Geothermal Energy Costly, Yet Still Within Reach, UK Government Advised

Geothermal power remains one of the more expensive methods of generating electricity in the UK compared to wind, solar, and possibly even nuclear power. Yet cost alone does not tell the whole story. According to a new analysis, geothermal energy carries unique advantages, particularly its ability to deliver large volumes of heat.

The review of geothermal electricity and heating potential in the UK reveals that the levelised costs of electricity (LCOE) range widely, from £136 to £852 per megawatt-hour. These figures do not include additional revenues from the sale of heat.

In simple terms, the LCOE measures the ratio between a power plant’s construction and operating expenses and the total energy it produces over its lifetime.

The report, produced by engineering consultancy Arup for the Department for Energy Security and Net Zero, clearly states that geothermal energy is currently more expensive than most other major renewable technologies. The main reason is a mix of high upfront costs and relatively modest power yields. A typical geothermal well produces only about 2 to 3 megawatts of electricity, or between 16 and 24 gigawatt-hours per year.

A geothermal well is essentially a borehole drilled deep into the Earth’s crust to access heat locked far below the surface. That heat can then be converted into electricity or used directly for heating.

To put things into perspective, the Arup study notes that a single offshore wind turbine can produce between 8 and 12 megawatts of energy. At the same time, one hectare of solar panels generates approximately 0.5 megawatts.

Even so, geothermal has a defining strength. Unlike wind and solar, it can supply a steady flow of baseload power to the national grid. This makes it valuable for grid stability. It also offers a vast capacity for direct heat, something that solar and wind cannot deliver on a large scale.

Part of the reason wind and solar look far cheaper today is that they have attracted enormous global investment over the past decade. Solar costs alone fell by nearly 90 per cent between 2010 and 2022, dropping from £347 to just £38 per megawatt-hour. Geothermal, on the other hand, has not benefited from the same level of attention or financing, which helps explain why its costs have not fallen as sharply.

The report does note that geothermal projects can reduce their LCOE significantly when revenue from heat sales is included, with estimates suggesting reductions of 40 to 60 per cent. Drilling and building the plant itself remain the most significant contributors to total costs.

Interestingly, the geology of a location plays a crucial role in determining feasibility. In regions dominated by granite, such as Cornwall, levelised costs are often lower than in sedimentary basins. Granite formations tend to hold more heat and provide greater energy potential, although accessing them requires deeper drilling and more expensive work.

While geothermal continues to battle high upfront costs, it may still prove vital in the UK’s broader energy mix. The government is preparing to make a key decision this winter on hydrogen for home heating, with expectations that a complete switch to hydrogen will be ruled out. Instead, ministers are leaning toward a 20 per cent hydrogen blend. Alongside that decision, the government will also unveil its Warm Homes Plan, which will include new initiatives to improve building efficiency and expand the use of heat pumps and heat networks.