27.03.2024
Source: Energy & Management Powernews
The Federal Ministry for Economic Affairs and Energy and the KfW development bank are currently working on a solution to insure the exploration risk of deep geothermal drilling in the future.
Geothermal energy is considered an important source of renewable energy for advancing the heat transition. However, the costs for drilling deep geothermal projects run into the millions - with no guarantee that sufficient heat can be extracted from the borehole afterwards. For years, the industry has therefore been calling on politicians to reduce the discovery risk through funding and financial instruments so that more suppliers and municipal utilities opt for this. Although it is already possible to apply for KfW loans for the implementation of deep geothermal projects, the insurance of the exploration risk has so far been excluded.
An insurance solution of this kind is now apparently within reach. The Federal Ministry for Economic Affairs and Energy (BMWK) and KfW Bankengruppe are currently working on a state-supported insurance solution for the exploration risk for deep geothermal wells. KfW confirmed this when asked by the editorial team. This measure is part of the "geothermal energy campaign" that the ministry presented at the end of 2022. The aim of the geothermal campaign is to develop a geothermal potential of 10 billion kWh in medium and deep geothermal energy by 2030.
KfW is working on an insurance solution
According to this, KfW is "currently preparing a product for the development of deep geothermal energy for heat supply", KfW told the editorial team. The product is intended to combine the financing of wells with the hedging of the exploration risk through debt or partial debt waivers in the event of damage (non-exploration or partial exploration of the well). To this end, KfW is "in close contact with the BMWK and private guarantors. In the future, our partners are to assume the risks that KfW incurs as a result of the cover provided in the event of damage. Not all internal and external requirements for a product launch on the market are currently in place," the banking group added.
Companies such as drilling specialist Daldrup & Söhne are in favor of such a solution. "A state-backed insurance solution will remove a major hurdle for municipal and private clients of deep geothermal projects," said Andreas Tönies, CEO of Daldrup & Söhne.
Geothermal energy, consisting of near-surface geothermal energy with the use of ground-coupled heat pumps and deep geothermal energy, could cover up to 42 percent of eco-heat for space heating and hot water in the future. This is the result of a meta-study on the national geothermal strategy (we reported). To date, geothermal energy has only accounted for 10 percent of renewable heat - and therefore only around 1.5 percent of the total heat demand in Germany.
Author: Heidi Roider
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