MunichRE insures exploration risk at Traunreut project in Germany

Hekla Energy drilling rig at Mauerstetten, Germany (source: Iceland Drilling)

Alexander Richter 2 Aug 2011

German Re-insurance giant MunichRE just announced it has insured the Traunreut geothermal project in Upper Bavaria, Germany.

In the announcement, MunichRE reports that “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 EUR60m (US$85 million), 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.

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.