Bringing Geothermal Power To The Market


On Thursday I wrote about the national conference of Australia’s geothermal industry being held in Brisbane, where serious contenders in the field looking for support had three days to make their case (and a series of bad "hot rock" puns). They came with scientists, economists, financiers and lawyers, exposing themselves to myriad expert scepticism.

In his opening address to the conference, Minister for Resources and Energy, Martin Ferguson, threw down the gauntlet to them. "You’ve proved your concept, so let’s prove the technology and then we’ll work out how we connect it to the grid," he told a crowd of eager companies.

But, as everyone there knew, that’s no overnight job. Despite the Government’s grant of $235 million for further testing, the industry faces significant obstacles — getting the energy out of the ground, connecting it to the electricity grid, and raising the money to do both. Ferguson won’t be hearing back from them in this election cycle.

Of the grant, $153 million went to Australia’s two biggest players, Geodynamics and Petratherm, but they are not alone, nor certain to be the first to produce. For three days at the Hilton conference centre, red laser dots drew attention to hot spots, flow rates, and "grid gateways" as PowerPoint presentations, one after another, ground their way to the bottom line of dollars per megawatt hour delivered. By the end, still none of the non-aligned would publicly pick a winner.

None, however, had any doubt that geothermal energy would be supplying the grid by 2015 at the latest.

Independent consultancy McLennan Magasanik Associates (MMA) advise government and the industry. It has forecast geothermal producing around 40 per cent of the Government’s renewable energy target (RET) of 20 per cent of Australia’s total electricity by 2020. With potential to meet our baseload energy needs for centuries — and zero emissions — it’s the sheer size of the prize that has drawn over $1.5 billion of investment before it can even show off its product.

At the moment, that product remains four to five kilometres below ground, and the first challenge still not met is how to bring it reliably to the surface. Overseas, geothermal energy has been produced for over a century, but it has been drawn from shallower, volcanic or sedimentary aquifers, and the output is generally lower. However, such projects are underway here too: in South Australia, Panax says they’ll be supplying a modest 5.9 megawatts of electricity from its sedimentary aquifer wells at Penola by 2011.

David McDonald, Managing Director at KUTh Energy in Tasmania, cautions, "it’s not who gets there first, but who gets there smartest". The method used by Engineered Geothermal Systems (EGS) is to pump water four to five kilometres down wells into very hot granite. This water, at pressure, fractures the rock, creating a reservoir. As the water spreads out, it gets heated. Extraction wells then draw the hot water back to the surface, where it drives a turbine just as water heated by burning coal would drive the turbines in a coal-fired station.

These methods are all elegant simplicity on the companies’ websites, but significant and complex challenges remain. First, you need to establish the right balance between heat and flow rates in the reservoirs. This involves issues of rock permeability, pressure, stability — and complicated equipment to test them. There’s managing the fluid, and its relationship with the drills and wells. In April this year, on the eve of success, Geodynamics had a major setback when their Habanero well broke down after chemicals in the fluid corroded steel in the well.

Certainly there are challenges, but Anthony Budd, from Geoscience Australia, reckons the industry will solve its technological problems. "I’ve seen nothing in the research and the experiences of companies here or overseas to make me doubt the viability of geothermal energy," he said. Geodynamics have since corrected the steel, and, with openness typical of the industry, privately briefed competitors on managing the issue. The real obstacle, thinks Budd, is what he calls "the valley of death" in trying to get finance.

The industry has a double bind: it’s expensive to prove your model, but investors won’t spend until your model is proven. Unlike with wind and solar, you can’t do this at a university. You need to do it in the geological world, at full scale, meaning big up-front investment.

Of course, the Government doesn’t just hand out millions of dollars to any bright spark with a cute idea. (Well, except for "carbon capture and storage", but that’s another story.) So, the "spark" must first present "proof of concept". Once it’s viable, the investors can get out their wallets. But they don’t open them until a company achieves the next phase, which is a commercial demonstration plant.

In Australia, only Geodynamics has achieved proof of concept, but Petratherm, their biggest competitor, is on track to achieve this by late next year. Several other companies are in the queue for one of the only two drilling rigs in the country that can get them to, and through, the demonstration phase. Another obstacle is the $30 million to buy a rig — if you’re leasing, it’s $5 million just to get it to your site.

Another problem detractors of geothermal energy often raise is its distance from the grid. The Cooper Basin in South Australia might have enough energy to power the country for centuries, but how the hell do you get it to the grid? The closest gateway to the national electricity market is 600 kilometres from Geodynamics’ demonstration project.

But that’s not an insurmountable problem either, according to the industry. After proving their technology, and with access to a massive resource, Susan Jeanes, CEO of the Australian Geothermal Energy Association (AGEA), believes economies of scale will enable the industry to bring the grid to them. "The MMA report states that these lines, carrying geothermal to the grid, would save consumers $2.8 billion in electricity prices to 2030," she says. Of the $800 million to build transmission lines to connect the Cooper Basin by 2014, AGEA is seeking $171 million from public funds.

The limitations of the existing electrical infrastructure can also work to geothermal’s advantage when compared with other renewables. In evaluating the feasibility of extending the grid to the power source, geothermal has the advantage over wind and solar in that it fully "occupies" the lines 95 per cent of the time. It doesn’t drop when the wind dies, or stop at night like solar. Sooner or later, those other renewables will face line congestion as they try to enter the grid. The capacity and available space on transmission lines will play a role. Tony Morton from energy consultancy Synergy sees this as just another investment issue. He tells me, "You get the same price on the NEM [national electricity market]regardless of where you enter." Although optimistic enough to say geothermal will be functional by 2020, Morton sees it as "a 2030 to 2050 thing".

Other projects don’t even have that to worry about. Spruiking their proximity to the grid, KUTh in Tasmania, Panax and Torrens in South Australia, Green Rock in Perth and others are all working "under the wires", in some cases right beside coal-fired plants. But as far along as all these projects are, they are relying on the big two companies’ demonstration projects to prove the EGS technology to the market. All those I interviewed at the conference spoke excitedly about how they’re positioning themselves for when — not if — this happens.

I asked Martin Ferguson if the ALP would adjust the funding arrangements for the competing renewables if geothermal turns out to be viable.

"Let’s see what happens with the demonstration. Once the technology is proven, the market will drive the network connections to get it online."

If the model happens to succeed when his party is in power, it will be interesting to see how they will balance coal-driven power against geothermal’s zero emissions, small land costs, and base-load credentials. Until the demonstration models fire up from 2011 on, the believers and sceptics will continue to place their bets. But the odds on geothermal are shortening.

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