Project developer Exorka, insurance broker Marsh and Munich Re have jointly developed an insurance concept covering the exploration risk of a geothermal energy project in Taufkirchen, near Munich. Drilling operations have now begun. Munich Re is once again assuming the significant risk of failure that thermal heat drilling entails. The policy was negotiated in collaboration with Marsh.
Deep geothermal heat is considered a very promising form of renewable energy. It involves pumping hot water from strata at a depth of up to five kilometres to the earth’s surface, where it is used to generate heat and/or electricity. However, the substantial drilling and development costs associated with this technology often constitute a huge investment barrier because there is a high risk of not making a find, in which case the investment is lost. Munich Re is providing cover for this risk for a geothermal energy project in Taufkirchen and is utilising one of its primary insurers to realise the insurance solution.
Exorka GmbH from Grünwald, the general contractor, has been commissioned to deliver a turnkey combined heat and power plant, including drilling operations, to GeoEnergie Taufkirchen GmbH & Co. KG. The deep geothermal energy drilling will be carried out by drilling-technology specialist Daldrup & Söhne AG, which recently successfully completed drilling operations for the neighbouring Grünwald/Oberhaching project. The output of the existing biomass power plant is to be increased by 20 MW to 80 MW with the aid of geothermal heat. GeoEnergie also plans to produce electricity. To achieve this, strata containing hot water at a depth of four to five kilometres will be tapped, the water being pumped back into the depths once it has been used, creating a closed water cycle. Up to four wells are planned at a cost of around €35m. Whether this outlay is worthwhile for investors depends on whether water is found underground that is hot enough and available for exploitation in substantial quantities.
Insurance broker and risk consultant Marsh, which has been advising project developer Exorka for four years, ascertained the insurable risks of the Taufkirchen project and prepared them for the insurance market. “A further milestone has been achieved in that we have been able to involve Munich Re in this project, based on our special concept – recognised in the field of deep geothermal energy – for the critical exploration risk”, commented Siegmund Fahrig, head of Marsh GmbH. “This underscores Marsh’s market leadership as a consultant dealing with exceptional renewable energy risks.”
Munich Re has set up a dedicated geothermal energy team since developing the world’s first exploration policy in 2003, and regards itself as a know-how leader in this field. Munich Re Board member Thomas Blunck: “With our expertise, we can also assume renewable energy risks that are not everyday occurrences and thus help provide greater investment security.” Munich Re’s renewable-energy commitment fits in seamlessly with the focus of the company, which has declared climate change a strategic topic. Blunck: “We see climate change not only as a risk but also as a great opportunity, because if climate protection is pursued resolutely, new technologies will have significant growth potential.” This will produce substantial business opportunities for Munich Re, as most investors would be unwilling to commit funds unless special insurances were in place.
Geothermal heat offers an almost inexhaustible source of energy. Germany has three regions that are considered particularly suitable for deep geothermal projects: the Molasse Basin south of Munich, the Upper Rhine Rift, and the North German Plain. With a power and heat output of 38 MW, Germany’s largest geothermal power plant to date was built in Unterhaching near Munich in 2003 – already insured as a pilot project at that time by Munich Re, and since 2005 also a client of Marsh.
Source : Munich Re
