Sourced from CleanEdge via New Energy FinanceMarch 2, 2009
The German Federal Ministry for the Environment, development bank KfW and reinsurer Munich Re have launched a 60 million euros ($75.9 million) credit initiative for the expansion of geothermal power in Germany.
The investment will be used to finance drilling of geothermal projects, a Munich Re statement said, adding that this was launched specifically 'to minimise the productivity risk of the projects'.
Geothermal projects are high-risk projects due to the high drilling costs involved and do not guarantee availability of sufficient volumes of water at the required temperatures. This often leads to an investment risk of at least EUR 10m for each individual project, the statement said.
Up to 80% of the cost will be financed by KfW loans for deep geothermal wells by way of commercial banks. If no find is made and the project is declared a failure, the investor will not be required to repay the remaining loan amount.
"With more financial support being provided for geothermal plants in the market stimulation programme and the amendment to the Renewable Energy Sources Act that has been in force since 1 January, we have again improved the general conditions for this technology. The new credit scheme will ensure a further reduction in the risks encountered by operating companies," said Sigmar Gabriel, federal minister for the environment.
Germany has three regions primarily considered to be geothermal hotspots: the molasse basin south of Munich, the Upper Rhine Rift, and the North German Plain.
The country's largest geothermal power plant of a combined heat and power capacity of 38MW was the first to receive productivity risk insurance cover by Munich Re. It was erected in Unterhaching near Munich.
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