Greater focus on low-carbon heating is offering geothermal projects a route to market, but not without long-standing difficulties
DEPTH CHARGES
Geothermal developers can take advantage of shallow wells across a lot of Europe for low-carbon heating and cooling solutions
MESSY REGULATION
The lack of a clear definition of geothermal energy results in developers becoming mired in red tape designed for mining purposes
KEY QUOTE
Replacing gas with geothermal district heating is a low-hanging fruit for many local authorities
In the 110 years since the world’s first geothermal power plant came online, high capital costs, worrisome project risks and poor public acceptance have dampened geothermal’s growth trajectory.
Talk to anyone involved in the geothermal space today however and you will hear a different story: the need for dispatchable low-carbon energy since Russia’s invasion of Ukraine has changed the energy landscape.
Sanjeev Kumar from the European Geothermal Energy Council (EGEC), a non-profit body that promotes the geothermal industry in Europe, sees a strong trend upward in project development. “We’re seeing a hell of a lot of new entrants into geothermal space,” he says.
Kumar is encouraged both by private sector uptake—groups of competing farmers are coming together to develop projects, he says—as well as EU-wide plans and policies like REpowerEU and the Net Zero Industry Act, both of which list geothermal as a key technology for enabling sustainable energy development
There is also a bumper crop of new roadmaps and policy statements from countries like Ireland, Poland and Germany, most of which give geothermal a role in the drive to replace fossil gas at scale.
However, if, as Kumar predicts it could, geothermal energy is set to replicate solar PV’s leap from niche technology into widespread use, the industry still needs to overcome some major challenges.
The right mix of policies and market conditions remains an issue as does another, more fundamental problem: Lawmakers and the general public often do not always understand what “geothermal energy” actually is. And when they do, it can still be a prohibitively expensive solution.
SHALLOW WELLS, HIGH GROWTH
Geothermal heat and power primarily come from the thermal energy radiated outward from the earth’s core and mantle. This energy can then be harnessed through extracting and recycling the hot groundwater it creates.
In places like Iceland, Tuscany and Île-de-France, a steep geothermal gradient (the rate of heat increase underground) puts this resource relatively close to the surface. This allows wells to produce vast amounts of heat and electricity relatively cheaply.
For many Europeans, their exposure to geothermal is likely to look a lot less explosive than a steam-drenched Icelandic plant. One of the biggest geothermal growth areas is low-level geothermal—low levels of heat found close to the surface.
“You can find temperatures of around 10-18℃ degrees all year round at 200 metres depth”, says Sarah Blake from Geological Survey Ireland about the upper or “shallow” geothermal environment found in almost all European regions. This “shallow” zone stretches down to depths of up to 500 metres.
Blake describes how heating systems built around shallow wells in this zone provide a “constant stable and sustainable space heating and cooling source for buildings that stays the same throughout the year, even in colder countries like Ireland”.
Though expensive to install compared to more commonly used air-source heat pumps, geothermal heat pumps (also called “ground source heat pumps”) tend to be quieter and are up to 50% more efficient.
Over 141,300 geothermal heat pump systems were installed in Europe during 2022, a 17% increase from the previous year. This represents a strong growth trend in building-scale geothermal use, which, according to EGEC’s 2022 Geothermal Market Report, is continuing in 2023 and will become a feature of more new developments and buildings.
One is Paris’s Elysée Palace, where work has just begun on a low-level geothermal heating and cooling system based on wells 65 metres deep. When complete, it will reduce the historic building’s emissions by 80%, producing five units of heat for every one unit of electricity used.
To encourage the uptake of similar systems in Ireland, Geological Survey Ireland has produced a shallow geothermal suitability map viewer. “People and businesses can just put their address in and find out how well shallow geothermal might work for them,” Blake says.
LOW HANGING FRUIT
Another growth area for geothermal is as a substitute for fossil gas in district heating systems. In 2022, 14 new geothermal systems added 105.23 thermal megawatts (MWth) of capacity across Europe.
In areas with hot rocks relatively close to the surface—roughly a quarter of the European continent—geothermal can be a cost-effective way of decarbonising heating systems.
Although EGEC sees around 12 geothermal district heating projects being developed in an average year, in the first half of 2023, there have been 12 already. “The Russia crisis has sped up a lot of projects that were lying dormant; we’re seeing fast-tracked approval processes to get them going,” Kumar says.
One example is the city of Szeged, Hungary. There, increased gas prices have led to the development of a new geothermal heating district system in under two years.
Built on the largest urban network of geothermal heating wells in Europe, Szeged will heat over 28,000 households and over 400 public buildings with ground-source geothermal heat, cutting the city’s use of natural gas and its related CO2 emissions in half.
Interest in geothermal district heating outside areas with favourable rock conditions is also growing.
Geological Survey Ireland recently drilled a 1000-metre borehole to investigate the potential for a geothermal district heating system in Dublin. At its base, they found stable temperatures of 38℃, demonstrating a geothermal gradient that could make district heating possible.
Kumar thinks that projects like these will build a groundswell of interest among operators of district heating schemes. “Replacing gas with geothermal district heating is a low-hanging fruit for many local authorities,” he says.
He’s not the only one. Earlier this summer, the EU’s Commissioner for Cohesion and Reforms, Elisa Ferreira, said the Szeged model can be replicable in many other cities as about 25% of the EU population lives in areas with sufficient geothermal resources.
MOON SHOT
Deep geothermal drilling still faces significant challenges
DEEPER UNDERGROUND
However, sourcing a quarter of the energy used by heating systems in the EU from geothermal and generating power will not be easy.
If shallow geothermal is low-hanging fruit, then scaling the “deep geothermal” drilling needed for district heating and power generation outside of hotspots can be more akin to a moonshot.
Deep geothermal projects are costly—a one-kilometer well can cost over €2 million—risk potential public backlash, face permitting challenges and do not guarantee a return on investment.
Further, despite improvements in predictive technologies, no project can be certain to find enough heat to generate power or provide large amounts of heat within a specific timeframe or budget. Going deep also creates various geological risks from corrosion of drills to induced seismicity.
Although the Ukraine war has prompted European countries like Spain and Bulgaria to start deep geothermal projects, no new deep geothermal power generation capacity came on stream in Europe in 2022.
In its annual report for 2022, EGEC blames this situation on a mix of Covid-19 pandemic-induced supply chain backlogs, policy uncertainty and a shift in priorities towards geothermal heat networks.
GROWING COSTS
However, even with these roadblocks out of the way, geothermal power generation would still be an expensive prospect in most places. A 2023 study from the United States’ Lawrence Berkeley National Laboratory looking at the net value of geothermal, wind and solar in the US found that cost is the biggest drag on geothermal energy’s growth.
Comparing geothermal to solar, researchers concluded that the levelized power purchase agreement (PPA) price for geothermal power is an average of $39 per megawatt-hour (/MWh) versus $30/MWh for solar PV, $29/MWh for wind and $19/MWh for solar PV combined with battery storage.
And this cost problem is growing. Levelised cost of electricity (LCOE) data, which excludes development subsidies and other market pricing factors, shows increased geothermal energy costs despite higher energy prices. A 2022 report from Fitch Solutions, a financial information service, shows that the LCOE of geothermal power has increased from $49/MWh in 2010 to $71/MWh last year.
PERMITTING PROBLEMS
Capital investment cost is just one of the many barriers still barring geothermal’s growth, according to Bram Claeys with the Regulatory Assistance Project (RAP), an NGO focused on policy innovation.
“There is a financial barrier and a deployment barrier. Geothermal faces unique deployment challenges mostly based around permits for drilling and building geothermal power plants,” Claeys says. Gaining permits for geothermal projects can be complex.
Permitting procedures are different across, and even within, countries. Many nations also lack a clear definition of geothermal energy. As a result, developers applying to deep geothermal drilling can become mired in legal frameworks designed for mining exploration and extraction.
Deep geothermal drilling and water extraction can also cause tremors, a problem that has led to geothermal projects in places like Mons in Belgium, shutting down in the face of local opposition.
Although Claeys sees these challenges as surmountable, primarily through more uniform permitting procedures and better public awareness, geothermal’s capital risk remains. “The biggest challenge is finding ways to de-risk the capital investment required for any deep geothermal project.”
POLICY ENABLERS
With the European energy market in flux following 2022′s price fluctuations, Claeys sees policy innovations like double-sided contracts for difference (CfD’s) as one key to reducing risk.
Under a two-sided CfD agreement, an electricity generator signs a contract with a public entity to sell energy on the market and receive a subsidy if the market price falls below a certain level. If markets place an excessive premium on energy (as happened in 2022), sellers pay back the difference between it and their contract price to public bodies, theoretically stabilising costs.
According to Claeys, these policy instruments will help give developers of projects like geothermal the price predictability they need to invest the necessary upfront capital.
HEDGING EARTH RISK
Solving geothermal’s market problem would still expose developers to other risks around project development, such as the tendency of wells to fail due to unforeseen geological conditions.
For over 40 years, France operated a geothermal risk mitigation system that subsidises geothermal developers in case of project failure when heat production is lower than expected or a well collapses.
Since 1981, this insurance system has encouraged dozens of deep geothermal projects and helped make France the largest user of geothermal district heating in the European Union. It is a system which also benefits consumers. According to Kumar, the security it gives developers “helps encourage more competitive power offers”.
NEXT GENERATION
Eavor’s project in Geretsried, Germany is trialling new geothermal technologies
New technologies are coming, too. A project near Geretsried in southern Germany, is trialling a technology known as the “Eavor loop”.
This system uses a closed loop system akin to an underground radiator instead of relying on direct exposure to hot water underground like most systems do. The Eavor loop can mine heat directly from the ground at lower temperatures, with greater efficiency and reduced risk.
Inaugurated at an event by German Chancellor Olaf Scholtz, this system could enable powerful geothermal heating systems to be installed at a lower cost in more places.
NOT OVER YET
Technologies and policies will help, but ultimately, geothermal’s future depends on its competitiveness in a market for sustainable energy.
“The main thing is to get to the energy mix that we need, there definitely is a big role for geothermal there [if] it can overcome today’s financial hurdles,” says Claeys.
Geothermal’s cost problem has not changed since 2022, but if policy tailwinds keep building, it may well play a bigger role in tomorrow’s energy mix than it does today.
TEXT Robbie Galvin IMAGES Unsplash - Viktor Kiryanov; MidJourney; Eavor