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Feature: Geothermal energy requires more investment in El Salvador

By the Potencia correspondent

Central America is becoming a key target for renewable energy investment. El Salvador is one of the most interesting nations in the region as it looks to explore different ways to generate electricity from non-conventional sources.

An article in Revista Eolica y del Vehàƒ­culo Electrico estimated that El Salvador’s energy production will receive a 115 MW boost from renewables in the coming years. Most of that output is expected to come from wind, photovoltaic and geothermal plants.

All the geothermal projects currently underway in El Salvador are being developed by LaGeo, which is a joint venture between Enel Green Power (EGP) and the government of El Salvador. It is also the only company allowed to exploit the country’s geothermal resources.

Prensa Libre highlights the constant availability as one of the main advantages of geothermal energy. Other renewable energy sources such as hydropower depend heavily on weather and can be adversely affected when a drought comes. Underground heat, in contrast, is constant and allows geothermal plants to operate whenever needed.

Studies quoted by Prensa Libre say that El Salvador has enough geothermal capacity to produce up to 640 MW. This represents more than two-thirds of the country’s energy demand, which is estimated in 900 MW.

Taking advantage of El Salvador’s geothermal potential, however, requires huge levels of investments. According to LaGeo’s chairman Julio Valdivieso, making the most of the underground heat would require an investment of $1.5bn.

Valdivieso reveals that the simple drilling of a well can cost between $6 million and $8 million. He adds that studies to identify where to drill are not enough to know what is lurking underground.

Looking for the ideal location for a geothermal plant often means drilling and not finding efficient energy sources. For example, LaGeo drilled three wells before finding the perfect spot. That represents a significant cost to the company.

Situations like that raise the price of a geothermal MW, which is said to be around $2 million. To calculate a geothermal MW several factors need to be considered, including in-depth research, drilling works and purchasing the power generating equipment.

LaGeo plans to drill a well at Vicentino volcano, and the project is expected to be supplying electric power to the country’s electric market by 2017. If the project works as planned it will produce up to 40 MW, enabling LaGeo to recover the investments the company made.

Local daily La Prensa Grafica adds that LaGeo has other geothermal projects in mind. One of those plants is Chinameca, a project that has a serious chance of being developed.

The company is also struggling to upgrade its geothermal facilities. In particular the 95 MW Ahuachapan plant, which opened 30 years ago and is the oldest geothermal station of El Salvador.

The situation is further compounded because energy investments in El Salvador are often delayed due to legal objections.

As mentioned above LaGeo, which was established in 2011 is jointly owned by EGP and the Salvadoran government, via the state-owned power company, INE/CEL.

EGP currently holds a 36.2 per cent stake, but according to La Pagina the Italian company wants to raise it share to become the main shareholder but the government is blocking it. EGP subsequently filed a lawsuit against the State that is awaiting resolution.

Despite this disagreement and the high CAPEX cost associated with this power generation resource, geothermal energy is here now and is here to stay in this Central American country.

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