Geothermal energy FAQ

This area is dedicated to the most important economic and legal issues of deep geothermal energy which is the only form of renewable energy available worldwide for the provision of base load power which can be controlled to generate either electricity or heat. The following provides potential investors interested in geothermal energy, including private investors, institutional investors or local authorities, with all the latest information from Rödl & Partner concerning the use of CO2-free energy gained from deep geothermal energy.

Questions relating to deep geothermal energy

What is geothermal energy?
Where is deep geothermal energy possible in Germany?
What are the special advantages of geothermal energy for local authorities?
What are the main risks with a geothermal project and how is it possible to reduce them?

What is geothermal energy?

Geothermal energy refers to heat energy under the earth's surface trapped in high pressure water zones, steam systems or hot water systems and heat energy stored in hot rocks. This heat energy partly consists of the continuous heat flow from the earth's core through the earth's mantle originating from the time when our planet was formed with the planet ultimately releasing the energy to the atmosphere via the earth's surface. A further part of the energy is derived from natural radioactive decay processes in progress in the earth's mantle which release energy.

The exploitation of geothermal energy can be roughly divided into close-to-the-surface geothermal energy extraction and deep geothermal energy. Close-to-the-surface geothermal energy offers the possibility of installing geothermal collectors and probes in order to supply individual buildings or building complexes. Using deep geothermal energy, on the other hand, boreholes deeper than approx. 1,000 m at a temperature of 60° C provide opportunities for larger energy supply projects including the production of electrical energy.

Hydrothermal deep geothermal energy is a special case as here water-bearing layers (aquifers) are exploited at a great depth. At least two boreholes are required to enable this (production borehole, re-injection borehole) as the thermal water pumped up has to be returned to the same layer after it has cooled down.

Where is deep geothermal energy possible in Germany?

The map on the side indicates the areas where hydrothermal deep geothermal energy has already been realised in Germany or areas where geological experts estimate there is exploitation potential.

The Molasse basin geological formation located in the south of Germany is particularly worthy of mention. Numerous successful heat supply projects here have clearly proven the feasibility of such projects and a lower exploration risk (to find sufficient volumes of thermal water) can be assumed.

The water-bearing layer in the Molasse basin (the Malmkarst) slopes from the north to the south. This affects borehole depths and the temperature of the water. The graphic on the side shows a section of the Molasse basin. The existing boreholes indicate that the borehole depths and temperatures rise towards the south.

What are the special advantages of geothermal energy for local authorities?

The great advantage of geothermal energy for local authorities is the availability of attractively priced heat and long-term price stability, which is increasingly turning out to be a locational advantage for local authorities.

In the case of a geothermal system, prices for the delivery of district heating are mainly oriented to investment and labour costs. Cost increases for fossil fuels have a considerably smaller impact on the commodity price of geothermally generated district heating. A geothermal heat supply is therefore characterised by long-term price stability.

The graphic on the side compares the price development between geothermal energy and energy derived from fossil fuels. The calculation was made using the price indices of the German statistics office extrapolated backwards for the last twenty years.

What are the main risks with a geothermal project and how is it possible to reduce them?

Potential risks with the implementation of hydrothermal geothermal projects arise in a number of different areas. These areas include geological, technical and economic risks and also management risks.

Up to now the biggest barrier to investment in geothermal energy generation has been the exploration risk. Nobody can predict how much thermal water can be accessed until the borehole has been sunk and the corresponding testing work has been concluded. This is in turn decisive for the economic success and feasibility of a geothermal energy generation project.
Insurance cover can provide some protection against the risk of exploration. This has been implemented for the first time with a geothermal project in Unterhaching on a privately financed basis according to a concept from Rödl & Partner. The insurability and premiums depend strongly on the respective project and its risk structure and therefore require adjustment and examination according to the project.
Prior to the investment the economic risk is analysed with detailed investment planning. The correct definition of the input parameters for this analysis such as fill and temperature forms the basis for the definition of the return which in turn is based on the taking out of insurance against exploration risk. The part of the investment covered for the first borehole and amount of the premium are therefore defined by the willingness of the investor to take a risk with the defined profitability. This is based on the above-mentioned profitability analysis which therefore becomes very important in relation to the complete concept.

The required capacity in terms of manpower to manage the project is frequently underestimated. The success of the project according to a defined schedule requires the perfect co ordination of geological, technical, economic, legal and organisational areas of responsibility. The mutual interference of these areas makes a supervising body absolutely essential. This position in Unterhaching was managed by Rödl & Partner. Due to the high daily cost of operations decisions often have to be taken under extreme time pressure, in particular during the drilling phase. The choice of partners with the required degree of economic competence and capacity is therefore a high priority.
According to section § 114 ff. German Federal Mining Act there is absolute liability for injuries to persons and damage to materials. Therefore the project company is exposed to a risk in situations where, for example, the drilling operations trigger seismic activity. An insurance solution for this has to be taken into account. Rödl & Partner also has the required experience to manage this.

The above-mentioned risks and solution possibilities have to be considered strictly in terms of the respective project situation. You can benefit from our experience with projects to reduce the risks involved in the implementation of your geothermal project.