Government seeking up to $250 million for geothermal risk reduction

September 27, 2024 | 12:00am

MANILA, Philippines — The government is securing multi-million dollar funding to bolster its geothermal de-risking strategy aimed at lowering the financial risk exposure for developers.

“The de-risking facility is about $250 million,” Energy Assistant Secretary Mylene Capongcol said on the sidelines of a conference hosted by the National Geothermal Association of the Philippines on Wednesday.

Initiated by the Asian Development Bank, the geothermal resource de-risking facility (GRDF) will cost-share exploration drilling with qualifying private developers to de-risk geothermal resources at the pre-development stage.

Although the GRDF has already been finalized, Capongcol said the Department of Energy (DOE) is still on the lookout for potential implementing partners and fund managers.

“We are in talks with prospective partners like Landbank, DBP (Development Bank of the Philippines), PhilGuarantee (Philippine Guarantee Corp.) and the DOF (Department of Finance),” she said.

Capongcol said the state-run banks would facilitate the mitigation fund and work alongside the DOE in reviewing the eligibility of geothermal developers seeking financing.

The main risk in geothermal development comes during the exploration stage, as drilling wells will not guarantee producing viable results, leading to significant investment without assured returns.

Marvin Bailon, vice president and head of business development group at Energy Development Corp. (EDC), said the estimated cost for the drilling of two wells is usually pegged from P1.5 billion to P2 billion.

“If the government can subsidize the whole exploration, it gets easier. First and second wells, that’s risky,” he said.

The industry, said Bailon, is eager for the implementation of the de-risking facility, as this would help developers get past the exploration phase.

“Government support is much needed and needs to be sustained as challenges and risks are inherent in various stages of geothermal development,” he said, noting the importance of a robust regulatory and market framework in advancing projects.

EDC, the renewable energy arm of the Lopez Group, is currently developing four geothermal projects with a combined capacity of 82.6 megawatts (MW).

At present, the company has a portfolio of over 1,464.5 MW of total installed capacity, which accounts for almost 20 percent of the country’s total installed renewable energy capacity.

Its 1,169.85-MW geothermal portfolio comprises 80 percent of the Philippines’ total installed geothermal capacity.