Panax Geothermal predicting US$45 / MWh geothermal power

Alexander Richter 1 Apr 2009

Geothermal developer Panax Geothermal (ASX:PAX) is predicting it can produce cheap geothermal power.

Reported by The Australian, Geothermal developer Panax Geothermal (ASX:PAX) is predicting it can produce cheap geothermal power.

The proposed AU$65 (about US$45) is well below estimates for other geothermal projects and on par with many gas-fired installations.

The estimate was released last week as Panax prepared to drill its first production well at its Penola project on South Australia’s Limestone Coast, and advances plans to have a 4.5MW demonstration plant connected to the main grid by late 2011.

Panax’s estimates compare with a predicted AU$75-95/MWh (US$ 52-66)at other proposed geothermal energy projects, AU$102/MWh (US$ 70.6) for wind and solar thermal and an average AU$62/MWh (US$43) for gas-fired generators. It has broken down its costs as AU$51/MWh (US$35.3) for capital, $12/MWh (US$ 8.3) for operating costs and a further AU$2/MWh (US$ 1.4) for grid connection. Panax expects to be able to access Renewable Energy Certificates, which currently sell at around AU$50/MWh (US$34.6), leaving a net cost of AU$13/MWh (US$9) — and plenty of room for a healthy margin.

The ASX-listed Panax will source energy from hot sedimentary aquifer rather than hot fractured rock common to other aspiring producers, so extraction is less complicated and less risky, and its reserves are located right next to transmission lines. Total capital costs for installed capacity are put at AU$10.5 million/MW, which suggests a total capital cost of around AU$450 million when its demonstration plant reaches a planned capacity of 45MW by 2016. Panax has cash reserves of just AU$7 million, but managing director Bertus de Graaf is not fazed.

“I don’t think there will be any problem financing. Once we can demonstrate we can produce power at this cost to the market, it will be very commercial. We will be able to pick and choose.” A likely partner is an established power generator, particularly in light of the investments made by Origin Energy in Geodynamics, TRUenergy in Petratherm and AGL in Torrens Energy.

Source: The Australian