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faces some of the same barriers to geothermal power development as in other parts of the world, including high upfront risks. 43. Global experience shows that there are a number of ways to overcome the barriers to geothermal development within the context of Central America’s power sector structure and business environment. What seems clear from both regional and international experience is that there is a need for mechanisms to overcome the upfront risks associated with resource exploration and confirmation, such as through upfront studies, geological prospecting, and test- drilling. In practice, such activities have been supported by the government or through public- private risk-sharing mechanisms. Interestingly, there are no proven record, to date, of an entirely private sector concession-based system for geothermal development as is common with other energy and natural resources. 44. At the regional level, regional power planning and regional risk sharing mechanisms for Central America are recommended. Given the relatively small size of the countries involved, there is an advantage to consider a regional geofund to pool the geological risks on the one hand, and to provide a platform for introducing geothermal power into the already developing regional power market. A more realistic assessment of geothermal costs and development prospects at the regional level would also help to prioritize geothermal versus other thermal and renewable technologies. 45. At the country level, geothermal development will require varying priority and degrees of efforts in different countries of the region. El Salvador has accumulated extensive in-country experience and expertise and appears to be in the readiest position to further scale up geothermal capacity while Honduras and Panama have least experience overall. Still, El Salvador needs to clarify the role of La Geo, the sole geothermal developer in the country. Costa Rica, which maintains a vertically integrated sector structure, has the lowest country risk in the region, but needs to improve its regulation to promote further geothermal development. Nicaragua has a specific geothermal law, but needs to update its geothermal inventory. In addition, the government should take a larger responsibility in exploration and drilling activities through creation of a risk-sharing mechanism. The government of Nicaragua could help to attract the private sector by providing political and credit guarantees. The Guatemalan government could usefully strengthen in-house capacity for geothermal development, develop its geothermal resource inventory, and explore other risk-sharing mechanisms besides the separation of steam and power production that are now in use. Honduras and Panama need to decide if geothermal will play a role in their power expansion, and if so, a first step would be to undertake an inventory of geothermal resources. xiiiPDF Image | Drilling Down on Geothermal Potential Central America
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