Fixed tariffs mooted to kickstart geothermal sector

Offering fixed tariffs to geothermal power plants could help to kickstart the fledgling low carbon sector, a government commissioned report has concluded.

Conservative backbench MP Kieran Mullan was commissioned by former prime minister Boris Johnson to produce a study on the technology, which works by piping water heated by rocks several km below the earth’s surface.

The report, entitled Dig Deep Opportunities To Level Up Through Deep Geothermal Heat & Energy On The Way To Net Zero, concludes that the right support could deliver 360 geothermal plants producing 15,000 GWh annually of heat and power per annum by 2050, thus reducing the UK’s reliance on imported gas.

However deep geothermal has high upfront costs, such as the drill heads required to penetrate rocks that cannot be recycled.

Mullan’s report says that while geothermal is eligible for support via the Contracts for Difference (CfD) process, no such projects have successfully bid, partly because they must compete on price with more mature technologies such as wind and solar.

One solution to this would be to create a “set aside” within the existing CfD programme for deep geothermal energy, like the ringfenced pot recently introduced to reflect the higher costs of tidal power projects.

Using this auction mechanism or setting a fixed price tariff for geothermal heat and power are the most effective ways to kickstart a deep geothermal sector in the UK, says the report.

These tariff-based approaches would transfer risk from the taxpayer to industry in comparison to grants, such as those on offer through the Green Heat Networks Fund, the other main source of support available for geothermal projects. Previous research has suggested setting a fixed tariff at £50 to £55 could stimulate the geothermal industry in the UK.

Tariffs would also help the geothermal sector to scale up more than by awarding grants to projects on a case-by-case basis.

The report also says roll out of geothermal heat and power could help the government’s levelling up ambitions because there are strong overlaps between economically lagging regions and areas with high potential for realising deep geothermal heat.

In addition, the report says the UK has opportunities to take advantage of its vast network of former coal mines, which are around half a km deep and have filled with water that has become gradually heated in the surrounding geological formations.

Frank Gordon, director of policy at the Association for Renewable Energy and Clean Technology (REA), said: “Deep geothermal heat and power is an established renewable energy technology in Europe, and the UK holds significant potential for developing deep geothermal heat, particularly in rural and levelling up areas.

“Government now needs to deliver a comprehensive geothermal strategy without delay, including policy support to help the industry get off the ground. Meeting the government’s net zero ambitions requires a complete range of renewable and clean technologies to all play their part, and geothermal should not be left behind.”