small geothermal power plant from historical perspective
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Anjar Priandoyo – MSC EM University of York 2015
Small Geothermal Power Plant
A historical approach
Disclaimer: Some pictures is taken from public license such as library, wikipedia, this
presentation is for educational purpose only
Mount Tambora Eruption, 10 April 1815Largest eruption in the 10,000 year
80 times bigger than Vesuvius 79 AD,
VEI-7 scale, dropping world global temperatures by 3’c degree
200
A Year Without Summer
1816 Lord Byron’s Darkness, 1818 Shelley’s Frankenstein, 1819 Polidori’s
Vampyre/Dracula
200
500
Beginning of Age of Discovery
22 April 1529 Treaty of Zaragoza (Moluccas). 7 June 1494 Treaty of Tordesillas
A first multinational, public listed company
20 March 1602 VOC open it’s trading post in Banten, Indonesia
400
400• 18% annual
dividen for 200
years, 40% in 1699
• 400% profit
in first Voyages to
Moluccas
• $7.4 trillion
business (adjusted,
Exxon $0.5 T,
Chevron $0.2 T)
Lesson #1: Skill > Resources
Having skill is more important than having a resources
Business & Finance
Macro Political Risk
Micro Political Risk
Geothermal is a perfect case study to apply the
engineering principles in business
Why Small Geothermal Power Plant?
Criteria Explanation
Background • Indonesia home of 40% world geothermal reserve (28 GW)
• 73% electrification, a country of 44GW expecting 35GW in next 5 year.
• Developing countries, with multiple issues in political, economy and
socio culture
Engineering
principles
• Technology selection (Geothermal vs Solar vs Hydro: Energy Mix)
• Design of Plant (Binary Cycle, Condensed System vs Multiple small
scale vs single medium scale
Business
model
• A public private partnership with academic and community involvement
• High risk business model
• High capital and long period return of investment
• Complex operating model?
International
Business
• Chevron own the biggest Geothermal facility in the world (354 MW),
largest Oil field in Indonesia since 1880-1952 (BP, Shell)
• US – Indonesia relationship perspective
• An understanding of micro political and macro political risk
Kamojang Geothermal Plant 1935
Power
Plant
Capital
Cost *
$mil / MW
LCOE **
(Fixed &
Var Cost)
Wind Off-S 4.91 100
Nuclear 3.98 60
Solar 2.60 280
Geothermal 2.42 60
Hydro 2.09 20
Coal 1.42 40
*IEA 2014 Report
**OpenEI 2014
Geothermal
Technology
Notes
Micro & Small 100 KW, 2 MW Back
Pressure, 5 MW
Condensing
Large Dry Steam, Flash
Steam, Binary Cycle
Enhanced
On what scale and condition the
business is feasible?
Fundamental Question
004• 26% world
market share for
Honda Motorcycle
• 6% Country
annual growth
• 250 Million
people
Opportunity
004• $3,475
GDP Percapita
• 107th Corruption Index
• 300 Ethnic
group, Potential for
horizontal conflict
300km/h speed, 1000’c, poisoned gas
Risk & Threat
010
0012004 Indonesian 9.2 SR TsunamiKilled 240,000 people, Cease Fire for Separatism
Newly president for 10 years relative stable politics after 32 years
under Soeharto
A good strategy with understanding of macro & micro risk
Benefit > Risk
Lesson #2: Benefit > Risk
Business is where benefit bigger then the risk
Business & Finance
Macro Political Risk
Micro Political Risk
Key assumption
What assumption made in this report?
Criteria Explanation
Plant Size • 10 MW
Capital • 30 Million USD
Party
Involved
• Investor: Chevron Indonesia 25% of share, Pertamina Indonesia 20%
• University of York, UK Technical Expertise
• BBPT/Agency for Assessment and Application of Technology, Indonesia
Ministry of Research and Technology
• Main Contractor: JGC-Alstom-Rekin
Construction
Period
• 2 Years
How accurate is our estimation?
1. Business Plan Estimation
• How accurate is the cost estimation of Geothermal Business
− Will be depending on geological survey and technical assessment
• How accurate is the current market share estimation
− The agreed FIT (Feed in Tariff) will be significant in business projection
• How accurate is the potential share that can be achieved
A sound of healthy economy performance in the
latest 10 years
2. International Business & Finance Perspectives
Indonesia Indicator US
5.01% Annual GDP Growth 2.5 %
7.5% Interest Rates 0.25 %
6.96% Inflation Rates 0.70 %
From Industry risk perspective, micro-political risk
is quite low and can be managed
3. Micro Political Risk
• Ensure robust project design such as well productivity, geothermal steam
resource availability and plant factor.
• Company can be set up using partnership with local company or local
government, so the risk can be shared.
• Transfer a risk using insurance claim
Any potential macro political risk must be
addressed as soon as possible
4. Macro Political Risk
• Define clearly the government’s role in electricity market reform and the
terms of its involvement as precisely as possible.
• Recognize that electricity price fluctuations are intrinsic to well-
functioning electricity markets
• Develop demand response within electricity markets.
• Be prepared to detect and to act upon wholesale electricity market
manipulation.
• Monitoring adequacy of gas markets and investments.
Carefully crafted entry strategy ensure the
business well executed
5. Mode of Entry
• The lifecycle of geothermal plant is to be estimated around 40 years.
• The high investment in the first three years and the following years in
the early production should be taken in to consideration carefully.
• A joint venture and partnership is required to mitigate some of the risk
• The cultural approach during the entry process is important to be
considered carefully.
• The development of geothermal business usually located in remote
area where infrastructure is difficult.
• The labor that will be used mainly from local and also there are also
number of possibilities of conflict with the local leader.
Question & Answer
Thank You …
Summary: A Small Geothermal Power Plant, with
10 MW Capacity, with Capital Cost of $ 300 Mil, is a
profitable and feasible business
A successful International business require a strong
understanding of business & finance perspective of
the two countries, a well managed macro and micro
risk, a condition where benefit is bigger than risk
Key Lessons:
1. Skill > Resources
2. Benefit > Risk
Sizing VEI SR Tons Volcanic Ash
Chernobyl 3.87 9 T
Hiroshima Bomb 6.00 15 KT
Tsar Bomba 8.35 50 MT
Merapi (ID) 2010 4
Vesuvius 79 AD 5 3
Krakatoa (ID) 1883 6 8.75 200 MT 18
Tambora (ID) 1815 7 80
Toba (ID) 75,000 BC 8 9.15 800 MT 2800 Biggest in 25 million y
Sumatra Tsunami 2004 9.20 950 MT
Appendix - 1
List of Images & URL
Appendix - 2
• http://upload.wikimedia.org/wikipedia/commons/6/66/Anonymous_The_Noord-Nieuwland_in_Table_Bay,_1762.jpg
• https://www.rijksmuseum.nl/en/explore-the-collection/timeline-dutch-history/1602-trade-with-the-east-voc
• https://ca.finance.yahoo.com/photos/most-valuable-companies-ever-adjusted-for-inflation-1351801906-slideshow/most-valuable-companies-in-history-adjusted-for-inflation-photo--1113431046.html
• http://www.publicresearchinstitute.org/Pages/geothermal/images/NesjavelirGeothermal30MwePlant.jpg
• http://en.wikipedia.org/wiki/Kamojang#mediaviewer/File:COLLECTIE_TROPENMUSEUM_Arbeider_aan_het_werk_op_de_Kawah_Kamojang_TMnr_10030172.jpg
• http://exergy.se/goran/cng/alten/proj/98/geotermal/Image6.jpg
• http://www.driever.nl/foto/achtergronden/JLM-NatGeo-Mount-St-Helens-1980-May-18.jpg
• http://www.tradingeconomics.com/united-states/gdp-growth-annual
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