Drilling Down on Geothermal Potential Central America

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Drilling Down on Geothermal Potential Central America ( drilling-down-geothermal-potential-central-america )

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Objectives of the study Executive Summary 1. Over the past two decades, the electricity sector in most of Central America has evolved from being predominantly hydro-based to having a substantial share of thermal-based generation with implications for import dependence and oil price volatility. Beginning in the early 1990s, rapid growth in power demand and the private sector's preference for technology that could be built quickly and at relatively low capital costs led to the region becoming heavily dependent on diesel and heavy fuel oil (HFO) for new power capacity. By 2007, the share of hydro generation in the region had fallen to 46 percent while the share of thermal production had risen from essentially zero in 1990 to 30 percent in 2007 and over 60 percent in Honduras and Nicaragua. 2. Based on their latest power expansion plans, the countries of Central America are interested in reducing their dependence on oil for power generation, primarily through the expansion of hydro, coal, and natural gas. One of the promising renewable power sources in the region is geothermal power. Not only are there good geothermal resources available in the region, but the costs of geothermal power are competitive with both hydro and fossil fuel plants. While most countries in Central America include some geothermal capacity in their power expansion plans, aside from Nicaragua, future expansion plans for geothermal are quite modest. 3. Several countries in Central America have accumulated considerable experience in geothermal development; geothermal accounts for 24 and 12 percent of the electricity production in El Salvador and Costa Rica respectively. Nonetheless, there are unique barriers to geothermal power development which are inhibiting a more rapid development, most of which revolve around the uncertainty and risk of identifying and confirming the resource potential of specific sites. The objective of this study, which draws on regional information and international experience, is to assess the potential for expanding the use of geothermal energy for electric power generation in Central America and to discuss how the countries of the region can overcome the resource uncertainties as well as the policy, institutional, and financing constraints facing geothermal power development. Understanding geothermal power 4. Geothermal energy is derived from the Earth’s natural heat and most geothermal fields are located around volcanically active areas which are often located close to the boundaries of tectonic plates. To utilize these underground resources for power generation, wells are drilled to tap into the geothermal reservoirs to access steam or fluid and transfer it through pipes to the power plant where the steam can be used to power a turbine generator. While geothermal energy i

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