Geothermal energy faces a range of technical, economical, commercial, organisational and political risks. Some of the risks can and should be borne by the project owner, some are routinely transferred to bodies that are better suited to carry specific risks, yet other risks can be high enough to be – in the absence of a risk transfer mechanism – a show-stopper.
This resource risk (also called geological risk) associated to geothermal project development is unique. It includes:
- The short-term risk of not finding an economically sustainable geothermal resource after drilling;
- The long-term risk of the geothermal resource naturally depleting rendering its exploitation economically unprofitable.
Some countries in Europe have already established public insurance schemes (e.g. geothermal guarantees, risk insurance funds, capital grants) that allow project developers to transfer some of the geological risk to public bodies. Risk mitigation schemes for geothermal have been recently launched by National and Multilateral funding agencies and banks in Latin America, Mexico, Chile, Eastern Africa.
In the framework of the H2020 programme, the GEORISK project, started in October 2018 for 36 months, aimed at establishing such risk insurance schemes all over Europe and in some key target third countries to cover the resource and the technical risks.
The project ended successfully. During the duration of the project, the main impact was the establishment of sustainable Risk Mitigation (RM) scheme covering the geothermal resource and technical risks, in the partners’ countries:
Switzerland: A supplementary risk guarantee has been developed to complement the existing financial grants of 60 % in the future. The proposal has been sent to the government. For this, however, the energy legislation (for the RMS for electricity projects) resp. the CO2 legislation (for the RMS for geothermal heat projects) must be adapted. Due to the complex and lengthy political decision-making processes, the decision is still open.
Germany: A New funding scheme for Renewable heat networks is about to be launched with 40% subsidies (max 50 €mio per project).
France: A new RM scheme with 3 zones together with an export fund is about to be published. Current fees are around 3%, new fees will be between 5% to 10%. Coverage will remain of 90% also outside the dogger area. For DH infrastructure, the Heat Fund continues to give subsidy: 25%-30%
Turkey: TSKB and the World Bank launched a 1st call for RM in 2018. With GEORISK inputs, a 2nd call was launched in 2020.
Poland: Poland proposed to include the establishment of a risk insurance fund into Geothermal road map by 2040 (initiated by the Ministry of Climate and Environment in 2021 (under elaboration). The paragraphs and provisions were indicated in the existing legal and regulatory documents which may facilitate the RMS establishment.
Greece: An initial proposal has been developed and has been submitted to the Ministry of Environment and Energy; the proposal is available in Greece
Hungary: In 2021, a new geothermal derisking scheme has been set up in Hungary to promote new developments in the country, with a specific focus on district heating and cooling. An Hungarian Geothermal Platform was also set up to provide easy access to geological data relevant to geothermal project development, in line with the principles edited by the GEORISK project . From Geoelec project (Altener 2010), a law in 2017 mentioned risk insurance
At EU level: In the updated version of the RES directive proposed on 14th of July 2021 by the European Commission, new provision are included. For renewable heating and cooling, article 23 suggests to member States to establish:
4. To achieve the average annual increase referred to in paragraph 1, first subparagraph, Member States may implement one or more of the following measures: e) creation of risk mitigation frameworks to reduce the cost of capital for renewable heat and cooling projects;
