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.