Risk Sharing Mechanism (RSM) for Geothermal Resource Validation in Turkey – Working Processes and Experiences

Abstract

A Risk Sharing Mechanism (RSM) for Resource Validation was established in Turkey as a component of the World Bank financed Geothermal Development Project (TGDP) that became effective in March 2017. The RSM is implemented by the Development and Investment Bank of Turkey (TKYB) and is capitalized by a $38 million contingent recovery grant from the Climate Technology Fund (CTF). A consortium of technical consultants, ÅF Consult, ÍSOR, and Verkís, (RSM Consultant) was hired under the TGDP to provide technical support to TKYB and support the day to day operation of the RSM. The objective of the RSM is to increase private sector investment in geothermal exploration drilling in Turkey by providing partial coverage of exploration wells’ drilling costs in case that wells drilled under an RSM-supported drilling program do not meet commercially viable power output criteria. Exploration drilling projects are selected for coverage under the RSM through a competitive application process. Developers selected for RSM coverage can get 40% or 60% cost coverage of unsuccessful wells. Projects in the less explored provinces of the country will receive 60% cost coverage whereas the coverage for the lower projects applies in areas where extensive geothermal development has already taken place and the exploration drilling risk is considered lower. This paper describes the structure and general terms of the RSM and the whole RSM process cycle, consisting of (i) marketing activities and preparation of RSM call for proposals, (ii) evaluation of proposals and negotiation with selected developers, (iii) monitoring and reporting on the exploration drilling projects. As of July 2019, the project is in stage (ii). Hence, for the phases (i) and (ii) the authors will also discuss some of the lessons learned to date, which can be of value for other project teams involved in setting up similar facilities for geothermal development in other countries.