Munich Re insures Traunreut geothermal project as well

This week sees the start of drilling operations at the site of a geothermal power plant in Traunreut, Upper Bavaria. In early September, a 60-metre-high drilling rig will be erected and initial drilling operations will commence later that same month. Following investments to the tune of €60m, the plant will in future supply up to 5 MW of electrical and 12 MW of thermal, district-heating power from two wells approximately 5,000 metres deep. Munich Re is once again assuming the significant exploration risk that thermal heat drilling entails.

Munich. Deep geothermal exploitation involves pumping hot water to the surface from strata at depths of up to five kilometres and using it to generate heat and electricity. However, the substantial costs of drilling and development associated with this technology often constitute a major investment barrier because there is a substantial risk of not making a productive find, in which case the investment is lost. In the past, there have been cases where exceptionally deep geothermal projects have been abandoned because funding was not available on the capital market.

Now that the restructuring of the energy sector has gained significant momentum, financially viable potential in the renewable energy field will be increasingly exploited. Exploration risk insurance cover for geothermal drilling operations plays a key role in providing certainty for investors. In the case of the new project in Traunreut, the cover was developed for the operator by insurance broker Dr. Schmidt & Erdsiek GmbH & Co. KG in cooperation with Munich Re. Grünwald Equity Geothermie GmbH’s Managing Director, Dr. Raimund König, commented: “Thanks to fruitful cooperation with Munich Re and Dr. Schmidt & Erdsiek GmbH, the exploration risk policy provides the best possible investment protection for our company, given the present situation and current state of knowledge, and taking the premium into account”.

Munich Re regards itself as a know-how leader in the field of exploration-risk covers and has set up a dedicated geothermal energy team since developing the first policy in 2003. Munich Re Board member Thomas Blunck: “Thanks to our expertise, we can also assume out-of-the-ordinary renewable energy risks and thus help provide greater investment security.” Munich Re’s renewable-energy commitment fits in with the focus of the Group, which has declared climate change a strategic topic. “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,” said Blunck. This will produce substantial business opportunities for Munich Re, as most investors would be unwilling to commit funds without special insurance cover in place.

Grünwald Equity Geothermie GmbH is planning a series of five geothermal power plants in all. Assuming a corresponding production volume, the company expects an output temperature of at least 125°C from the initial drilling operations in Traunreut. 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. Germany’s largest geothermal power plant to date, with a power and heat output of 38 MW, was built in Unterhaching near Munich in 2003 and already insured as a pilot project at that time by Munich Re.