Lord Oxburgh
Main Page: Lord Oxburgh (Crossbench - Life peer)(13 years, 3 months ago)
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Lord Teverson
My Lords, we come to a specific issue here, which is around one of the older renewable technologies in many ways—geothermal or, in this case, deep geothermal. I do not wish in any way to give noble Lords a lecture, but I would like briefly to summarise the position of geothermal energy. It is a tried-and-tested technology in many parts of the world. In the volcanic areas of our globe, hot water rises naturally—it does not need persuasion or drilling—and is used for heating directly or for generating. That part of the technology has existed for some time in places such as Italy, Japan, New Zealand and Iceland in particular. It is a fundamental part of electricity and power generation in those countries. It is also possible to have a variation where there is drilling, often down to five or 10 kilometres, with cold water pushed down and hot water coming out at the top. That is the clever bit—the bit that needs to happen. In the oil industry and other industries, drilling technology is pretty proven.
A great deal of work is taking place on geothermal in Australia, the United States and Europe to make the technology work. The good thing about it—this is where I will end my sales pitch—is that it is the one renewable technology that can produce large-scale electricity, but it is also consistent in its operation. It is not intermittent, as so many other of the renewable technologies—tidal, wave, solar and wind—can be, which is important. In many ways, the United Kingdom led the field in the 1970s and 1980s. Then, as happened with so many of these technologies, with the crash of oil prices the research stopped taking place and progress happened elsewhere in the world. Various bits of the technology are proven; it is highly desirable in its characteristics; and it is available in the United Kingdom, particularly but not only in the south-west, so it could be an important part of our renewable energy mix. Indeed, two planning permissions have been granted in Cornwall for geothermal stations of a smaller scale than the large ones that there can be. Visually, they have a small footprint and do not have great impact either.
However, as noble Lords will understand, one of the areas that must be tied up for exploitation of any energy resource is certainty for investors and the engineers who make these systems work. Elsewhere in the world, in Ireland next door, Germany, Australia and various other parts of the world, licensing regimes have been introduced. What should not happen is that if there is a strike and a well is made that produces hot water— 200 degrees plus is the optimum—someone in the next field should not be able to exploit that resource and that heat for themselves because they have not had the risk or made the investment for exploration.
The amendment would do one simple thing. It would give power to the Secretary of State to consult and then put into place within a certain time period, which I will come back to, a licensing regime for geothermal. The industry feels that one key part of the jigsaw is to allow investment with some certainty on the return, so that investments can be made.
The amendment refers to 18 months in terms of the licensing regime. When I tabled this amendment for the last Energy Bill I thought it should be two years, but now that these types of agreement have moved on, I feel that 18 months is perhaps the maximum. The industry feels that it could go through this process within a year. Since the industry has said that it can cope, I would prefer 18 months.
That is why the amendment is so important. It fits very well in the Bill because it has a whole area on renewable technologies. It is something that the United Kingdom still has an opportunity to lead on. That may be difficult because other nations have got further ahead at the moment, but it is an important technology. It works in other parts of the world and we should benefit from it in terms of meeting our own renewable energy targets—not necessarily up to 2020, although it may make a small contribution, but certainly beyond that. I beg to move.
Lord Oxburgh
My Lords, I am happy to support the amendment, to which I put my name, and I support everything that the Lord, Lord Teverson, just said. The Government have very challenging targets for renewable energy by 2020. They will achieve those targets only if there is sufficient private investment. Investment decisions depend on assessment of risk.
In the case of geothermal in this country, there is a really no doubt about the existence of the resource. Indeed, a couple of decades ago, I was co-leader of the group that produced the first geothermal map of the UK. The resource is certainly there. I declare an interest as a technical consultant to one of the companies to which the noble Lord, Lord Teverson, just referred.
We know that we have the hot rocks at depth. The real question is whether we have adequate technology to extract the heat from those rocks. Therein lies the uncertainty and the exploration risk. There is a good chance that we can do that, but if an investor is going to invest in this he really wants to see the risks minimised. As the noble Lord pointed out, after the demonstration of a successful well in one place, there is a real danger of someone else coming in and drilling nearby.
At an earlier stage in informal discussions, the Government’s position was that that could probably be managed through local planning consents, but I do not think that that is the case. Modern drilling technology allows you to drill in one place, maybe 10 miles away, and then turn your well horizontal and go into anywhere within a pretty wide radius. In other words, if we are really to give investors the kind of security which I suspect they will demand in order to support this kind of investment, we really have to have a licensing regime which effectively pre-empts others who come in later and have not made the primary investment from tapping in on the risky exploration work that the initial company has done. I am not sure whether this amendment is in the exact terms that we need, but there will not be significant investment in geothermal in this country, I believe, unless something along these lines is done fairly rapidly.
What we have to bear in mind is that capital moves between countries and that any company interested in investing in geothermal will compare the opportunities in this country with those elsewhere. For example, I believe that Ireland has legislation in place to give the kind of protection that we are asking for here. Ireland has comparable geothermal possibilities; the same is true in other parts of Europe. If we do not do this, the capital will simply move elsewhere and this contribution to the 2020 target will not be realised.
Lord O'Neill of Clackmannan
Perhaps the noble Lord can help me. I understand exactly where he is going on the protection of the investment but he is being incredibly coy about telling us what the scope of the possibility would be. He said that he conducted an inquiry some years ago. How many gigawatts or megawatts of electricity could there be in the UK? I am not wanting to pour cold water on this—I stumbled into that one. However, are we going to do something here that could, at the end of the day, be worth while or are we just kidding ourselves? Perhaps this is another technology that might be appropriate in countries or areas of the world where tectonic plates are crashing. In Iceland, that is self-evident but one does not get the feeling that there are too many serious earthquake areas in the UK where you are likely to access those kind of geothermal possibilities. Can the noble Lord be a little more specific about what he would regard as the likely output from a geothermal electricity industry?
Lord Oxburgh
My Lords, that is a difficult question to answer at the moment; we would be in a better position to answer it after the Cornish exploration has gone ahead. The fact is that this work was killed around about 25 years ago, as the noble Lord, Lord Teverson, said, by the crash of the oil price and by the DTI, as it was then, simply being no longer interested in supporting this work. Until that time, we had very good support from the DTI. In fact, the one geothermal source in this country that is functioning at the moment, which is the one around Southampton, was the outcome of the PhD work of one of my students at the time.
Since that time, drilling and fracturing technology has improved enormously. The oil companies have developed that to a very fine art. One can now drill, with control of the drill tip, to about the same precision as a brain surgeon uses when operating on a brain. It can be a very fine control indeed. We really have to see how successful this is at exploiting these resources, which have been known about for quite a long time. It is very simple to tell the noble Lord how many gigawatts of energy could in principle be removed, but that is a meaningless figure until we have some feeling about how effective the new technology is going to be. I would not want to say at this stage that this will save our renewables targets. At the moment, I would say there is a good chance that it will amount to good housekeeping but it may be considerably more than that.
Lord Marland
The noble Lord makes a good point. We have been looking at this matter very carefully for the past month or so. There is a framework in place; we have a deep geothermal challenge fund and have been allocating funds towards research. There is a ROC that is currently cast in stone and we are in a very adequate space to take this issue forward. I invite my noble friend to withdraw his amendment.
Lord Oxburgh
To answer a couple of points raised by the right reverend Prelate, I should say that 25 years is a perfectly reasonable time, but it might well be 35 years for the life of a field of this kind.
Lord Oxburgh
I am sorry. To repeat, 25 to 35 years is a plausible length of time for a field such as this to operate. There are various possibilities of rejuvenation, but it is too early to think of that.
The right reverend Prelate also asked whether there would be low-grade heat available as well. Yes, there normally is low-grade heat available after you have generated electricity. The aspiration is that a project such as this would wash its face commercially simply on the basis of electricity generation. If you can find a local use for low-grade heat associated with it, whether it is for agriculture or for district heating, that is an additional bonus.
Lord Teverson
I thank all noble Lords who have taken part in this debate. I should like to follow through on a couple of questions. The noble Lord, Lord Oxburgh, was talking about generation that was purely electricity or purely heat. If there is a demand for hot water, whether it be for market gardening or district heating, the most energy-efficient thing to do would be to use as much of it as you could for that purpose. This is primarily for electricity generation although you could theoretically have one or the other.
In terms of depletion, as I understand it—the noble Lord, Lord Oxburgh, knows about it far better than I do—that is a conservative estimate. It could be argued that there should be no depletion over time on very deep exploration; there is a chance for rejuvenation. The industry is rightly conservative regarding those estimates because ultimately the earth is being heated from the core upwards. Cornwall and Devon are particularly good in this respect because there is a layer of limestone over granite, which makes it a particularly good cocktail. I have probably got that slightly wrong. I see from the noble Lord, Lord Oxburgh, that I have. That is what someone from the industry told me, but there we are. It is not just Devon and Cornwall—this relates to other areas as well.
On remuneration, the two-ROCs regime is already in place, as the Minister said. The industry would like to look at the renewable heat initiative in terms of the hot water that comes out. That is probably an area of future discussion.
I am very encouraged by the Minister. I know that these things are not necessarily easy to achieve. Other countries, particularly in Europe, have these systems in place and they are the sine qua non. Without them, you will not get development of this technology. That is why it is important to get on with it. I would have thought that setting up a licensing regime from fresh would be a civil servant’s heaven—that there would probably be people queueing up in DECC to invent the British geothermal licensing system. That clearly has a cost in people power, but there is no ongoing cost to the department afterwards. Indeed, I hope that in due course revenues will come in from this technology, as in oil or whatever.
I am encouraged by the Minister’s remarks. I am sure that this will be a point of discussion between now and Report, and on that basis I am pleased to withdraw my amendment.
Lord O'Neill of Clackmannan
I was not going to speak on this amendment, but I have to say that there is a lot of water up in the North Sea and I am not sure why the two cannot coexist. You cannot move the oil and gas fields, but a lot of windmills can be moved because there is rather a lot of wind up there, which tends to be spread over a bigger area. I think that it is incumbent on the mover of this amendment to be more explicit about in which areas he would envisage a degree of overlap or competition. At the moment, he is seeking to legislate by assertion, not by evidence, and seeking to tell us that there could be some need for reassuring of investors. Frankly, there are lots of other reasons why investors are a bit leery of offshore wind farms. The technology, the durability of the metals and the exposure to all kinds of elements mean that the North Sea is more inhospitable than a lot of areas where offshore wind developments have taken place so far.
However, perhaps the noble Lord can tell us where there is likely to be an overlap; that is, where there is a clear need for wind power in addition to reservoirs of oil and gas. I have to come back to the point that not all the output of the North Sea is used for energy-generating purposes. A lot is used for the high-tech existing industries. We are in the process of losing Pfizer, but the petrochemical complexes across the United Kingdom are sources of high-tech, well paid employment for large numbers of people. These jobs exist and they will carry on as long as oil and gas is coming through to be reprocessed. National security and various economic objectives would stand up just as robustly and strongly as anything in relation to renewable targets, from which I do not demur.
I have yet to see where we would find that there would be a conflict on such a scale as to require amendments of this kind. If there is a case, it has not been made. If there is not a case, I think that it is part of the anti-oil and gas mentality of certain sections of what chooses to call itself the green and renewable movements in this country. Therefore, it has to be balanced out. I do not think that the case has been made adequately for such an amendment.
Lord Oxburgh
In the interests of reducing internecine strife, I think the prospects of serious incompatibility here are quite small. There is not really as much scope for moving wind farm locations as it might appear—wind is pretty variable—but, given the kind of technology of which I spoke in relation to the previous amendment, one can now exploit gas fields or oil fields at an angle from some distance without too much difficulty. It is important to give some confidence, as far as it is needed for investors in this area, but I do not think this is going to be a big problem.
Lord Jenkin of Roding
My Lords, the noble Lord, Lord Oxburgh, is absolutely right. The more I have looked into this, the more I see that it is a very complex problem. It has been under discussion with the two industries and my noble friend’s department for some years. From time to time, pressure has been brought on one or the other to try to find a solution. I am sure that the noble Lord, Lord Oxburgh, is right but the prospects of a serious overlap are pretty small.
It seems to me that often the problem is bringing the product ashore. The problems with offshore oil and gas are well known but I know that some wind farms have found difficulty in finding ways of getting their supplies ashore. It has been suggested to me—I think this has been discussed with my noble friend’s department—that there might be some form of compulsory purchase onshore to ensure that the product of a wind farm can be brought ashore at the most appropriate place, even if at present the landowners are reluctant to give permission. However, it does not seem to me that this complex matter has been dealt with by a single amendment in a Bill of this sort.
I entirely take the point made by the noble Lord, Lord O'Neill of Clackmannan, that oil and gas will be very important—particularly gas—for many years ahead. It is not so long ago that there was a major discovery off the coast of Scotland—the Buzzard gas field—and that could still happen. These things are far from certain and gas has to be exploited where it is. Yes, as the noble Lord, Lord Oxburgh, implies, there is a limited capacity for drilling horizontally, if necessary, or at an angle to develop a field but my impression is that the two industries have tried over a long period to reach an accommodation about how this might be handled. I think we would be a little unwise to start legislating in the way the noble Lord, Lord Whitty, suggests and simply say that there can be a retrospective revocation or variation of a lease that has been given in respect of which a great deal of capital investment may have taken place.
On the whole, I do not support the amendment in the name of the noble Lord, Lord Whitty, but I think that the discussions should continue. If it appears to my noble friend’s department that some legislative provision needs to be made, perhaps the Government could look at that for the next energy Bill, whenever it appears. My impression is that we may not see it this Session.