Additional financial support instruments can be combined with other finance schemes, to increase the success of the financing approach – and thus the geothermal project. It helps to optimize the matching of the finance scheme to the requirements of both the project developer and the potential community investors. Some examples of additional financial instruments include:
- Guarantee schemes: In a loan guarantee scheme a guarantor gives a guarantee to investors that in case of default, the loan the investors have given to a third party (in this case the geothermal project or company) will be (partly)repaid by the guarantor. The guarantor can be for example the European Union, the national government, an insurance company or an NGO. Usually a guarantee covers a certain percentage of the principal amount that has been lent but will not be paid back (called the default). It does not cover any interest payments that have been missed.
- Decentralized Finance and Smart contracts: A smart contract has the terms of the agreement between buyer and seller directly written into lines of code. The self-executing means that, if certain conditions are met the contract will start the necessary transactions independently. Transactions are trackable and irreversible. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism.
- Fiscal instruments: Tax measures. If a government wants to promote the development of geothermal projects, certain tax measures could be introduced, for example, a tax relief for investments into geothermal projects.
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