Funding Open Loop Geothermal Projects in the UK

If you’re looking at funding an open loop geothermal project, you’re probably not short of information, but you might be short of clarity. There is funding available in the UK. That’s not the problem. The difficulty is understanding which routes apply to your project, how they’re structured, and what you need to demonstrate to secure them.

Because funding is no longer awarded on intent. It’s awarded on confidence. And that confidence comes from how well your project holds together: technically, commercially, and operationally.

This guide is designed to help you navigate that properly.

Where funding comes from

Most geothermal projects are not funded through a single source. They’re assembled from a combination of funding and financing, each covering a different part of the risk profile.

For public sector schemes, the starting point has traditionally been central government support. The Public Sector Decarbonisation Scheme was, for a time, the primary route for capital funding. It supported large-scale heating replacement programmes and drove early momentum across universities, hospitals and civic estates. But that landscape has shifted. The scheme is now closed to new applications, and the direction of travel is clear: reliance on single, large grants is reducing.

What remains are more targeted programmes. The Green Heat Network Fund continues to support low-carbon heat networks, particularly where geothermal forms part of a wider system. These schemes are still viable routes, but they are competitive and structured in stages, with increasing scrutiny as projects move forward.

Alongside grant funding sits something far more stable, and often underused: borrowing. Public sector organisations can access low-cost finance through mechanisms such as the Public Works Loan Board or the National Wealth Fund. These are not "funding" in the traditional sense, they are debt, but they’re frequently what allows viable projects to proceed when grant funding alone is insufficient.

In practice, many large schemes are only possible because borrowing fills the gap between ambition and available grants.

There is also a clear shift towards third-party delivery models. Energy Performance Contracts and Energy-as-a-Service arrangements allow projects to be delivered without full upfront capital. Instead, the system is paid for over time, often linked to performance or energy savings. These models change the nature of the project entirely. You’re no longer simply funding an asset, you’re entering a long-term operational relationship, where performance, measurement and contractual structure become just as important as the engineering itself.

And then there is internal funding - the part most organisations underestimate. Planned plant replacement, maintenance budgets, and existing capital programmes often form the foundation of a geothermal scheme. The most effective projects don’t wait for external funding. They align with spend that was going to happen anyway and then build outward from there.

What this means in practice is simple: if you’re looking for "a single funding route", you won’t find one. You’re assembling a structure, not selecting an option.

How projects are structured

A geothermal project rarely begins as a geothermal project. It usually starts with a problem.

Ageing plant. Rising energy costs. A commitment to decarbonisation. Something that needs to be replaced or improved regardless of technology choice.

That baseline requirement becomes the anchor for funding. From there, additional layers are added. Internal capital covers what would have been spent anyway. External funding, where available, reduces the upfront burden. Borrowing or third-party models are used to bridge what remains. Over time, operational savings support the long-term case.

What determines how that structure comes together is not preference. It’s confidence. If a project can demonstrate that it will perform as expected, within a realistic programme, under real site constraints, it becomes fundable. If it cannot, funding becomes more expensive, more complex, or simply unavailable.

This is where many projects start to struggle. Not because funding isn’t there, but because the project hasn’t been developed in a way that gives anyone confidence to back it.

What funders are assessing

When a funder looks at a geothermal scheme, they’re not asking whether it works in principle. That question has already been answered. They’re asking whether it will work here. That translates into a small number of critical areas.

The first is the ground itself. Not in broad geological terms, but in practical ones. Can the aquifer deliver the required yield? Will it behave consistently over time? Is the water chemistry manageable?

These are not theoretical questions. They go directly to long-term performance and risk.

The second is testing. A surprising number of projects reach this stage without a clear, deliverable testing strategy. Pump testing is not just a technical exercise, it’s a logistical and regulatory one. Water needs to be discharged or reinjected. Volumes need to be managed. Permissions need to be in place.

If testing cannot be carried out properly, performance cannot be proven, and without that, the project cannot progress with confidence.

The third is programme. From the outside, geothermal can appear straightforward. In reality it’s slow. Procurement alone can take months. Feasibility and design can take years. Even relatively simple schemes often take around two years from concept to delivery, with more complex systems extending well beyond that. Programmes that underestimate this are immediately weakened.

The fourth is regulation. Abstraction, reinjection and discharge are not administrative steps. They are defining constraints. A project that assumes these will be resolved later is one that carries risk from the outset.

And finally, delivery. Can the system actually be built on this site? Can boreholes be drilled where they are proposed? Is there space for testing infrastructure? Can the works be carried out without disrupting surrounding operations?

This is what funding decisions are based on. Not just intent. Not just modelling. But whether a scheme stands up under scrutiny.

Why funding applications fail (and how to avoid that happening)

Most failed applications look reasonable on paper. They have a clear decarbonisation narrative showing strong carbon savings and are supported by competent design teams.

What they lack is evidence. Ground conditions are inferred rather than demonstrated. Testing is assumed to be straightforward. Programme timelines are optimistic. Regulatory pathways are acknowledged but not resolved.

Individually, none of these are unusual. Together, they introduce enough uncertainty to reduce confidence. And once confidence drops, funding becomes harder to secure, or comes with conditions that reshape the project entirely.

The way to avoid this is not complexity, it’s clarity. A strong application doesn’t try to remove uncertainty. It shows that uncertainty has been understood, tested, and allowed for.

How to approach a funding application properly

A good funding application reads less like a pitch, and more like a plan. It starts with a clear baseline. What exists today, what needs to change, and why. It builds a technical case that explains not just what is being proposed, but why it is appropriate for the site. It quantifies benefits in a way that stands up to scrutiny: energy, cost, carbon, and operational impact.

But the difference comes in how it deals with delivery. A strong application shows how the project will move from concept to operation. It sets out a realistic programme, with time allowed for procurement, testing, and approvals. It explains how the system will be built, not just how it will perform. It identifies risks early and shows how they will be managed.

A project that is clearly defined, technically credible, and deliverable will find funding. A project that isn’t will struggle - regardless of how strong the narrative is. So instead of starting with funding, start with viability.

Because once you can show that the scheme will work, on your site, under your conditions, within a realistic programme, funding becomes a far simpler conversation.

Where to Apply for Funding (UK)

Green Heat Network Fund (GHNF)

Best for: large-scale projects, heat networks, campuses, ESCo-led schemes

What it covers: capital and some revenue support for low-carbon heat networks (including geothermal sources)

How it works: two-stage process - Expression of Interest followed by Full Application

Typical timeline: months, not weeks - expect staged assessment and technical scrutiny

Apply / learn more: https://www.gov.uk/government/collections/green-heat-network-fund

Public Sector Decarbonisation Funding (via Salix)

Best for: public sector estates (when open)

What it covers: historically large capital grants for heat decarbonisation projects

Important: The main PSDS scheme is currently closed to new applications, but successor or similar schemes may emerge

Keep updated: https://www.salixfinance.co.uk/

Public Works Loan Board (PWLB)

Best for: local authorities funding capital works directly

What it covers: low-cost, long-term borrowing (up to 50 years)

Key point: requires a robust business case and affordability - but not competitive like grant funding

Apply / guidance: https://www.gov.uk/guidance/public-works-loan-board

National Wealth Fund (NWF)

Best for: larger or bundled projects (typically £5m+)

What it covers: debt and investment for infrastructure projects aligned to net zero and economic growth

Key point: works best where projects are aggregated into programmes rather than one-off schemes

Apply / guidance: https://www.nationalwealthfund.org.uk/

Energy Performance Contracts / ESCo Models

Best for: projects without upfront capital or where risk transfer is preferred

What it covers: third-party funding, design and operation - repaid over time via performance or energy use

Key point: not a grant, but often the most realistic delivery route

Where to start: speak to ESCo providers or framework suppliers (e.g. via Crown Commercial Service)

Local & Sector-Specific Funding

Best for: smaller schemes or gap funding

Examples include: local authority decarbonisation funds, NHS funding routes, university capital programmes

Key point: often less visible - requires direct engagement with sector bodies

Before You Apply (Read This)

Most applications don’t fail because funding isn’t available. They fail because:

• the programme is unrealistic
• testing hasn’t been properly thought through
• regulatory constraints are unclear
• cost and risk aren’t properly defined

If you’re applying, expect to demonstrate:

• how the system will actually be delivered
• how it will be tested and validated
• how risks will be managed in practice

Not just what it will achieve on paper.

A final tip: don’t wait for a funding round to open. The strongest projects are already developed to a point where they can move quickly when funding becomes available, or proceed using a combination of borrowing and internal capital if needed.

FAQ: Funding Open Loop Geothermal Projects

Is funding available for open loop geothermal in the UK?

Yes. Funding is available through a mix of government grants, public-sector borrowing, internal capital and third-party delivery models. Most projects use a combination rather than a single funding source, depending on scale, sector and delivery approach.

Can open loop geothermal still be funded through PSDS?

Previously, many schemes were funded through the Public Sector Decarbonisation Scheme (PSDS). The main programme is now closed, so projects typically rely on alternative funding, including newer schemes, borrowing, or blended finance structures.

What funding can replace PSDS?

Common alternatives include the Green Heat Network Fund (GHNF), Public Works Loan Board borrowing, National Wealth Fund investment, and ESCo or Energy-as-a-Service models. Most projects now combine multiple funding routes rather than relying on a single grant.

Can geothermal projects be delivered without upfront capital?

Yes. Energy Performance Contracts and Energy-as-a-Service models allow third parties to fund and operate systems. Costs are repaid over time through energy use or performance, reducing or removing upfront capital requirements.

What do funders need to see before approving a project?

Funders look for confidence in deliverability. This includes evidence of viable ground conditions, a realistic pump testing strategy, a clear regulatory pathway, and a programme that reflects real delivery timescales.

How long does it take to fund and deliver a geothermal project?

Typically 2 - 4 years from concept to operation. This includes feasibility, funding approval, procurement, drilling, testing and commissioning. Funding decisions sit within this timeline, not outside it.

What are the biggest risks to securing funding?

Common risks include uncertain ground conditions, unclear testing or discharge plans, unrealistic timelines, and incomplete regulatory understanding. These reduce confidence and can delay or prevent funding approval.

Is open loop geothermal always the best option?

No. Open loop systems can be highly efficient, but only where suitable groundwater conditions exist. The best system depends on your site, constraints and energy demand.

What is the first step to secure funding?

Start with feasibility focused on real-world delivery. Understand ground conditions, testing requirements, and regulatory constraints early. This strengthens your funding position and reduces risk later.

Do I need full certainty before applying for funding?

No. But you must show that key risks are understood and being addressed. Strong applications demonstrate credible assumptions, testing plans and delivery pathways, not just theoretical performance.