Geothermal energy has made a name for itself in Germany in recent years with some very noteworthy projects. There is still room for more geothermal projects, particularly in Bavaria and the North German Plain. Geothermal energy has multiple key features that clearly distinguish it from other asset classes in the renewable energy sector.
What should be noted, is the high economic risk factors of geothermal drilling. The wells used as part of geothermal drilling require considerable capital investment, which is difficult to secure when it is not always clear whether a project will be a success. This situation prevents even promising projects from being realised because neither investors nor banks are prepared to bear the risk of a non-existent or unsuccessful well. This is precisely where the new German coalition agreement comes in, making it clear that the coalition partners want to introduce suitable instruments to hedge the exploration risk as quickly as possible. The issue of possible compensation for damages (e.g. in the event of drilling damage) is also to be clarified in a binding manner. A new Geothermal Acceleration Act has been announced for this purpose.
Click here to view all articles in our series about the German federal government’s 2025 coalition agreement which offer a legal and practical assessment of selected topics from the coalition agreement.
