Sheep shearers and tourists calling at the Innamincka Hotel in Australia’s outback will soon have their beer chilled by energy from rocks 5 kilometers (3.1 miles) underground.
The South Australian township (population 12) has been chosen by Brisbane-based Geodynamics Ltd. for a one-megawatt pilot project that will tap hot underground granite to generate electricity. The company says the area could produce as much as 10,000 megawatts of emission-free power, equivalent to 10 nuclear plants.
Tata Power Ltd., India’s biggest non-state electric utility, and Hong Kong’s CLP Holdings Ltd. are among those betting more than $750 million on geothermal exploration in Australia over the next 5 years. If it works, hot-rock technology could provide 5 percent of the country’s electricity by 2012, according to Melbourne-based consulting firm McLennan Magasanik Associates.
“It’s quite a marvel of nature,” said Jo Fort, co-owner of the hotel in Innamincka. “What to some eyes would be desolate country on top has this massive wealth underneath in the form of energy.”
Australia plans to increase renewable energy to 20 percent of supply by 2020, with laws that force retailers to increase purchases of this type of power. The legislation may trigger more than A$20 billion ($13 billion) of investment, according to the Clean Energy Council, whose members include Spain’s Acciona SA and BP Plc’s solar business. A A$50 million government fund to help with drilling costs is spurring spending on geothermal energy.
EDF, Google
An investment of about A$12 billion would be required for enhanced geothermal plants to provide 5 percent of Australia’s energy by 2020, McLennan Magasanik estimates.
“This technology has a very major part to play in reducing the overall carbon footprint of the Australian energy sector,” said Richard McIndoe, managing director of CLP’s TRUenergy Pty unit, which is investing A$57 million in a South Australian project run by Petratherm Ltd.
Geodynamics’ Innamincka plan follows similar pilot projects in France and Germany backed by companies including Electricite de France, Pfalzwerke AG and EnergieSuedwest AG. Other investors in the technology include Google Inc., which invested $10.3 million in two companies working on enhanced geothermal systems and funding for a university project, according to an Aug. 19 statement on its Web site.
Unlike traditional geothermal plants in the U.S., Iceland and New Zealand that pump hot water from shallow volcanic systems, the hot-rock technique, or enhanced geothermal, circulates water through cracks created deeper underground, turning it to steam to run a turbine, according to the Australian Geothermal Energy Association. While solar, wind and wave projects typically fluctuate with the weather, geothermal can provide a constant level of power.
Steady Power
“It’s one of the few, if not the only, forms of baseload renewable power,” said Banmali Agrawala, executive director, strategy and business development at Tata Power in Mumbai.
Tata paid A$44.1 million in September for a 10 percent stake in Geodynamics, becoming its biggest shareholder ahead of Origin Energy Ltd., Australia’s second-largest electricity and gas retailer.
Innamincka, 1,065 kilometers northeast of Adelaide, is best known as where explorers Robert O’Hara Burke and William John Wills died in 1861 attempting to return to Melbourne after being first to cross the continent from south to north.
Below the ground nearby is one of the world’s shallowest, hottest and largest non-volcanic geothermal rock systems, allowing the deployment of generators several hundred times the capacity of those possible in France and Germany, said Doone Wyborn, Geodynamics’ chief scientific officer.
Behind Schedule
Geodynamics plans to follow its pilot project, three years behind schedule, with a A$300 million 50-megawatt plant by 2011, and a 500-megawatt venture by 2016. It may produce 10,000 megawatts “eventually,” according to the company’s Web site. One megawatt can power about 1,000 Australian homes.
Forty Australian companies have applied for 363 geothermal exploration licenses, mostly in South Australia, according to the geothermal association. With Australia’s plan to start carbon trading in 2010, power from hot rocks may be 47 percent cheaper than coal-fired output and a quarter below wind power, Milton, Queensland-based Panax Geothermal Ltd. estimates. Panax plans to start drilling its Limestone Coast project in South Australia this year.
Still, the system faces technical hurdles. Hot-rock geothermal wells are as much as double the depth of the deepest conventional hydrothermal systems, pushing up drilling costs.
Years Away
The projects are years away from being able to operate on a commercial scale and suitable sites are far from cities, requiring investment in transmission lines. Geodynamics estimates it would cost A$600 million to connect its Cooper Basin project to the nearest grid at BHP Billiton Ltd.’s Olympic Dam mine, 550 kilometers away.
Last year, Woodside Petroleum Ltd., Australia’s second- biggest oil producer, sold its shares in Geodynamics, which have slumped about 20 percent in Sydney trading the past six months, compared with a 30 percent drop in Australia’s benchmark index.
“Everyone’s fairly convinced that it’s not that far off technically now,” said Mark Taylor, a Washington-based associate at renewable energy researcher New Energy Finance. “What people are worried about is how far off it is financially. If it works, the potential could be huge. I would still attach a giant ‘if.’”
At the Innamincka Hotel, power from the hot rocks plant 11 kilometers away will replace a diesel generator that costs as much as A$35,000 a month in fuel. The machine will be kept as a back-up.
“We always need to have a plan B,” Fort said. “We don’t travel in the outback without two spare tires.”
