20 April 2021
S4CE project - The influence of energy policies on the development of geothermal energy in Europe

 

By Vipin Pillai, TWI Ltd, Cambridge, UK

Winter 2020


The Horizon 2020 project S4CE implements technologies needed for successfully identifying and managing the risks associated with sub-surface geothermal operations such as emissions, micro-seismic events, enhanced gas recovery and carbon sequestration.

Within the S4CE project, a thorough study is carried out to determine the influence of energy policies on the development of geothermal energy in Europe. It is observed that policies and incentives introduced to encourage investment in geothermal specifically have met with varying degrees of success e.g. many have ignored the major commercial risks in the exploration and drilling phases in favour of supporting the operational phase of a project. Latterly, this has been corrected with policy instruments such as loan guarantees and drilling failure insurance exerting a more positive influence. However, concerns persist about the administrative efficiency of permitting, licencing etc.

In the European context and as a clean technology, geothermal energy falls within the ambit of the EU energy policy. During 2019 and 2020, the EU has signalled its intent to become a net-zero bloc by 2050 by launching several large strategic initiatives intended to decarbonise all aspects of life. The 2020 pandemic has accelerated the implementation of these measures, with the EU seeing decarbonisation as the means not only of economic recovery, but also of sustainable growth thereafter.

The European Green Deal and European Green Deal Investment Plan (EGDIP) have the potential to be transformative for the geothermal industry. A positive indication of this is the approval this month of a €150M investment in Romania to construct or upgrade a series of district heating generation and distribution systems to be powered by renewables, including geothermal.

In parallel, the European Geothermal Energy Council (EGEC) has launched its ‘Geothermal Decade’ initiative which aims to facilitate the rapid expansion of geothermal growth over the next ten years. EGEC's Secretary General, Phillipe Dumas, recently highlighted four other funds linked to the Green New Deal that geothermal is suited to: Clean Energy for EU Islands, Coal Region Transition, Just Transition Fund, and the Innovation Fund.

As well as direct development funding of geothermal programmes, policy interventions to reform European wholesale energy markets are being called for. The geothermal industry via the EGEC and others is growing increasingly vociferous in its criticism of the European Green Deal for allegedly disregarding the decarbonisation of heating and cooling (a geothermal strength) as well as electricity generation.

Heating and cooling is claimed to represent 50% of the total energy demand in the EU and is produced largely by gas-fired power plants. Phillipe Dumas called recently for the creation of a competitive and transparent European wholesale heat market. This would replace the current gas market with its perceived 'direct and indirect subsidies' that impede the development of geothermal as a viable renewable generation technology. EGEC believes that gas is unduly favoured in other areas of EU energy policy too, such as the EU's Hydrogen Strategy with its perceived reliance on'‘blue' hydrogen (i.e. derived from methane) as an interim technology while 'green' hydrogen scales up.

The influence of energy policies should be seen in light of the effect of pandemic as well. The S4CE study observed that Covid-19 has had a limited and short-term effect on geothermal energy with neither operations nor new build significantly affected. This is in common with the whole renewable sector. The pandemic none withstanding, geothermal is set to grow by 7% by 2022, with most growth seen outside the EU. Significant growth within the EU is inhibited less by Covid and more by challenges concerning project risk, and operational efficiency and flexibility. The firm direction the EU has set out on in pursuit of a net zero bloc by 2050 presents opportunities that could advance geothermal significantly. The study recommends that reform of wholesale markets to accommodate renewables may be needed to realise geothermal's potential.

 


This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 764810. This article reflects only the author's view and that the Commission is not responsible for any use that may be made of the information it contains.