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Developers tap into hot water deposit

The Bratislava-based geothermal research firm Slovgeoterm in May finished three years of tests of a deposit of hot water buried up to 3,000 metres below the surface of eastern Slovakia's Košice district, and pronounced the deposit suitable for use as a source of energy. So suitable, in fact, that the firm's scientists predict the deposit could provide heating for about one-third of Košice city's 250,000 residents for over 30 years.
The Košice geothermal deposit, the largest on the European continent, has a mean temperature of 135 degrees centigrade, and can be tapped at a rate of 55 to 60 litres per second.
Following the Slovgeoterm tests, a joint-stock company named Geoterm Košice will be formed by the end of June with a basic capital of 306 million crowns ($6 million). The new firm will comprise shareholders such as Slovgeoterm, Košice City Hall and Slovakia's giant gas monopoly, Slovenský plynárenský priemysel (SPP), with the latter contributing over 99% of the funds. The Slovak Geoterm backers are also courting French and Icelandic investors.

The Bratislava-based geothermal research firm Slovgeoterm in May finished three years of tests of a deposit of hot water buried up to 3,000 metres below the surface of eastern Slovakia's Košice district, and pronounced the deposit suitable for use as a source of energy. So suitable, in fact, that the firm's scientists predict the deposit could provide heating for about one-third of Košice city's 250,000 residents for over 30 years.

The Košice geothermal deposit, the largest on the European continent, has a mean temperature of 135 degrees centigrade, and can be tapped at a rate of 55 to 60 litres per second.

Following the Slovgeoterm tests, a joint-stock company named Geoterm Košice will be formed by the end of June with a basic capital of 306 million crowns ($6 million). The new firm will comprise shareholders such as Slovgeoterm, Košice City Hall and Slovakia's giant gas monopoly, Slovenský plynárenský priemysel (SPP), with the latter contributing over 99% of the funds. The Slovak Geoterm backers are also courting French and Icelandic investors.

Slovgeoterm was entrusted by the Slovak government in 1991 with developing the country's geothermal potential, and holds an Environment Ministry license to exploit the Košice reserves. The firm's officials said they wanted the deposit to be functioning by 2005.

For Košice city officials, hot water from the earth's crust represents cheaper and more environmentally friendly energy than they are currently getting from the Tepelná energetika Košice (Košice Heating Energy - TEKO), a wing of the Slovenské elektrárne (Slovak Electric - SE) energy monopoly. According to city planners, the deposit could be used for heating residential apartments, recreational facilities, fish-breeding pools and greenhouses.

"Looking at the future and the ecology aspects of the project, the city sees it [the deposit] as a much-needed and lucrative energy source," said Košice mayoral spokesman Marián Krajňák.

Long time coming

The possible move to alternative and renewable sources of energy has been welcomed by environmental and energy experts, particularly in view of Slovakia's current heavy reliance on pollution-heavy fossil fuels such as coal as a primary energy source (see chart this page). While the Slovak parliament in April 2001 relaxed emissions controls that would have seen air pollution fines rise as mush as 16 times over 1998 levels by 2006, experts have said the country's efforts to join the European Union will eventually make the use of renewable or non-polluting energy sources cheaper than fossil fuels.

Ján Szöllös, a geologist with the Slovak Academy of Sciences, also pointed to the need for such a project in eastern Slovakia, "which has never had good traditional sources of energy compared to the west of the country, where energy utilities are clustered."

But for the moment, the cost of developing such sources remains prohibitive. A single 3,000-metre well at the Košice site costs about 90 million Slovak crowns (almost $2 million), money which Szöllös says Geoterm will have to raise on its own without government help.

Use of the earth's natural heat as an energy source experienced a global boom in 1995, since when the number of thermal water installations around the world has grown annually by 30%. But the boom has not been spread evenly - while thermal deposits provide 86% of all energy in Iceland, which has the world's largest geothermal potential, Slovak geothermal sources contribute less than one tenth of one percent to the country's energy needs.

"The [Slovak] government has created neither the economic nor the legislative pre-conditions for the development of alternative energy," said Szöllös.

Of course, it hasn't been just about tight state budgets and absent laws - during the 1970s and 1980s, when Slovakia received its energy raw materials cheap from the Soviet Union and Warsaw Pact countries, there was little pressure to look for other sources. In the 1990s, meanwhile, lobby groups supporting continued reliance on electricity from domestic coal and nuclear plants, as well as natural gas from Russia, managed to block any attempts to develop competing energy sources.

"Today, the country's nuclear and oil structures are politically so strong that they prevent any development of these sources," Szöllös said. "Instead of feeding billions of crowns into the construction of nuclear reactors, we should instead invest the money into renewable energy sources, which would be a more effective way of using our finances."

But Milan Kachút, head of the Economy Ministry's Energy Policy Department, said that it was simple economics, rather than lobbying, which had hitherto kept state money out of alternative energy development. "The return on investments made into other energy sources are simply quicker," he said. "The state budget can't afford to invest large sums of money without being sure of seeing a return in the near future."

Kachút added that while the state budget had given only 30 million crowns ($600,000) this year to developing alternative energy projects, the government was preparing legislation that gave financial incentives to energy companies to buy energy produced from renewable resources.

Slovakia's geothermal resources were first explored in the 1970s. However, out of the 70 geothermal sites identified and drilled since then, only around 30% are currently in use, mainly by health spas. Central Slovakia's Galanta is the only town in Slovakia that uses geothermal energy commercially to heat houses.

"This source of energy does the least environmental damage," said Jozef Franzen, of the Environment Ministry's geology department. "It's a pure form of energy that doesn't produce any waste, as long as the water does not get into the river system after it's used," he said, explaining that waste geothermal water had a high salt content that could damage river ecosystems. The Geoterm Košice project has solved this problem by drilling additional holes to flush the used water back into the ground.

The ministry's Franzen said that the government expects the share of renewable sources of energy on Slovakia's total consumption to climb in future, it hasn't got the money to force the pace of change. "These [geothermal] rigs are enormously expensive, and the state budget doesn't have money to finance them," he said. Franzen added that the state responsibility for geothermal exploration and development should be restricted to performing research in the field.

Back to Košice

The first two geothermal drilling rigs in the Košice region were jointly funded in 1998 by SPP and the European Union's PHARE programme, while a third rig in 1999 was paid for by SPP. Since then, Slovgeoterm has used the rigs to establish the size of the deposit and assure that the waste water could be disposed of.

Once the Geoterm new joint-stock company is founded, 11 more rigs will have to be built at a cost of around 90 million Slovak crowns each. The whole project is expected to cost three billion crowns, while Slovgeoterm project manager Vladimír Beňovský expects the investment to be returned within a decade.

"Since the life-expectancy of the facility is projected at 30 years, we consider the nine-year payback period to be an ideal one," Beňovský said, adding that domestic geothermal energy would then have a clear advantage over imported natural gas, coal and oil.

While Geoterm Košice's shareholders will collectively be stumping up around 25% of the project money, the company has turned for the remaining funds to European institutions as well as the Word Bank. They have not applied for loans from Slovak domestic banks, Slovgeoterm officials said, because domestic interest rates were considerably higher than they hoped to find abroad. Beňovský criticised the Slovak government's passive approach to funding such projects, saying "a government guarantee would have helped us get these loans at a lower interest rate."

Slovgeoterm was founded by SPP, Virkir Reykjavik and Nefco Helsinki in 1992 as a company specialising in using geothermal energy in Slovakia. It's basic capital was raised from 2.8 million crowns to 22.5 million ($450,000) last year.

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