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Tata Power and CLP Holdings hot for Australian geothermal

Alexander Richter 19 Feb 2009

"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.

Reported by Bloomberg, “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.”

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.

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.

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.

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.

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.’”

Source: Bloomberg