Australian geothermal firms to face funding challenges in 2011

Drilling rig at Paralana project of Petratherm, Australia (source: Petratherm)
Alexander Richter 16 Jan 2011

Australian geothermal firms will face funding challenges in 2011, faced by risk reluctant investors and banks, as well as not sufficient government support compared to other renewables in the country.

An article in Australia says that Australian geothermal companies might face a tough year in attracting funding for the progress of their projects.

It refers to the industry calling for further government commitment, quoting “enormous potential” for the geothermal energy industry in Australia.

The article refers to Matt Herring, head of KPMG’s renewable energy team in Australia, who says that the “vicious cycle of needing to remove risks from projects to attract funding, but also needing to raise operating capital to reach milestone requirements set by government grant programs.”.

While the Australian government has set AU$150m under a Renewable Energy Demonstration Programme in November 2009, but it cannot be accessed until two companies, Petratherm and Geodynamics reach a proof of concept stage, where they show that their EGS project approach is viable to produce electricity.

With Geodynamics further advanced and Petratherm still needing to drill a second well, the industry has showed “extraordinary level of progress in a very short time.”, so KPMG. But – and this is an issue all over the world, geothermal risk is not understood by the financial sector, making it hard to attract much needed financing.

So it is no surprise that the Australian Geothermal Energy Association compares its “minimal government support” with a AU$1.5 billion allocated to the Australian solar industry.

Government support is crucial to the sector in Australia, but also in other regions of the world.

Source: Adelaide Now