Changes from report parliamentary committee draft to plenary report

Geothermal energy has a tremendous potential in Europe across all Member States. Although geothermal development dates back more than a century, it still occupies a niche market compared to other energy sources. The development of geothermal energy is hindered largely by limited knowledge about existing technologies and their potential, particularly for shallow geothermal, among policy makers, local authorities, economic actors and the general public. Other challenges are of financial, legal and technical nature.

The draft report does not focus on presentation of available technologies and their application – taking into account already existing reports prepared by industry itself, as well as by the EU Clean Technologies Observatory or IRENA. The text is concentrated on policy recommendations. It is important to note that while new technologies significantly expanded the areas of cost-efficient application of geothermal solutions, nevertheless existing differences in geological and climate conditions between Member States are the reason why the costs of deployment of similar projects differ due to, for example, the need for deeper drills, usage of geothermal heat pumps (GHPs) and associated infrastructure. These differences therefore should be taken into account in formulating any policy solutions.

One of the most important challenges for geothermal is the lack of sufficient geothermal resource mapping. Industry calls for a solution to ensure that all subsurface data is collected in one place (including data on location of decommissioned oil and gas wells) and made available for the public. Practices on data sharing largely diverge across Member States. In some Member States proprietary subsurface data are not generally made available. In others, only government-funded geological data is made public. There are countries where companies share available subsurface data with relevant government bodies, which later use them for publicly available reports on geothermal potential. In all cases, however there is a vital role for Member States to provide services of collecting geological data, organising, systemising it and making data available in cooperation with companies who own data. In some Member States, with insufficient subsurface data, governments themselves could fund the resource mapping and exploration drilling in order to establish national atlas on geothermal potential. This should be supported by European funding in view of creating an EU-wide atlas of geothermal potential.

Unfortunately, the assessment of deployment of geothermal energy in Europe is very difficult due to the lack of standards for industry data reporting. Therefore, it is difficult to understand whether particular regions are advanced in deployment of geothermal and to which extent EU funding was used for these purposes. In the EU databases geothermal is categorised as “other renewables” where it is aggregated with hydro projects. National and EU authorities agree that there is a mismatch in reported data and, generally, the deployed geothermal is underestimated. While power generation is quite well documented, there is a problem in reporting on heating and cooling. These fragmented values and the lack of common standards lead to an underrepresentation of the geothermal industry in the energy market, with detrimental effects for the industry. High-quality data lead to favourable political support, help setting ambitious energy targets and enhance policy assistance. From an economic perspective, it promotes an increase in geothermal projects, marketability, competitiveness, and financial support from governments. Therefore, it is necessary to identify best practices among Member States and to replicate them. Meetings held by the Commission on heating and cooling accountability should be the first step into this direction.

Geothermal installations are characterised by low operational expenditures but high capital investment, primarily due to the high cost and risk of exploration drilling. Explorers can also come across imperfect wells — failure rates range from less than 10 percent in Hungary and Germany to 30 percent in the Netherlands, according to Rystad. Market financiers generally are unwilling to carry these early-stage risks and costs, while municipalities that often foot the bill, as they are usually in charge of local district heating, feel skittish about suffering potential losses. These subsurface resource risks and associated financial costs represent one of the major barriers for geothermal project developers. Government policies that lower risks are therefore crucial to incentivise private sector financial investment. De-risking instruments can take many forms and be designed according to the overall maturity of the market. There are already good examples of such instruments in some Member States. In August, the European Commission approved under EU state aid rules a French aid scheme to set up a guarantee fund for deep geothermal operations.

Complex and incomplete regulations fragmented between Member States, and long and complex authorisation slow down geothermal deployment. While the revised Renewable Energy Directive simplifying the permitting rules is a step in a good direction, it covers only surface projects, such as heat pumps, and leaves aside subsurface activities. Particularly, problems exist with the mining law, which was designed for large mining activities and not for projects of smaller scale, such as geothermal. Its complexity in combination with the often not streamlined authorisation process have adverse economic implications for the development of projects and investment decisions. There is therefore an urgent need for Member States to revise and simplify mining laws or to develop dedicated permitting rules for geothermal.

Heat pumps and geothermal energy technologies are categorised as strategic net zero technologies by Net Zero Industry Act. While the EU is leading in R&D and manufacturing of geothermal technologies and has a reliant supply chain, funding support measures are needed for the next-generation geothermal technologies in order to uphold the forerunner position, particularly in geothermal storage, industrial applications and geothermal lithium. In this context, it is important to note the recent award of an EUR 91,6 million grant from the European Innovation Fund to Eavor’s next-generation geothermal project.

Year 2022 witnessed the largest ever volume of GHP sales within the EU, with over 141,300 new systems installed. At the same time, some Member States reported worrying statements about the low-quality of and the lack of conformity with declared energy efficiency of a large number of imported heat pumps. Some of them are considering establishing the pre-approved lists of models that would qualify for co-financing from existing national support programmes; others call for more stringent market surveillance. Third party conformity assessment, instead of current self-declaration, should be discussed under revision of Ecodesign ENER lot 1.

However, completion of planned projects and development of new ones will not be possible without sufficient numbers of qualified workforce. It is quite concerning that the already increased demand for geothermal could not be fully met due to the lack of capacity: some components were not delivered in time, skilled workers were not available as much as required and public administrations and licensing authorities were often overwhelmed and understaffed by the increasing demand. Therefore, in order to keep the pace of geothermal development, to meet the objective stated in the EU Solar Energy Strategy about tripling energy demand covered by geothermal, there is an urgency to invest in skilling and reskilling the workforce for geothermal. Geo3En program - projects supported by Erasmus+ that aims to remedy the lack of qualified junior graduates in the geothermal energy value chain, and that lays the foundation for a future Erasmus Mundus Master's degree in geothermal engineering, is one of the needed initiatives. Particular efforts should be put on reskilling existing specialists from hydrocarbon industries taking into account both the potential of geothermal for the just transition and that oil and gas industry skills can be easily applied to geothermal sector;

Geothermal energy is vital not only for the energy transition, but for the just transition. The potential of geothermal development using the infrastructure formerly used by hydrocarbon industry is not yet fully tapped by the Member States. There are several successful projects across Europe where decommissioned coal mines were repurposed for geothermal heating and cooling. Recent Hunosa project in Asturia transformed the old coal colliery into the largest geothermal district heating in Spain. There are promising works on the use of decommissioned oil and gas wells for geothermal applications, some of them carried out by hydrocarbon companies themselves. There is a need for dedicated policies, legal and support framework and specific actions that would enable and advance the transition from fossil fuel-producing regions to sustainable growth, through geothermal energy use.

Geothermal is a constant “24-7” form of energy with fixed costs and the highest capacity factor. Geothermal installations do not require critical raw materials to the extent of other renewable technologies, and all major investments are local. Compared to other renewable resources, geothermal typically requires much less land and can be easier integrated into the landscape. Despite these benefits geothermal meets certain social barriers. One of the social barriers of geothermal energy is the lack of awareness and knowledge among the general public, policymakers, local authorities and financial institutions. Geothermal energy is often perceived as a niche technology that is expensive, complex or suitable to territories with very rare particular geological qualities. Geothermal energy also faces competition from other renewable or conventional sources of energy that may have more established markets, policies or subsidies. To overcome this barrier, geothermal advocates together with Member States need to increase the visibility and credibility of geothermal energy, by showcasing its benefits, costs, and performance, and by engaging with relevant stakeholders and communities. There is a growing national awareness towards supporting geothermal - a number of Member States, such as France, Poland, Ireland, have developed roadmaps, targets, and dedicated policy measures to support geothermal.

Geothermal development may also face resistance from local residents who fear the negative impacts of noise, traffic, or environmental hazards such as water contamination, seismic activity or harmful emissions. To address this barrier, geothermal developers need to respect and consult with the affected parties, and to seek their consent and participation in the planning and implementation of geothermal projects.