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New report from Bloomberg estimates global growth of 63% in next 10 years

New report from Bloomberg estimates global growth of 63% in next 10 years Nga Awa Purua geothermal power plant, New Zealand (source: Mighty River Power)
Alexander Richter 3 Nov 2010

In a new report, Bloomberg New Energy Finance estimates a 63% global growth in geothermal capacity in the next 10 years, if it can secure investments of up to $31 billion.

In a new report by Bloomberg, the company looks into the question if new geothermal favourable policies are actually a sign for rumbles of movement. In its analysis, Bloomberg New Energy Finance shows that the global geothermal market will grow 63% to reach 18GW by 2020 – as long it can attract $31bn of investment in the period.

This is a 63% increase (6.9GW) from the current base of 11GW, but a 48% discount on growth otherwise anticipated from the current global pipeline.

The global development pipeline for geothermal projects currently sits at 13.3GW in all stages of development. Over 75% of this comes from early-stage projects that are still in the planning stage and over 65% is planned for the current top three countries: the US, Indonesia and the Philippines. The trend of using high-grade flash resources will continue representing 64% of the global pipeline as high-enthalpy resources in untapped areas are developed. Global capacity additions in 2010 are expected to be 2.2GW for the year, but the real uptick will start in 2012 and carry through into at least 2015.

During 2009-10, several countries implemented policies favourable to geothermal development such as incentive programmes, tariffs, regulatory measures, and goals for geothermal capacity which has set the stage for sustained growth in the global geothermal market over the next decade, according to Bloomberg New Energy Finance, the world’s leading provider of research and analysis into clean energy and the carbon markets. The short-term impact of these plans is starting to come about as evidenced by the growing number of announced projects. This translates to immediate opportunities for drilling and services contractors and early-stage equity investors, as well as opportunities during 2012-13 for late-stage value chain players and project financiers.

The incentives and geothermal goals put into place in several markets have enticed a crop of new entrants to the sector, as well as some consolidation amongst existing players. The newcomers to the industry are opting for one of two strategies: i) acquiring a company to gain the talent of a smaller but more-experienced entity, or ii) acquiring or partnering with another company with the scope of gaining access to another region. The consolidation is mostly taking place among smaller companies in order to gain sufficient strength to raise capital and complete projects.

Bringing the capacity to 18GW by 2020 will require between $2.2bn and $3.4bn annually, an increase of 63-152% from the current industry average $1.3bn per year. Despite a slow start to the year, 2010 has so far seen $1.4bn invested in new asset finance from eight deals. This year is expected to be a record year of geothermal investment and has already brought in almost double the 2009 total. Seven of the deals were closed in Q3 for a total of $407m. But we do not expect the Q3 total to be matched in Q4, as the bulk of efforts through the end of the year will be spent on proving (i.e. drilling) resources.

Prospects for increased asset finance in coming years look good as rates for asset financing are improving and are expected to fall in the 6-8% range rather than the crippling 12-14% prevalent during 2009. The rates can go even lower through loan guarantees offered in a handful of nations, including the US, and through financing from multilateral banks available in numerous developing markets.”

Source: Bloomberg