Geothermal Power Project

Integrated Feasibility Study on Geothermal Utilisation in Hungary

Here you can find some chapters of the feasibility study - introducing one of the main deliverables of the project.

The whole document is available in .pdf format here (3,5 MB).

Data sources and background information relevant to the feasibility study

Introduction

In the European Union the total energy consumption of all Member States being derived from renewables is currently around 6%. The Member States - in accordance with the Kyoto Protocol - set as a common goal to increase the share of renewables to 12% and to achieve a 15% reduction in greenhouse gas emission by 2010. In February 2004 Bohoczky Ferenc, head councillor of the Ministry of Economy, stated that in order to fulfil our commitments by 2010, Hungary - as previous estimates show - will need approximately 80-130 milliard HUF state subsidy, that is, an overall investment of 400-450 milliard HUF for extending the use of renewable energies.
At present the percentage of renewable energy in the overall energy production is 3,6%, while electricity produced from renewables is only 0,5%. In accordance with the EU expectations, Hungary also aims to double the share of renewable energy usage. Regarding electricity, the share of green energy in the EU is 13%, which is to be raised to 22% by 2010 according to the directive 2001/77/EC. This directive also applies to Hungary. As far as electricity is concerned, a share of 3,5-6% was set by the EU for Hungary to be reached by 2010. It means that Hungary has to increase the share of renewables in the total energy production from the current 266 GW/h to at least 1.600 GW/h.

Besides EU expectations, domestic laws also enact both energy saving actions and the enhanced use of renewable energy sources. The long-term objective, set out in 1107/1999. (X. 8.) Government Resolution, describes an energy saving programme - in line with the Kyoto Protocol - covering a period until 2010. This programme foresees national funding as well. However, if we take a closer look at the specifications concerning the use of geothermal energy, we find that legal regulations on its use for water and energetic purposes have not yet been harmonised. Some unregulated issues, like the wastewater fine, or the act mining concession, practically play against subsidies ordained by 1107/1999. (X. 8.) Govt. Resolution, as they obstruct the economic and environmentally friendly use of geothermal energy.
According to the experience of the past years, the support policy aiming for the increase of renewable energy usage needs to be supervised, since some of the new member states find it impossible to meet the objective of increasing the share of renewable energy in the EU within the total energy production to a level of 12 % until the end of the decade. The shortfall is significant; therefore good examples are badly needed.

Investment supports (both non-refundable and refundable under favourable conditions) due to the unfavourable rate of return cannot achieve considerable success among the present economic circumstances without introducing a targeted tax or with neglecting the external expenses. The reason is that government revenues cannot cover the capital intensity required by a considerable increase in renewable energy capacities.

The Act on Electricity in Hungary provides a theoretical chance for the recuperation of alternative energy, but providers are obliged to repurchase only the quantity produced above 100 kW. Since the acceptance price is not favourable, from the point of view of investments, state incentives do not achieve the expected effect. One of the reasons for this is that the period of the return on investments - without state support - is 10-12 years. The present support systems are short-term and the available sources for financing represent only a part (0,1-0,2%) of what would be necessary for having the expected results. According to those who urge a reform in the system of funding and support schemes, a special fund with a budget guaranteed for more years should be set apart for funding renewable energy.
According to the Ministry of Economy "in order to achieve the foreseen goals a Renewable Energy Program (REP) which uses appropriate support schemes should be introduced and financed by joint budget lines. The program should be established with an inter-departmental cooperation and disseminated on a wide scale."

In the field of the use of geothermal energy the main tasks to be carried out by REP support were defined as follows:
- survey of systems already deploying geothermal energy,
- analysis of possibilities for increasing cogeneration,
- analysis of re-injection investments.

At present there is no electric energy production from geothermal energy in Hungary and according to optimistic estimations only a 0.01% share can be achieved until 2010. (Source: Megújuló villamos energiatermelés Magyarországon 2010-ig, GKM, Energia Központ).
The current geothermal energy utilisations are in a trap due to some environmental protection and water management laws. The current regulations are not uniform and deliberate therefore can lead to the closure of thermal wells. The utilisation of this type of renewable energy can become uneconomic by 2007 with the current regulations. The environmental and water management charges can increase to such a level that the energetical utilisation of the geothermal resources will become uneconomic. As long as the thermal water utilisators do not change substantially their current utilisation technology according to the regulations then they will have to pay drastically increasing taxes and charges. Those who want to avoid these charges have to implement uncertain and costly technical solutions in a very short time. The technology change with the current regulations is not a solution because the costly investments would not return even on a long term.
The new Electricity Act came into force on 1 January 2003, implementing a feed-in tariff system and a preferential grid access for renewable energy producers. However, the current system may end-up promoting too few renewable projects. In 2004, the feed-in tariff was on average 17.41 HUF/kWh (6.6 € cents/kWh). This single price support scheme is favourable only for wind power, while it proves not to be enough to support geothermal investements or other renewable technologies. According to the Electricity Act, renewable energy systems are only allowed to connect to the grid using preferential rights if their capacity is greater than 0.1 MW capacity. This prevents many small power plants from gaining access to the grid. Furthermore, projects are hindered by complicated and lengthy administrative procedures (up to 28), which unnecessarily slows down the process of development.

Hungary has deployed feed in tariffs to support the further development of renewable generators. However, it is as important to have the correct feed-in tariffs as its establishment itself. The correct price to cover costs must be establish and also medium term guarantees for prices must be imposed, giving 10-15 year price guarantees for new renewables The decree by the economic minister related to the above mentioned Electricity Act determines a moderate feed-in tariff for the renewables. The Act defines that the feed-in tariff is modified every year according to the inflation and the takeover period of the electricity is guaranteed until 2010. The problem with this regulation package is that the feed-in tariffs are not a part of the act but only of the minister decree, which can be modified easily and there is no regulation yet for the period after 2010. This causes high insecurity for the investments into renewable energy projects.

Altogether it can be stated that the regulation of geothermal energy utilisation is not investment friendly. The conception of promoting and aiding renewable energy utilisation are present in the Hungarian laws but are not harmonised and thought over and the different acts are not coherent. The safety of future investments has to be guaranteed by raising the insecure decrees to a higher level of regulation and to harmonise the laws with the basic conception of support and encouragement of renewable investments. The different water management and environmental protection charges have to be decreased and adjusted according to the method of exploitation and utilisation. The administrative procedures of permits and licenses have to be simplified greatly and their number reduced. In general all administrative procedures must be streamlined but for RES specific procedures must comply with the requirements of the RES Directive and guidelines should be developed on a national level to reduce local or regional planning differences and to ensure environmental protection. There is a need to increase the knowledge of regulators about the specific characteristics of renewable energies and how to support their development. Action aimed at raising awareness, sharing information and supporting policy makers and regulators in this area should be implemented.

Data sources and bakcground information relevant to the feasibility study

The number of wells drilled in Hungary in the last 150 years is close to 100.000 and in 15-25% of these wells temperature measurements of some kind were carried out. A significant number of these drillings were very shallow: temperature distribution in shallow depth can be very disturbed due to atmospheric influences and intensive fluid migration, and extrapolation of these temperature data for deeper regions gives very uncertain results. Therefore only temperature data measured in deep wells were incorporated in the present research. In Hungary almost all deep wells were drilled for hydrocarbon exploration. In case it turned out to be dry – i.e. either gas nor oil was found in a good quantity in the sedimentary unit – the wells was handed over in many cases to the water authorities (national or local) for either balneological or other purposes. The water authorities usually could not make use very high temperature water: spas require
water not hotter than 50-60°C, and in case the well was used for producing drinking water, even 30°C water temperature proved to be high enough. Therefore the deeper parts of these wells were plugged and filters were built in at shallower depth, depending on the type of utilization. Other dry wells were either only closed at the wellhead or destroyed.

However, if a well contained hydrocarbon it remained the property of the oil company. The casing of the HC-production wells was opened only at the producing layer. Depending on the status of the HC-field, each well might have gone through different scenarios: 1) if the field and the well are still producing, no information can be obtained on the well; 2) if the well or the field is depleted, the well and the field might be used for underground gas storage, and no information is released about the well; 3) if the field is depleted and is not used for
underground storage, the wells were usually destroyed. In any case, hydraulic tests, water yields and time series of water yield data are just exceptionally available from HC-producing wells, due to the simple fact that (hot) water was not the target of the exploration and drilling activity. We have carried out an intensive Integrated Feasibility Study on Geothermal Utilisation in Hungary Page 11 Geothermal Power Project - Altener II 4.1030/Z/02-045, February 2005 search for existing deep wells that are acceptable for the purposes of the project
and also have information on the chemistry and yield of hot water.

Development of reliable geothermal data collection of Hungary started more than two decades ago (Dövényi et al. 1983). However, successful and effective work within the present project required the expansive completion of the data set and the development of an up-to-date, user oriented, Windows based software to handle the data.

Figure 1: Main screen of the geothermal data base program

The new database program, written exclusively for the purposes of the “Geothermal Power” Altener project (Figs. 1 and 2), utilizes several methods to sort, correct and classify temperature data and also provides the opportunity to incorporate further data regarding other parameters of the wells. In fact, additional data were even required in order to carry out reliable calculations. The database software filters out erroneous data, corrects non-steady-state temperatures (e.g. bottom-hole temperatures as function of recovery time, wellhead temperatures as function of yield etc.) and qualifies the temperature values Integrated Feasibility Study on Geothermal Utilisation in Hungary Page 12 Geothermal Power Project - Altener II 4.1030/Z/02-045, February 2005 based on the registered circumstances of measurements. It also can be used for heat flow calculation and for extrapolation and interpolation of temperature data in space and depth, estimating adequate thermal conductivity values for layers with different ages and/or lithology (Fig. 2). The database program provides also
the opportunity of data selection and grouping based on arbitrary criteria.

In order to complete the data base to the highest possible degree we have contacted the Hungarian Geological Survey, the Hungarian Oil Company (MOL) and the Hungarian Water Authority (VITUKI) and made an agreement with them: they opened their data rooms for the purposes of the Altener project. Following this data completion, our data base now includes more than 15000 temperature data from nearly 5000 wells excluding data of all drillings with less than 200 m total depth unless the temperature measurement in those wells showed a value higher than 30°C. Temperature data with no information about the circumstances of measurement were also neglected. Only data of representative wells have been included from small areas with a high number of drillings (mainly from the territory of hydrocarbon fields).

Figure 2: Graphic interpolation screen of the geothermal data base program

Integrated Feasibility Study on Geothermal Utilisation in Hungary Page 13 Geothermal Power Project - Altener II 4.1030/Z/02-045, February 2005. Beside temperature values the data collection resulted in additional information about the drillings (date, coordinates, bottom-hole depth, diameter, etc.) as well as about the circumstances of temperature measurement (depth interval of perforation, yield, time of thermal recovery before the measurement, depth and type of measurement e.g. well-log, bottom-hole, well stem test, well-head, etc.) and the geologic record of penetrated layers (age, lithology). These information was also put into the database.

Quantity and quality of available data
The processed database now consists of nearly 5000 wells, as described below, for this study a base of 236 wells were sorted by temperature. This base was then reduced to just over 100 wells, which are presented in Annex 1 of this study. The available chemical and yield data for these wells are unfortunately scarce.

Therefore during the summer and autumn of 2004 ELTE provided further details of potential wells which 1) exist; 2) are acceptable for geothermal utilization and 3) have a twin to ensure re-injection. All available chemical and yield data were processed by the project partners and included in this report. This database consists of the most prospective 52 wells in the Zala region and 13 wells in the
Great Hungarian Plain. The data gaps are due to the reason that the vast majority of deep wells in Hungary were drilled for HC-exploration or production. Therefore the determination of water yields and water chemistry was not an important goal.

Some wells were analysed, but definitely not all of them. If, however, a well is located within a CH-production area, data are still confidential and therefore unavailable to the public and to potential proposers of geothermal projects. After completion of the geothermal data base an additional geological and geophysical data collection had to be set up, which had to include water chemistry, water yield, technical parameters, status (producing or dry well), Integrated Feasibility Study on Geothermal Utilisation in Hungary Page 14 Geothermal Power Project - Altener II 4.1030/Z/02-045, February 2005 porosity and permeability data, thickness and spatial distribution of certain
geological units and rock types, etc. The only adequate solution to handle such an amount of different types of information was a GIS based interpretation system.

Within the GIS software we could set up different data selection criteria in order to delineate the best provinces for geothermal energy utilization in Hungary. In the followings we would like to introduce the results of the step-by-step analysis that we have carried out. The results are illustrated with a set of maps.

Conclusions

The current geothermal energy utilisations in Hungary are in a trap due to some environmental protection and water management laws. The current regulations are not uniform and deliberate therefore can lead to the closure of thermal wells. The utilisation of this type of renewable energy can become uneconomic by 2007 with the current regulations. The environmental and water management charges can increase to such a level that the energetical utilisation of the geothermal resources will become uneconomic. As long as the thermal water utilisators do not change substantially their current utilisation technology according to the regulations then they will have to pay drastically increasing taxes and charges. Those who want to avoid these charges have to implement uncertain and costly technical solutions in a very short time. The technology change with the current regulations is not a solution because the costly investments would not return even on a long term.
The new Electricity Act came into force on 1 January 2003, implementing a feed-in tariff system and a preferential grid access for renewable energy producers. However, the current system may end-up promoting too few renewable projects. In 2004, the feed-in tariff was on average 17.41 HUF/kWh (6.6 € cents/kWh). This single price support scheme is favourable only for wind power, while it proves not to be enough to support other renewable technologies. According to the Electricity Act, renewable energy systems are only allowed to connect to the grid using preferential rights if their capacity is greater than 0.1 MW capacity. This prevents many small power plants from gaining access to the grid. Furthermore, projects are hindered by complicated and lengthy administrative procedures (up to 28), which unnecessarily slows down the process of development.

Altogether it can be stated that the regulation of renewable energy utilisation is not investment friendly. The conception of promoting and aiding renewable energy utilisation are present in the Hungarian laws but are not harmonised and thought over and the different acts are not coherent. The safety of future investments has to be guaranteed by raising the insecure decrees to a higher level of regulation and to harmonise the laws with the basic conception of support and encouragement of renewable investments. The different water management and environmental protection charges have to be decreased and adjusted according to the method of exploitation and utilisation. The administrative procedures of permits and licenses have to be simplified greatly and their number reduced. In general all administrative procedures must be streamlined but for RES specific procedures must comply with the requirements of the RES Directive and guidelines should be developed on a national level to reduce local or regional planning differences and to ensure environmental protection. There is a need to increase the knowledge of regulators about the specific characteristics of renewable energies and how to support their development. Action aimed at raising awareness, sharing information and supporting policy makers and regulators in this area should be implemented.

This also indicates that at the moment geothermal energy sources alone are less competitive than traditional ones. Their general use depends on the amount of state subsidy available. Present state subsidy for renewables means the obligatory acceptance and a more favourable acceptance price than the prices for other energy sources. Currently experience gained so far is not enough to introduce the system of the Green Certificates Furthermore the number of producers is also low. When producing for the competitive market the restrictive factors are high; therefore only the installation of those producing capacities are being implemented that fall into the scope of obligatory acceptance, while long-term contracts stay. It is because with regard to renewable energy production the biggest barrier is not the lack of supporting investments, but the unfavourable acceptance prices. It is obvious that the present legal and economic framework does not support the increase of the share of renewables, and the situation cannot be changed by investment supports. However investment subsidies contribute to the dynamic development of renewable energies. From what is mentioned above, it is clear that due to its high marginal costs geothermal energy used for electricity production may only be realized with the help of state interventions and on an experimental base.