Geothermal Energy Development Program for Europe and Central Asia Region (GeoFund)

Abstract

The GeoFund for Europe and Central Asia region was created by the World Bank with US$25 million GEF grant. The GeoFund can provide support geothermal development in the region through three windows; technical assistance, geological risk insurance, and direct investment funding. One of the first subprojects was a geothermal power pilot project in Hungary sponsored by MOL (Hungarian Oil and Gas Company) and its partners. The project was supported by the geological risk insurance of US$3.72 million for the drilling of two wells. The outcome of the drilling was not successful and the GeoFund paid part of the insured amount as agreed under the contingent grant agreement. The geological risk insurance scheme worked as designed. However, lessons can be drawn from the experience to further improve the instrument and its effectiveness. Extensive pre-drilling exploratory work, clear exclusions of nongeological risk events, monitoring method, cost itemization and expense cap, clear definition of parameters and testing method, dispute resolution, etc. would be the key areas for improvement. GeoFund is open to new donors and contributing partners. In the medium term, co-insurance arrangement with private risk insurers would also help scale up the GeoFund resource as well as enhance risk assessment technologies.