Potential for deep geothermal energy in Scotland: study volume 1

Appendix C: Summary of Main Outcomes from the Stakeholder Workshop

The Project Stakeholder Workshop was held on the 31 October 2012 at the offices of the British Geological Survey in Edinburgh. The following organisations participated in the stakeholder workshop:

Aberdeenshire Council
British Geological Survey
City of Edinburgh Council
Cluff Geothermal
Cornwall Council
Edinburgh Centre for Carbon Innovation
Fife Council
Geoserve Solutions
Geothermal Engineering
Glasgow Caledonian University
Glasgow City Council
GT Energy
Health & Safety Executive
Midlothian Council
North Ayrshire Council
Scottish and Southern Energy
Scottish Enterprise
Scottish Power
Scottish Renewables
Semple Fraser LLP
Scottish Environment Protection Agency
Tait Enterprise Development Limited
The Coal Authority
The James Hutton Institute
The Scottish Government
University of Glasgow
University of St Andrews
West Lothian Council

The following sections provide a summary of the main outcomes of each workshop session.

C1 Session 1 - Legal and Resource Licensing

Is a specific resource licensing regime required for deep geothermal energy resources?

• It was considered that 'deep' geothermal energy should be a state resource and therefore should be legally defined as such through a statutory resource licensing regime, to control and administrate geothermal development and protect the resource. There are parallels with the development of the oil and gas industry in the UK.
• It is considered that the deep geothermal industry in the UK is currently at the 'research and design' or 'demonstrator' stage and that the lack of a specific resource licensing regime has not significantly hindered the development of the deep geothermal industry to date (geological risk is currently the primary concern for the proposed deep geothermal projects in Cornwall). However, the industry is currently developing and evolving and for it to continue to do so, a specific resource licensing regime is considered to be required in the near future.
• It was postulated that, based on the current rate of development of the deep geothermal industry, resource licensing will be required in the near future (say within 18 to 24 months) and therefore action is required immediately in order to put this in place. Timing for getting legislation produced or amended is critical and action may be required prior to the end of the 2012/2013 financial year (end of March 2013).
• When the industry has approached UK Government energy regulators ( DECC) in the recent past to request that a licensing system be put in place, feedback had been that it would be difficult for DECC to justify spending on developing a licensing system for such a fledgling industry but they would anticipate introducing licensing if the industry develops significantly.
• Future investment in deep geothermal energy projects is unlikely to happen unless specific developments are licensed. Introduction of a resource licensing regime now, early in the evolution of the deep geothermal industry would assist in shaping the future industry. The geothermal resource needs to be managed sustainably through licensing and regulation.
• There is a need for a strategic heat resource strategy as per the water resource strategy.

Potential licensing regimes for deep geothermal energy

• It was considered that any License must be site specific to protect the geothermal asset and the environment. Site specific modelling is required as part of the licensing process to demonstrate no significant impact upon adjacent reserves ('significance' would need to be defined or determined).
• It was considered that due to the wide range of geothermal heat resources that different licensing regimes should apply depending on the geological source of the heat and or the depth. It was also suggested that truly 'deep' geothermal be defined as resources at greater than 1000m depth. Licensing may also be required for resources at 'moderate' depth, say 100m to 1000m deep.
• Water, either groundwater or injected water, is generally the medium through which heat is extracted in a geothermal development (excluding closed-loop systems which tend to be relatively shallow) and therefore licensing is likely to relate to abstraction and re-injection of water ('discharge').
• It was considered that existing groundwater abstraction licences are inadequate as they are primarily aimed at environmental protection, as opposed to heat resource protection, and do not specifically consider geothermal heat extraction.

Existing Licensing Regimes in the UK

• In England and Wales geothermal is currently dealt mainly through the groundwater abstraction licensing regime administered by the Environment Agency ( EA). Experience from one developer suggested the following process is being followed:

a. The developer goes to the EA and gives exact details about the borehole saying how much land area they consider will be effected by the development;

b. The EA awards an abstraction license on this basis;

c. The developer constructs the borehole and then determines whether they need larger or smaller area (based on borehole testing);

d. The license size is then amended to suit the actual area required; and

• A similar groundwater abstraction licensing regime exists in Scotland.
• It is noted that abstraction licenses are primarily in place for environmental protection rather than geothermal resource protection.
• It is also noted that abstraction licenses does not take account of third-party land interests, other than other groundwater abstraction licences.
• For geothermal developments affecting the interests of The Coal Authority, require a license for access to or through existing coal mine workings and / or coal reserves.
• In addition, The Coal Authority has developed a system of "Heat Access Agreements" to license abstraction of geothermal heat from coal mine workings and / or coal reserves.
• It was suggested that geothermal resource licensing should potentially be similar to petroleum resource licensing, and include:

a. Separate licenses to explore and produce;

b. Environmental / hydraulic fracturing controls could be included;

c. Third-party land interests, that could potentially be affected by directional drilling or heat extraction, could be considered; and

d. Could include a royalties mechanism for if the resource becomes valuable in the future.

Existing Licensing Regimes in Other Countries

• Various licensing systems are in place in different countries around the world.
• The Irish Geothermal Licensing regime is a potential model for a UK or Scottish licensing regime:

a. Deep geothermal is defined as greater than 1km in Ireland;

b. From the Irish example, the state should take ownership of the resource;

c. The Irish Legal System is very similar to the UK;

d. Compulsory purchase of all land rights below 1km (zero value); and

e. Anyone with existing interests below 1km to declare them (none to date)

• There were similar workshops in Ireland 2 to 3 years ago so Scotland is currently perhaps 2 to 3 years behind Ireland in developing a resource licensing regime.
• There may be lessons to be learned from the existing resource licensing regimes in other countries.

Opportunities for introducing a resource licensing system

• It was considered that there is now an opportunity to re-introduce proposals for resource licensing to DECC because:

a. There is a greater and growing interest and momentum in the geothermal sector;

b. Licensing in Ireland was apparently developed in liaison with DECC;

c. There is new licensing for hydraulic fracturing for the developing shale gas industry;

d. The Scottish Government could potentially lobby DECC to introduce licensing, potentially following the Irish example;

e. It is considered that DECC may be receptive to such an approach as they recognise the need for resource licensing; and

f. There is a potential opportunity for amendment of the Electricity Market Reform Bill to include resource licensing but timing is critical for introducing any amendments through the Westminster Parliament.

C2 Session 2 - Environmental Legislation and Permitting

Adequacy of existing environmental permitting

• It is considered that environmental permitting is currently adequate for addressing geothermal energy developments.
• It was stated that clear guidance on the application of relevant environmental legislation would be beneficial for potential developers of geothermal energy projects.
• It is considered that more specific reference to "deep geothermal" or "geothermal" in environmental legislation would provide clarity and assist potential developers of geothermal energy projects.
• Environmental regulators positioned to ensure resources are protected on a holistic basis
• Contamination between aquifers is a key risk.
• Regulation should be linked to heat energy and not just water quality

Application of environmental permitting and regulations

• Water quality could actually be improved by geothermal heat extraction treating extracted water before discharge or re-injection, including removing iron from ferrous-rich mine waters. The Coal Authority has a pilot scheme for pumping, treating and extracting heat from mine water discharge at Dawden in Co. Durham.
• Concern was expressed over potential standards for re-injection of groundwater following heat extraction, potentially to Drinking Water Standards ( DWSs) and / or Environmental Quality Standards ( EQSs) which could be overly onerous and may inhibit development of geothermal resources, particularly those in former mining areas.
• The area of 'development' refers to surface not sub-surface, geothermal developments could effect a wider area than the surface compound. Under existing EIA regulations, there is a threshold is an apparently arbitrary 1 hectare on the surface site area before an EIA is required. It is noted that drilling compounds may be deliberately kept below this threshold to avoid the need for an EIA.

SEPA's viewpoint on existing regulation

• Deep geothermal developments are likely to require a Controlled Activities Regulations ( CAR) license under existing regulation.
• Of particular concern to SEPA is that geothermal (or other) borehole construction is "fit for purpose" and does not cause cross-contamination between different aquifers that may overlie each other. NB - confidential: there is likely to be incoming control on drilling of boreholes to prevent cross-contamination between aquifers in CAR GBR3.
• There was a review of CAR licensing for shale gas issues and Coal Bed Methane ( CBM, 'coal gasification').
• SEPA have produced practical guidance for hydraulic fracturing / stimulation.
• Change in temperature is defined as a potential pollutant under the Water Framework Directive

Issues around stimulation for development geothermal resources

• For potential stimulation of geothermal resources:

a. The meaning needs to be defined and terminology carefully defined and used;

b. Stimulation will induce seismic events but the scale of these will vary dependent on the situation; and

c. Has been carried out extensively in Scotland, particularly Scottish highlands to enhance bedrock permeability for public water supply.

• It was stated that we should wary about aligning geothermal with shale gas extraction for licensing and regulation because there are significant differences between hot water for geothermal and flammable gas and the risks are therefore different
• It was acknowledged that both the public and politicians are concerned about hydraulic fracturing and that public perception and communication from industry is essential.
• SEPA reinforced the need to engage the public and that the geothermal industry needs to speak as one voice in relation to these issues which could be perceived to be of concern.

There was some debate within the wider group on the potential interaction of different regulatory licensing and regulatory regimes, for example the potential conflict between say a geothermal project (currently controlled by CAR licensing) and say a coal gasification project (controlled by Petroleum licensing). It is considered that this potential conflict or uncertainty is due to a lack of a specific resource licensing regime for geothermal energy and that such potential conflicts need to be addressed in development of such a regime.

C3 Session 3 - Planning

What are seen as the Primary potential Planning barriers and what options exist within planning to improve opportunities for deep geothermal energy developments and what options exist to improve opportunities?

• Planning Authorities need to have the expertise to assess a geothermal application. It is a significant responsibility for the Planning Authority and potentially significant pressure for the individual planner concerned.
• Current planning applications can only be dealt with under existing planning policies. The current perceived lack of clarity and specific advice could potentially lead to delay in determination of applications.
• It is noted that in assessing planning applications there will be a predictable range of issues with which Planners are familiar, including noise and traffic. The primary impacts are generally during drilling, including potentially 24 hours a day (dependent on the type and scale of the development). There is generally a low visual impact.
• To deal with primary planning impacts in terms of policy context requires strategic level support. There is currently a perceived lack of policy coverage.
• Uncertainty was expressed over whether Planning is required at the exploration stage for drilling boreholes.
• Hydraulic fracturing is not required for developing the majority of deep geothermal resources and would only be relevant for the deepest 'enhanced' systems which would be limited in number and extent. Hydraulic fracturing required for deep geothermal energy development is very different to for shale gas extraction but this distinction needs to be defined and clarified.
• Developers want planning certainty supported by primary Government policy.

What are the primary potential planning policy interventions or actions that could be put into place at national / local level?

• The Scottish Government could consider changes to planning policy in relation to promoting geothermal energy, for example there could be a presumption in favour of deep geothermal developments which would give greater planning certainty.
• Amending planning policy to give greater planning certainty for deep geothermal energy developments would assist in de-risking and therefore encourage investment.
• It was considered that deep geothermal energy should be included in the review of National Planning Framework ( NPF) and Scottish Planning Policy ( SPP) and national planning guidance.
• The Scottish Government have commenced the development of a NPF3 document. Comments are currently being accepted by the Government via an on-line proposals form. The closing date for submission of completed forms is Friday 14 December 2012.
• The Scottish Government have also commenced the development of a revised SPP. Comments are currently being accepted by the Government via an on-line priorities for change form. The closing date for the submission of completed forms is Friday 11 January 2013.
• The NPF and the SPP could potentially contain information about resource availability and heat mapping. Deep geothermal resources could also be linked to District Heating.
• There are potential parallels with the way Coal Bed Methane ( CBM) was incorporated into Planning.

Are there realisable scales of deep geothermal that could be factored into development planning, policies or development management advice?

• It was considered that deep geothermal should be included in Local Development Plans ( LDPs) that are currently being prepared, or as they are reviewed in the future, dependent on the current status of the review cycle.
• Geological information on the locations of potential deep geothermal resources could be included in development plans in map form to show their spatial distribution with the Planning Authority area.
• Under the Climate Change Act, LDP's are required to include for provision of on-site renewable energy, and this could include deep geothermal energy.
• It was recognised that there are various scales of geothermal energy developments at various depths, from shallow (tens of metres) to deep (thousands of metres), and the planning regime needs to take account of this.
• Within Scotland, only a limited number of Planning Authorities are likely to be involved in a particular scale of geothermal energy developments.
• It was suggested that supplementary specific planning guidance ( SPG) for deep geothermal should be developed.
• The 2016 Zero Carbon Building policy will potentially influence geothermal developer actions and choices

Are there any resources / tools or other actions that could assist planning authorities in supporting deep geothermal opportunities and effectively dealing with any applications submitted?

• So that the requirement for deep geothermal energy developments can be assessed, amended planning advice should include links to demand i.e. heat demand and heat source (including geothermal resources) maps for Planning Authority areas.
• There should be information about the industry and its development prior to planning consideration including what the benefits are.
• The Scottish Government Planning should facilitate and have responsibility for developing advice and guidance but this should be developed jointly with other stakeholders, including representatives of the geothermal development industry.
• There is a requirement for Planners to have access to knowledge through training and CPD to make informed decisions in relation to deep geothermal energy developments.
• Planners need to ask the right questions rather than request significant amounts of information from applicant due to lack of experience of such projects

a. Unfamiliarity amongst planners; and

b. Should ensure the first Planning Authority to go through geothermal planning application are supported wherever possible by the Scottish Government.

• It was noted that pre-application consultation is not required for geothermal projectsbut should be considered.
• Planning applications for large-scale deep geothermal projects should be phased to allow a staged approach to exploration and development.
• Can use planning to build public confidence
• Planning facilitation of district heating and heat stores could actually encourage development of geothermal energy as a heat source
• Need to communicate positive messages to the public regarding deep geothermal energy, including that heat generated is used locally (as opposed to generating electricity to be used elsewhere) and it is a cheaper, low-carbon heat and reliable source of heat energy.
• Heat pumps could be used to balance a district heat network?

C4 Costs, Financing and Benefits

Is the ROC / RHI level likely to encourage interest in the Deep Geothermal / Mine water Sector?

• ROC is considered a good support mechanism if pitched at right level and that a ROC level of 4 to 5 would be reasonable for deep geothermal as an emerging technology that would provide baseload.
• It was questioned whether geothermal, as a developing market, would realistically be able to take advantage of the current UK level of support of 2 ROCs, as it is likely that much activity will take place post-2013 (with support reducing to 1.8 ROCs in 2017).
• ROCs should be compatible with other countries, particularly European countries (including Germany), as UK projects are competing in the international investment market for geothermal development. Schemes in other countries are also generally backed by exploration risk insurance.
• There is currently no FiT available for electricity produced using geothermal energy.
• It is considered that the 5p/kWh RHI currently proposed by DECC could make the business case for deep geothermal heat developments (>500m depth).
• It is anticipated that after say 100MW of installed development the RHI could reduce as the cost of equity reduces.
• It was suggested that there should potentially be different tariffs for different geothermal technologies / applications, i.e. for GSHPs, mine workings, HSA/hydrothermal and HDR.

What needs to happen to encourage increased drilling activity?

• The new UK Green Investment Bank is keen on investing in deep geothermal but only at the low risk stage, i.e. would invest in the second well once the resource has been proved but not the initial exploratory well.
• From one developer's experience, deep geothermal development funding is typically a 50:50 equity to bank debt split. Equity investors require a 20% return.
• Deep geothermal Geothermal development attractive to pensions funds and other long-term investors due to long life - the resource potentially lasts for 100s of years.
• Success rates for deep geothermal electricity generation schemes can be as low as 10 to 40%, however, heat-only schemes are much less risky.
• Heat-only schemes can have a 100% success rate if managed properly and this has been the case in Germany:

e. Therefore projects in Germany have not required risk insurance;

f. Expected to run 250-300 years; and

g. Very attractive for pension funds and other long-term investors.

• Geothermal heat is much less risky than deep geothermal electricity production and should be targeted first:

a. 10 to 40% success rate for deep geothermal electricity production compared to up to 100% for deep geothermal heat;

b. Deep geothermal heat developments are not as deep so less of a technical challenge, easier to predict the resource, reduced drilling costs, etc;

c. Deep geothermal heat developments require groundwater abstraction at only ~85°C and 50 litre/sec , compared to ~150°C and 150 litre/sec for deep geothermal electricity production; and

d. But needs to be near to end use heat loads.

• Consideration should be given to a Scottish deep geothermal exploration risk insurance scheme similar to the schemes that are in place in most other countries that are developing geothermal resources.

a. The Scottish Government would underwrite the exploration risks;

b. Potentially this may not perceived as "State Aid" (to be confirmed);

c. It could potentially be funded or part-funded by banks (e.g. German Development Bank scheme); and

d. The Scottish Government has no grant funding

• Holland has a 80% deep geothermal exploration risk insurance scheme with the aim being to promote drilling activity.
• As the geothermal resource evidence base increases the potential risks will be reduced and it will be easier to get private funding. Geothermal risks can also be reduced by good practice.
• In the UK, it is currently not possible to get any grant funding and revenue support (FiT/ ROC), unlike some other European countries many of which also have higher levels of revenue support.
• One developer considered that grant aid really only assists the particular development but that revenue support can encourage the whole industry.

What financial interventions in other areas might stimulate development activity in Scotland?

• Community and Renewable Energy Scheme ( CARES) that is available for wind, hydro and heat could be rolled out for deep geothermal.
• Public financing for deep geothermal exploration means geological information is available to others to build a knowledge base, reduce risks and encourage private investment.
• Some other countries have Nationalised drilling companies for drilling wells, for example in Kenya.
• If using public financing and direct involvement then how and when the development is handed to the private sector.
• There was some debate in the workshop regarding who is best paced to develop District Heating Networks ( DHNs), private utilities companies (e.g. E-On have increased their District Heating development team 10 fold) or Local Authorities (e.g. Manchester City Council have allowed for facilitation of development of district heating in Planning etc).
• Scotland's petroleum drilling resources and expertise could potentially be re-tasked into deep geothermal drilling as part of the switch from fossil fuels to renewable energy sources to stimulate finance and reduce costs in the deep geothermal sector.