Geothermal industry “shocked” at decision to freeze subsidy

It is estimated the UK has enough deep geothermal resource to match 20 per cent of the UK's electricity demand and to provide 100 gigawatts of heat. Last week, plans to develop the UK’s largest geothermal heat plant in Manchester were unveiled by GT Energy.

The industry was today hoping to see the same level of subsidies for deep geothermal as have been promised to the wave and tidal stream energy – both of which are to see their renewable obligation certificates (ROCs) increase from two to five ROCs between 2013 and 2017. Subsidies for deep geothermal, however, will be frozen at 2 ROCs, a level too low to stimulate domestic investment, the industry maintains.

"We are shocked by this announcement," Dr Ryan Law, chair of the Renewable Energy Association Deep Geothermal Group said. "We should be at the forefront of this industry, given the strength of British engineering skills. If the UK wants to seize a share of the booming global market for geothermal development we must prove our competence at home."

The industry points to Germany, which has similar sub-surface temperatures to the UK, and is building 150 geothermal heat and power plants, representing a €4 billion investment and creating 9,000 jobs.

"We are now watching from the side-lines while other countries forge ahead in a global market estimated to be worth $40 billion by 2020," said Law.

But in May, the UK Government signed a Memorandum of Understanding with Iceland to look at developing the deep geothermal sector in the UK and explore whether electricity interconnection between Iceland and the UK is possible. 

Davey said today’s changes to the RO, which affect more than 30 technologies, could incentivise between £20 billion and £25 billion of new investment in the economy between 2013 and 2017. But while some technologies, such as gasification, biomass, wave and tidal, have fared well and others, such as onshore wind, have escaped with less deep cuts than were feared, there is widespread concern across the renewable sector that investment will be strangled due to decision to review subsidies across a number of technologies. 

The anaerobic digestion (AD) industry expressed its concern that the Government will consult on proposals to remove support for AD under the RO for projects under five megawatts (MW) in size.

"In the space of one week, AD has been squeezed from both sides," said David Collins, head of Biogas at Renewable Energy Association. "On Friday, it was revealed that the annual capacity threshold for AD up to 500 kilowatt is to be 4.5 MW, which if breached will trigger a [Feed-in Tariff] reduction of 10 per cent. This would permit only nine to 15 typical plants to come through per year before the tariff is reduced. While unwelcome news, we took solace in the knowledge that up to 5 MW, AD projects could seek alternative support under the RO."

"Today we have learned that Government will consult on proposals to remove support for AD (and other FiT technologies) under the RO for projects under 5 MW. It is rarely practical to build AD above 5 MW – only one of the 33 plants supported under the RO today is over 5 MW – so this would effectively represent a total withdrawal of support for AD under the RO."

It was also announced today that the Department of Energy and Climate Chagne will undertake official reviews into the costs of onshore wind and solar later this year.

"Government has re-affirmed its commitment to the renewables industry, but we are concerned about the further reviews facing many technologies, which is likely to inhibit investment," said Martin Wright, chairman of the Renewable Energy Association.