CASE STUDY: Munich Re

Electricity from the desert

"We are pursuing a visionary plan. We will do our utmost to ensure that DII GmbH, the Desertec project planning entity, can put forward finished plans in the next three years. Munich Re will, of course, also be involved in their implementation as an investor and insurer."

Dr. Torsten Jeworrek, member of the Board of Management of Munich Re.

The problem

Climate change is not only a cause of concern for society, scientists and politicians. In the coming years, it will also pose an immense challenge for the industrial sector too, both in terms of the measures required to adapt to our changing environment and of the necessary endeavours to reduce greenhouse emissions.

Renewable energy resources provide an option to combat climate change and to increase energy independence. The use of wind, solar and other forms of renewable energy will substantially reduce Europes dependence on imports of fossil fuels, which stand at 70% today.

However, the investment required to bring these technologies to scale has been hard to find. Initial investment costs are high and typically give returns over the longer-term (2025 years). On top of this, new and untested technologies carry additional and new risks. A combination of these factors makes it difficult for most investors and lenders to get involved.

The solution

The Desertec concept describes the prospects of providing Europe (EU), the Middle East and North Africa (MENA) with a sustainable supply of renewable energy by the year 2050. The concept can make a valuable contribution to a reliable, environmentally compatible and cost-competitive power supply. It is estimated that by covering an area of 150 x 150 km with solar power units, 15% of Europes electricity needs could be met, while a substantial portion of the power is aimed to remain in the producer countries.

It is an ambitious project, and in July 2009 Munich Re initiated together with the Desertec Foundation the founding consortium with 11 industrial partners to establish the DII GmbH (Desertec Industrial Initiative) for a speedy implementation of the Desertec concept.

Two of the main objectives of DII GmbH in the next three years are to bring forward political and regulatory requirements and produce feasible preliminary plans and financing models for the construction of a large number of networked power plants distributed throughout the EUMENA region.

The benefits

Munich Re has been concerning itself with the consequences of climate change for more than three decades and as a global reinsurer consequently promoting solutions. Apart from risk management, it sees large opportunities in addressing the substantial demand for insurance-based solutions stemming from the very different strategies necessary to mitigate and adapt to climate change and the ensuing challenges.

By calculating the risks involved and providing insurance products for investors, Munich Re is not only generating value for stakeholders, but is also contributing towards investment security in new renewable energy projects.

Munich Re is also an investor in renewable energy, with a diversified portfolio of renewable energy sources. Well over 80% of its overall Group investments of around 180bn EUR are already based on sustainable criteria. Being involved in major new renewable energy developments improves its understanding of how to make projects profitable and allows its clients and shareholders to participate in the financial benefits of successful, long term and sustainable energy projects.

About Munich Re

Munich Re has adopted the Climate Principles. This case study outlines how the organisation is meeting its commitment under Section 2.4.3. We will develop insurance products and services that encourage our customers to reduce their carbon and climate risks, assist the development and adoption of GHG mitigation technologies and strategies and take advantage of the carbon market.