Embed Size (px)
Citation preview
Study on Economic Partnership Projects in Developing Countries in FY2013
Study on Geothermal Power Development
in Tacna, Peru
Final Report
February 2014
Prepared for:
The Ministry of Economy, Trade and Industry Ernst & Young ShinNihon LLC
Japan External Trade Organization
Prepared by: Nippon Koei Co., LTD Fuji Electric Co., Ltd.
Yokogawa Electric Corporation
Reproduction Prohibited
Study on E
conomic P
artnership Projects in D
eveloping Countries in FY
2013 S
tudy on Geot
hermal Powe
r Developme
nt in T
acna, Peru
February 2014
The M
inistry of Econom
y, Trade and Industry
P
repared by: N
ippon Koei C
o., LT
D
Fuji E
lectric Co., L
td. Y
okogawa E
lectric Corporation
Preface
This report was prepared by Nippon Koei Co., Ltd., Fuji Electric Co., Ltd., and Yokogawa Electric Corporation
who were entrusted by the Ministry of Economy, trade and Industry of Japan with the “Study on Economic
Partnership Projects in Developing Countries in FY2013”.
This report was prepared to study the feasibility of a 50 MW geothermal power plant with an estimated cost of
twenty five (25) billion Japanese Yen. The area of Calientes, Tacna Region has been unable to materialize
geothermal electricity projects due to restrictions of institutional, legislative and other natures, and this report aims
to overcome such difficulties and enable the implement of the project.
The Study Team wishes that this report would contribute to the realization of the Project and to serve as reference
for relevant parties of Japan.
February 2014
Nippon Koei Co., Ltd., Fuji Electric Co., Ltd.,
Yokogawa Electric Corporation
Project Site Map
Source：Study Team
Brazil
Bolivia
Columbia
Ecuador
Lima
Tacna Province
Bolivia
Tacna Province
Tacna
Calientes
Candarave
Source: http://www.mofa.go.jp/
50km
N
Source: Google Earth (Licensed)
Pictures in the Project Area and its Suburb Geothermal Manifestation in Calientes
（Springs and Fumaroles）
Yukamane Volcano in the west of Calientes by about
10km far from the site
Alpaca Pasturing in Villacota Maure
Protection Wet Area
Borateras Facilities (Hot Spring)
Meeting in Tacna State Government Office Candarave Town as the project camp site
Source: Study Team
List of Abbreviations
Abbreviation Full Name
ACR Área de Conservación Regional
(Regional Conservation Area)
ANP Áreas Naturales Protegidas
(Natural Protection Areas)
B/C Beneficio/Costo
(Benefit/Cost)
CDM Mecanismo de Desarrollo Limpio
(Clean Development Mechanism)
COES Comité de Operación Económica del Sistema Interconectado Nacional
CIRA Certificación de Inexistencia de Restos Arqueológicos
(Certificates of Non-existence of Archaeological Relics)
CR En Peligro Crítico
(Critically Endangered)
DCS Sistemas de Control Distribuido
(Distributed Control System)
DGAAE Dirección General de Asuntos Ambientales Energéticos
(General Directorate of Energy - Related Environmental Affairs)
DGE Dirección General de Electricidad
(Electricity General Directorate)
DREM Direcciones Regionales de Energía y Minas
(Regional Directorates of Energy and Mines)
E/S Servicios de Ingeniería
(Engineering Service)
EAE Evaluación Ambiental Estratégica
(Strategic Environmental Assessment )
EIA Evaluación de Impacto Ambiental
(Environmental Impact Assessment)
EIRR Tasa Interna de Retorno Económico
(Economic Internal Rate of Return)
EN En Peligro
(Endangered)
EP Electroperu, S.A.
F/S Estudio de Factibilidad
(Feasibility Study)
FCRS Fluido de Recogida y el Sistema de Reinyección
(Fluid Collection and Reinjection System)
FIRR Tasa Interna de Retorno Financiero
(Financial Internal Rate of Return)
FONAFE Fondo Nacional de Financiamiento de la Actividad Empresarial del Estado
(National Fund for Financing State Enterprise Activity)
GDP Producto Interno Bruto
(Gross Domestic Product)
GNI Renta Nacional Bruta
(Gross National Income)
INC Instituto Nacional de Cultura del Peru
(National Institute of Culture of Peru)
INGEMMET Instituto Geológico Minero y Metalúrgico
(Institute of Mining and Metallurgical Geology))
IPP Productor Independiente de Energía
(Independent Power Producer)
IUCN Unión Internacional para la Conservación de la Naturaleza
(International Union for Conservation of Nature and Natural Resources)
JASE-W Japanese Business Alliance for Smart Energy Worldwide
JBIC Japan Bank for International Cooperation
JETRO Japan External Trade Organization
JICA Agencia de Cooperación Internacional del Japón
(Japan International Cooperation Agency)
JOGMEC Japan Oil, Gas and Metals National Corporation
MEF Ministerio de Economía y Finanzas
(Ministry of Economy and Finance)
MEM Ministrerio de Energia y Minas
(Ministry of Energy and Mines)
MINAM Ministerio del Ambiente
(Ministry of Environment)
MPU Unidad de Microprocesadores
(Micro Processor Unit)
NCG Gas No Condensable
(Non-Condensible Gas)
NPV Valor Presente Neto
(Net Present Value)
NT Casi Amenazado
(Near Threatened)
PDD Documento de Diseño de Proyecto
(Project Design Document)
PPP Participación Público Privada
(Public–Private Partnership)
QCBS Quality & Cost Based Selection
SEIA Sistema de Evaluación de Impacto Ambiental
(National Environmental Impact Assessment System)
SEIN Sistema Eléctrico Interconectado Nacional
(National Interconnected Electric System)
SENACE Servicio Nacional de Certificacion Ambiental para las Inversiones
Sostenibles
(National Service of Environmental Certification of Sustainable
Investments)
SENAMHI Servicio Nacional de Meteorología e Hidrología del Perú
(National Service of Meteorology and Hydrology of Peru)
SERNANP Servicio Nacional de Areas Naturales Protegidas por el Estado
(National Service of Natural Protected Areas)
SINANPE Sistema Nacional de Áreas Naturales Protegidas por el Estado
(National System of Protected Natural Areas)
SNIP Sistema Nacional de Inversión Pública
(National Public Investment System)
Table of Contents
Preface
Project Site Map
Pictures in the Project Area and its Suburb
List of Abbreviations
Table of Contents
Executive Summary
(1) Justification, Objectives and Necessity of the Project .................................................................................. S-1
(2) Basic Principle to Formulate the Project ...................................................................................................... S-1
(3) Abstracts of the Project ................................................................................................................................ S-2
(4) Schedule of the Study ................................................................................................................................... S-5
(5) Feasibility Study for Yen Loan request and implementation ........................................................................ S-5
(6) Technical Advantage of Japanese Company................................................................................................. S-6
(7) Practical Schedule and Risks for the Project Implementation .................................................................... S-7
(8) The map that shows the project point of Peru .............................................................................................. S-8
Chapter 1 Overview of the Host Country and Sector
(1) Economic and Financial Situation of Recipient Country ............................................................................. 1-1
1) Outline of the Republic of Peru .................................................................................................................. 1-1
2) Economy and Financial Situation ............................................................................................................... 1-1
(2) Overview of Sector Subject to the Project .................................................................................................... 1-3
1) Target sectors ............................................................................................................................................. 1-3
2) Outline of Electricity Sector ....................................................................................................................... 1-3
(3) Conditions in the Project Area ..................................................................................................................... 1-6
Chapter 2 Study Methodology
(1) Scope of Work ............................................................................................................................................ 2-1
1) Objective .................................................................................................................................................... 2-1
2) Contents of the Study ................................................................................................................................. 2-1
(2) Organization and Methodology of the Study ............................................................................................. 2-2
1) Methodology of the Study .......................................................................................................................... 2-2
2) Organization of the Study ........................................................................................................................... 2-2
(3) Study Schedule ........................................................................................................................................... 2-3
Chapter 3 Justification, Objectives and Technical Feasibilities of the Project
(1) Background and Necessity of the project ..................................................................................................... 3-1
1) Background of the Project .......................................................................................................................... 3-1
2) Scope of the Project and Beneficiaries ....................................................................................................... 3-1
3) Analysis of the current state, future prospects and problems expected when not implementing projects .. 3-1
4) Effectiveness and Impact when Implementing the Project ......................................................................... 3-2
5) Comparison with this Project that is Proposed and Other Options to be Considered ................................. 3-2
(2) For Sophistication and Streamlining of Energy Use .................................................................................... 3-4
(3) Justification, Objectives and Technical Feasibility of the Project ................................................................ 3-5
1) Estimated Power Demand .......................................................................................................................... 3-5
2) Review of Previous Studies ........................................................................................................................ 3-5
a) Geology and Geochemistry ...................................................................................................................... 3-5
b) Type and Origin of Geothermal Fluid ...................................................................................................... 3-6
c) Resistivity Distribution ............................................................................................................................. 3-6
d) Conceptual Geothermal Model ................................................................................................................. 3-6
e) Evaluation of Geothermal Resource Potential .......................................................................................... 3-7
f) Selection of Production and Reinjection Zone .......................................................................................... 3-7
3) Results of the Study .................................................................................................................................... 3-9
4) Study of the Technical Method ................................................................................................................ 3-10
(4) Abstracts of the Project .............................................................................................................................. 3-12
1) Basic Design for Determination of Project Contents ............................................................................... 3-12
a) Selection of Project Area ........................................................................................................................ 3-12
b) Project Implementation Organization ..................................................................................................... 3-12
c) Project Implementation Period ............................................................................................................... 3-12
d) Determination of Output Capacity ......................................................................................................... 3-12
e) Transmission Line to be Connected to Main Power Grid ....................................................................... 3-13
2) Basic Design Concept and Outline of the Major Equipment.................................................................... 3-13
a) Basic Design Concept ............................................................................................................................. 3-13
b) Countermeasures against Geothermal Atmosphere ................................................................................ 3-14
3) Outline of the Proposed Project ................................................................................................................ 3-15
a) Major Mechanical Equipment ............................................................................................................ 3-15
b) Geothermal Steam Turbine .................................................................................................................... 3-15
c) Condensing System ................................................................................................................................ 3-16
d) Major Electrical Equipment- Generator ................................................................................................. 3-16
e) Instrumentation and Control System ...................................................................................................... 3-17
f) Fluid Collection and Reinjection System (FCRS) .................................................................................. 3-18
4) Issues and its Counter Measures for the Technical Proposal and System ................................................ 3-20
5) Drilling Plan for Exploration Wells ......................................................................................................... 3-21
a) Selection of Drilling Pad ........................................................................................................................ 3-21
b) Accessibility to the Site .......................................................................................................................... 3-21
c) Specifications for Exploratory Wells ...................................................................................................... 3-22
d) Suggestion of Structural Test Well ......................................................................................................... 3-24
Chapter 4 Evaluation of Environmental and Social Impacts
(1) Analysis of Present Environmental and Social Conditions ........................................................................ 4-1
1) Analysis of Present Conditions t ................................................................................................................ 4-1
a) Outline of Project Site .............................................................................................................................. 4-1
b) Natural Environment ................................................................................................................................ 4-2
c) Regional Regulation ................................................................................................................................. 4-2
2) Future Projection (In case of no project implementation) .......................................................................... 4-4
(2) Environmental Improvement Effects by the Project ................................................................................... 4-5
1) Environmental Improvement Effects by the Project .................................................................................. 4-5
2) CDM Potential of the Project ................................................................................................................... 4-6
(3) Environmental and Social Impacts by the Project ...................................................................................... 4-7
1) Preliminary Scoping for Environmental and Social Items ......................................................................... 4-7
2) Results of Comparison between the Proposed Project and Other Alternatives that Cause Smaller Negative
Impacts ............................................................................................................................................................. 4-9
3) Results of the Meeting with Implementing Agencies and Organizations Knowledgeable about
Environmental Issues of the Project Area ....................................................................................................... 4-10
(4) Outlines of the Legislation for the Environmental and Social Considerations in Peru ............................ 4-11
1) Outline of the Legislation for Environmental and Social Considerations Related to the Project ............. 4-11
a) Environmental Impact Assessment (EIA) .............................................................................................. 4-11
b) Environmental Standards ....................................................................................................................... 4-12
c) Natural Protection ................................................................................................................................... 4-12
d) Social Considerations ............................................................................................................................. 4-12
2) Environmental Impact Assessment (EIA) which is required for the Project ............................................ 4-12
a) Environmental Impact Report for Geothermal Development ................................................................. 4-12
b) EIA for Electric Power Project ............................................................................................................... 4-13
c) Laws and Regulations of Peru related to implementation of the project. ............................................... 4-15
(5) Actions to be taken by the Project Proponent in Peru for the Project Implementation ............................ 4-16
1) Preparation of Environmental Impact Report for Application of Geothermal Right based on Geothermal
Resource Law ................................................................................................................................................. 4-16
2) EIA for Electric Concession Law（Obtain of Environmental Certificate） ........................................... 4-16
3) EIA for SNIP ............................................................................................................................................ 4-16
4) Certificates of Non-existence of Archaeological Relics (CIRA) .............................................................. 4-16
5) Land Acquisition ...................................................................................................................................... 4-17
6) CDM Registration .................................................................................................................................... 4-17
Chapter 5 Financial and Economic Evaluation
(1) Project Cost ................................................................................................................................................ 5-1
(2) Case study without Yen Loan ..................................................................................................................... 5-3
1) Environmental Improvement Effects by the Project .................................................................................. 5-3
a) Consideration of Financial Internal Rate of Return (FIRR) ..................................................................... 5-3
b) Consideration of Economic Internal Rate of Return (EIRR) .................................................................... 5-3
2) Case Study with Yen Loan ....................................................................................................................... 5-3
a) Case for using Yen Loan in the General Terms ........................................................................................ 5-4
b) Case for using Yen Loan of Preferential Terms ....................................................................................... 5-5
3) Comparison and Verification of Geothermal Development Cases of Other Countries ............................ 5-5
a) Comparison of Project Cost of Geothermal Power Plant of 50MW ......................................................... 5-5
b) Well Drilling Cost and Power Plant Construction Costs as a Percentage of Total Construction Costs ... 5-6
c) Comparison of the Power Purchase Price ................................................................................................. 5-6
Chapter 6 Planned Project Schedule
(1) Construction Schedule for Geothermal Power Plant .................................................................................. 6-1
(2) Schedule for Environmental and Social Considerations ............................................................................ 6-1
Chapter 7 Implementing Organizations
(1) Outline of Implementing Agency ............................................................................................................... 7-1
1) ELECTROPERU ........................................................................................................................................ 7-1
2) Ministry of Energy and Mines .................................................................................................................... 7-1
3) Peru Geological Mining and Metallurgy Institute ...................................................................................... 7-2
(2) Organizational structure for implementation of the project in partners country ........................................ 7-3
Chapter 8 Technical Advantages of Japanese Companies
(1) Organizational structure for implementation of the project in partners country ........................................ 8-1
1) Turbine and Generator ................................................................................................................................ 8-1
2) Consulting and Operation of Geothermal Project ...................................................................................... 8-2
(2) Main equipment and material expected to procured from Japan and cost .................................................. 8-4
(3) Measures Necessary to Promote Receipt of Orders by Japanese Companies ............................................ 8-4
Executive Summary
S-1
(1) Background and Necessity of the project
The total installed capacity of power plant facilities of Peru in 2010 is 7,309 MW, and a growth of 8.1% per
annum is expected for the 2009-2018 power demand. Peruvian government has established the “Energy Efficient
Use Promotion Law (Law 27 345, 2000) " for the purpose of development of renewable energy and energy saving
and conservation promotions. The "Sub-regulations on renewable energy power generation" put into force in 2008
defines implementation of the bidding of the renewable energy business and the target value of the renewable
energy (It is updated every five years. The goal of five-years term from 2009 to 2013 is 5% of the total power. The
target value of the succeeding term is under study). There are expectations for the development of geothermal
resources which are abundant (available potential resources of more than 3,000 MW). To seek possibility of such
expectations, Pre F/S surveys of geothermal development were implemented by Japan Bank for International
Cooperation (JBIC) (2008) and Japan External Trade Organization (JETRO) (2008), and a master plan study has
been implemented by Japan International Cooperation Agency (Agencia de Cooperación Internacional del Japón:
JICA) (2012) until now. However subsequent development has not progressed because of various constraints and
problems of institutions and legislations. Hence, the geothermal power plant does not yet exist in the country.
As an activity of Japanese Business Alliance for Smart Energy Worldwide Geothermal Working Group, Latin
America sub-working group, the study team sent two missions to Peru to exchange views with related
organizations, gather information and survey the project site in September 2012 and March 2013. Through these
activities, the following issues were confirmed: 1) State-owned power company Electroperu,S.A. (EP) has come
to have a strong desire of implementing the first geothermal power generation project and for such purpose,
wishes to obtain the support of the Peruvian government and expects the entry of Japanese companies as well as
the participation of Peruvian governmental sectors, 2) There will be expectation for Japanese companies to have
future opportunities to join geothermal development in the country, 3) Geothermal development in the country is
expected to advance the progress of rural electrification and economic development, and furthermore, an increase
in power demand can be expected by mining development in the province. In October 2012, Hon. Jorge Merino
Tafur, the Minister of Energy and Mines, instructed EP to consider the studies on geothermal development
projects. From the circumstances described above, what we are proposing is a geothermal generation project in
Calientes, Tacna Region in southern Peru of which EP would be the implementing agency.
The power demand of Peru is expected to be three to four times the current demand in the next 15 years up to
2030. Most of this demand will be covered by large-scale gas power generation using natural gas and large-scale
hydroelectric power generation.
The power demand of Tacna Region is concentrated mainly around Tacna city. With recent development in Tacna
Region, the power demand in the province is increasing as similar as that in entire Peru. This increase of power
demand will be covered by large-scale gas power generation plants (500 MW, 2 plants) which are planned in the
neighboring province, and a 500 kV transmission line between Lima and Tacna Region.
The geothermal power plant, to be constructed by this project, produces less electricity compared with the above
S-2
large-scale gas power generation plants so it is difficult to obtain the generation capacity which can meet the
increase of power demand. However it is expected to cover the local power demand which is originated by copper
and other mine operators around Candarave. The mines and refineries they operate require a large amount of
electricity which is mainly generated by their own power plants. Thus, the local power demand can be covered by
transmitting electricity to the copper mines from new geothermal plant to be constructed by this project, and it has
another advantage for power companies to stabilizing the power supply and reducing transmission loss.
In addition, it is possible to ensure FIRR (Financial Internal Rate of Return) of 12% or more at revenue of 0.045
USD per kWh if preferential terms of Japanese Yen Loan is used. The key to the realization of the project is this
yen loan.
(2) Basic Design for Determination of Project Contents
Peru holds the leading position among the geothermal promising countries of the world. However, despite the
above mentioned advantage, Peru so far has not built any nor shown signs of building geothermal power plants.
This is because of Peru's preference for implementation by private companies which will continue to be the
obstacle for geothermal power generation.
Many geothermally developed countries also had similar problems in the past, but they received public funds for
geothermal development at the initial stage of the project to reduce resource risk effect. For example, in countries
such as Costa Rica, the Philippines, Indonesia, and Mexico, their first geothermal power generation projects were
implemented with yen loan fund and thereafter they successfully obtained funds of private sector and other donors
for the following projects. There is no reason why Peru cannot implement geothermal power generation project in
the same manner as above which will be the bridgehead for such projects of full-scale. In addition, as the first
successful geothermal project in South America, a ripple effect is also expected on neighboring countries with
geothermal potential.
In the meantime, EP, the national electric company, has expressed strong willingness to conduct the first
geothermal development project as operator with the support of the government of Peru, for the purpose of
making a breakthrough in the current stagnating situation. Peru’s technology and management capacity for
geothermal development will be advanced if EP conducts its own geothermal development project. This will cause
reviewing and revising of present geothermal laws and regulations (in terms of application for project
implementation and environment and incentives for geothermal development). Furthermore, it would be a model
case for promoting private operators to enter the geothermal business and finally is expected to promote
geothermal development projects among private operators.
(3) Abstract of the Project
1) Basic Design for Determination of Project Contents
a)Selection of Project Area
S-3
The Calientes geothermal area was inspected by JBIC (2008) and JETRO (2008) together with Borateras
geothermal area, and confirmed as high-potential areas for geothermal development.
On the other hand, Tacna Region designated those geothermal-prone areas as conserved area in 2008. Therefore,
those two areas were not yet considered as concession area and geothermal development was not planned there.
Then, Peru selected this area to be studied as geothermal development areas to be funded by Japanese Yen Loan,
through the discussions between Latin America sub-working group and the Peruvian government, in 2012 and
2013.
b)Project Implementation Organizations
The number one candidate organization for project implementation is EP, which is the national electric company
conducting power production in Peru. Practically, EP is the only organization who is eligible to be the
implementing party of a Japanese Yen Loan project and EP's playing such role is the key to the materialization of
this project.
The Ministry of Energy and Mines (Ministerio de Energia y Minas: MEM) and Institute of Mining and
Metallurgical Geology (Instituto Geológico Minero y Metalúrgico: INGEMMET) are ministry and agency related
to the project promotion. INGEMMET will provide geological information and technical support. MEM will
control the rights and approvals.
c)Project Implementation Period
From 2014 to 2023
d)Determination of Output Capacity
According to JBIC (2008), the total geothermal resource of the area was evaluated as approximately 100 MW.
This project will be the first step of the development in the said area and an output capacity of 50 MW would be
appropriate to start with. This output capacity will be reviewed and revised by future study.
e)Transmission Line to be connected to Main Power Grid
Generated power will be connected to the 128 kV electrical power transmission line, and transferred to Tacna
Region, mainly Candarave Province.
The main electrical power transmission line will be constructed from Lima to Tacna and if it is completed before
this project, it can connect to the geothermal power plant.
2) Actions to be taken by the Project Proponent in Peru for the Project Implementation
a)Preparation of Environmental Impact Report for Application of Geothermal Right based on Geothermal
Resource Law
As per the Articles 12 and 21 of Geothermal Resources Implementation Regulations (Nuevo Reglamento de la
S-4
Ley No.26848, Ley Organica de Recursos Geotermicos: D.S.No.019-2010-EM), the project implementing party
must submit a sworn statement on submission of an environmental survey report to Directorate General for
Energy Environmental Affairs (Direccion General de Asuntos Ambientales Energetico: DGAAE) before
applications of exploration and concession respectively. In addition, according to the National Service of
Protected Natural Areas by Study (Servicio Nacional de Areas Naturales Protegidas por el Estado: SERNANP),
Environmental Impact Assessment (Evaluación de Impacto Ambiental: EIA) report on geothermal development
which is approved by DGAAE is required before commencement of Phase II of geothermal exploitation.
b)EIA under Electricity Concession Law
EIA of this project needs to be conducted based on Electricicity law as well as the Environmental Impact
Evaluation System (Sistema de Evaluación de Impacto Ambiental: SEIA) law, and Environmental Certificate
should be obtained. In the EIA, current environment needs to be surveyed at field, detailed prediction and
evaluation based on the results of field survey, and it significant impacts on environment need to be predicted: it is
also necessary to consider countermeasures. In addition, monitoring for environmental items where significant
impacts are expected is required.
Environmental Protection Regulation on Electrical Activities (Reglamento de Proteccion Ambiental en las
Actividades Electricas: D.S. No. 29-94-EM) provides that consulting firms that implement EIA must be those
registered with the MEM.
c)EIA for National Public Investment System (Sistema Nacional de Inversión Pública :SNIP)
In SNIP, the projects are categorized based on project scale (investment cost). Although contents and depth
required in the report vary from one category to another, EIA is required in all public projects by the SNIP law.
EIA stipulated by the Electricity Concession Law can be used for SNIP.
d)Certificates of Non-existence of Archaeological Relics (Certificación de Inexistencia de Restos Arqueológicos:
CIRA)
The Archaeological Investigation Regulations (Supreme Resolution No. 044-2000-ED) provide that the National
Institute of Culture (Instituto Nacional de Cultura: INC) is also in charge of evaluating archeological investigation
results and issuing CIRA. To conserve historical and cultural assets, in principle, all projects need CIRA which is
issued by INC. For application of CIRA, field survey by INC is required for the project less than 5 ha in area or 5
km long. If the project area or length is more than the above, the implementing party of the project must carry out
archaeological investigation before starting development activities. In parallel, archaeological monitoring plan
(Plan de Monitoreo Arqueológicos) is to be prepared. The survey for application of CIRA is to be carried out
during the process of Environmental Certification. In case of encounter with unexpected relics during project
activities, the work must be halted and the findings reported to the Ministry of Culture.
e)Land Acquisition
The project site has been used communally by the community for long-time even though it is not registered. For
this kind of “common land of community”, it is necessary to hold consultations between the project implementing
S-5
party and local people, and agreement on compensation should be made. In Article 31 of Geothermal Resource
Implementation Regulation (D.S.No.019-2010-EM), before the start of Phase II of geothermal exploration or
activities corresponding to geothermal exploitation, there must be agreements with the owners of the land to be
affected by the geothermal activity, otherwise they could request the imposition of easement.
As for Electricity Concession Law, it provides that resettlement of residents and land acquisition must be
compensated, and the scope of compensation shall include land, crops and buildings.
f)Clean Development Mechanism (Mecanismo de Desarrollo Limpio: CDM) Registration
In order to register this project as a CDM project, a Project Design Document (PDD) should be prepared by the
project implementing party.
3) Summary Results of the Financial and Economic Preliminary Analyses
a)Case Study without Yen Loan
The cash flow statement was also calculated on the assumption of the selling price of electricity and determining
the financial internal rate of return (Tasa Interna de Retorno Financiero : FIRR) for this cash flow, without taking
debt into account. The validity of the project was also examined. The condition was assumed that: operation
period: 30 years, efficiency: 90% and economic discount rate: 12%, etc.
In addition for the project’s economic analysis, economic internal rate of return (Tasa Interna de Retorno
Económico : EIRR) was obtained by comparing the case of the construction of a combined cycle gas turbine
power plant having the same power capacity (50 MW). For the real case for comparison, there is a large-scale gas
power plant is planned near Tacna Region, however it is too difficult to compare in terms of capacity. Thus, a
combined cycle gas turbine power plant of equal capacity was selected to compare.
Based on the standard selling price (per kWh) of USD 0.10 for electricity, FIRR was estimated under five price
cases of USD 0.05, 0.06, 0.09, 0.10, and 0.12. Benefit exceeds the cost at a selling price USD 0.06 or more.
However, in order to ensure 12% of the long-term market interest rates, it is necessary to set the selling price of
electricity more than USD 0.10.
The EIRR was compared with the gas-fired combined-cycle power plants, which are one of the major power
sources in Peru. The power plant output was assumed at 50 MW, which is the same as this project. Gas prices
have been estimated to be 75% of the current prices, with 150% and 200% as variable factors. It is necessary that
gas prices to rise by over 150% of the present in order to obtain an EIRR of more than 12%, which is the
acceptable long-term market interest rate.
b)Case Study with Yen Loan
The study team studied the project cases with yen loan for economic evaluation.
In this study, the study team used an interest rate of 1.7% with a redemption period of 25 years and a seven year
S-6
grace period, which is the standard condition under the General Terms and Standards. In addition, in consideration
of the environmental project case, the second option was considered in conjunction to a 0.6% interest rate, a
redemption period of 40 years and also a ten-year grace period, which is the standard condition under preferential
terms. Yen financing is carried out starting from the third year of the project and the calculation was done on the
assumption that 80% of the project cost will be covered through yen loan. The remaining 20% of the project cost
three years later and the cost of the first and second years are set to be procured from the open market where the
calculated long-term market interest rate is 12%, with a ten-year redemption period.
As a result of using the general conditions, USD 0.072 (free), 0.08 (taxable), and 0.10 (free and taxable) were
used as selling prices of electricity. The IRR and NPV were examined for the different selling prices. In order to
secure a 12% long-term market interest rate, in the case of a tax-free option, the selling price of electricity is
required to be USD 0.072 or more. In the case of a tax burden of 30%, the selling price of electricity is required to
be USD 0.08 or more.
As a result of using the preferences, the study team examined the cases for USD 0.072 (free), 0.08 (taxable), and
0.10 (free and taxable) selling prices for electricity. In order to secure a 12% long-term market interest rate for a
tax of 30%, the selling price of electricity is required to be more than USD 0.045.
From the above results for the case of the yen loan under general terms, the estimated feasible selling price of
electricity shall be equal to USD 0.08 per kWh or more. In addition, for a yen loan under preferential terms, the
estimated feasible project selling price of electricity is equal to USD 0.045 per kWh or more. It is believed that in
particular, the geothermal project that takes advantage of the yen loan under preferential terms will be competitive
even if compared with the electricity selling price of a hydroelectric power plant, which is the cheapest in Peru.
(4) Schedule of the Study
After the study, a detailed study, drilling of test wells, evaluation of geothermal resources, detailed design, drilling
of productive and injection wells and construction of geothermal plant with associated facilities are scheduled to
be performed. Selection of the consultant and contractors are also included. The working period of each work item
by stage is estimated as follows: In case the Loan Agreement (L/A) is concluded in late 2014, detailed design will
be done in early 2018, bidding the middle to late 2019 and the construction work will be conducted from
middle-late 2019 to late 2023.
Table-1 Work Item and Period
Stage Work Items Period
Exploration Stage
Detailed study (Preparatory Study by JICA) Approx. 6 months
Application for Project Implementation Approx. 6 months
Exploration Well Drilling (Engineering Service Loan) Total 37 months
Procurement of the Consultant Local Drilling Contractor for ES Loan (Preparation of Specification and Bidding)
Approx. 15 months
S-7
Drilling of exploration wells (Dia.:6-1/2inch, Depth:2,000m)
Approx. 12 months
Evaluation of Geothermal Resources Approx. 12 months
Detailed Design of Facilities Approx. 15 months
Development Stage
Construction of Power Plant and Associated Facilities Total 75 months
Procurement of Consultant Approx. 9 months
Procurement of Local Drilling Contractor for Access road construction (Local Bidding)
Approx. 12 months
Procurement of Contractor for Construction of Geothermal Power Plant (International Bidding)
Approx. 18 months
Drilling of productive and injection wells (total 15 wells) Approx. 30 months
Construction of Geothermal Power Plant with associated facilities (50MWx1)
Approx. 44 months
Test Operation Approx. 4 months
Source: Study Team
Regarding the Socio-Environmental Consideration, the following documents are necessary to be submitted to and
approved by the relevant organizations:
- EIA report approved by DGAAE based on the Geothermal Resource Implementation Law
- EIA based on Electricity Concession Law and SNIP
- CIRA
- Land Acquisition
- CDM Registration
It will take maximum 12 months to prepare above environmental consideration documents necessary for obtaining
exploration right. In the stage of application of development right, review of EIA report approved with exploration
right and additional investigation are expected to be done.
(5) Feasibility Study for Yen Loan request and implementation
In case of a power generation project funded with Japanese Yen Loan of general conditions, it can be judged to be
economically feasible if the selling price of product electricity is 8 cents per kWh or higher. If the same project is
funded with Japanese Yen Loan of preferential conditions, the said price would be 4.5 cents per kWh or higher. It
can be emphasized that a geothermal project with Japanese Yen Loan of preferential conditions is more
competitive even compared with hydroelectric power plants which, in Peru, has the lowest sales price.
For geothermal development projects in Peru, the Peruvian government was hoping for project implementation by
the private sector such as Independent Power Producer (Productor Independiente de Energía: IPP) and
Public-Private Partnership (Participación Público Privada: PPP), rather than a country-driven project. But
currently the government is changing the process as follows.
MEM supports in principle the Concession scheme by the private sector such as PPP and IPP for geothermal
S-8
development, but recognizes that development by the private sector is not progressing, MEM is showing interest
in geothermal development by the state funded with the Japanese Yen Loan. In addition, EP has expressed strong
willingness to conduct geothermal development by Japanese Yen Loans which is economical since it has
continues coordination with MEM.
Also, the Ministry of Economy and Finance (Ministerio de Economia y Finanzas: MEF) is making an effort to
reduce the external debt to achieve a sound financial structure and economic growth. In the past few years, Peru
has continued to have healthy economical growth at a stable low inflation rate. Under such circumstances, MEF
has borrowed yen loan only for very high business priority. Since energy demand increases are expected in the
future, MEM has a positive attitude for the implementation of geothermal power generation development by
Japanese Yen Loan.
In consultation meeting between the Government of Japan and the Government of Peru held in Lima on
November 12, 2013, the Japanese Yen Loan request on geothermal project was noted in the margin. However,
according to the hearing survey to MEF by the study team on 10th December 2013, MEF has announced that they
would consider the Japanese Yen Loan request if there is a request from the MEM. So, MEF is thought to be
considering Japanese Yen Loan for the geothermal project.
As of December 2013, EP sent a written request in accordance with the promotion of this project to MEM and
Tacna provincial government sent the same to MEF. MEM, which is the competent authority for EP, requested a
review of the economics and the implementation scheme for this project. Based on this review results, MEM is
expected to determine whether or not MEM will request Japanese Yen Loan to MEF.
(6) Technical Advantages of Japanese Companies
1) Turbine and generator
Japanese manufacturers have a great deal of experience in turbines and generators for geothermal development
projects all over the world, ranging from research and development, through design, manufacturing, installation,
and to operation & maintenance. Japanese-made geothermal turbines and generators have over 67% share in the
global market.
Since economic performance and operation reliability of a power plant are largely depending on the performance
and reliability of the turbine and generator installed, Japanese manufacturers with abundant experience will have
the greatest advantage. At a geothermal power plant, since both atmosphere the steam supplied to the steam
turbine contain hydrogen sulfide gas, it is very important to take countermeasures including improvement of metal
materials of turbine, turbine shape design which prevents concentration of stress and improvement of coating for
electrical wire and control unit to prevent corrosion caused by hydrogen sulfide gas. The selection of proper
materials and the know-how of countermeasures to protect electrical parts, instrumentations and control devices
from corrosion are the advantages of the Japanese manufacturers. Recently, Japanese manufacturers have
competed with those from Italy and USA and China has recently become a new competitor. Nevertheless, with
S-9
advanced technologies and abundant experience not only in manufacturing but also in terms of efficient
maintenance programs, especially for meticulous detailed after-sales service (To monitor the status of geothermal
power generation facility by telecommunication line after delivery, and propose contents and period of proper
maintenance, etc.), Peruvian contractors will have sufficient reasons for selecting the Japanese manufacturers over
the others.
2) Consulting and operation of geothermal project
Japanese consulting companies have abundant experience to develop both vapor-dominant and water-dominant
geothermal fluid and construct both flash and binary geothermal power plants. Direct use such as for bathing,
farming and heating is spread across the country. Japanese technology and the experience cultivated over many
years have contributed to overseas geothermal development projects in Southeast Asia, Central and South
America and Africa, and this would be also applied to the geothermal development in Peru. In addition, it should
be pointed out that Japanese geothermal power plants endured the large-scale earthquake disaster on March 11,
2011. When the giant earthquake of M 9.0 attacked East Japan, power generation was stopped by turbine trip for
ensuring safety in the six power plants in the region. All geothermal power plants in the East Japan could re-start
generating electricity after several hours or several days. It hugely contributed to local power supply security. The
is due to Japanese-original earthquake-resistant design; the power plants were designed for the standard of
Japanese earthquake-resistant and seismic accelerometer is inside the control unit of turbine, which is
programmed for emergency halt of turbine when the earthquake was detected.
Peru is located in the subduction zone of the oceanic plate like Japan and sometimes suffers damage from major
earthquakes. Experiences, that Japanese geothermal power plant encountered by the Great East Japan Earthquake
Disaster, would be an asset for the Peru side to choose Japanese companies.
(7) Practical Schedule and Risks for Project Implementation
1) Construction Schedule for Geothermal Power Plant
The entire implementation schedule is shown in the following table. It is noted that access road construction was
not included in this schedule. Application for project implementation to be done by the government of Peru,
would be done once when Engineering Service (Servicios de Ingeniería: E/S) Loan is applied and not be done at
the construction stage of the project.
S-10
Table-2 Project Implementation Schedule
Source: Study Team
Stage Work Item
Preparation and Approval ofSocio-Environmental Consideration
Application to Exploring Right
Detailed Study (JICA Preparatory Study)
Application for Project Implementation
Exploration Well Drilling (Engineering Service Loan)
L/A Conclusion
Procurement of Consultant
Procurement of Drilling Contractor (Local Bidding)
Drilling of Exploration Wells (3 Nos.)
Evaluation of Geothermal Resource
Detailed Design of Facilities
Review and Additional Survey forSocio-Environmental Consideration
Application of Development Right
Construction of Power Plant and Associated Facilities(Japanese Yen Loan)
L/A Conclusion
Procurement of Consultant
Procurement of Drilling Contractor (Local Bidding)
Drilling of Productive/Injection Wells (15 Nos.)
Procurement of Contractor (International Bidding)
Construction of Power Plant (50MW)
Construction of Associated Facilities
Test Operation
20232022202120202016 20192015
Dev
elop
men
t Sta
geE
xplo
ratio
n St
age
201820172014
S-11
2) Risks for the Project Implementation
For the introduction of renewable energy including geothermal power generation, at present, the Peruvian
government is trying to implement by private participation. However, initial risk of geothermal power generation
is large as compared with wind and solar power so the development has not yet progressed at present. The risks
associated with geothermal development are uncertainties related to the development of initial resources, the
length of the construction period, and such as prolonged investment recovery period among others.
The prerequisite in Peru for project implementation, technology selection and request for Japanese Yen Loan may
arise from the following legislative and financial issues.
a)Renewable energy development policy by the IPP
Based on the Electricity Concession Law, power generating is basically implemented by IPP. There were two
biddings for renewable energy project based on the regulation concerning renewable energy. However, in
interviews with power-related influential people of Peru, it was noted that the IPP policy does not prohibit placing
of public funds in power development. For this reason, the operation of a flexible policy is desired while
performing the coordination of interests with other private power companies.
b)Environmental and Social Impacts
Environmental Consideration
In carrying out this project, it is necessary to obtain approval of whether it is possible or not to develop first
because of the fact that the project site is part of a conservation area of Tacna State Government, and from the
standpoint of environmental protection.
Social Consideration
In the last few years the residents have come to know how different geothermal development is from mining as
result of presentations and seminars held by private sector and local government. However, it is necessary to take
measures to deepen their understanding of the project, make further consideration on their benefit and avoid
problems in the project development.
c)Capacity Development of implementation organization in Peru side
Because this is the first geothermal development in Peru, there is no experience in the areas of technical, human
resources and management for geothermal development. There is a method of forming a new organization of
professionals specializing in geothermal development, but because it is impossible to secure human resources and
funds to be launched soon, it is practical to proceed with the existing organization.
S-12
(8) Location Map
Figure-1 Location Map
Source: Map from INGEMMET, arranged by Study Team
CalientesGeothermal Power Plant
Tacna
Candarave
50km
Lima
Tacna
N
150km
Chapter 1 Overview of the Host Country and Sector
1-1
(1) Economic and Financial Situation of Recipient Country
1) Outline of Peru
Peru is located in an area with geographical coordinates S 3o-18o W 69o-81o. Its capital Lima is situated near S 12o
of the country. Peru is situated in the center of the South American continent, inside the Tropic of Capricorn, and
is contained within the tropics in terms of latitude, but the area is subject to various geographic effects and has
various climatic conditions. The country, which has a land area about 3.4 times of Japan, may broadly be divided
into three areas, i.e., tropical rain forests (Selva) which occupy about half the land mass, the Andes mountains
(Sierra), and the coastal desert area (Costa) which extends along the Pacific coast. The country’s population
exceeds 30 million, where more than half of it is concentrated in the coastal district including the capital Lima.
General data on Peru is as follows (JETRO, 2013):
・ Area : 1,285,216 km2
・ Population : 30,140,000 (2012)
・ Capital : Lima, Population: 9,130,000 (2011, Greater Lima Metropolis)
・ Races : Mestizo (52%), Indigena (32%), European (12%), and Others (4%).
・ Languages : Spanish, Quechua, and Aymara
・ Religion : Catholic (95%) and others (5%)
・ Regime : Constitutional Republicanism
・ Major industries : Manufacturing, agriculture, husbandry, oil, and mining
Peru was the first country where Japan has established its diplomatic relationship among the countries in Central
and South America (August 21, 1873). Currently, this year is the 140th anniversary of this relationship.
Traditionally, both countries have friendly and cooperative relations. In 2009, the 110th anniversary of Japanese
migration was celebrated.
2) Economy and Financial Situation
The macro-economy of Peruhas the steady. Since 2001, due to the expansion of domestic demand and a jump in
the international price of mineral resources, there has been rapid growth and low inflation. Because of this, Peru
has achieved the leading growth rate in Central and South America (8.8% in 2010, 6.9% in 2011, and 6.3% in
2012). According to the Government of Peru, the economic growth rate in 2013 was expected at 6.0% (refer to
Table 1.1).
In Peru, the gross domestic product (Producto Interno Bruto : GDP) is USD 199 billion, and the per capita gross
national income (Renta Nacional Bruta : GNI) is USD 6,530 (2012, the World Bank). The consumer price index
appreciation rate in 2013 was expected at 2.0%, and is now gradually leveling off. Despite this strong economy,
many citizens believed that some people of poverty group living in the mountains and tropical rain forest zones,
have not benefited from this economic growth.
1-2
Staple trade items include copper, gold, lead, textiles, and fish meal. Its main export destinations are China, the
United States of America (USA), Canada, and Japan. In the international balance of payments, although the trade
balance is surplus, it is thought that the current balance including interest payments on debts will continue to be
2.3%.
Table 1.1 Key Economic Indicators of Peru
Item 2011
(Track record)
2012 (Prospects)
2013 (Prospects)
①Real GDP growth rate (%) 6.9 6.3 6.0
Private-sector final consumption expenditure 6.4 5.8 5.5
Government final consumption expenditure 4.8 9.1 6.0
Private investment 11.7 10.0 10.0
Exports of goods and services 30.1 5.6 8.4
Imports of goods and services 28.3 9.9 9.8
②Consumer price index appreciation rate (%) 4.7 2.8 2.0
③Wage growth rate (%) － － －
④Unemployment rate (%) 7 6.6 －
⑤International balance of payment
Current balance (%) 1.9 2.3 2.3
Trade balance (USD 1 million) 9,302 8,249 8,389
⑥Other key indicators
Budget deficit (GDP ratio, %) 1.9 1.0 1.1
Public foreign debts (PEN 1 million) 54,470 54,969 53,731
⑦Exchange rate (USD 1.00 to PEN) 2.75 2.67 2.64
Source: JETRO Economic Prospect 2013 (53 countries and areas), p.67
1-3
(2) Overview of Sector Subject to the Project
1) Target Sectors
The objective of the project is the construction of a geothermal power plant. The energy and electrical power
sectors are the target sectors of the project. The responsible authority for the energy and electrical power sectors in
Peru is MEM. Figure 1.1 shows the organizational chart of MEM.
The MEM, as the general energy organization, is responsible for planning policies in order to ensure legal security
in the energy field and is also responsible in drawing up related bills. The MEM is divided into two parts: the
Division of Energy and the Division of Mines. Each department is headed by a vice-minister. The target sectors of
this project are mainly under the Division of Energy, particularly the Electricity General Directorate.
Figure 1.1 MEM Organization Diagram
Source: Peru Electricity Subsector, MEM, 2012
2) Outline of Electricity Sector
Although the electrification rate of Peru exceeds 90% in the urban areas such as Lima, the electrification rate in
other regions where 40% of the country’s population lives is only about 35%. The gap of electrification rate
between regions is remarkable, and Japan has already previously carried out a project entitled Electricity Frontier
Extension to improve the local electrification rate in Peru.
In 2011, the national installed capacity was 8,556.4 MW. The electrical power structure in the country consisted
mainly of hydroelectric power (about 59%) and natural gas generation (37%), as shown in Figure 1.2. Through the
installed capacity, the proportion of thermal power stations run by natural gas has been increasing in recent years
(Figure 1.3).
1-4
Figure 1.2 Breakdown of Electricity Supplies in Peru
Source: Peru Electricity Subsector, MEM, 2012
Figure 1.3 Trend in Electricity Generation in Peru (1995-2011)
Source: MEM Statistics
In 1995, the per capita power demand was 584 kWh, and by 2011, it had doubled to 1,149 kWh in a span of 15
years. Moreover, due to the improvement of the electrification rate and increased industrial use, the maximum
demand has increased by about 2.5 times. It is expected that the future growth of demand in the coming 15 years
until 2030 will increase by 3-4 times (refer to Figure 1.4). In order to avoid future electricity shortfall, the
construction of new electric power plants is required.
Figure 1.4 Future Trend of Maximum Power Demand (2010-2030)
Hydropower
Thermal power
1-5
Source: Peru Electricity Subsector, MEM, 2012
Figure 1.5 shows the change in electricity price. For industrial use, it has reached at about USD 0.06/kWh,
whereas for home use, it has reached at about USD 0.12/kWh. This showing that the prices of electricity have not
increased much over the past 15 years.
Figure 1.5 Change in Price of Electricity per Sector (1995-2011)
Source: MEM Statistics
Peru is aggressively promoting renewable energy. The power station business is basically run by the IPP system.
So far, there have been two bids for renewable energy projects. There have been bids for small hydroelectric
power, wind power, biomass, and solar energy. As shown in Figure 1.6, a total of 37 bids amounting to 357 MW
and 2,360 GWh/year of renewable energy have been successfully completed. As for geothermal energy, although
mining rights (exploration rights) have been acquired and several areas are currently under surface investigation,
no bids have been tendered in the electrical power business. The reason is considered to be regarding resources
development risks peculiar to geothermal development as well as its comparatively large initial investment cost.
Figure 1.6 Renewable Energy Bid Results
1-6
Source: Peru Electricity Subsector, MEM, 2012
(3) Conditions in the Project Area
The planned project site is located in Calientes, Candarave Province of Tacna Region in southern Peru. Nearby
villages are Candarave and Tarata.
Table 1.2 gives an overview of the project region (refer to the photographs at the beginning).
Table 1.2 Overview of Project Region
Item Summary
Altitude of Project Area 4,200-4,300 m
Outline of Candarave
Province
Area: 2,261.10 km2, Population: 9,534 (2000)
Provincial capital: Candarave
Climate
Dry alpine desert area with little rainfall.
Annual mean precipitation is 167.4 mm. Rainfall is generally heaviest from
January to March, and there may be snowfall. Annual mean temperature is 9.6 °C
and fluctuates from 6 °C to 13 °C through the year.
Surrounding Geography
Located in the Andes mountains' volcanic area.
The Calientes River flows into the planned project site.
1-7
Since its neighboring hot spring water flows into the Calientes River, the salinity
of the river is fairly high, making it unsuitable for irrigation. Because of this,
drainage canals from rainwater pond for irrigation have been installed.
Nature Reserve
Planned project site
In the Vilacota Maure Conservation Area, a regional conserved area (Area de
Conservacion Regional : ACR) set up by the regional government to complement
the natural protection areas (Areas Naturales Protegidas : ANP) has been
established at the national level.
Land use
The target region and its surrounding area are mainly used as grazing land. There
are about 2,000 - 3,000 alpacas and llamas pastured feeding plants grown on
swamps and marshes that spread out on both sides of the Calientes River. Local
residents of the Calientes River make their living by pasturing for alpacas and
llamas, and live a nomadic existence depending on the grass required for
pasturage.
The planned project site is located on a land which the community has been using
for many years as public (communal) land.
Access to Electricity
According to the Rural Electrification National Plan in Peru 2011-2013 (Plan
Nacional de Electrification Rural Period 2011-2020), electrification rate in Tacna
Region on 2011 was 85.9%, rather high level in Peru. Aiming to 91.6% of
electrification rate in 2020, it is planned that the amount of USD 18,146,820 is
invested for electrification of 14, 795 houses and 62,622 beneficiaries in 194
village.
Sightseeing
From nearby villages to the target area, an unpaved road has been built for the
needs of local residents (or nomadic people) for sightseeing, and for recreation. At
hot springs resorts, simple bathing facilities are also installed. According to one
Tacna Region state officer, the area near the target region is included in sightseeing
tours as a tourist attraction.
Source: Study Team
Chapter 2 Study Methodology
2-1
(1) Contents of the Study
1) Objective
The objective of this project is to construct a 50 MW geothermal power plant, its electrical transmission and
distribution, transformer station, associated facilities such as roads, etc. The aim of this study is to determine the
point of geothermal test wells, prepare a drilling plan, prepare a plan for the power plant and associated facilities,
analyze the environment and economic feasibility, review related laws and regulations, and prepare the plan for
financial arrangements. The purpose of the aims is to promote project and business development of Japanese
enterprises overseas.
2) Contents of the Study
The contents of the study are as follows:
- Discussions with respective organizations and collection of related data,
- Clarification of laws, regulations, and organizations for geothermal development,
- Geothermal resource potential survey at the site,
- Review and analysis of collected data,
- Basic design for geothermal power plant,
- Cost estimation and examination of the project implementation schedule, and
- Preparation of project implementation plan.
2-2
(2) Organization and Methodology of the Study
1) Methodology of the Study
The study is composed of field work and desk work. Field work was done twice with the study team members
visiting Peru. The study team discussed with respective organizations, collected related data, clarified about laws,
regulations and organizations for geothermal development, and carried out geothermal resource potential survey at
the project site.
The desk work was done in Japan wherein the study team reviewed and analyzed collected data, prepared a basic
design for the geothermal power plant, estimated project cost, and prepared the project implementation plan.
Furthermore, the study team prepared the report based on the above results.
2) Organization of the Study
Figure 2.1 shows the organization of the study team while Figure 2.2 shows the organizational chart of the
Peruvian counterpart and respective agencies.
Figure 2.1 Organizational Chart of the Study Team
Source: Study Team
2-3
Figure 2.2 Organizational Chart of the Counterpart and Respective Agencies in Peru
Source: Study Team
(3) Schedule of the Study
The contract of this study was made and agreed upon on 21 September 2013, with the first field work having
commenced on 22 September 2013. The entire schedule of the study is shown in Table 2.1 and all respective
organizations that were visited during the field work are described thereafter.
Table 2.1 Schedule of the Study
Work Item / Year and Month Year 2013 September
October
November
December
Year 2014 January
Febuary
<Field Work> 1. Discussion with
Respective Organizations 2. Site Survey 3. Drilling Plan 4. Power Supply Survey and
Constitutional Survey 5. Environment, Social,
Economic, and Financial Survey
6. Explanation to the Counterpart Agencies
(1st Field Work)
(2nd Field Work)
ELECTROPERU MEM
State Minister for Energy State Minister for Mines
Electricity General Directorate (DGE)
DGAAE
INGEMMET
Coordination
EIA Approval
Technical Cooperation
2-4
<Desk Work> 1. Preparatory Work 2. Collection and Analysis
of Information 3. Consideration of Project
Circumstance and Basic Design
4. Project Cost Estimation and Economic Evaluation
5. Finalization/Preparation of Draft Report
6. Final Reporting and Report Submission
Source: Study Team
A. First Field Work
The first field work was conducted from 22 September to 6 October 2013. The contents are as follows:
Contents of the Work
- Meeting and data collection survey to respective organizations in Lima
(from 23 to 25 September and from 30 September to 3 October 2013)
- Interview and data collection survey in Tacna Region and Candarave Province
(from 25 to 29 September 2013)
- Site survey in Calientes Geothermal Field (from 26 to 29 September 2013)
Member and Date of Meeting
23 September, 2013 (Monday):
- EP, Mr. Jesus Ramirez, President, and two other members
- MEM-DGE, Mr. Alcides Claros, Director of Power Concession, and two other members
24 September 2013 (Tuesday):
- SERNANP, Mr. Pedro Gamboa, Senior Secretary, and three other members
- The Embassy of Japan in Peru, Mr. Yasushi Imai, Ambassador ad Interim; Mr. Takayuki Kondo, Vice
Representative, JICA Peru Office; and Mr. Masayuki Fujimoto, Representative, JETRO Peru Office
- INGEMMET, Ms. Susana Vilca, Senior Secretary, and two other members
25 September, 2013 (Wednesday):
- Tacna Region, Ms. Edith Naara Campos, Secretary General, and five other members
25 to 29 September, 2013 (Thursday to Sunday):
- Site survey in Calientes Geothermal Field and surrounding areas
30 September 2013 (Monday):
- SERNANP, Mr. Marcos Pastor, Board Member, Technical Advisor
2-5
1 October 2013 (Tuesday):
- MEM, Hon.Mr. Dicky Edwin Quintanilla Acosta, State Minister for Energy (Position for applying Japanese
Yen Loan), Mr. Nicho Diaz, Ag. Director of Electric; and one other member
- EP, Mr. Jesus Ramirez, President, and two other members
2 October 2013 (Wednesday):
- The Embassy of Japan in Peru (for reporting)
3 October 2013 (Thursday):
- Mr. Shoji Sakakura, Representative, JICA Peru Office
B. Desk Work
Desk work for compiling results of the first field work was conducted from October 2013 to February 2014. The
contents are as follows:
- Review and analysis of collected data,
- Evaluation of geothermal resources,
- Basic design for geothermal power plant,
- Cost estimation,
- Examination of implementation schedule of the project,
- Preparation of project implementation plan,
- Preparation of interim report meeting, and
- Preparation of draft final report.
C. Second Field Work
The second field work was conducted from 4 to 15 December 2013. The contents are as follows:
Contents of the Work
- Reporting and explanation of the results of the study to respective organizations and discussion for the
possibility of Japanese Yen Loan (10 December 2013)
- Additional interview survey and data collection on environmental and social consideration
(4 to 5 December 2013)
- Site survey in Calientes Geothermal Field (from 7 to 9 December 2013)
- Data collection of local companies (5 and 11 December 2013)
Member and Date of Meeting
4 December 2013 (Wednesday):
- SERNANP, Mr. Marcos L. Pozas, Board Member, Technical Advisor
2-6
5 December 2013 (Thursday):
- INGENIEROS S.A. CIDES (Environmental Consultant), Mr. Cesar Zumaran Calderon, President, and one
other member
6 December 2013 (Friday)
- Mr. Takayuki Kondo, Vice Representative, JICA Peru Office
-
7 December 2013 (Saturday):
- Mr. Marco Alberto Navarro Guzman, Senior Manager, Vilacota Maure Conservation Area
8 December 2013 (Sunday):
- Site survey in Calientes Geothermal Field
9 December 2013 (Monday):
- (1)Regional Directorate of Tacna Region, Mr. Ricardo Paullo Perez, Director
- (2)Energy Directorate of Tacna Region, Ing. Marcelo Marca Flor, Director
- (3)Natural Resources Directorate of Tacna Region,Mr. Giancarlo Franco Diaz, Director
10 December 2013 (Tuesday):
- (1)EP, Mr. Jaime Hanza Sanchez Concha, Chairman, and two other members
- (2)MEF, Mr.. Valentin Cabanas, Officer, and two other members
- (3)MEM, Mr. Rivera, Officer of Power Concession Directorate, and two other members
11 December 2013 (Wednesday):
- (1)Weatherford (drilling company), Mr. Patricio Wehncke, Marketing Manager, and two other members
- (2)Schlumberger (drilling company), Mr. Eddy Cordero Manrique, Manager and one other member
- (3)INGEMMET, Ing. Lionel Fidel Smoll, Officer
- (4)The Embassy of Japan in Peru, Hon. Mr. Masahiro Fukukawa, Ambassador Extraordinary and
Plenipotentiary of Japan to Peru, Mr. Hideki Morimoto, Second Secretary; Mr. Takayuki Kondo, Vice
Representative, JICA Peru Office: and Mr. Masayuki Fujimoto, Representative, JETRO Peru Office
Chapter 3 Justification, Objectives, and Technical
Feasibility of the Project
3-1
(1) Background and Necessity of the Project
1) Background of the Project
The total installed capacity of power plant facilities of Peru in 2010 is 7,309 MW, and a growth of 8.1% per
annum is expected for the 2009-2018 power demand. Peruvian government has established the “Energy Efficient
Use Promotion Law (Law 27 345, 2000) " for the purpose of development of renewable energy and energy saving
and conservation promotions. The "Sub-regulations on renewable energy power generation" put into force in 2008
defines implementation of the bidding of the renewable energy business and the target value of the renewable
energy (It is updated every five years. The goal of five-years term from 2009 to 2013 is 5% of the total power. The
target value of the succeeding term is under study). There are expectations for the development of geothermal
resources which are abundant (available potential resources of more than 3,000 MW). To seek possibility of such
expectations, Pre F/S surveys of geothermal development were implemented by Japan Bank for International
Cooperation (Banco Japonés de Cooperación Internacional: JBIC) (2008) and Japan External Trade Organization
(Organización de Comerció Exterior del Japón: JETRO) (2008), and a master plan study has been implemented by
Japan International Cooperation Agency (Agencia de Cooperación Internacional del Japón: JICA) (2012) until
now. However subsequent development has not progressed because of various constraints and problems of
institutions and legislations. Hence, the geothermal power plant does not yet exist in the country.
As an activity of Japanese Business Alliance for Smart Energy Worldwide Geothermal Working Group, Latin
America sub-working group, the study team sent two missions to Peru to exchange views with related
organizations, gather information and survey the project site in September 2012 and March 2013. Through these
activities, the following issues were confirmed: 1) State-owned power company Electroperu,S.A (EP) has come to
have a strong desire to implement the first geothermal power generation project and for such purpose, wishes to
obtain the support of the Peruvian government and expects the entry of Japanese companies as well as the
participation of Peruvian governmental sectors, 2) There will be expectation for Japanese companies to have
future opportunities to join geothermal development in the country, 3) Geothermal development in the country is
expected to advance the progress of rural electrification and economic development, and furthermore, an increase
in power demand can be expected by mining development in the province. In October 2012, Hon. Jorge Merino
Tafur, the Minister of Energy and Mines, instructed EP to consider the studies on geothermal development
projects. From the circumstances described above, what we are proposing is a geothermal generation project in
Calientes, Tacna Region in southern Peru of which EP would be the implementing agency.
2) Scope of the Project and Beneficiaries
The scope of this project focuses on geothermal power plant construction. The main beneficiaries are residents,
mines, and companies that are located in Tacna Region. By connecting the transmission line to nationwide
networks that are currently being planned, it is possible that the benefit will spread throughout Peru.
In addition, in association with this project, electrification in the region, development of multi-purpose use of
geothermal fluid, maintenance of road networks, and job opportunities are expected.
3-2
3) Analysis of the Current State, Future Prospects, and Expected Problems when Projects are Implemented
At present, the Peruvian government is trying to introduce renewable energy including geothermal power
generation in the country through the participation of the private sector. However, as the initial risk of geothermal
power is larger as compared with wind and solar power, the development has not yet progressed. The risks
associated with geothermal development are uncertainties related to the development of initial resources, the
length of the construction period, and prolonged recovery period. For this reason, despite being a promising
country for geothermal energy development and as one of the world's leading sources of geothermal energy, no
plant has been built yet. If it relies on private participation, no sign of geothermal development has been seen.
Many countries with developed geothermal plants also had the similar problems in the past, but they casted public
funds to geothermal development in the initial stage to reduce resource risk. For example, countries like Costa
Rica, the Philippines, Indonesia, and Mexico have geothermal projects that were carried out through yen loan as
the countries’ first projects for geothermal power generation, which were able to attract the funds from other
donors and private companies thereafter.
When geothermal power generation project is successfully carried out in Peru by Japanese Yen Loan as same as
above countries, it would be possible to advance the geothermal development in earnest by IPP in the future.
4) Effectiveness and Impact of Implementing the Project
By using yen loan as its first geothermal power plant construction, it is expected that the project will attract
funding from other donors and private companies, which can also be used for expanding geothermal power
generation into a full-scale business in Peru. In addition, by becoming the first successful geothermal project in
South America, a ripple effect on neighboring countries with geothermal potential as well as within Peru is also
expected.
5) Comparison with the Proposed Project and Other Options to be Considered
Currently, power generation comes mainly from natural gas and hydropower in Peru. Hydropower can be a cheap
power supply in the economy. But because the power generation is dependent on rainfall, the risk has been
increasing in terms of stable power supply considering the impact of climate change in recent years. In addition,
natural gas is advantageous in terms of power generation efficiency. Although from the standpoint of national
policy, such as the export of natural gas and carbon dioxide emissions, promoting the development of large-scale
natural gas power generation may not be possible.
Figure 3.1 shows the correlation of power generation utilization rate and cost of each power generation system.
According to the said figure, the cost is reduced as the utilization rate is higher for each power system. For 80% or
more utilization rate, it can be seen that geothermal energy is more efficient than other generating systems
including renewable energy in particular. Furthermore, compared to other renewable energy such as small hydro,
wind, solar, and solar thermal power, geothermal energy source is more stable as it is not influenced by weather
and climate.
3-3
When considering a substitute for hydropower and natural gas in power generation from the energy security and
economical viewpoints, geothermal power is very advantageous as was previously pointed out.
Figure 3.1 Levelized Energy Costs (USD/kWh) as a Function of the Capacity Factor
Source：World Bank/ESMAP Geothermal Handbook (2012)
3-4
(2) For Sophistication and Streamlining of Energy Use
An advanced use of energy is possible by turning the fuel power generation into export of resources and energy,
while power generated by local source will be used for local consumption as much as possible.
As previously described, the main power source of Peru comes from hydropower and natural gas mined within the
country. It is possible to obtain a national interest for exporting these abundant natural gas resources. Locally
produced energy, that is, renewable energy as an alternative energy will lead to a sophisticated and maximized use
of energy resources.
In addition, as compared with thermal power generation from fossil fuels, in terms of reducing carbon dioxide
emissions, the introduction of renewable geothermal energy will largely contribute to solving global warming.
By moving away from the current focus of using natural gas and fossil energy for power generation and excessive
dependence on unstable hydropower because of climate change, the rationalization of energy use is to achieve the
best mix and diversification of energy and to measure cost savings and risk reduction.
Figure 3.2 shows an example of the best energy mix. Base power is covered by geothermal power generation
while the daily or seasonal peak demand for electricity is covered by fossil fuels, which can easily change power
output. The only renewable energy not affected one by weather and climate is geothermal power generation, thus,
it can be utilized for base power.
Figure 3.2 Example of Load Curve (Geothermal Energy as Base Power Supply)
Source: World Bank / ESMAP Geothermal Handbook (2012)
3-5
(3) Justification, Objectives and Technical Feasibility of the Project
1) Estimated Power Demand
As shown in Figure 1.4, the power demand of Tacna Region is concentrated mainly around Tacna city. With recent
development in Tacna Region, the power demand in the province is increasing as similar as that in entire Peru.
This increase of power demand will be covered by large-scale gas power generation plants (500 MW, 2 plants)
which are planned in the neighboring province, and a 500kV transmission line between Lima and Tacna Region.
The geothermal power plant, to be constructed by this project, produces less electricity compared with the above
large-scale gas power generation plants so it is difficult to obtain the generation capacity which can meet the
increase of power demand. However it is expected to cover the local power demand which is originated by copper
and other mine operators around Candarave. The mines and refineries they operate require a large amount of
electricity which is mainly generated by their own power plants. Thus, the local power demand can be covered by
transmitting electricity to the copper mines from new geothermal plant to be constructed by this project, and it has
another advantage for power companies to stabilizing the power supply and reducing transmission loss.
2) Review of Previous Studies
The Calientes Geothermal Field is located in an active volcanic zone in southern Peru. The geothermal models are
created according to its geology, geochemistry, and geophysics such as MT survey（JBIC, 2008; Cruz et al., 2010;
and INGEMMET, 2012）.
a)Geology and Geochemistry
・ Stratigraphy
The Calientes Geothermal Field and its surroundings are formed by Mesozoic sediment and volcanic products
as basement rocks which are overlain by Cenozoic formation. Surface geology of the study area consists of
Cenozoic formation of Barraso volcanic rocks and alluvial and glacial deposits.
Although there is no direct information about the underground geology since no borehole surveys have been
executed, it is assumed that the Calientes Geothermal Field is formed by the thick formation of Barraso volcanic
rocks.
・ Structure and Lineament
According to the distribution of lineaments and geothermal manifestations, two main faults called Fc-1 and Fc-2
that run along the northeast-southwest axis and north-south axis, respectively, are found at the Calientes River
(refer to Figure 3.3). There are many geothermal manifestations around Challepina area (as shown at the center
of Figure 3.1), which is expected to be the intersection point of two faults. In addition, some faults that strike
along the north-northeast-south-southwest axis are estimated from the lineament analysis.
・ Volcanoes
There are many active volcanoes around the study area like the Yucamane Volcano that have been activated
3-6
from the last part of the Quaternary period to present. There is likely to be a magma chamber in the relatively
shallow underground.
・ Geothermal Manifestations
Many hot springs with temperature near boiling point are distributed along the Calientes River especially from
Chaullane to Challepina. There are also some alternated rocks and carbonates as well as silicate deposits called
sinter along the Calientes River.
・ Fluid Geochemistry
Most of hot springs along the Calientes River have temperature near the boiling point of 82-87 °C, while its pH
is neutral from 7.3 to 8.1 with high chlorine (Cl) concentration of 1,700-1,900 mg/L.
The water chemistry of the Calientes River differs from the upstream and downstream. The river water at the
upstream has a lower temperature, lower chlorine content with acid (pH=3.1), and higher concentration of
sulfate ions. On the other hand, the river water at the downstream has relatively higher temperature, neutral pH,
high electric conductivity, and high Cl concentration that is affected by the mixture of hot springs.
b) Type and Origin of Geothermal Fluid
Hot springs along the Calientes River are classified as neutral, Cl-type water which is the same as an ordinal
deep geothermal fluid. Based on the analyzed data of hydrogen and oxygen isotopes and Cl concentration of hot
spring water, the origin of geothermal fluids are recharged local meteoric water, and the water is mixed with
magmatic water. According to the silica and alkali ratio geothermometers, the temperature of geothermal fluid is
more than 200 °C.
c) Resistivity Distribution
Based on the resistivity distribution at the study site, underground formations can be classified into three layers:
the surface formation with low resistivity between 10 to 100 Ω-m, the intermediate formation with resistivity
under 5 Ω-m, and deep formation with resistivity over 30 Ω-m.
There are low resistivity zones near the surface along the Calientes River from northeast to southwest, and the
discontinuity lines along the trend are identified and named Rc1 and Rc2 as shown in Figure 3.3. Rc1 and Rc2
show a clear lineament structure that corresponds to Fc-1. It is estimated that the low resistivity zone show the
distribution of geothermal alteration or the existence of hot water. Geothermal alteration zone might form cap
rocks for geothermal reservoir by smectite and zeolite. The area between Rc1 and Rc2 are likely forming the
fractured zone.
d) Conceptual Geothermal Model (Figure 3.4)
The following conceptual geothermal models are established based on collected data and evaluation for the
study area:
・ Geothermal reservoir is formed in the permeable zone along high-angle faults of the northeast-southwest
3-7
strike which are assumed to belong to the Barraso fault group.
・ Geothermal fluid mainly originated from meteoric water. Recharged meteoric water around the site,
especially at the volcanic areas in the south, are mixed with high temperature magmatic water, and/or
conductively heated. It then becomes a fluid-dominant geothermal reservoir with a neutral and high Cl
concentration.
・ Geothermal fluid flows along faults and creates a geothermal alteration zone at shallower depth of about
500 m, which performs as a cap rock. Some amount of geothermal fluid continues up flowing to the
surface and become hot springs along the Calientes River.
e) Evaluation of Geothermal Resource Potential
The geothermal potential at the Calientes Geothermal Field has been estimated by volumetric method using
parameters such as estimated temperature and the volume of the reservoir (JBIC, 2008). For the calculation, the
Monte Carlo analytical method was applied which is a kind of sensitivity analysis for each parameter. The most
probable value for the geothermal potential has been statistically identified. The volumetric method is used to
estimate the volume of geothermal resources which can be used for power generation by calculating the quantity
of heat in the reservoir.
As a result of the calculation, the estimated resource volume is in the range from 40 to 500 MWe, and the
probability of existence of resources more than 100 MWe is over 80%. It is concluded that the considerable
development scale is 100 MWe (JBIC, 2008).
f) Selection of Production and Reinjection Zone
The production zone has been selected at the area between discontinued lines Rc1 and Rc2 identified from the
resistivity distribution along the Calientes River. This is due to the high permeable zone that might exist along
the northwest-southeast trend of this area which controls the geothermal fluid flow as shown in Figure 3.3 (JBIC,
2008).
However, there are no existing wells in the study area. It is necessary to confirm the existence of geothermal
resources by exploration wells and to observe fractures, temperature logging, and high temperature fluid as well.
3-8
Figure 3.3 Conceptual Geothermal Model of Calientes Geothermal Area
Source: JBIC, 2008
Figure 3.4 Cross Section of Conceptual Geothermal Model
（Temperature structure was estimated by resistivity distributions）
Source: JBIC, 2008
3-9
3) Results of the Study
In this study, we conducted a survey to support the above hypothesis. The survey consisted of topographic analysis
and field survey, in order to verify the conceptual geothermal model shown in Figure 3.4. The results are as
follows.
・Result of Topographic Analysis
Rc1 and Rc2 fault (JBIC, 2008) are assumed faults of NE-SW direction which are parallel to Calientes river. In this
study, we conducted topographic analysis using digital elevation data by U.S. National Aeronautics and Space
Administration (NASA). As the result shown in Figure 3.5, bending of some river branches was found where the
Rc1 and Rc2 fault is crossing. This structure indicates that those faults are available and the area, intercalated by
those faults, has geological weakness.
Figure 3.5 Result of Topographic Analysis
Source: Study Team
・Result of Field Survey
We conducted geological survey at the Point A where the river branch and fault are crossing for the purpose of
verification of existence of Rc-2 assumed fault. As a result, we could not find Rc-2 fault on surface, but we could
find steep fractures which direction is parallel to Rc-2 fault in andesite lava of the Barroso Group. Further we
confirmed that surrounded andesite lavas are block-shaped by clashing (Photo 3.1).
・Verification of Conceptual Geothermal Model of Calientes Geothermal Area
The geological information obtained in this field survey was generally corresponded to the Conceptual Model by
JBIC (2008). Even though Rc-2 fault was not observed on surface, based on the existence of concordant fractures
Rc1
Rc2
N
Bending structures at river branch
Point A
Bending structures at river branch
3-10
and block-shaped rocks, there is high possibility of existence of Rc-1 and Rc-2 fault and high permeability zone in
underground, which is the premise of the model.
Photo 3.1 Geology in Point A
Highly blocked andesitic lava（north of stream） Steep fractures concordant with Rc2 Fault in andesite
（south of stream）
Source: Study Team
4) Study of the Technical Method
There are mainly two methods for major geothermal generation systems: the flash type system and the binary type
system. Depending on the temperature, pressure, and fluid of geothermal resource, the most appropriate method
shall be selected.
Table 3.1 Comparison of Geothermal Generation Type System
Geothermal Generation Type Generation Method and Features
Flash Type
Geothermal fluid produced from geothermal wells shall be separated into
steam and brine by a separator. The steam shall be used for turbine
operation.
This method is normally applied for the geothermal resource where steam
of more than 150 °C is obtained.
As of today, this method is the most popular one in the world. Japanese
companies had many experiences using this method.
Binary Type
Heat from hydrothermal fluid causes the secondary fluid to vaporize or
flash, which then drives a turbine for power generation. The working fluid
with boiling point lower than water passes through a heat exchanger. This
method is applicable for power generation to use lower temperature
reservoir at 100-150 °C .
Butane, pentane, ammonia-water mixture, and fluorocarbons are used as
secondary fluid.
Source: Study Team
3-11
Flash systems are further detailed in Table 3.2.
Table 3.2 Features of the Flash Type System
Flash Type Generation Method and Feature
Single Flash
Geothermal fluid produced from geothermal wells shall be separated
into steam and brine by a separator. The steam shall be used for
turbine operation.
Geothermal brine is re-injected into the ground through a re-injection
well.
Double Flash
Lower pressure steam is obtained by de- pressurization of the brine
separated by the separator. Such produced steam is admitted in
intermediate turbine stages for geothermal generation.
About 15-20% more power may be obtained compared with the
single flash type with the same volume of the geothermal resource.
Because the double flash system utilizes lower temperature level, the
silica scaling at the re-injection well would be the issue to study. It
is necessary to study the anti-scaling by analyzing the composition of
geothermal steam and brine.
Source: Study Team
According to the information collected by the study team, it is assumed that appropriate steam can be obtained for
the normal flash type generation. For the Calientes Geothermal Field, it is recommended that the single flash type
will be applied due to it being the most popular, with large experience, and has easier maintenance.
However, it is noted that this concept may be reviewed again if any further information is obtained including
steam condition.
3-12
(4) Abstracts of the Project
1) Basic Design for Determination of Project Contents
The Government of Peru is promoting IPP and PPP with the participation of private operators by setting
concession areas and giving exploration rights. However, private operators that have acquired exploration rights
are concerned about fund-raising for drilling of test wells and risks of promoting the projects. Thus, geothermal
development has not been promoted as well.
In the meantime, EP, the national electric company, has expressed strong willingness to conduct the first
geothermal development project as operator with the support of the government of Peru, for the purpose of
making a breakthrough in the current stagnating situation. Peru’s technology and management capacity for
geothermal development will be advanced if EP conducts its own geothermal development project. This will cause
reviewing and revising of present geothermal laws and regulations (in terms of application for project
implementation and environment and incentives for geothermal development). Furthermore, it would be a model
case for promoting private operators to enter the geothermal business and finally is expected to promote
geothermal development projects among private operators.
a) Selection of Project Area
The Calientes and Bolaterus geothermal areas were prospected by JBIC (2008) and JETRO (2008). The areas
were confirmed as high-potential areas for geothermal development.
On the other hand, Tacna Region designated those geothermal-prone areas as conserved area in 2008. Therefore,
those two areas were not yet considered as concession area and geothermal development was not planned there.
Due to the abovementioned background, Peru selected these areas as geothermal development areas to be funded
by Japanese Yen Loan, through the discussions between the above-mentioned Latin America sub-working group
and the Government of Peru, in 2012 and 2013.
b) Project Implementation Organization
The number one candidate organization for project implementation is EP, which is the national electric company
conducting power production in Peru. Practically, EP is the only organization who is eligible to be the
implementing party of a Japanese Yen Loan project and EP's playing such role is the key to the materialization of
this project.
The Ministry of Energy and Mines (Ministerio de Energia y Minas: MEM) and Institute of Mining and
Metallurgical Geology (Instituto Geológico Minero y Metalúrgico: INGEMMET) are ministry and agency related
to the project promotion. INGEMMET will provide geological information and technical support. MEM will
control the rights and approvals.
3-13
c) Project Implementation Period
The project will be implemented from 2014 to 2023.
d) Determination of Output Capacity
In the view of future demand in Peru and Tacna Region and its countermeasure, especially for large-scale gas
power plants (capacity: 500 MW, two plants) which are planned to be constructed in adjacent region, the capacity
of 50 MW, to be generated by geothermal power plant planned in this project, is relatively smaller than those, and
it cannot give much contribution against the future demand. However, geothermal development in the Candarave
area has a significant local benefits from the viewpoint of global environment preservation, such as: improving
electrification rate, industrial development, use of renewable energy, choice of different types of energy.
According to JBIC (2008), the resource capacity of the Calientes area was evaluated at approximately 100 MW.
This project will be the first step for geothermal development with an appropriate 50 MW of output capacity. This
output capacity will be reviewed and revised in future studies.
The project implementing party has no experience in managing and operating geothermal power plants. He may
receive such trainings from Japan and other countries so it is practical to start with a plant of world standard
capacity of 50 MW. Furthermore, it is appropriate to start with the standard capacity in order to review and
strengthen the institution of geothermal development.
e) Transmission Line to be Connected to the Main Power Grid
Generated power will be connected via 128 kV electrical power transmission lines, and transferred to Tacna
Region, particularly to Candarave Province.
Meanwhile, a 500 kV electrical power transmission line is being constructed along Pan-American Highway, a
major national road, to connect Lima and Tacna. Itis possible to connect via this power line when this power line
construction is completed before the project completion. However, consideration with the scale of generation, it
would be appropriate that the generated electricity should be consumed in Tacna Region and surroundings.
2) Basic Design Concept and Outline of Major Equipment
a) Basic Design Concept
Based on the result of this study, the study team assumes that all obtained steam with suitable pressure will be
used and the plant shall be operated as base load with standard output. The basic design concept is discussed
below.
i) Base method of power station
Flash cycle is adopted as the model of geothermal power generation where the turbine will be rotated with the
steam obtained from production wells. According to the resource characteristics of Calientes Geothermal Field,
the flash cycle suits such characteristics with a simpler configuration. Furthermore, the single flash cycle is
selected in consideration of easy maintenance including the FCRS.
3-14
ii) Turbine/Generator
Condensing steam turbine will be adopted in order to obtain more power. As for the generator, a three-phase
synchronous generator with air cooling will be adopted. The generator is brushless or without mechanical contact.
Its design power output is a single 50 MW unit in consideration of the economic point of view and the possible
steam and demand. The turbine will have a down exhaust. Therefore, the turbine will be installed on the second
floor of the powerhouse, while the condenser will be installed on the ground floor. Non-condensable gas included
in the geothermal steam (such as CO2 and H2S) will flow into the condenser through a steam exhaust.
iii) Condenser/Cooling System
In order to minimize the volume, the exhaust steam from turbines which will include non-condensable gas will be
cooled in the condenser. The direct type condenser will be adopted. Because the cooling water for operation is
difficult to obtain from nearby water source, a cooling tower will be used. The cooling water will be sent from the
cooling tower to the condenser by the pressure differences between the inner pressure of the condenser and the
barometric pressure of the water pool of the tower.
The cooled exhausted gas containing non-condensable gas will be sent from the condenser to the gas extractor to
be installed near the condenser.
iv) Gas Extractor/Gas Releasing
The gas extractor will be of a hybrid type. Non-condensable gas will be extracted from the exhausted gas in the
extractor and will be sent to the cooling tower. The gas sent to the cooling tower will then be released to the open
air by cooling fans.
v) Transformer
Power will come from the output of the generator terminal with 11 kV, and then pressurized with transformer
through a circuit breaker. The power will be sent via the transmission line. The transformer shall be installed at the
opposite side of the cooling tower across the turbine house. This will protect as much as possible the transformer
from having contact with non-condensable gas and/or water droplets or dew. The detailed layout shall be further
reviewed with more information including the surrounding weather condition during the detailed design stage.
The conceptual layout is shown in Figure 3.6. The layout presented in the figure is for information only and more
details will be studied during the detailed design stage.
Figure 3.6 Conceptual Layout of Geothermal Power Plant
3-15
Source: Study Team
vi) Countermeasures against Geothermal Atmosphere
Because hydrogen sulfide (H2S) gas is present in both the atmosphere and the steam supplied to the steam turbine,
greater care must be taken not only on the selection of materials but also on the design of equipment. Corrosion of
the plant electrical and instrumentation systems by H2S gas will impose serious problems during plant operation;
therefore, countermeasures against H2S gas are significant in plant design.
The following plans shall be considered for the countermeasures against H2S gas corrosion:
- To prevent equipment or systems from being directly exposed to H2S gas by applying tin or zinc coating on
such surface especially on copper materials.
- To use anti-corrosion materials,which shall be used for the equipment that are directly exposed to H2S gas;
and
- In order to prevent H2S gas from entering into the control and electrical rooms, H2S gas absorption filters
shall be installed at the air intake of the control and electrical rooms.
3) Outline of the Proposed Project
a) Major Mechanical Equipment
The Calientes geothermal power station is designed with turbines that will have a rated output of 50 MW, a single
casing, and double flow down exhaust. Turbine exhaust will be led to the condenser, which will be installed on
ground level under the turbine. Since there is no water source at the near area to satisfy the required water volume,
cooling water will be used with condensate water by condenser and will be cooled by the cooling tower. The
3-16
non-condensable gas in the geothermal steam will be extracted by hybrid type gas extractor from the condensers
and will be diffused into the atmosphere through the air discharged from the cooling tower fans.
The above facilities are quite general for a geothermal power plant of and are well adopted throughout the world.
b) Geothermal Steam Turbine
i) Outline
The geothermal steam turbine is of single casing, multi-stage, double flow, and condensing type. The turbine will
be assembled in the factory and then dismantled for the upper casing, lower casing, rotor, etc. for transportation
purposes. These will be transported to and then re-assembled again on site. The steam pipe branches off into two
at the upstream of the turbine and will be connected to the turbine through steam strainers, main stop valves, and
steam control valves.
Since carbon dioxide and highly corrosive H2S gas are contained in the geothermal steam, there is a high risk of
stress corrosion cracking (SCC), etc. Therefore, the turbine design shall be reliable for this situation with its
proven track record.
ii) Main Specifications
Below are the list of major specifications based on the available and assumed information on steam pressure,
temperature, wet bulb temperature, cooling temperature, etc. These shall be further reviewed during the detailed
design stage.
Type of turbine : Single casting, multi-stage, and double flow condensing
Steam pressure : 11.0 bar (absolute)
Steam temperature : 185 °C (saturated)
Speed : 3,000 rpm
Connection method with generator : Rigid type direct coupling
c)Condensing System
i) Outline
Direct contact type condensers will be adopted. Since the exhaust from the steam turbine contains
non-condensable gas mainly consisted of carbon dioxide, non-condensable gas extraction systems will be installed
to maintain condenser vacuum.
ii)Main Specifications
Condenser type : Direct contact
Cooling water temperature : 20 °C
Design wet bulb temperature : 10 °C
Condenser pressure : 0.1 bar (absolute)
3-17
Gas extraction type : Single stage steam jet ejector and vacuum pump
Driving steam pressure : 11 bar (absolute)
d) Major Electrical Equipment-Generator
i)Outline
Air-cooled three phase synchronous generator will be adopted. For a geothermal power plant, since highly
corrosive H2S gas is contained in the atmosphere, countermeasures such as oxidization catalytic filters must be
installed at the air inlet of the generator in order to remove the H2S gas.
ii) Main Specifications:
Type : Totally enclosed water to air cooled type
Rating : Continuous
Output : 62,500 kVA
Voltage : 11 kV
No. of phase : 3
Power factor : 0.8 (lagging)
Frequency : 50 Hz
Speed : 3,000 rpm
Connection : Star
Neutral point grounding method : Transformer
Cooling system : Totally enclosed type with air cooler
Excitation system : Brushless
Insulation : F class
Temperature rise : F class
The voltage will be boosted from 11 kV to 138 kV by the generator transformer and then will be led to the grid
through a switchyard.
As for the electrical equipment including the generator, a single line diagram is proposed as shown in Figure 3.7.
This concept shall be further reviewed with more information in the detailed design stage.
3-18
Figure 3.7 Power Station Single Line Diagram
Source: Study Team
e) Instrumentation and Control System
In order to achieve an effective plant management, the distributed control system (Sistemas de Control
Distribuido: DCS) will be adopted. DCS will help in controlling and supervising the power plant operation. With
the data stored in the DCS a for long period, it will support in measuring and storing several of operating data
automatically so that the operation and maintenance team can perform its work with more efficiency.
The Calientes geothermal power station is assumed as one of the important sources of energy in the Tacna Region.
A dual redundant configuration may be adopted for this station where two units of pair module, each with a
dual-core micro processor (Unidad de Microprocesadores : MPU), will be installed. The chip will ensure that a
higher reliability can be maintained as well as minimize DCS plant shut down.
The main control system and devices in the power plants are as follows:
i) Steam turbine
The turbine governor system, which is normally used in other geothermal power plants, will be adopted.
ii) Condenser level
Hot water in the condenser is delivered to the cooling towers by hot well pumps. Water level control in the
3-19
condenser is required in order to protect the hot well pumps. For this reason, level transmitters will be mounted on
the condenser and used for level control according to control logic incorporated in a DCS.
iii) Cooling tower water level
Water level in the cooling tower basin is controlled. This control works to avoid abnormal low level which causes
cooling water not to flow to condensers, and excessive high level which causes overflow from the basin.
The interlock will be applied for equipment protections in the power plant. The equipment control interlocks are
built in the DCS. The interlocks on the generator and turbine protection are basically done by relay circuits. The
DCS consists of a liquid crystal display (LCD) which provides an interface with operators where general
operation monitoring and control can be carried out through the LCD screen and keyboard. As a power source for
the DCS, an uninterruptible power system will be installed so that the system can safely stop in case of blackout.
f) Fluid Collection and Reinjection System (Fluido de Recogida y el Sistema de Reinyección : FCRS)
i) Type of FCRS
In this study, fluid produced from production wells is assumed as a mixture of dry steam and brine (two phase).
Produced steam will be transported from the production well pad to the power plant via steam pipes.
ii) Description of FCRS
The FCRS will consist of a two-phase piping: separator and steam pipeline. The plant layout is assumed as
follows:
There are 12 production wells, which produce all steam (400 t/h) for the 50 MW power plant that
will be drilled in group but at several production well pads.
Steam from the 12 production wells will be fed to a cyclone separator via steam header. Thereafter,
steam will be separated by the cyclone separator.
Separated steam will be transported from the production well pad to the power plant via steam
pipeline.
The steam condition may be reviewed later during the detailed design stage.
[Production Well Pad Equipment]
i) Separator
A cyclone separator will be installed at the production well pad in order to separate steam from geothermal fluid.
ii) Rock Muffler
A rock muffler will be constructed at the production well pad in order to reduce the noise caused by steam venting
to the atmosphere.
iii) Hot Water Pond
A hot water pond will be constructed at the production well pad. Drainage from the separator and rock muffler
will be discharged to the hot water pond via drain pipes.
3-20
iv) Basic Design Condition
Production well is designed as follows:
Number of wells : 12
Fluid : Steam
Wellhead pressure : 16.0 bar abs.
Flow rate : 35 t/h (per well)
Tie-in point of the power plant is designed as follows.:
Site : Power plant
Interface : Block valve installed on tie-in point
Pressure : 11.0 bar (absolute)
Flow rate : 35 t/h (per well)
v) Steam Pipelines
Steam pipeline is designed as follows:
Steam pressure : 11.0-15.0 bar (absolute)
Steam temperature : 185-195 °C
Flow rate : 400 t/h
Length : 4,500 m (approx. total length)
Pipe diameter : 500 mm (main steam pipe)
[Outline of Process]
At the Calientes Geothermal Field, no major obstacles were observed and the site level was found to be relatively
flat. Therefore, the FCRS piping was designed based on such condition. The construction of the FCRS pipeline
will be largely affected for its construction period and cost due to such site condition. It is expected that the
detailed design will help in selecting an easier location for construction, which may also be related to the location
of each steam wells.
The conceptual process flow of FCRS is shown in Figure 3.8.
3-21
Figure 3.8 Conceptual Process of FCRS
Source: Study Team
4) Issues and Countermeasures for the Technical Proposal and System
There are no significant technical issues found in the case of the proposal for the power station and FCRS system
as mentioned above. However, special attention should be given on the site location which is 4,500 m above sea
level. The following special attention should be considered:
・ The electrical equipment shall be carefully designed for appropriate insulation distance and cooling effect in
order to maintain the reliability even at low atmospheric pressure.
・ The equipment control especially the electronic parts shall be designed to maintain sufficient cooling.
・ When planning site erection and commission works, adequate working hours and rest hours should be
planned to keep a sufficient time frame.
5) Drilling Plan for Exploration Wells
Based on the results of geothermal resource evaluation and site survey, drilling plan for exploration wells were
designed as follows:
a) Selection of Drilling Pad
According to the geothermal model from existing studies and verified by this study, two main faults from the
northeast-southwest trend, named Fc-1 and Fc-2, have been assumed in the study area (refer to Figure 3.3). It is
expected that the drilling depth should be about 2,000 m up to the assumed faults and high temperature convective
3-22
zone. Therefore, flat areas of about 4,000 m2 will be selected as drilling pads for a rotary type rig with 2,000 m
class (750 HP class). The area shall also act as site for material storage. Selected drilling locations are shown in
Figure 3.9. CT-1 and CT-2 are expected to be installed as production wells, and CT-3 will be used for reinjection
well.
There are enough spaces for drilling pads at each location. However, it is necessary to confirm the strength of the
ground for drilling works.
b) Water Supply Plan
The three selected locations have advantages of securing drilling water from the neighboring river, then the
drilling water will be taken from the river by using suction pump or gravity with construction of water intake in
upward. However water treatment by neutralizer, such as calcium bicarbonate, is necessary before using it as
drilling water, as the river water is found to be acidic with a pH of about 3.4.
Figure 3.9 Location of Exploratory Wells
Source: Study Team
c) Implementation Plan of Drilling Rig
The access road from Tacna City to Candarave where the base camp is set, becomes an unpaved rough road 15 km
before reaching Candarave. From Candarave to Calientes, the road continues to be unpaved and rough with steep
slopes, large curvature and narrow width.
In order to transport the rotary-type drilling rig, it is necessary to undertake a large scale road rehabilitation for
large trucks, trailers and large cranes to be able to pass, however the access road passes some of the center of
villages between Candarave and Calientes, then road rehabilitation would be very difficult.
Therefore, it is desirable to construct new access road for transportation from the upward of Calientes to the
direction of north-east, to deploy drilling rig, provided that the geothermal potential should be confirmed.
3-23
d) Specifications for Exploratory Wells
In the study area, the Fc-1 and Fc-2 faults run along the northeast-southwest trend of the river in Calientes which
control the flow of geothermal fluid. These faults will be the target for exploratory wells. Specifications for each
exploratory well are shown in Table 3.3.
The casing program and the drilling cross section of CT-1 are shown in Figure 3.10 and Figure 3.11, respectively.
The last diameter is designed at 6.25 in while the intermediate casing shoe is at 1,200 m.
Table 3.3 Drilling Specification of Three Exploration Wells
Item CT-1 CT-2 CT-3
Outline of target Drill near the fault Fc-1,
aiming at high
permeable fracture zone
along Fc-1.
Drill near faults Fc-1 and 2,
aiming at high permeable
fracture zone along Fc-1 and
Fc-2.
Drill near the fault Fc-2,
aiming at high permeable
fracture zone along Fc-2.
Target Fc-1 (NE-SW, high
angle fault)
Fc-1 (NE-SW , high angle)
Fc-2 (NNE-SSW, high angle)
Fc-2 (NNE-SSW, high
angle)
Location of target from
wellhead
Direction from true
North standard : S60°E,
Vertical depth: 1,500 m
Horizontal distance:
100 m
[Fc-1]Direction from North :
S79°E,
Vertical depth: 1,223 m
Horizontal distance: 336 m
[Fc-2] Direction from North :
S79°E,
Vertical depth: 1,590 m
Horizontal distance: 667 m
Direction from North :
S35°E,
Vertical depth: 1,500 m
Horizontal distance: 660
m
Depth of target 1,506 m (2,850 m a.s.l.) [Fc-1] 1,332 m (3,092 m a.s.l.)
[Fc-2] 1,828 m (2,723 m a.s.l.)
1,675 m (2,796 m a.s.l.)
Direction at target 7°30’ 42° 32°
Estimated Temperature
at target
Approx. 250 °C Approx. 230-260 °C Less than 250 °C (Out
from active geothermal
manifestation area)
Kick off Point (KOP) 660 m 630 m 180 m
Intermediate casing shoe 1,200 m (3,152m a.s.l.) 1,200 m (3,190 m a.s.l.) 1,200 m (3,199 m a.s.l.)
Last diameter (inch) 6-1/4 6-1/4 6-1/4
Drilling depth to bottom 2,000 m 2,000 m 2,000 m
Source: Study Team
3-24
Figure 3.10 Casing Program of CT-1
Source: Study Team
Target（Well Encounters estimated fault FC‐1）approximately 1,506m in drilling depth
KOP 660m
Depth (m)0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
17-1/2″
105.00m
12-1/4″
605.00m
8-1/2″
1205.00m
6-1/4″
2000.00m
7″CSG
1200.00m
(L-80,23.0lb/ft,BTC)
600.00m
9-5/8″CSG(K-55,47.0lb/ft,BTC)
100.00m
13-3/8″CSG(K-55,54.5lb/ft,BTC)
L/H TOP
1150.00m
ＧＬ
4-1/2″CSG
1990.00m
(L-80,11.6lb/ft,BTC)
2Stage Cementer
3-25
Figure 3.11 Cross Section of CT-1
Source: Study Team
e) Suggestion of Structural Test Well
In order to drill the 2,000 m exploratory wells, it is necessary to construct an access road. Since surveys were only
conducted on surfaces, information is not clear about underground situation such as geological structure and
temperature. Prior to drilling exploratory wells, it is considered to drill a test well to examine the temperature and
geological structure in the Calientes Geothermal Field using a spindle-type driller, which is possible to transport
on the existing road.
This structural test well shall be drilled near the CT-3, which is expected to yield the highest potential. The well is
designed as a vertical well and the drilling depth will be 1,500 m in order to drill through the cap rock.
It is recommended to firstly clarify the geothermal structure from the obtained data of the structural test well. The
next step is to decide which has the higher potential from the three drilling targets for exploration wells; CT-1,
CT-2, or CT-3, .
0
500
1000
1500
2000
-800 -600 -400 -200 0 200 400 600 800
Deviation
Total Vertical Depth(m)
MS60°E
Target（Well Encounters estimated fault FC‐1）approximately 1,506mdrilling depth
Chapter 4 Evaluation of Environmental and Social Impacts
4-1
(1) Analysis of Present Environmental and Social Conditions
1) Analysis of Present Conditions
a) Outline of Project Site
The project site is located in Calientes, Tacna Region, in southern Peru. The nearest villages to the site are
Candarave and Tarat. The area around the project site is mainly used for grazing animals. There are
approximately 2,000-3,000 alpacas and llamas (Lama glama) being grazed in the area where the animals feed on
vegetation on wetlands or marshlands that spread along the Calientes River. The local people in Calientes earn
their living by grazing alpacas and llamas and rolling grass seed based on the conditions of the grass necessary
for grazing. Although some resident houses can be found near the project site, they have relocated to Candarave
a few years ago and the houses are not used at present. The land at the project site is used by the community for
a long-time.
The project site is located at altitudes between 4,200 and 4,300 m above sea level (a.s.l.). Precipitation is small
due to the dry alpine arid region climate. The air temperature (monthly averages of daily maximum and
minimum air temperature) and monthly precipitation records nearest the Candarave village (3,415 m a.s.l.) are
shown in Figure 4.1. The precipitation tends to be concentrated from January to March and sometimes
experiences snowfall because of the high altitude. However, as the project site is located at about 1,000 m higher
than Candarave, the air temperature is considered to be lower and precipitation patterns may be slightly
different.
Figure 4.1 Air Temperatures and Precipitation at Candarave
Source:Tourist Climate Guide, SENAMHI
The Calientes River flows near the project site. The Calientes River flows slowly along a flatland where the
valley stretches out, making the valley look like a wetland or marsh area. Since hot spring water coming from
underground flows into the stream of the Calientes River, the salinity of the river water is relatively high. Thus,
the river water is not suitable for irrigation, and that is why small scale irrigation canals were established.
Air Temperature P
recip
itatio
n
mm
Air Temp. (Max) Air Temp. (Min) Precipitation
4-2
In addition, unpaved road is being developed up to the project site for local use (grazing) as well as for tourism
purposes. Simple bathing facilities have been also established at the place where hot spring water flows to the
surface. According to the Tacna Region officers, the project site is a tourist attraction and it is included in tourist
tour routes.
b) Natural Environment
Since the project site is in a dry alpine arid region with little precipitation, flora is limited. The plants which
have been identified near the project site are as follows (as referred to the Feasibility Study on Geothermal
Sector and Calientes Field, JBIC, April 2008):
・Bent grass (Stipa, Festuca, Calamagrostis)
・Ericaceous low trees (Lephydophyllum quadrangulare, Fraseria fruticosa)
・Succulent plant (Opuntia spp.)
Furthermore, Yareta (Liareta), flowering plant of Umbelliferae, was commonly observed.
In addition, fauna is also limited, reflecting that the project site is located in a dry alpine arid region with little
precipitation. Vegetation is also poor and water is scarce. Thus, only a limited number of animals that have
adjusted to this kind of environment have inhabited near the project site. Faunas found in this region are as
follows (as referred to the Feasibility Study on Geothermal Sector and Calientes Field, JBIC, April 2008):
(a) Mammals
・Vizcacha (Lagidium peruanum)
・Vicugna (Vicugna vicugna)
・South american foxes (Zorro, Lycalopex culpaeus)
(b) Birds
・Falcon (Halcon, Falco peregrines)
・Chimney swallow (Golondrina, encejo, Apodidae: sp1 and 2)
・Humming bird (Tordo negro, Myrtis fanny)
In Peru, valuable species are categorized as critically endangered (en peligro crítico: CR), endangered (en peligro:
En), and nearly threatened (casi amenazado: NT) according to categories of the International Union for
Conservation of Nature and Natural Resources (Unión Internacional para la Conservación de la Naturaleza: IUCM).
As mentioned below, the project site is located inside Vilacota Maure ACR. In Vilacota Maure ACR, valuable
species are identified such as Polylepis (quenoales) categorized as En in D.S.No.043-2006-AG (Categorizacion de
Especies Amenazadas de Flora Silvestre), and Suri (Rhea Pennate) categorized as CR in D.S.No.034-2004-AG
(Categorizacion de Especies Amenazadas de Fauna Silvestre y Prohiben su caza, captura, tenencia, transporte o
exportacion con fines comerciales).
4-3
c) Regional Regulation
The project site is located inside Vilacota Maure ACR. ACRs have been established by local government in
order to complement national level ANPs.
Vilacota Maure ACR was established on August 27, 2009 through D.S. N°015-2009-MINAM (Decreto
Supremo que establece el Area de Conservacion Regional Vilacota Maure y desafecta la Zona Reservada
Aymara Lupaca) with an area of 124,313 ha. According to D.S. N°015-2009-MINAM, Article No.2., the
objectives of the establishment of Vilacota Maure ACR are as shown in Table 4.1.
Table 4.1 Objectives of the Establishment of Vilacota Maure ACR
Category Objectives
General To conserve the natural, cultural resources, and biological diversity of the Andean ecosystem of Tacna Region, ensuring the continuity of ecological processes through integrated and participatory management.
Specific (a) To conserve the biodiversity based on the sustainable use of the resources of wild flora and fauna. (b) To contribute to the conservation of the population of Suri (Rhea pennata). (c) To protect the soil and vegetation as regulators of the hydrological regime in the
Maure River basin, and ensure the supply of water and other environmental services for the benefit of the involved population.
(d) To prevent the degradation and loss of natural resources by destruction of the fragile ecosystem. (e) To create the necessary conditions for carrying out of ecotourism, recreational,
educational, scientific and cultural activities.
Source:D.S. N°015-2009-MINAM
The area of Vilacota Maure ACR is divided into seven zones. The project site is located in the “tourism and
recreational zone” as shown in Figure 4.2. As per D.S. N°015-2009-MINAM, Article No. 6, renewable natural
resources can be used in the ACR under the management plan and supervision of project competent authority. In
addition, as per Article No.8, development activities are possible if the project has been given a status in the
master plan and its EIA has been approved, taking into considerations the opinions of the National Service of
Natural Protected (Servicio Nacional de Naturales Protegidas por el Estado: SERNANP). SERNANP also
showed its opinions that if the lands in the Strict Management Zone, where the Polylepis (quenoales) forest is
protected and that the Wildlife Zone where the population of Suri is conserved, are not disturbed, development
activities can be approved with appropriate procedures.
4-4
Figure 4.2 Vilacota Maure ACR and the Project Site
Source: Study Team, based on Zoning Map of Vilacota Maure ACR of Tacna Region
2) Future Projection (In case of no project implementation)
In case there is no project implementation in addition to hydraulic power generation, thermal power generation
based on natural gas will be continuously used. Consequently, the following situations would be anticipated to
be caused by thermal power generation:
・Possibility to worsen air pollution, and
・Possibility to increase greenhouse gas (mainly CO2) emissions.
It is estimated that Peru has abundant geothermal resources. Thus, the development of geothermal generation
could contribute in reducing greenhouse gas emissions by alternating a part of electricity from thermal power
generation using fossil fuel.
Tourism and recreational zone
Wild zone
Direct use zone
Strict management zone
Project Site
Buffer zone
Buffer zone
Legend
124,303.18ha
Vilacota MaureACR
4-5
(2) Environmental Improvement Effects by the Project
1) Environmental Improvement Effects by the Project
It has been known that greenhouse gases emitted from geothermal generation is less than those of other power
sources. According to the information published by the Ministry of Economy, Trade and Industry (METI) and
the Agency for Natural Resources and Energy of Japan, greenhouse gas emissions from geothermal generation
is estimated at approximately 1/65 of coal-fired power generation, 1/35 of integrated gasification combined
cycle (IGCC) generation, and 1/3 of photovoltaic generation. CO2 emissions of different power generating
sources are shown in Figure 4.2.
Figure 4.2 CO2 Emission of Power Generating Sources
Source: METI, and the Agency for Natural Resources and Energy of Japan
In general, the facility utilization rate of geothermal generation is relatively high at 80-95%. Because of this,
when compared with other renewable energy, it is possible to supply a relatively large amount of electric power.
Thus, a relatively greater CO2 emission reduction could be expected. In this connection, the examination of the
effects of environmental improvement of the project should be focused on the reduction of CO2 emissions, as
well as the preliminary estimation of the amount reduced.
If the generating power of the geothermal plant is set at 50 MW with a facility utilization rate of 95%, the
estimated annual power generation and net power supply to the grid is 416,100 MWh, as shown in Table 4.2,
with a 6% distribution loss based on the World Bank data.
Table 4.2 Annual Power Generation and Net Power Supply to the Grid
Planned Generating Power
(MW)
Utilization Rate (%)
Annual Power Generation
(MWh)
Loss of Distribution
(%)
Net Power Supply to the Grid (MWh)
50 95 416,100 6 391,134
Source: Study Team
0
200
400
600
800
1000
1200
Coal fired power Oil fired powerLNG fired power (steam）LNG fired power (combined)Photovoltaic Wind Nuclear energy Geothermal Hydroelectric power
Construction （indirect）
Combustion （direct）
g‐CO2/kWh
Coal Oil PNG LNG Solar Wind Nuclear Geothermal Hydro
4-6
In general, when geothermal generation development is examined as a Clean Development Mechanism (CDM)
project, the consolidated baseline methodology for grid-connected electricity generation from renewable sources,
also known as ACM0002, is applied in order to estimate the reduction of CO2 emissions in many cases. If the
combined mission factor (CM factor) is set at 0.5470 t-CO2/MWh (FONAM, Fondo Nacional del Ambiente, 2007),
the estimated annual CO2 emission reduction is 213,950 t-CO2/MWh as shown in Table 4.3. However, for
convenience, CO2 emission from geothermal generation through the release of non-condensable gas (Gas No
Condensable: NCG) was not considered in the estimation.
Table 4.3 CO2 Emission Reduction as CDM Project
Items Estimated Amount
Net power supply to the grid (MWh/y) 391,134 CM emission factor (t-CO2/MWh) 0.5470 Annual emission reduction (t-CO2/y) 213,950
Source: Study Team
2) CDM Potential of the Project
As of October 2010, a total of 16 geothermal generation projects worldwide have been proposed as CDM projects,
of which nine projects have been registered as CDM projects. Among the nine registered CDM projects, three are
in Indonesia, two in El Salvador, and one each in Guatemala, Nicaragua, Papua New Guinea, and Kenya. Most of
the proposed projects adopted the ACM0002. Problems to be tackled for the application of geothermal generation
as CDM projects include the estimation of CO2 emission from NCG in geothermal fluid and steam, estimation of
grid emission factor, and verification of additionality.
So far, there are no geothermal generation projects in Peru that have been proposed as a CDM project. However,
62 CDM projects have been registered in Peru from 2005 to 2013, of which, 45 are hydraulic power generation
projects, five are solid waste management projects, and four are fuel conversion projects.
3) Laws and Regulations of Peru related to implementation of the project
Table 4.6 shows the environmental laws and regulations related to the project in Peru.
Table 4.6 Environmental laws and regulations related to the Project in Peru
No. Name Abstract
Law No. 27446 Ley de Sistema Nacional de
Evaluacion de Impact Ambiental
SEIA law: All projects required the
acquisition of environmental
certification and EIA
Decreto Legislativo 1078 Decreto Legislativo que modifica la
ley No.27446
Revised SEIA law
D.S.No.019-2009-MINAM el Reglamento del la ley No.27446
Sistema Nacional de Evaluacion de
Procedure of SEIA
4-7
No. Name Abstract
Impact Ambiental
Law No.29968 Ley de Creacion del Servicio Nacional
de Certificacion Ambiental para las
Inversiones Sostenibles (SENACE)
The law stipulates an organization for
National Service of Environmental
Certification of Sustainable
Investments (SENACE)
D.S.No.003-2008-MINAM Estandares de Calidad Ambiental para
Aire
Approval of Air Quality Standard
Law No.25844 Ley de Concesiones Eléctricas Basic Law for Electrical Concession
D.S.No.29-94-EM Reglamento de Proteccion Ambiental
en las Actividades Electricas
Operation method of Environmental
conservation For Electrical Project
Law No.26848 Ley Organica de Recursos
Geotermicos
Basic law for Geothermal
Development and its application
D.S.No.019-2010-EM Nuevo Reglamento de la Ley
No.26848, Ley Organia de Recursos
Geotermicos
Operation method for Geothermal
Development Law
Law No.27293 Ley de Sistema Nacional de Inversion
Publica
Basic law for Operating SNIP
Law.No.26834 Ley de Areas Naturales Protegidas Natural environment conservation law,
stipulating SINANPE
D.S.No.038-2001-AG Reglamento de la ley de Areas
Naturales Protegidas
Operation method for Natural
environment conservation law,
D.S.No.015-2009-MINAM Decreto Supremo que establece el Area
de Conservacion Regional Vilacota
Maure y desafecta la Zona Reservada
Aymara Lupaca
Stipulation of Vilavota Maure ACR
D.S.No.034-2004-AG Categorizacion de Especies
Amenazadas de Fauna Silvestre y
Prohiben su caza, captura, tenencia,
transporte o exportacion con fines
comerciales
Classification of vulnerable animals
followed by IUCN
D.S.No.043-2006-AG Categorizacion de Especies
Amenazadas de Flora Silvestre
Classification of vulnerable plants
followed by IUCN
Law No.28296 Ley General del Patrimonio Cultural
de la Nacion
Stipulation for conservation of Cultural
heritage
Law No.27117 Ley General de Expropiaciones Basic law for land acquisition and its
process
Source: Study Team
(3) Environmental and Social Impacts by the Project
4-8
1) Preliminary Scoping for Environmental and Social Items
In order to identify the environmental and social considerations items for the project, preliminary scoping was
conducted as shown in Table 4.4. The items analyzed in the preliminary scoping were selected based on the
check items listed in the “JICA Guidelines for Environmental and Social Considerations (April 2010)”, and
“JBIC Guidelines for Confirmation of Environmental and Social Considerations (April 2012)”. The degree of
impacts were assessed for the preparation stage (test drilling, land acquisition), construction stage (construction
of facilities), and operation stage (operation of facilities) assuming that the case has no avoidance and mitigation
measures are taken.
Table 4.4 Results of Preliminary Scoping
Category No Items Rating
Rating Basis Pre Con Ope
Pollution 1 Air Quality
B- B- B- Pre・Con：By production test, generation of the gas containing hydrogen sulfide (H2S) is expected. In addition, emission gases are discharged by operation of heavy machines during well drilling and facility construction. Ope：H2S is expected to be released along with steam.
2 Water Quality
B- B- B- Pre・Con：Muddy water is expected to be generated due to well drilling. Ope： Wastewater is expected to be discharged from the facilities.
3 Wastes
B- B- B- Pre・Con：Drilling sludge, construction waste soil, and scrap wood are expected to be generated by well drilling activities. Ope：Wastes (sludge, waste oil) are expected to be generated at the facilities.
4 Soil Pollution
D D D No activities which may cause soil pollution are planned.
5 Noise/ Vibration
B- B- B- Pre・Con：Blowout of geothermal fluid by well drilling and noise from operation of heavy machines are expected. Ope： Noise from operation of the facilities（power generator, steam turbine, cooling tower, etc.）is expected.
6 Ground Subsidence
D D C Pre・Con: Collection of geothermal fluid during well drilling and facilities construction is limited. Ope：Although ground subsidence is expected by collection of geothermal fluid, detail examination is required.
7 Offensive Odor D D D No activities which may cause offensive odor are planned.
8 Sediment Quality
D D D No activities which may cause sediment quality pollution are planned.
Natural Environment
9 Protection Area A- A- A- The project site is located inside Vilacota Maure ACR.
10 Ecosystem/ Flora and Fauna
A- A- A- Some negative impacts on regional ecosystem and flora and fauna are expected due to disturbance of the land, operation, and existence of the facilities.
11 Hydrology
B- B- D Pre・Con： Surface water or groundwater is planned to be used. Ope ： The amount of surface water or
4-9
Category No Items Rating
Rating Basis Pre Con Ope
groundwater planned to be used is limited. 12 Topography/
Geology
D B- D Pre：Impacts are negligible as large-scale well drilling is not planned. Con：The land is expected to be disturbed by construction of facilities (generator building, steam and hot fluid transport pipe, cooling tower, etc.). Ope：No activities which may cause impacts on topography/geology are planned.
Social Environment
13 Involuntary Resettlement
D D D Since there are no residents at the project site, involuntary resettlement is not required.
14 Poor People D B+ B+ Pre：Creation of employment opportunities are limited by test drilling. Con・Ope：Some positive impacts on regional economy are expected such as creation of employment opportunities through construction and operation of the facilities.
15 Ethnic Minority/ Indigenous People
D D D There are herders and nomads available in the area, but there are no ethnic minorities or indigenous people who need special consideration.
16 Local Economy and Livelihood
D B+ B+ Pre：Test drilling only creates limited employment opportunities. Con・Ope：Some positive impacts on regional economy such as creation of employment opportunities are expected by construction and operation of the facilities.
17 Land Use and Utilization of Local Resources
D D B+ Pre・Con：No impacts on land use and utilization of local resources are expected. Ope：Geothermal fluid could be used for other purposes in addition to geothermal generation.
18 Water Use B- B- D Pre・Con： Surface water or groundwater is planned to be used. Ope ： The amount of surface water or groundwater planned to be used is limited.
19 Social Infrastructures and Services
D D D There are no sensitive social infrastructures (dwelling, school, medical facilities, etc.) located in and around the project site.
20 Social Institutions and Local Decision- making Institutions
D D D No impacts on social institutions and local decision-making institutions are expected.
21 Misdistribution of Benefits and Damages
D D D No unequal distribution of benefit and damage is expected in and around the project site.
22 Local Conflicts of Interest
D D D No local conflict of interest is expected in and around the project site.
23 Cultural and Historical Heritages
C C C Although no cultural and historical heritage were considered at the project site, a detailed investigation is required.
24 Landscape D D A+/- Pre・Con： Since no large scale construction work is planned, impacts on landscape are temporal and limited.
4-10
Category No Items Rating
Rating Basis Pre Con Ope
Ope： Some impact on landscape is expected by the existence of plant facilities (power generator, steam turbine, cooling tower, etc.).
25 Gender D D D No impact is expected.
26 Children’s Rights
D D D No impact is expected.
27 Infectious Diseases (such as HIV/AIDS)
B- B- D Pre・Con： Although no large-scale construction work is planned, there is a possibility for infectious diseases to spread due to the influx of workers. Ope：Since the number of works at the project facilities, impact on infectious disease is considered to be small.
28 Occupational Environment (including Occupational Safety)
B- B- B- Since the project site is located at a high elevation, special considerations on occupational safety are required.
Others 29 Accidents B- B- B- Special considerations on accidents are required during test drilling, facility construction, and operation, respectively.
30 Climate change D D A+ Pre・Con：Since no large-scale construction work is planned, impact on climate change is temporal and limited. Ope：This project could contribute to reduce greenhouse gas emission.
Note: Pre-During preparation, Con-During construction, Ope-During operation A+/-: Significant positive/negative impact is expected. B+/-: Positive/negative impact is expected to some extent. C+/-: Extent of positive/negative impact is unknown (further examination is needed, and its impact could be clarified as the study
progresses) D: No impact is expected.
Source:Study Team
As a result of preliminary scoping, environmental impacts are to be expected on air quality, water quality, waste,
noise, protected area, ecosystem/flora and fauna, hydrology, topography, geology, landscape, and climate
change. In addition, positive and negative social impacts are also expected on poor people, local economy and
livelihood, land use and utilization of local resources, water use, infectious disease (HIV/AIDS, etc.,),
occupational environment (including occupational safety), and accidents. Further studies are required to assess
ground subsidence and cultural and historical heritages.
2) Results of Comparison between the Proposed Project and Other Alternatives that have Smaller Negative
Impacts
Aside from geothermal power, small-scale hydropower, wind power generation, or photovoltaic generation
could also be considered as possible power plant alternatives that have smaller environmental and social impacts.
As these are renewable energy projects, environmental and social impacts would be smaller. However, as their
generating power is small, it is difficult to consider these plants in providing base power. On the other hand,
4-11
thermal power generation and hydraulic power generation could be considered as base power, but the
environmental and social impacts are considered to be larger than geothermal generation.
3) Results of the Meeting with Implementing Agencies and Organizations Knowledgeable on Environmental
Issues of the Project Area
The results of meetings with project implementing agencies and organizations relevant to the environmental and
social conditions of the project site are summarized in Table 4.5.
Table 4.5 Results of the Meetings with Implementing Agencies and Relevant Organizations on Environmental
Issues of the Project Area
Agency/Organizations Collected Information and Opinions MEM - Since the project is implemented in Vilacota Maure ACR, an agreement
between Tacna Region and SERNANP is necessary. DGAAE - Development steps for geothermal generation are described in the
Geothermal Resources Implementation Regulations (D.S, No.019-2010-EM).
- Before implementing Phase II of the test drilling, application to DGAAE is necessary. For the application, the contents of the Phase I survey’s initial environmental examination (advance EIA report) should be submitted to DGAAE. For extraction, a detailed EIA is required.
INGEMMENT - Data on natural conditions are available at the National Service of
Meteorology and Hydrology of Peru (Servicio Nacional de Meteorología
e Hidrología del Perú : SENAMHI).
- Regulations were issued for the creation of the National Service of Environmental Certification of Sustainable Investments (Servicio Nacional de Certificate Ambiental para las Inversiones Sostenibles : SENACE) as a sub-agency (independent organization) under the Ministry of Environment (Ministerio del Ambiente : MINAM).
SERNANP - If lands in the Strict Management Zone and Wildlife Zone are not disturbed, then development activities will be approved through appropriate procedures.
- For application of exploration, the EIA report approved by the Directorate General of Energy-related Environmental Affairs (Dirección General de Asuntos Ambientales Energéticos: DGAAE) must be attached. The contents of EIA must be coordinated with DGAAE.
Tacna Region Environment and Natural Department
- Development activities are possible for tourism and the development of a recreational zone even in Vilacota Maure ACR, but careful considerations for preserving the ecosystem should be made.
- The management plan of Vilacota Maure ACR is available. Although the survey was carried out in 2008 for the management plan, the plan was approved in 2012.
- Admission from the water authority of Tacna Region is required regarding water utilization rights.
Tacna Region Candarave
- The land at the project site is a communal land that has been used the local for a long time.
- Most of the local people in Calientes earn their living by grazing alpacas and llamas and rolling grass seed based on the conditions of grass necessary for grazing.
4-12
Source: Study Team
(4) Outlines of Legislation for Environmental and Social Considerations in
Peru
1) Outlines of Legislation for Environmental and Social Considerations Related to the Project
a) EIA
In 2011, the law of the National Environmental Impact Assessment System (Sistema de Evaluación de Impacto
Ambiental: SEIA) (Law No.27446) was promulgated which obliges project proponents on the implementation of
EIAs as well as obtaining environmental certifications.
The SEIA law was amended partially based on the Government Decree No.1078 (Decleto Legislativo 1078,
Decreto Legislativo que modifica la ley No.27446) upon the establishment of MINAM in May 2008. In the
amended SEIA law, obligations for obtaining an environmental certification and its process, categorization of
the projects, information disclosure, follow-up and monitoring, and strategic environmental assessment
(Evaluacion Ambiental Estrategica: EAE) are stipulated, with its details stipulated in the enforcement
regulations of SEIA law (D.S.No.019-2009-MINAM : Reglamento del la ley No.27446 Sistema Nacional de
Evaluacion de Impact Ambiental). According to the enforcement regulations, the development of a geothermal
power plant which generates more than 20 MW shall follow the SEIA law.
Although MINAM has been defined as the regulating authority for EIA in the amended SEIA law upon its
establishment, checking of contents of the EIA is not within the jurisdiction of MINAM. Thus, MINAM is not
involved with the EIA procedures. The department of the regulating authority for the project also reviews and
approves the EIA and issues its corresponding environmental certification.
EIA for power development projects is reviewed and approved by DGAAE of MEM. According to D.S. No.
29-94-EM of the Environmental Protection Regulations for Electrical Activities (el Reglamento de Protección
Ambiental en las Actividades Eléctrica), DGAAE is in charge of review of the EIA contents, approval of EIA,
amendment of procedures, and regulations of permissible maximum emission amount. However, as this project is
a development activity in the ACR, DGAAE will inquire technical opinions from SERNANP which is an
organization under MINAM. Considering the technical opinions of SERNANP, DGEEA shall then make the
approval of the submitted EIA.
However in December 2012, regulations under S.D. No.003-2013-MINAM was issued to set forth a timetable for
the creation of the National Service of Environmental Certification of Sustainable Investments (Servicio Nacional
de Certificación Amiental: SENACE) as a sub-agency (independent organization) under MINAM to review and
approve the EIAs defined under the SEIA law and its enforcement regulations (Law No.29968: Ley de Creacion
del Servicio Nacional de Certificacion Ambiental para las Inversiones Sostenibles (SENACE)). SENACE is
currently under establishment for its operation as a part of an exclusive specialized organization of SEIA. After
4-13
SENACE starts its operation, the EIA (or EIA-d) will be reviewed by SENACE.
b)Environmental Standards
There are environmental standards (estandar de calidad ambiental: ECA) targeted on environmental conservation
and environmental regulations (limite maximo permisible: LMP) to archive the ECA. ECA is the standard which
is adapted to the cross-sectoral society, while LMP is a deferent by sector. ECA and LMP on air quality, water
quality, and noise are more relevant in geothermal generation projects. In particular, ECA for H2S, which is
closely related to geothermal generation, is defined in the Environmental Standards for Air Quality (D.S. Nº
003-2008-MINAM, Aprueban Estándares de Calidad Ambiental para Aire). The environmental standard value for
H2S control is 150 ug/m3 (24 hour average), as with the standard value written in the WHO guidelines (150 ug/m3,
corresponding value 0.1 ppm).
c)Natural Protection
The law on the protection of natural environment, i.e., Protected Natural Areas Law (Law No. 26834, Ley de
Áreas Naturales Protegidas) defines the National System of Protected Natural Areas (Sistema Nacional de
Inversión Pública: SINANPE). In addition, Law No. 26834 and D.S. No. 038-2001-AG, the Regulation of the
Law on Protected Natural Areas (Reglamento de la Ley de Áreas Naturales Protegidas) classifies the ANP into ten
categories according to protection level and designates buffer zones outside the ANP.
In addition to SINANPE, ACRs were established. As with the areas surrounding the ANPs, buffer zones are
designated outside the ACRs. The development and use of natural resources are possible in the ACRs in which
buffer zones around the area have the same use restrictions on the ANPs categorized as direct use areas. Likewise,
EIA is required for the approval of SERNANP on planned development activities.
d)Social Considerations
The laws related to social considerations are laws or regulations on land acquisition, conservation of relics,
considerations on socially vulnerable people, and safety of construction activities.
For land acquisition for public projects, Law No.27117 or the Basic Law on Expropriation (Ley General de
Expropiaciones) which was promulgated in May 1999 was adopted. However, forced expropriation is only
authorized by the national government under the special law enacted by the congress. Law No.27117 stipulates
that fair compensation, payment of cash, and compensation for potential damage must be made for expropriation
in accordance with the procedures provided by the law.
2) EIA Required for the Project
a)Environmental Impact Report for Geothermal Development
When the geothermal development moves to the electric generation stage, it is necessary to obtain a concession,
and the application of geothermal right (exploration or concession) must be done based on Law No. 26848,
which is the Law of Geothermal Resources (Ley Orgánica de Recursos Geotérmicos) promulgated on 29 July
1997. Under Articles 30 and 49 of the said law, namely the application of a geothermal development concession,
4-14
environmental survey documents are required to be attached in the application as a form of judicial declaration.
In the environmental survey report, current environmental conditions at the proposed project site and predicted
environmental impacts based on related laws and regulations must be discussed. The environmental survey
report must be prepared based on the TOR given by DGAAE, which shall be approved by DGAAE.
b) EIA for Electric Power Project
EIA implementation for power development projects is provided in the Decree Law No. 25844, or Law on
Electricity Concessions and Regulations, promulgated in 1993. The details of EIA implementation are also set
forth in D.S. No. 29-94-EM on Environmental Protection Regulations for Electrical Activities, which came into
effect in 1994. Law No. 25844 stipulates that the requirement for EIA for a power development project depends
on the energy output capacity of the power plant. An EIA is required for a project of 20 MW or greater capacity.
For a power development project of 20 MW or greater output capacity, an EIA must be prepared and processed
in accordance with the provisions under Law No. 25844 and D.S. No. 29-94-EM. The EIA process as shown in
Figure 4.3 is as follows:
- Submission of stakeholders’ opinions on the proposed project and holding workshops for collection of
information;
- Submission of a plan regarding resident participation (PPC) and TOR (TOR will be sent to SERNANP, and
other agencies concerned, as required);
- Holding workshops prior to commencement of EIA survey (preparatory stage) and during survey (mid-stage
of EIA survey);
- Submission of EIA statement to the DGAAE-MEM and other agencies concerned (SERNANP and local
municipal governments);
- Evaluation and approval of EIA statement overview;
- Publication of EIA (in addition to the publication on El Peruano newspaper and broadcast on local radio, EIA
statement must be available for viewing at the MEM, regional Directorate of Energy and Mines (Direcciones
Regionales de Energía y Minas: DREM) and local municipal government offices)
- Conducting workshops to explain the details of the EIA statement;
- Technical review by SERNANP;
- Holding public hearings; and
- Approval of EIA (decision by bureau chief).
Figure 4.3 EIA Procedure for Power Development Projects
4-15
Source: DGAAE
After an EIA statement has been submitted, its processing takes 60 days before approval which includes a 20
day period for holding public hearings after the publication of the EIA statement. As for EIA report preparation,
any necessary preparation period as well as survey items shall depend on the components and location of the
project. If the survey is required to cover seasonal changes, the EIA report preparation period should cover any
adjustment period for the survey.
Items to be included in the EIA are provided in Article 4, Part 2 of D.S. No. 29-94-EM. The major items are as
follows:
- Baseline study (the current conditions of resources, geography and society of the planned development area,
and effects of project activities and facilities to be constructed on the local culture, economy and
communities)
- Overview of the proposed project;
- Forecasts and assessment of direct and indirect impacts on the environment during each stage of the project;
- An environmental management program that includes measures to avoid and/or minimize negative impacts
of the project on the environment and measures to enhance positive impacts;
- An environmental monitoring program incorporating the measures to mitigate potential impacts of the
project; and
- A contingency plan and environmental restoration plan after closure of the power plant.
For power development projects, there are two kinds of EIA survey guidelines formulated by MEM/DGAA, i.e.
Guidelines of Environmental Impact Studies for Electric Activities (Guía de Estudios de Impacto Ambiental
para las Actividades Eléctricas, DGAA-2001), and Guidelines of Community-related Studies (Guía de
Relaciones Comunitarias, DGAA-2001). The major survey items required by the Guidelines of Environmental
4-16
Impact Studies for Electric Activities are as follows:
- Introduction (framework of policies and laws, and administrative agencies);
- Environmental conditions (including natural geography, hydrology, meteorology, water quality, soil, flora
and fauna, society, economy, and culture) of the area where the project will be implemented;
- Overview of the project development activities;
- Environmental impact forecast and assessment;
- Environmental management program;
- Environmental monitoring program;
- Contingency plan and environmental restoration plan after closure of the power plant; and
- Cost and benefit analysis.
4-17
(5) Actions to be Taken by the Project Proponent in Peru for the Project
Implementation
1) Preparation of Environmental Impact Report for Application of Geothermal Right based on Geothermal
Resource Law
As per Articles No. 12 and No. 21 of the Geothermal Resources Implementation Regulations
(D.S.No.019-2010-EM), a judicial declaration (declaration jurada) states that the environmental survey report
must be submitted to DGAAE before its applications for exploration and concession. In addition, according to
SERNANP, the EIA report on geothermal development which is approved by DGAAE is required before the
commencement of operation.
2) EIA for Electric Concession Law（Obtain of Environmental Certificate）
The EIA of this project must be conducted based on the electricity law as well as the SEIA law. An
environmental certificate should also be obtained. In the EIA, the current environment must be surveyed, after
which detailed prediction and evaluation based on the results of field survey will be conducted and significant
impacts on the environment will be predicted. It is also necessary that measures in minimizing the impacts
should be considered. In addition, monitoring of environmental items in which significant impacts are expected
is required.
In general, the EIA system for power projects in Peru meets the basic requirements of the JICA Guidelines for
Environmental and Social Considerations for Category A projects. However, for the implementation of EIA, it is
necessary to analyze the gaps between the EIA system in Peru and the JICA guidelines. Necessary measures
should also be taken.
D.S. No. 29-94-EM provides that consulting firms implementing EIAs must be registered with the MEM.
3) EIA for SNIP
In SNIP, projects are categorized based on project scale (i.e., investment cost). Although contents and depth are
required in the report, EIA is required in all public projects according to the SMIP law. For the EIA required in
the SNIP, the EIA based on the power law can also be used.
4) Certificates of Non-existence of Archaeological Relics (CIRA)
Protection of cultural assets is provided under Law No. 28296, or General Law of the Cultural Heritage of the
Nation (Ley General del Patrimonio Cultural de la Nacion). The Archaeological Investigation Regulations
(Supreme Resolution No. 044-2000-ED) indicates that the Ministry of Culture (Instituto Nacional de
CulturaNational: INC) is also in charge of evaluating archeological investigation results and the issuance of
Certificates of Non-existence of Archaeological Relics (Certificados de Inexistencia de Restos Arqueológicos:
CIRA). To conserve historical and cultural assets, in principle, all projects must apply for CIRA that will be issued
by INC.
4-18
For projects less than 5 ha or 5 km long, field survey by ICM is required when applying for CIRA. If the project is
more than the above, the development project proponent must carry out archaeological investigation (Proyecto de
Evaluación Arqueológica) before starting any development activity. In parallel, an archaeological monitoring plan
(plan de monitoreo arqueológicos) shall be prepared. The survey for the application of CIRA shall be carried out
during the environmental certificate process. However, in case of an encounter with unexpected archaeological
relics during project activities, the work must be halted and the findings should be immediately reported to the
Ministry of Culture.
5) Land Acquisition
The communal land at the project site has been used by communities for a long-time, although it is not yet
registered. For this kind of communal land, it is necessary to have consultations between the project
implementing agency and the local people. An agreement on compensation should be made between the two
parties. In Article 31 of the Geothermal Resource Implementation Regulations (D.S.No.019-2010-EM), before
the start of Phase II of the geothermal exploration or activities corresponding to geothermal exploitation, there
must be agreements with the owners of the land to be affected by the geothermal activities. Otherwise, the
affected party may request the respective imposition of easement.
The Electricity Enterprise Law provides resettlement and land acquisition compensation for affected residents.
The scope to be compensated includes land, crops, and buildings.
6) CDM Registration
In order to register the project as a CDM project, a project design document (Documento de Diseño de Proyecto :
PDD) should be prepared by the project implementing agency.
Chapter 5 Financial and Economic Evaluation
5-1
(1) Project Cost
Figure 5.1 shows the configuration of the project cost while Table 5.1 shows the breakdown of the general project
cost estimate. The total project cost for the construction of the 50 MW geothermal power plant was estimated at
USD 233 million (about JPY 24.2 billion). The cost estimation was based on the following conditions: drilling
cost in steam production equipment on past construction data in Japan considering the site conditions of this
project and the power plant cost on the recent construction data in the world.
During the project’s development stage, the structure of the project cost can be broadly classified as "steam
production equipment costs" and " power plant construction costs." The conditions are as follows:
A) Steam Production Equipment Costs
• Exploration wells in the F/S survey, including the drilling of three 2,000 m deep exploration wells. The study
team assumes that one of these three wells will be successful and can be developed to a production well. This
cost should be the survey cost for verification of geothermal resources.
• The success rate of drilling geothermal wells during the development stage is 80% and the output is assumed at
about 5 MW per well.
• The tests and surveys associated with well drilling, as steam tests, are included to drilling cost.
B) Power Plant Construction Costs
• Building a power plant unit with a 50 MW capacity.
• Construction cost includes electrical installation work and civil construction work.
It should be noted that, in association with this project, the repair of existing roads as well as construction of new
roads and a power transmission line will be required. Since there is a possibility that these requirements will be
carried out in other projects, their construction costs were not included in the project cost estimate. However,
these facilities are intended to be used for estimating the project cost after considering the project’s funding
sources and making the construction schedule in future detailed designs.
Figure 5.1 Configuration of Project Cost
Source: Study Team
5-2
Table 5.1 Breakdown of Project Cost
Source: Study Team
QuantityUnit Price（MM USD）
ForeignCurrency(MM USD)
LocalCurrency
（MM Sol）
・Surface Survey (Geochemistry, MT survey etc) 5.6
Confirmation
・Land and Rights 2.8
・Exploration wells with tests 3 15.4 46.2
・Evaluation and detailed design 2.8
・Consultant fee at FS stage 1
1 57.4
・Production wells with tests 12 15.4 184.8
・Injection wells 5 11.2 56
・Land and Rights 2.8
・Separator Station 4
・FCRS Piping 20
4 Consultant fee 4
5 Administration Cost 16.8
28 260.4
・Facility cost for Power Plant(Generator:50MW) 49
・Facility cost for Switchyard etc. 3
・Electrical installation and Civil construction Works 28
7 Consultant fee 4
8 Administration Cost 16.8
84 16.8
113 334.6
US MM$ 233
Million Yen 24,194
1US$ = 2.8 sol = 104.06JPY
Steam Field Development Total(2+3+4+5)
Item
A. Steam Field Development
0 Reconnaissance & Exploration
1
F/S Total(0+1)
2 Drilling
3 FCRS Construction
B. Power Plant Construction
6 Power Plant
Power Plant Construction Total(6+7+8)
Total（0～8）US$119.50
Total Cost
5-3
(2) Summary Results of the Financial and Economic
Preliminary Analyses 1) Case Study without Yen Loan
After conducting the project’s financial and economic preliminary analyses, the project cost was estimated as (1),
for the case without Yen Loan . The cash flow statement was also calculated on the assumption of the selling price
of electricity and determining the financial internal rate of return (Tasa Interna de Retorno Financiero : FIRR) for
this cash flow, without taking debt into account. The validity of the project was also examined. The condition was
assumed that: operation period: 30 years, utilization rate: 90% and economic discount rate: 12%, etc.
In addition for the project’s economic analysis, economic internal rate of return (Tasa Interna de Retorno
Económico : EIRR) was obtained by comparing the case of the construction of a combined cycle gas turbine
power plant having the same power capacity (50 MW). For the real case for comparison, there is a large-scale gas
power plant is planned near Tacna Region, however it is too difficult to compare in terms of capacity. Thus, a
combined cycle gas turbine power plant of equal capacity was selected to compare.
a) FIRR
Based on the standard selling price (per kWh) of USD 0.10 for electricity, FIRR was estimated under five price
cases of USD 0.05, 0.06, 0.09, 0.10, and 0.12. As shown in Table 5.3, benefit exceeds the cost at a selling price
USD 0.06 or more. However, in order to ensure 12% of the long-term market interest rates, it is necessary to set
the selling price of electricity more than USD 0.10.
Table 5.2 Calculation Results of FIRR
Selling Price (USD/kWh) 0.05 0.06 0.09 0.10 0.12
FIRR 4% 6% 10% 12% 1%
B/C 0.83 1.0 1.5 1.7 2.0
Source: Study Team
b) EIRR
The EIRR was compared with the gas-fired combined-cycle power plants, which are one of the major power
sources in Peru. The power plant output was assumed at 50 MW, which is the same as this project. Gas prices
have been estimated to be 75% of the current prices, with 150% and 200% as variable factors, as shown in
Table 5.3 It is necessary that gas prices to rise by over 150% of the present in order to obtain an EIRR of more
than 12%, which is the acceptable long-term market interest rate.
Table 5.3 Calculation Results of EIRR
Gas price 75% 100% 150% 200%
EIRR 5% 8% 12% 16%
Source: Study Team
5-4
2) Case Study with Yen Loan
The study team studied the project cases with yen loan for economic evaluation.
Peru is a more developed country (upper-middle income countries) based on the classification of the World Bank
and DAC. ODA loans under JICA conditions for upper-middle income countries are shown in Table 5.4.
Table 5.4 ODA Loan Conditions for Upper-Middle Income Countries
Source: JICA (http://www.jica.go.jp/english/our_work/types_of_assistance/oda_loans/standard/index.html)
In this study, the study team used an interest rate of 1.7% with a redemption period of 25 years and a seven year
grace period, which is the standard condition under the General Terms and Standards of the above table. In
addition, in consideration of the environmental project case, the second option was considered a 0.6% interest rate,
a redemption period of 40 years and also a ten-year grace period, which is the standard condition under
preferential terms. Yen lending is carried out starting from the third year of the project and the calculation was
done on the assumption that 80% of the project cost will be covered through yen loan. The remaining 20% of the
project cost three years later and the payment of the first and second years are set to be procured from the open
market where the calculated long-term market interest rate is 12%, with a ten-year redemption period.
a) Case for Using Yen Loan in the General Terms
As a result of using the general conditions, USD 0.072 (free), 0.08 (taxable), and 0.10 (free and taxable) were
used as selling prices of electricity. The IRR and NPV were examined for the different selling prices and the
results are shown in Table 5.5. In order to secure a 12% long-term market interest rate, in the case of a tax-free
option, the selling price of electricity is required to be USD 0.072 or more. In the case of a tax burden of 30%, the
selling price of electricity is required to be USD 0.08 or more.
Table 5.5 IRR and NPV Calculation Results Under General Terms
Selling Price (USD/kWh) 0.072 0.08 0.10 0.10
5-5
Tax 0% 30% 0% 30%
IRR 12% 12% 31% 25%
NPV (USD in millions) -1 1 41 27
Source: Study Team
b) Case for Using Yen Loan of Preferential Terms
As a result of using the preferential terms, the study team examined the cases for USD 0.072 (free), 0.08 (taxable),
and 0.10 (free and taxable) selling prices for electricity and the results are shown in Table 5.6. In order to secure a
12% long-term market interest rate for a tax of 30%, the selling price of electricity is required to be more than
USD 0.045.
Table 5.6 NPV and IRR Calculation Results Under Yen Loan of Preferential Terms
Selling Price (USD/kWh) 0.045 0.05 0.05 0.07 0.08 0.10
TAX 30% 30% 0 0 0 0
NPV (USD in millions) 1 6 7 37 52 80
IRR 13% 15% 16% 27% 32% 40%
Source: Study Team
From the above results for the case of the yen loan under general terms, the estimated feasible selling price of
electricity shall be equal to USD 0.08 per kWh or more. In addition, for a yen loan under preferential terms, the
estimated feasible project selling price of electricity is equal to USD 0.045 per kWh or more. It is believed that in
particular, the geothermal project that takes advantage of the yen loan under preferential terms will be competitive
even if compared with the electricity selling price of a hydroelectric power plant, which is the cheapest in Peru.
3) Comparison and Verification of Geothermal Development Cases of Other Countries
In order to verify this project and the project cost of geothermal power generation in Peru, the study team
compared the project with other geothermal development projects in the world.
a)Comparison of Project Cost of Geothermal Power Plant of 50 MW
Table 5.7 shows a breakdown of the estimated project cost of a 50 MW general geothermal power plant. The
project cost of this project is USD 232 million, which is slightly higher when compared to the project cost (middle
value) as shown in the table. This may be because the power plant for this project is located in the highlands,
making the excavation and construction costs more expensive.
5-6
Table 5.7 Total Project Cost Breakdown of the 50 MW Geothermal Power Plant (USD in millions)
Source: World Bank/ESMAP Geothermal Handbook (2012)
b)Well Drilling Cost and Power Plant Construction Costs as a Percentage of the Total Construction Costs
Figure 5.2 shows the percentage of each item with respect to the project cost in Iceland. In Peru, 37% of the
project cost is allotted for well drilling while 34% of project cost is for power plant construction cost. The well
drilling and power plant construction costs were 34% and 35% respectively for Iceland, which is close with that
for Peru
Figure 5.2 Comparative Distribution of the Total Construction Cost in Iceland and Peru
Source: World Bank / ESMAP Geothermal Handbook (2012)
c)Comparison of the Power Purchase Price
Table 5.8 shows the electricity selling price of geothermal power generation per kWh in geothermal power
plant-rich countries. As mentioned in the previous section, electricity selling price obtained in this project without
5-7
the use of yen loan is about USD 0.12, while it is USD 0.08 under general terms of the yen loan and USD 0.045
for the use of the yen loan under preferential terms.
Based on the above, it is believed that the use of the yen loan can make the geothermal project viable at a lower
cost or as the same price as the average selling price value in the world.
Table 5.8 Geothermal Power Generation Cost in Geothermal Power Generation Facility-Rich Countries
(USD/kWh)
Source: World Bank / ESMAP Geothermal Handbook (2012)
5-8
Table 5.9 FIRR Calculation Flow (Result of USD 0.10 /kWh)
Source: Study Team
Investment Revenue Cost
Project
Year
Operation
YearOutput
Capacity
FactorSALES Investment
No. of
Additional
Wells
Supplement
Drilling Cost
Total
InvestmentEnergy sales Revenue
Total
RevenueO & M cost Net revenue
MW % GWh MM$ MM$ MM$ MM$, 10cent/kWh MM$
1 7 7 -7
2 7 7 -7
3 7.5 7.5 -7.5
4 22 22 -22
5 99 99 -99
6 90 90 -90
7 1 50 90 367 36.7 18 3 33.7
8 2 50 90 367 36.7 18 3 33.7
9 3 50 90 367 36.7 18 3 33.7
10 4 50 90 367 36.7 18 3 33.7
11 5 50 90 367 2 9.5 9.5 36.7 18 3 24.2
12 6 50 90 367 36.7 18 3 33.7
13 7 50 90 367 36.7 18 3 33.7
14 8 50 90 367 36.7 18 3 33.7
15 9 50 90 367 36.7 18 3 33.7
16 10 50 90 367 2 9.5 9.5 36.7 18 3 24.2
17 11 50 90 367 36.7 18 3 33.7
18 12 50 90 367 36.7 18 3 33.7
19 13 50 90 367 36.7 18 3 33.7
20 14 50 90 367 36.7 18 3 33.7
21 15 50 90 367 2 9.5 9.5 36.7 18 3 24.2
22 16 50 90 367 36.7 18 3 33.7
23 17 50 90 367 36.7 18 3 33.7
24 18 50 90 367 36.7 18 3 33.7
25 19 50 90 367 36.7 18 3 33.7
26 20 50 90 367 2 9.5 9.5 36.7 18 3 24.2
27 21 50 90 367 36.7 18 3 33.7
28 22 50 90 367 36.7 18 3 33.7
29 23 50 90 367 36.7 18 3 33.7
30 24 50 90 367 36.7 18 3 33.7
31 25 50 90 367 2 9.5 9.5 36.7 18 3 24.2
32 26 50 90 367 36.7 18 3 33.7
33 27 50 90 367 36.7 18 3 33.7
34 28 50 90 367 36.7 18 3 33.7
35 29 50 90 367 36.7 18 3 33.7
36 30 50 90 367 36.7 18 3 33.7
Total 11010 232.5 10 47.5 280 1101 540 90 731
NPV 150 296 24
Benefit (MM$) 296 Cost (MM$) 174 FIRR 12%
5-9
Table 5.9 EIRR Calculation Flow
Source: Study Team
Project
Year
Operation
Year
Project
CostCapability
Capacity
Factor
Annual
Salable
energy
O & M costSupplement
Drilling CostTotal Cost
Alternative
Project CostCapability
Capacity
Factor
Annual
Salable
energy
Efficiency
Fuel
Consump-
tion
Fuel Cost O & M cost Total CostCost
Balance
MM$ MW % GWh MM$ MM$ MM$ MM$ MW % GWh % Million m3 MM$ MM$ MM$ MM$
1 7 7 -7
2 7 7 -7
3 7.5 7.5 -7.5
4 22 22 20 20 -2
5 99 99 20 20 -79
6 90 90 30 30 -60
7 1 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
8 2 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
9 3 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
10 4 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
11 5 50 90 367 3 9.5 12.5 50 87.2 367 48 70 16 4 20 7.5
12 6 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
13 7 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
14 8 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
15 9 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
16 10 50 90 367 3 9.5 12.5 50 87.2 367 48 70 16 4 20 7.5
17 11 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
18 12 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
19 13 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
20 14 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
21 15 50 90 367 3 9.5 12.5 50 87.2 367 48 70 16 4 20 7.5
22 16 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
23 17 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
24 18 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
25 19 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
26 20 50 90 367 3 9.5 12.5 50 87.2 367 48 70 16 4 20 7.5
27 21 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
28 22 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
29 23 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
30 24 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
31 25 50 90 367 3 9.5 12.5 50 87.2 367 48 70 16 4 20 7.5
32 26 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
33 27 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
34 28 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
35 29 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
36 30 50 90 367 3 3 50 87.2 367 48 70 16 4 20 17
Total 232.5 11,010.0 90.0 47.5 370.0 70.0 11,010.0 480.0 120.0 600.0 230.0
EIRR 8%
Alternative : Gas Combined Cycle Power Plant (50 MW)This Project
ConstructionPeriod ConstructionPeriod
5-10
Table 5.9 Cash Flow Sheet in General Terms (Result of USD 0.08 /kWh)
Source: Study Team
Inflow Outflow (yen Loan) Outflow Balance
Project
Year
Operation
Year
Annual
Salable
energy
Energy
sales
Revenue
Interest O & M cost
Cash flow
from
operating
Activities
Depreciation of Asset Cash Outflow Balance
Borrowing
Yen Loan
Borrowing
Non Yen
Loan
GWhMM$,
8cent/kWh
Yen Loan
Total
Yen Loan
Standard
Rate: 1.7%
Total
Payment for
Principal
Total
Payment for
Interest
Total
Payment
Grand TotalMM$
Earning
before
income tax
Initial Inv.Additional
Inv.Total
Taxable
IncomeTax Profit
Initial
Investment
Additional
InvestmentPer year
80% 20% 30%
1 7 0 0 0.7 0.7 0.84 0.70 0.84 1.54 7 -1.54
2 7 0 0 0.7 0.7 1.4 1.60 1.40 1.60 3.00 7 -3.00
3 6 1.5 0 0 0 0.7 0.7 0.15 1.55 1.61 1.55 1.61 3.16 7.5 -3.16
4 17.6 4.4 0 0 0 0 0.7 0.7 0.15 0.44 1.99 1.95 1.99 1.95 3.94 22 -3.94
5 79.2 19.8 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 3.97 4.09 3.97 4.09 8.06 99 -8.06
6 72 18 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 5.77 5.77 5.77 11.54 90 -11.54
7 1 367 29.36 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 5.08 5.77 5.08 10.85 3 15.51 6.2 6.2 9.31 2.79 6.52 6.52
8 2 367 29.36 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 4.39 5.77 4.39 10.16 3 16.20 6.2 6.2 10.00 3.00 7.00 7.00
9 3 367 29.36 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 3.69 5.77 3.69 9.46 3 16.90 6.2 6.2 10.70 3.21 7.49 7.49
10 4 367 29.36 0.24 0 0 0 0.24 0.102 0.342 0.7 0.7 0.15 0.44 1.98 1.8 5.77 3.00 6.01 3.10 9.11 3 17.25 6.2 6.2 11.05 3.31 7.73 7.73
11 5 367 29.36 0.24 0.704 0 0 0.944 0.39712 1.34112 0.7 0.15 0.44 1.98 1.8 5.07 2.31 6.01 2.71 8.72 3 17.64 6.2 6.2 11.44 3.43 8.01 9.5 -1.49
12 6 367 29.36 0.24 0.704 3.168 0 4.112 1.727472 5.839472 0.15 0.44 1.98 1.8 4.37 1.70 8.48 3.43 11.91 3 14.45 6.2 1.9 8.1 6.35 1.91 4.45 4.45
13 7 367 29.36 0.24 0.704 3.168 2.88 6.992 2.881568 9.873568 0.44 1.98 1.8 4.22 1.18 11.21 4.06 15.27 3 11.09 6.2 1.9 8.1 2.99 0.90 2.09 2.09
14 8 367 29.36 0.24 0.704 3.168 2.88 6.992 2.762704 9.754704 1.98 1.8 3.78 0.67 10.77 3.43 14.20 3 12.16 6.2 1.9 8.1 4.06 1.22 2.84 2.84
15 9 367 29.36 0.24 0.704 3.168 2.88 6.992 2.64384 9.63584 1.8 1.8 0.22 8.79 2.86 11.65 3 14.71 6.2 1.9 8.1 6.61 1.98 4.63 4.63
16 10 367 29.36 0.24 0.704 3.168 2.88 6.992 2.524976 9.516976 0 6.99 2.52 9.52 3 16.84 6.2 1.9 8.1 8.74 2.62 6.12 9.5 -3.38
17 11 367 29.36 0.24 0.704 3.168 2.88 6.992 2.406112 9.398112 0 6.99 2.41 9.40 3 16.96 6.2 1.9 8.1 8.86 2.66 6.20 6.20
18 12 367 29.36 0.24 0.704 3.168 2.88 6.992 2.287248 9.279248 6.99 2.29 9.28 3 17.08 6.2 1.9 8.1 8.98 2.69 6.29 6.29
19 13 367 29.36 0.24 0.704 3.168 2.88 6.992 2.168384 9.160384 6.99 2.17 9.16 3 17.20 6.2 1.9 8.1 9.10 2.73 6.37 6.37
20 14 367 29.36 0.24 0.704 3.168 2.88 6.992 2.04952 9.04152 6.99 2.05 9.04 3 17.32 6.2 1.9 8.1 9.22 2.77 6.45 6.45
21 15 367 29.36 0.24 0.704 3.168 2.88 6.992 1.930656 8.922656 6.99 1.93 8.92 3 17.44 6.2 1.9 8.1 9.34 2.80 6.54 9.5 -2.96
22 16 367 29.36 0.24 0.704 3.168 2.88 6.992 1.811792 8.803792 6.99 1.81 8.80 3 17.56 6.2 1.9 8.1 9.46 2.84 6.62 6.62
23 17 367 29.36 0.24 0.704 3.168 2.88 6.992 1.692928 8.684928 6.99 1.69 8.68 3 17.68 6.2 1.9 8.1 9.58 2.87 6.70 6.70
24 18 367 29.36 0.24 0.704 3.168 2.88 6.992 1.574064 8.566064 6.99 1.57 8.57 3 17.79 6.2 1.9 8.1 9.69 2.91 6.79 6.79
25 19 367 29.36 0.24 0.704 3.168 2.88 6.992 1.4552 8.4472 6.99 1.46 8.45 3 17.91 6.2 1.9 8.1 9.81 2.94 6.87 6.87
26 20 367 29.36 0.24 0.704 3.168 2.88 6.992 1.336336 8.328336 6.99 1.34 8.33 3 18.03 6.2 1.9 8.1 9.93 2.98 6.95 9.5 -2.55
27 21 367 29.36 0.24 0.704 3.168 2.88 6.992 1.217472 8.209472 6.99 1.22 8.21 3 18.15 6.2 1.9 8.1 10.05 3.02 7.04 7.04
28 22 367 29.36 0.24 0.704 3.168 2.88 6.992 1.098608 8.090608 6.99 1.10 8.09 3 18.27 6.2 1.9 8.1 10.17 3.05 7.12 7.12
29 23 367 29.36 0.24 0.704 3.168 2.88 6.992 0.979744 7.971744 6.99 0.98 7.97 3 18.39 6.2 1.9 8.1 10.29 3.09 7.20 7.20
30 24 367 29.36 0.24 0.704 3.168 2.88 6.992 0.86088 7.85288 6.99 0.86 7.85 3 18.51 6.2 1.9 8.1 10.41 3.12 7.28 7.28
31 25 367 29.36 0.24 0.704 3.168 2.88 6.992 0.742016 7.734016 6.99 0.74 7.73 3 18.63 6.2 1.9 8.1 10.53 3.16 7.37 9.5 -2.13
32 26 367 29.36 0.24 0.704 3.168 2.88 6.992 0.623152 7.615152 6.99 0.62 7.62 3 18.74 6.2 1.9 8.1 10.64 3.19 7.45 7.45
33 27 367 29.36 0.24 0.704 3.168 2.88 6.992 0.504288 7.496288 6.99 0.50 7.50 3 18.86 6.2 1.9 8.1 10.76 3.23 7.53 7.53
34 28 367 29.36 0.24 0.704 3.168 2.88 6.992 0.385424 7.377424 6.99 0.39 7.38 3 18.98 6.2 1.9 8.1 10.88 3.26 7.62 7.62
35 29 367 29.36 0.704 3.168 2.88 6.752 0.26656 7.01856 6.75 0.27 7.02 3 19.34 6.2 1.9 8.1 11.24 3.37 7.87 7.87
36 30 367 29.36 3.168 2.88 6.048 0.151776 6.199776 6.05 0.15 6.20 3 20.16 6.2 1.9 8.1 12.06 3.62 8.44 8.44
2.88 2.88 0.04896 2.92896 2.88 0.05 2.93 3 -5.93 -5.93 -5.93 -5.93
175.6 57.9 11010 880.8 6 17.6 79.2 72 174.8 38.6308 213.4308 7 7 1.5 4.4 19.8 18 57.7 38.08 232.50 76.71 309.21 509.82 186 47.5 233.5 276.32 84.97 191.64 232.5 47.5 112.91
IRR 12%
NPV 1
Refund
General Term, Fixed Interest Rate,
Period of Deferment: 7 years
Period of Payment: 25 years
Bollowing from Private Bank
Period of Deferment: 0 years
Period of Payment: 10 years Bollowing
from Non
Yen
LoanTotal
Bollowing
from Private
Bank Total
Interest
5-11
Table 5.10 Cash Flow Sheet in Preferential Terms (Result of USD 0.08 /kWh)
Source: Study Team
Borrowing
Non Yen
loan
Annual
Salable
energy
Energy
sales
Revenue
Interest O & M cost
Cash flow
from
operating
Activities
Project
Year
Operation
Year
Borrowing
Yen loanGWh
MM$,
8cent/kWh
Yen Loan
Total
Payment
TotalMM$ EBIT Initial Inv.
Additional
Inv.Total
Taxable
IncomeTax Profit
Initial
Investment
Additional
InvestmentPer year Accumulate
80% 20% 30%
1 7 0 0 0.7 0.7 0.84 0.7 0.84 1.54 7 -1.54 -1.54
2 7 0 0 0.7 0.7 1.4 1.596 1.4 1.596 2.996 7 -2.996 -4.536
3 6 1.5 0 0 0 0.7 0.7 0.15 1.55 1.608 1.55 1.608 3.158 7.5 -3.158 -7.694
4 17.6 4.4 0 0 0 0 0.7 0.7 0.15 0.44 1.99 1.95 1.99 1.95 3.94 22 -3.94 -11.634
5 79.2 19.8 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 3.97 4.0872 3.97 4.0872 8.0572 99 -8.0572 -19.6912
6 72 18 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 5.7708 5.77 5.7708 11.5408 90 -11.5408 -31.232
7 1 367 29.36 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 5.0784 5.77 5.0784 10.8484 3 15.5116 6.2 6.2 9.3116 2.79348 6.51812 15.5116 -15.7204
8 2 367 29.36 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 4.386 5.77 4.386 10.156 3 16.204 6.2 6.2 10.004 3.0012 7.0028 16.204 0.4836
9 3 367 29.36 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 3.6936 5.77 3.6936 9.4636 3 16.8964 6.2 6.2 10.6964 3.20892 7.48748 16.8964 17.38
10 4 367 29.36 0 0 0 0 0 0 0 0.7 0.7 0.15 0.44 1.98 1.8 5.77 3.0012 5.77 3.0012 8.7712 3 17.5888 6.2 6.2 11.3888 3.41664 7.97216 17.5888 34.9688
11 5 367 29.36 0 0 0 0 0 0 0 0.7 0.15 0.44 1.98 1.8 5.07 2.3088 5.07 2.3088 7.3788 3 18.9812 6.2 6.2 12.7812 3.83436 8.94684 9.5 9.4812 44.45
12 6 367 29.36 0 0 0 0 0 0 0 0.15 0.44 1.98 1.8 4.37 1.7004 4.37 1.7004 6.0704 3 20.2896 6.2 1.9 8.1 12.1896 3.65688 8.53272 20.2896 64.7396
13 7 367 29.36 0.15 0 0 0 0.15 0.036 0.186 0.44 1.98 1.8 4.22 1.176 4.37 1.212 5.582 3 20.778 6.2 1.9 8.1 12.678 3.8034 8.8746 20.778 85.5176
14 8 367 29.36 0.15 0.44 0 0 0.59 1.407 1.997 1.98 1.8 3.78 0.6696 4.37 2.0766 6.4466 3 19.9134 6.2 1.9 8.1 11.8134 3.54402 8.26938 19.9134 105.431
15 9 367 29.36 0.15 0.44 1.98 0 2.57 0.61236 3.18236 1.8 1.8 0.216 4.37 0.82836 5.19836 3 21.16164 6.2 1.9 8.1 13.06164 3.918492 9.143148 21.16164 126.59264
16 10 367 29.36 0.15 0.44 1.98 1.8 4.37 1.04436 5.41436 0 4.37 1.04436 5.41436 3 20.94564 6.2 1.9 8.1 12.84564 3.853692 8.991948 9.5 11.44564 138.03828
17 11 367 29.36 0.15 0.44 1.98 1.8 4.37 1.02894 5.39894 0 4.37 1.02894 5.39894 3 20.96106 6.2 1.9 8.1 12.86106 3.858318 9.002742 20.96106 158.99934
18 12 367 29.36 0.15 0.44 1.98 1.8 4.37 1.00272 5.37272 4.37 1.00272 5.37272 3 20.98728 6.2 1.9 8.1 12.88728 3.866184 9.021096 20.98728 179.98662
19 13 367 29.36 0.15 0.44 1.98 1.8 4.37 0.9765 5.3465 4.37 0.9765 5.3465 3 21.0135 6.2 1.9 8.1 12.9135 3.87405 9.03945 21.0135 201.00012
20 14 367 29.36 0.15 0.44 1.98 1.8 4.37 0.95028 5.32028 4.37 0.95028 5.32028 3 21.03972 6.2 1.9 8.1 12.93972 3.881916 9.057804 21.03972 222.03984
21 15 367 29.36 0.15 0.44 1.98 1.8 4.37 0.92406 5.29406 4.37 0.92406 5.29406 3 21.06594 6.2 1.9 8.1 12.96594 3.889782 9.076158 9.5 11.56594 233.60578
22 16 367 29.36 0.15 0.44 1.98 1.8 4.37 0.89784 5.26784 4.37 0.89784 5.26784 3 21.09216 6.2 1.9 8.1 12.99216 3.897648 9.094512 21.09216 254.69794
23 17 367 29.36 0.15 0.44 1.98 1.8 4.37 0.87162 5.24162 4.37 0.87162 5.24162 3 21.11838 6.2 1.9 8.1 13.01838 3.905514 9.112866 21.11838 275.81632
24 18 367 29.36 0.15 0.44 1.98 1.8 4.37 0.8454 5.2154 4.37 0.8454 5.2154 3 21.1446 6.2 1.9 8.1 13.0446 3.91338 9.13122 21.1446 296.96092
25 19 367 29.36 0.15 0.44 1.98 1.8 4.37 0.81918 5.18918 4.37 0.81918 5.18918 3 21.17082 6.2 1.9 8.1 13.07082 3.921246 9.149574 21.17082 318.13174
26 20 367 29.36 0.15 0.44 1.98 1.8 4.37 0.79296 5.16296 4.37 0.79296 5.16296 3 21.19704 6.2 1.9 8.1 13.09704 3.929112 9.167928 9.5 11.69704 329.82878
27 21 367 29.36 0.15 0.44 1.98 1.8 4.37 0.76674 5.13674 4.37 0.76674 5.13674 3 21.22326 6.2 1.9 8.1 13.12326 3.936978 9.186282 21.22326 351.05204
28 22 367 29.36 0.15 0.44 1.98 1.8 4.37 0.74052 5.11052 4.37 0.74052 5.11052 3 21.24948 6.2 1.9 8.1 13.14948 3.944844 9.204636 21.24948 372.30152
29 23 367 29.36 0.15 0.44 1.98 1.8 4.37 0.7143 5.0843 4.37 0.7143 5.0843 3 21.2757 6.2 1.9 8.1 13.1757 3.95271 9.22299 21.2757 393.57722
30 24 367 29.36 0.15 0.44 1.98 1.8 4.37 0.68808 5.05808 4.37 0.68808 5.05808 3 21.30192 6.2 1.9 8.1 13.20192 3.960576 9.241344 21.30192 414.87914
31 25 367 29.36 0.15 0.44 1.98 1.8 4.37 0.66186 5.03186 4.37 0.66186 5.03186 3 21.32814 6.2 1.9 8.1 13.22814 3.968442 9.259698 9.5 11.82814 426.70728
32 26 367 29.36 0.15 0.44 1.98 1.8 4.37 0.63564 5.00564 4.37 0.63564 5.00564 3 21.35436 6.2 1.9 8.1 13.25436 3.976308 9.278052 21.35436 448.06164
33 27 367 29.36 0.15 0.44 1.98 1.8 4.37 0.60942 4.97942 4.37 0.60942 4.97942 3 21.38058 6.2 1.9 8.1 13.28058 3.984174 9.296406 21.38058 469.44222
34 28 367 29.36 0.15 0.44 1.98 1.8 4.37 0.5832 4.9532 4.37 0.5832 4.9532 3 21.4068 6.2 1.9 8.1 13.3068 3.99204 9.31476 21.4068 490.84902
35 29 367 29.36 0.15 0.44 1.98 1.8 4.37 0.55698 4.92698 4.37 0.55698 4.92698 3 21.43302 6.2 1.9 8.1 13.33302 3.999906 9.333114 21.43302 512.28204
36 30 367 29.36 0.15 0.44 1.98 1.8 4.37 0.53076 4.90076 4.37 0.53076 4.90076 3 21.45924 6.2 1.9 8.1 13.35924 4.007772 9.351468 21.45924 533.74128
37 31 0.15 0.44 1.98 1.8 4.37 0.50454 4.87454 4.37 0.50454 4.87454 3 -7.87454 -7.87454 -7.87454 -7.87454 525.86674
38 32 0.15 0.44 1.98 1.8 4.37 0.47832 4.84832 4.37 0.47832 4.84832 -4.84832 -4.84832 -4.84832 -4.84832 521.01842
39 33 0.15 0.44 1.98 1.8 4.37 0.4521 4.8221 4.37 0.4521 4.8221 -4.8221 -4.8221 -4.8221 -4.8221 516.19632
40 34 0.15 0.44 1.98 1.8 4.37 0.42588 4.79588 4.37 0.42588 4.79588 -4.79588 -4.79588 -4.79588 -4.79588 511.40044
41 35 0.15 0.44 1.98 1.8 4.37 0.39966 4.76966 4.37 0.39966 4.76966 -4.76966 -4.76966 -4.76966 -4.76966 506.63078
42 36 0.15 0.44 1.98 1.8 4.37 0.37344 4.74344 4.37 0.37344 4.74344 -4.74344 -4.74344 -4.74344 -4.74344 501.88734
43 37 0.15 0.44 1.98 1.8 4.37 0.34722 4.71722 4.37 0.34722 4.71722 -4.71722 -4.71722 -4.71722 -4.71722 497.17012
44 38 0.15 0.44 1.98 1.8 4.37 0.321 4.691 4.37 0.321 4.691 -4.691 -4.691 -4.691 -4.691 492.47912
45 39 0.15 0.44 1.98 1.8 4.37 0.29478 4.66478 4.37 0.29478 4.66478 -4.66478 -4.66478 -4.66478 -4.66478 487.81434
46 40 0.15 0.44 1.98 1.8 4.37 0.26856 4.63856 4.37 0.26856 4.63856 -4.63856 -4.63856 -4.63856 -4.63856 483.17578
47 41 0.15 0.44 1.98 1.8 4.37 0.24234 4.61234 4.37 0.24234 4.61234 -4.61234 -4.61234 -4.61234 -4.61234 478.56344
48 42 0.15 0.44 1.98 1.8 4.37 0.21612 4.58612 4.37 0.21612 4.58612 -4.58612 -4.58612 -4.58612 -4.58612 473.97732
49 43 0.15 0.44 1.98 1.8 4.37 0.1899 4.5599 4.37 0.1899 4.5599 -4.5599 -4.5599 -4.5599 -4.5599 469.41742
50 44 0.15 0.44 1.98 1.8 4.37 0.16368 4.53368 4.37 0.16368 4.53368 -4.53368 -4.53368 -4.53368 -4.53368 464.88374
51 45 0.15 0.44 1.98 1.8 4.37 0.13746 4.50746 4.37 0.13746 4.50746 -4.50746 -4.50746 -4.50746 -4.50746 460.37628
52 46 0.15 0.44 1.98 1.8 4.37 0.11124 4.48124 4.37 0.11124 4.48124 -4.48124 -4.48124 -4.48124 -4.48124 455.89504
53 47 0.44 1.98 1.8 4.22 0.08502 4.30502 4.22 0.08502 4.30502 -4.30502 -4.30502 -4.30502 -4.30502 451.59002
54 48 1.98 1.8 3.78 0.0588 3.8388 3.78 0.0588 3.8388 -3.8388 -3.8388 -3.8388 -3.8388 447.75122
55 49 1.8 1.8 0.03348 1.83348 1.8 0.03348 1.83348 -1.83348 -1.83348 -1.83348 -1.83348 445.91774
Total 175.6 57.9 11010 880.8 6 17.6 79.2 72 174.8 23.80026 198.60026 7 7 1.5 4.4 19.8 18 57.7 38.082 232.5 61.88226 294.38226 524.64974 186 47.5 233.5 291.14974 113.99198 177.45776 232.5 47.5 445.91774
IRR 32%
NPV 52
Payment
Bollowing from Private Bank
Payment: 40 Years
Deferment: 10 years
Fixed Interest RateYen Loan
Standard
0.6%Payment: 10 Years
Depreciation of Asset BalanceCash OutflowTaxInterest
Payment
Grand Total
Payment for
Interest
Total
Payment for
Principal
Total
Bollowing
from Non
Yen
LoanTotal
Bollowing
from Private
Bank Total
Chapter 6 Planned Project Schedule
6-1
(1) Construction Schedule of the Geothermal Power Plant
After the study, succeeding work items such as the detailed study, drilling of test wells, evaluation of geothermal
resources, drilling of productive and injection wells and construction of geothermal plant with associated facilities
are scheduled to be done. Furthermore, the selection of consultants and contractors are also to be included. The
working period of each work is estimated in Table 6.1.
Table 6.1 Future Work Items and Time Period
Stage Work Items Period
Exploration
Stage
Detailed Study (Preparatory Study by JICA) Approx. 6 months
Application for Project Implementation Approx. 6 months
Exploration Well Drilling (Engineering Service Loan) Total 37 months
Procurement of Consultant Local Drilling Contractor for ES
Loan (Preparation of Specification and Bidding) Approx. 15 months
Drilling of Exploration Wells (Dia: 6.5”, Depth: 2000 m) Approx. 12 months
Evaluation of Geothermal Resources Approx. 12 months
Detailed Design of Facilities Approx. 15 months
Development
Stage
Construction of Power Plant and Associated Facilities Total 75 months
Procurement of Consultant Approx. 9 months
Procurement of Local Drilling Contractor for Access Road
Construction (Local Bidding) Approx. 12 months
Procurement of Contractor for Construction of Geothermal
Power Plant (International Bidding) Approx. 18 months
Drilling of Productive and Injection Wells (15 wells) Approx. 30 months
Construction of Geothermal Power Plant with Associated
Facilities (50 MWx1) Approx. 44 months
Test Operation Approx. 4 months
Source: Study Team
(2) Schedule for Environmental and Social Considerations
Regarding the Socio-Environmental Consideration, as described in Chapter 4 (5), the following documents are
necessary to be submitted to and approved by the relevant organizations at the application of exploration right and
development right:
- EIA report approved by DGAAE based on the Geothermal Resource Implementation Law
- EIA based on Electricity Concession Law and SNIP
- CIRA
- Land Acquisition
- CDM Registration
6-2
It will take maximum 12 months to prepare above environmental consideration documents necessary for obtaining
exploration right. In the stage of application of development right, review of EIA report approved with exploration
right and additional investigation are expected to be done. This review may take up to nine months, but not as
long as the application of the exploration rights.
The entire implementation schedule including the above issues is shown in Table 6.2.
It is noted that the access road construction was not included in this schedule. Application for project
implementation to be done by the government of Peru, would be done once when Engineering Service (Servicios
de Ingeniería: E/S) Loan is applied and not be done at the construction stage of the project.
Table 6.2 Project Implementation Schedule
Source: Study Team
Stage Work Item
Preparation and Approval ofSocio-Environmental Consideration
Application to Exploring Right
Detailed Study (JICA Preparatory Study)
Application for Project Implementation
Exploration Well Drilling (Engineering Service Loan)
L/A Conclusion
Procurement of Consultant
Procurement of Drilling Contractor (Local Bidding)
Drilling of Exploration Wells (3 Nos.)
Evaluation of Geothermal Resource
Detailed Design of Facilities
Review and Additional Survey forSocio-Environmental Consideration
Application of Development Right
Construction of Power Plant and Associated Facilities(Japanese Yen Loan)
L/A Conclusion
Procurement of Consultant
Procurement of Drilling Contractor (Local Bidding)
Drilling of Productive/Injection Wells (15 Nos.)
Procurement of Contractor (International Bidding)
Construction of Power Plant (50MW)
Construction of Associated Facilities
Test Operation
20232022202120202016 20192015
Dev
elop
men
t Sta
geE
xplo
ratio
n St
age
201820172014
Chapter 7 Implementing Organizations
7-1
(1) Outline of Implementing Agency
1) Electroperu (EP)
EP, the country’s national power corporation, will be the implementing agency for this project. EP has jurisdiction
over the power generation, power transmission, and power distribution in Peru.
Figure 7.1 shows the organizational chart of EP. The general meeting of stockholders and the Board of Directors
have been established as the highest decision-making body of the company, while the General Affairs Bureau has
been established as the executive body. The Planning and Administration, Legal Affairs Bureau, Public
Relations/CSR Office, Production Office, Marketing Office, Project Management Office, and the Treasury are
under the General Affairs Bureau. Carrying out the management and supervision of this project is the
responsibility of the Project Management Office.
With regard to the financial situation of EP, in September 2012, the Peru Rating Committee (Comite de
Clasificacion de Equilibrio) rated EP having an AA+ pe financial situation from 2008 to 2011. From this, the
study team has determined that EP maintains a healthy financial position.
The EP has no experience when it comes to geothermal power generation. However, the study team has
determined that EP is at a technical first-class level in terms of power generation, power transmission, and power
distribution.
Figure 7.1 Organizational Chart of EP
Source: Study Team
7-2
2) MEM
MEM is the highest organization responsible for the entire implementation of the energy and mining policies in
Peru.
Figure 7.2 shows the organizational chart of MEM. Positioned under the minister is the vice minister for energy
and mine sector.
In this project, Directorate General of Electricity (Dirección General de Electricidad: DGE) will conduct
coordination work to EP, the Directorate General of Energy-related Environmental Affairs (Dirección General de
Asuntos Ambientales Energéticos: DGAAE) will control the approval of Socio-Environmental Consideration for
conducting the project.
Figure 7.2 Organizational Chart of MEM
Source: Study Team
3) INGEMMET
INGEMMET is a national research organization that conducts surveys and studies related to geology and mineral
resources under the Ministry of Energy and Mines . For this project, INGEMMET will support the academic and
technical studies on well drilling and underground science data obtained from the geothermal development area.
7-3
(2) Organizational Structure for Implementation of the Project in Partner
Countries
Figure 7.3 shows the organizational structure of the project.
EP will establish a project management unit under the Project Management Office at the time of project
implementation. The unit shall then perform project management and supervision of contractors and consultants.
In addition, the unit will coordinate with the electricity general directorate (Dirección General de Electricidad
: DGE) and DGAAE of MEM, and issue licenses for exploration and development rights as well as the approval
of the environmental impact assessment.
In addition, it is expected that the needs and technical support to INGEMMET in studying the well during
excavation and adjustments, in support of the environmental and social considerations for Tacna Province, shall be
provided by EP.
Figure 7.3 Organizational Structure of the Project
Source: Study Team
Government agencies such as EP and MEM do not have enough staff with expertise on the generation and use of
geothermal power at present. The system for exchanging information between concerned organizations towards
the development promotion has also not been established. Human resource development such as training in Japan
and technical cooperation projects by JICA should be proposed for this purpose.
EP
Project Management Office
MEM
-DGE (adjustment of general matters related to power)
-DGAAE (approval in accordance with the environmental
and social considerations)
Advice
Project Management Unit
(PMU)
SERNAMP (environmental and social considerations)
Coordination and licensing application
INGEMMET
(Technical advice)
Tacna Province (environmental and social considerations)
Support
Manage and supervise Other institutions (such as Petroperu) Consultant and Contractor
Chapter 8 Technical Advantages of Japanese Companies
8-1
(1) International Competitiveness and Possibility of Contract by Japanese Companies for the Project
1) Turbine and Generator
Japanese manufacturers have a great deal of experience in geothermal development projects all over the world,
ranging from research and development, design, manufacturing, installation, and operation and maintenance of
turbines and generators. The share of Japanese-made geothermal turbines and generators is over 67% in the global
market (refer to Table 8.1).
Since the economic performance and operational reliability of a power plant largely depends on the performance
and reliability of the turbine and generator installed, Japanese manufacturers with abundant experiences of such
will have the greatest advantage. At the geothermal power plant, since both the atmosphere and the steam supplied
to the steam turbine contain H2S gas, it is very important to take countermeasures including improvement of metal
materials of turbine, turbine shape design which prevents concentration of stress and improvement of coating for
electrical wire and control unit to prevent corrosion caused by H2S gas. The selection of proper materials and the
know-how of countermeasures to protect electrical parts, instrumentations and control devices from corrosion are
the advantages of the Japanese manufacturers.
Recently, Japanese manufacturers have competed with those from Italy and USA and China has become a new
competitor. Nevertheless, with advanced technologies and abundant experience not only on manufacturing but
also in terms of efficient maintenance programs, especially for meticulous detailed after-sales service (To monitor
the status of geothermal power generation facility by telecommunication line after delivery, and propose contents
and period of proper maintenance, etc.), Peruvian contractors will have sufficient reasons in selecting Japanese
manufacturers over the others.
Table 8.1 Geothermal Turbine Manufacturers (as of 2010)
Manufacturer Country No.Total MW
Manufacturer Country No. Total MW
Mitsubishi Heavy Industries Japan 100 2,882Kawasaki Heavy Industries
Japan 3 16
Toshiba Japan 44 2,746 Westinghouse USA 1 14.4Fuji Japan 60 2,387 UTC USA 57 13.7Ansaldo/Tosi Italy 72 1,556 Elliot NZ 3 12.5Ormat Israel 174 1,234 Exex Iceland 2 11.4GE/Nuovo Pignone USA 23 533 Harbin China 2 11.3Alstom France 11 155 Makrotek Mexico 1 5 Associated Electrical Industries
NZ 3 90 Parsons NZ 1 5
Kaluga Russia 11 82 Siemens Germany 2 3.6 British Thompson Houston UK 8 82 Barber Nichols USA 4 2.3 Mafi Trench USA 6 72 Peter Brotherhood UK 1 1 Qingdao Jieneng China 9 62 GMK Germany 1 0.2
Total 599 11,977
Source: Geothermal Power Generation in the World, 2005-2010 Updated Report
by Ruggero Bertani, Proceedings Geothermics 41 (2012)
8-2
2) Consulting and Operation of Geothermal Project
Japan is known for having a lot of volcanoes. The country has more than 200 active volcanoes, so that there are
plenty of geothermal resources to be developed. Japan has succeeded its first drilling of steam for geothermal
energy use in Oita Prefecture in 1919. In 1966, the country’s first geothermal power plant has started its operation
at Matsukawa in Iwate Prefecture, which is the fourth geothermal power plant that was made in the world. At
present, 20 geothermal power plants in 18 areas with a total capacity of 535.25 MW exist in Japan (refer to Figure
8.1).
Japanese consulting companies have abundant experiences in the development of both vapor-dominant and
water-dominant geothermal fluids as well as the construction of both flash and binary geothermal power plants.
Direct use such as bathing, farming, and heating are also installed. Japanese techniques and experiences cultivated
from many years have contributed to overseas geothermal development projects in Southeast Asia, Central and
South America, and Africa, which would also be appealing to the geothermal development in Peru.
In addition, it should be pointed out that Japanese geothermal power plants have endured the large-scale
earthquake disaster on March 11, 2011, known as the Great East Japan Earthquake. When the magnitude 9.0
earthquake attacked eastern Japan, power generation stopped at once due to turbine trip in order to ensure the
plant’s safety. All geothermal power plants in the East Japan could re-start generating electricity after several
hours or several days. It hugely contributed to local power supply security (Figure 8.2).
This is due to Japanese-original earthquake-resistant design; the power plants were designed for the standard of
Japanese earthquake-resistant and seismic accelerometer is inside the control unit of turbine, which is
programmed for emergency halt of turbine when the earthquake was detected.
Peru is located in a subduction zone of the oceanic plate like Japan and sometimes suffers damage from major
earthquakes. Experiences that the Japanese geothermal power plants have encountered from the Great East Japan
Earthquake would be appealing for the Peru to choose Japanese companies.
8-3
Figure 8.1 Geothermal Power Plants in Japan
Source: Geothermal Research Society of Japan (2011)
Figure 8.2 Situation of Operation of Geothermal Power Plants in Japan after the Great East Japan Earthquake in
2011 Source: Yasukawa (2011) Geothermal Energy in Japan: Asia Pacific Clean Energy Summit and Expo
8-4
(2) Main Equipment and Materials Expected to be Procured from Japan
and Their Costs
The steam turbine and generator, which are the core equipment of the geothermal power station, are expected to
be designed and manufactured from Japan in case a Japanese contractor will be chosen. Other equipment will be
properly selected from candidate manufacturers all over the world.
The share of the equipment from Japan is expected at around 30-40% among the total cost of power station in the
budget. Especially for the case of Calientes, as it is located in Peru which is very far from Japan, the rate of
procurement from Japan would be relatively low because of issues on transportation and others.
(3) Necessary Measures to Promote Receipt of Orders by Japanese
Companies
For the success of this project, Japanese companies are able to contribute the best for the following reasons .
· Single Unit Capacity of the Turbine Generator
In the bidding of geothermal turbine, it actually becomes a competition between three Japanese companies with
European companies. European companies have no experience for installation of more than 25MW of geothermal
turbine. The 50MW single unit capacity is a prerequisite for the best economic value of the project. Therefore, the
design specification should be a single unit capacity of 50MW, and an experience of installation of geothermal
single unit turbine of about 50 MW in recent years should be prequalification criteria for bidding.
・Regulations of Earthquake-resistant Design
Earthquake-resistant design is one of the most important issues for Peru, earthquake-prone country, and should be
included to the specification for the safety of this project. Japan is also an earthquake-prone country in the world;
Japanese companies have unique technology of earthquake-resistant design through many years of experience. For
example, earthquake-resistant structure of the power plant as well as an emergency trip of the turbine due to the
occurrence of earthquake, such kind of unique technologies are essential to this project.
・Environmental Conservation
Conservation of natural environment is a fundamental issue of this project. An experience of the geothermal
power plant construction in the National Park of Japan and landscape-considered building design by Japanese
companies are the key to success.
Though Japanese products are predominantly advantageous not only in terms of quality itself but also in its strict
observance of delivery date and duration of works, it was observed that the companies in other countries won the
bid due to their discounted price during the public international bidding through quality-and cost-based selection
(QCBS). In such circumstances, Japanese companies are spending efforts to bear the price of their products at a
8-5
minimum while keeping high quality services. We have told to Peru this kind of nature of Japanese companies,
and we would like to continue the efforts in order to be evaluated and properly understood. This report concluded
that the feasibility of this project is high; however we would like to repeat that one of the prerequisite is the
adoption of reliable products and technologies backed by experience.
