NOTE: Research and Development Program only.
ARENA’s investment focus is on supporting geothermal research and development activities that develop or improve:
- techniques for finding prospective geothermal resources without drilling
- technologies to increase the flow rate from geothermal wells.
ARENA established an International Geothermal Expert Group (IGEG) in 2013, which undertook a comprehensive assessment of Australia’s geothermal sector to help ARENA critically evaluate the technology’s performance and assess its prospects.
The ARENA Board endorsed the IGEG report, which was released in July 2014. This assessment reflects that work.
How is ARENA involved with geothermal energy?
Likely scale and potential for growth by 2030-40
Australia has a significant potential geothermal resource, which is estimated to be 440,570 PJth. However, projections of the potential role of geothermal energy in Australia’s future energy mix assume the deep heat resources can reliably be extracted in ways that provide a commercial return on investment.
Around $900 million – approximately 80% of which came from private investors – was spent on geothermal projects in the period to 2013. Yet in 2015 the Australian geothermal sector is essentially stalled.
IGEG concluded that geothermal energy’s principal strength is as a dispatchable power source that has a low environmental footprint.
IGEG identified three critical barriers for the sector:
- finding it (identifying and characterising suitable geothermal resources)
- flowing it (producing hot fluid from the reservoir at a high rate)
- financing it (financing projects involving an immature technology and high resource risk).
Unlike other forms of renewable energy, geothermal is hampered by the high cost of accessing the renewable resource. The cost of drilling is the largest contributor to the overall capital costs of geothermal projects in Australia and drilling costs have increased rapidly over the past decade.
The current high drilling costs create a barrier to investment in geothermal energy, especially in the high-risk exploration stages of geothermal projects. Innovations that significantly bring down drilling costs or increase the probable value of each hole drilled could open up substantial commercial possibilities.
While IGEG concluded that utility-scale power generation from geothermal energy was not cost-competitive in 2014 and unlikely to be so in 2020, it found there are plausible commercialisation pathways for geothermal energy.
The most likely cost-competitive, commercial-scale market for geothermal energy in the next decade is in the provision of direct heat for the gas sector, especially in the processing of shale gas where both gas and proven geothermal resources are co-located.
Gap in ARENA Portfolio
As at June 2015, ARENA’s geothermal portfolio included two studies and one demonstration project, with a total ARENA commitment of over $62 million.
Consistent with IGEG’s ‘reboot’ option, ARENA’s investment focus for geothermal energy is research and development in both finding and flowing the resource. This focus on promoting innovation is expected to assist the geothermal sector towards a more cost-competitive path in the long term.
ARENA also intends to develop an Innovation Roadmap to identify funding pathways for the geothermal industry and drivers for lowering the technology’s costs.