REN21’s Katie Findlay spoke to Marit Brommer about potential for the geothermal sector to benefit from lower upfront costs and new partnerships with the oil and gas sector. Marit is Executive Director of the International Geothermal Association (IGA) and a REN21 member.
As oil prices crash in the wake of COVID-19, media outlets are discussing the benefits for the renewable energy sector. Grist predicts a boost for the geothermal industry, ‘America’s untapped energy giant’. The reason: The geothermal and fossil fuel industries use the same equipment, expertise and skills for drilling. As oil companies cut contracts, drillers slash upfront costs on projects – some experts expect price drops for drilling of up to 40%.
Geothermal is an opportunity to re-deploy oil and gas workers
According to The Globe and Mail, drillers in North America are ‘turning to geothermal’ in an effort to put rigs and crews back to work. In Canada, Think Geoenergy reports that oil and geothermal groups have formed a new partnership.
Marit confirms that the two industries have a lot in common on the service side. “The overlap between geothermal and oil and gas is in exploring, drilling and production. With this comes expert understanding of the earth’s sub-surface. It takes expert knowledge to find the right spots to drill, how to drill, what equipment is needed, and how to use it. During the current crisis, many skilled workers in oil and gas drilling companies are on standby. These workers could be re-deployed to the geothermal sector.”
“The enabling industry who use technical expertise to do the sub-surface work are really interested in geothermal. For them it’s a one to one shift.”
But there is more to it. According to Marit, “It’s clear that the energy landscape is going to change. Geothermal offers a ‘green pivot´ for fossil fuel companies into new, cleaner business opportunities. It’s logical that there will be a shift in their thinking on how to use their workforce, equipment tools, rigs, and their mindset on big projects. Given that some major oil companies are already investing in renewable electricity, like solar and (offshore) wind projects, the pivot to geothermal seems more likely than ever.”
Policy support needed for a radical change
However, switching from oil and gas dependence to renewables will require big changes in the energy system and its regulations. From lengthy permitting procedures to discrimination in incentives and tax systems, the list of persisting barriers is long. The COVID-19 crisis highlights the vulnerabilities of current energy systems and presents an opportunity for change. But it is essential that recovery packages support this reorientation.
To enable geothermal energy to scale-up, changes must be made to support sub-national control of energy systems. According to GSR2019, local policies and regulatory frameworks as well as a lack of market incentives often limit the expansion of geothermal heating and cooling. One of the causes is a lack of institutional and technical capacities at local level. Another obstacle is access to financing or risk-mitigating grants.
Similar, but different
Despite similarities in technology, there is an important difference in the operational scale of oil and gas and geothermal. Thus, there are differences in strategic thinking between oil and gas operators and geothermal.
“The oil and gas industry have the mindset of a global commodity,” Marit explains. “Oil and gas are traded on the global market with an accompanying infrastructure, e.g. pipelines, shipping routes and storage facilities to facilitate trading. Commodities are not customer dependent on-site. Geothermal energy, on the contrary, operates locally, with the customer close to the energy source. Therefore, its operators tend to have much more focus on the needs and views of the customer.”
An unexpected alliance
Worldwide, China is one of the leading countries in connecting the geothermal and oil sectors. The Chinese state oil company, Sinopec, have launched a joint venture with the National Energy Authority of Iceland to bring geothermal expertise to Asia. Plus, the World Geothermal Congress 2023 will be in China.
“This spotlight on the collaboration between the industries is very good news,” says Marit. “Not just because I firmly believe that collaboration between oil and gas and geothermal is the next step, but because we have embarked on this journey together for a long time.”
Avoiding job losses is key to a just transition
Geothermal has an important role to play in the renewable energy future. By offering employment to displaced oil and gas workers, the sector can contribute to a just energy transition.
Geothermal is an important part of the energy transition. Marit Brommer explains.
But the key to real expansion lies in policy support and financing for local renewable implementation. Already today, geothermal energy and associated industries employ roughly 100 000 people – a number that will increase significantly if governments choose to support the switch to renewables.
Marit concludes; “At the end of the day it’s about getting real investment and policy support going into these joint initiatives”
“For oil companies who have the capacity to invest in geothermal, investment will require a shift in thinking. The business models are completely different. But when you have the mindset, there is a value in the local-local energy approach both for power and for direct use in the heating and cooling sector.”
Marit Brommer is Executive Director of the International Geothermal Association (IGA) and a REN21 member. For information on how to join the REN21 network, click here.
Sign up to get the Renewables 2020 Global Status Report (GSR), launching 16 June. Find out about the launch event, or follow us on social media for live updates.