Social Return On Investment Analysis: An Evaluation of Environmental, Social and Economic Values For Deep Engineered Geothermal Energy In Eden Project 3/14/2014

University of Salford – School of Built Environment Student name: Ahmad Naser Alsaadi Roll number: @00312494

Module name: Sustainable Design Theory and Practice

Program of study: MSc BIM and Integrated Design

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1- Introduction

1-1- Social Return on Investment (SROI)

SROI Network (2012) defines SROI as “Social Return on Investment (SROI) is a framework for measuring

and accounting for this much broader concept of value; it seeks to reduce inequality and environmental

degradation and improve wellbeing by incorporating social, environmental and economic costs and

benefits”. So, it is a tool to combine social, economic and environmental accountings in order to analysis

the outcomes’ Impact of activity or project for the involved stakeholders. The analysis process relies on

number of principles starts with, identifying the most affected shareholders and how can they involve in

making decisions about the important outcomes of the project, then specifying the outcomes value.

Finally, the outcomes value is compared to the monetary value of the inputs. According to SROI Network

(2010), there are two types of approaches to carry out this process, evaluative (depends on an existing

data for relative project in the past) and forecast (refers to project in the future).

1-2- Eden organization background information

The Eden project is internationally visitor attraction and famous environmental centre was established

in May 2000 at Bodelva in Cornwall. During the last century, Cornwall had an extended constriction in its

primary income resources (fishing, mining and agriculture) lead to left 4000 hectares of derelict land.

Eventually, this situation stimulates the Eden vision of creating project to present the role of humanity in

the natural world. In order to meet the vision targets, all activities have to perform within frame of

sustainability, social enterprise and educational charity(community planning, 2009). They can be divided

into four categories (developing education and learning, creating strong communities, regenerating

places and tackling climate change). The chosen case study in this paper is Deep Engineered Geothermal

Energy (DEGE), related to the last group of activities and interests in sustainability and social benefits.

1-3- Executive summery

This paper provides a practical evaluation of ecosystem and social services can be delivered by one of

the evolutionary projects in Eden organisation named Deep Engineered Geothermal Energy (DEGE). The

key stages of SROI are undertaken in valuing both social and sustainable data. In summary these stages

are:

Establishing scope and identifying stakeholders: based on encompassing groups of

shareholders consist of Eden Trust, EGS Engineering, Nearby households and local

community.

Mapping outcomes: begins with determining and valuing the stakeholders’ inputs that can

affect on the project existence. Then illustrates the impacts of the outcomes on nature and

local community.

Evidencing outcomes and giving them value: identifying relative indicators and possible

proxies in order to measure each outcome.

Establishing impact: identifying Deadweight, Attribution and Drop-off rates, then

calculating the total value.

Calculating the SROI

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It presents that following these stages can guarantee a more methodical process to analysis the project

environmental and social impact, as well as calculate its value for the stakeholders.

2- Deep Engineered Geothermal Energy (DEGE)

The Eden project is already presented a real practice in terms of sustainable implementations. But, it has

promised to deliver significant improvements in sustainable technologies, such as, Deep Engineered

Geothermal Energy. Eden in association with Engineered Geothermal System (EGS) has a permission

from Cornwall council to establish power plant can generate both electricity and heating. The deep

geothermal plant will be made drilling of two wells driven around 4.5 KM beneath the Eden location

where the temperature 180 to 200 degree centigrade can be got. One of the boreholes will injected with

water down to the hot granite, while, the superheated water will returned to the surface from the

second. The steam that collected from the second borehole is sufficient to operate the plant’s turbine,

generating about 4MW of electricity and heating, which are enough to supply all Eden facilities, as well

as around 5000 households. In order to realize the full benefits from this project, a comparison between

the situation of Eden energy usage before and after the deep geothermal plant should be explained.

Firstly, before the power plant, 4853 tonnes of greenhouse gas emissions was calculated in 2008

included electricity, heating and site operation emissions (Eden project sustainability report, 2011).

According to 2011 calculation report these carbon dioxide amount has been decreased by 12% due to

changes in practices and implementation of major and efficient energy technologies. For example, 100%

of electricity purchase was Green Tariff, using photovoltaic solar sheets installed on the Corde building

and wind turbine producing a small amount of power (SWRDA, 2009). Another point to mention related

to oil consumption, there was a huge reduction between year 2008 and 2011, the amount of usage oil

went down about 80% from 208,665 litres to 41,873 litres (Eden project sustainability report, 2011). This

reduction is largely because using efficient Liquefied Petroleum Gas (LPG) boilers instead of oil fuelled

boilers. However, Eden project sustainability report (2011) noticed that the use of LPG gas was

increased considerably from 21,294 litres to 109,814 in order to provide the required heating for Eden

functions and Biomes, while the gas consumption remained stable just under 6 million kWh all over 4

years.

Secondly, in considering what the best to understand the outcomes of geothermal energy for Eden

project and Cornwall in general, it is important to specify the outcomes that could deliver to Eden and

society through adopting this project.

The potential benefits can be classified regarding to Defra Guide (2007):

2-1- Regulating services

It is non-carbon energy source lead to help Eden and Cornwall to decrease the emitting of CO2

and establish a sustainable sample of low carbon economy which encourages investors to

transfer this experience in other regions in order to achieve the legislative targets of emissions

reductions.

The fertile alternative source will minimize the dependence on external source of energy, such

as, fossil fuels which improve national and local energy security.

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Reducing the energy waste that lost in transmission by build small-scale supplier within

demand location.

Eden functions, Biomes and 5000 houses can be provided with heating directly, and then the

fuel for heating will reduced.

Has a low effect on the nearby environment, particularly on water sources and the injected

water in the borehole will re-injected through cycle system with offering an opportunity to

treat poor and abstracted groundwater.

2-2- Cultural services

The visual impact is very low with noise pollution. Building height is no more than 10m and

there are no visual emissions. This feature is completely compatible with Eden’s general

shape.

Impressive socio-economic benefits can be delivered by the plant. According to European

Regional Development Fund indicates that the geothermal plant can provide 11 times as many

jobs as comparable plant powered by fossil fuels.

3- Start SROI evaluation

3-1- Stage 1

3-1-1- Establishing scope

A project of building geothermal power plant considered the UK’s first experience in this field with

capacity to generate 4MW, which be sufficient to cover the energy requirement for Eden and some

district houses. The cost is too high compared with relative plants powered by fossil fuels. The mission of

Eden organisation in any project is assisting people to understand the connection between them and

nature as well as between themselves. It is encouraging and supporting the activities that lead to

sustainable environment in order to draw a universal attention to the critical importance of the nature.

So, according to the Eden principals, Deep Engineered Geothermal Energy is the most effective and

suitable option to enhance their energy performance and present an iconic sustainable project.

DEGE project is interested in analysing its sustainable and social return on investment in order to clarify

its impacts to its major funder and other direct stakeholders. The main aims of the project is the

transformation from relying on fossil fuel in generating electricity and heating to 100% environment-

friendly and renewable source can be exist for approximately 20 years.

3-1-2- Identify stakeholders

There are many parties have the ability to be affected by and affected on the project. It can be hard to

count the benefits for some of them because of the lake of information that needed to complete the

SROI evaluation or they may considered as indirect stakeholders and by counting them the impact map

will be so complex. Also, there is another type of stakeholders which is organisation consists of several

parties that required from analyst to specify the most beneficiary party, in this case for instance, Eden

organisation funded by Eden Trust and run by both Trust and educational charity, but also there are the

staff and the Eden visitors. As a result, the major shareholder within Eden organisation is the one who

can get the biggest share in the end of value calculation and that means the funder. However, the

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stakeholders can be divided into two categories (key stakeholders and excluded stakeholders),

according to the benefits they gain and if they have sufficient resources can affect the outcomes and as

the following table:

Key stakeholder Reason Excluded stakeholder Reason

Eden Trust Funding shareholder expected to gain the major benefits of implementing its sustainable and social principals, as well as the financial benefits.

Eden visitors and Staff The cannot included because there are insufficient information to analysis the benefits they could gain, specially, for huge number of visitor every year

Engineered geothermal system (EGS)

Funding shareholder and the engineering firm that will build the project.

UK Government, National Energy Security

They excluded because it is the first time to establish such a project and there is no relative project lead to sufficient resources.

Nearby households 5000 houses in the project district expected to provide with energy from the plant project.

Local community The project promised to deliver skills training programs related to operate the plant then many job opportunities.

3-2- Stage 2

3-2-1- Identifying and valuing inputs

Project inputs rely on key stakeholders, the direct contributors to make this project possible, then value

these inputs financially. Money and time are factors that invested in this analysis, for example, the

funder will invest his money to build DEGE, while time is what the other stakeholders will input to gain

the benefits after finishing the plant.

In collaboration between EGS energy and Eden project the geothermal power plant will be delivered for

£ 35 million. The calculation estimates that each borehole cost about £ 10 million and another £ 15

million for construction and installing equipments. It is hugely expensive without UK government

support. Nevertheless, due to the fact of the large proportion of greenhouse emissions in UK is

produced by electricity generation and the UK energy roadmap policy of reducing CO2 to 85% by 2050,

the government have to support these types of project, because it is offering a great opportunity to

achieve these environmental targets. The cost would fall from £ 35m to £ 20m, particularly when the

government pull down the cost of geothermal wells drilling.

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3-2-2- Clarifying outputs

The project has the following outputs:

A geothermal power plant generates 100% pure energy with capacity of 4MW that enough to

supply all Eden facilities with heating and electricity.

Changes in operational practice, as well as introducing a range of energy efficiency

measures to be more compatible with geothermal power system.

The power station also has the ability to provide 5000 houses with heating and electricity.

Provide intensive training programs for 300 local people such as, technical skills training to

provide specific education of geothermal operation, as well as course of clean technology work

to explain the environmental issues and how to apply the principals of the project. This training

course is necessary, because Eden has been promised to deliver a number of jobs for the low

income local people.

Offering a number of 300 employments 70% of this number specified for local people.

3-2-3- Describing outcomes

Identifying project’s outcomes is the most important step to measure the value during SROI analysis (

SROI Network, 2012). It is explains what is the real purpose of the project and what are the changes can

be delivered by its outputs. In terms of Deep Engineered Geothermal plant, there are many entirely new

outcomes were specially determined based on Eden principles and its mission towards society and

nature, beside the direct and indirect financial interests that can be grossed by all stakeholders.

Firstly, depending on this productive energy source, in supplying the required electricity and heating,

reduced the usage of fossil fuels considerably, which led to improve national energy security.

Consequently, the amount of carbon dioxide emissions produced from energy generation decreased by

90% led to noticeable improvement in local natural environment. In addition, the energy, that provided

by the geothermal power plant to some district households, is cheaper than previous sources.

Furthermore, raising the local people income and increasing their life quality, because the geothermal

plant delivered a number of high value, high quality jobs to local people accounting about 70% of the

total opportunities that offered. Finally, the technology that obtained from work and training will make

the local trainers more employable besides enabling Cornwall to have unique local skills and expertise

that maybe not existing in other local economy.

3-3- Stage 3

3-3-1- Developing outcomes indicators according to collective data

The project outcomes cannot be known if they delivered or not without identifying measurable

indicators. They are always related to measure what the stakeholders interested in. Some outcomes

have an obvious and straightforward indicators, for instance, the outcome is the project causes fewer

carbon emissions, the indicator is the amount of CO2 emissions that reduced in one year, which led to

minimize Carbon Floor Price (CFP) taxes*. On the other hand, it can be difficult to set explicit indicators

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for some outcomes, which has to find relative measurable, similar effort in order to calculate a

reasonable value. The DEGE project has the two types of these indicators:

Outcomes Indicators Data collective resources

The usage of fossil fuels has been reduced significantly to enhance national energy security

The quantities of fuel that replaced with geothermal energy which led to reduce the money paid for buying fossil fuel based energy annually.

According to the Eden sustainability report (2011), the quantity of consumed gas 5,887,203 kWh, Liquefied Petroleum Gas was 109,814 litres, oil 41,873 litres, wood ship 49,138 kWh and gas oil 4,099 litres. All these quantities minimized to zero after operating the power plant.

Great improvement in district natural environment and resources like water due to the huge reduction in carbon dioxide.

The amount of carbon gas that carved out because the adoption of the new energy source caused a remarkable decrease in Carbon Floor Price (CFP) taxes, that paid by energy generation stations for emitting amounts of CO2.

Eden sustainability report (2011), showed that before the geothermal station, the total CO2 emissions, for electricity and heating needs, was about 4254 tonnes.

Providing some district households with much more affordable and pure electricity and heating.

The number of registered householders who report that they paid less by 75% for heating compared with what they were paying for gas system , because the station does not spend money for producing this super heated water, except the cost of establishing transmission cycle network and maintenance.

Survey was taken over sample of houses supplied with energy. This survey compared between the households energy bills before and after running the DEGE plant.

Increasing the local people income by the unique skills and expertises that obtained from the training courses which made them more employable.

The number of low income, trained people from the district who report they feel more employable and have gained job in similar stations outside Cornwall.

Interview with number of low income people from the district who have gained sufficient skills and expertise to work with relative project.

As well as increasing in wealth to the local economy by delivering high wage job opportunities within the Deep Engineered Geothermal plant.

The number of trained local people who they have maintained a high value job in DEGE power plant after 12 months.

Annual DEGE employment report explained that 200 jobs have been determined for low income people from Cornwall.

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*Carbon Floor Price Taxes (CFP) is a policy of taxation approved in April 2013 by UK government, which

states that any pollution generator have to pay a minimum amount of money for the right to pollute

(HM Revenue & Customs, 2013).

3-3-2- how long outcomes last

The effect duration of some outcomes can be longer than others because, it considers if the activity will

continue or not. The most noticeable characteristic of DEGE is all its outcomes connected directly to the

project life and existence. The geothermal studies in Cornwall estimates that the project of Deep

Engineered Geothermal Energy will has a very long life expectancy for 200 years if fully exploited, based

on how long the continuation of the geothermal source in this region will be last (EGS Energy, 2009). For

instance, Relating to reduce fossil fuel consumption and CO2 emissions, it is obvious that without the

geothermal solution, the energy supply will keep relying on fossil fuels. So, as long as DEGE plant

generates power, there is no need for fuels. Another important point, there are outcomes can be last

even if the project stopped, such as the skills and expertises that gained from training or work within the

plant. As a result of this fundamental relationship between the activity and project life expectancy, the

outcomes will produce value each year. However, because of this project considered as a capital project,

it is quiet impossible to set outcomes last long duration (in order to calculate the total value) according

to this extremely long life expectancy. So, the assumption of 5 years impact is what considered for the

most outcomes in this evaluation, just for calculation purposes, except the training outcome will

generate value for only one year.

3-3-3- Putting value on the outcomes

The purpose of this step is to monetise the project outcomes in order to realize the value and

importance of some outcomes relating to other outcomes. Identifying appropriate monetary value

requires first determining alternative financial proxies which is approximate price for the outcomes to

show the stakeholders how worth it is. So, multiplying proxy value by the outcomes quantities, the total

return on investment will be gained.

The identified financial proxies of DEGE plant are:

The cost of purchasing one unit of fossil fuel, which are (100 kWh of gas, 1 litre of LPG, 1 litre of

oil and 1 litre of gas oil), multiplying by the total reduced quantity of each fuel per one year.

The amount of Carbon Floor Price (CFP) tax, that imposed by UK government for firms emitting

CO2 to generate power, multiplying by the decreased amount of CO2 emissions per year.

The monetary value of 75% annual reduction in space heating cost of medium house using gas

fuel in UK, multiplying by the number of registered households.

The cost of training course per year for one person. In this case the average annual wage cannot

be considered as proxy because number of trainers may travel to work in another region.

The average annual salary in geothermal power station for one worker, multiplying by the total

employed from the local people within last 12 months.

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3-4- Stage 4

3-4-1- Deadweight and displacement

According to A guide to SROI (2012), Deadweight is a measure of the outcomes amount that would have

been occur even the project had not established. As it mentioned before, Eden has been already applied

several sustainable implementations to reduce the negative impact on the nature. Therefore, it had

introduced many measures of energy efficiency such as, high efficiency boilers, transformation from oil

to LPG in heating. That led to reduce the consumption of electricity and heating, which based on fossil

fuels, by 14%. Also, in terms of greenhouse gas reduction, a 12% decreased in emissions had been

recorded in 2011 (Eden Sustainability Report, 2011). While, the other three outcomes cannot be exist

without the DEGE power plant, and that means the Deadweight proportion is 0%.

3-4-2- Attribution

It means the amount of the outcomes was happened by the association of another organisation (A guide

to SROI, 2012). The most remarkable feature of the DEGE plant is after operating the project, the fuel

consumption for energy and CO2 impact from that will reduce to zero without any support from another

organisation or program and this characteristic can be applied for the district houses. However, there is

only one contribution related to employment outcomes, which is the other geothermal energy firms can

associate to employ 27% of the local trained people.

3-4-3- Drop-off

In fact, the outcomes of DEGE can be last long for very time regarding to the geothermal source

sustainability which is discussed in stage 3. But, 5 years duration that suggested for calculation purposes

makes the outcomes effectiveness less to change, because it is short period compared with the total

project life. Though, there are many factors can influence the outcomes productivity. The employment

services are the most nominated outcome to be less in the future because people usually get bored of

working in same routine and difficulties for long time, but even with that happen the Eden organisation

still offers the biggest percentage of available jobs for Cornwall people. In this case of DEGE the Drop-off

proportion of getting job within the plant estimated to be less by 10% in the future.

3-4-4- Calculating the impact

In order to calculate the value of each outcome, the data of outcomes quantity, financial proxy,

deadweight and attribution percentage, should be available.

First step is multiplying the quantity by the proxy. Secondly, deducting the value of deadweight from the

previous result, and then deducting the attribution from the total amount and as the following

calculation per 1 year:

Outcome one: The usage of fossil fuels has been reduced significantly to enhance national energy

security.

Gas quantity= 5,887,203 kWh X £5.25 for (100kWh) = £309,078

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Deadweight= 309,078 – (309,078 X 14%) = 265,807

Attribution = 265,807 – 0%= 265,807

_____________________________________________________________________________________

LPG= 109,814 litre X £ 0.71 for (1 litre) = £ 77,967

Deadweight= 77,967 – (77,967 X 14%) = 67,051.62

Attribution = 67,051.62– 0%= 67,051.62

Oil= 41,873 litre X £ 0.58 for (1 litre) = £ 24,286

Deadweight= 24,286 – (24,286 X 14%) = 20,886

Attribution = 20,886 – 0%= 20,886

Gas oil= 41,873 litre X £ 0.58= £ 2,378

Deadweight= 2,378 – (2,378 X 14%) = 2,045

Attribution = 2,045 – 0%= 2,045

_____________________________________________________________________________________

Outcome two: Great improvement in district natural environment and resources like water due to the

huge reduction in carbon dioxide.

CO2 = 4254 ton X £ 16 per ton = £ 68,064

Deadweight= 68,064 – (68,064 X 12%) = 59,896.32

Attribution = 59,896.32 – 0%= 59,896.32

Outcome three: Providing some district households with cheap and pure electricity and heating.

The reduced amount of heating bill = 5000 (number of houses) X (75% X £1200 (annual gas bill)) =

£4,500,000

Deadweight= 4,500,000 – (4,500,000 X 0%) = 4,500,000

Attribution= 4,500,000 – (4,500,000 X 0%) = 4,500,000

Outcome four: Increasing the local people income by the unique skills and expertises that obtained from

the training courses which made them more employable.

The outcome value = 300 (total trained people) X £ 2000 (the average course cost per person) =

£600,000

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Deadweight= 600,000 – (600,000 X 0%) = 600,000

Attribution = 600,000 – (600,000 X 0%) = 600,000

Outcome five: As well as increasing in wealth to the local economy by delivering high wage job

opportunities within the Deep Engineered Geothermal plant.

The outcome value = 200 (the number of jobs offered by DEGE) X £ 40,000 average annual salary for one

worker= £ 8,000,000

Deadweight= 800,000 – (800,000 X 0%) = 800,000

Attribution= 800,000 – (800,000 X 27%) = 5,840,000

The total value of the outcomes per one year is = £ 11,355,685.9

3-5- Stage 5 : calculating the impact map

The SROI total value for 5 years has been calculated in the impact map. In order to reflect the present

value of the outcomes into the future, tow factors contributed to adjusted it : Drop-off proportion,

which is only 10% for employment services, and the discount rate, which is assumed 0% because the

short period of calculation(5 years) related to the project long life (200 years).

Year 1 Year 2 Year 3 Year 4 Year 5

11,355,685.94 10,171,685.94 9,646,085.94 9,173,045.94 8,687,422.62 Total Present Value (PV)= 49,033,926.38 Net Present Value (NPV)= 29,033,926.38 Social Return = £ 2.45 for each £ 1

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4- Conclusion

Deep Engineered Geothermal Energy evaluation illustrates five stages that support the sustainable and

social approach to achieve the Eden organisation objectives. It begins with determine the scope and

stakeholders and move to clarifying inputs, outputs and the potential outcomes the can be delivered by

the project, then identifying indicators, relative proxies and adding value for the services in order to run

the calculation process during the last two steps. The evaluation showed that build such project is quite

valuable, because the energy source can last for a long time and most of the outcomes connected

directly to its existence which lead to generate value each year. However, the duration of 5 years is

proposed just for calculation and in spite of the period is too short the calculation ratio is £2.45 for every

£1 invested in DEGE plant.

The services users are the stakeholders whom accrued most of the value and the sustainability of the

activities relies on them. The most noticeable result is the local community people are the biggest

beneficiary, given return of £5,840,000 for employment outcome beside £600,000 for learning purposes

during the first year. Followed by 5000 houses, from the district, account for £4,500,000 profits of

getting cheaper energy, as well as the environmental benefits.

In general, there are a lot of information about a range of outcomes has been provided through this

evaluation showing how much these outcomes are compatible with Eden mission. This includes

sustainable services related to environment, such as reduce the dependency on the fossil fuel to

generate energy and enhance the local nature by decreasing CO2 emissions. Secondly, social outcomes

are represented by providing jobs opportunities and training programs.

5- Recommendations for future studies

The results of SROI evaluation would be more powerful if there is a continuous evaluative

program carried out by the project team to provide an accurate data in some areas.

In terms of capital project such as DEGE plant, it is quite difficult to realize its whole impact

and parties, as well as evaluation the long project life. So, it is recommended to share the

initial findings and data of the analysis with stakeholders to measure outcomes and allow

them to consider methods of collecting and updating SROI data.

Finally, monitoring system is one of the most important criteria, particularly, for outcomes

with indirect indicators, such as increasing in wealth and feeling more employable.

Therefore, it needs to evaluate the services during separate periods to ensure there is no

change in outcome.

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Appendix A: The Impact Map

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References

• community planning. (2009). The Eden Project Case Study. UK. www.communityplanning.net/casestudies/casestudy013.php

• Defra. (2007). An introductory guide to valuing ecosystem services. London . UK.

• Eden. (2011). Eden Project Sustainability Report. Cornwall. UK.

• EGS Energy. (2009). EGS Energy and Eden's hot rocks proposal goes before the public in

consultation. Cornwall. UK. http://www.egs-energy.com/media/news/107.html

• HM Revenue & Customs. (2013). Carbon price floor. UK.

• SROI Network.(2012). A guide to Social Return on Investment. UK.

• SROI Network.(2010). An evaluation of social added value for Real Jobs, the Action

Group, Edinburgh. UK.

• SWRDA. (2009). Evaluation of the Eden Project and SWRDA's role . Liverpool. UK.