The announcement from the Australian Renewable Energy Agency on Thursday that funding for Petratherm, a geothermal company, would be restructured with more modest objectives was a victory for commonsense.
Petratherm was originally awarded a $62.8 million grant by the government under the Renewable Energy Demonstration Program to support construction of a 30MW project; as well as $7 million under the Geothermal Drilling Program.
Under the restructured funding arrangements:
1) Petratherm’s Drilling Program grant has been terminated with $2.8 million relinquished;
2) The $62.8 million grant for a 30MW project will be scaled-down to a grant of $24.5 million for a 7MW project; and
3) Perhaps most importantly, ARENA will provide $13 million for an applied research project to better understand the nature of the Paralana resource and whether it can be usefully extracted.
As I wrote about in the special report on why the Whyalla solar thermal dish project fell-over, government low emission energy grant programs have a bad track record of setting their sights so high that nothing ever happens. ARENA, in conjunction with Petratherm, has done the sensible thing by focussing on baby steps before trying to fly.
Petratherm’s drilling around Paralana shows some degree of promise that heat can be extracted. But there’s a lot more work that needs to be done to thoroughly understand whether this can be done to at a level that makes power generation economically viable. The challenge comes down to not just how hot the rocks are four kilometres underground (they’re definitely hot). What’s also critical is whether you can circulate:
a) Enough water through these rocks; and
b) Fast enough; and
c) Over a long enough period of time.
In order to generate enough power to make the very expensive drill holes at $10-15 million a pop all worth it.
While the government was holding out $62.8 million for a 30MW project, this wasn’t much good to Petratherm until it knew whether it could get enough hot water to flow to power one megawatt, let alone 30. And in the end Petratherm has found the private sector money to prove-up the resource just isn’t there.
Frustrating progress is that the government adopted a convention with grant programs where they insisted the private sector stump up $2 for every $1 the government puts in. What’s the basis for this magic formula? I don’t know because the government has never explained it.
With such uncertainty and long time frames involved in generating money from deep granite geothermal power, such a formula was unrealistic.
So we are now aiming to do what should have been done in the first place. ARENA has said it’ll stump up $13 million on a one-for-one basis with Petratherm to assess whether there’s actually a resource that makes power generation viable. But there’s a quid pro quo, as there should be for taxpayers providing a greater proportion of the funding. Petratherm will need to partner with an Australian public research institution such as a university, so that the knowledge gained from this applied research project is shared more broadly.
Right now ARENA is going through an assessment process for the various renewable energy technologies, not just geothermal, against what it calls a commercial readiness index. In consultation with experts and industry stakeholders the intention is to honestly gauge each energy source’s technological and commercial maturity.
It seems astounding that government is only now applying this 'first things first' approach. But this is the first time that decision-making around how to structure funding has come from experts rather than politicians, through the delegation of program design to ARENA.
In the past government departments would co-fund what are known as industry roadmaps. These would detail how a sector or technology might build capacity and overcome major development hurdles. But these seemed to be developed in a complete vacuum to wider government policy, left to gather dust on some bureaucrat’s shelf.
ARENA is finally closing the loop.