Potential for deep geothermal energy in Scotland: study volume 1

8 Conclusions and Recommendations

8.1 Introduction

Realisation of commercialisation of the deep geothermal energy sector in Scotland will require a strong partnership between the Scottish Government, government agencies, developers and other stakeholders. It is anticipated that the Scottish Government have a significant role to play in initially establishing the industry sector, particularly in terms of financial support. In time, as private sector confidence in the sector grows, the support could reduce appropriately.

It is recommended that the following key actions are undertaken by the Scottish Government in order to encourage and facilitate development of the sector.

A progressive and phased approach to developing Scotland's geothermal resources is advocated to build confidence, reduce costs, and thereby encourage private investment.

8.2 National Geothermal Energy Vision Statement and Strategy for Scotland

It is recommended that a clear Vision Statement is developed and a Strategy for its delivery is also developed and then implemented. This would serve to direct and realise the development of the geothermal energy sector in Scotland.

Both the Vision Statement and Strategy should be directly linked to existing Scottish Government policies on renewable energy and heat, including the 2020 Routemap and associated policies but also specifically and importantly the Outline Heat Vision.

It is not intended that these should be exhaustive documents or take a long period to produce; resources and effort should be directly channelled into progressing the development of the geothermal resources themselves, however the Vision Statement and Strategy are considered to be key enablers.

8.2.1 Vision Statement

The purpose of the proposed Vision Statement is to define the Scottish Government's ambition for geothermal energy development in Scotland, and to set goals to be reached at certain defined points in the future.

It is anticipated that the Vision Statement will present a progressive approach to developing Scotland's geothermal resources with targets for:

• Short to medium term (say 0 to 10 years+) - developing the supply of heat from geothermal resources and the tie-in with allied technology and infrastructure development for distributing and utilising heat, i.e. combined heat and power plants, district heating networks, etc.
• Medium term (say 5 to 10 years+) - potential development of deeper Hot Sedimentary Aquifer ( HSA) systems for heat and potentially generation of baseload electricity.
• Medium to longer term (say 5 to 20 years+) - potential development of deeper Hot Dry Rock resources using Enhanced Geothermal Systems ( EGS) for generation of baseload electricity as the knowledge base, market confidence and technology advances.

Experience gained from development of progressively deeper schemes will increase market confidence, reduce costs, and thereby encourage private investment.

8.2.2 Strategy

The proposed Strategy is the routemap that will outline how the Vision Statement for geothermal energy development in Scotland will be achieved.

The Strategy will have several strands, technical, administrative, regulatory and commercial. The general suggested content of these is highlighted in the sections below, but would not be limited to these alone.

8.3 Geothermal Demonstrator Projects

8.3.1 Initial Demonstrator Project (Heat Only)

In order to increase confidence in the geothermal resources and technologies, it is recommended that a geothermal demonstration and evaluation project (or projects) is developed and installed as soon as feasibly possible.

This would be a full scale working scheme, supplying heat to an identified demand, be it domestic or commercial or some combination of the two.

The demonstrator should be a heat-only project most likely utilising abandoned mine workings as the geothermal resource. The advantages of the abandoned mine workings are that there is a wealth of information available on them, they are accessible in terms of depth and they coincide in many parts with the major population centres in central Scotland.

The two existing small-scale schemes in Scotland that utilise abandoned mine workings have already demonstrated that this resource can be used to heat homes at a relatively small scale. The demonstrator would seek to replicate this at a significantly larger scale, the scale itself being dependent on the resource and the nature of demand.

To identify the potential opportunities to site the demonstrator project the resource availability mapping needs to be combined with existing / predicted heat demand (from heat mapping). Once these geographical areas have been defined, specific heat demand opportunities need to be identified.

Heat demand opportunities could comprise (but are not limited to) housing, commercial buildings, industry, horticulture, aquaculture, public buildings, combined heat and power plants (as a 'warm' water supply to increase efficiency). These could be by conversion of existing stock or facilities, or a new build opportunity.

Potential opportunities are known to exist in and around Scotland's two largest conurbation areas; Glasgow and Edinburgh.

For example, the BGS has undertaken a significant amount of research to produce a three-dimensional model of the strata underlying Glasgow, including abandoned mine workings. This is now being utilised in research work being undertaken at Glasgow Caledonian University(and part funded by Scottish Power) to map abandoned mine workings that is currently. This is particularly focussing on the Clyde Gateway area in eastern Glasgow, and allied with the significant ongoing regeneration in this area, opportunities are likely to exist for a demonstrator project.

A significant amount of work was also previously undertaken as part of a European Union project on utilising mine waters of the former Monktonhall Colliery as a source of heat for a development at Shawfair in Midlothian on the outskirts of Edinburgh as part of a major residential and business development ( PB Power, 2004). The mine water project at Shawfair did not go ahead; the reasons for this are not known but have been been attributed variously to landowner issues or a lack of economic viability. In addition the residential development was later cancelled due to economic conditions. A sister mine water project at Herleen in the Netherlands was successfully installed. An opportunity exists to either resurrect this project or identify other opportunities local to this area that could utilise mine water from Monktonhall. The new Shawfair railway station on the reinstated Waverley Line (Borders Rail project) may act as a catalyst for renewed interest and development in this area.

Once opportunities are identified, site specific feasibility studies should be undertaken on the best of these and the overall most certain and beneficial project should be selected as the demonstrator(s).

The options for funding need to be fully explored and this is beyond the scope of this report. As this would be a demonstrator project, aimed at encouraging future investment, it is considered that additional funding from the government (Scottish or UK) would be required to encourage investment. It is envisaged that the demonstrator would be developed and operated by a private company with allocation of funding on a competitive basis, either to a single project or to multiple competing projects. It may be possible to encourage the private funding in return for an incentive, for example a guaranteed purchase of heat energy by a public body for a contracted period.

8.3.2 Deep Demonstrator Projects (Heat and Electricity Generation)

Following the implementation of the National Geothermal Exploration Programme ( see following section), it is anticipated that demonstrator projects may be required for deeper resources ( HSA and HDR). This is due to the high level of risk associated with such deep drilling.

The opportunities for locating these initial projects can only be determined following the exploration programme. SKM (2012) previously assessed the case for a deep demonstrator project for Scottish Enterprise and their report contains useful information but identifies significant information gaps.

A deep demonstrator project could be ultimately achieved by progressively advancing a research and evaluation borehole, with further advancement to the next depth only on proving of certain conditions at each stage, e.g. geothermal gradient (below the glacially-effected zone), heat flow, geological conditions, etc. This however may take a significant length of time to complete and would require policy stability over the term of the investigation.

SKM (2012) also raised the possibility of extending existing borehole(s) at the Weatherford Evaluation Centre ( WEC) near Bridge of Don, Aberdeen. However, this would be dependent on geological conditions being suitable for an evaluation well / demonstrator, and the cooperation of Weatherford, a commercial organisation in the oil and gas services sector.

A key principle of the Scottish Government's heat vision is to recover as much 'waste' heat as possible. Therefore any deep geothermal power plant developed in the future should, for demonstration purposes, recover as much 'waste' heat as possible for other uses and should therefore be a combined heat and power ( CHP) plant.

8.4 National Geothermal Exploration Programme

Many of the barriers to development of the geothermal sector in Scotland centre around our current knowledge level of the resource. In particular, geothermal gradients and heat flow is poorly understood and there is a poor understanding of potential Hot Sedimentary Aquifers ( HSA) and High Heat Production ( HHP) granites (' HDR') at depth. Both of these are primarily due to the lack of suitable deep onshore borehole data.

In parallel with the Geothermal Demonstrator Project, and to advance the development of deeper geothermal resources in Scotland, a National Geothermal Exploration Programme is recommended. This would be undertaken in three parts as outlined in the following sections:

• Creation of a National Geothermal Database;
• Research programme for deeper prospects; and
• Physical exploration programme.

It is recommended that the exploration programme is phased to concentrate on the most promising regions already identified by this study and to advance development of these resources and the sector as quickly as possible.

The linkages between this proposed programme to any other existing and planned investigation programmes is still to be established.

8.4.1 National Geothermal Database

The creation of a National Geothermal Database would provide a central source of relevant information for both onshore and offshore data for stakeholders, potential developers and researchers. The current lack of deep onshore borehole data in Scotland will mean that while offshore geothermal resources may not be exploited commercially in the near future, offshore data will be important for correlating with onshore data.

The database would remain live and be maintained, receiving and storing new data as it becomes available to further define the resources available. Initially data would be gathered from all available sources and it is hoped that the data would be supplied by relevant organisations on a cooperative partnership and collaboration basis, in the national interest, with the benefit of open access for all interested parties. It is envisaged that formal legal agreements would be put in place with the relevant organisations to protect their interests and control use of the data by third parties. Some data may be commercially sensitive and organisations are unlikely to release such data until it ceases to be commercially sensitive (if ever).

Organisations likely to hold significant amounts of relevant data include:

• DECC (data from oil and gas exploration, including bottom-hole temperature data)
• The BGS (various data sets of potential relevance)
• The Coal Authority (coal mining data)
• Ground Source Heat Pump industry (near-surface data)
• Oil and gas exploration and production companies (data from oil and gas exploration and production).

A suitably qualified and experienced research or regulatory body would be required to host, operate and maintain the database. As the state body responsible for geological data, it is considered that the BGS would be well placed to carry out this service.

8.4.2 Research programme for deeper geothermal prospects

A programme of geological research into the deeper prospects is required to review and reinterpret existing data, particularly relating to identified thermal anomalies and HHP granites (including buried granites).

The creation of the National Geothermal Database will make data available to allow modelling of the deep geothermal gradient (temperature variation with depth) and heat flow.

Where not already available, heat production data for all significant exposed granite intrusions across Scotland should be obtained and the fracture networks in identified HHP granites should be characterised.

The ultimate aim of the geological research programme is to further define the most likely regions for deeper geothermal prospects.

8.4.3 Physical exploration programme

It is anticipated that the physical exploration programme will be in two parts, geophysical survey on a regional basis and deep drilling once specific target resources have been identified.

The targeted geophysical survey will be used to determine the three-dimensional geological structure of the identified region(s) and help define the extent of potential geothermal resources. The types of geophysical survey employed will be dependent on the particular geological conditions but could include aeromagnetic, gravity, radiometric imaging, electromagnetic, seismic (reflection, refraction and tomography).

Deep drilling will ultimately be required to investigate the suitability of the potential deep geothermal resources identified from the research programme and geophysical surveys. The primary aims of the deep drilling will be to determine the properties and thickness of overlying strata, the nature of the resource, including groundwater conditions (if any), temperature, structure, fracturing, major faults/fault zones, porosity, permeability (natural, unenhanced) and the existing stress regime.

As the cost of deep drilling is extremely high it is anticipated that, subject to suitable conditions being encountered, that a deep exploration borehole could be converted into a production well (other production wells would also need to be drilled in addition to the deep exploration borehole). This may be as a deep demonstrator project ( see preceding section).

8.5 Resource Ownership & Licensing

The legal ownership of geothermal resources is not currently defined under existing legislation. The uncertainty of ownership of geothermal resources is a potential risk for individual projects, which along with risks associated with geological uncertainty, gives rise to increased cost and can make it difficult to obtain sufficient finance to develop deep geothermal projects.

A clear definition of what comprises geothermal energy is vital in establishing ownership of the resource and determines whether it is defined in legislation as a mineral, water or heat/energy.

From the review of legal ownership and existing licensing regimes, it is considered that creation of new, specific legislation is the preferred option. Key requirements for a potential geothermal licensing regime have been identified.

It is recommended that the legal ownership of geothermal energy resources should be established to allow a geothermal resource licensing system to be established. It is considered that this can only be undertaken by amending existing primary legislation or introducing new primary legislation.

It is recommended that new primary legislation should be introduced, a proposed 'Geothermal Energy Act', to include claim ownership of geothermal resources and implement a licensing system for geothermal resources.

It is expected that the rights to geothermal energy resources would be claimed on a UK-wide basis and rights then licensed by a UK Government agency (for example DECC), or possibly the powers for Scotland could be 'transferred' to the Scottish Government.

It is recommended that the Scottish Government liaises with DECC to determine whether establishing legal ownership (and introduction of a licensing system) can now be taken forward as UK priority, or alternatively, how this can be undertaken by the Scottish Government.

It is also recommended that the Scottish Government, in conjunction with DECC, reviews the potential political opportunities and timescales for introduction of the proposed Geothermal Energy Act, and potential interim legislation.

It is anticipated that given the likely timescale involved in drafting new and specific geothermal resource licensing legislation (several years), interim measures are required to encourage commercial investment in the short term and medium term. It may be appropriate to follow a two stage approach to legislation, initially creating relatively simple interim exploration and development legislation, as an amendment to existing legislation, to be replaced at a later date with more comprehensive and stand-alone legislation, as the industry develops and matures.

It is recommended that in the intervening period before any amended or new legislation can be introduced, geothermal development is controlled through the development management (planning) regime through the EIA process. Some changes to planning guidance would be required to enable this. It is recommended that SEPA are consulted by the Scottish Government regarding this issue as they would be the primary consultee for both relevant EIA issues and groundwater abstraction.

The enactment of geothermal resource licensing should be such so as not to inhibit the take-up of GSHP technology. It is therefore recommended that geothermal resources shallower than 200m depth should be either exempted from future licensing or made subject to general rules.

8.6 Environmental Regulation

Environmental legislation relating to assessment and consenting issues are based on various European Directives and associated UK and / or Scottish legislation or regulations and these are well established in Scotland.

Although, the existing framework of legislation could control geothermal development in Scotland, some changes to the legislation should be considered.

Activities relating to deep geothermal projects are specially identified in Schedule 2 of the EIA Regulations 2011. It is noted that under the existing Regulations, EIA for deep geothermal development is only likely to be required if the surface footprint of the development is greater than 0.5 hectares, regardless of the sub-surface extent of the geothermal developments.

Activities relating to geothermal projects are specially identified in Schedule 3 of the Water Environment (Controlled Activities) (Scotland) Regulations 2011, with further discussion provided in relevant SEPA guidance notes. Currently a potential gap in regulation exists as water abstraction and reinjection for geothermal developments is covered by general binding rules (specifically GBR17) and SEPA would not need to be consulted regardless of the actual water volumes, unless the difference between the two was greater than 10m ³ per day (notwithstanding the requirements for 'complex' boreholes i.e. >200m depth).

Hydraulic fracturing may, in the future, be required to develop deep engineered/enhanced geothermal systems ( EGS) for electricity generation and heat production from deeper resources. Hydraulic fracturing is unlikely to be required for the development of heat-only geothermal schemes. Seismic risk assessment is likely to be seen as good practice for developments involving hydraulic fracturing.

The following key recommendations are made in relation to the environmental regulatory regime for deep geothermal energy.

• It is recommended that the Scottish Government clarifies whether EIA should consider the surface and / or sub-surface extent of potential geothermal developments and advice issued accordingly (see also Resource Ownership & Licensing).
• It is recommended that the Scottish Government considers specific reference to "deep geothermal" or "geothermal" when drafting future environmental legislation.
• It is recommended that SEPA produce a detailed specific Regulatory Guidance document for deep geothermal development.
• It is recommended that SEPA should consider whether the existing CAR GBR's relating to abstraction licences for geothermal energy developments are appropriate to future larger-scale geothermal developments which may be abstracting and re-injecting large volumes of water.
• It is recommended that SEPA should clarify what constitutes groundwater heating or cooling pollution in relation to geothermal developments.
• It is recommended that geothermal energy should be listed by SEPA as a NORM Industrial Activity in a future revision of the Regulations. In the interim, good practice would dictate that developers should adhere to the Regulations as if geothermal energy was included.

8.7 Planning Policy

In relation to considering national planning policy in the context of and achieving the Scottish Government's ambitious targets for renewable/low carbon and decentralised sources of energy, geothermal energy is a good source of renewable and low carbon heat. A supportive planning framework is considered to be important to encourage commercialisation of geothermal energy in Scotland.

There is currently a perceived lack of policy coverage for deep geothermal energy. Dealing with primary planning impacts in terms of policy context requires strategic level support.

Geothermal energy developments are likely be classified as 'Local Developments' under the Hierarchy Regulations. Geothermal energy may become of national significance as an energy source in the future. A key challenge is therefore including and promoting geothermal energy at national planning policy level.

The following are the key recommendations:

• The NPF3 main issues report is currently under consultation and it is recommended that geothermal energy is specifically included in NPF3;
• It is recommended that the Scottish Government should develop a specific strategy for the development of geothermal energy (similar to the strategy for the development of marine renewable energy);
• It is recommended that the Scottish Government should consider specifically including geothermal energy at national planning policy level in the revised SPP. This could include a statement on a presumption favour of geothermal developments;
• To achieve renewable heat energy targets and the desired uptake, it may be necessary to require new-build developers to install district heating systems. It may be possible to encourage or incentivise developers to include geothermal energy as the, or part of, the heat source;
• Planning Authorities require the expertise to assess geothermal energy applications. The current perceived lack of clarity and specific advice could potentially lead to delay in determination of applications. Supplementary specific planning guidance ( SPG) for deep geothermal energy should be developed;
• It is recommended online renewables planning advice on deep geothermal is revised to provide more specific advice, reflect the current understanding of available resource, and differentiate clearly between shallower heat-only schemes (the likely future majority of schemes) and deeper power and heat schemes;
• Circular 2/2011 relates to renewable energy for non-domestic microgeneration. It is recommended that the Scottish Government may wish to consider amending Circular 2/2011 to specifically allow small-scale geothermal heat energy within permitted development in a similar manner to GSHP systems;
• It is recommended that policies on geothermal energy are adopted by planning authorities in the next review of their Strategic Development Plans and Local Development Plans;
• Deep geothermal (>200m depth) should be included in current and future reviews of Local Development Plans as the review cycle dictates. Planning Authorities require information on the spatial distribution of both deep geothermal resources and heat demand, so that they can be linked;

8.8 Costs and Financing

As highlighted elsewhere in this report, there are currently significant differential in technological, risk and costs uncertainty between relatively shallow heat-only developments (relatively low risk) and deeper primarily electricity-generating developments (relatively high risk).

It is anticipated that experience gained from the demonstrator project(s), and progressively deeper schemes will increase developer and investor confidence and reduce costs and thereby encourage development. Shallower heat-only developments are likely to be viable a significant period of time before deeper developments.

The German government has stimulated activity in the deep geothermal sector by providing a range of support measures, including a generous FiT (with bonuses for HDR projects), exploration risk insurance and grants.

The proposed Renewable Heat Incentive ( RHI) of 5.0p/KWh for 2013 is welcome support for deep geothermal (defined as schemes >500m depth under the RHI) and could help to start unlocking the geothermal development potential.

With regard to electricity generation from geothermal sources, i.e. from HDR sources only, SKM (2012) undertook a revenue assessment based on their estimated costs for a relatively small-scale deep geothermal demonstrator project. This indicated a significant funding gap of approximately £700/MWh based on the current 2 ROC level of support, with only a slightly reduced funding gap of approximately £620/MWh for a theoretical 5 ROC level of support.

It is considered that for an emerging technology, with the potential to provide baseload electricity generation, the level of support should be increased to 4 to 5 ROCs.

Even with a significantly increased ROC level of support, the funding gap would still be large and significant government additional funding and / or some alternative funding mechanism would currently be required to attract and encourage deep geothermal developments for electricity generation. As discussed above, costs should reduce over time, and confidence increase, such that in the future the level of additional funding would be reduced and ultimately may not be required.

DECC previously issued grants under the Deep Geothermal Challenge Fund. Funds were allocated to both heat-only and electricity-generating schemes. None of the current UK electricity-generating schemes have currently proceeded due to shortfalls in total project funding. The future intentions for funding of deep geothermal projects by DECC is unknown.

Any additional state funding would be subject to State Aid regulations.

It is recommended that the Scottish Government investigates how it can act unilaterally to support deep geothermal projects in Scotland, potentially setting up its own deep geothermal fund. This could potentially initially be used as a mechanism to fund the proposed demonstrator project(s).

Geothermal exploration risk insurance has been requested by some potential geothermal developers to encourage otherwise risky investment. However, the Scottish Government have advised that under the existing internal government budgetary arrangements the 'insurance' provisions would have to be covered with an actual budgetary sum, thereby potentially depriving other areas of those funds, which would be difficult to justify.

It is recommended that the Scottish Government investigates how it can offer some form of exploration risk insurance.

As an alternative or in addition to direct funding from the Scottish Government, it is recommended that it should be investigated whether other institutions could provide exploration risk insurance (for example the Green Investment Bank or the commercial insurance sector). The European Geothermal Risk Insurance Fund ( EGRIF) proposed by the European Geothermal Energy Council ( EGEC) may also provide an alternative but is currently only a proposal.