Already, the world is watching as the geothermal industry here leads the way in developing its potential to provide large-scale, base load and low cost renewable energy.

There are many in the hunt with some 48 companies, including ten ASX-listed, involved with projects throughout Australia.

This country has all the key ingredients to create a healthy industry – high heat producing granites, a continent under compression and a strong commitment to the industry from government and financial markets.

Australia’s geothermal heat resource contains enough energy to meet the country’s total electricity needs for centuries to come.

The Australian Geothermal Energy Association (AGEA) recently commissioned energy specialist modelling firm McLennan Magasanik Associates Pty Ltd (MMA) to produce a report estimating the future electricity generation capacity of geothermal energy in 2020 and the price.

The report predicted:

• The Australian Geothermal Energy Industry • can be expected to provide up to 2,200 megawatt (MW) of base load capacity by 2020 into the National Electricity Market based on current government policy settings.
• That capacity potentially represents up to • 40 per cent of the Federal Government’s 2020 Renewable Energy Target (RET) of 45,000 gigawatt hours (GWh) — the equivalent of the output of around 6,000MW of wind farms.
• An estimated $12 billion would be • invested to develop 2,200 MW of installed capacity.

The report found that the cost of generating electricity from geothermal resources is expected to move rapidly down the cost curve through the pilot, demonstration and commercialisation stages to reach economies of scale by 2020. MMA estimated that this would occur from $90 to $135 per MWh from small scale demonstration plants (10 MW to 50 MW); and from around $80 to $120 per MWh for large scale plants by 2020.

The report found the upper cost boundary would decline over time because the level of uncertainty is expected to narrow as the industry grows.

South Australia has the best known Engineered Geothermal Systems (EGS or hot rock) geothermal resources in Australia and the report found most geothermal capacity is likely to happen from developments here with other states increasing their contribution toward the end of the 2020 period.

It is in South Australia that Petratherm, with its joint venture partners TRUenergy and Beach Petroleum, is on track to begin drilling at its flagship Paralana project 600 kilometres north of Adelaide.

The Paralana Geothermal Energy Project aims to initially develop a 7.5 MW plant and expand it to 30 MW to meet the local electricity needs of the Beverley Uranium Mine only 11 km away. This unique project has all the ingredients to be commercially viable at all stages. Drilling of the 4 km deep wells at Paralana is scheduled to begin in June 2009.

Petratherm is also working towards utilising its expertise internationally and is set to become the first company to formally develop geothermal energy projects in Spain. The company said that it has several projects underway in the large electricity consuming markets of Madrid and Barcelona and are pursuing projects in the Canary Islands and China.

Our industry is now operating in an uncertain global economy with an increasing cost of delivering energy globally. There is also increasing political and social pressure to implement major greenhouse gas reduction and renewable energy programs.

These factors will help drive a need for low cost, large-scale renewable and low emission technology such as geothermal energy.

The geothermal industry knows it has its challenges, such as achieving successful drilling and adequate flow rates, but we are confident that we can overcome them. Just as the coal seam gas industry overcame the challenges it faced in its early stages to move on to becoming a very lucrative business.