Industry Trend Analysis - Global Geothermal Forecast: Indonesia, Kenya & Mexico In The Spotlight - JAN 2018

BMI View: We forecast global geot hermal capacity to increase by 2 8 % between 201 7 and 2026 - from roughly 1 3. 8 GW to just over 1 7 .5 GW. Indonesia will emerge as the largest geothermal market by installed power capacity over the course of our forecast period, and we also expect strong growth in Kenya as the government prioritises exploiting the country ' s vast geothermal resources.

Select Markets Driving Global Growth
Heat Map Of Geothermal Capacity Additions By Country Between 2017 & 2026, MW
*Grey colour means no new capacity, or outside of coverage. Source: EIA, BMI, IRENA
Headline Global Geothermal Forecasts
Indicator 2016 2017f 2018f 2019f 2020f 2021f
e/f = BMI estimate/forecast. Source: EIA, IRENA, BMI
Generation, Geothermal, TWh 81.755 89.356 95.431 97.886 102.630 105.508
Generation, Geothermal, % y-o-y 4.359 9.298 6.798 2.572 4.847 2.804
Capacity, Geothermal, MW 12,697.7 13,799.6 14,323.5 14,862.4 15,314.2 16,153.7
Capacity, Geothermal, % y-o-y 7.3 8.7 3.8 3.8 3.0 5.5

Key Forecast Takeaways

  • We forecast global geothermal power capacity to increase by 28% between 2017 and 2026 - from roughly 13.8 gigawatts (GW) to nearly 17.7GW. By the end of our 10-year forecast period the geothermal segment will comprise just 1% of global installed non-hydro renewables capacity.

  • Indonesia will be the largest geothermal market globally by the end of our 10-year forecast period. The gradual commissioning of projects in the pipeline will see Indonesia's geothermal capacity increase to just over 3.8GW by 2026.

  • Kenya will be a growth outperformer for geothermal, with its domestic geothermal sector expanding by 60% between 2017 and 2026.

  • Increasing numbers of countries in the Latin America region will turn to geothermal energy in a bid to diversify hydropower-reliant power mixes. We expect geothermal capacity in the region to increase by over 35%, albeit from a relatively low base.

  • Mexico will be the primary growth driver in Latin America, as the government looks to capitalise on the country's vast untapped geothermal market potential, estimated at 8.6GW.

Indonesia Heading For The Top
Global - Top Five Markets By Installed Geothermal Capacity In 2026f
f = BMI forecast. Source: EIA, IRENA, BMI

Key Global Geothermal Trends

  • Indonesia The Largest Market, But Kenya Emerging As Key Growth Outperformer

Geothermal capacity in Indonesia will increase from 1.5GW in 2016 to 3.8GW by 2026. Expanding the geothermal industry is a key priority for the Indonesian government given the vast potential for geothermal power generation in the country (estimated at about 28GW), the baseload nature of the resource and elevated power demand across the country. The implementation of conducive policy in the geothermal sector has encouraged investment into the market, and this strong investor interest has translated into a robust pipeline of geothermal projects.

While Indonesia will emerge as the largest geothermal market globally over our 10-year forecast period, Kenya will grow at an equally rapid pace - with capacity expanding by 60% between 2017 and 2026. Kenya's continual expansion of the Olkaria geothermal power plants, along with further developments, will boost total geothermal capacity to over 1.7GW by 2026, in line with government aims of achieving a geothermal capacity of 1,500MW by 2019, rising to 5,000MW by 2030.

The impact geothermal will have on Kenya's power market is significant, considering that geothermal electricity has a high efficiency rating and is not intermittent like other renewable power sources. We expect geothermal electricity generation to account for 45% of total electricity generation in Kenya by 2026, alleviating power supply issues in the country and reducing the reliance on volatile hydropower output.

Geothermal Contribution Significant
Kenya Geothermal Capacity And Contribution To Total Generation
e/f = BMI estimate/forecast. Source: EIA, BMI

Latin America Heating Up, Mexico Out In Front

The number of markets in Latin America that are looking to exploit their domestic geothermal potential is on the rise and we expect geothermal capacity in Latin America to increase 35% to 2.3GW by 2026. This capacity expansion will come from a wide range of markets in the region, including Mexico, Nicaragua, Chile, Argentina, and Costa Rica. That said, the high costs of developing geothermal power plants and the growing availability of cheaper renewables-based alternatives will mean that the sector will only contribute a limited amount to the region's overall power mix.

Mexico is the clear outperformer in terms of the Latin America geothermal expansion, and over 60% of the geothermal capacity that will be added over the next decade in Latin America will be within Mexico. Prospects for investment into Mexico's geothermal power sector are improving significantly due to the confluence of multiple supporting dynamics. For example, the geothermal industry in Mexico will benefit from increased financial support, particularly from national and multilateral financing mechanisms devised to mitigate the risks associated with early exploratory drilling - which accounts for a large component of the high upfront investment required by geothermal projects. In addition, the government has opened up the industry to investors by allocating unexploited sites for tender to the private sector - through the 'Round Zero' process.