Projects running out of steam

Adelaide Advertiser
12 January 2011, Page: 55

Catch-22 as geothermals struggle to attract funding

Geothermal companies face a tough year as they work to attract enough funds to get their energy projects over the line. Two leading industry figures yesterday called for further government commitment to the "enormous potential" of the geothermal industry.

KPMG national leader, renewables, Matt Herring said geothermal faced a vicious cycle of needing to remove risk from projects to garner interest from the financial markets, but then needing to raise vital operating capital to reach government grant milestone requirements. Mr Herring, an Adelaide based partner at KPMG, said the Federal Government had supported the industry with $50 million in geothermal drilling grants.

But another $150 million announced under the Government's Renewable Energy Demonstration Program grants in November 2009 could not be accessed until the two recipients reached proof of concept - effectively showing they can circulate water through geothermal wells drilled more than 4km into the earth, and bringing it back to the surface where the heat it contains can produce electricity.

Geothermal company GeoDynamics was further advanced, but Adelaide-based Petratherm still needed to drill a second well at its Paralana geothermal energy project before it could access funds to build a pilot plant.

Petratherm reported this month it had successfully completed the first step toward fracturing the hot rocks at the base of its well located north of the Flinders Ranges. Once the rocks were fractured, scheduled for later this year, the second producer well could be drilled.

"While the industry has achieved an extraordinary level of progress in a very short period of time, it now faces a vicious cycle", Mr Herring said. "Investors are not prepared to provide funds until project risk is reduced and geothermal becomes more economically viable. "The Government could actually get much better value for money if it brought that money forward and actually increased the amount".

Australian Geothermal Energy Association chief executive Susan Jeanes said funding for the geothermal industry was minimal compared to the $1.5 billion committed to the solar industry. "Finance is the number one single biggest hurdle whether it's public or private", she said. "There are so many projects ready to go".

Ms Jeanes said it was prudent to support the development of clean energy technology in Australia, as many other renewable energy projects tended to rely on imported technology. "The technology question is whether the Australian resource can support a commercially viable project,.. there's a need to support the industry as it further refines the technology", she said.