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 antic ipated 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.
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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.
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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 lcitp@scotland.gsi.gov.uk
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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 nondomestic 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.
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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.
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
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
March
30 April 2015
June 2015
31st January 2016
Launch of Challenge Fund
Workshops
Deadline for Challenge Fund applications
Grant offer letter issued to successful
Challenge Fund applicants
Final invoice must be submitted for payment
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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 selfsustaining, 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.
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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
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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.
You are strongly advised not to commit yourself to any expenditure on which grant aid may be sought, until after a decision has been made on your application. If an offer letter is sent to you, you should sign and return it before incurring costs. The
Scottish Government will not give grant funding to cover incurred costs that have started before an offer letter has been signed.
Appraisal of applications
A Microsoft Word electronic version of your application, including an electronic signature in the relevant sections, must be submitted to energy.info@scotent.co.uk for receipt no later than 5pm on 30 April 2015 .
If you do not have an electronic signature, please e-mail the application form to energy.info@scotent.co.uk to arrive by 5pm on 30 April 2015 and post a hard copy of your application form, with the necessary signatures in the relevant sections, to:
Scottish Enterprise
EFRS
Caspian House
2 Mariner Court
8 South Avenue
Clydebank Business Park
Clydebank
G81 2NR
The deadline for signed hard copies of application forms which have already been submitted electronically (for arrival by 5pm on 30 April) is 5pm on 5 May.
It is not possible to accept late entries. Applications will be assessed by the
Challenge Fund assessment panel.
Grants will be awarded based on the quality of applications submitted, their alignment with the Geothermal Energy Challenge Fund objectives, applicant criteria and minimum scope requirements. Applications will also be considered against the
LCITP eligibility criteria (as set out in page 2 of this guidance document). The
Assessment Panel may request further information from applicants.
Award of grants
It is expected that grant offer letters will be issued by the Scottish Government to successful applicants in June 2015. This offer may be subject to conditions that need to be met. The grant offer letter, including the terms and conditions of grant, form the agreement between your organisation and the Scottish Government. You must sign the offer letter and return it to establish the agreement.
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Where bids are not successful, the Scottish Government will send you a letter informing you that your application has been unsuccessful, and indicating the reasons for this decision. All decisions on funding made by the assessment panel are final. Feedback from sector specialists will be provided to all applicants.
Grant payments
Grants will be awarded by the Scottish Government. The grant agreement will set out all terms of the funding partnership and the duties and responsibilities of both parties.
The Scottish Government will only release funds after signing of the grant agreements. Grantees must follow the conditions in their agreements on release and use of funds.
The Scottish Government recognises the importance of remaining flexible and pragmatic throughout project implementation and will consider changes to ensure the most effective use of funds. The Scottish Government should be requested to approve any changes to the overall impact and outcome of projects and any significant changes in outputs. Requesting a significant change may necessitate a re-examination of project purpose or implementation. The Scottish Government must approve any changes that will have an impact of 10% or more on the total budget for the project. An updated work plan and budget may also be needed when requesting changes.
No extension to the project timescales is expected. However, if circumstances outside the control of grantees occur that impact on delivering the expected outputs before the end of the 2015-16 financial year, grantees must inform the Scottish
Government as soon as possible.
Funds should be claimed against evidence of expenditure which will usually take the form of a receipted invoice accompanied by evidence or copies of work undertaken.
A claim form will be issued with your letter of offer and should be submitted to the
Scottish Government for processing. Claims will be processed within 21 working days of any claim being received. If more prompt payment is required in order to ensure continuati on of the project, for example to settle suppliers’ invoices or to meet the month’s paybill, this should be discussed with the Scottish Government in advance of the submission of the claim. Finance is released against work carried out rather than a lump sum on approval.
Reporting
Each grantee must maintain regular communication with the Scottish Government nominated contact, as specified in the grant offer letter. Short updates will include:

A brief monthly narrative (due by the 15th of the following month). This may take the form of an update call with the Scottish Government nominated contact.

A final financial and narrative report within 15 days of the end of the project.
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The Scottish Government will review all reports and will address any issues in these and contact grantees accordingly.
Queries
If you have any queries about the Challenge Fund, please e-mail energy.info@scotent.co.uk
.
Any queries about the LCITP, should be directed to: Ryan Gunn, LCITP Programme
Manager, 0300-244-1254, lcitp@scotland.gsi.gov.uk
SECTION D: EXAMPLES OF GEOTHERMAL PROJECTS
Glenalmond Street, Shettleston
The Glenalmond Street project consists of 16 flats and houses, some of which are privately owned under a shared-ownership scheme, while most are rented from
Shettleston Housing Association. These flats and houses utilise heat drawn from water pumped from nearby mineworkings.
The heating system design includes:

Taking water from a disused coal mine 90 metres under the site. The water has a constant temperature of 12 o C and heat energy is extracted from the minewater by heat pumps and the resultant hot water is stored in a 10,000 litre thermal storage tanks where the temperature is boosted to 55 o C by an array of solar powered water panels. A circulating pump then feeds the hot water into a domestic heating system in each property.

Use of heat pumps powered by off peak electricity.

Simple thermostat controls in the living room ensure that once sufficient temperature has been reached in living areas, that the energy is switched to heat the hot water cylinders. This provides an incentive to conserve energy since tenants who reduce energy losses in rooms have more free hot water.

Individual room thermostats.

A large (90 KW) back up electric heater.
Over the 15 years of the project, tenant turnover has been very low, which has had financial benefits for the Housing Association. The tenants pay for their heating via their rent and the sharedowners pay via a service charge. A nominal charge of £10 per annum is applied to cover maintenance costs for the geothermal and solar systems. Low energy bills have been attractive, with residents having heating bills of around £440 per year, as compared to £700 1 for an average Scottish family.
During the early stages of the project, some design difficulties were experienced and a number of steps were taken to resolve these, including:
1 Source: Energy Saving Trust 2014
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
The installation of a more sophisticated water filter system and a back-up system.

Servicing water filters weekly to ensure that they do not become clogged with iron oxide from the mineworkings.

A water recycling system complete with storage tank and an independent feed system was installed to recycle some of the waste minewater, by feeding toilet cisterns. However ferrous-oxide compounds become brown and sticky when exposed to the air, resulting in blocked valves and discolouration of toilet basins.
The decision was made to discontinue the system.
The heating system has been refined over the years and, overall, is simple and very reliable: the back-up heater has only had to be used twice in the past 5 years.
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Ochil View, Lumphinnans 2
Following the success of the Shettleston scheme, a similar minewater-sourced heat pump system was constructed in 2000 in connection with the refurbishment of a
1950s apartment block, comprising 18 apartments, at Ochil View, Lumphinnans, near Cowdenbeath, Fife. The area is underlain by a part of the Fife Coalfield, known locally as the Lochgelly Coalfield, which has had a long history of coal mining.
Minewater is abstracted at a reported temperature of 14.5

C from workings via a
172.5 m deep borehole, drilled at 8 inches and lined at 6 inches. The shallower reinjection borehole is located around 100m from the abstraction well and the minewater is pumped 24 hours per day. The combined effect of the building refurbishment and installation of the heat pump system has been to halve the primary energy cost for heating and domestic hot water per apartment and reduce the annual CO
2
emission from 5.2 to 1.9 tonnes per year. Prior to refurbishment the apartments were heated by electric storage heaters using electricity from the national grid.
The Lumphinnans scheme has been more problematic in terms of operation than the
Shettleston scheme, although no critical failures can be ascribed to the system concept as such. The gauze filters at Lumphinnans generally do not require replacement, and no significant accumulations of ferric oxyhydroxide are observed in the heat pump evaporators or in the associated pipework. There have, however, been operational problems related to the heat pumps themselves and, more significantly, in around 2005, vandals damaged the recharge main at the reinjection well, necessitating the well to be redrilled.
Following redrilling, the recharge water is not ‘injected’ below the water level in the borehole, but allowed to cascade down the borehole from a manhole. This has led to precipitation of ‘ochre’ in the recharge borehole, clogging of the borehole and periodic overflowing of the borehole at the surface. The submersible pump was found on removal in 2006
–2007 to be covered in ‘ochre’. The Coal Authority considers a pump lifetime of 5 –10 years in ochreous mine water as typical.
2 Extract from article by D. Banks, A. Fraga Pumar and I. Watson published in the Quarterly Journal of
Engineering Geology and Hydrogeology in 2009.
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Southampton District Energy Scheme, UK http://www.cofely-gdfsuez.co.uk/solutions/district-energy/district-energytechnologies/geothermal/
Thisted Geothermal Plant, Denmark http://www.geotermi.dk/media/2040606/WGC-1995-Geothermal-Plant-in-Thistedpart-1.pdf
https://stateofgreen.com/en/news/30-years-of-geothermal-energy-in-denmark
Heerlen, the Netherlands http://www.mijnwater.com/wp-content/uploads/2014/04/Energy-procedia_IRES-
2013_Verhoeven-V20012013-Final-1.pdf
http://www.smart-er.eu/sites/default/files/attachments/The%20Netherlands%20-
%20Smart%20Energy%20Regions%202014.pdf
(see case study)
Paris, France http://iea-gia.org/wp-content/uploads/2013/11/SIMS2012-DoggerSustainableUse-
LopezEtal1.pdf
http://www.bloomberg.com/news/articles/2014-09-01/a-mile-below-paris-drillers-hithot-pools-to-warm-houses
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SECTION E: LINKS TO REFERENCE MATERIAL
Draft Heat Generation Policy Statement http://www.scotland.gov.uk/Resource/0044/00445639.pdf
The Scotland heat map allows users to identify where there are opportunities for decentralised energy projects across Scotland. It can be used to identify where there are opportunities for heat networks, to assess heat density and proximity to heat sources. http://www.scotland.gov.uk/Topics/Business-Industry/Energy/Energysources/19185/Heat/HeatMap
Study into the potential for deep geothermal energy in Scotland http://www.scotland.gov.uk/Publications/2013/11/2800 and http://www.scotland.gov.uk/Publications/2013/11/6383
Geothermal Energy Expert Group http://www.scotland.gov.uk/Topics/Business-Industry/Energy/Energysources/19185/GeothermalEnergy/GEEG
State aid http://www.scotland.gov.uk/Topics/Government/State-Aid
General Block Exemption Regulation http://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32014R0651&from=EN
SME definition http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32003H0361
Renewable Heat Incentive https://www.ofgem.gov.uk/environmental-programmes/non-domestic-renewableheat-incentive-rhi
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