Geothermal Energy Challenge Fund

GEOTHERMAL ENERGY CHALLENGE FUND

GUIDANCE NOTE

This guidance note provides information on applying to the Geothermal Energy Challenge Fund. This document should be read in advance of submitting any application and should be referred to throughout the process.

Your application will be reviewed by an independent assessment panel. The minimum award for each application is £10,000 and the maximum award is £50,000 (however, if the anticipated cost of the project is in excess of £50,000, applicants should indicate where the remaining funding or financial support will be resourced from).

This guidance note has five sections:

·  Section A outlines the Low Carbon Infrastructure Transition Programme.

·  Section B provides details of the Geothermal Energy Challenge Fund, its objectives and the minimum scope requirements of feasibility study applications.

·  Section C provides guidance for applying for funding.

·  Section D provides information about existing geothermal projects in Scotland, elsewhere in the UK and internationally.

·  Section E provides links to reference material.

SECTION A: LOW CARBON INFRASTRUCTURE TRANSITION PROGRAMME

The Low Carbon Infrastructure Transition Programme (LCITP) has been designed to drive the investment in, and delivery of, low carbon infrastructure across Scotland. Its aim is to simplify the landscape for low carbon projects across Scotland, whilst strengthening the financial and technical support available to them. The programme will build on the collective project and programme experience of partners including Highlands and Islands Enterprise, Scottish Enterprise, Scottish Futures Trust and the Scottish Government and is being supported under the new European Structural Funds Programme which will be announced shortly.

The LCITP will provide advice and support to low carbon projects across the private, public and community sectors taking into account that projects are rarely exclusive to one sector and are more commonly delivered across communities and geographic locations. The programme will also be flexible, responding to both market trends and new emerging technologies.

The LCITP has been developed to support potential projects through the various phases of their evolution. The programme will support early feasibility studies, such as those applying to the Geothermal Energy Challenge Fund, and has the potential to support any future demonstration project arising as a result of these feasibility studies.

The LCITP will consider support for projects in the following areas:

·  low carbon and/or renewable electricity and heat generation;

·  local energy economies;

·  heat recovery (e.g. district heating);

·  energy storage and distributed energy systems;

·  hydrogen;

·  demand side management and active network management;

·  innovative/local finance solutions and investor readiness for low carbon projects;

·  energy efficiency (e.g. non domestic building retrofit);

·  resource efficiency; and

·  materials recycling and re-use.

It is anticipated that eligible projects will demonstrate:

·  that they fall within the agreed subject/topic areas outlined above;

·  an innovative approach to cross sector collaboration to ensure successful project delivery;

·  the potential to deliver significant reductions of greenhouse gas emissions (MtCO2e); and/or energy consumption;

·  the ability to attract other sources of funding that make a significant contribution towards the cost of the project; and

·  have a positive social and economic impact to Scotland.

Desirable criteria

·  community involvement and/or potential for community investment; and

·  demonstrate the added value of LCITP funding where possible.

LCITP will not generally support projects which can already access existing support and/or funding. The LCITP works jointly with sector partners that deliver support in other areas and may be able to signpost applicants to the alternative funding schemes where possible.

Specific exclusions are listed below:

·  research and development of technology;

·  marine energy;

·  sustainable transport;

·  domestic energy efficiency;

·  capital investment into commercial renewable development (except where it has a community focus); and

·  established technologies.

It should be noted that, as the LCITP is a new programme, the eligibility criteria will be reviewed periodically as the programme develops and evolves and therefore may be subject to change.

For more information about the LCITP, contact:

Ryan Gunn,

LCITP Programme Manager

0300-244-1254

SECTION B: GEOTHERMAL ENERGY CHALLENGE FUND

Overview

Heat is estimated to account for over half of Scotland’s total energy use and an estimated £2.6 billion a year is spent on heating by householders and the non-domestic sector. In March 2014, a draft Heat Generation Policy Statement (HGPS) was published for consultation. This sets out that Scottish Government policy aims to address four key challenges. These are:

·  largely decarbonising our heat system by 2050, to help meet statutory greenhouse gas emissions reduction targets in the Climate Change (Scotland) Act 2009;

·  diversifying our sources of heat and support a resilient heat supply;

·  reducing the pressure on household energy bills, in particular supporting the fuel poor; and

·  seizing the economic opportunities that this transformation offers.

The draft HGPS notes that modelling indicates a mix of heat sources will be required going forward, with a growing proportion of low carbon and renewable generation, and included proposals to develop the geothermal industry in Scotland. The results of a desk based study, commissioned by the Scottish Government, highlighted that there may be significant potential for deep geothermal energy in Scotland. The report concludes that the geothermal heat resource beneath Scotland can be considered in terms of three main settings: abandoned mine workings (low temperature), hot sedimentary aquifers (low and possibly relatively high temperature), and hot dry rocks / petrothermal sources (relatively high temperature).

Geothermal systems of all sizes, including combined heat and power systems, are eligible for support under the non-domestic Renewable Heat Initiative scheme.

The Geothermal Energy Expert Group was set up to provide advice to Scottish Ministers in respect of practical proposals for the development and implementation of geothermal heat, or heat and power, with a view to reducing Scotland's carbon footprint while providing additional security of energy supplies. The Scottish Government is launching the Geothermal Energy Challenge Fund in response to a recommendation of the Expert Group.

Objectives

The Challenge Fund has been set up to help support feasibility studies in respect of the capacity of the geothermal resource in abandoned mine workings, hot sedimentary aquifers, and hot dry or wet rocks to support a local market and the viability of the identified location(s) as a self-sustaining, economically attractive investment prospect.

The objectives of the Challenge Fund are to:

·  Support projects exploring Scotland’s potential geothermal energy capacity to provide heat utilising minewater, hot sedimentary aquifers, hot dry and hot wet rocks);

·  Encourage the development of proposals for the utilisation of geothermal energy to local community benefit, achieving measurable carbon reductions (without sacrificing proper consideration of the impacts on the local environment), which are sustainable on a long term basis; and

·  Support the development of future viable delivery models, emphasising the requirement for projects to demonstrate commercial viability as part of the energy solution in local developments.

Scope

Applications must be based on project activity conducted in Scotland and present a clear case for commercial and community benefit. The scope of any feasibility study to consider the capacity of the identified geothermal resource to support a local market and its viability as a self-sustaining, economically attractive investment prospect, would be expected to include:

·  Detailed assessment of 1 or more individual sites or locations to identify specific targets (including comprehensive desk-based lithological and structural analysis).

·  Assessment of existing baseline data for the proposed site or location(s), where available, or development of a strategy to acquire such a dataset (recommendations should also be included for the timescale required to obtain data, where existing data is insufficient).

·  Preparation of a provisional borehole design for production and reinjection (if required) specifying suitable locations, considering depth, geometry of workings, size and type of workings to be targeted, geological conditions, and assessed risks.

·  Identification of a strategy to reduce risks of all kinds – geological, technical, environmental, financial, legal, regulatory etc – to an acceptable level and unlock the geothermal industry in Scotland.

·  Outline of method and technologies to be used.

·  Assessment of potential medium and long term supply and demand for local geothermal resource.

·  Initial outline of potential heat delivery models to potential consumers, including assessment of heating network requirements, related roles and responsibilities.

·  Estimates of emissions reductions, heat costs, performance improvements and other benefits (such as efficiency improvements, cost savings) of potential delivery model.

·  Provision of indicative financial models, including development, operation and maintenance costs, highlighting key assumptions, such as anticipated eligibility for payments under the non-domestic Renewable Heat Initiative scheme.

·  Production of a report on the techno economic feasibility and the anticipated environmental impact of the project and readiness for the next stage e.g. demonstration project, discussing how it could unlock the geothermal industry, outlining a timescale and identifying the key assumptions.

These are the minimum scope requirements expected of any geothermal energy feasibility study Challenge Fund applications, regardless of setting (mineworkings, hot sedimentary aquifers, hot dry or hot wet rocks).

Your application should include a more detailed description of the scope of the proposed feasibility study, reflecting the setting, depth and technological complexities of the proposed location(s).

Applications for funding consist of a single stage process – there is no expression of interest or ‘pre-qualification’ stage.

Timetable

February / Launch of Challenge Fund
March / Workshops
30 April 2015 / Deadline for Challenge Fund applications
June 2015 / Grant offer letter issued to successful Challenge Fund applicants
31st January 2016 / Final invoice must be submitted for payment

SECTION C: GUIDANCE FOR APPLICATIONS

Geothermal Energy Challenge Fund support will be available from the Scottish Government (the grant awarding body). Grants from £10,000 up to £50,000 are available for up to 100% of eligible costs.

The Scottish Government hopes that the development of the evidence base on geothermal energy potential and making the data publicly accessible, free of charge, will help encourage future investment which will contribute to the development of a commercially viable and sustainable geothermal energy industry in Scotland.

What project activities can be supported?

The Geothermal Energy Challenge Fund has been set up to support feasibility studies in respect of the capacity of the geothermal resource in Scotland’s abandoned mine workings, hot sedimentary aquifers, and hot dry or wet rocks to support a local market and the viability of the identified location(s) as a self-sustaining, economically attractive investment prospect.

Who can apply for funding?

Applications are invited from consortia/partnerships which consist of at least two of the following: a community group, registered charity, community benefit society, community interest company, local authority, registered social landlord, academic institution, heat supplier, third sector, or a commercial organisation. Applications must be submitted by a project lead organisation which will receive funds and sign up to the grant conditions.

Applicants:

·  Must include credible and experienced partner/member with evidence of robust financial planning, and financial due diligence carried out to a high standard.

·  Must be able to produce evidence of local community support for the principles, including an understanding of the potential environmental impact of the project, and potential for the project to contribute to the long term development of a commercially viable geothermal industry in Scotland.

·  Must be prepared to share publicly, and free of charge, geological and geophysical data collected and analysed as part of the feasibility study.

Maximum and minimum awards

The minimum award will be £10,000 and the maximum award will be £50,000. Funding will be delivered as either de minimis State aid funding or funding under General Block Exemption Regulation (GBER) Article 25.

De minimis State aid

The European Commission’s de minimis Regulation permits aid of up to €200,000 to an individual recipient (from all public sources) being awarded under that Regulation in any rolling three-year fiscal period. The sterling equivalent is calculated using the Commission’s exchange rate applicable on the written date of offer of the de minimis funding. If you have received any de minimis aid from another source, you must declare this as part of your application in Section 4.2 of the application form. As the applicant, it is your responsibility to ensure that any award that may be provided does not breach the €200,000 ceiling.

The European Commission considers that public funding to a single recipient of up to €200,000 over a 3 year fiscal period has a negligible impact on trade and competition, and does not require notification. This aid can be given for most purposes, including operating aid, and is not project-related. This is generally known as Industrial de minimis aid because of the economic sectors it supports.

This ceiling takes into account all public assistance given as de minimis funding over the previous 3 years and which can take various forms (grants, loans, subsidised contracts, etc). Aid given under an approved scheme does not have to be cumulated with de minimis aid, provided any such de minimis aid is not awarded towards the same eligible costs as those supported via that approved scheme.

It is important to record on your application any de minimis funding you have received over the previous 3 years. This can normally be easily identified on any previous grant offer letters you have been given from public bodies.

GBER funding

The GBER authorises aid in favour of a number of areas, including research and development which, in turn, includes feasibility studies. The GBER definition of 'feasibility study' is the evaluation and analysis of the potential of a project, which aims at supporting the process of decision-making by objectively and rationally uncovering its strengths and weaknesses, opportunities and threats, as well as identifying the resources required to carry it through and ultimately its prospects for success.

The eligible costs for feasibility studies shall be the costs of the study. The aid intensity for each applicant shall not exceed 50% of these eligible costs but may be increased by 10% for medium-sized enterprises and by 20% for small enterprises.

The Commission has set the following definitions for small and medium sized enterprises: a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million, while a medium sized enterprise employs fewer than 250 people and whose annual turnover and/or balance sheet total does not exceed EUR 43 million.