Geothermal energy can be useful to achieve the (national) renewable energy goals. However, it is an investment-heavy technology when it comes to great depths. Scientists from the Geological Survey of Belgium, part of the Royal Belgian Institute of Natural Sciences (RBINS), and the University of Antwerp, come to the conclusion that a public loan that is repaid only if the geothermal project turns out to be profitable, is the most appropriate policy measure.
As Zuhal Demir, the Flemish Minister of energy, recently declared, Flanders will not meet its renewable energy goals in 2020. Among other things, planned investments in geothermal energy production are lagging behind the development path set out in the National Renewable Energy Action Plans.
Costs and benefits
Geologist Kris Welkenhuysen (RBINS) explains: “The Earth’s heat can be used for geothermal energy. Extracting heat to drive a heat pump is one of the geothermal applications. Deep geothermal applications refer to the heat extracted at great depths. This technique is very promising given that it delivers an important and constant source of sustainable energy. But it also requires massive investments to kick off and involves geological and market-related uncertainties. This discourages investors.”
Tine Compernolle, environmental economist at University of Antwerp, developed with Kris Welkenhuysen and Kris Piessens, both geologists at RBINS, a model that shows how political measures could reduce risks linked to investments and how they can increase the profitability. Tine Compernolle says: “We have studied if the public costs of political measures could counterbalance private profits.”
A recoverable loan
Scientists considered that a geothermal project is carried out in several steps and that it could be stopped based on information after the exploration phase. Tine Compernolle adds: “Even if most countries prefer an insurance scheme to decrease the risks of investing, our results have shown that such system increases the risks of stopping the project.”
According to Kris Piessens, “the most adequate political measure appears to be a loan only refunded if the project proofs to be profitable. This measure increases the likelihood that a project will be developed further and that it will be profitable. It also assures a fair distribution of support for projects that need it the most. That is the best guarantee for the development of a stable geothermal sector.”
The study, which builds upon results from the ALPI project (Belspo), has been published in the journal Energy Economics.
