The Department for the Economy (DfE) recently closed a consultation on proposals to introduce new legislation that would create a regulatory framework for geothermal developments in Northern Ireland (the Consultation).

Geothermal heat refers to subsurface hot water that can be abstracted via borehole and piped into buildings to provide a low carbon heat source. Northern Ireland has exciting potential for investment in geothermal with its mix of both deep and shallow sub surfaces. Demonstrator geothermal projects are already underway in Northern Ireland such as at Stormont Estate and the College of Agriculture, Food and Rural Enterprises Greenmount Campus.

The observations below are informed by client engagement and attendance at a geothermal consultation event held in conjunction with the DfE earlier this summer. From these conversations, we have identified five key (non-exhaustive) points to provide some insight on the current concerns of some developers in Northern Ireland (although not indicating that this a representative sample).

 

Single Geothermal Desk

As drafted, the consultation envisages DfE licensing geothermal projects independently of Northern Ireland Environment Agency (NIEA), planning, Health and Safety Executive Northern Ireland (HSENI) and other consents required for geothermal projects, leaving developers with potentially up to ten parallel regulatory processes to navigate without coordination.

If separate exploration and commercialisation licences are required (i.e. a preliminary exploration licence, followed by a full commercialisation or development licence), developers may also need to align those applications with separate planning applications and environmental impact assessments. That creates a risk of duplication, particularly if the parameters approved by NIEA or the planning authority for a particular project do not match the scope of a given DfE licence. There is also uncertainty about what an applicant is required to do to obtain a licence. Some developers have therefore suggested a coordinated “one-stop shop” within DfE (i.e. with a single point of contact, pre-application advice, one common technical submission and aligned timelines).

Other jurisdictions that have scaled geothermal have coordinated services to guide developers through the authorisation process. For example, France operates the TéléGMI service for smaller geothermal projects, which is an online portal for environmental authorisations. For larger geothermal projects, France uses an integrated consent model so that developers are not required to obtain multiple separate environmental authorisations.

Notably, the current Renewable Energy Directive (2018/2001) now requires Member States to set up and designate contact points to guide and facilitate applicants during the permit granting process for renewable projects and applicants “shall not be required to contact more than one contact point during the entire procedure” (Article 16).

A single Geothermal Desk within DfE would not be intended to remove the statutory functions of NIEA, planning authorities, HSENI or other consenting bodies but to instead provide a coordinated route for geothermal developers to progress their projects. The suggested “one-stop shop” model would ensure that relevant information is shared with the appropriate bodies efficiently, it would avoid any administrative burden on applicants and provide certainty on the authorisation process.

 

Licence Duration

The licence duration is also essential to ensure project bankability.

Whilst the Consultation envisages a 25-year initial duration, followed by two further 12.5-year extensions (total 50 years), these extensions are not automatic and are envisaged to be further subject to “5-year reviews”.

By way of context, we understand geothermal assets typically have long operational lives, with doublet HSA systems typically designed for 30–50-year operation and ATES systems for 25–30+ years.

That means the proposed 25-year initial duration is shorter than expected asset life and shorter than typical project finance debt tenor, which for infrastructure-grade renewable thermal assets we understand is in the 20–25-year range with refinancing assumed at year 15–20.

As such, we understand some developers are keen to see a longer fixed period, with more predictable and bankable gateways for licence renewal.

 

Northern Ireland geothermal is a heat sector, not a power sector

The proposal for exploration licences within the consultation appears to borrow more heavily from commodities (for example oil and gas) extraction regimes, which are markets that operate differently to geothermal heat. Oil and gas are fungible and can be transported and sold in the global market when abstracted, but the commercial value of geothermal projects depends on them having a nearby customer to use the hot water resource.

Developers we have spoken to are keen to advocate for a phased development licence approach instead, granted against an identified off-taker (or off-take opportunity, in the case of heat networks) with the appropriate safeguards in place for developers.

The appraisal work required before committing to a geothermal project is materially different from conventional exploration activity, as they are project (and opportunity) specific appraisal activities rather than those entailed in an exploration licence model.

 

IP protection for developer-generated work

The Consultation states that developers must in its application for geothermal licensing to the DfE, provide detailed operational and technical data and all geological technical and environmental information is to be published to the DfE’s website. Annex B of the Consultation provides that applicants must agree all subsurface data submitted to the DfE will be deposited into the  Northern Ireland geothermal database once the full geothermal licence has been issued.

The data-deposit rules in the proposed framework do not distinguish between the raw subsurface data and data from a developer’s own analysis, modelling and design. If developers do not have the necessary protections in place for their own work product, then they are likely to be reluctant to invest in new projects at all as they risk paying for their analysis that is not protected and that competitors could benefit from.

If these materials are treated like ordinary data available in a public portal or shared broadly then another developer down the line could use the data to reduce its cost and risk for a project where the first developer invested more into the project. Therefore, this risk should be addressed by the DfE through the necessary safeguards for such developer data, otherwise the proposed framework could disincentivise the very appraisal investment the DfE seeks to encourage.

It is our understanding that where there is an environmental assessment required at this preliminary stage, the DfE will need to publish at least some the relevant technical data to allow for a lawful consultation process, so these statutory requirements would need to set against the developer’s desire to protect commercially sensitive information.

 

The 100m ownership boundary

The consultation creates a 100m boundary, where anything above that depth falls outside of the licensing regime.

Comments from developers we’ve engaged with indicate that the proposed depth is shallow and a unique feature of the framework when compared with other jurisdictions, creating a hard distinction between, for example, 99m projects and 101m projects where technically there is no significant difference between the two.

The specified boundary also has the potential to encourage developers to make project decisions based on the threshold rather than on what would be the most efficient use of the heat source. For example, if the optimal heat resource sits just beyond 100m, a developer may be incentivised to keep the project shallow to avoid the additional administration involved with a different ownership and licensing regime, which might then impact the project’s commercial viability.

One workable alternative might be to vest geothermal heat in public ownership while excluding small domestic systems through an exemption by function, rather than depth.

This option would avoid the hard distinction created by the 100m boundary and would ensure that developers can design projects around the most efficient use of a heat source.

 

Next Steps

Based on current indications, the legislation required to support geothermal development in  Northern Ireland is unlikely to be implemented until 2030. The next steps expected will involve DfE conducting the necessary assessments which might include things like a strategic environmental impact assessment to consider the likely environmental impact of any new geothermal policy.

After these assessments have been completed, we understand that the DfE intends to hold a second more detailed consultation before finally proceeding with laying down primary legislation (and subsequently secondary legislation).

Developers in Northern Ireland should continue engaging with the DfE as the framework develops and continue assessing potential geothermal opportunities. Given the indicated timeframe for the legislation, developers should use this period of time to identify viable sites and off-takers to ensure that projects are capable of progressing quickly once the regulatory framework is implemented.

We will continue to monitor the development of the proposed geothermal framework in Northern Ireland and provide updates as the position evolves.

 

For legal guidance and advice regarding understanding the content of the DfE consultation, engaging with policymakers or advising on wider energy matters, please contact Andrew Kirke, Charlotte Gourley or a member of the Energy team.

 

Relevant Links:

Proposals for Geothermal Regulation Consultation | Department for the Economy

GeoEnergy NI – Unearthing The Heat Beneath Our Feet

EUR-Lex – 02018L2001-20240716 – EN – EUR-Lex

Licence and Permit Finder | Single Point of Contact | SEAI

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.