KUTh Energy closer to PPA in Vanuato with UNELCO

Erakor Island Resort, Efate, Vanuatu (source: flickr/PhillipC creative commons)
Alexander Richter 8 May 2012

KUTh Energy and local utility UNELCO in Vanuatu announce they are closer to signing a PPA for the geothermal power project of KUTh Energy Vanuatu that could start exploration activities by the company soon.

Last month, Australian geothermal developer KUTh Energy has issued a joint release with UNELCO Electrique du Vanuatu Limited (UNELCO, part of the GDF Suez Group).

UNELCO & KUTh unite to make geothermal electricity a reality for Vanuatu. With the Power Purchase Agreement close to being finalised, over half of Port Vila’s electricity could be supplied from a clean, renewable, local resource.

“This is a tremendous step towards energy independence,” said UNELCO Chairman, Yves Morault. “As with the wind power at Devils Point we are committed to the Government policy of finding clean renewable solutions to electricity in Vanuatu.”

“KUTh has undertaken a very comprehensive geothermal exploration program and the next stage drilling is all that is needed to prove the geothermal potential. We are keen to see this project succeed,” explained Mr Morault.

The geothermal project will involve at least two stages, firstly a 4 MW plant due to come online in 2015 to be followed by a further 4 MW two or three years later. “That will mean over half of Port Vila’s electricity will be supplied from a clean, renewable, local resource and will provide a great boost to economic development around the new coastal ring road,” Mr Morault continued.

“Plans are already underway for the power lines needed to connect Port Vila to the geothermal power plant at Takara. It is now very important that final government approvals are implemented so that KUTh can commence the drilling.” Geothermal electricity is produced from steam using hot water that is trapped underground. Holes are drilled 2 to 3 kilometres deep to reach the hot water reservoir and bring it to the surface. This powerful resource is then used to turn a turbine that produces electricity. The hot water is later returned to the reservoir deep underground.

Over the last two years experts appointed by the World Bank have reviewed the exploration data produced by KUTh. They concluded that geothermal power from Takara produces the lowest cost power supply addition for Efate under a broad range of conditions, and would generate net economic benefits for Vanuatu. The World Bank study further confirmed that KUTh’s development strategy is sound and recognises that the highly specialised nature of geothermal development will require skills from the private sector.

“We have actually been working in Vanuatu since 2009,” commented KUTh Managing Director, David McDonald, “and we are really excited to see that an independent team of experts has endorsed our strategy.

“The critical next stage is drilling exploration holes into the geothermal reservoir area,” Mr McDonald went on to explain. “This is a high cost operation. Once final government approvals are completed power purchase arrangements can be finalised and we will bring the drilling rig to Efate to start the project.”

“This is an excellent project for Vanuatu. It is good for the investors, good for the community, good for the environment and great for the economy. Through the close cooperation of UNELCO, KUTh and the Government, we are now reaching the point where this project can start.”

Mr McDonald concluded by saying, “I would like to publicly thank those in the government who have had the foresight to support the project and accelerate the final agreements and legislative requirements. This project is a significant step in reducing dependence on imported diesel fuel and a giant leap towards energy independence.”

Commenting on the press release KUTh managing director said “This joint release reflects the strong cooperation that exists between UNELCO and KUTh. Now that the World Bank
report has been completed and submitted to the government we expect that momentum for this project will increase. We have a few regulatory issues to deal with and our people on
the ground are working with the government and UNELCO to address the outstanding items.”

David McDonald further added “Vanuatu is the first project in a portfolio of diesel replacement projects being compiled by KUTh. We have recently announced the successful tender award for KUTh to carry out gradient drilling in Saipan with grant support from the US government. We are also making good progress toward securing the Fiji tenements. The experience of Vanuatu, coupled with the equipment and team that are being assembled for drilling, will position the company well for replicating the model.”

The Vanuatu project

KUTh is planning the development of a two stage geothermal project on the main island of Vanuatu (Efate). Deep drilling is planned to commence in 2012 to delineate the geothermal resource.

Subject to successful drilling;

  • The first stage is a 4MW (net) power plant targeted for completion in 2014/2015;
  • The second stage is a duplicate 4MW (net) power plant to service the increasing electricity demand. This demand is predicted to come online as a result of new development along the recently completed sealed coastal ring road.

KUTh’s goal is to deliver a clean indigenous power project to Vanuatu at a price that will be more than competitive with existing diesel generated power. With the high (unpredictable) costs associated with diesel power generation ( April 2012 base electricity tariff for Vanuatu is 55.52 Vatu per KWh (AUD 59c)) geothermal power can offer not only lower pricing but stability in prices and important energy security for Vanuatu.

Consultants appointed by the World Bank have had the opportunity to carry out due diligence on KUTh’s exploration program. Their report concurs on the resource target selected by KUTh and the scale of operations required to meet the existing base load and future needs of Efate.

Source: KUTh Energy release by email