Powerring agri-food value chains with geothermal heat

EXECUTIVE SUMMARY
The worldwide deployment of renewable energy has seen significant growth over the last decade, driven by increasing awareness of the impacts of climate change and the associated need to reduce fossil fuel consumption and greenhouse gas emissions. Geothermal energy will play an important role in fostering a clean energy transition, as the technology offers a reliable source of baseload power that reduces emissions and improves energy security. The demand for energy is expected to nearly double globally by mid-century. Meanwhile, the demand for food and water is expected to grow 50%, putting pressure on existing water, energy and food systems (IRENA, 2015). Scaling up investment in renewable energy technologies in agriculture and food (“agri-food”) systems is critical to the success of the global energy transition. There are many opportunities for clean energy technologies to support food production, drying, cooling, storage, transport and distribution. Yet, energy use in agriculture and food still relies heavily on fossil fuels, with relatively limited penetration of renewables in these sectors to date (IRENA and FAO, 2021).

The benefits of deploying geothermal direct-use applications in the agri-food sector are wide ranging. Geothermal heat utilisation in agri-food chains can contribute to improved food security and nutrition, reduce food waste, enhance productivity and increase the off-season availability of products. In addition, it supports the establishment of industries that create employment for youth, contributes to the empowerment of women who are the primary food producers in most developing countries, and provides increased income for businesses and farmers, thereby lifting living standards for rural communities. Furthermore, it can contribute to minimising greenhouse gas emissions and to helping the agri-food sector adapt to the effects of climate change (IRENA, 2019). This guidebook recommends the adoption of a methodology to measure and quantify the socio-economic impacts of deploying geothermal heating in the agri-food sector. The information generated using this methodology could
be used to raise awareness on the benefits of geothermal agri-food applications among policy makers, thereby supporting decision making. Finally, the bankability of developing geothermal resources for agri-food applications should be supported by a business case, based on the sale of heat to enterprises. Therefore, a competitive heat tariff that encourages the deployment of geothermal energy would be required by agri-food enterprises. The common methodologies for developing heating tariffs are also discussed in the guidebook.

On the other hand, resources in the low- and medium-temperature range, which are suitable for direct heating applications, are not as constrained geographically compared to conventional high-temperature resources used mainly for electricity generation. These lower-temperature resources can be found not only in volcanically active areas, but also in other geological settings such as sedimentary basins. The widespread occurrence of low- and medium-temperature resources presents an opportunity to develop direct-use geothermal applications potentially in most countries globally. Figure 1 shows the geographic distribution of the global maximum aquifer temperature at 3 kilometres depth in sedimentary basins (indicative of the broader potential for geothermal direct-use applications), together with
locations of geothermal power plants around the world, which coincide with the locations of high temperature geothermal resources (>150°C). The grey areas are where the sedimentary thickness is less than 100 metres and hence the temperature is not shown (Limberger et al., 2018).

Investment in direct-use geothermal projects is increasing, driven mainly by the energy savings associated with using geothermal energy in these applications. In 1995, only 28 countries took advantage of the direct use of geothermal energy; by 2019, this number had more than tripled to 88 countries. The total estimated installed capacity for geothermal direct use in 2019 was 107.7 gigawatts-thermal, representing a 52% increase over the 2015 data. Between 2015 and 2019, the growth in direct use of geothermal energy led to an estimated reduction in CO2 emissions of 252.6 million tonnes (Lund and Toth, 2020). Direct uses of heat present an enormous opportunity for the deployment of geothermal energy. The largest installed capacity for direct use in existence today is for heat pumps and district heating, as well as for bathing and swimming. However, great potential also exists in the agricultural sector, which continues to support most rural livelihoods throughout the world. Direct-use geothermal technologies can create job opportunities and boost local productivity in rural areas, among other benefits. For example, geothermal crop drying can help reduce the drying time, preserve the quality of produce, offer skilled and unskilled employment, reduce food waste and improve food security.

Figure 2 provides an overview of the growth in geothermal heating capacity worldwide as it applies to the specific agri-food value chains of agricultural drying, greenhouse heating and aquaculture pond heating – three of the most widely used applications of geothermal heat in the agri-food sector. Greenhouse heating has experienced particularly strong growth in recent years, with a capacity increase of more than 60% between 2000 and 2020. Aquaculture heating and agricultural drying also grew steadily over this period. The use of geothermal energy for electricity generation and direct-use applications is still limited globally. This is due mainly to: a lack of data (both on geothermal direct-use potential and on energy use in agri-food systems); low levels of awareness about the opportunities and benefits for the productive use of energy associated with direct-use technologies; limited financing options due to high upfront costs and resource risk; and the fact that countries have not established enabling conditions for investment in the sector, which in most cases is lacking or inadequate.
In this regard, IRENA aims to support countries to increase their capacities to develop and implement policies and regulations that aim to strengthen the enabling environment for geothermal heat applications, including for agri-food applications.

OVERVIEW OF GEOTHERMAL HEAT APPLICATIONS IN AGRI-FOOD VALUE CHAINS

Benefits and linkages to sustainable development and climate action Key benefits of geothermal direct use in the agri-food sector Geothermal heating applications in the agri-food sector have wide-ranging benefits for the environment as well as multiple stakeholders, including investors, geothermal project developers, local communities and local authorities, among others. Social, economic and environmental benefits for stakeholders are introduced in this section and further developed in section 4.1, which includes a cost-benefit analysis framework to assess socio-economic indicators and benefits resulting from the incorporation of geothermal energy into agri-food value chains.

With a rapidly increasing global population, geothermal energy is uniquely positioned to enhance food production without putting additional pressure on land and water resources, among other Sustainable Development Goals.

Geothermal direct-use applications in the agri-food sector

Energy is a key input in agri-food value chains. In food production, it can be used to power farm machinery, support the provision of inputs (such as fertiliser manufacture and water pumping for irrigation) and regulate temperature and humidity to create the optimal environment for cultivation of produce. In post-harvest preservation of produce, energy can be used to support drying, dehydration, cooling and cold storage to minimise spoilage. Energy is also a key input to other stages in agri-food value chains, such as transport, value addition, retail and cooking.

Table 2 shows the various uses of geothermal energy in agri-food value chains. However, the focus of this guidebook is on non-electric uses, primarily heat utilisation.

In the agri-food sector, geothermal energy is used to increase the efficiency and productivity of different
applications such as greenhouse heating, aquaculture and food processing, among others (Figure 3). The
temperature requirement for these applications can largely be met by low- to medium-temperature geothermal resources. For high- and medium-temperature geothermal resources, heat utilisation could be combined with electricity generation.

GUIDELINES FOR ADOPTING AND SCALING UP THE USE OF GEOTHERMAL HEAT IN THE AGRI-FOOD SECTOR

This section provides an overview of the key components of direct use of geothermal heat in agri-food systems and recommended measures for policy makers to scale up the adoption of this technology. The seven priority areas covered are: 1) mapping of geothermal resources and co-location with energy demand in the agri-food sector; 2) enabling policy, legal and regulatory frameworks; 3) cross-sectoral alignment and multi-stakeholder engagement; 4) project development and ownership; 5) access to financing; 6) building local capacity, education and awareness; and 7) leveraging technology, innovation and sustainability. The section also identifies gaps and challenges hindering the scale-up of direct-use technologies in the agri-food sector and provides possible solutions and corresponding case studies to exemplify how the identified barriers can be addressed.

Geothermal project developers may select direct use projects for implementation based on the objectives they wish to fulfil such as profit maximisation, environmental and resource sustainability, and promotion of local socio-economic development.

Leveraging technology, innovation and sustainability
The use of geothermal energy for electricity generation extracts only a portion of the energy obtained from the geothermal resource, while the rest is often re-injected back into the ground with the spent brine. Direct uses, including geothermal agri-food applications, present an excellent opportunity to utilise the geothermal resource sustainably by extracting more energy from the brine before it is re-injected. Geothermal heat applications encourage the implementation of innovative technologies designed with an eye towards enhancing sustainability. For instance, practices that cascade energy through various thermal processes that require energy at different temperature levels ensure that as much energy as possible can be extracted from the geothermal resource. A stream of hot water or steam containing geothermal energy is passed from one thermal process to another, with each process extracting the amount of energy it requires. Processes that require higher temperature are located upstream, while those with lower temperature requirements are located downstream.

TOOLS AND METHODOLOGIES

Assessing socio-economic impacts of geothermal direct use in agri-food value chains

The incorporation of geothermal direct use into an agri-food application impacts a diverse group of stakeholders along the agri-food value chain, encompassing investors, developers, farmers, local authorities, local communities, households and individuals. Section 2.1 introduces how these stakeholders can benefit financially, socially and environmentally from the incorporation of geothermal energy into agri-food businesses, while this section provides a methodology to measure the impacts of those benefits (here referred to as socio-economic benefits). This methodology underscores the importance of net socio-economic benefits contributing to project viability, beyond financial profitability. Notably, it provides decision makers with a semi-quantitative approach to-incorporate socio-economic factors into business cases. Lastly, it informs decision makers of the relevance of non-financial benefits in the geothermal agri-food value chain, further encouraging the adoption of energy policies that promote geothermal direct use in agri-food projects.

This section recommends a cost-benefit analysis methodology for assessing the impacts of deploying geothermal energy in agri-food systems. A cost-benefit analysis considers the attractiveness of investments by quantitatively determining if the benefits outweigh the costs. Next, this section identifies socio-economic indicators that are specific to the geothermal agri-food sector and describes how the indicators can be monetised (when possible), or alternatively evaluated qualitatively, in the cost-benefit analysis. This approach to assessing socio-economic impacts builds on the work of IRENA (2016b) and the FAO and GIZ (2018; 2019).

Developing geothermal heat tariffs
Geothermal energy tariffs
Developing geothermal resources requires high upfront investments but relatively low operating costs. The use of geothermal heat in the agri-food sector means that customers need to pay for the use of this energy in the form of a heat tariff. Given the nascent nature of geothermal applications in the agri-food sector, proper pricing mechanisms for geothermal heat should result in a tariff that encourages investment in this technology. The development of tariffs for geothermal energy usually results in different pricing regimes that vary depending on the jurisdiction. Contrary to conventional sources of energy (i.e. fossil fuels) – which are traded in global commodities markets and their prevailing
market price directly affects the ultimate energy tariff – the pricing of renewable energy (particularly from geothermal sources) varies widely around the world.

A sustainable heating tariff should account for all the costs incurred in generating the heat during a given period, in addition to a markup to pay back the investment cost within a reasonable period.

In determining the heating tariff, it is first necessary to estimate the amount of energy that should be delivered to the direct-use application during the period under consideration. The estimate can be based on the demand for energy from the direct-use application for an ongoing operation, or it can be estimated from demand based on alternative fuels. Since it is assumed that thermal energy will be supplied as hot water or steam, the delivered energy may be represented as the total volume of hot water/steam to be supplied to customers at a given temperature (i.e. cubic metres). Alternatively, the extractable thermal energy in the hot water could be represented in kilowatt-hours. The second step is to approximate the cost expected to be incurred in supplying thermal energy to direct-use applications over a given period. This involves amortising the capital costs over the lifetime of the project and then
allocating a proportionate cost to the period under consideration. The expected operating costs for the same period should also be determined.

Source:IRENA

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