Geothermal Direct Use for a Crop Drying Center in

Implemented by In cooperation with Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Registered offices Bonn and Eschborn, Germany

“Promotion of Geothermal Energy in Central America (Geo I)” GIZ Office San Salvador Boulevard Orden de Malta, Casa de la Cooperación Alemana, Urbanización Santa Elena, La Libertad, El Salvador, Central America T +503 2121-5145 F +503 2121-5101

E [email protected] I https: https://www.giz.de/en/worldwide/78071.html I www.sica.int/energias4e/

As of September 2020

Authors Helen S. Carpenter Based on the feasibility study conducted by: Mauricio Muñoz, Sofia Vargas Centro de Excelencia en Geotermia de los Andes CEGA

Editing Isabel von Griesheim, Max Fernandez, Ana Lucía Alfaro and Karla Hernandez (GIZ)

GIZ is responsible for the content of this publication On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ)

Design and layout Plasmático Media Lab (Consultant), Karla Hernandez and Neimy Giron (GIZ)

Photo credits Mauricio Muñoz

2 Lake Amatitlán is the 4th largest water body in Guatemala.

This lake used to be a preferred touristic attraction as nearby hotsprings were popular among visitors.

3 This summary presents findings from research on the technical, economic, and social feasibility of developing a geothermal direct use pilot project in Guatemala. The research took place from 2018 to 2019 and forms part of the regional project “Promotion of Geothermal Energy in Executive Central America (Geo I)” (2016-2020), which was implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on Summary behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). The objective was to provide technical support as well as incentives to invest in geothermal energy in Central America. The main counterpart on the project was the Central American System for Regional Integration (SICA).

The technical support from GIZ will continue in a second phase that focuses on geothermal heat processes in Central American industry (2020-2023). In Guatemala, with the goal of establishing a geothermal direct use project, GIZ collected data and information and established relationships with potential stakeholders. In 2018, GIZ commissioned the Andean Geothermal Center of Excellence (CEGA) to research the feasibility of developing a direct use project. The local community supported the initiative, welcoming a plan to create the country’s first direct use geothermal crop drying facility. Guatemala possesses multiple underutilized geothermal resources that could be harnessed to improve businesses, while at the same time, improve opportunities near geothermal areas where there are high levels of social and economic vulnerability. In the El Cerrito community on the southwestern bank of Lake Amatitlán, access to crop drying and storage facilities that use geothermal heat could improve farmers’ production and profits. The research indicated that the community could support the development of a crop processing center, and, moreover, that it would benefit them. The processing center will promote agricultural development and economic progress among Amatitlán area residents, who have a strong relationship with the thermal spring. Producers will gain time, grow income, and learn about geothermal energy. A drying and storage center based on direct use of geothermal GIZ Experts taking temperature measurements energy not only keeps carbon emissions low, it can during the field trip to Lake Amatitlán. also promote sustainable community development.

4 Benefits of a drying center

Traditional coffee drying method used in industries in Guatemala.

The first of its kind in Guatemala, the proposed area, so the proposed project fills an important geothermal drying center will improve the processes gap. For pineapple producers, the drying center will for drying, storing, and commercializing crops, and allow increased production. The use of geothermal create jobs. GIZ researched the project’s feasibility energy reduces drying time considerably without in terms of costs, risks, and opportunities, and fossil fuels and thus avoids emitting carbon. At the technical, social, and economic requirements. The same time, the technification of the drying process result of careful planning, the drying center includes stabilizes and optimizes product quality regardless an initial pilot phase, where the project will focus of weather conditions, which makes the direct use on corn, beans, and pineapples—crops with the of geothermal energy a valuable anecdote to the highest potential for steady and profitable sales. unreliable drying and storage conditions associated Over time, new crops may be added. For grain with climate change. producers, there are no other drying centers in the

5 An innovation that improves the local economy

Lake Amatitlán serves many purposes to the local population, including water supply for domestic use (household shores and sanitation), produce irrigation and other industrial activities.

The Amatitlán municipality is notable for its high The drying center can build the local economy in level of vulnerability and unemployment. The main important ways. Notably, access to high-quality challenges residents face are food security, access processing facilities can help producers increase to education, citizen security, and unemployment. the quantity of goods that they bring to the market. As recently as 2013, Amatitlán (population 120,000) There is a need to improve the agricultural practices had the highest homicide rate in Guatemala. to increase production. Currently, corn and bean Agriculturally, the area of interest is characterized producers harvest their biannual crops and then by small and isolated production. Corn and beans dry them naturally on fields or in homemade are the most widely grown crops in Amatitlán. artisan facilities, a process where they can lose Guatemalan corn and bean producers are poor (68.5 approximately 10 % to 30 % of their harvest due to %) or extremely poor (20.5 %). Poverty leads to highly damage from sources such as rain, mold, and pests. precarious production conditions—approximately 45 They sell their produce to intermediaries. Pineapple % of corn production and 37 % of bean production is producers harvest one crop per year. They dry about for self-consumption. Pineapple is the most widely 10 % of their harvest; a drying center, however, grown crop in , the community adjacent would allow them to produce more dried pineapple. to Amatitlán. Pineapple is a profitable crop and Challenges local farmers face are organizing dried pineapple a profitable commodity; by offering themselves and increasing commercialization access to drying services, pineapple producers can capacity. A drying center helps local producers expand their businesses and generate income for organize and empower themselves while improving the drying center. production and commercialization processes. Using

6 Dryng Center Activities Dryng Center Activities

Pineapple Corn & Beans | Receiving: Move pineapple from trucks | Receiving: Move beans and corn from to the grain processing room. trucks to the grain processing room.

| Pineapple quality control: Perform | Quality control: Perform quality control quality control inspection based on inspections on samples to establish level a sample of pineapples, examinig of humidity and percentage of impurities. the level of sunburn, level of decay, | Cleaning: Clean beans and corn to and uniformity of size and shape. remove impurities and weeds. | Pineapple peeling and slicing: | Grain-drying: Dry grains in drying beds. Peel and slice pineapple. | Shelling: Shell corn to separate | Pineapple-dryng: Weigh, package, and kernels from cobs. seal died pineapples for marketing. | Cleaning: Clean beans again to | Distributing products to consumers by remove all remaining impurities. transporting them to markets, public institutions, and government warehouses, | Separating and classifying: Perform or selling them directly at the warehouse. final quality control inspection and remove poor quality grains.

| Packaging and storing: Package dried Figure 1. Drying center activities for pineapple. grain products (e.g., in 46kg-bag “quintals” ) and store in warehouse. dryers, producers can preserve more of their crops | Distributing products, and and do so at a faster rate, decreasing the time it government warehouses, or selling takes to prepare them while increasing the quantity them directly at the warehouse. available to sell. Bean and corn producers can dry their crops soon after a harvest instead of leaving them in fields. They can control the amount of drying time and the temperatures for drying, skillfully calibrating Figure 2. Drying center activities for corn and beans. moisture levels, yielding reliable and dependable quality. Afterwards, producers can safely store dried business. The center will purchase crops at fair produce in the warehouses, strategically saving prices, and then dry, store, and commercialize them the crops to sell later, either throughout the year or for profit (Figures 1 and 2). The center’s activities during specific seasons when prices are higher. The will generate income to cover capital expenditures availability of crops outside of harvest time allows and operating expenses, including compensation producers to better control their incomes. for five employees. Additional financial details are summarized below. The resulting crop processing In addition to providing services and facilities for center will sustain itself for the proposed ten producers, the drying center will add revenue to years and, hopefully, serve as a local institution for the local economy by operating a crop processing agribusiness for many years beyond.

7 Direct use of geothermal energy

Coffee Processing Company in Lake Amatitlán: Understanding the traditional way in which coffee is processed allowed GIZ experts to better designed a geothermal direct use solution that could fit the coffee industry needs.

The proposed center will be based on direct use of The facilities that will rely on geothermal direct use geothermal energy. Specifically, the dryers and the are grain dryer and a pineapple dryer. A warehouse climate-controlled warehouse will recover heat will not require geothermal direct use. from a thermal spring south of Lake Atitlan. Lake Amatitlán is surrounded by active volcanoes such as Grain dryer. The center will include one bed- the Fuego-Meseta volcanic complex, which includes type dryer with a three-ton capacity for corn and the Fuego and Acatenango volcanoes and the beans. These dryers will decrease drying time to one volcano. In addition, the inactive Agua volcano is day. Considering seven months of production, 21 located nearby. The proposed site is a concession field days per month, and 12 hours per day, the annual south of Lake Amatitlán that started production in thermal consumption is about 15,000 kWht. When 1998, when the National Institute of Electrification operational, it is estimated that the dryer will (INDE) installed a 5 MW wellhead unit. In 2003 the produce a flow cooldown in the thermal spring of geothermal field was given in concession to Ormat 2.5 °C during full capacity working conditions. Company, who renamed it Ortitlán. By 2015, there were two units of 12 MWe and one unit of 1.2 MWe Pineapple dryer. The center will include one that run with five production wells and two injection pineapple dryer with a 200kg capacity. Taking into wells. The geothermal field is known as Amatitlán account an ambient temperature of 25 °C, drying geothermal field, but the concession field is the temperatures of 50 °C, and a drying period of Ortitlán concession field. 24 hours, the power capacity of the pineapple dryer is

8 90°55W 90°50W 90°45W 90°40W 90°35W 90°30W 90°25W

egend heral sring Geothermal concession field rtitln eibillo ross setion

itiy of uateala

Antigua uateala

Aatenango olano

uego olano Agua Aatitlan olano ae Aatitln

Paaya olano

90°55W 90°50W 90°45W 90°40W 90°35W 90°30W 90°25W

Figure 3. Location of the geothermal springs south of Lake Amatitlán, including concession areas and a cross section of the Amatitlán geothermal field. Concession areas from [4]

estimated to be 8 kWt, with an efficiency of 4,000 kJ/ geothermal direct use. kg H2O. Considering four months of production, 21 working days per month, and 24 working hour To spread awareness and to educate others, the per day, the annual thermal consumption will be center will generate a brand to highlight its unique about 16,000 kWht. While operational, the dryer is geothermal processes when it markets crops. estimated to produce a flow cooldown in the thermal Branding should help expand marketing networks spring of 2 °C during full capacity working conditions for those involved with the drying center. Products will display an environmental or green logo to Warehouse. The center will include a warehouse indicate that they were processed using renewable for 15 tons of grain. It will not require temperature and clean energies, which, in this case, are direct and humidity control, and thus, will not require uses of geothermal energy.

9 Designing a geothermal drying center

Through the interviews the experts were able to find a governance structure that suited the needs of the different organizations involved in the project and propose a sustainable business model.

GIZ and its collaborators developed a roadmap that studies that are required will occur at this time. will form the basis for building the drying center Once design plans have been finalized, construction can and purchasing machinery and equipment. As the begin. To build the center, the manager and board will planning stage begins, engineers will develop a basic hire a qualified construction company with expertise engineering model to (a) validate and verify that the in building a drying center. The builder should have data provided in the conceptual engineering model experience in constructing piping and facilities, which was developed based on the feasibility study, (b) involves contact with hot water containing a high provide technological guarantees, and (c) determine content of total dissolved solids. They should be able to the cost of the pilot project facilities and machinery. able to build a container to store the hot water from the At this stage, developers will assess the tasks for the thermal spring that provides greater flexibility of access proposed construction and articulate the business to the resource in terms of caudal. The manager and model more thoroughly. board will also have to research and purchase machinery and equipment for the center’s operations. During This basic engineering model is followed by a detailed construction, management should hire security for the engineering model that fully articulates the project. construction site and equipment location. Operations It contains detailed diagrams for construction, can begin after construction has been completed. equipment, electrical facilities, management Different actions include ensuring that the drying of suppliers, costs, procurement of equipment, system continues functioning, training administrative economic evaluation, environmental impact, the and operational teams, monitoring the operation, and control system, and the schedule of activities. Any consolidating the supply chain management.

10 Initial costs and projected annual expenses and profits

The goal is to create and then operate the drying Profits rely on the margin between wholesale center for a minimum of 10 years. Start-up costs prices and farm prices as follows: beans (40.22 %), are estimated to be US$ 66,755 for designing corn (15.00 %), and pineapple (1,058.00 %). The and building the center, plus working capital of production level of the plant will increase gradually US$ 18,327 for acquisitions. Funding will come until reaching peak production at 149.52 tons from bank loans, but may also come from grants, per year in the fifth year of operation. The center investments, and/or donations. potentially has a high profit margin. Indeed, CEGA predicted the proposed center will have a positive net present value (NPV) of US$ 237,776 and an internal rate of return (IRR) of 32 %.

Coffee drying patios: these areas are designated for drying coffee (in the sun).

11 The governance structure for operating the drying center

A coalition of stakeholders will participate in should attend workshops and seminars to cement developing and operating the drying center. At the engagement and then serve as guides down the road onset, a governing board of key stakeholders must for the new stakeholders who begin to contribute be established, and the project managers must be to the project. From the design and construction identified. It is important to recruit or organize phase onwards, as many stakeholders as possible a group of local community members to manage should attend workshops and field trips to the site the project. The next step is to engage additional to address possible construction and operation stakeholders who can broaden the project’s reach. challenges. Informed, cohesive leadership will During the planning phase, the main stakeholders contribute to the project’s overall success.

Dried grain storage facility. Guatemala.

12 There is both enthusiasm and support for the center, which will call on the knowledge and skills of local experts while opening doors for others through production services and employment and training opportunities. The feasibility study indicated that the Authority for the Sustainable Management of the Amatitlán Basin and Lake (AMSA) is the most important decision maker for the project. Additional stakeholders and their potential roles were identified based on the scope, mission, and vision of each group. Below is a list of the stakeholders and their probable roles. y The Authority for the Sustainable Management of the Amatitlán Basin and Lake (AMSA) is a local public institution whose main goal is to safeguard and restore Lake Amatitlán. They will serve on the project’s board. They will support project implementation, carry out follow-up strategies for implementing the project, engage stakeholders in developing project, and support the project in obtaining financing. y The Amatitlán Municipality is the most important local authority and will serve on the project’s board. They will support a communication channel for the project manager, local producers, and main stakeholders. They will also engage stakeholders in developing the project, provide commercialization channels (e.g., Amatitlán Market), and support the board and manager in obtaining financing. y The Ministry of Environment and Natural Stakeholders Resources (MARN) is a national public institution in charge of public polices concerning conserving, sustaining, and improving the environment and natural resources. They will serve on the project’s Participation: identifying the correct stakeholders board. They will create and modify public policies and working closely with them has facilitated the for implementing and replicating the project and data gathering process and the business structure engage stakeholders in developing the project. design towards a sustainable business model for this geothermal heat application aimed at the industry. y The Community Development Council (COCODE) is a local community organization. They will serve on charge of public polices concerning agriculture, the project’s board. They will support the formation livestock, and hydro-biological production. They of a local association to manage the project. will serve on the project’s board. They will engage stakeholders in developing the project and provide y The Ministry of Agriculture and Livestock and the project manager with training for economic, Food (MAGA) is a national public institution in social, and environmentally sustainable production.

13 Coffee production is one of the industries that could benefit from the development of the drying center. By using geothermal energy in a direct use application, the process would shorten the drying period considerably allowing farmers to send their product to market sooner. y The Mancomunidad Gran Ciudad del Sur is y The local Non-Governmental Organization a local community organization that includes six (NGO), the Federación de Cooperativas Agrícolas municipalities within : de Guatemala (FEDECOAG) is an association of 148 Amatitlán, Ciudad de , , cooperatives and 20,000 coffee producers. They , Villa Canales, and Villa will empower the project manager, improve the Nueva. They will engage stakeholders in developing capacities of the project manager, and carry out the project and support the board and manager in follow-up strategies for implementing project. obtaining financing. y The local community living around Lake y The Ministry of Energy and Mining (MEM) is a Amatitlán will sell crops to geothermal drying center. national public institution in charge of public polices concerning distributing and commercializing energy and y Agroindustrias La Laguna is a local company hydrocarbons and exploiting mining resources. They will near Lake Amatitlán. They will contribute practical engage stakeholders in developing the project. expertise to developing and operating the project.

14 From independence to social cohesion

The feasibility study indicated that stakeholders independently, not as organized groups. To promote and producers typically work independently. There collaboration, institutions (such as NGOs) that help is a need to train stakeholders to collaborate on build teams, combined with educational and training the center’s management and operations. For programs, will play key roles. After establishing the example, members of local communities who could drying center, follow-up assistance for the manager potentially administer the project typically work will continue to be necessary.

It takes approximately 3-6 weeks for the fresh grains to dry following the traditional method. The geothermal drying center would improve their ability to get the produce to market, faster.

15 Education that leads to success

GIZ Experts interviewed local authorities to better understand the level of involvement in the project as they are key stake holders. Their inputs were of great value to understand the role other institutions could take and convene a governance structure.

Throughout the area of interest, the concept of potential benefits, especially direct uses. There direct use of geothermal energy is largely unknown. should be an effort to create specific procedures Different actors mentioned that the lack of for developing low enthalpy projects and increasing knowledge was a risk to the project’s success. On one awareness about Amatitlán’s geothermal potential. hand, there is a need for greater technical knowledge from those who support the project. On the other, The educational initiative can cover topics such as residents mistakenly perceive that direct use of using geothermal energy for electricity production thermal water flow for drying process may pollute and direct uses such as heating greenhouses or Lake Amatitlán and negatively impact potable drying crops. Information campaigns can increase drinking water. To promote success, education the level of awareness about geothermal energy about direct use specifically and geothermal energy among ministries, local authorities, local community generally will play an important role. Educational organizations, and residents. campaigns should focus on geothermal energy’s

16 The proposed geothermal drying center is designed to be a sustainable operation for years to come. The feasibility study considered factors that could either promote or hamper the drying center’s success over time. It researched technical factors that impact longevity, such as the fluctuation of thermal energy and the need to monitor corrosion and scaling. In addition, it examined whether the center could sustain itself both legally and economically. Finally, it looked at social factors, such as stakeholder contributions, social systems, and community know-how. A resulting roadmap, available from GIZ, describes specific actions to take that will enable the center’s success.

The drying center will sustain itself financially through purchasing, producing, and commercializing crops. The project board and manager should receive ongoing training to help operate the center. To secure a supply of produce, the center should Sustainability reach out to stakeholders and local producers and implement a system of purchase contracts. When it is time to commercialize the products, they can potentially sell to municipal markets, P4P- associated institutions, established businesses Temperature measurements taken by experts from GIZ and local authorities during the field trip to Lake Amatitlán. (e.g., hotels, restaurants), supermarkets, and bean and corn transformation industries. These actions will contribute to the center’s long-range financial municipality of Amatitlán has discussed purchasing success and sustainability. the field for the project’s construction and allowing access during the period allocated for the project’s In addition to financial considerations, legal execution. A further consideration is that MARN agreements are necessary to secure the center’s must create and modify public policies for project continued success. The pilot project could be implementation, which would also allow the carried out by a private individual or a private possibility of additional geothermal energy direct group—as opposed to public entities—since there use projects. The governing board and managing is no explicit prohibition, but this is a matter of community should evaluate the environmental legal interpretation. The proposed project is impacts of the project on the local area. located within the Ortirán and Ceibillo concession areas. To develop a new project in these areas, the Collaboration among stakeholders will help the concessions holders must authorize the geothermal drying center operate profitably. Representatives activities. Project developers should first request from the different stakeholder organizations will and then gain legal consent from the concession come together for meetings, site visits, and training owners. Representatives of the drying center should to promote collaboration, stay informed, share negotiate a binding agreement that allows the center knowledge, and offer guidance. In addition, the drying to operate for 10 years. Moreover, developers must center manager and staff will attend management and consider how employees, producers, and others operational training sessions to help them maintain engaged in center operations and sales can legally the facilities and develop a successful and profitable enter the property to access the drying center. The community-based business.

17 Conclusion

The conditions found in Lake Amatitlán make it a desirable setting for developing a thriving geothermal direct use project that benefits the local communities

The research indicates that a direct use geothermal developers can take for legal access to the concession drying center is a feasible project for Guatemala. From fields so that they can create the drying center, allow a technical perspective, there is adequate heat from managers and staff to access the center, and use the thermal springs near Amatitlán to support the the geothermal resource and land for 10 years. To requirements of one grain dryer and one pineapple secure the commitment, a formal agreement must dryer. There is community interest in and support be generated. Finally, the project is economically for developing a project. From a social perspective, feasible. Not only are there several producers in the the project is feasible due to encouragement and region who can benefit from selling or processing support from ambitious stakeholders. Drawing on crops at the center, there are multiple private outlets the stakeholder analysis, the role of the Authority for and state-run programs for commercializing the the Sustainable Management of the Amatitlán Basin center’s agricultural products. The center’s activities and Lake (AMSA) and the Amatitlán municipality will generate income to cover capital expenditures are pivotal for the success of any initiative in the and operating expenses, including compensation territory. To enable stakeholders to collaborate and for five employees. Taken together, the technical, function at a high level, there will be workshops, site social, legal, and economic situation in Guatemala is a visits, and regular meetings. In addition, there will be desirable setting for developing a thriving geothermal regular follow-up once the center begins operations direct use project that benefits the local community. to promote ongoing success. Moreover, the project is legally feasible. GIZ’s roadmap describes a path The proposed center contributes several benefits.

18 A geothermal drying center will create new employment opportunities and increase incomes in the area near the thermal springs.

At a local level, the drying center resolves farmers’ area. At a national and international level, the center main challenges: preserving as much of a harvest can promote direct use of geothermal resources across as possible through accurate processing (drying the nation. Furthermore, it would serve as a model and storage) and selling crops for fair prices and/ project that promotes environmental education and or when prices are the highest. Local farmers agricultural innovation in the face of climate change. The could sell produce directly to the market, reducing proposed direct use project will provide benefits beyond uncertainties about selling their own production. drying and storing crops in a socially and economically Instead of selling their crops to intermediaries, as vulnerable area that is open to development. they do now, they can sell their crops to the drying center for fair prices. Working with the center’s For more information, please contact the GIZ resources, producers can take their businesses project team. to new levels. In addition, the drying center will create new employment opportunities and increase Isabel von Griesheim Project Manager incomes in the area near the thermal springs. At a Promotion of Geothermal Energy in Central America regional level, the geothermal project could improve [email protected] commercialization for producers, by concentrating their production and affording more selling power. Ana Lucia Alfaro Lead Coordinator for Pilot Projects and Knowledge In addition, the project can promote the use of local Transfer and Management. and renewable energy sources in the Amatitlán [email protected]

19 Implemented by In cooperation with