Declining North Sea Oil Patch Could Make Way For Geothermal Boom
Alex Kimani

Oil and gas fields in Europe’s North Sea are in terminal decline. Last year, the oil basin produced 34 m tonnes of oil, its lowest since production in the North Sea was established in the 1970s. Scores of Big Oil companies have been pulling out of the aging oil basin, with production expected to continue shrinking despite the UK government recently issuing a raft of licenses since Russia’s invasion of Ukraine.

And now Europe’s scientists are looking into ways to put into good use all that oil and gas infrastructure. Researchers at Edinburgh’s Heriot-Watt University's Global Research Institute for "net zero and beyond," iNetz+, are exploring how to repurpose oil and gas wells for geothermal energy. According to the experts, repurposing existing infrastructure for geothermal energy offers manifold advantages. First off, it’s a cost-effective approach that avoids theenvironmental impact and substantial expense of drilling new geothermal wells. They have pointed out that these reservoirs are well understood, significantly cutting the risk of drilling new wells that could potentially fail.

Whereas this might sound novel, open loop systems that directly produce hot formation water for geothermal energy have been successfully tested in the U.S., China and Colombia. Water content in produced fluids typically increases In the late phases of oil and gas production, making it feasible to harness the energy in these brines for geothermal power. The scientists have proposed the use of enhanced geothermal systems (EGS) where the natural fluid flow is insufficient.

Geothermal Boom

Last year's COP28 climate summit in Dubai made history after becoming the first UN climate deal calling for countries to cut back on fossil fuels. Dubbed the UAE Consensus, the summit also called on all parties to the United Nations Framework Convention on Climate Change (UNFCCC) to triple renewable power generation capacity and double the rate of energy efficiency improvement by 2030. Unfortunately, cutting back on fossil fuel power generation is proving to be an onerous task at a time when electricity demand is soaring. The world is witnessing unprecedented electricity demand growth. Last year,  power sector consulting firm Grid Strategies published a report titled “The Era of Flat Power Demand is Over,” which pointed out that United States grid planners--utilities and regional transmission operators (RTOs)--had nearly doubled growth projections in their five-year demand forecasts. For the first time in decades, demand for electricity in the U.S. is projected to grow by as much as 15% over the next decade driven by the Artificial Intelligence (AI), clean energy manufacturing, and cryptocurrencies boom.

The unfolding energy crisis has triggered a rush to develop more fringe low-carbon power generation. One such power source is geothermal energy.

According to the U.S. Department of Energy, the continental U.S. has over 100 GW of geothermal electric capacity or 40 times the current installed geothermal capacity, meaning geothermal has the potential to supply 10% of the country’s power needs. In Europe today, geothermal energy is only used to produce 1.5 GW of electricity, mainly in Iceland and Italy. However, it is estimated that it is possible to utilize geothermal energy in Europe to the equivalent of 80-100 GW.

Unfortunately, high drilling and production costs compared to other clean energy sources has impeded growth for the geothermal sector. According to the International Renewable Energy Agency (IRENA), the Levelized Cost of Energy (LCOE) for geothermal energy has been rising at a time when generation costs for other renewables fell. In the 2010-2023 period, geothermal LCOE climbed 31% to $71/MWh while solar PV declined 90% to $44/MWh while onshore wind fell 70% to $33/MWh. LCOE calculates the present value of the total cost of building and operating a power plant over an assumed lifetime. 

Enter “enhanced geothermal systems” (EGS).

EGS promises to not only boost the energy output of wells over a smaller footprint but also increase the areas where geothermal energy can be exploited. 

For the most part, geothermal has only made economic sense in countries such as Iceland, where heat and water can be found close to the surface of the Earth. However, much like shale drilling, EGS creates a subsurface fracture system that increases the permeability of the rock and allows for the injection of a heat transfer fluid (typically water). The injected fluid is then heated by the rock and returned to the surface to generate electricity. In June,  the U.S. Department of Energy announced a $165 million investment in geothermal energy research and deployment. The Enhanced Geothermal initiative by the DOE aims to lower the cost of EGS projects to $45 per MWh by 2035, thereby vastly increasing the competitiveness (and attractiveness) of geothermal power. Further, the 2021 bipartisan infrastructure law included$84 million for research into EGS projects.

In Europe, the EU-funded GEORISK project has worked to record and mitigate risks associated with new geothermal projects in a bid to attract private investment into the industry. GEORISK is a large-scale collaboration between key stakeholders in the geothermal industry across Europe. The team has developed a new tool, which categorizes risks of proposed projects, including external hazards from natural or man-made factors, risks due to subsurface uncertainties, and potential technical issues. The project has helped European countries develop financial risk mitigation frameworks for geothermal projects, which are required under the new EU Renewable Energy Directive.

“It’s like solar: If you look at solar 20 years ago, nobody’s interested in solar because it costs too much. But as solar has grown, the cost has come down as it’s improved in scale. We’re kind of on the cusp of moving into the cost-effective range [for geothermal], just like we did with solar, over the next 20 years,” Roland Horne, a professor of earth sciences at Stanford University, told Yahoo News.

Overall, there’s currently a large, ongoing transfer of skills and personnel from the oil and gas industry into geothermal since many of the technologies used are similar. This could help propel this clean energy source into mainstream usage in the coming decades.

By Alex Kimani for Oilprice.com

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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