Risk Mitigation and Insurance Schemes Adapted to Market Maturity: The Right Scheme for my Market

摘要

Geothermal project development has several risky components, the most important one being the resource risk. This concerns mainly deep geothermal projects, but some shallow geothermal open systems could also be included in this category of projects. Beyond exploration, the bankability of a geothermal project is threatened by this geological risk. The geological risk 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. Until the first borehole has been drilled into the geothermal reservoir, developers cannot be sure about the exact parameters (temperature and flow rate) of the planned geothermal electricity or heating and cooling project. Once drilling has taken place, in situ pump tests, temperature and hydrological measurements then reduce the resource risk and make it possible to attract external capital. Risk insurance Funds for the geological risk already exist in some European countries (France, Germany, Iceland, The Netherlands, Denmark and Switzerland). The geological risk is a common issue all over the world. Outside Europe, the Geothermal Development Facility (GDF) for Latin America and the Geothermal Risk Mitigation Facility (GRMF) for Africa offer some risk mitigation tools. With the notable exception of these regions, project developers have very little capability to manage this financial risk. The establishment of such risk insurance all over the world to cover the exploration phase and the first drilling (test) is key for a large development of deep geothermal. But it appears clear that a risk mitigation scheme must be designed, especially the involvement of private financers, according to the market maturity of the sector in each country and region.