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37. The development of hydro and geothermal resources faces similar issues, but also presents different types of challenges. Both types of projects require the collection of substantial amounts of information before they can be fully developed. The specificity of the site of the underlying resources could also present similar challenges to accessing the transmission grid for both sources. However, it is possible to gauge the amount of hydro resources via relatively modest investments at the identification and prefeasibility stages (e.g. topographical surveys and shallow drillings for soil and geological studies) whereas geothermal soundings require costly deep well drillings to prove resource potentials. The additional labor and costs associated with the exploration and prefeasibility stages of geothermal development are the main disadvantages of geothermal development relative to hydro power. Finally, it should be noted that the main competitor to geothermal plant in this mountainous region consists of hydro resources: over 40 hydro sites have been identified with a total capacity of around 6,000MW, many of which have costs below $3,000/kW. 38. The previous comparisons show how geothermal resources compare at a basic level with other generation options. For example, the analysis did not take into account the costs of associated infrastructure, such as transmission and distribution lines, nor did it fully take into account the additional labor costs in the early stages of geothermal development. The actual choice of plant is usually done with more sophisticated models which take into account different sources of uncertainty. One of the earliest models, developed by International Atomic Energy Agency (IAEA), known as the WASP, takes into account reliability considerations when operating a power system, and is applicable mainly to thermal systems. When the source of uncertainty stems from operating considerations, such as hydro or wind, detailed simulations based on the probability distributions of hydrology allow an evaluation of expected operation costs for different configurations of power plants. This is accomplished with detailed simulation programs which are commercially available, such as the SDDP model. Geothermal is a particular case in the sense that the main source of uncertainty lies in the investment cost. The only comparable case is hydro, where investment costs may vary according to how geological characteristics develop during construction; however, a priori determination of expected costs can be gauged with some accuracy, whereas in the case of geothermal, the actual exploration cost is a major factor in the economics of a potential project. Computer models which take into account this source of uncertainty to quantify the tradeoffs with competing resources have yet to be developed. Policy environment for geothermal development 39. Restructuring of Central America’s national power sectors has yielded differing domestic sector structures (Table 14). In the 1990s the countries approved new laws and regulations that initiated restructuring processes in their power sectors. Those reforms aimed to promote private participation in a sector that had traditionally been controlled by fully integrated state-owned companies. Sector reforms in Costa Rica and Honduras were limited to the opening of the generation segment to private participation. However, significant reforms to liberalize electricity markets were implemented in El Salvador, Guatemala, Nicaragua, and Panama. These countries implemented vertical and horizontal unbundling of generation, transmission and distribution 20PDF Image | Drilling Down on Geothermal Potential Central America
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