Turkey is an emerging superstar in the geothermal energy field thanks to a combination of its underground resources and a stable tariff regime. Other countries in Southeast Europe can’t hope to emulate the kind of investment seen in Turkey, the site of some of the world’s largest geothermal power plants, but they too are increasingly harnessing underground energy to provide cheap and eco-friendly local heating and energy.

Investment in geothermal energy in Turkey has gathered momentum recently, with the country ranked seventh in the world in terms of total installed capacity as of 2016, according to geoenergy portal ThinkGeoEnergy, ahead of countries that have long relied on the technology such as Iceland and Kenya. This is largely thanks to its natural resources — exploratory research has shown abundant hot water resources, some with temperatures of more than 200°C. However, other factors also play a role.

“The high potential for geothermal energy generation is the primary reason for the level of investment in Turkey,” says Andi Aranitasi, senior banker in the European Bank for Reconstruction and Development (EBRD) energy team, which is supporting development of the sector. “In addition, Turkey has very fast growing energy demand, and the sector has attracted a lot of investors, both local and international. Turkish investors especially tend to be very entrepreneurial, looking for high risk/high return investments. The third factor is that the regulatory regime for renewables in Turkey has been fairly stable.”

All this has added up to a rapidly expanding sector. Major geothermal power plants already in operation in Turkey include the Kizildere Geothermal Power Plant (GPP) in the west of the country, which is now being expanded with a 65.5 MW second phase. The even larger Efeler GPP — one of the 10 largest geothermal power plants in the world — had capacity of 170 MW when it was commissioned in 2015, and there are plans to boost capacity up to 232 MW.

Currently Turkey has installed capacity of 1GW, which is 1-2% in terms of capacity, although “geothermal punches above its weight in terms of generation, accounting for 2-2.5% of the total,” points out Aranitasi. “It is difficult to forecast the future, but from our studies there is theoretical potential of about 4GW.”

“Within Turkey, most projects to date are concentrated in the west and southwest, which has been explored by the Turkish authorities from the 1960s so better data is available,” Aranitasi adds. “Other areas with good potential but which have not been exploited yet are Cappadocia [in central Turkey] and the area around Lake Van in eastern Turkey.”

The EBRD has supported the sector through direct lending, for example by supporting local renewable energy company Güriş Holding develop the Efeler GPP alongside two local banks and the Black Sea Trade and Development Bank (BSTDB). It has also financed six projects through Turkish commercial banks.

To help with riskier early stage projects, the EBRD has also launched the $125mn Pluto initiative alongside the Clean Technology Fund. In the debut investment through the initiative, a €5mn loan was extended for the early stage development of the Prosin-Dikili geothermal power plant near the coastal town of Dikili in the Izmir province. The initiative is part of a global push by multilateral development banks to scale up geothermal energy production, where the high risks during the early stages of a project can inhibit investment.

“Geothermal energy projects face high risks particularly in their initial stages, including high investment costs and development risks and very limited access to project finance once drilling has confirmed the resource,” the bank said when it launched the initiative.

The World Bank is also supporting the sector, announcing in November it had approved just under $290mn in loan and grant funding for a geothermal development project in Turkey, working with two local banks to encourage private sector investment in the sector.

Ring of Fire

Turkey is an outlier in the CEE/CIS region in terms of its geothermal resources. The only other country in the region with similar potential is Russia, whose eastern extreme lies on the “ring of fire” — the 40,000km circle around the Pacific Ocean marked by intense seismic activity caused by tectonic plate movements. Plate boundaries, together with areas where the earth’s crust is thinnest, have the highest underground temperatures and therefore the greatest scope for geothermal power generation.

In Russia’s Kamchatka Peninsula and the Kuril Islands, which lie on the northwestern part of the ring of fire, thermal waters have temperatures as high as 300°C. “It has been estimated that the high-temperature resources defined to date in the [Kamchatka] peninsula could ultimately support generation of 2,000 MW of electrical power and 3,000 MW of heat for district heating. Exploration has shown that the discovered geothermal resource of Kamchatka could provide the peninsula’s total demand for both heat and electricity for in excess of 100 years,” says a report from the World Energy Council.

Back in 1966, the first plant using geothermal energy for power generation was commissioned at the village of Pauzhetka, close to the southern tip of the peninsula. More GPPs were built from 1999 onwards, with installed capacity reaching 81.9 MW by the end of 2008.

On the other side of Russia’s huge landmass, geothermal energy has also been used for district heating in Dagestan and the Krasnodar region; the Caucasus are another high potential area. Nearby Azerbaijan is also eyeing geothermal energy as it seeks to reduce reliance on fossil fuels and boost renewables to 20% of total generation by 2020. In the “land of fire” as Azerbaijan was historically known, “it is highly likely that significant power generation from deep geothermal resources is possible,” says a report from the Organisation for Security and Cooperation in Europe (OSCE).

Virtuous circle

As countries around the world look to boost renewable energy generation, those in a position to use their geothermal resources to produce energy benefit from an alternative energy source that — unlike for example solar or wind generation — is as stable and predictable as fossil fuel generation.

“One of the biggest benefits is that while geothermal energy is renewable, it’s possible to forecast the production level very easily as with coal or gas power, but unlike hydro, wind or solar. Secondly, there is an unusually high efficiency factor, which can be as high as 80%-85%,” says the EBRD’s Aranitasi.

“When it comes to geothermal energy, we can conclude that the energy generation is ecologic, stable (unlike solar or biomass energy generation) and relatively cheap (although the initial investment is mostly high),” says Stepan Santrucek of the Czech Development Agency, which has been supporting the sector in Bosnia & Herzegovina and Serbia.

The downsides, in addition to the initial expense of setting up a plant, are, as outlined by Aranitasi, the high risks in the early stages of a project, which has meant that historically many have been initially taken on by governments.

Prices for wind and solar technology have fallen dramatically in recent years, which has fuelled a virtuous circle of investment and more technology development. This isn’t likely to happen for geothermal technology, as the limited amount of areas where it can be deployed mean there isn’t the same incentive to invest in new technologies.

But it’s not only the countries in the highest potential areas that are looking to develop their geothermal resources. This is the case in Southeast Europe, where a report published earlier this year by the International Renewable Energy Agency (Irena) found that “the geothermal energy potential of this region is primarily characterised by a relatively low-enthalpy [temperature] resource base which is more appropriate for non-power applications”, though it does note that binary plants which allow cooler geothermal reservoirs to be used for electricity generation are “considered feasible options for generating electricity”. Within the region, the highest potential countries are seen as Bulgaria and Romania, and to a lesser extent Croatia and Slovenia.

Modest resources

A utility-scale geothermal power plant may be beyond the reach of most of the Balkan countries northwest of Turkey, but this hasn’t stopped them looking to tap their more modest geothermal resources for example for district heating, or to power greenhouses. And the region has long used thermal waters for spas, from the Ottoman era Turkish baths in Budapest to Europe’s largest waterpark, the brand new Therme in the outskirts of Bucharest.

Beius in northwest Romania is the only European town to be heated entirely by geothermal water. Before 2000, the town of 12,000 people only received heat for five to six hours a day and sanitary hot water only one day per week, at a cost of over €75 per Gcal, using an elderly plant that burnt oil residues. Enter Transgex, one of the country’s two main developers of geothermal energy; today Beius’ residents receive hot water and heating 24/7.

Beius is just one of the towns where Transgex is active. The company holds a number of concession licences for geothermal areas in northwest Romania, representing an estimate of over 50% of the country’s resources, Transgex's strategy and development director Miron Sferle tells bne IntelliNews. In total, it administers 48 geothermal water wells, including several serving the city of Oradea, close to Romania’s border with Hungary.

In future, says Sferle, “We intend to extend the production of geothermal energy”. He points out that the current need for thermal energy at Beius can’t be covered from existing wells, so Transgex plans to drill a new production well, while production of geothermal energy is planned to increase in line with demand for connections to the system in the nearby settlements of Bors and Sacuieni.

The first geothermal combined heat and power (CHP) plant in neighbouring Hungary was recently commissioned and is in the test-operation phase, according to a spokesperson for KS Orka, which has also developed major projects in China, Iceland and the Philippines. The Tura plant will have 3 MW power and 7 MW of heating capacity. According to local media reports, the plant will provide heat and power to nearby businesses, as well as heating a 100,000 square metre greenhouse that will produce some 6,000 tonnes of tomatoes a year.

KS Orka, whose largest shareholder is Shenzhen-listed Kaishan Group, is also working with Serbian oil and gas company NIS on developing the first geothermal power plants in Serbia, according to its website, as well as developing business opportunities in Croatia and Turkey.

Also in Serbia, the local government in Vranje, in the north of the country, announced in 2016 that Chinese Betec, a company specialising in geothermal energy source exploration, will start exploration in Vranjska banja spa — an area known for natural springs that are hot enough to boil an egg. “It is quite certain that Vranjska banja will get its first power plant using renewable sources,” the town’s deputy mayor Igor Andonov said, according to the statement. A power plant with capacity of 20 MW is envisaged.

Surveys have also been carried out in Bosnia & Herzegovina, funded by the Czech Development Agency. “Based on the preliminary surveys there are suitable conditions for the use of geothermal energy in northern Bosnia,” Santrucek tells bne IntelliNews, adding that “it is obvious that the geothermal energy will play and important role” in the country.

By the end of this year, the geothermal heating system for a local elementary school in Sevarlije, a village in Doboj municipality, will be completed, which Santrucek says will be the “most visible outcome [of the project, although] the results of the surveys can be used for further development of the municipality of Doboj … since the project has not been finished yet it is hard to measure its success. But we would not have invested in the project if we hadn't assumed some positive impact.”

Geothermal energy isn’t going to make up a major part of the energy mix in any of these countries, but it is increasingly being used in smaller scale developments serving individual buildings, local communities or to power greenhouses and for other agricultural uses and this is likely to become more prevalent as the emphasis on renewable generation continues.