(11 months, 3 weeks ago)
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Lord Cameron of Dillington
To ask His Majesty’s Government what assessment they have made of the geothermal potential for heat and power in Great Britain; and what plans they have, if any, to make use of it.
The Deputy Chairman of Committees (Baroness Henig) (Lab)
My Lords, Members will notice that the clock is not working, but I am sure they will seek to respect the time limits.
Lord Cameron of Dillington (CB)
My Lords, first, I thank everyone, including the Minister, for taking part in this important debate. Apparently, I am not allowed to say anything at the end, so I thank noble Lords now.
The importance of what we have to say is evidenced by the fact that heating and hot water make up around 40% of the UK’s energy consumption and nearly one-third of our greenhouse gas emissions. That is quite a large proportion, so this area needs a lot of focus. However, so far, compared to our continental neighbours—who, like us, are blessed with geothermal potential—we have done little to harness the power lying waiting for us: the heat beneath our feet.
In Holland, they hope to meet 23% of their heat demand by 2050 using geothermal heat. I realise that we cannot hope to match that because of our more dispersed population and our dispersed geothermal resources—population centres and geothermal resources do not always occur in the same place—but, with the right policies, there is considerable potential, which I will come to in a moment.
Meanwhile, the deep aquifer under Paris is supplying geothermal heat to around 250,000 homes, while in Munich and its surrounding communities some 130,000 houses now have geothermal heating. France currently has 74 geothermal plants and aims to increase that by 40% by 2030. The Netherlands has 21 plants and major increases planned, and Germany has 190 plants. But in England, only a few buildings are currently heated geothermally, although a few schemes are currently being developed around the country. Given the heat resources beneath our feet, it is a pretty poor record so far.
The UK has good potential in terms of enhanced geothermal systems—that is, 5 kilometres down, or more. A mere 2% of this potential could cover the current UK energy demand for over 1,000 years. We have two pilot schemes in Cornwall: one near Eden and one near Redruth. This heat is very expensive and difficult to tap into—right now, a lot of drill bits are wearing themselves out on our Cornish granite—but both these projects should eventually provide large amounts of meaningful heat, not only for direct use in homes, businesses, biospheres and hospitals, but, I hope, with temperatures capable of driving a turbine to produce electricity. We shall see.
While some of our very deep rocks have potential, the greatest potential for heat lies in much shallower aquifers. The geothermal gradient in the UK averages—I stress that word—27 degrees per kilometre, so temperatures at 1,000 metres, 3,000 metres and 5,000 metres underground are usually 40, 90 and 150 degrees centigrade respectively.
Even a small amount of heat combined with a heat pump is worth harnessing. For instance, our family home in Scotland is heated with a water-based heat pump using an aquifer only some 20 metres down. It was cheaper to install than a flat surface loop in the field, and the aquifer water temperature is 9 degrees centigrade, compared to the normal flat ground loop temperature of 5 degrees centigrade, which therefore minimally reduces the cost of our hot water.
More to the point, many major population centres in the UK live above, or are adjacent to, hot sedimentary aquifers at, say, 500 to 2,000 metres’ depth, with temperatures usually in the range of 25 to 60 degrees centigrade. These, combined with an at-scale community heat pump, have huge potential to produce heat for hundreds of thousands of homes, plus factories, hospitals, greenhouses and so on.
A recent report by Dr Mullan MP identified the enormous benefits available from such heat sources and made the point that these resources are, luckily, predominately available in areas suffering from a lack of economic resilience—in other words, areas which would qualify for levelling up and where these geothermal projects would, therefore, do the most good. But at the moment we are doing little or nothing to tap into these resources: the heat beneath our feet.
Cutting to the chase, we need, first, a proper, detailed subsurface survey of all our geopotential. This geothermal atlas should identify all the opportunities in detail, and it then needs promoting so that businessmen, builders and local authorities are aware of the local potential. The recent fuel crisis must surely give properties with cheap heat potential an advantage in the marketplace, and the marketplace needs to be informed of that potential advantage.
Secondly, the Government must then set themselves targets for the development of geothermal wells—so many per year to be developed. That is what they have done in Holland. Then the Government must promote these opportunities and put in place a firm long-term plan of support. This sustained support is very important and could include some form of initial grants, subsidies—perhaps in the form of FiTs or CfDs—or investment assistance. For some reason, energy projects do not qualify for EIS relief, which seems to make a mockery of the Government’s ambitions to make the UK a green and renewable energy investment hothouse.
Drilling is the most expensive bit, and in that context, with the expertise available from our now hopefully fading oil and gas industries, we should have an advantage. France, the Netherlands and Germany have all used national risk insurance schemes to attract private capital. For instance, for every £1 paid by the French Government, £42 has been leveraged from private investors. The Mullan report indicated that our potential investors are not attracted by this route, and it is not for me to tell the Government and the industry how to achieve their target number of geothermal wells. Setting a target and delivering it are the important bits, along with some sort of stable but long-term support or derisking measures.
Thirdly, the UK must deregulate. It is absurd, for instance, that in England and Wales you still need both an abstraction licence and a discharge licence to take water out of an aquifer and put it straight back in again. In Scotland, under general binding rules, abstractions and discharges in an open loop system do not need any licence or permit, provided that the water is discharged back into the same geological formation from whence it came. Furthermore, the planning system in a heat network zone should encourage and facilitate the harnessing of our geothermal resources, rather than cause delays.
Fourthly, in order to build the supply chain, the Government should zone areas which have geothermal resources, and then put in place in those heat network zones effective legislation compulsorily to reduce the long-term carbon output from all new buildings and, where possible, older ones as well. This legislation should look to promote communal heating systems—I really do not know why we have so few such systems in this country—or it could promote the use of geothermally heated water with so-called shoebox heat pumps. I always prefer to encourage rather than compel people to do the right thing, but in the Netherlands, which is virtually one large geothermal zone, they have already prevented all new-build houses connecting to the gas grid. There must be a lesson there. In this country, we are too hooked on the gas grid.
Fifthly and finally, the UK Government must involve local communities and get people and planners involved in heat network zoning. This should be part of a drive to grow the demand and the supply chain. Tapping into geothermal heat should become part of national thinking in the architectural, planning and construction worlds. We have geothermal resources in the UK: we have the heat beneath our feet. We also have the drilling skills left over from our oil and gas exploration. The UK geothermal industry is poised to deliver growth, renewable heat and employment; it just needs a small amount of government focus and pump priming.
Lord Lucas (Con)
My Lords, I am extremely grateful to the noble Lord, Lord Cameron of Dillington, for giving us the opportunity to debate this subject, and to my honourable friend Kieran Mullan for all the work he has done in exploring its potential. I am going to approach this as a former investment banker because I think we are looking at an extremely investable set of projects, but one which needs some government support at the beginning.
Once we get going and are in the state they are in on the continent—when we know the state of the underground aquifers and know that they are permeable —we are looking at producing a long-term stream of income, which is essentially index linked. By long term, I mean 100 years or so. Essentially, these projects have low costs to keep them going. Such a project is an extremely attractive asset for big insurance companies, pension funds and others, but one that they are not used to. They need talking through, educating and working into this so that they are prepared to pay a really good price for what should be, for them, an excellent asset. That is work I hope to encourage the Government to do.
The second side is the initial risk. For instance, looking at southern England, we know that there is a good layer of carboniferous limestone. We did a lot of oil exploration in the layers above it, so we have a pretty good picture, but we do not know that the fracture zones are permeable. We could get down there and find that it is all gummed up. I do not think it will be. The British Geological Survey produced some recent mapping, which gives me a lot of confidence that that and other strata throughout the UK will prove to be productive, but we just do not know.
Although we have experienced crews from the North Sea, they are not experienced in this geology. It will take them longer to drill the first hole than the 10th hole, by which stage it will be falling off a log for them, as it were. You just do not know, when you are drilling a first hole into a stratum, exactly what it will feel like and how it will work. There are risks there, which are likely to increase costs. For the first well, there are very substantial equity risks. In a stable situation, you will get one bad hole in 20 and you can insure against that. They do this on the continent; the insurance system covers it, and you know what the picture is. But for the first hole in a new geological province in the UK, you just do not know.
There is a real role there for the Government to stand as a very expensive equity investor—not to say, “We will give you a grant or a subsidy”, but “If we are taking the risk, we want a proper return from this. If you can do better on the commercial market, then do better on the commercial market, but we will be the first equity investor because we as a country need to get this started”. If that is an attractive idea to the Government, I hope they will agree to a meeting because I have been running around the City looking for people who would respond positively to such an opportunity. There appears to be no great shortage of them.
I am optimistic that we can make this happen, even below London. We do not know anything about what happens below London. The first well there will be a complete unknown, but if we can show that there is a geothermal resource beneath London, that is a superb place to start heat networks. We can, as the noble Lord, Lord Cameron, said, start to chew into the 40% of our energy that is going on heating, most of which is coming from fossil fuels. We could provide maybe up to 10% of total UK energy demand from geothermal resources. I encourage the Government to take this seriously and do what it takes to get it started. It could be a complete bust, but without their help, we will never know.
Lord Berkeley (Lab)
My Lords, it gives me great pleasure to follow the noble Lord, Lord Lucas, and I am grateful for the opportunity that the noble Lord, Lord Cameron of Dillington, has provided for this debate.
My civil engineering days are decades past but I did a lot of rock drilling in my youth. Technology has moved on, but even in those days it was quite simple and straightforward. Of course, the geology varied. Looking at the application to the production of energy that we are talking about today, it has one thing in common: there is a plentiful supply of drills, drilling and expertise—there is plenty of water underground. It could eventually be cheap, and of course it is safe; it is nothing like fracking, which people get worried about. It is all to do with water. I appreciate that the capital cost to start with is high, as other noble Lords have said, and some of the drills may be noisy, but on the other hand, you do not need much space, the technology is well proven, and as we move forward and get a plentiful supply, the costs will come down.
The other interesting thing that many people forget is that the temperature of the water that comes out can vary dramatically. I think that at Eden, which the noble Lord, Lord Cameron, mentioned, it is 85 degrees centigrade, which is pretty hot—plenty hot enough—but even lower temperatures not so far down are hot enough for many purposes. I live in Cornwall and in the Isles of Scilly and I have been to see this project in Eden. The drill was, frankly, enormous, very impressive and fast, and it is now working. The noble Lord, Lord Cameron, mentioned Redruth; the first one was in fact in Penzance. Noble Lords may know that there is a rather interesting open-air swimming pool next to the sea, part of which is heated with geothermal water, and there is a queue of people to go to it. There is not as much water as there might have been because they are experimenting with air-drive and water-drive drills, but it works, people like it, and it is available.
We spend a lot of time in your Lordships’ House talking about storage—hydroelectric is one solution, and underground gas storage another—but this stuff does not need storage. You just switch it on and off; it is a pump. There are an awful lot of benefits here. The fact that it can provide 40% of the UK’s energy consumption means that we really need to take this more seriously. It can be used in many parts of the country. Cornwall is probably the best, because the water is hottest, but it is worth looking at many other places and—as I think the noble Lord, Lord Cameron, said—doing a proper mapping of this country from a geological point of view.
This is a way forward for many of our energy needs. I would just like to reflect on the fact that many communities in this country say, “Let’s have a series of windmills to give us electricity for the community”, or “Let’s have a solar farm and get cheap electricity”. You could just as easily have one or two of these geothermal wells to give you hot water, and that is all you need to keep your homes warm and to get a hot bath or shower. Before noble Lords say, “That’s not very much”, that is 40% of our energy requirements. I hope the Minister will find a way forward so that we can all benefit from this.
Baroness Sheehan (LD)
My Lords, I declare my interest as a director of Peers for the Planet. I thank the noble Lord, Lord Cameron of Dillington, for giving us an opportunity to debate the potential of geothermal for heat and power in the UK. We have only to look across the channel to see what is possible. France, Germany and the Netherlands share the same tectonic plate as us and have harnessed this deep heat source far more ambitiously than we have. That said, I want to concentrate on the potential opportunity of using the shallow geothermal energy under our feet—not necessarily as far down as even a shallow aquifer but just the heat differential that exists between the air and the ground.
Ground source heat pumps use ambient stored solar energy in the ground, where temperatures remain constant 24/7, 365 days a year, regardless of air temperature changes. The Government have invested much energy and enthusiasm—and, I think, money—into trials for hydrogen boilers in towns in the north-east. These are riddled with challenges, not least that of explosions from the leakage of a notoriously leaky gas. That is unsurprising, as hydrogen is the first, and therefore lightest, element in the periodic table.
I cannot help but compare the hydrogen trial to the Heat the Streets pilot in Stithians, Cornwall, carried out by the Kensa Group. This essentially uses the proven technology of ground source heat pumps to see whether it can be deployed at mass scale to retrofit whole streets with typical mixed housing stock of any tenure; that is, in a realistic UK town or village scenario.
We are used to hearing about ground source heat pumps in a single property where a ground loop is installed in someone’s garden. Imagine that you can pay for a heat pump in your home without the headache of sorting out the details of where the ground loop would go because someone else would do that part for you. In essence, the networked model of heat pumps is the same as the gas grid model. A white box ground source heat pump is installed in your home, and you pay a standing charge to connect to the street’s underground loop infrastructure, which has already been installed by experienced engineers. Consumers have total control over their heating. For utility companies, it is an investment that will last for decades, as shared borehole ground arrays have a lifetime of up to 100 years. For landlords, it means no more split-billing or metering requirements for tenants. I should add that the technology can easily switch to cool homes, which is becoming more necessary. In an FT article, the BBC’s Roger Harrabin referred to the Stithians scheme as “simple and elegant”. It has much to recommend it.
Such ground source heat pumps have many advantages—I shall list only a few of the most important ones. They last a great deal long longer than air source heat pumps, and therefore work out cheaper in the long run, and use 40% less electricity. Most importantly, there are advantages at an energy system level. With demand shifting and heat batteries, networked ground source heat pumps could reduce peak electricity demand by 37 gigawatts, which could save up to £15 billion a year in reduced generation and grid infrastructure costs, something that I am sure is of great interest to the Government.
It is appropriate at this stage to welcome the heat network zones that the Government have proposed in the Energy Bill, but they should be extended to cover all the UK and make a stab at identifying the right technology for the right place, working together with local authorities.
In Committee on the Levelling-Up and Regeneration Bill, I tabled two amendments asking for government support for pilots for a renewable-powered new town and an existing town, both using networked ground source heat pumps to provide heating. Does the Minister, who I believe is pretty conversant with this technology—probably far more so than I am—agree that properly constructed trials are essential to carry out evidence-based assessments for potential solutions that merit government support? That will be essential to evaluate which projects could meet our fast-approaching decarbonisation deadlines. I end by saying that I intend to retable my amendments to the Levelling-Up and Regeneration Bill on Report.
Lord Moynihan (Con)
My Lords, I also thank the noble Lord—oh, I do apologise.
Baroness Jones of Moulsecoomb (GP)
That is all right—a glass of champagne later will make up for it. I thank the noble Lord, Lord Cameron of Dillington, for this debate, as it will give us the chance to show the world just how rubbish this Government are on climate change and cheap energy. They are eco-stupid. I cannot in five minutes begin to explain how deep that eco-stupidity goes.
For example, they have just scrapped £11.6 billion of the climate pledge and at the same time are giving £11.4 billion as a tax break to oil giants to extract more fossil fuels. How is that common sense when climate change is making life more difficult for millions of people? We have been discussing the Illegal Migration Bill. The number of people moving around the planet now will be as nothing when climate change hits faster. People will not be able to live where they want to if they cannot farm or find water there.
Part of the Government’s problem is an inability to see the global impact of climate change and our role in it. Part of it is the straightforward corruption of several million pounds of donations to the Conservative Party buying influence, North Sea oil licences and the demolition of our net-zero target. This resistance to all things green is often disguised as innate conservatism, but it is pure hypocrisy. They love open-cast coal mines and giant fracking wells but find large windmills an ugly addition to our traditional landscape.
Self-reliance used to be a conservative value, but that was before the party was dominated by billionaires and the vested interests of the fossil fuel industries. A village that generates its own power with a few wind turbines or a solar farm undermines corporate power and the ability to extract huge profits from consumers. Community energy becomes a real possibility with new technology, such as geothermal. This Government are resisting that as they see a threat to the profits of the oil and gas industries. The UK is ranked last for heat-pump installation out of 21 European countries. That is shameful.
We are constantly told by the Minister that we are doing really well on the environmental stuff, but the Environment Minister at Defra, the noble Lord, Lord Goldsmith, told us recently that the problem is not that the Government are hostile to the environment but that the Prime Minister is simply uninterested. That is more concerning. If they at least had some interest, they would understand the problems we are facing.
Our failure to deal with energy demand is exactly why we expect to import more gas in the coming decade. That failure is costing consumers a lot of money. Insulation, along with technologies such as geothermal, could cut those costs dramatically. Other countries can see the long-term savings and strategic benefits of being more reliant on their own clean energy sources and less reliant on volatile, foreign-owned fossil fuels. Above all, they can see the end of fossil fuel use and are making it happen faster. They are not applying the brakes in the way that our Government are.
Why not have a street-by-street, town-by-town, city-by-city switch to heat pumps? We did it with the massive switchover from town gas to natural gas. It can be done. Why not talk to people in towns and villages with the right geology about going geothermal in powering their homes and communities and why not ensure that those communities benefit financially from investment in geothermal plant? It is a win-win for communities, people and the planet.
I have been in your Lordships’ House for 10 years, banging on about ways to make energy cheaper and reduce people’s costs in their homes by putting in insulation and about how to make us a better country in terms of our impact on the rest of the world. Somehow, the message just does not get through. Can the Minister tell me what language to use to make this Government listen? If they are not even listening to the head of the UN, António Guterres, who says that carrying on with oil and gas production is economic and moral madness, who are they listening to? Who on earth can get through to this Government that they are on the wrong path and must stop as soon as possible?
Lord Moynihan (Con)
It is such a privilege to both precede and follow the noble Baroness, Lady Jones. I am sure the Minister welcomes having one or two additional points to answer from the noble Baroness, but maybe I am the only Conservative whom she would support for doing something for the environment. When I was Minister for Energy in 1990, we had the first round of the non-fossil fuel obligation, which introduced renewable energy into the UK through a competitive round of tendering.
Geothermal power was at the heart of that. It has been important since the days of the Camborne School of Mines and its hot dry rocks project, which was the precursor to the United Downs Deep Geothermal Power project. That continues to this day in Redruth, Cornwall. At the time, it was important for the Government to encourage that technology to be developed and provide the right framework for it to be taken forward. I hope that we will both be able to celebrate its start with a glass of English sparkling wine—I prefer that to champagne. I agree with the noble Baroness that we should have gone a long way further in the ensuing 30 years, but it was an important start. It was important for United Downs in particular, because that project, by mid-2023, has the opportunity to generate between 1 and 3 megawatts through its power plant. It will be sold to the national grid via the UK’s first power purchase agreement for deep geothermal electricity with Ecotricity.
I support geothermal energy, but it is important to continue the debate and look at a number of points. In response to the noble Lord, Lord Cameron, the British Geological Survey has undertaken quite a significant geological survey, but more work can be done. I would be grateful if the Minister could update us on whether the Government could support its further mapping of the geothermal heat potential in Great Britain. It is undoubtedly significant and the resource could contribute to meeting a substantial proportion of the country’s heat demand. As we have heard, the temperature gradient below the surface increases by an average of 25 to 30 degrees Celsius per kilometre depth, indicating good potential for heat extraction throughout the United Kingdom.
The key issue, which we have known about from that time, is economic viability. We need to look at that, so I would be grateful if the Minister would comment on his and the Government’s view of the economic viability of geothermal projects at the moment—their exploration costs, drilling expenses, installation costs and the potential revenue from heat or power generation. Technical feasibility is also important, because drilling depth and reservoir permeability are critical factors. We do not have the advantages of many of our neighbouring countries, but there are significant opportunities for ground source heat pumps nevertheless, as we just heard.
Lithium is also relevant to this important debate. The United Kingdom has significant potential for lithium production and exploration. Lithium-bearing brine deposits and potential hard-rock lithium sources are most prominent in Cornwall and, through the projects that we have been discussing, have the potential to produce both lithium and renewable heat and power. I very much hope that we do not ignore their benefits for this country and ensure that we not only manufacture the batteries used in electric vehicles and energy storage systems in the UK but develop the lithium resources that are so critical to their success. They come from the work that we have been discussing today in the context of geothermal electricity and energy. If the Minister could comment on that in closing, it would be much appreciated.
Baroness Walmsley (LD)
My Lords, I am delighted that the noble Lord, Lord Cameron of Dillington, has given us the important opportunity of this debate. I will focus my remarks on shallow geothermal, although deep geothermal is also highly efficient and has a low visual impact and no noise or emissions when installed. One cannot say that about wind turbines.
Eighteen years ago, my husband and I built a little wooden house in Aberdeenshire for family holidays. We installed shallow ground source heating, which began my love affair with capturing heat from the ground and cutting electricity bills while contributing to saving the planet. It has never let us down, even when the air temperature was well below zero. At that time, few contractors could install such a system, but we found one—although we used a Swiss heat exchanger as there were no British ones then. The contractor complained that it was hard to get skilled installers and there was no help from the Government to train them.
Today, that technology has developed and is even more important as we aim for net zero. Hydrogen will not be our saviour when we stop burning gas for space and water heating, as it takes six units of electricity to get one unit of hydrogen. In contrast, one unit of electricity will get us four units of heat from the ground.
What is the answer on the scale we need? My family’s individual solution had a higher upfront cost than most people can afford, so others in off-grid locations in rural areas will need some government support. In streets where houses have little or no garden, in terraces where individual air source heat pumps cannot be installed and in blocks of flats, the answer is ground source heat networks, as my noble friend Lady Sheehan said. Networks provide a utility in the street to which homes can connect as easily as connecting to the gas mains. The Kensa Group, the British manufacturer and installer, has just completed a demonstrator project, supplying the first village in the world, Stithians in Cornwall, with its own clean heat network. My noble friend explained how it works. The company is growing and creating many jobs, although the UK is a long way behind France, the Netherlands and Germany, so opportunities for UK growth are being lost. We are well behind the curve again.
Although deep geothermal is currently costly, costs are coming down as technology develops. Pilot schemes are happening in areas with the most potential heat gain, such as Manchester and Stoke-on-Trent, but shallow ground source is appropriate in all locations. Just as wind and photovoltaic technologies were supported by the Government to help them scale up, the ground source industry needs the same. We also need funding for training installers. Crucially, the energy efficiency of ground source will reduce future pressure on the national grid, but only if we realise its full potential. The technology is cost effective in the long term: deep ground source infrastructure will last for 100 years, and shallow for at least 25 years, compared to 15 years for air source. The industry is aiming for subsidy-free growth by the end of this decade, but it needs help now to enable it to get there, just like solar and wind did before, so what can the Government do?
First, when will the Government decide on the future homes standard so that the market knows that no new homes will be connected to gas from 2025 and when will gas boilers in existing homes be phased out? Secondly, despite their lower energy efficiency, gas boilers are still cheaper to run because of the artificially large disparity between electricity and gas prices. The Government could tackle that; will they? Thirdly, most heat pumps will be installed in existing properties, so we need a proper incentive for GSHPs. The current five schemes have poor uptake and are badly designed for ground source. Will the Government work with the industry to develop a scheme to help the GSHP industry become subsidy free by 2028?
The Commons Environmental Audit Committee concluded that the Government were too slow to exploit the potential of geothermal and had not integrated it into the net- zero strategy. Will the Minister respond to that challenge, particularly in light of the need for improving the energy security of this country given recent events? Nobody can take away the heat beneath our feet in our own ground—not Russia, nor China—but we have to exploit it.
Lord Lennie (Lab)
My Lords, I, too, am grateful to the noble Lord, Lord Cameron, for setting up this debate. Geothermal energy offers opportunities as a sustainable and reliable energy solution. We all know that, with possibly one or two exceptions, a decarbonised power system is the key to us achieving net zero. This means that our Government, whoever they are, must give focus to different low-carbon solutions. The current Government are simply not doing enough of this.
One of the potential solutions is geothermal energy. It is regarded as environmentally friendly because of its lower greenhouse gas emissions compared with carbon-based sources, minimal air pollution, efficient energy conversion, lower water use than other conventional technologies and reduced land requirements. It is also considered a renewable source of energy that harnesses the earth’s natural heat to generate power. This heat is continually renewed through geological processes, such as radioactive decay, and residual heat from the planet’s formation.
It is argued that geothermal energy projects not only contribute to emissions reductions but provide job opportunities across the supply chain. As has been said, in Germany the geothermal industry has generated €14.9 billion for the economy and created 24,000 jobs this century. In the Netherlands, which was also cited by the noble Lord, Lord Cameron, there are claims that for each direct geothermal job a further two or three indirect jobs are also created. According to the International Energy Agency’s 2021 geothermal Annual Report, this country has an estimated 43,700 GSHP systems installed which generate approximately 1,330 gigawatt hours of energy per year, which is less than 0.3% of the annual UK heat demand. By comparison, Germany had more than 440,000 systems installed in 2020, while France had around 210,000 systems.
What is geothermal energy? We have heard that shallow geothermal systems typically involve the use of ground source heat pumps to modify the temperature obtained from the resource, but just last week it was reported that the Government’s boiler upgrade scheme managed to award only half the number of grants to help households it targeted switch from boilers to heat pumps. The £70 million left over from this policy due to grants not being issued cannot be used in future years and will be returned to the Treasury.
In order to meet the UK’s climate change targets, the Government want to install 600,000 low-carbon heat pumps annually, but the current rate is about one-ninth of that. In December 2022, the House of Lords Environment and Climate Change Committee launched an inquiry into the boiler upgrade scheme and found that the scheme was seriously failing to deliver on its objectives, with a disappointingly low take-up of grants. The committee called on the Government to take a number of steps: to provide clear guidance and information to industry and consumers regarding viable options for low-carbon home heating; to roll over the remaining budget from the first year of the scheme into the second year; and to establish a review to consider an extension to the scheme. Have the Government responded to these asks from the committee?
Deep geological systems are, as the name implies, at greater depth where the heat is more intense but cost significantly more to produce. By way of an example—we have also heard Redruth being cited—there is an active project in Auckland in the north-east of England. It will involve geothermal energy being sourced four miles underground. The water temperature is 73 degrees centigrade at Auckland Castle, and there is the aim of ensuring that Bishop Auckland becomes the first fully decarbonised town. That is exactly the sort of project the Government should be investing in if levelling up is to have a real practical meaning, particularly in former mining communities such as those in the north-east.
The House of Commons Environmental Audit Committee has judged that the Government have been slow to exploit the potential of geothermal energy and have not integrated it fully into the net-zero strategy. It went on to argue that the Government appear to be holding back a sector which could have a transformative effect upon the UK’s capacity to meet climate goals and grow the economy. With the Government missing their target towards achieving their aims, without a change of direction, geothermal energy will remain a peripheral influence.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, first, I join noble Lords in thanking the noble Lord, Lord Cameron, for securing this debate on a fascinating and exciting topic. I do not think there is any difference between us. I think we all share a passion for renewable energy and for the green transition. That undoubtedly includes geothermal energy which is, as noble Lords have pointed out, a significant store of energy beneath our feet.
Before I get on to the topic of the debate, as always, I greatly enjoyed the contribution from the noble Baroness, Lady Jones. It was typically entertaining; it was of course total nonsense but very entertaining none the less. I have a couple of facts for the noble Baroness. We have not scrapped our contribution to international climate funds, and we do not give tax breaks, as she described it, to fossil fuel producers. In fact, the opposite is the case: they pay increased levels of taxation compared with other businesses. I am very proud of our decarbonisation record, which is in fact the best of all the G7 countries. Of course, the noble Baroness is perfectly entitled to push us to go further and faster, but let us not pretend that we are not doing anything. We have the best record in the G7, and it is much better than in some of the countries where the Greens are in government—I could point out Germany as an example.
However, back to the subject of the debate, the Government recognise the massive potential of geothermal energy in many parts of the UK. It has the potential to deliver low-carbon heat and power, as well as many critical minerals such as lithium. In the British Energy Security Strategy, the Government set out that they would explore renewable energy opportunities afforded by our geography and geology, including geothermal. I reassure the noble Lord, Lord Cameron, that geothermal technologies that generate power are in fact eligible for contracts for difference awards, which is the Government’s main mechanism for supporting low-carbon electricity generation.
I can also inform my noble friend Lord Moynihan that evidence from my department suggests that geothermal is one of the cheaper emerging technologies that are eligible for the contracts for difference scheme. That builds on the point from my noble friend Lord Lucas that we are also exploring a range of other support mechanisms to de-risk and bring down the high capital cost of drilling down—there is a lot of risk there for private investors.
The UK’s first geothermal plant that will generate electricity, located at the United Downs site in Cornwall, is set to start generating next year. It is expected to deliver a baseload capacity of 12 megawatts, roughly the equivalent of 12 onshore wind turbines, which will rise to 25 megawatts by 2028—a project supported by the Government.
The most significant potential for geothermal energy within the UK lies in extracting geothermal heat for use with heat pumps in district heating or heat networks, as a number of noble Lords mentioned. This resource is more widespread, closer to the surface and more economic to extract. Accessing geothermal heat at scale will rely on the existence of heat networks to distribute the heat—the noble Baroness, Lady Walmsley, was right about that.
I did not quite understand the point the noble Baroness made about heat network zoning; she suggested that we should spread it to the whole of the country but of course we are extending it to all the country. I apologise if that was the noble Baroness, Lady Sheehan. The noble Baroness often calls on us to work with local authorities; the Energy Bill will give local authorities the power to designate heat network zones throughout the whole of England in particular—obviously it is devolved in the devolved nations—but it will be up to local authorities to decide whether they wish to designate heat network zones in their areas. We will of course support them in central government, and we are in talks and discussions with a number of local authorities —dozens of them—that are interested in doing exactly that.
I am also grateful to the noble Lord, Lord Cameron, and the noble Baroness, Lady Sheehan, for highlighting the importance of heat networks and zoning. As I said, the Energy Bill will enable all of local government to designate heat network zones.
I am also grateful for the support, on this occasion, from the noble Baroness, Lady Jones, for community heating and enabling towns to bring this forward. That is indeed why the Government have provided funding to many local authorities through the Heat Networks Delivery Unit to support them to develop heat networks in their own towns. These heat networks will of course also need to correspond to the suitable geological conditions; I can confirm to my noble friend Lord Moynihan that we have in fact supported the north-east LEP to commission research into the potential contribution that deep geothermal technologies could make in the United Kingdom.
The British Geological Survey has been a lead author of that study, which is due to be published later this month—I am sure that the noble Lord will be interested to read it. It has considered many of the options for supporting the industry that the noble Lord, Lord Cameron, summarised in his excellent opening speech. The Government will use it to consider the next steps to support what at the moment is a nascent industry. That includes the provision of easy access to geological data. It will contribute to our understanding of the possible benefits and the options for achieving them, and it will inform future policy development.
We are actively supporting and encouraging the development of geothermal heating projects through the current Green Heat Network Fund, which supports the development of low-carbon heat networks. The noble Lord, Lord Berkeley, correctly referred to the tremendous potential of Cornwall. Through the fund that I have mentioned, the Government have announced £22 million of funding to Cornwall Council to develop the Langarth Deep Geothermal Heat Network, connecting to the United Downs deep geothermal site. This will be the UK’s first heating system to use deep geothermal energy and it will heat nearly 4,000 local homes and public facilities.
I am pleased to tell my noble friend Lord Lucas that the Government support his view that this opportunity can deliver benefits for communities across the country. The Government have previously awarded funds of £5.9 million and £4.3 million through the Heat Networks Investment Project to shallow geothermal schemes in Gateshead and Seaham, respectively. The noble Lord, Lord Lennie, referred to the opportunities in our home region, in the north-east of England. On his way home to Tynemouth, he could stop off in Gateshead and look at one of the government-funded schemes that is delivering excellent heat network funding for a mine water recovery project. In fact, if he looks over to his right when he crosses the Tyne Bridge, he will almost be able to see the project from the train—another government-supported project that is delivering precisely the benefits that he suggested.
I am also happy to confirm to the noble Baroness, Lady Sheehan, that there is value in supporting new renewable heat sources to come forward. One of the major benefits of the Heat Networks Investment Project has been the range of networks that have been supported through its funding.
My noble friend Lord Moynihan asked me about the economics of deep geothermal. He is right: at present, the cost of extracting the heat is uncertain, due to the uncertainties associated with the geology until it is tested. Uncertainty in capital costs, operational costs and revenues means that very few projects have been shown to be financially viable without government support. The potential for costs to reduce with scale is also uncertain and it depends on what we will learn from some of the early projects that I have mentioned that we are already supporting with considerable government funding.
My noble friend also made a very good point about the potential for battery-grade lithium extraction from the waters pumped by geothermal plants. That shows great promise. Some predict that geothermal lithium extraction could account for up to a quarter of domestic demand and help drive transport decarbonisation—another happy benefit of some of the geothermal schemes. Geothermal Engineering in Cornwall has been successful in securing £12 million from the Government’s Automotive Transformation Fund for precisely that purpose.
I thank again the noble Lord, Lord Cameron, for securing this debate today as well as all other noble Lords for their insightful contributions. As I set out today, the Government recognise the tremendous potential of geothermal energy in many parts of the UK and we remain committed, as set out in the British energy security strategy, to explore the renewable energy opportunities afforded by our geography and geology, including geothermal. Despite the challenges currently experienced by the sector, we believe that there is an opportunity for geothermal energy to be one of the wide range of technologies that we can deploy to help us to meet our climate change targets and provide energy security—and, you never know, in the meantime, we might even keep the noble Baroness, Lady Jones, happy.