Geothermal Energy

Luke Graham Excerpts

Tuesday 19th June 2018 Westminster Hall

[Luke Graham (Ochil and South Perthshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Evans, and I apologise for my late arrival to the debate. I congratulate the hon. Member for Bishop Auckland (Helen Goodman) on securing this debate. I was lucky enough to secure an Adjournment debate on geothermal injury in my constituency in Clackmannanshire a few weeks ago on 4 June. The Minister was very generous in her response then and I hope she will be even more so today.

Geothermal is a fantastic opportunity and, as we have heard from different Members today, it could breathe new life into areas that have been without a key industry and key employment opportunities for a long time. It is important that as part of the industrial strategy, which looks at the entire United Kingdom, we use the powers in this place—energy is of course reserved—to make sure that every part of the United Kingdom benefits from geothermal initiatives and that the United Kingdom remains a leader in renewable energy and shows the way, as we have in other areas, such as wind. As I said in that earlier debate, there are a number of international partners and friendly countries that are already far ahead of us, such as El Salvador and Costa Rica, which already bring in 15% of their energy from geothermal sources. We are leading the way on wind and we want to lead the way on geothermal too.

Energy is a reserved function. The hon. Member for Strangford (Jim Shannon), who is now not in his place, mentioned the district heating fund—obviously heating is devolved in different parts of the United Kingdom, and that is £300 million. I hope the Minister and the Treasury could apply a little flexibility on how that fund is applied for, especially when it is linking to geothermal energy projects across the United Kingdom, so that all parts of the United Kingdom can benefit.

My Adjournment debate was very much about Clackmannanshire, an important part of my constituency. It has a long history of mining and milling. We have mines filled with water that is sitting at around 40° C. Geothermal energy enables us to use technology to tap some of that warm water to help with heating and to generate power. That could help not only build new homes, but slash energy bills. In my constituency, in Clackmannanshire, about one in three suffer from fuel poverty. Introducing a new form of energy could help tackle that, as well as slashing up to 50% off the energy bills of the local council. As we know, every council in the country faces funding challenges and that would be very welcome.

Geothermal is not a total solution, but it is an important part of our future energy mix. The leadership that the Government have shown through the industrial strategy highlights the fantastic opportunity we have. We have grasped that with both hands with wind, but we can lead in geothermal energy throughout the United Kingdom. I hope that through this debate and the Minister’s support we will be able to move that agenda forward and deliver for our constituents.

[John Mc Nally (Falkirk) (SNP)]

It is always a pleasure to serve under your chairmanship, Mr Evans, and I thank the hon. Member for Bishop Auckland (Helen Goodman) for securing this debate. Many interesting points have already been made on geothermal energy; it has been quite an education. The hon. Member for Bishop Auckland enlightened me that we have an MP in our midst who delivered projects on geothermal energy and I will make reference to that later on. Her points on disused coalmines are absolutely relevant, as were those raised by the hon. Member for Ochil and South Perthshire (Luke Graham) about the coalmines in Clackmannanshire.

My ears pricked up when the hon. Member for Bishop Auckland mentioned fracking. I would inform those here today that the Scottish Government have won their fracking case. The Court of Session has today rejected a petition by Ineos Upstream Limited and Reach Coal Seam Gas Limited that sought to challenge the Scottish Government’s action in relation to unconventional oil and gas. I am absolutely delighted by that.

[Luke Graham]

Will the hon. Gentleman give way?

[John Mc Nally]

No, I am not going to take any interventions.

[Luke Graham]

It was going to be complimentary.

[John Mc Nally]

I can handle anything at all, but I want to get on with what we are talking about, which is extremely important. With the demise of coalfields, the potential for communities to benefit from new energy possibilities is endless. My home town of Denny in Falkirk is built on coalfields. The whole Falkirk area is built on coalfields and the potential that we have there should be realised. I hope that will happen over time.

As has been mentioned, geothermal energy is the heat stored in the Earth’s crust. The term brings to mind large geothermal energy plants exploiting volcanic sources of heat, such as those found in Iceland. As we heard from the hon. Member for Strangford (Jim Shannon), geothermal energy satisfies around two thirds of Iceland’s needs. To add to that mix, there is also a vast non-volcanic geothermal heat resource—the top 10 to 15 metres of the Earth’s surface act as a heat sink, trapping the sun’s heat.

As we have heard, estimates of the UK’s geothermal power potential vary. There are credible estimates that we could supply 4% to 20% of the UK’s electricity demands, and all of its heat, which is indeed good news, especially if the energy were used to combat fuel poverty. Why people in this energy-rich country suffer from fuel poverty totally escapes me and probably everybody else here. Given the huge potential of this fully renewable resource, why is it not being widely deployed? Will the Minister tell me if any geothermal projects have been awarded to contracts for difference during either of the allocation rounds to date?

There are mature geothermal renewable technologies providing heat and electricity that should and must play their part in the decarbonisation of our energy networks. Then there are ground source heat pumps, where water is pumped through pipes laid within the top 10 to 15 meters of the earth. The pipes absorb heat from the soil, which is then extracted to provide heat. They are cheap to run and are typically small installations, servicing homes, individual buildings or small-scale industry. Ground and water source heat pumps accounted for 6% of non-domestic accredited installations and 15% of domestic accredited installations under the renewable heat initiative between 2011 and April 2018. We surely need to be more ambitious than that.

Deep geothermal plants draw heat from rocks or aquifers heated by the earth’s core, and the UK certainly has geological features suitable for that, especially in Cornwall, northern England, the English midlands and Scotland. As the hon. Member for Ochil and South Perthshire said in a geothermal energy debate on 4 June, there are only nine geothermal energy projects in operation or being planned in the UK: four in Cornwall, two in the north-east of England, one in Southampton and three in Scotland. That is hardly the uptake we would expect for a reliable form of renewable energy that poses few big engineering challenges.

The UK has a poor track record of supporting deep geothermal projects. The UK first showed interest in mapping the country’s geothermal potential during the 1970s oil crisis, but funding was withdrawn as oil prices fell. The practice of short-termism and lack of vision had begun. The first commercial deep geothermal project in the UK started life as a Department of Energy research and development project in 1980 in Southampton, as has been mentioned. The Department of Energy abandoned it as being not economically viable. With a lot more vision than the Department of Energy—perhaps thanks to the hon. Member for Southampton, Test (Dr Whitehead)—Southampton City Council took over the project and developed it into a commercial district heating system, supplying more than 1,000 residential properties as well as hospitals and commercial and civic buildings. I applaud the council for taking that forward and for its courage and vision.

The UK deep geothermal energy challenge fund was set up in 2009 and £4 million was allocated to projects in 2009-10. However, the then Department for Energy and Climate Change halved that in 2010-11. What was it playing at? An early-day motion was lodged by a cross-party group of MPs expressing regret about the decision and 46 MPs signed it. Will the Minister tell us whether I am right in thinking that no further funding has been provided by the fund? I look forward to her answer.

In 2013, the Government withdrew a £6 million grant allocated to the United Downs geothermal power station project in Cornwall on the basis that the project could not attract enough private investment. However, the project went ahead in 2017 after the company was able to crowdsource nearly £4.5 million in private investment using debentures sold by the renewable energy and crowdsourcing specialist Abundance Investment. There seem to be an unending series of obstacles facing projects because of the Government.

The UK’s regulatory landscape and renewable heat initiative create structural barriers to investment in geothermal energy. There is no joined-up approach to licensing geothermal energy in the UK. Developers must navigate the planning system plus a number of environmental permits and consents, and a lengthy, complex process involving local planning authorities, the Environment Agency, English Heritage and other bodies. Unlike a licensing system, a system of permits cannot secure investment in the geothermal sector. As far as I am aware, there is nothing to prevent another developer drilling next door to an existing development once a company has demonstrated a successful well. Will the Minister confirm whether that is the case?

Arrangements for geothermal energy under the RHI actually prevent investment. Asset-based lenders and finance companies do not regard future RHI revenues to be security against lending risks as they would in the case of physical assets. The physical assets of a geothermal energy project have poor portability, since so much of them are stuck in the ground. Asset-based lenders and finance companies do not view the assets as security because they are difficult, if not impossible, to liquidate. Projects cannot lock in to an RHI tariff at the pre-accreditation stage, which adds uncertainty, particularly for projects with long lead-in times. RHI asset ownership rules are complex and prevent companies using an operating lease model, since under the present arrangements the asset finance provider would have to be the applicant receiving the RHI revenues.

It is interesting that a third of the operations are in Scotland, where there is consistency of support. Following a feasibility study of the potential of geothermal energy to provide a renewable source of heat in Scotland, published in 2012-13, the Scottish Government set up their geothermal energy challenge fund. In 2015, the fund invested nearly £250,000 in five feasibility studies. The projects are an important step towards demonstrating how geothermal energy could cut the estimated £2.6 billion a year spent on heating by householders and the non-domestic sector. They are in the Aberdeen Exhibition Centre; Guardbridge in Fife; Polkemmet in West Lothian; Hartwood in North Lanarkshire; and Hill of Banchory in Aberdeenshire. A small investment returns very large benefits.

A further four proposed projects were invited to contact the Scottish Government’s low carbon infrastructure transition programme team to discuss possible early development support to help them in their proposals. Scotland’s first deep geothermal heating system, the HALO 2 km deep borehole being drilled near Kilmarnock, received a £1.8 million grant and is under way as we speak. The Scottish Government’s investment in renewables is underpinned by a coherent decarbonisation strategy and is in turn underpinned by an all-party agreement. The political certainty, and the consistent political and financial support for that and for renewable energy as a whole, sends a message to businesses that the Scottish Government and Parliament are a friendly environment for investment in geothermal technologies.

Today Scotland may have a third of the UK’s planned or operational geothermal energy plants, but it seems that proportion will increase steeply in the near future. As with onshore wind and wave energy, the UK Government could learn much from the Scottish Government’s approach to supporting geothermal energy development. We are at a privileged moment in time developing renewable energy. The Scottish Government and Parliament are realising that ambition on behalf of all our communities.

Finally, I have been clear that any threat to Scotland’s distinctive and ambitious approach to environmental standards and climate change is completely unacceptable. The best way to ensure our environmental ambitions is to ensure that Scotland’s devolved powers continue to be respected.