Written evidence submitted by the British Geological Survey (DHH0092)

About the British Geological Survey

The British Geological Survey (BGS) is the UK national geological survey and a world-leading applied geoscience research organization. BGS provides objective and authoritative geoscientific data, information and knowledge to inform UK Government, industry and civil society on the opportunities and challenges of the subsurface environment.

We have extensive expertise relating to subsurface energy resources, which have the potential to make a considerable contribution to the UK’s decarbonisation efforts. In our response we wish to highlight the potential role of the subsurface in the decarbonisation of heat and focus specifically on policies relating to renewable heat from geothermal energy resources and thermal storage.

Background:

Geothermal energy (the energy stored in the form of heat beneath the earth’s surface) provides a home-grown, nationally-secure, low-carbon and green alternative to conventional heating and power generation. Resources available in the UK could deliver about 100 years of domestic heating for the entire UK (Gluyas et al. 2018). In contrast to the intermittency of wind and solar, geothermal energy is available 24 hours a day and 365 days a year, offering a widely applicable, affordable and constant baseload supply of heat plus the potential for significant inter-seasonal thermal storage for waste heat and cold. Geothermal energy resource can be harvested from different depths and geological settings using different technologies (Figure 1).

To date, the available geothermal energy resource in the UK is used very sparsely. Deployment of geothermal systems is less (by a factor of 10 or more) than in other European countries  with similar resource potential, such as Germany, France and The Netherlands (Sanner 2019).

Experience has shown that the success of geothermal development in these countries is closely linked to their government’s policies, regulations, incentives and initiates (Rybach 2010). Of particular importance are the availability of a long-term, stable regulatory framework, and also to the ability to insure economic risks (Bader and Bauer 2017), as outlined in response to question 1 in the example for Germany.

Figure 1.              Different ground source (left side) and deep geothermal (right side) energy technologies for extracting geothermal heat (and power) © BGS/UKRI.

1. What has been the impact of past and current policies for low carbon heat, and what lessons can be learnt, including examples from devolved administrations and international comparators?

Past and current policies in the UK:

The Renewable Heat Incentive (RHI) is the principal mechanism to support domestic and commercial-scale, renewable heat installations in the UK, including ground source heat pump (GSHP) installations, mine water geothermal schemes as well as deep (direct-use heat) geothermal schemes which are currently investigated as a source to provide district heating schemes at various locations across the UK, e.g. at Stoke-on-Trent.

Initially, the impact of the RHI on GSHP installations was negative with the number of installations falling due to tariff imbalances which favoured biomass (Curtis and Pine 2016).  Since spring 2017, following revision and rebalancing of the initial tariffs , the RHI has shown significant (positive) impact on the rate of GSHP installations in the UK, particularly in larger installations in the non-domestic sector (Batchelor et al. 2020; Curtis et al. 2019).

The RHI has had little impact on the development of renewable heat from deep geothermal resources[1] (e.g. for district heating). While exploitation of the resource could make a significant contribution to the decarbonisation efforts of the UK, there has been no successful development of this resource since the end of the exploration programme funded by the Department of Energy in the 1980s. Support mechanisms for the development of these systems are currently absent in the UK (see Abesser et al. 2020; Abesser 2020).

Lessons learnt (UK)

Sustained, long-term government support is a key factor in developing nascent renewable technologies into thriving industries, as exemplified by UK offshore wind.  Sustained, long-term support from the UK government is the main reason that the UK is now amongst the world’s market leaders in this field. It has encouraged off-shore wind suppliers to move their manufacturing base to the UK, creating 13,700 jobs, bringing investment into the economy and promoting rejuvenation in areas such as Hull, Grimsby, Barrow-in-Furness, Great Yarmouth, Campbeltown, and Lowestoft through the development of a UK supply chain (IEA 2019).

Within this context, the announcement of the removal of the current RHI and the lack of detail regarding future incentive schemes is of great concern because this has removed the financial viability of investing in GSHPs and geothermal technology. The challenge for the UK GSHP industry now becomes how to maintain growth without the certainty of incentives that support the industry, and how to bridge the 4 year gap between the end of the RHI and 2025 introduction of the requirement for low carbon heating systems in new housing.

To date, none of the replacement schemes announced by the government include support for deep geothermal technologies. Hence, it is not clear if and how these geothermal developments will be supported in the future.  A separate £270M Green Heat Network Scheme has been announced, but details have yet to be defined. According to a recent BEIS consultation (June 2020) on the non-domestic RHI, the scheme is expected to cover large-scale heat pumps, solar thermal, waste heat recovery and biomass. Although not explicitly ruled out, there is currently little detail available on whether government funding for deep geothermal (e.g. direct-use heat) will be available in the future. This creates a high level of uncertainty that is likely to deter investors. This is because it is difficult to build a viable business case for new development with such a high level of risk.

Lessons learnt from international comparators: Germany

Germany is second in Europe on the deployment of ground-source heat pumps (GSHP). Numerous small- and medium-sized decentralised GSHP units are in use for heating and cooling of individual houses and office buildings. At the end of 2018, more than 380,000 GSHP (compared to <30,000 sytems in the UK) were running successfully in Germany, supplying renewable heat mostly for residential buildings.  Installation of these systems is supported by the government through GSHP-specific grants which provide between 4,000 € and > 7,000 € per new installation (Weber et al. 2019). The support increases by 100 € per kW heating capacity above the threshold of 40 kW, up to a maximum capacity of 100 kW. Introduction of the grant in 2015 has led to an immediate rise in monthly installations from <500 installations in April 2015 to > 1000, >1400 and >1800 installations in May, June and July 2015 (BAFA 2016 in Weber et al. 2019).

Germany also leads in geothermal district heating, with an installed capacity of 406 MWth  (compared to <2 MWth in the UK). The German government provides extensive financial support for the development of these systems, including project funding, market incentives credit offers and research funding, and support through risk-sharing was also available via industry-led insurance schemes[2]. Most importantly, the German regulation offers long-term investment reliability with no indication that the support for geothermal developments could be reduced in the near future. As a result, the market for geothermal energy in Germany continues to grow with many new plants at various stages of planning and development: 52 M€ have been invested in the geothermal plant and district heating grid in Munich. The latest addition is the Heizkraftwerk Süd (Heat Plant South). When completed (mid-2020), the six deep boreholes drilled by the city’s utility company, Stadtwerke München, are expected to have a capacity  >50MW that can supply more than 80,000 Munich residents with ecological heat (Richter 2020) (see Abesser et al., 2020 for further details and examples for France and The Netherlands).

2. What key policies, priorities and timelines should be included in the Government’s forthcoming ‘Buildings and Heat Strategy’ to ensure that the UK is on track to deliver Net Zero? What are the most urgent decisions and actions that need to be taken over the course of this Parliament (by 2024)?

The importance of heat networks (driven by a renewable source such as geothermal heat) and heat pumps in the decarbonisation of the heat sector in the UK is widely recognised (Paardekooper et al. 2018; Watson 2019). It is also recognised that “the scale and speed of the transition means that decarbonisation progress for areas currently on the gas grid will be required before more about hydrogen is known” (Rosenow et al. 2020).

Within this context, the potential role of geothermal energy in the decarbonisation of heat has not yet been adequately defined. There is also scope for the development of a policy framework with respect to geothermal energy which would facilitate its development as one of a range of technologies needed on the road to Net Zero. There is opportunity to look to the successful development of geothermal energy policies in other European states to inform this process. The success of geothermal developments in countries such as the Netherlands and Germany is closely linked to a long-term, national strategy (Platform Geothermie 2018), the availability of a long-term, stable regulatory framework and the willingness of the state to share economic risks during the early stages of development.

In order to deliver benefits from ground source heat pumps and deep geothermal development, a number of policy interventions are recommended for the UK (Abesser et al. 2020; Abesser 2020). These include:

RISK SHARING AND FUNDING SUPPORT

• Continued provision of long-term guarantees for financial incentives, such as the Renewable Heat Incentive (RHI) or Contracts for Difference (CfD) and consideration against other renewable technologies to create a level playing field for geothermal technologies and boost investor confidence.
• Future incentives schemes should include incentives for renewable cooling[3].
• Introduction of a publicly-funded risk insurance scheme that bears part of the early exploration risk of a deep geothermal project.

STREAMLINED REGULATIONS

Stringent regulations have been in place in the UK for several decades for many subsurface resources and assets, but there are no fit-for purpose regulations for geothermal energy in the UK. This means that subsurface heat flows and geothermal resources are not adequately characterised, licenced, monitored, or controlled. As such, consideration should be given to:

• Short-term adjustments that streamline the regulatory processes, improve communication between industry and the regulator, develop expertise in regulation and monitoring of geothermal energy and lead to swifter decisions.
• Long-term changes in the definition of Geothermal energy that recognises its status as a natural resource and enables development of a national licensing system (administrated by a sector-specific regulatory body).

GEOTHERMAL TARGETS LINKED TO GOVERNMENT GOALS AND POLICY

• A geothermal roadmap with quantifiable targets that links advancement of ground source heating  and geothermal energy to government goals and policy objectives such as the Clean Growth Strategy or a Green Heat Roadmap (as called for by MPs and the former Minister for Climate Change Lord Duncan in 2019 (Policy Connect 2019a, 2019b)).
• Bold, interventionist measures (e.g. delivered through the planning process) to achieve renewable heating targets and replace fossil fuels − which currently still are the cheapest option.

GOVERNMENT-SUPPORTED RESEARCH

• Government-funded geothermal research and demonstrator development to improve data availability and raise the base level knowledge of the sub-surface and geothermal energy potential to a level that will reduce exploration risk and provide confidence for private investment.

With increased electrification and use of solar and wind energy, there is a need for medium term storage of energy which is lacking in the UK.  Using the sub-surface for larger storage capacity needs to be considered and investigated urgently.

3. Which technologies are the most viable to deliver the decarbonisation of heating, and what would be the most appropriate mix of technologies across the UK?

Several low-carbon heating options need to be pursued in the transition to low-carbon heating and cooling; no one option may dominate, as natural gas currently does (Policy Connect 2019b).  The right option will be dependent on geographical options available and on demand.  Therefore, there needs to be the ability to select the technology that is most appropriate for the location, type of buildings and level of demand. Geothermal options should be considered for various settings:

a)      Geothermal energy from deep systems can provide a heat for district heating and are also suitable for providing baseloads to a combined heat and power plants. There are a number of places in the UK where such geothermal systems could access heat resources. These often coincide with areas of high heat demand; for many areas of the UK it would be technically feasible to exploit geothermal resources for space heating using district energy schemes. (Busby 2014).

b)      GSHPs are scalable and can be deployed to provide heating and/or cooling to individual houses or to support heat networks. The systems can be utilised in urban areas (see Cardiff case study[4] (Boon and Farr 2019)) as well as in areas with lower population density.  Feasible geological settings for GSHP exist across most of the UK. Heat pump technology is currently one of the most effective ways of reducing the carbon footprint of heating and cooling, specifically ground source heat pumps (GHSP) which are more efficient than air source heat pumps (ASHP) (Miara et al. 2014). Efficient GSHPs have typical carbon emissions of 2000-2500 kgCO2/year (COP[5] = 3.5-4.0) compared to carbon emissions of 3000-4000 kgCO2/year (COP = 2.2-2.8) for efficient ASHPs (Fawcett 2011).

c)       Abandoned mines can present a feasible heat source where mines are in proximity of a larger demand for heat (see for example the proposed Seaham Garden Village[6]). Overall, the thermal resources contained in old flooded mines across the UK could provide heating for 650,000 houses (Adams and Gluyas 2017). Research and innovation to unlock this resource are underway at the UK Geoenergy Observatory (UKGEOS) in Glasgow[7] (funded by the UK Government Plan for Growth Science & Innovation).

d)      Energy storage in the medium term to maximise the use of renewable energy from solar and windfarms. These stores are required near the renewable energy or hydrogen production source.

4. What are the barriers to scaling up low carbon heating technologies? What is needed to overcome these barriers?

The main barrier to upscaling renewable heating using geothermal resources in the UK is the absence of long-term government support that is aligned with the maturity of the geothermal market (e.g. Dumas et al. 2019).

Government support is required during early stage of developing the geothermal / ground source industry in order to encourage and guide financing from the private sector; investors have been shown to take over when the market becomes more established. To support geothermal development in the UK and enable it to progress from its current stage as nascent industry into a more mature market, a number of specific government-led measures are required (as outlined in previous answers). These would demonstrate the long-term commitment to the technology, and guarantee the long-term government support and funding structure needed by private finance investors to match their long term investment profile.

December 2020

References

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