Hitotsubashi University
Institute of Innovation Research

Possibilities of Geothermal Power Generation in Japan:
Notes from an Iceland Field Study

Yaichi Aoshima
Tomono Miki
IIR Working Paper WP#12-11

September 2012

Institute of Innovation Research
Hitotsubashi University
Tokyo, Japan
http://www.iir.hit-u.ac.jp

Possibilities of Geothermal Power Generation in Japan: Notes from an Iceland Field Study1

February 27, 2012

Institute of Innovation Research, Hitotsubashi University
Yaichi Aoshima

College of Business, Rikkyo University
Tomono Miki

1

Much of the content of this report is based on a field survey in Iceland that was conducted from June 30 throughJuly 1, 2011. When conducting the survey we received extensive support from Mr. Kristjan Bjarnar Olafsson of
Orkuveita Reykjavikur (Reykjavik Energy) and Ms. Akiko Hasegawa at the Embassy of Japan in Iceland. We would
like to express our deep appreciation for their assistance.

11. Introduction: Expectations Concerning Geothermal Resources in Japan

Former Japanese Prime Minister Hatoyama’s declaration at the 2009 United Nations Climate
Change Conference of Japan’s intention to reduce greenhouse gases (GHG) by 25% by 2020
compared with 1990 is still a fresh memory. The speech was received with thunderous applause in
the hall. Domestically, however, his remarks were also subjected to various criticisms as native
words that disregarded the adverse effects on Japan’s economy. Most of these opinions noted thatunless Japan envisages purchasing a significant number of emissions rights when emissions are
actually slashed by 25% by 2020 compared with 1990, there is no specific scenario laid out torealize this goal. It was provisionally calculated that just to reach the target of an 8% reduction
compared with 1990 set out under former Liberal-Democratic Party Prime Minister Aso, Japan
would have to construct nine new nuclear plants and boost plant operating rates from the 60% levelup to 81% (Kaneko, 2010). So when the 25% reduction goal was laid out suddenly under thesecircumstances, it wasn’t unreasonable for the proposal to be met with critical opinions.
To make matters worse, the Great East Japan Earthquake in March 2011 resulted in the accident
at the Fukushima Daiichi Nuclear Power Station, and a situation now exists where even thecontinued use of existing facilities, let alone the construction of new nuclear plants, is being
questioned. It will also be difficult for Japan to continue its energy policy of relying on nuclear
power in the future given that former Prime Minister Naoto Kan also declared that Japan would seek
to be a society without nuclear plants.
Along with being a major energy policy shift, the movement to break with nuclear power
generation points to an even more serious issue for environmental policy. Japan probably can cover
the immediate electricity shortage resulting from the shutdown of nuclear power plants by restarting
cold thermal power plants. This will cause greenhouse gas (GHG) emissions to increase, however.
Japan will be unable to maintain even the status quo, let alone achieve a reduction of 25%.
Japan currently seems to be confronted with three serious issues that are mutually contradicting
in terms of its “energy policy (stable energy supply),” “environmental policy (reduction ofgreenhouse gases)” and “economic policy (long-term economic development).” Japan must do
whatever it takes, however, to solve the complex simultaneous equations involving these issues, andfind a balance over the long term among all three issues.
The key to that will be the early development of renewable energy. If it can cover its power
supply needs using renewable energy with few CO2 emissions, Japan might be able to solve its
energy problem and environmental problem simultaneously. There remains the issue of cost,
however. Under the present circumstances, the power generation costs of distributed renewableenergies such as solar and wind power that have attracted so much attention are not at a level thatcan compete with nuclear or thermal power. According to the Economic White Paper for 2008, for2

photovoltaic power generation the cost per 1kWh was 46 yen, while the cost for wind power
generation ranges from 10 to 14 yen. Because the per-kWh cost of coal-fired thermal power is from
5 to 6.5 yen and the cost of nuclear power is from 4.8 to 6.2 yen, from a cost standpoint there
remains a significant gap 2 . Despite the fact the cost of wind power generation has declined
considerably, such power is influenced by the weather and presents a problem in terms of unstable
power supply. Therefore thermal power plants or some other alternative will have to be used toabsorb the supply fluctuations. If electric power can be stored, that would help, but storage batteries
are overly costly and their economic efficiency cannot be assured. The situation is the same withphotovoltaic generation as well.
Judging from the perspectives of Japan’s location advantage and power generation stability,
geothermal power generation should be the one form of renewable energy that would attract themost attention. Among countries possessing geothermal resources, Japan ranks third in the world.
Geothermal reserves (geothermal resources considered to be economically feasible to develop) are
estimated to be 23.47 million kW (trial calculation by the National Institute of Advanced Industrial
Science and Technology (AIST)). Because Japan has total electric power generation capacity ofroughly 200 million kWh, of which about 60% is actually in operation, about 20% of total power
generation capacity could be supplied by geothermal power if all of Japan’s geothermal resourceswere developed for power generation. Even if that figure is unrealistic, if half of these geothermal
resources were developed, it would certainly make a major contribution from the standpoint of
replacing nuclear power plants. Moreover, geothermal power generation does not incur any expense
for fuel, and the volume of CO2 emissions also is extremely low.
What’s more, from the standpoint of industrial policy there also exists the possibility ofgeothermal power generation becoming a promising market. The capacity at all geothermal power
stations worldwide at the end of 2009 was 10,711MW. Although the growth of geothermal power
generation slackened as a result of the global recession triggered by the collapse of Lehman Brothers,
power generation capacity is predicted to expand in the future up to 18,500MW by 2015 (ABS
Energy Research, 2010). Currently three Japanese companies (Mitsubishi Heavy Industries, Ltd.,
Fuji Electric Co., Ltd. and Toshiba Corporation) account for 7,300MW of installed generating
capacity on a power generation basis, and have captured a global market share of about 70% in theturbines that are at the core of geothermal power generation facilities (see Figure 1).

2

Although this trial calculation is not without problems, if nothing else it seems certain that under present conditions,
solar and wind power remain expensive. According to a report released in August 2011 by the Institute of Energy
Economics, Japan, nuclear power costs 7.2 yen/kWh and thermal power is 10.2 yen/kWh.

3

Figuree 1: Global shhare of geothhermal power generation tu
urbines (Unit : MW)

3,000
0

2,630

2,525

1,207
1,500
0

869

300
608

1,138

1,238

575
0
523

4
490
1,211

D
Dry SteamD
Double FlashS
Single FlashB
BinaryB
Back Pressure
e
T
Total

2,146

520

8
823

00
1,10
550

0
Other (13)

BTH

KalugaAEI

AlstomGE / NP

100
ORMAT 11.100

Ansaldo / Tosi 1.138

Fuji 2.146

Toshiba 2.525

MHI 2.630

Sourcce: Reykjavik Energy materrials

B
Because the marketmis sm
mall, the contrribution to earningseat prresent is connsidered minoor, but
comppared with phhotovoltaic generationgannd wind pow
wer generatio
on it is a maarket sector where
Japannese firms arre highly com
mpetitive. Ass a stepping--stone toward
d the expanssion of geoth
hermaldevellopment in Jaapan, it could become a prromising meaans of solving
g without contntradiction thee threeproblems of energgy, environm
mental and ecconomic con
ncerns if the technology can be deveeloped
globaally as an induustry.
U
Unfortunatelyy, however, noo new geotheermal power stationsshave been built inn Japan for ov
ver tenyears. The 18 geoothermal pow
wer stations ccurrently exissting in Japann have a geneeration capaccity ofds to just 2%% of the still untappedugeoothermal resou
ources. How shoulds
535,0000 kW, whicch correspondgeothhermal resourrces be developed in Japanan and how shhould the geo
othermal induustry be deveeloped
as ann environmenntal energy industry in the future, andahow sho
ould Japanesse firms usee their
comppetitiveness too create addedd value as parrt of this proccess?
T
The goal of thhis report is tot lay out guiidelines for th
he promotion
n of geotherm
mal developm
ment inJapann by introduucing the exp
perience of Iceland, whiich has aggrressively mooved forward
d withgeothhermal develoopment and reelies on geothhermal for ov
ver 60% of itss primary eneergy and abou
ut 30%of its electric poweer supply.

4

2. Problems Confronting Geothermal Electric Power Development in Japan

Among countries possessing geothermal resources, Japan ranks third in the world afterIndonesia and the United States. Geothermal resources are one of Japan’s few domestic natural
resources. Nevertheless, geothermal development in Japan is in a moribund state. Althoughconstruction of geothermal development and power plants was undertaken following the oil crises asJapan groped for energy alternatives to oil, and 18 facilities are currently operating, for the past ten
years new construction has been halted. After geothermal energy was excluded from “new energy”
in 1997, central government research and development assistance was sharply curtailed, and in 2003
R&D grants were discontinued. Why is no geothermal development being pursued in Japan? Before
describing the experience of Iceland, let’s first lay out the current situation in Japan.
The following three reasons are typically cited as reasons why geothermal power generation
development in Japan is moribund.
(1) Lack of economic efficiency (particularly the amount of initial investment risk)(2) Difficulty of coordination with nearby hot spring businesses(3) Restrictions based on various regulations such as the Natural Parks Law

First is the problem of economic efficiency, a hurdle facing other renewable energy sources aswell. According to the Geothermal Development Promotion Survey conducted by the New Energy
and Industrial Technology Development Organization (NEDO) in 2002, geothermal power would
cost 12.87 yen per 1kWh over 15 years and 11.03 yen over 30 years. Although far less expensive
compared with solar power, which has attracted significantly more attention, the geothermal power
generation cost varies substantially depending on location. Even in the NEDO survey, the cost had arange from 9 yen/kWh to 22 yen/kWh, which means generating stations that can undercut the cost of
nuclear power and thermal power generation are limited in number.
According to estimates by the Institute of Energy Economics, Japan (IEEJ), however, newenergy mainly including geothermal power generation has a cost of 8.9 yen/kWh, in contrast to 10.2
yen/kWh for thermal power and 7.2 yen/kWh for nuclear power, a result indicating that geothermal
generation is less expensive than thermal power, which has been affected by the sharp jump in oil
prices. From this it can be seen that although many existing geothermal power stations are aged, asituation caused by the fact capital cost recovery is advanced, these plants still ensure sufficienteconomic efficiency. That geothermal power generation’s low economic efficiency is emphasized as
an impediment to development despite this fact is believed to mainly reflect the degree of initialdevelopment risk and the investment risk.
To develop a geothermal power station, exploration surveys that take more than ten years are5required. There is also the risk that geothermal resources will not be found as assumed even if thedrilling of geothermal wells has in fact taken place. Because of such risk, borrowing from banks isout of the question, and projects must rely on equity financing. Even if a geothermal resource isdeveloped, however, electric power supply has the strong nature of a public service, and unlike
exploration for oil does not produce large returns. There is also the problem that the amount of
capital investment has increased because of the sharp rise in prices for materials such as steel.
Currently an investment outlay of nearly one million yen per 1kW is said to be required. As thisindicates, geothermal development is “high risk, low-return.” The difficulty of securing the capitalnecessary for initial development is thus a problem that constantly clouds geothermal power.
Another factor cited as a reason the development of geothermal power generation has laggedcompared with other renewable energy is inadequate government support. As already noted, R&D
assistance was curtailed sharply when geothermal energy was excluded from “new energy” in 1997,
and in 2003 grants were discontinued. In addition, in the same year the flash steam system, which
was the main technology used, was excluded from the eligible technologies under Japan’s
Renewable Portfolio Standard (only the binary system was eligible). In other words, even if
Japanese power utilities purchased electricity generated by geothermal power stations, this would
not fulfill the obligation imposed on them by the Renewable Portfolio Standard. Therefore unlike
other renewable energy, geothermal electric power must compete on cost in the same arena as otheralternatives such as coal-fired thermal power. Given such conditions, Japan Petroleum Exploration
Co., Ltd., Japan Metals & Chemicals Co., Ltd. and DOWA Holdings, three geothermal power
generation companies, had not alternative but to withdraw from the business (Adachi, 2009).
The second problem is the opposition from hot spring businesses nearby. Hot spring resorts
frequently exist near locations that are suitable for geothermal power generation. Hot spring
operators have strongly opposed geothermal development because of misgivings about a decline in
the volume of discharge from the hot spring or disappearance of the hot spring as a result of thedevelopment of geothermal resources. The Kusatsu Hot Springs Cooperative, for example, hasvigorously opposed even exploratory surveys3. Certainly in other countries there have also beencases where the hot springs water level has dropped and the hot spring itself has disappeared as aresult of geothermal power generation development (Noda, 2009). Although such a problem has
never actually occurred in Japan as of this time, the concerns of hot springs operators that have been
managing their business for years isn’t unreasonable, because the geothermal resources deep
underground and hot springs at a shallower depth are not separated.
The third problem hindering geothermal development is regulations under the Natural Parks
Law. Of Japan’s 23.47 million kW of geothermal resource reserves, 19.22 million kW or 81.9% of
3“Geothermal Power Station to Undertake no New Construction for Over 10 Years, Coexist with Local Region by
Supporting ‘Eco-hot Springs’” BPnet, May 10, 20016

the total amount is found within national park special protection zones and national park special
zones (Muraoka, 2008). Only 4.25 million kW, or 18.1% of the total, exists in zones that are notsubject to national park restrictions on development. Of this, 530,000kW has already been developed.
In other words, there is little hope for any significant growth in geothermal power generation as longas restrictions on development in Japan’s national parks are not eased.
Incidentally, in 1972 consent was given under the names of bureau directors at both theEnvironment Agency and the Ministry of International Trade and Industry to limit geothermal
electric power development in national parks to six locations and to not undertake any new
development. In 1974, notification was given that approvals would be limited to surface surveys by
the Agency of Industrial Science and Technology (AIST), and in 1994 a notification was put out
under the name of a section chief of the Environment Agency to enable local governments andbusinesses to separately conduct studies concerning development in the ordinary zones of nationalparks while giving consideration to protection of the visual environment.
Following concerns about electricity shortages due to the Fukushima nuclear power plant
accident, however, the Ministry of the Environment is assessing the technological progress incontrolled drilling, which would involve sinking wells diagonally from outside of national parks, andhas begun studying the deregulation of geothermal power generation in national parks4.
The reasons Japan has not moved ahead with development of the vast geothermal resources at
its disposal have been marshaled from the three points discussed above. Yet these circumstances
apply more or less to Iceland as well. The problems concerning economic efficiency must be similar
to those in Japan. For Iceland in particular, which depends entirely on foreign companies including
Japanese firms for its power plant equipment, there are drawbacks as well.
Certainly the standoff with hot springs businesses might be a problem unique to Japan. In
Iceland, however, for many of the pools that people use every day, all of the hot water is pumped
from underground. As explained below, rather than being at odds, in Iceland power generation andhot water utilization have a supplementary relationship with each other. The problem that many of
the geothermal resources are under national parks, while different in degree, also similarly exists in
Iceland. And in Iceland as well, various regulations have been put on geothermal resource
development from the viewpoint of environmental protection.
In contrast with Japan, however, geothermal electric power development has advanced rapidly
in Iceland since the latter half of the 1990s. Geothermal power station capacity in Iceland alreadyexceeds the capacity in Japan, and is approaching 30% of the country’s entire power generation
capacity. Making a simple comparison between Japan and Iceland isn’t possible, given the twocountries’ vast differences in population and topographic features, but there might be much that4
“Toward Expanded Use of Geothermal Power Generation and Deregulation of Development… Government Policy,”
The Yomiuri Shimbun, October 12, 2011

7

Japan can learn from Iceland’s experience in overcoming the issues involved in geothermal resource
development.

3. History of Geothermal Development in Iceland

3.1

Iceland’s geothermal resources5
Like Japan, Iceland is an island nation where earthquakes occur. In Japan’s case, it iswell-known that earthquakes occur as the result of four plates jostling one another. Two of theseplates – the North American Plate and the Eurasian Plate – appear in Iceland. Iceland sits above a hot
spot (the mid-Atlantic ridge), and the two plates are moving away from each other by an average of
2cm per year. This is the reason Iceland is shaken frequently by quakes.
Iceland has more than 200 active volcanoes that are strung out along the hot spot. The region
where the active volcanoes exist is called a “high temperature field” because it spews out steam witha temperature of about 200°C even at a depth of 1,000 meters underground. Around the perimeter ofthis zone extends a broad area called a “low temperature field” where the temperature even 1,000
meters below ground is no more than 150°C. The first Europeans who immigrated to Iceland around
870 A.D. and saw this steam boiling up in various locations mistook it for “smoke.” Hence they
named the place where they settled “Reykjavik,” meaning “Smoky Bay.”

3.2

Direct use and indirect use of geothermal resources
Geothermal resource use can be broadly separated into direct use and indirect use. “Direct use”

refers to water at a temperature of 90°C or less that is pumped from the earth and used directly forhome indoor heating or used for commercial purposes such as hot spring spas and plant cultivation.
“Indirect use,” on the other hand, indicates water at medium or high temperatures from 150°C toabout 350°C or steam that is pumped out from underground and used for power generation. Therealso are numerous so-called cogeneration systems that separate the high-temperature brine and steam
taken out of the earth into steam and water, and use the former for power generation and the latterfor direct applications such as heating. In Iceland, the cogeneration mode has been adopted for thethree power plants at the Nesjavellir, Svartsengi and Hellisheidi power stations as described below.
When examined globally, as of the end of 2009 direct-use production capacity was 50,700MW,
more than four times the power generation capacity of 10,711MW. Direct use in Iceland is about
twice the amount of indirect use.
As will be described below, Iceland has a long history of geothermal power use, where it has
5

Taken from Orkustofun (2010) “Geothermal Development and Research in Iceland,” and Reykjavik Energy
materials.

8been used chieflyy for heating homes. Fullly 66% of Icceland’s primmary energy use is coverred bygeothhermal powerr, with the greater part oof this being for direct usse. Of the 399PJ (petajoulles) ofgeothhermal powerr used in 2008
8, 63% was ffor direct use and the remaaining 37% w
was for indireect use
for poower generation. Among direct uses, tthe largest caategory of usee is heating aapplications, which
has riisen to 48% ofo all geotherrmal power uuse (See Figu
ure 2). Geothermal power use in Icelannd canbe saaid to have beegun with dirrect use centtered on heatting applications, and exppanded into use
u forpoweer generation afterwards.

F
Figure 2: Geothermal poweer use in IcelaandSource: Orkkustfnun (Nation
nal Energy Authhority) HP htttp://www.nea.iss/geothermal/diirect-utilizationn/

3.3

Direct use: Development
Dof the districct heating systtem
T
The people off Iceland have long used ggeothermal powerp
directlyy for needs suuch as bathin
ng andwashiing laundry. GeothermalGheat
h was usedd for greenhou
uses for the firstf time in 19924, and camme intouse ffor heated sw
wimming poo
ols and spacee heating at around the same time. Heating needds areespeccially large inn a country ass cold as Icelland. While peat,pcoal andd oil had tradi
ditionally beenn usedas a fu
fuel for heatinng, the system
matic use of ggeothermal for district heatting began inn 1930.
Inn 1930, a meechanism wass built by whiich geotherm
mal water fromm the Thvottaalaugar districct wasdeliveered to two elementary schools,sa sw
wimming poo
ol, a hospital and the hom
mes of 60 faamilies
withinn the Reykjaavik area. To carry the geeothermal watter a 3km pip
peline was laaid. In 1943 a new
9

18km pipeline from Rykir was constructed, and heating service in the Reykjavik area was introduced.
By the end of 1945, 2,850 households among Reykjavik’s population of 44,000 were able to use
district heating.
Spurred by the oil crises in 1973 and 1979, Iceland implemented a major energy policy shift,
sharply reducing the use of oil and moving toward the utilization of its existing domestichydropower and geothermal energy resources. In conjunction with this shift, it also greatly expanded
geothermal heating applications, and from 1970 to 1982 significantly reduced the percent of heating
provided by oil from 53 to 7%. Many pipelines ranging from 10 to 20km in length also wereconstructed to carry the geothermal heat to towns and villages. Today 92% of Iceland’s population isusing geothermal heat for heating applications. The percentage of heating supplied by oil is a mere
1%.

3.4

Indirect use: Construction of power plants and development of the aluminum industry
Although the first geothermal power station in Iceland was built in 1969, the construction of

power plants on a practicable scale has progressed since the second half of the 1990s. As the resultof construction carried out since the second half of the 1990s to expand the power generation plants
at the Nesjavellir, Reykjanes and Hellisheidi power stations, in 2008 power generation capacity was
575MW and the total amount of electricity generated annually was 4,038GWh, accounting for24.5% of Iceland’s entire power supply (the remainder is provided by hydro-power). This figurenearly rivals geothermal power generation capacity in Japan. Furthermore, in 2008, two new 45MW
turbines were installed at the Hellisheidi Power Station, which increased capacity to 663MW andboosted the annual supply of electric power to 4,600GWh from 2009.
Iceland’s power-generation business and the aluminum refining industry have a deep
relationship. Iceland has a background of using its abundantly existing natural energy (hydro-powerand geothermal) to strategically develop the aluminum industry, which consumes a tremendous
amount of electricity. Traditionally heavily dependent on fishing, Iceland has achieved industrial
diversification through its development of the aluminum industry, and today the population working
in the aluminum industry outnumbers the population involved in fishing.
Although aluminum smelters had been constructed since the latter half of the 1960s, they wereaffected by the deterioration of the global market and in the 1980s Iceland was unable to achieve its
anticipated industrial development. Therefore Iceland established the Energy Strategy Agent in 1988
and decided to strategically develop power consuming (power-intensive) industries that would use
renewable energy. Based on this change, the Energy Strategy Agent secured four large-scale
investment projects totaling 800 million dollars after 1995 and the aluminum industry expanded. As
a result, the volume of aluminum produced rose from 210,000 tons in 2000 to 770,000 tons in 2008.
Currently there are three large aluminum refining plants in Iceland. The biggest smelter, located10

in eastern Iceland and owned by Alcoa, Inc., has a production capacity of 346,000 tons (2008). A
smelter with production capacity of 180,000 tons (2008) located in southwest Iceland is owned by
Century Aluminum Company, a U.S. firm6. The Canadian entity Alcan, which built the originalaluminum smelter in Iceland, has its plant on the outskirts of Reykjavik, the capital. That facility’sannual production capacity is 180,000 tons (2008). Annual production capacity including output
from smelters other than these three plants is being expanded each year, and aluminum production in
Iceland is forecast to reach one million tons in 2011. This constitutes about 3% of global aluminumproduction and puts Iceland among the world’s top ten producers. The electric power consumed by
Iceland’s entire aluminum industry is currently 5,500GWh, all of which is covered by hydro-powerand geothermal power generation.

4. Iceland’s Geothermal Power Plants

After the first geothermal power plant was constructed at Bjarnarflag in 1969, a total of sevengeothermal power stations had been established in Iceland by 2006 (see Figure 3). As of 2011,
Iceland had total geothermal power generation capacity of 662MW, sufficient to handle more than
one-quarter of the country’s electric power production.
The Bjarnarflag power plant is located in northern Iceland and currently has 3.5MW of power
generation capacity7. Over the following years the Svartsengi, Krafla, Nesjavellir, Husavik andRekjanes power plants were constructed, and the newest power plant, the Hellisheidi geothermal
power station, began operating in 2006 and was enlarged in subsequent years up to 2011. A summaryof each power plant that is presently operating is shown in Figure 48.
As can be understood from Figure 3, the Nesjavellir Geothermal Power Station and Hellisheidi
Power Station are owned by Reykjavik Energy, while the Svartsengi Power Station and Reykjanes
Power Station are owned by HS Orka. The Bjarnarflag Power Station and Krafla Power Station are
owned by Landsvirkjun, the state-owned power company. Reykjavik Energy and HS Orka areelectricity companies that focus on geothermal power generation. Landsvirkjun, on the other hand, isinvolved primarily in hydroelectric power, and supplies power for the aluminum industry. Overviewsof the Nesjavellir Geothermal Power Station, Hellisheidi Power Station and Svartsengi Power

6

See the Ministry of Fisheries and Agriculture website.
http://www.fisheries.is/economy/Structure/Manufacture-sector/
7
http://www.mannvit.com/GeothermalEnergy/GeothermalPowerPlants/GeothermalProject-Hellisheidi/
8
The Husavik power plant is a binary type (Kalina Cycle) power plant and is not described in Figures 3 and 4
because it currently is not operating. Wasabi Energy of Australia acquired the plant in 2011, which it plans torefurbish it with the goal of commencing operations.
http://www.wasabienergy.com/Downloads/News/Husavik%20Announcement%2010%20Jan%202011.pdf#search='H
usavik%20geothermal'

11

Station, the three main geothermal power plants in Iceland that play a key role as cogeneration
facilities for power generation and district heating, are introduced in the following section.

Figure 3: Electric power generation in Iceland using geothermal power (1969-)
1600

1,382

MW Installed
1400

Accumulated

1200
1000
800

662

600
400

303

200
0

3

76

60

120

100

50

90

135
40

180
90

Note: Facilities in blue are as of 2010. Figures in yellow show planned future additions.
Source: Reykjavik Energy materials

Figure 4: Summary of Iceland’s geothermal power plants
12

90

45

2010 generating
Power plant

capacity (MW)Year built

Owner

Main turbine manufacturer

Bjarnarflag

3

1969

Landsvirkjun

Svartsengi

76

1976

HS Orka

Fuji Electric Co., Ltd.

Krafla60

1977

Landsvirkjun

Mitsubishi Heavy Industries, Ltd.

Nesjavellir

120

1997

Reykjavik Energy

Mitsubishi Heavy Industries, Ltd.
Mitsubishi Heavy Industries,

Hellisheiði

303

2006

Reykjavik Energy

Ltd./Toshiba Corporation

Reykjanes

100

2006

HS Orka

Fuji Electric Co., Ltd.

Source: Taken from Reykjavik Energy materials and other sources

4.1

Nesjavellir Geothermal Plant
The Nesjavellir Geothermal Plant is located on the Lake Thingvallavatn levee adjacent toThingvellir National Park, a high temperature zone in the northern part of the Hengill volcano and a
UNESCO World Heritage site. Outfitted with four 30MW turbines manufactured by Mitsubishi
Heavy Industries, Ltd., it has a total power generation capacity of 120MW. The plant has 26
boreholes and a maximum steam well depth of 2,000m. Because it is located near a national park,
the plant was constructed with emphasis on the building and landscape design.
The Nesjavellir Geothermal Plant is a cogeneration facility, and in addition to electric power it
supplies hot water for district heating in Reykjavik. The plant was initially developed as a base tosupply hot water to Reykjavik. Although heating and service water within Reykjavik were being
covered using low-temperature geothermal sources, the geothermal resources at Nesjavellir about
30km east of Reykjavik were newly developed because the water level was projected to decline as
the result of growing demand. Supply of hot water to the city began in 1990. A power plant designed
to use the well field for hot water was subsequently constructed, and power supply from geothermal
power generation was started in 1999.
A total of 300MW of energy is created for heating. The geothermal brine and steam gushingfrom the boreholes is divided into hot water and steam, and the steam is used to spin the turbines andproduce electricity. The separated hot water and the heat and low-pressure steam remaining after
turning the turbines are sent through a heat exchanger and used to heat low-temperature groundwater.
The water heated to 82°C is then transported to Reykjavik through a 27km pipeline.
The first plans to utilize the geothermal heat at Nesjavellir were made in 1947. Several test
boreholes were later drilled to evaluate the feasibility of power plant development and assess thechemical syntheses of the steam, and specific search surveys were continued from 1965 through1986. Construction of the geothermal power station was finally begun in 1987; the first stage was13

commissioned in May 1990, and the last turbine was brought on line in 2005.

4.2 Hellisheidi Geothermal Plant
The Hellisheidi Geothermal Plant is the newest geothermal power station in Iceland. It issituated in the Hellisheidi wilderness at a location to the south of the Hengill volcano9. The plant isequipped with six 45MW turbines manufactured by Mitsubishi Heavy Industries, Ltd. and one
33MW turbine from Toshiba Corporation, giving it a total power generation capacity of 303MW.
There are 50 boreholes, each to a depth of 2,000m. Like the Nesjavellir generating plant, it produces
hot water for district heating, which corresponds to energy of 400MW. Like the Nesjavellir
Geothermal Plant, it was also designed with emphasis on the landscape.
Many research boreholes were drilled when the power plant was constructed. Boreholes forresearch were made on Klvidarholl hill in 1985 and on Olkelduhals ridge in 1994. The data obtained
from both boreholes, however, was not sufficient to build a power plant. Consequently twoboreholes were made in Hellisheidi heath in 2001, and three more were drilled in 2002, and the dataobtained from these holes finally provided the grounds for building the power plant, enabling thework to go forward.
The Hellisheidi power plant was constructed from the beginning as a cogeneration facility. The
first two 45MW turbines, made by Mitsubishi Heavy Industries, Ltd., were introduced in 2006, andelectricity generation began with a capacity of 90MW. This was followed by a 30MW low-pressure
turbine made by Toshiba Corporation, which was brought on line in 2007. Two more 45MW turbinesfrom Mitsubishi were added in 2008, boosting power generation capacity to 210MW. Furthermore,
the supply of hot water was initiated with the construction of a geothermal facility (130MW) for
heating in 2010, and in 2011, two more 45MW turbines manufactured by Mitsubishi began
generating electricity.

4.3

Svartsengi Geothermal Power Plant
The Svartsengi Geothermal Power Plant is a generating station owned by HS Orka hf. It was thefirst geothermal power station in Iceland to achieve energy supply for power generation and district
heating.
Development of Svartsengi was carried out in six phases. In Phase I (1978-1979), two 1MW
turbines made by GE were commissioned and began generating power in 1978, mainly for district
heating. In Phase II (1979-1980), the facilities for district heating were expanded. Power generation
capacity was then gradually increased by introducing a 6MW turbine from Fuji Electric Co., Ltd. inPhase III (1980), and an 8.4MW binary facility manufactured by Ormat in Phase IV (1989). With the9Three volcano systems exist in the vicinity of Hengill; at least three volcano explosions have been confirmed tohave occurred in the past 11,000 years. The most recent explosion occurred in 2000.

14

commissioning of a 30MW turbine from Fuji in Phase V (1999-2000), both power generation
capacity and district heating capacity were substantially increased. Most recently in Phase V(2006-2008), further capacity expansion was achieved when another 30MW turbine manufactured
by Fuji was introduced. As a result, as of 2011 the plant has a total electric power generating
capacity of 75MW and creates 150MW of energy to supply warm water for district heating.
While cogeneration utilizing geothermal heat and groundwater for power generation and district
heating is a feature shared with the other two power plants described above, the Svartsengi Power
Station is characterized by it further expansions of the scope of cogeneration. One is a resort facility
called “Blue Lagoon.” A spa that uses seawater warmed by geothermal heat, the Blue Lagoon isvisited by 400,000 people every year, making it Iceland’s number one sightseeing spot. Its beginning
traces back to 1981, when people noticed by chance that the constituents in the heated water in asmall hot water pond (lagoon) created next to the Svartsengi Geothermal Power Plant are good forthe skin, and in 1987 the location was opened as a public spa. The facility was newly opened as“Blue Lagoon” in 1999. The Blue Lagoon covers an area of 5,000 square meters and is spring-fed
with six million liters of seawater warmed by geothermal heat per hour. It is calculated that all of theseawater is renewed in approximately 40 hours. Located on two continental plates, the Blue Lagoon
has become a location visited not only by the local population but also by many tourists. Moreover,because the spa uses geothermal seawater and cosmetics are based on silica and algae, beauty
products have been developed and are being sold. Ethanol is also being produced, and various uses
for geothermal resource are being pursued.

5． Geothermal Power Generation Systems and the Role of Japanese Firms in Iceland

Geothermal power generation systems are divided into three basic technologies: (1) dry steam,(2) flash steam and (3) binary. Dry steam, the oldest geothermal power generation technology, is atechnology to directly extract the steam from a geothermal reservoir and generating electricity byusing the steam to turn a power generation turbine. In contrast to this technique, flash technology –currently the most widespread technology – is a technology to extract high-pressure hot water andsteam heated to 182°C or more from a geothermal reservoir using pumps, and using the steam thathas been separated from the hot water by a steam separator to turn a power generation turbine. The
third technology is a binary power plant, which is a system to transfer heat from the hot water drawn
up from the geothermal reservoir to a separate medium that has a low boiling point, such as pentane(36°C boiling point), causing the medium to expand into a gaseous vapor that is then used likeordinary steam to drive the power generation turbine. This system is used for wells having
comparatively low temperature. With a binary system, the water (primary medium) drawn up from15

the reeservoir does not come intto direct conttact with the powerpgeneraation machineery, and is retturnedto thee reservoir aftter its heat haas been exchaanged. Thereffore one charaacteristic of ssuch systems is thatthey eeliminate thee concern thaat the water llevel in the reservoir
rwilll decline. Inccidentally, off thesethree systems, the binary system is the onlyy technology that is accep
ptable at this ttime under Japan’s
Renew
wable Portfoolio Standard. One issue for geotherm
mal developm
ment in Japann is addressinng theworryy of hot sprinng resort opeerators that ggeothermal po
ower use willl lower the uunderground waterlevel;; this is not a concern if a binarybcycle ssystem is utillized.
O
Of the world’s total geotheermal power generation capacitycat the end of 20009, which excceeded
10,0000MW, dry stteam systemss accounted fo
for 2,878MW
W, flash system
ms accountedd for 6,483MW
W andbinaryy systems acccounted forr 1,178MW. Three Japannese firms – Mitsubishi Heavy Indu
ustries,
Toshiiba and Fujii Electric – have shownn themselves to be highlly competitivve in this market,mdeliveering 2,007M
MW (share excceeds 70%) ffor dry steam systems and 5,240MW (sshare exceedss 80%)
for flflash systemss (including single flash and double flash). Up until now, hhowever, Jap
panesecomppanies have noot handled biinary systemss10, and as off 2010 Ormat Technologiess, Inc., a U.S. firm,
has neearly 100% sharesof this market.
mW
With the exceeption of certaain facilities, all of the maain geothermal power stattions in Icelannd useflash systems, andd power generration turbinees manufacturred by Japaneese firms havve been adoptted fornearlyy all of thesee plants. For example, of the 14 turbin
nes Reykjavik
k Energy hass at all at its power
plantss, including thosetthat aree in planning,, 13 were maanufactured byb Mitsubishii Heavy Indu
ustries,Ltd. aand the other unit was madde by Toshibaa Corporationn (Figure 5).

Figgure 5: Reykjavik Energy’’s geothermall turbines (inccluding plannned)MH
HI Hverahlíð and
New Site 3 units
135MW
24.2%

Toshiba Hellissheiði
1 unit33MW
5.9%

MHI NesjavellirN
4 units
12
20MW
21
1.5%

MHI Hellisheiði 6
units
270MW
48.4%
10

In M
May 2010 Fuji Electric announ
nced it will com
mmercialize a 2M
MW binary sysstem.
http://w
www.fujielectriic.co.jp/about/n
news/10051001//

16

Source: Reykjavik Energy materials

6． Players Involved in Geothermal Resource Development in Iceland

6.1 Resource Exploration: ISOR (Iceland GeoSurvey)
The establishment of a geothermal power station broadly involves three phases: (1) exploration,(2) drilling and (3) plant construction. In the exploration phase, the objective is to confirm and assess
the existence of geothermal resources. Because of the large cost involved to actually drill, it isnecessary to identify beforehand and as accurately as possible the locations where geothermal
resources exist.
Detailed maps showing the locations where potential geothermal resources exist, including
information on tectonics and lithology, are drawn based on the accumulation of geological surveys
made over many years. When the outlines of candidate sites for geothermal resource development
are shown on a map and a candidate site is identified, specific measurements concerning a variety ofphysical characteristics and chemical attributes are taken and the geothermal resource conditions(depth, temperature, etc.) understood. Thus the status of the geothermal reservoir, which exists deep
underground and cannot be observed directly, is extrapolated to the extent possible.
Following the search from the earth’s surface, exploration wells are drilled. The purpose is to
more accurately grasp the conditions underground by drilling a few wells prior to commencement offull-scale geothermal well drilling. Compared with the past, it has even become possible tounderstand underground conditions from information obtained from the earth’s surface, based on
extensive geothermal resource development experience. Nevertheless, without actually drilling,accurate well sites and conditions cannot be fully understood.
During the search phase for Iceland’s geothermal resources, ISOR (Iceland GeoSurvey) has
played a key role. Iceland’s electric power market was deregulated in 2003 by amendment of its laws.
The power generation market was entrusted to free competition, while electric power transmission
and supply were placed under government control. The role of the NEA (National Energy Authority)
in management and oversight of the deregulated market was enlarged, and the GeoScientific
Division, which was the NEA's research arm, was spun off and established as an independent entity
renamed ISOR. Until becoming independent in 2003, the GeoScientific Division had supported the
Icelandic government and Iceland’s power utilities, mainly through geological surveys, for 60 years.
Although the spun-off and independent ISOR is state-owned, financially it operates as anindependent entity. According to its annual report for 2010, operating revenues in that year were 866
million kronor (about 577 million yen) and the net loss was 94.4 million kronor (about 63 millionyen). The organization’s main business is services such as geothermal exploration and surveys,
17

drilling consultancy, geothermal well testing and evaluation, and environmental impact assessment.
While traditionally its customers were the government and Iceland’s electric power companies, inrecent years ISOR has expanded its operations overseas, and its revenues as of 2010 have beenbroadened to include foreign activities within the scope of its business.

6.2

Exploration: Iceland Drilling Ltd.
Iceland Drilling Ltd. is the biggest firm sinking geothermal wells in Iceland. Established in 1986

as a firm owned jointly by the state and the city of Reykjavik, Iceland Drilling traces its roots backto 1945 when it predecessor, State Drilling Contractors (a government agency), was founded. To
achieve more diversified ownership, in 1992 the Iceland Drilling shares owned by the governmentand city were also offered up to ordinary investors.
As a firm specialized in geothermal well drilling, Iceland Drilling handles activities ranging
from the exploration phase to full-scale drilling. It is developing its services not only in Iceland but
overseas as well. The company also owns Helka Energy GmbH, a wholly-owned subsidiary inGermany, and is developing its business internationally as Helka Energy.

6.3

Plant construction: Engineering firms
Engineering firms are in charge of geothermal field development and geothermal power plant

construction. Iceland has a number of engineering firms, including small and medium-sizedcompanies; two engineering firms related to geothermal power station construction are Mannvit
Engineering and Verkis.
Mannvit, the largest engineering firm in Iceland, was created through the merger of three
engineering companies that were all founded in the 1960s. In 2010, the company employed 400
employees and had operating revenues of six billion ISK (about four billion yen) and net earnings of
570 million ISK (370 million yen). The company also provides services in other countries. Verkis
was established in 2008 through the merger of five engineering and consulting firms. VST, one ofthe pre-merger entities, had a history going back to 1932.
Both companies, through the firms that were their predecessors, were involved in the first stageof thermal resource development in Iceland. Both provide wide-ranging services, from geothermal
resource exploration to drilling, plant construction and plant management. While most of the plantfacilities installed during geothermal power plant construction in Iceland are purchased from foreigncompanies, including Japanese and German firms, engineering services are being provided by thesedomestic entities.

6.4

Electric power companies
The companies that actually make the investments in geothermal resource development and use
18

geothermal resources as a business are the power utilities. The costs related to development areeither financed internally, or through the use of financing schemes that include domestic andoverseas investors. As discussed earlier, the three power utilities that own geothermal power stationsin Iceland are Reykjavik Energy, HS-Orka and Landsvirkjun. The power-generation business andpower transmission business in Iceland are separate; the power transmission business takes the formof a monopoly managed by a single state-run company, while the three power utilities operate thepower-generation businesses.
Reykjavik Energy is a public utility corporation (the government owns nearly 100% of its
shares) formed in 1999 by the merger of Reykjavik Electricity and Reykjavik District Heating. Bothcompanies had long histories; Reykjavik Electricity began operating in 1921, while Reykjavik
District Heating was founded in 1930. The former supplied electric power, and the latter supplied
heating systems. Today Reykjavik Energy supplies electricity to 56% of Iceland’s entire population,and supplies hot water and chilled water to 61% and 41% of the population, respectively.
HS Orka was made independent in 2008 after it was separated from Hitaveita Sudurnesja hf,
which was established in 1974. Discussion of geothermal development in the Sudurnes district
began in 1953. NEA examined the feasibility of geothermal development in Svartsengi for years,
and Hitaveita Sudurnesja hf was subsequently established in 1974 to construct a district
heating/power generating system. The supply of hot water was started in 1976, and power generation
began from 1978. HS Orka is a firm that specializes in the production of geothermal power based on
this experience. Initially, most of HS Orka’s shares were held by public institutions, but in 2009
Magma Energy of Sweden acquired a 41% stake, and Geysir Green Energy of Iceland purchased
57.4% of the shares. In 2010 the company became a de facto subsidiary of Magma Energy, which
now owns 98.1% of the shares.
Landsvirkjun is a state-run power utility that generates 73% of the electricity used in Iceland. In
contrast to Reykjavik Energy, whose main customers are ordinary families, Landvirkjun’s principal
business is supplying power for industries that use large amounts of electricity at sites such asaluminum smelters. About 80% of the company’s sales are to industries with concentrated electric
power needs. Landvirkjun has grown together with the global aluminum companies Alcan and Alcoa,
which have constructed smelter plants in Iceland. Most of Landvirkjun’s power generating capacity
is hydro power, and the company has only two geothermal power stations, at Krafla and Bjarnarflag.

7.

Overcoming Geothermal Development Issues
As described earlier, three reasons why the development of geothermal power generation has notprogressed very far in Japan have been identified: (1) economic efficiency (initial investment risk),(2) the opposition of hot springs operators and (3) Natural Parks Law regulations. Other than the19

opposition from hot springs operators these issues, while different in degree, are found in Iceland as
well. In Iceland, however, power generation capacity has been increased rapidly in recent years
despite these geothermal resource development issues. Why has that been possible?

7.1

Economic efficiency: Diversified resource use
Although there are no detailed data concerning power generations costs, with regard to theeconomic efficiency of geothermal power generation we can surmise the cost to some degree basedon rates. Figure 6 shows the electricity rates of Reykjavik Energy and HS Orka for electricity sold tohomes. Because the power generation, power transmission and electric power supply businesses
were separated in Iceland in 2003, the electricity rates customers pay are shown divided into theamounts for power generation, power transmission and power supply. Looking at the power
generation portion, we can see that both Reykjavik Energy and HS Orka charge about three yen/kWh.
This is end selling price, so the power generation cost is assumed to be lower than this. Consideringthat the cost of nuclear power and thermal power generation in Japan is from 7 to about 10 yen, we
can see that a considerably low cost has been achieved. This is very inexpensive even whencompared with the power generation cost for geothermal power generation of about nine yen foundin Japan (IEEJ, 2011).

Figure 6: Household electricity rates for geothermal power in Iceland (price/kWh)Supply rate

Transmission

Electric bill

Energy tax

rate

Electric bill includingElectric bill including

25.5% sales tax (on power

25.5% sales tax (on power

generation only)

generation, transmission andsupply)Reykjavik

3.53

1.27

4.74

0.12

6.07

12.12

Energy(2.29 yen)

(0.83 yen)

(3.01 yen)

(0.08 yen)

(3.94 yen)

(7.88 yen)

HS Orka

—

—

4.59

0.12

5.91

—

(2.98 yen)

(0.08 yen)

(3.84 yen)

Notes:

Because HS Orka is only in the power generation business, charges for electric power supply andtransmission are not included in its rate. Figures in parentheses are the value in yen calculated at
1ISK=0.65 yen.

Source:Taken from HS Orka and Reykjavik Energy websites

20Why can these firms generate electricity at such low cost? We cannot provide a detailed analysis
in this paper concerning this point, but one factor is believed to be that geothermal resources are put
to multiple uses including the provision of heating and hot water11.
As mentioned previously, Iceland’s geothermal resources were originally developed for district
heating. Power plants were constructed later at the developed geothermal fields. To the extent thesame field is shared, it appears possible to lower the costs.
Contrast this with the situation at the Hatchobaru Geothermal Power Station, for example, thebiggest geothermal power station in Japan, where Kyushu Electric Power Co., Inc. uses geothermalheat only to generate electricity and, except for heating the interior of the power plant itself, does notsell the hot water externally. Yet because Hatchobaru can achieve a power generation cost of 7-8
yen/kWh, among renewable energy sources the plant could probably become extremely
economically efficient if it were to also use the geothermal heat for indoor heating applications.
Even if such strong potential economic efficiency is recognized, however, there is still aproblem in terms of financing because of the high development risk. This point is the same in Japanand Iceland. In Iceland, however, the major electric power firms like Reykjavik Energy that havestrong hallmarks of government entities are aggressively undertaking self-financing and pushingahead with geothermal power development. Despite the risk, a firm that has been granted amonopolistic position probably can absorb the development risk to some extent.

7.2

Coexistence with the environment and local area
Although the restrictions in Japan are greater, the current situation in which many geothermal

resources lie under national parks is the same in both Japan and Iceland. Regulations have beenplaced on geothermal resource development in Iceland as well, based on the Nature Conservation
Act (environmental protection law). Plants are constantly monitored so they do not affect theecosystems in national parks, and harmony with the landscape and power plant design areemphasized in power plant construction.
In Iceland firms are lucky that resource exploration and plant construction are not stifled by
opposition from hot spring resorts like in Japan. Heated swimming pools everywhere in Iceland, and11

However, compared with Japan Iceland also has an advantage in terms of power plant construction costs. In

contrast to Iceland, where the required investment amount per MW is said to be 2.5-3.0 million dollars (from 200
million to 240 million yen), in a trial calculation made in 1996 the amount in Japan was 660 million yen, and in a
calculation prepared in 2008 was 510 million yen (Adachi, 2009). While the two sets of figures are not directlycomparable because the trial calculations for Japan also include running costs, this is a significant difference even if
the running cost is assumed to account for 1/3 of the total cost.

21the fact that people are able to enjoy the pools every day seems to have heightened awareness of thebenefits of geothermal development. Geothermal development and hot water use are two sides of thesame coin. The status of hot water and steam use is monitored continuously, however, and moderate
use of natural resources is borne in mind. Hot water is pumped and used from wells within the cityof Reykjavik, for example, but changes in the underground water level are monitored continuously
and the pumping rate controlled. For development of the Nesjavellir geothermal field as well, thefact that hot water pumped up to meet the increase in hot water and heating demand within the city
would cause the water level to fall and draw in hot water from a location 30km away wasconsidered.

7.3

Development authorization and handling of rights
When developing a geothermal resource, one more issue in relation to districts and theenvironment is development rights. Entities wanting to develop a geothermal resource in Iceland(typically a power utility) must obtain a license from the NEA. Licenses are either an “exploration
license” or a “utilization license.”
Both licenses are provided in accordance with the Act on Survey and Utilization of GroundResources, and the Electricity Act. Moreover, to exploration for or use resources, approval must also
simultaneously be obtained in accordance with the provisions of the Nature Conservation Act andPlanning and Building Act.
The NEA can grant exploration licenses to entities that want to undertake resource exploration,
whether on publicly owned land or in a privately owned area. In the case of privately owned land,
the party that receives the license is not necessarily the landowner. Although resources belong tolandowners, resource utilization licenses are not granted just to land owners, and landowners also do
not have priority to receive a resource utilization license. The fact landowners and development
rights holders are separated is a special characteristic of Iceland.
Usually the entity that receives an exploration license and conducts an exploration will thenobtain a resource utilization license and proceed with resource use, but the party that has received alicense must obtain mutual agreement with the landowner concerning the resource use (including
compensation) within 60 days from the day when the license was received. If a mutual agreement is
not obtained, the license is revoked.
When mutual agreement is not obtained it is also possible to pursue mediation based on the
judgment of a specialist. In other words, both parties will be urged to reach a consensus based on acompensation amount judged by the specialist to be appropriate. Therefore landowners cannot infact continue to refuse resource utilization by other parties.

228. Conclusion: Feasibility of Geothermal Development in Japan and Issues

Viewed from the perspective of the creation of a renewable energy industry that solves theenvironmental problem, energy problem and financial problem, geothermal power generation looks
very promising. Among countries possessing geothermal resources, Japan ranks third in the world. If
half of those reserves (geothermal resources considered to be economically feasible to develop) weredeveloped, they would be able to cover about 10% of Japan’s total power demand. Not only does
geothermal power generation not incur any expense for fuel, the volume of CO2 emissions also isextremely low. Judging from the case history of Iceland, potentially high economic efficiency can be
expected at a minimum. Considering how highly competitive Japanese firms are in turbines,
development could also be expected to stimulate industrial development in Japan.
Notwithstanding such benefits, the development of geothermal resources in Japan has been
extremely slow. It is an area that has been disregarded in policy for a long time. Despite receiving
greater attention in the wake of the Great East Japan Earthquake, the hurdles remain high. Therefore
the goal of this paper has been to identify some guidelines for Japan’s geothermal development byanalyzing the case history of Iceland as a geothermal development pioneer. In addition, althoughsufficient analysis has not yet been completed, some hints were obtained as well.
The first is that multiple uses of geothermal resources, through utilization that includes direct
use of hot water and district heating, appears to be the key to boosting the economic efficiency ofgeothermal power generation. For Japan as well, the effectiveness of the use of geothermal heat for
district heating in cold areas such as the Tohoku region is believed to be high. There is a possibility
the environment and energy problems can be solved while maintaining high economic efficiency ifheating and power generation are developed as a set.
The second hint is the importance of continuously maintaining concern for the environment.
One reason people in hot spring resorts oppose construction of geothermal power stations is theirworry that the hot spring water level will fall. To eliminate such concern, monitoring the status of theunderground resource continually, and keeping moderate resource use in mind, appears to benecessary. Consideration of the landscape also is vital. In Iceland, considerable care is taken withpower plant design. Unlike in the case of a normal power plant, the value placed on designs that do
not disrupt natural park landscapes and harmonize with surroundings appears to be considerable.
The third hint is that the problem of investment risk appears to be solvable to some extent if alarge monopolistic firm (power utility) addresses the issue seriously. Moreover, in the case of hot
spring development, a scheme in which the spring’s source is not developed by the party owning theresource at its own risk, and the risk is borne individually by the land owners, developers andinvestors and the parties cooperating, might be necessary. Development might move forward if
appropriate investment schemes can be formulated, because the potential economic efficiency is23high. Of course, geothermal development is likely to be accelerated by the full-volume feed-in tariffpurchase system set to begin this year if a high price of 20 yen/kWh or more is set. One criticalfactor, however, will be to have a scenario for development as an industry without having to relyindefinitely on taxes (public financing burden).

24References

ABS Energy Research (2010). “The Geothermal Energy Report 2010: Direct Use and Power Generation.”International Energy Agency (2011). “2011 IEA Key World Energy Statistics.”
Masaho Adachi (2009) “Economic Efficiency and Development Risks of Geothermal Development.”
Second Meeting of the Ministry of Economy, Trade and Industry Agency for Natural Resources andEnergy Research Committee Concerning Geothermal Power Generation. Published documents,
January 30
http://www.meti.go.jp/committee/materials2/downloadfiles/g90130b08j.pdf
Shozo Kaneko (2010). “Achieving the Interim Objective of a 25% Reduction: Policy Proposals andIssues.” Symposium on CO2 Reduction and Japan’s Innovation. Lecture materials. March 30, 2010.
Academic Information Center
Agency for Natural Resources and Energy. “Outlook for Long-Term Energy Supply and Demand(Recalculation).” August 2009
Agency for Natural Resources and Energy. “New Energy Industry Study Group Interim Report.” March2012
Institute of Energy Economics, Japan. “An Evaluation of Thermal Power and Nuclear Energy Costs
Using Annual Securities Reports.” August 31, 2011.
Tetsuro Noda (2009). “Influence of Geothermal Power Station on Nearby Hot Springs.” Second Meetingof the Ministry of Economy, Trade and Industry Agency for Natural Resources and Energy
Research Committee Concerning Geothermal Power Generation. Published documents, January 30(http://www.meti.go.jp/committee/materials2/downloadfiles/g90130b08j.pdf).
Yusaku Yano (2008). “Feasibility of Geothermal Power Generation Development.” First Meeting of the
Ministry of Economy, Trade and Industry Agency for Natural Resources and Energy ResearchCommittee Concerning Geothermal Power Generation. Published documents, December 1.
(http://www.meti.go.jp/committee/materials2/downloadfiles/g81201a05j.pdf).

25