Aug-2023

Geothermal solutions for net zero in industry

Geothermal has long been praised as a golden ticket for sustainable decarbonisation. Why, then, is this power source not being used to its full potential?

Max Brouwers
Getech

Article Summary

There has never been more focus on the need to decarbonise industry. With around 30% of global greenhouse gas (GHG) emissions stemming from industrial activities, failure to create sustainable and practical decarbonisation pathways will result in irreversible damage. Limiting climate change is a task in which stakeholders across all industry sectors are united, and the pressure to act now is unavoidable. However, once quick fixes have been made and inroads have been created, many organisations are faced with the challenge of how to further progress their net zero ambitions.

There are no misconceptions about the fact that the industry as a whole is lagging far behind on its emissions reduction targets. With a recent Ernst and Young report revealing that only 5% of FTSE 100 companies have so far disclosed transition plans that would be deemed ‘credible’ or sufficiently detailed under draft government guidance (Ernst & Young, 2023), it is evident that the challenge of implementing decarbonisation strategies at scale is prevalent across industry.

Determining what practical decarbonisation solutions work best for your business is a difficult process, with a myriad of challenges facing any organisation seeking to reduce its carbon footprint.

The technologies needed to achieve the necessary deep cuts in global emissions by 2030 across industry already exist. However, while renewable alternatives to traditional fossil fuels such as wind and solar are promising in theory, issues such as congestion within the national grid and irregular availability make it difficult to build full sustainable decarbonisation plans on these substitutes.

Geothermal has long been praised as a golden ticket for sustainable decarbonisation, with many citing the heat beneath our feet as the best route for sourcing inexhaustible power for decades to come. By capturing the nearly limitless energy from the subsurface, we have the potential to power and heat businesses across the globe for low cost with very little carbon impact. However, with so many positives, why is this seemingly perfect clean power source not being utilised to its greatest potential?

It is a source of energy that often goes unnoticed when it comes to identifying our optimal renewable energy mix. And by overlooking it as a source, we overlook the benefits.

How much do we know about geothermal energy?
Geothermal energy has been around for centuries. Geothermal dates back almost 10,000 years ago to the settlement of Paleo-Indians (US Department of Energy, 2022) at hot springs, which served as a source of heat and cleansing, with the ancient Romans also making good use of its potential. However, the first record of it being used to generate electricity was in 1904, when steam from a geothermal source was captured to turn a small turbine that powered five light bulbs.

Today, nations such as the US can generate more than 3.7 gigawatts (GW) of domestic power through geothermal energy plants. That is enough to power around 2.7 million US homes. With governments around the world increasing their funding for the sector, this power source is currently going from strength to strength.

The International Energy Agency (IEA) expects geothermal power generation to increase to 857 terawatts per hour (TWh) by 2050 (IEA, 2020), an 800% increase compared to the 94 TWh generated in 2020 and, according to Rystad Energy, geothermal investment is expected to reach USD 85 billion between 2020 and 2030 (Rystad Energy, 2023). But what are the main drivers for adopting geothermal energy as a cleaner energy source, and how can it support the wider industrial decarbonisation?

What benefits are associated with geothermal for decarbonisation?
Geothermal energy is one of the most reliable, sustainable, and potentially efficient energy sources available and is theoretically accessible everywhere in the world.

As businesses transition away from fossil fuels, it is imperative for stakeholders that whatever clean energy alternative they turn to is secure and reliable. Unlike many other low-carbon solutions, geothermal production is not affected by the weather, which gives consumers confidence that they will have access to green energy at all times. Beyond this, it is one of the few renewable power sources that can be switched on and off, meaning it can manage peak demand.

Another key aspect of geothermal which makes it attractive for decarbonising business is its low lifecycle cost curve. With many geothermal power generation facilities being located close to their source, producers and consumers do not have to worry about the costs typically associated with alternative energy sources such as transportation and storage. Also, a geothermal plant has a very small footprint. Moreover, geothermal is one of the few clean energy sources cost-competitive with fossil fuel.

A recent study by Lazard revealed that contrary to popular opinion, geothermal energy is cost competitive with both solar and wind  (Lazard, 2023). While at face value, these more popular forms of energy appear more cost-effective, there are significant supplementary costs associated with batteries required for both storing energy when it is needed and their lack of consistency.
Battery, solar, and wind have had decades of reducing costs due to economies of scale and technological advances. However, all are currently experiencing cost increases due to shortages in critical raw mineral supply. As traditional resources are being depleted, the effects of historic under-investment in mineral exploration are becoming more apparent. Geothermal energy has avoided the price volatility other sources of energy have faced in previous years, making it, for the first time, the cost-competitive option for businesses looking to decarbonise.

While extracting the heat from the subsurface, we can also identify and retrieve valuable metals and critical minerals such as lithium from underground. These resources are essential components for many energy transition efforts, such as the creation of electric vehicles. This can significantly enhance the economic benefits of geothermal by making overall investments more valuable and thus attractive for potential investors.

However, while there are numerous benefits associated with geothermal, this effective form of clean energy has not witnessed the surge in interest that other forms of clean energy have in recent decades. To understand why this is, we must first consider the challenges associated with geothermal energy and what must be done to integrate it into successful decarbonisation models.