Geothermal Energy: A Question of Ownership

Geothermal energy is the heat found below the Earth’s surface, and this can be extracted and used to provide space heating, hot water and electricity. The carbon emissions from the extraction and use of geothermal energy are significantly less than those from the extraction and use of conventional energy sources and it therefore has the potential to make a significant contribution to the achievement of net zero, particularly in relation to the decarbonization of heating.

As there is a continuous release of heat from the Earth’s core, geothermal energy is, in principle, a renewable source. However, it is possible for heat to be extracted at a rate that exceeds the regeneration rate. This means that where there are multiple geothermal operations extracting from the same geothermal resource, there is the potential for one operation’s extraction to interfere with/reduce the amount of heat available to other operations and thereby reduce their efficiency. The chance of this happening is increased by the operation of Section 43 of the Infrastructure Act 2015, which gives everyone the right to access and extract geothermal resources below 300 metres. Interference between users therefore presents a significant risk for investors and highlights the need for a regulatory regime that balances the rights of different users of the heat.

The regulatory regime that currently applies to geothermal energy does not do this. It is comprised of a number of different regulatory regimes, in particular licences and permits issued by the Environment Agency in relation to the abstraction and discharge of water, planning permission granted by local authorities, and health and safety law, none of which addresses the extraction of heat. Indeed, heat is not currently properly recognized by the law as a resource that can be regulated, but rather considered a physical characteristic of land. The only regulatory provision that explicitly covers heat as a resource is Section 43 of the Infrastructure Act 2015, which seems to take the approach that heat is not owned by anyone and is available for use by everyone. If the geothermal energy industry is to grow, this needs to change and operators of geothermal projects must be able to be certain that they can access the amount of heat needed for the project to be economically viable. In order for this to be the case, the extraction and use of geothermal energy needs to be regulated in way that recognizes heat as a valuable resource, protects it from over-extraction, and enables geothermal operators to be granted exclusive rights to it. Such a regulatory regime could take the form of a state-based licensing system, similar to that which applies to the extraction of petroleum under the Petroleum Act 1998, or a system that gives exclusive rights to the owner of the land within which the geothermal resource is found.

There are advantages and disadvantages to both these types of system, although it is at least arguable that a state-based licensing system that grants the licence-holder exclusive rights to a specific amount of heat from a particular geothermal resource better provides for management of geothermal energy in terms of ensuring optimal extraction and mitigating investment risk. However, the introduction of any regulatory regime that protects and grants rights to geothermal energy requires resolution of the question of who owns the heat. A state-based licensing regime requires ownership of the heat to be vested in the state. Alternatively, a regulatory regime under which landowners have exclusive rights to geothermal resources requires a private ownership model in which the owner of the land is also the owner of geothermal resources beneath the land. Therefore, the ability of geothermal energy to make a significant contribution to decarbonization objectives depends upon determination of the question of who owns it. Only then can a regulatory regime be developed to facilitate its widespread use.

Anna McClean has published a paper "Who Owns the Heat? The Scope for Geothermal Heat to Contribute to Net Zero" in The Journal of Environmental Law.

Last modified: Thu, 27 Jan 2022 10:01:39 GMT