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even without taking into account the environmental externalities associated with thermal generation). Indonesia addressed this problem with the assistance of the World Bank by developing a financial package to buy down the financial incremental costs. Mexico has developed an innovative mechanism called OPF (Obra Pública Financiada) to accelerate geothermal development with the participation of the private sector. Under this scheme, CFE, the state-owned utility, develops the steam field, completes the pre-design of all the necessary components of the power plant, including the plant itself and associated transmission connections, obtains necessary permits, and then puts the project out for public bidding. The risk for the private sector is limited to short-term financing over the construction and commissioning period and guarantees for the equipment. 36. Legal and Regulatory Framework. In order for public-private partnerships to be effective, there is a need to strengthen sector regulations and incentives for geothermal energy development in general, including appropriate laws and regulations on developing underground resources, managing environmental and social impacts, providing incentives for renewable energy development, promoting private sector participation, and removing market entry barriers to power sector operations. Given the peculiarities of geothermal development, specific legal statutes, such as the Nicaragua Geothermal Law, with appropriate incentives, could be instituted to support Public-Private Partnerships (PPPs) in this connection. 37. The public sector role in developing geothermal projects does not cease once the geological risk has been surmounted. Before a private developer agrees on participating in a partnership it will assess other sources of risk, such as country and regulatory risks. The government can help reduce the risk by establishing a solid regulatory framework regarding both geothermal development and power sector expansion and operations (such as providing appropriate assurances that the resource will be economically dispatched and remunerated when a power market exists). The government can also support the development of private sector geothermal plants by offering assistance in reducing the cost of financing, and make publicly available a geothermal resource inventory and guarantees (such as with multilateral support) regarding political risk/force majeure. 38. Resource Inventory. A comprehensive inventory of geothermal resources with high quality data are available in relatively few countries (Indonesia is one of them), but is a strong invitation to the private sector for geothermal development. Nicaragua is the only country in Central America that has completed a geothermal resource inventory and the private sector has shown significant interest in getting exploration concessions, particularly for those sites with quality resource information. 39. Environmental and Social Impacts. The potential environmental and social impacts of geothermal plants are generally small and compare favorably to fossil fuel technologies as well xiPDF Image | Drilling Down on Geothermal Potential Central America
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