Geothermal Power: Warming to a Global Opportunity

Issue 3 and Volume 13.

If you imagine a graph showing the price of oil over the last 20 years, the dips and peaks would correlate fairly closely with interest in deep geothermal energy.

In the 1990s, cheap oil matched a corresponding dip in geothermal exploration. Why bother with renewable resources when there are already oil rigs in operation pumping out a cheap energy source? Now, however, we are in a new millennium and a new energy era. Peak oil is predicted to potentially hit within the next five years, and as prices spike, so too does interest in commercial deep geothermal technology.

A significant minority of people (11%) in the UK still use oil for domestic heating (particularly in rural areas), and last year saw a steady increase, from a low base, in oil prices, rising from a trough of about US$40 to a peak of about $80. In addition, people who get their heat from electrical sources will not necessarily be any better off than their oil-heated counterparts – generating electricity is expensive work, and those prices are passed onto the consumer.

Last year, UK energy regulatory group Ofgem reported that, in a worst-case scenario, the UK’s domestic energy bills could rise by 60% by 2016. Heat already comprises 60% of an average household’s energy bills.

However, it’s not just oil prices that have played a part in the resurgence of deep geothermal exploration. From a technical standpoint, deep geothermal systems have been taking on minor roles as pilot or research projects over the last 20 years, and over the last five years global interest has significantly increased.

The Massachusetts Institute of Technology (MIT) published a paper in 2006 which raved about the possibilities of geothermal technology in the US. Consequently, the US government has now become the world’s biggest investor in geothermal exploration. Germany beat the Americans to it with The Renewable Heat Act (EEWärmeG); a law passed in 2004 which states that by 2020, 14% of the heat in Germany must come from renewable energy sources. Geothermal heat energy, unsurprisingly, plays a big part in achieving the Germans’ target. €500 million a year ($669 million) has been made available to help fund the cost of geothermal exploration and exploitation and, to date, Germany has four geothermal drilling sites and four operational geothermal power plants.

The financial backing and match funding on offer in countries such as the US, Germany and Australia has been a huge boon to the industry in each respective nation. Geothermal power plants have high initial costs but they become remarkably cheap and cost-efficient in the long term (while a nuclear plant lifecycle must include the cost of decommissioning the site and the cost of nuclear waste disposal). In 2009 Credit Suisse research put the base price of nuclear power at $62/MWh, and geothermal power at $36/MWh. It is winning the initial financial backing that has stalled the geothermal industry’s development, but a more structured support system guarantees return on investment for cautious venture capitalists.

The UK has recently made welcome financial overtures to the small but determined British deep geothermal community. The Department of Energy and Climate Change (DECC) has created a Deep Geothermal Challenge Fund, worth £6 million ($9.2 million), which launched last year. This year saw the announcement of the renewable feed-in tariffs and the renewable heat incentive (RHI) – financial carrots rewarding renewable energy producers.

The RHI is the first incentive to specifically target renewable heat generation, which in theory will make the UK an international leader in the renewable heat field when the scheme goes live in 2011. Renewable heat is currently a much underfunded sector that the UK needs to develop; the more diverse the UK’s energy portfolio, the more chance it stands of meeting the 2020 renewable energy targets. Renewable heat sources can provide enough thermal energy to heat whole communities, and generation on this scale dramatically reduces the amount of wasted energy by keeping supply and distribution localised. District heating is popular in Eastern Europe for this reason (although much of their local heating does not come from strictly renewable sources – typically the heat will come from neighbouring nuclear plants). However, district heating has not caught on in the same way in the UK, despite excellent results from a geothermal heating scheme in Southampton, which heats the local shopping centre, and a proposed eco-village in County Durham which is set to be powered by a geothermal project at Newcastle University.

While the RHI scheme has the potential to thrill even the most jaded of geothermal engineers, in practice it is still in need of some economic refinement. In March 2009 the Renewable Energy Association proposed that government classify 12 primary heat classifications as suitable for the RHI, and it is disappointing to see that this list has been almost halved in the official DECC documents. As it stands, deep geothermal heat has been categorised alongside large scale Ground Source Heat Pump (GSHP) technology, despite their very different investment requirements, and the fact that GSHPs use electricity from the national grid to supply the heat.

Geothermal heat providers need the RHI to be set at a higher level to attract more investment for both the power plants and the distribution networks required to connect consumers to the heat. To truly encourage deep geothermal in the UK, the RHI needs to be sufficiently tailored to make such projects economically viable. The deep geothermal sector in the UK is currently campaigning, through the Renewable Energy Association, for a dedicated geothermal tariff to be included in the RHI scheme.

The reason behind such impassioned campaigning is that all the evidence from Germany has proved that geothermal energy can be a valuable asset in a nation’s renewables portfolio. Geologically, socially and politically, Germany is a reasonably close match to the UK, and both nations answer to the same EU legislation. In Germany, over a decade of strong government and financial support for providers of renewable energy has pushed Germany’s renewables sector to the forefront of the nation’s economy. The non-profit American Solar Energy Society (ASES) reported last year that over 249,000 German workers now have ‘green collar’ jobs. ASES compared the US and German renewable energy sectors and reported that although Germany’s population is about one-quarter the size of the US’, Germany has more renewable energy jobs and generates new jobs faster than the US. It’s worth noting that in the US, feed-in tariffs are mostly unheard-of, although some states are now considering European-style schemes. Germany, meanwhile, has an extremely sophisticated and long-standing tariff arrangement.

Just as certain countries are lucky enough to sit on oil, gas and coal reserves, nations with the right geological conditions can capitalise on geothermal renewable power. Iceland, for example, is perhaps most famous for its unique geology – witness the recent volcanic activity which saw European air travel disrupted – and this has even prompted one scheme which proposes that the nation pay off its debts to the UK and the Netherlands by exporting its geothermal power in place of hard currency.

While the UK cannot match Iceland’s spectacular geysers, it does have a significant geothermal resource, primarily located in the south-west of England. Of the south-west region as a whole, Cornwall has some of the best geothermal possibilities, as the temperature increase with depth in the county has been measured at greater than 35°C per kilometre. A research project carried out in Cornwall in the mid-1970s looked at this resource in more detail, and geothermal technology is now at the stage where this heat resource can be tapped by drilling to depths of approximately five kilometres. Indeed, this project’s findings were used in the development of a successful geothermal plant in Soultz-sous-Forêts, France, which is now producing power.

A recent Canadian proposal has funded a project to produce geothermal power from waste hot water inside mature oil wells in Alberta. One of the project’s leaders stated in an interview: ‘I like to say in the oil and gas industry we drill for gold and throw the silver out.’ He was referring to the hot water in the oil wells, which is typically regarded as an unwanted nuisance rather than an asset. Likewise, with commercial geothermal projects, the heat we mine is a means to an end – namely, to power turbines and generate electrical power.

Without a supporting infrastructure, this heat will just be returned back down the borehole. But this heat, essentially a by-product of the process, can be a valuable commodity in its own right, with the potential to be used for industrial, agricultural, commercial or municipal purposes. Heat from geothermal plants could provide thermal energy for schools, local swimming pools, commercial greenhouses – or it can be used for more exotic purposes. Iceland’s famous tourist attraction, a spa called the Blue Lagoon, is heated by the neighbouring geothermal plant. Heat can even be used, via an absorption chiller, for air conditioning, making it a year-round commodity.

Renewable heat has enormous social and economic potential. All the industry needs is investment at the right point in the cycle to address the initial cost of developing and constructing geothermal plants, and we could be generating a gigawatt of renewable heat in Devon and Cornwall alone.