EU: Geothermal energy major and relatively cheap step towards achieving the Netherland’s renewable energy goals

Using geothermal energy to heat greenhouses is taking off fast in the Netherlands. Rabobank sees further increasing geothermal energy use as a major and relatively cheap step towards achieving the Netherland’s renewable energy goals and a means to improve the financials and the stability of the Dutch greenhouse industry. Geothermal energy could replace an estimated 2 percent (22pj) of national natural gas consumption at an estimated investment cost of EUR 1.6 bn.

“The ongoing development of geothermal energy reflects a win-win for the Dutch greenhouse industry,” said Rabobank analyst, Clara Van Der Elst. “The sector is currently facing declining profit margins, two of the main reasons being its high energy demand and rising natural gas prices. As a highly energy intensive industry, the sector accounts for 10% of the country’s total natural gas consumption. Geothermal energy provides an opportunity to combat rising costs and can lower energy costs by up to 50%.” For heat-intensive varieties such as tomatoes and cucumbers, geothermal energy can be considered on a stand-alone basis from an acreage of above 6 HA, while for most other greenhouse species a cluster of several greenhouses combined could be suitable.

For the greenhouse grower, the switch to geothermal energy implies both fixing and hedging heating costs: the Dutch policy provides a top-up on the gas price to a fixed total technology cost level. The hedge is on gas prices going up, and in many cases on gas prices going down to some extent. The Dutch greenhouse sector currently benefits from both energy tax reductions as well as an alternative CO2 emissions scheme. If either change, the advantages of geothermal energy would increase substantially.

Other advantages over natural gas are its low variable costs combined with a technical life that is 20 to 25 years longer than combined heat and power (CHP) installations. As a result it is easier to forecast the financial characteristics of geothermal, and it is more sustainable than natural gas thanks to its much lower CO2 emissions.

Comparing geothermal energy to other mainstream renewable energy sources such as wind or solar PV, three major advantages emerge: a supply source that is relatively low cost, has no intermittency (a predictable and reliable source) and is fairly concentrated. Also, for renewable heat generation, fewer options are available compared to electricity.

“Geothermal energy is a particularly suitable primary energy source because of the greenhouse industry’s concentrated and high heat demand,” explained Van der Elst. “We anticipate that more and more greenhouse growers in the Netherlands will be investigating the case for using geothermal energy. We expect the development of the current pipeline of granted applications to continue at a rate of three to five projects annually. To realise the full potential by 2020, we estimate that the project development rate would have to grow to ten projects annually”.

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