Honduras goes full steam ahead with first geothermal renewable energy power plant

With the launch of 35MW Geotérmica Platanares SA de CV (“Platanares”) electric power generation plant Honduras has added geothermal energy to its renewable energy matrix project portfolio.  Privately owned, Platanares is the first utility-scale geothermal project in Honduras.  Although only recently inaugurated, the interest in developing the potential geothermal energy generation in Honduras, including the Platanares site, dates back to the mid-1970s.

Geotérmica Platanares SA de CV 35 MW power plant in Honduras 

Early Geothermal Energy Studies in Honduras

The first study for potential development of geothermal energy in Honduras was carried out in 1976 by the United Nations and identified several areas of interest including the Platanares area, located in the municipality of La Union, department of Copán, in western Honduras.  Leveraging on this geothermal reconnaissance work, a subsequent assessment of the nationwide geothermal resource potential of Honduras was conducted as part of the Central American Energy Resources Project sponsored by the U.S. Agency for International Development (“USAID”).  As part of this assessment project, the Los Alamos National Laboratory (“LANL”) in May 1986 issued a field report on the Geology of the Platanares Geothermal Site which included measurements taken at various surface hot springs.  The investigation, a joint effort by the LANL and U.S. Geological Survey (“USGS”) of the United States of America and the Empresa National de Energia Electrica (“ENEE”) of Honduras held that a preliminary evaluation showed upstream from the observed hot springs, the Quebrada del Agua Caliente flowed with a temperature of 21°C (69.8°F) at several thousand liters per minute during the field work yet downstream temperatures averaged approximately 37°C (98.6°F), which indicated an increase of the stream's thermal energy on the order of several megawatts.  Because this estimate was larger than the integrated value of the measured hot springs the report stated that there must be a significant contribution from unmeasured springs that were submerged in the stream bed.

Map of hot springs in the Quebrada del Agua Caliente near Platanares (Source: Los Alamos National Laboratory “Geology of the Platanares Geothermal Site” field report, May 1986)

This preliminary investigation recommended the drilling of thermal gradient boreholes drilled to several hundred meters below Platanares (on the terrace) to provide information needed to make decisions on the potential use of this geothermal resource for electric power generation.  Subsequently, as part of a deeper study, three wells were completed to depths ranging from 428m (1404.2 ft) to 679m (2227.7 ft). With the geological and geochemical results obtained the LANL/USGS team concluded the work at the site by 1991 with a report to ENEE recommending geothermal assessment feasibility levels in this Platanares area.

In addition to Platanares, the LANL/USGS/ENEE geothermal research was conducted at five additional sites (San Ignacio, Azacualpa, Pavana, Sambo Creek and El Olivar) showing an estimated combined potential of 120 MW of geothermal electricity generation in Honduras.

Potential for geothermal electricity generation in Honduras (Source: Honduran Ministry of Energy, Natural Resources, Environment and Mining General Directorate for Energy.)

In spite of the promising results of the 1985-1991 USAID-sponsored studies indicating the likely existence of medium to high enthalpy geothermal resources, no further exploration was carried out until 18 years later when, in 2009, geothermal exploratory work was resumed by Electricidad de Cortes, S.R.L. (“ELCOSA”), a private Honduras company, through its affiliate Geotermica Platanares, S.A. de C.V.

Stimulation of Renewal Energy Projects to meet Power Generation Needs

Honduras requires a 26% increase in power generation capacity over the next decade to keep up with projected GDP growth.

To meet this demand from domestic renewable resources, the government of Honduras has an established goal of generating 80% of its energy from renewables by 2032 and in 2007 enacted the Law for the Promotion of the Generation of Electric Power by Renewable Resources (May 31, 2007 Legislative Decree No.70-2007 published in the Official Publication La Gaceta on October 2, 2007) providing a tax exemption during the first 10 years of the renewable energy plant’s operation as a way to stimulate projects to meet the renewable resources energy contribution target.

The country has steadily been increasing its installed capacity in renewable energy and diversifying the energy mix with new power generation technologies such as solar and wind, while simultaneously increasing hydroelectric and biomass generation.  As of 2017, 62% of the installed power generation capacity of Honduras depended on renewable resources and only 38% on fossil energy.

2017 Energy Matrix of Honduras Installed Electric Power Generation Capacity (Source: Boletín de Datos Estadísticos – diciembre 2017, Gerencia de Planificación, Cambio e Innovación Empresarial, ENEE)

Prior to Sept. 1, 2017 (commencement of Platanares generation), despite providing an exceptionally constant source of energy and a top ranked availability factor, geothermal energy had been noticeably absent from the energy mix as any potential geothermal energy generation had been held up in the Honduran National Congress (the governing body that must ultimately authorize all government contracts) since January 2009 when the first geothermal energy project contract was granted to Geotérmica Platanares, S.A. de C.V. by the Honduran Secretariat of Natural Resources and Environment (“SERNA”) (January 6, 2009 “Contrato de Operación”).  Although the PPA contract with the ENEE (June 3, 2010 “Contrato de Suministro de Potencia y su Energía Asociada No. 086-2010) was approved (Legislative Decree 159-2010 published in the Official Publication La Gaceta on December 31, 2010), the permission to operate languished in the National Congress.  Recognizing the potential of geothermal energy projects to generate sustainable, reliable, and cost-effective power, while contributing to the country’s goal for increased installed renewable energy capacity and diversification of the energy matrix, on March 14, 2012 (Legislative Decree 197-2012 published in the Official Publication La Gaceta on January 31, 2013), after 3 years of paralysis, the Honduran National Congress began giving the final approval to geothermal energy project contracts with 95MW of the 120MW of the country’s combined geothermal energy general potential now already authorized.

Authorized Geothermal Power Generation Projects in Honduras

Geotérmica Platanares Economics and Financial Structure

The Platanares project has secured a 30-year Power Purchase Agreement for up to 35 MW with the national utility of Honduras, ENEE.  The average annual production is 297,400,000 kWh per year with the expected value per kWh hovering around $0.112/ kWh, which provides a lower purchase cost to the ENEE per kWh than the energy generated from other renewable resources.  The project is expected to generate average annual revenue of approximately $33 million and benefits from the tax exemption during the first 10 years of operation.

While ELCOSA and its affiliates, as a privately-owned independent power producer in Honduras having an expansive portfolio that includes large utility scale solar, hydro, and HFO-thermal electric generation, had engaged in geothermal exploratory work at Platanares since 2009, the company decided to partner with Reno, Nevada-based Ormat Technologies, Inc. (NYSE: ORA) (“Ormat”) for development of the geothermal power plant.  Having built more than 2,100 MWs of geothermal capacity in more than 150 geothermal power plants across more than 25 countries worldwide, Ormat was selected for its leadership in the global geothermal sector.  Leveraging Ormat’s vast expertise, the Platanares geothermal plant has been designed to harness the power and lifespan of the areas reservoirs by re-injecting 100% of all geothermal fluids, and hence the geothermal solution is sustainable and virtually emissions-free while the facility has been environmentally designed to blend into its natural surroundings of the Copan mountains.

35MW Geotérmica Platanares power plant located at La Unión, Santa Rosa de Copan, Honduras

In November 2012, ELCOSA and Ormat entered into a Build, Operate, and Transfer (“BOT”) contract for the Geotérmica Platanares geothermal project under which Ormat became the owner of all project assets, including wells, land, the Power Purchase Agreement and necessary permits to develop the geothermal project.  Ormat will hold the assets under the BOT structure for approximately 15 years commencing from the commercial operation date (“COD”), after which the project will revert in full to ELCOSA.

The roughly $180 million geothermal project is funded by private Honduran and foreign investment. With approximately $45 million having already been contributed in cash and/or assets satisfactory as equity or subordinated debt the project is supported by $124.7 million of financing from the Overseas Private Investment Corporation (“OPIC”), the U.S. Government’s development finance institution, as the sole lender.  On May 03, 2018 Ormat completed the closing of the finance agreement and received a disbursement of $114.7 million representing the full amount of Tranche I of the OPIC non-recourse project loan that carries a fixed interest rate of 7.02% per annum with a maturity of approximately 14 years. The closing of the second tranche of up to $10 million is expected during the first half of 2019.

35MW Geotérmica Platanares power plant located at La Unión, Santa Rosa de Copan, Honduras

Inauguration

Although commissioned by Ormat on September 1, 2017 as the official COD, the 35 MW Platanares geothermal power plant was officially inaugurated seven months later on April 30, 2018.  At the ribbon cutting ceremony, Honduran President Juan Orlando Hernández, CEO of Ormat Technologies Isaac Angel, and U.S. Overseas Private Investment Corporation (OPIC) Vice President for Investment Policy Ryan Brennan inaugurated Geotérmica Platanares.  In attendance at the inaugural event were also Larach family members of ELCOSA, local dignitaries, business and community leaders, as well as additional Honduran and U.S. government officials, and other Ormat senior leadership.

Geotérmica Platanares Inauguration

Performance Statistics and Ormat geothermal technology

In December 2015, Ormat concluded the drilling activity as well as extensive tests that supported the decision to construct the 35 MW project. The project has two (2) exploration wells, one (1) monitoring well, four (4) production wells, and two (2) injection wells.

35MW Geotérmica Platanares power plant located at La Unión, Santa Rosa de Copan, Honduras

35MW Geotérmica Platanares power plant located at La Unión, Santa Rosa de Copan, Honduras

From COD on September 1, 2017 through October 13, 2017, Ormat reported field-wide performance was steady, with net generation at the expected output of 35 MW. The four production wells were steady in these first 6 weeks of commercial operation:

Geotérmica Platanares start-up period performance

The total of these rates is 10,895 gpm.  During the initial start‐up period, individual wells showed production rates as high as 4,000 gpm, and the sum of the individual maximum rates would be over 14,000 gpm. This suggests that there is a surplus of approximately 30% in the combined capacity of the production wells. The operational data reported by Ormat suggests that resource decline is minimal and the production well capacity is more than sufficient for 35 MW of net electrical generation.

The Platanares geothermal plant uses Ormat’s binary technology.  According to Ormat, binary plants are ideal for geothermal reservoirs to maximize sustainability and return on investment. Binary plants maximize sustainability by reinjecting 100% of the geothermal fluid, maintaining reservoir pressures. Return on Investment (“ROI”) is maximized due to much lower operating costs and higher resilience to changing reservoir conditions thereby maintaining higher efficiency over the long term.

Ormat Technologies Geothermal Combined Cycle Power Plant

As shown in the image above in Ormat’s geothermal combined cycle power plant the hot geothermal fluid is extracted from an underground reservoir and flows from the production wellhead through pipelines to heat exchangers in the Ormat Energy Converter (OEC).  Inside the heat exchangers, the geothermal fluid heats and vaporizes a secondary working fluid which is organic, with a low boiling point.  The organic vapors drive the turbine and then are condensed in a condenser, which is cooled by either air or water.  The turbine rotates the generator. The condensed fluid is recycled back into the heat exchangers by a pump, completing the cycle in a closed system.  The cooled geothermal fluid is re-injected into the reservoir.

To learn more about how Ormat’s geothermal power generation binary technology process implemented at Geotérmica Platanares in Honduras works Ormat has produced this excellent introductory video