Department of Energy and Climate Change

As announced in the UK Low Carbon Transition Plan, published on 15 July 2009, £6 million in capital grant funding is being made available over the next two financial years to explore the potential for deep geothermal power in the UK, helping companies carry out exploratory work needed to identify viable sites.

A DECC press release on 22 October 2009 announced that this funding would be disbursed via a challenge fund. This challenge fund will form part of the Low Carbon Investment Fund (LCIF). Please note that the press release stated that eligibility was restricted to England, Scotland and Wales. This was incorrect and we apologise for any inconvenience caused.

There will be two rounds of grant funding:

• £4 million in funding for capital expenditure in financial year 2009-10
• £2 million in funding for capital expenditure in financial year 2010-11

Projects whose ultimate object is deep geothermal energy exploitation in the UK are eligible to bid to the fund. DECC will establish a panel to judge the bids received by the closing date against the following criteria:

• credibility and experience of bidding team
• scale of plant. Projects will be expected to be commensurate with either electricity generation at a scale of 2 MW_e or greater, or heat generation at 5 MW_th or more within 5 years, as reflected in their business plans. Note that the phase of the project for which grant funding is being sought is not expected to achieve heat or power production
• robust business plan in place, including plausible assumptions on power and heat outputs of the project in the medium and longer term
• evidence of high quality desk-top geological analysis
• evidence of robust financial planning, and financial due diligence carried out to a high standard
• potential for the project to contribute to the long term development of the UK deep geothermal sector
• plausible plans to spend funds within the deadlines

The 2009 Renewable Energy Strategy (RES) sets out the intention behind the challenge fund is to help develop the potential of a deep geothermal sector in the UK, and the panel will be guided by that principle. However there will be no limit in bid size other than the size of the fund i.e. bids up to £4 million will be accepted for the first round and up to £2 million for the second round.

Projects may bid for funding in both rounds of the challenge fund.

As announced, the grants will be for capital spend under Government accounting rules – for guidance on what constitutes capital spend, please see the Treasury’s guide 'Consolidated budgeting guidance from 2008-09', with the section on capital spending beginning at p.71.  DECC officials (see contact address below) will be happy to advise on what falls within the definition of capital spend.

Interested projects are invited to bid to the Challenge Fund for grants, setting out evidence that their project is aligned with the criteria set out above.

DECC is aware that capital spending proposals within some projects will be dependent on achieving planning permission. Bids may be submitted on a provisional basis, and may be successful, on the condition that funding is unlikely to be released until significant progress through the planning process has been achieved.

Successful bidders will be informed of the size of their grant, which will be released to them when receipts are presented demonstrating capital expenditure within the time-frame of the funding round.

Funding will be subject to State Aid Rules.

Timetable

The timetable for the challenge fund will be as follows:

• Mid  October 2009: publish agreed criteria for bidders
• 20 November  2009: deadline for first round bids covering first £4 million
• Late November early December:  2009: announce successful bidder to first round

Bidders should send their bids to: 

Bids by email are welcome to Michael.Feliks@decc.gsi.gov.uk