Geothermal power heats up with newfound certainty

Age
12 July 2011, Page: 6

SCIENTISTS estimate there is enough energy stored in hot rocks beneath Australia's surface to meet its power demands millions of times over, but bold prognostications have not been enough for the geothermal industry.

Kevin Rudd's abandonment of Labor's first proposed emissions trading scheme hit the industry hard, with share prices plummeting and investors baulking. "That policy backflip has hurt the industry, no doubt", says Terry Kallis, managing director of South Australian company geothermal Petratherm. Hot rocks power remains a highly speculative industry, but things are slowly looking up for Petratherm.

Last month, it began drilling to fracture rock four kilometres beneath the Earth's surface in the North Flinders Ranges using part of a $7 million federal government drilling grant the key step in proving a geothermal reservoir can be created deep underground and the project has a future. Mr Kallis said he believes his is the only company with an active drilling project.

Yesterday Petratherm's shares leapt 16%, reaching a high of 23.5¢ before closing at 19¢. It is a far cry from its high of 92C, but is an important reflection of the role the carbon price package and a new $10 billion clean energy finance corporation, largely paid for with carbon tax revenue could play in developing the industry. "It has put us back on track, which is very important", Mr Kallis says.

"Every geothermal project will take a bit longer and cost a bit more because of the policy backflips that we have had, and we all rely on the equity market, which was hit with the financial crisis. [But] having a carbon price out there starts to create an investor framework and gives the industry some certainty something we haven't had".

Changes in government policy is not the only thing that has held up geothermal investment. Projects take a long time to get off the ground and the costs are considerable with no guarantee of success. Petratherm's project involves injecting water into rocks deep beneath the ground at high pressure in an attempt to create fractures. If successful, power will be generated by circulating hot water between two underground wells and back to the surface.

Petratherm has no short term need for the new funding it hopes to access an existing $63 million demonstration stage grant later this year. But Mr Kallis says the seed funding available from the corporation could prove valuable for the industry if well run. "It is great to see lots of dollars earmarked for renewable energy funding. We're hoping to see more of the funding arrangements that are better tailored to our needs", he says. "The sooner they can get the funding going and out the door, the better".