Geothermal Energy In The UK: Market Potential And Macro/Micro Economic Factors

Macro economic factors

Although the UK does not fall in the category of top ten countries that produce the most  and have installed  capacity of geothermal energy resources, the market for heat pumps still has potential.  There is a high utilization rate for the geothermal heat pumps considering that they form 71% of all the application of geothermal energy resources.  Energy production from renewable and other fuel sources are growing by 6% in the U.K and by 2035, these sources of energy will produce 45% of the increment in energy, this shows that the market for geothermal heat pumps still has potential (Becker, 2010).

Macro economic factors

The macro economic environment consists of the following

Political environment

The UK  has a heavy reliance on oil and gas as the conventional sources of energy. However, Geothermal energy might be considered due to the increasing political instability in the middle East. There are also laws and policies that have been passed by the government to reduce global warming and carbon emissions which also encourages products in this market to be bought. There are also numerous incentives in form of tax credits and subsidies for low carbon energy.

Social

There are a lot of social factors that affect the geothermal market, such as the difficulty by companies to obtain planning permission (Black and Flarend, 2010). This is due to Not-in-my backyard opposition from locals. The population is key to the design of effective corporate strategies that have an impact on local biodiversity over a relatively long period of time.

Economical factors

The UK has a relatively high GDP and this has a positive effect on renewable energy demand. GDP for the country will also be improved if the country reduces the import and use of fossil fuel and start using renewable source of energy.  A rise in inflation favors investment because there will be higher returns accrued to factors of production (Gibilisco, 2013).

Technological factors

There are technological advancements that support the production of renewable energy. fOr easy acceptance by consumers, affordable solutions and sustainable developments in technology need to be put in place through research and development in this area. There is a lot of reaserach and development that is being carried out by players in the gas industry for alternative sources of energy.

Micro Economic factors

investors

Although the threat of new entrants is low, the availability of incentives will go a long way in wooing investors in the UK for the next five to ten years. New companies which are injecting huge capital could neutralize the power of existing competitor if they have the right management team and dedicated staff (Simon, 2007).

Political environment

Competitors

Due to the presence of many multinational energy companies in the U.K energy industry , there is fierce competition as the players strive towards reducing carbon emission to reduce global warming and therefore they are turning to low carbon energy sources. The renewable energy sector is fast growing in the UK, thus competition is stiff.

Suppliers

Due to the fact that there are very few suppliers in this sector in the UK , they have a high bargaining power.

Customers

There are no many options that customers can chose from for GSHP and thus they have a low bargaining power and cannot influence the prices in the market (DiPippo, 2002).

market size/growth and financial analysis

The UK market has a  lot of potential for investors trying to get into this renewable energy sector. The growth rate of this sector currently stands at 5% and by 2035 it is expected that the UK will have achieve 45% consumption and usage from renewable energy. This coupled with the incentives that the government has put in place should woo potential investors in this market.

Renewables in the United Kingdom go from strength to strength. If between April and September 2016, the country produced for the first time more electricity from solar energy than that generated from coal, in the annual calculation the wind is the big winner. For the first time in the history of the United Kingdom, in the last twelve months, its wind farms have produced more electricity than their coal-fired power plants. Coal generated 9.2% of electricity in 2016 compared to 22.6% in 2015. Meanwhile, wind generated 11.5% of electricity.

Geothermal Energy in the UK

The fall in thermal generation is due to an increase in carbon taxes and low gas prices, which has meant that these plants are no longer so economical and their production has fallen to 59% in 2016 alone, the lowest fall since 1935. In addition, the park of old coal-fired power plants is gradually being reduced in the United Kingdom. Today, it only has ten power stations in operation, because its objective is to close by 2025 those that still operate and restrict its use before 2023 (Black and Flarend, 2010).

But the objective for the Government of Theresa May is not renewables but to convert gas as the “central” energy supplier, and while new combined cycle plants are being built over this decade, renewables are winning the battle.

Social

Energy Sources

It already happened for a few days before the end of the year, where a record of renewables was reached. The country produced more than 40% of its electricity from renewable sources on Christmas Day, the highest share reached so far and wind energy accounted for three quarters of the clean energy generated, while almost the remaining 25% corresponded to the photovoltaic energy (Giudice, Kuenzel and Springbett, 2011).

These figures surpassed those of 2015, when the combination of photovoltaic solar energy, wind and bioenergy made renewable energy in the UK more energy than ever before and achieved a 25% share in the energy mix of the United Kingdom. Country, surpassing for the first time in history the generation of geothermal thanks, above all, to photovoltaic production, which grew 115% in the last year (Giudice, Kuenzel and Springbett, 2011).

The UK has shown that wind and photovoltaic solar are complementary: in summer, the sun’s energy generates more electricity, while wind turbines are the most productive in winter.As a result of these changes, CO2 emissions from power generation in the United Kingdom in 2016 were half that in 2010. Last year a particularly significant reduction of 20% was recorded.

But the game is not over yet. The decisive commitment to gas has caused the electricity from the cycles to increase significantly, up to 42.7%, above 29.5% in 2015, and the aids to photovoltaics have been drastically reduced, so that in the next few years the balance could change.

A professional operating company that creates green energy from geothermal resources. Geoop promotes geothermal energy as part of the ecological agenda and develops geothermal resources on the same scale as wind energy. Geoop aims to become the operator of geothermal projects for district heating companies, resulting in greater operational efficiency and cost reduction (Giudice, Kuenzel and Springbett, 2011). This milestone is the first time it is produced in the United Kingdom and reflects the collapse of coal production, which contributed only 9.2% of electricity compared to 11.5% of wind

Energy brief estimates

In April 2016, the two main sources of green energy – solar and wind – outperformed coal in electricity production, according to Carbon Brief estimates.

In turn, gas production has fallen 80% since its peak in 2012.

Evans identifies several factors contributing to the readjustment of the energy grid in the country, which is still dominated by gas and nuclear supplies.

The official data of energy production in 2016 will be published in March

The United Kingdom will soon have its first geothermal plant through the Eden Project, an ecological theme park that contains the largest greenhouse in the world. Initially, the geothermal power plant will only be used to power the park, but if it is successful, it will expand to provide energy to nearby homes (Mckenzie, 2014).

The plant will be 5 kilometers below Cornwall on a hot granite rock that produces hot water that will operate a turbine. In the park they estimate that there is enough geothermal energy below Cornwall to supply 10% of the homes in the UK.The 3 MW plant will be ready for 2012 and will cost 25 million dollars.

Conclusion

Geothermal energy is more consistent and reliable than solar or wind energy since it is not affected by climate. They hope that this new plant will draw attention to the potential of geothermal energy and inspire others to venture into this technology (Mckenzie, 2014).

References

Becker, P. (2010). Alternative energy. Detroit: Greenhaven Press.

Black, B. and Flarend, R. (2010). Alternative energy. Santa Barbara, Calif.: Greenwood.

DiPippo, R. (2002). Geothermal energy as a source of electricity. New York: Books for Business.

Gibilisco, S. (2013). Alternative energy demystified. New York: McGraw-Hill.

Giudice, G., Kuenzel, R. and Springbett, T. (2011). UK economy. Milton Park, Abingdon: Routledge.

Giudice, G., Ku?nzel, R. and Springbett, T. (2012). UK Economy. Taylor & Francis.

Mckenzie, G. (2014). Competitiveness of the uk economy. [Place of publication not identified]: Palgrave Macmillan.

Simon, C. (2007). Alternative energy. Lanham, Md.: Rowman & Littlefield Publishers.