Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries

The report argues that public finance for geothermal energy in developing countries must increase 7-10 fold to meet 2030 targets. Through case studies in Kenya, Indonesia, and Turkey, it demonstrates that public risk mitigation measures—such as concessional loans, guarantees, and exploration support—can reduce the levelized cost of electricity (LCOE) by 35-48%, allowing governments to achieve deployment targets while spending only 15-35% of the resources required for full public ownership.

• Public finance for geothermal energy in developing countries needs to increase from USD 7.4 billion to between USD 56 billion and 73 billion to mobilize the private investment required to meet deployment targets of 23GW by 2030.
• Total additional financing of approximately USD 133 billion is needed for geothermal in developing countries by 2030, with the public sector expected to provide 42-55% of this amount.
• Public risk mitigation measures can significantly lower the levelized cost of electricity (LCOE) for private investors, reducing it by 35-48% through tools that address exploration risk, political instability, currency fluctuation, and access to low-cost debt.
• By leveraging private investment and mitigating specific risks, governments can achieve the same electricity generation while providing only 15-35% of the financial resources they would have spent if they had built and operated the projects themselves.
• Private sector requirements for higher returns can increase the LCOE and potentially lead to tariff increases of more than 60% if the private investor bears all project-related risks.
• Public finance allocation needs to shift toward the earlier, riskier stages of project development; the share of public finance flowing to early stages should increase from 11% to 17% (approximately USD 12.5 billion) by 2030.
• Concessional loans from development finance institutions (DFIs) can reduce power tariffs by up to 25%, which is critical in countries with high costs of debt finance.
• USD-denominated feed-in tariffs (FiTs) are used in Turkey, Indonesia, and Kenya to remove currency devaluation risks, which can avoid tariff increases of up to 10%.
• Government guarantees for off-take obligations are essential for unlocking debt finance in contexts with high off-taker risk, such as the 20-year Business Viability Guarantee Letter (BVGL) provided by the Indonesian government for the Sarulla project.

APA

Micale, V., & Oliver, P. (2015). Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/08/Lessons-on-the-Role-of-Public-Finance-in-Deploying-Geothermal-Energy-in-Developing-Countries-Full-Report.pdf

Chicago

Micale, Valerio, and Padraig Oliver. Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/08/Lessons-on-the-Role-of-Public-Finance-in-Deploying-Geothermal-Energy-in-Developing-Countries-Full-Report.pdf.

Wikipedia

{{cite report |last1=Micale |first1=Valerio |last2=Oliver |first2=Padraig |title=Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries |publisher=Climate Policy Initiative |date=August 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/08/Lessons-on-the-Role-of-Public-Finance-in-Deploying-Geothermal-Energy-in-Developing-Countries-Full-Report.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{micale2015lessons, author = {Micale, Valerio and Oliver, Padraig}, title = {{Lessons on the Role of Public Finance in Deploying Geothermal Energy in Developing Countries}}, institution = {Climate Policy Initiative}, year = {2015}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/08/Lessons-on-the-Role-of-Public-Finance-in-Deploying-Geothermal-Energy-in-Developing-Countries-Full-Report.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }