| Abstract |
This paper aims to highlight the main financial barriers and to propose innovative tools for funding both geothermal heat and geothermal electricity projects in different context. To this end, the paper will put forward key recommendations for designing new and improving the functioning of existing public support schemes. Geothermal energy projects are indeed challenging to finance and require tailored instruments. Among the specific constraints embedded in the development of new geothermal projects, the geological risk and the very capital-intensive nature of project financing constitute a challenge, which can slow down the deployment of new geothermal capacity. Moreover, the large diversity in the quality of geothermal resources and level of market maturity creates widely different conditions for geothermal project developers. To fund geothermal projects, it is therefore necessary to lay out the right financing scheme for the right project. The geothermal sector has steadily been growing over the past decade. Many new areas of Europe are now geothermal regions, and some countries that used to be marginal in geothermal energy are now key markets. This evolution was driven by research, development and innovation (RD&I) programmes, public support in the form of investment or operating aid, and by renewable energy policies and objectives. However, as progress in renewable energy deployment have been significant, public policies are increasingly geared towards a greater exposure of such projects to the market, including for geothermal energy. This means that public support will increasingly be a complement to private finance instead of a primary driver of investment. Such an evolution poses fundamental questions such as: i) how geothermal projects can attract private financing; ii) which business models and financing schemes are needed; and iii) what trends are emerging considering the above challenges. |