Risk Sharing and Renewable Energy - The Case of Geothermal Energy Projects

Abstract

There exist numerous barriers to the increased utilization of geothermal energy resources in the ECA countries, the most prominent ones are those associated with the management of geological risk. While investors and financiers are prepared for and willing to take economic/financial risks and conventional technology risks, the special knowledge that pertains to the assessment and handling of geological risks is often beyond the experience and capacity of both potential energy investors and lenders which reduces their willingness to undertake geothermal projects of large investment requirement. Although insurance schemes for conventional investments are readily available on the market, a mechanism that guarantees against losses from geothermal energy exploration is not yet common, given the high level of uncertainty about the success of the investment not only for the construction time but also for a prolonged period during operation.