Non Technical Barriers in Developing Non Technical Barriers in Developing Geothermal District Heating in the Paris Geothermal District Heating in the Paris BasinBasin

Pierre UNGEMACH and Miklos ANTICSPierre UNGEMACH and Miklos ANTICSGPC IPGPC IPParis Nord 2, 14, rue de la Perdrix, Lot 109, B.P. 50030Paris Nord 2, 14, rue de la Perdrix, Lot 109, B.P. 5003095946 ROISSY CDG CEDEX, FRANCE95946 ROISSY CDG CEDEX, FRANCEe-mail: e-mail: pierre.ungemach@geoproduction.frpierre.ungemach@geoproduction.fr

m.antics@geoproduction.frm.antics@geoproduction.fr

OUTLINEOUTLINE

1.1. MILESTONESMILESTONES

2.2. STATUSSTATUS

3.3. TECHNICAL SHORTCOMINGSTECHNICAL SHORTCOMINGS

4.4. NON TECHNICAL OBSTACLESNON TECHNICAL OBSTACLES

5.5. CONCLUSIONSCONCLUSIONS

MILESTONES (1)MILESTONES (1)

1960’s Pre-oil shock1960’s Pre-oil shock first attempt – abandonedfirst attempt – abandoned second attempt successful doublet completionsecond attempt successful doublet completion

1973-1978 Post first oil shock1973-1978 Post first oil shock four completed doubletsfour completed doublets enforcement of legal frameworkenforcement of legal framework

1979-1986 Post second oil shock1979-1986 Post second oil shock 51 completed doublets51 completed doublets >90% success ratio>90% success ratio first well damage symptomsfirst well damage symptoms

late 1980’s Early exploitation stageslate 1980’s Early exploitation stages thermochemical (corrosion/scaling) damagethermochemical (corrosion/scaling) damage equipment failureequipment failure

MILESTONES (2)MILESTONES (2)

1990’s Technological/managerial maturation1990’s Technological/managerial maturation technological improvements (R&D stimuli)technological improvements (R&D stimuli) debt renegotiationdebt renegotiation abandonment of 21 non economic/severely damaged abandonment of 21 non economic/severely damaged

doubletsdoublets

2000’s Follow-up. Where to go next?2000’s Follow-up. Where to go next? PrivatisationPrivatisation Co-generationCo-generation Future prospects (development vs. sustainability issues)Future prospects (development vs. sustainability issues)

PARIS BASIN DISTRICT HEATING SCHEMEPARIS BASIN DISTRICT HEATING SCHEME

operating abandoned

Location of the geothermal district heating sites in the Paris Basin

PARIS BASIN DISTRICT HEATINGPARIS BASIN DISTRICT HEATINGDOUBLET COMPLETION/ABANDONMENT STATUSDOUBLET COMPLETION/ABANDONMENT STATUS

-5

0

5

10

15

20

Year

Abandonned

doublets

Completed

doublets

75 80 85

90 95 00 05

PARIS BASIN GEOTHERMAL HEATINGPARIS BASIN GEOTHERMAL HEATING

191--Co-generation doublets

14776Self flowing wells

20273649Artificial lift wells

29,40036,20033,80036,000Unit Yield (GWht/yr)

5.96.76.06.5Unit Capacity (MWt)

1,0001,2401,4552,000Heat Production (GWht/yr)

200227260360Installed capacity (MWt)

34344355Operating doublets

2006200019901985

AchievedTarget

STATUSSTATUS

31/12/200631/12/2006

TECHNICAL SHORTCOMINGSTECHNICAL SHORTCOMINGS

Corrosion/scaling damageCorrosion/scaling damage thermochemically sensitive geothermal brine thermochemically sensitive geothermal brine

causing well damage (corroded casing, reservoir causing well damage (corroded casing, reservoir plugging) and equipment failureplugging) and equipment failure

Equipment failureEquipment failure Downhole production pumpsDownhole production pumps Injection pumpsInjection pumps Heat exchanger pluggingHeat exchanger plugging Regulation malfunctioningRegulation malfunctioning

ConsequencesConsequences Productivity lossesProductivity losses Frequent/prolonged doublet shutdownFrequent/prolonged doublet shutdown

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSFINANCIALFINANCIAL

Massive debt chargesMassive debt charges InvestmentInvestment 10 M€10 M€ OM costsOM costs 0.6 M€0.6 M€ EquityEquity 5-10 %5-10 % DebtDebt 90-95 %90-95 %

Low fossil fuel costsLow fossil fuel costs MWht natural gas < 30 €MWht natural gas < 30 €

ConsequencesConsequences Debt repayment charge >50-60% of Debt repayment charge >50-60% of

revenuesrevenues Near to bankruptcy stateNear to bankruptcy state

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSSELECTED FINANCIAL FIGURESSELECTED FINANCIAL FIGURES

Item/doublet A1 A2 B C D1 D2

(1) (1) (2) -1 (1) (2)

Total heat supply (MWht/yr) 58,000 43,500 48,888 51,000 40,000 31,000

- geothermal 39,500 32,500 42,000 41,000 26,000 15,000

- back-up boilers 18,500 11,000 6,000 10,000 14,000 16,000

- geothermal coverage % 68 75 87.5 80 65 48

Heat selling price (€/MWht) 38 37 38 39 41 41

Revenues (103 €/yr) 2131 1598 1808 2006 1646 1285

Expenditure (103 €/yr) 2061 1607 1764 1886 1492 1349

- debt charge 1082 1037 1052 1159 656 488

- power 133 108 157 90 85 79

- back-up fuels 508 302 165 274 384 439

- maintenance 247 224 281 268 276 252

- heavy duty workover provision 55 37 61 50 38 38

- overhead 37 37 49 44 53 53

Balance (103 €/yr) 70 -9 44 120 154 -64

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSOPERATOR’S EXPERTISEOPERATOR’S EXPERTISE

Geothermal operators lackingGeothermal operators lacking Mining experienceMining experience (well (well

maintenance/workover, downhole production maintenance/workover, downhole production pumps, corrosive/scaling fluids handling)pumps, corrosive/scaling fluids handling)

Heating experienceHeating experience in operating GDH in operating GDH grids, under retrofitted schemes, combining grids, under retrofitted schemes, combining several base load, backup/relief energy several base load, backup/relief energy sources and fuelssources and fuels

Managerial/entrepreneurial skillsManagerial/entrepreneurial skills No integrated management structure. Unclear No integrated management structure. Unclear

definition of intervening parties duties and definition of intervening parties duties and commitments. Inefficient marketing/negotiation commitments. Inefficient marketing/negotiation of heat sales and users’ subscription contractsof heat sales and users’ subscription contracts

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSFISCAL (1)FISCAL (1)

VAT 19.6 % applicable to GDH operators VAT 19.6 % applicable to GDH operators whereas gas and electricity producers benefit whereas gas and electricity producers benefit from a 5.5 % rate. This is clearly unfair.from a 5.5 % rate. This is clearly unfair.

IMPACT:IMPACT:

SectorSector € (VAT free) € (VAT included)

       building heating, geothermal grid 445 528

       building heating, gas fired boilers 445 518

       individual gas heating 449 506

       individual electric heating 445 520

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSFISCAL (2)FISCAL (2)

Local, so called, professional tax penalises GDH grids serviced Local, so called, professional tax penalises GDH grids serviced under lease/concession contracts (non deductible under lease/concession contracts (non deductible infrastructure neutral costs). infrastructure neutral costs).

Prejudice: GDH grid serving 5,000 equivalent dwellings #70,000 €/yr.Prejudice: GDH grid serving 5,000 equivalent dwellings #70,000 €/yr. Ecotax exemption for individual users (families) arguing Ecotax exemption for individual users (families) arguing

that ecologic taxation do not apply to them whereas that ecologic taxation do not apply to them whereas they represent ca 25% of total energy consumption they represent ca 25% of total energy consumption (heat+power)(heat+power)

Fuels (Mtoe's/yr) Electricity (TWh/yr) domestic uses (families): residential 34 119 transports 24 58 corporates, transports 25 8 tertiary sector 10 91 industry 26 131 agriculture 18 30

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSIMAGEIMAGE

GDH difficult to apprehend & GDH difficult to apprehend & comprehendcomprehend

GDH remains esoteric and somewhat GDH remains esoteric and somewhat exotic compared to other RE and fossil exotic compared to other RE and fossil fuel sourcesfuel sources

GDH regarded, in the early days, as a GDH regarded, in the early days, as a poorly reliable, costly and, occasionally, poorly reliable, costly and, occasionally, hazardous technologyhazardous technology

More efforts required to attract a More efforts required to attract a wider social acceptance and public wider social acceptance and public awareness.awareness.

NON TECHNICAL BARRIERSNON TECHNICAL BARRIERSCONCLUSIONS/RECOMMENDATIONSCONCLUSIONS/RECOMMENDATIONS

Most NT obstacles, if not yet totally Most NT obstacles, if not yet totally removed, are being progressively removed, are being progressively overcomeovercome

WHAT IS NEEDED MOSTWHAT IS NEEDED MOST Operators side.Operators side. More integration, less More integration, less

dissemination, by grouping several GDH grids dissemination, by grouping several GDH grids into single management structures with a well into single management structures with a well defined mining/heating synergydefined mining/heating synergy

State side.State side. A clearly stated (and applied) A clearly stated (and applied) environmental policy explicitly by favouring environmental policy explicitly by favouring RES via relevant regulation, fiscal incentives RES via relevant regulation, fiscal incentives and ecologic taxation.and ecologic taxation.

Overall.Overall. Gain wider social acceptance via Gain wider social acceptance via selectively targeted actions.selectively targeted actions.