Drill dominion: First ever CfDs awarded for geothermal energy

Evening drilling rig activity at the site of the £35m United Downs project in Cornwall (image credit: GEL).

The first Contracts for Difference (CfD) have been awarded for geothermal energy in what seems to be a major milestone for home-grown power and heat in the UK.

Geothermal Engineering Limited (GEL), a leading UK developer and operator of geothermal plants, together with its investors Kerogen Capital and Thrive Renewables announced on 8 September that it had received the awards in the UK Allocation Round 5 (AR5) process for three projects – at GEL’s United Downs, Manhay and Penhallow plants.

The contracts will run for 15 years and are underwritten by the UK Government.

GEL’s flagship site at United Downs is the first geothermal project in the UK, forecast to deliver electricity by 2025. GEL is targeting 25 MWe of baseload electricity and 100 MWh of heat energy across its geothermal portfolio by 2028, enough heat and power for 70,000 homes.

“This increasing momentum in the UK’s geothermal industry will enable further innovation, cost reductions and crucially generate new highly skilled and green jobs, benefitting local communities,” said the announcement. The Renewable Energy Association and Arup have estimated* that the development of deep geothermal projects in the UK could fulfil the UK’s entire residential heat demand for 100 years and create as many as 10,000 direct and 25,000 indirect jobs by 2050.

GEL said the awards are a recognition that geothermal has an important role to play in meeting growing energy demands alongside the UK’s energy security strategy and decarbonisation ambitions. “Geothermal can provide zero carbon, 24/7 electricity and heat, thereby bypassing intermittency issues faced by technologies such as wind and solar.”

Ryan Law, Managing Director of Geothermal Engineering said the awards were “a hugely significant milestone in our push to extend the boundaries of what’s possible with geothermal power and heat”

“Securing these CfDs will also provide the necessary financial foundation to allow more substantial investment in the multiple projects that we have planned in the UK. This is exciting news for the whole geothermal industry in the UK, and we look forward to playing our part in delivering much needed baseload power and heat at this crucial time.”

Jason Cheng, CEO and Co-Founder of Kerogen Capital, said: “We are delighted that GEL has been successful in securing the CfDs and extend our congratulations to the whole team working on these industry-leading projects. As an investor in geothermal in the UK, we recognise the contribution this can make to the development of a low-carbon, home-grown and reliable energy source.

“Today’s news is a crucial first step in successfully scaling-up the industry to leverage the abundant and largely un-tapped source of geothermal energy in the UK. We are pleased to be part of this significant step in the UK’s transition to a cleaner energy system, in line with our mission to accelerate decarbonisation.”

* Gluyas et al., Keeping Warm: a review of deep geothermal potential of the UK, 2021