor Enrique Lima. In some conversation this renowned scientist told us that Peru has great possibilities with the Borateras and Calientes fields.

It is worthy to admit that a great work team was formed for the development of geothermal energy from 2006 to 2014. Likewise, the work in itinerant workshops and the dissemination and education of this technology, as well as in the supervision of the development of the geothermal energy by the private sector, with active action in the exploration, exploitation and operation stages, should constitute a clear signal of the need to strengthen capacities and consolidate technical geothermal equipment by the responsible entities.

Finally, Peru, according to the studies carried out for the preparation of the Master Plan for the Development of Geothermal Energy in Peru, has a total geothermal potential for generating electricity, estimated at 3000 MW distributed in different geothermal fields. The regions with abundant geothermal resources are mainly located in the southern part of Peru (approximately 640 MW). It should be noted that Bolivia has also undertaken the development of a 5 MW geothermal pilot plant, it remains for Peru to make the most suitable decision considering a long-term vision.

For the full article in Spanish and the sources referenced above, see linked article below.

Source: Rorberto Carlos Tamayo Pereyra, “Anotaciones de una historia de la geotermia en el Perú”, via LinkedIn