Hot rocks a dud: ask Tim Flannery

Here is a very balanced piece by Keith Orchison, who is always worth reading.

It tells the story of investors (who should have known better) and the taxpayer getting caught up in the fairytale of hot rocks (which need to be fracked to release the heat, incidentally) becoming a major source of electricity generation any time soon.

Gillard and Swan were peddling this line for quite some time.

I guess the only good news about this story is that Flannery must have really done his dough by investing in Geodynamics.  (Does anyone know why we have ARENA, by the way?)

Here is the piece sourced from Business Spectator:

A billion dollars is a lot of money, especially when it delivers the dimming of a green dream and a lot of frustration for investors.

This is today’s story for enhanced geothermal energy, or ‘hot rock mining’, as some in the media will have it.

The technology’s travails have been revealed in a report commissioned by the Australian Renewable Energy Agency and it does not make especially happy reading.

ARENA asked an international expert panel chaired by economist Quentin Grafton of the Australian National University to canvass the local opportunities for geothermal. The shorthand response was “not good”.

This is of more than esoteric interest. Bear in mind that geothermal was a technology touted by the Gillard government as one of the big green hopes for the ‘clean energy future’ just three years ago.

In the Treasury paper ‘Strong growth, low pollution’ published by Wayne Swan and Greg Combet to support the carbon tax argument, the government endorsed the view of consultants that geothermal power generation could fuel up to 23 per cent of mid-century electricity production, helping to shove coal to the sidelines of baseload supply.

This was one of the cornerstones of the government’s assertion that its policies could deliver renewables as the largest electricity contributor (with a 40 per cent market share).

What happened?

Grafton and his panel say the pursuit of geothermal development has stalled and the sector is facing a funding crisis as many private sector investors exit the field after spending $828 million (or $1 billion if you translate the sum in to today’s dollar values), about 13 per cent of which was obtained from taxpayers as subsidies.

‘Unrewarding’ is the word for geothermal in the minds of investors, the panel observes.

“Utility-scale power generation from geothermal is not cost-competitive in 2014 and is not expected to be so in 2020,” they reported. They added that the technology might become competitive with fossil fuel generation in 2030 “but only with a high carbon price” and if it can sort out a few other hassles.

They estimate that the levelised cost of geothermal energy will sit in the range of $170 to $300 per megawatt hour in an east coast market where the wholesale price of power is likely to be between $50 and $100.

As Grafton and the panel see it, the future for geothermal is remote — literally not figuratively — and ironically is tied up with green radicals’ bete noir, shale gas production.

They suggest that the most prospective market for the technology out to 2030 is in locations off the power grid where there are commercial scale applications for electricity or direct heat.

In the case of shale gas, the Cooper Basin, where it is most likely Australia’s first commercial shale operations will occur, also has some of the best ‘hot rock’ resources.

As Grafton & co point out, the gas needs to be processed in situ to remove impurities before being sent on its way to the next stages of production for the market. At present, this is done using the gas as feedstock. Geothermal energy could be an alternative.

Even here, the geothermal people have some barriers to climb to make their product cost-competitive.

One of the bugbears is drilling charges, which make up a big part of geothermal upfront costs as the rigs have to bore up to five kilometres in to the ground and this is no task for just any old kit.

This situation isn’t helped by the fact that drilling costs onshore in Australia have shot up in recent years as the result of upstream petroleum industry demands.

Another irony, given the carrying-on by the Greens, some Labor types and ‘Lock the Gate’ etcetera, is that geothermal development requires hydraulic fracturing (the much demonised ‘fracking’.)

A social licence to operate could be an issue, the panel notes.

Grafton and his colleagues have produced a 128-page report that canvasses not only what has been going on here but also the experience around the world.

A condensed version of their careful analysis is “much still needs to be known and risks remain”.

Ultimately, they say, Australian development will require gaining access to resources that can be cost-effectively drilled and can produce heat at levels that make the expense worthwhile.

And by the way, they add, it helps if the resources are placed where the electricity they produce doesn’t require mighty expensive delivery bills.

One of the problems with Cooper Basin ‘hot rock mining’ is that production and consumers are separated by about a billion bucks worth of (to be built) transmission line.

The bottom line, however, as the panel says, is that everything in the energy market depends on access to capital, either through investors or taxpayer handouts. The Australian geothermal business, at least for the time being, has apparently exhausted the patience of the investment community.

This leaves us with handouts.  Which is where ARENA comes in — the Abbott government is hell-bent on giving it the chop.

All of this has the nuclear lobby raising its hand to ask: doesn’t it make more sense as a zero emissions baseload option?

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31 Responses to Hot rocks a dud: ask Tim Flannery

  1. john constantine

    Geodynamics has done the sums, and now is moving into the volcanic pacific islands, to use existing technology to generate electricity the way new zealand and iceland do, from hot water.

    The numbers add up, if they are competing against diesel powered generators.

  2. MartinG

    john constantine
    #1408435, posted on August 8, 2014 at 9:23 am

    Geodynamics has done the sums, and now is moving into the volcanic pacific islands, to use existing technology to generate electricity the way new zealand and iceland do, from hot water.

    The numbers add up, if they are competing against diesel powered generators.

    So for all the Australian tax payers subsidies pumped into the company, how much electricity will it produce for us? Silly me of course. it will one day start making vast profits and start paying tax in Australia.

    By the way, who’s paying the bill for this exiting development?

  3. cohenite

    This is old news; geodynamics, Flannery and the idiocy of hot rock energy has been in the pipeline for at least 3 years.

    Geothermal energy works in places like Iceland, New Zealand and California. There it is called wet geothermal with the water close to the surface. The down-side are earth-quakes and volcanoes.

    In Australia the hot rocks are kilometres down and the plan was to pipe down to the rocks, pour water down the shaft which would be turned into steam which would then come back up the pipe and turn the turbines.

    2 things; firstly the depth was so great the hot water recondensed before it came back the surface. Secondly the hot water and steam released vast amounts of CO2 sequestered in the surrounding bedrock.

    Flannery is a loon but he knows how to make a buck; I don’t believe he lost cent in the Geodynamic debacle.

  4. Andrew

    How much taxpayer money was wasted on a report that said Flim Flammery didn’t know what he was talking about? And having written it, can they (for a further 20%) add an appendix saying “…about geodynamics, sea level rises, soil sequestration, droughts, dams, cyclones, hybrid cars, and in all likelihood kangaroos.”

  5. H B Bear

    It tells the story of investors (who should have known better) and the taxpayer getting caught up in the fairytale of hot rocks…

    It wasn’t the taxpayer who got caught up – it was the dishonest, criminally inept Gillard government through its ministers, the most intellectually limited Treasurer ever aka The Goose and ACTU stooge Combet.

    The taxpayer just gets taken along for the ride.

  6. Alfonso

    Just another Green crony scam enabled by govt. and financed by taxpayers…… and the taxpaying sheep seem to hardly care. Who can blame a Flan for taking the opportunities provided to those of his special status.

  7. Ant

    Charlatans and fools will always be with us.

    The Great Global Warming Racket will be with us for years to come.

    I think it’s high time the Australian media class learnt a new word (for them):

    BOONDOGGLE

  8. egg_

    cohenite
    #1408450, posted on August 8, 2014 at 9:46 am

    IIRC primary and secondary water circuits not unlike a thermonuclear plant; the primary circuit down to the hot rocks containing all manner of chemicals (anti-corrosives, etc.) leaked into the rocks due to sealing issues – if it were a Monadelphous/other mining site, the Greens would have plastered all over the media re a “bio hazard” catastrophe.

  9. Tim Neilson

    Flim Flammery may have suffered a diminution in value of his shareholding but I’d be astonished if he has lost a cent of his own money. Middle class pinko’s don’t do “personal responsibility”, “assumption of risk”, “making a contribution” or anything of that nature.

  10. John Williams

    ..”I guess the only good news about this story is that Flannery must have really done his dough by investing in Geodynamics.”
    Wanna bet ?
    Possibly Flannery was gifted shares in return for his advocacy.
    Make that “more likely”
    I note the shares peaked just over $2.00 late 2007…currently around 5 cents.
    Ouch!
    That was me …you can safely bet that the sharpies made other more agreeable exclamations after they took the windfall gains.

  11. dianeh

    I simply do not agree with the govt giving money to start up business. If a business is viable, it will get private investment. If not, then it has no business taking taxpayer money to piss up against the wall.

  12. Bruce of Newcastle

    Engineering is hard. Murphy is not your friend. Also competent engineers tend to be ruthlessly realist and empirical, and therefore tend to be climate sceptics – who then don’t go and work for dodgy geothermal projects.

    Highly technical engineering projects tend not to work as intended when built by Green Party members who have degrees in LGBT policy development and Marxist literature.

  13. goatjam

    Apparently, all those green jobs that Swannee used to bang on about are held by accountants that are employed to calculate how much money green projects have lost.

    Except for the guys who clean up all the minced birds that for some reason collect around wind farms of course.

  14. john constantine

    the actual first hot dry rock drilling was a disaster [genuinely, the insurance company had to pay up]

    the reason i have been accumulating gdy shares at this market, is that gdy has no significant unfunded liabilities from past activities, it has a bombed out and hated shareprice, it has enough cash reserves to fund activities into the medium term without a capital raising and it has a ‘moat’ around its new prospective areas of operation.

    gdy has realised that hot dry rocks are beyond our current ability to economically develop, and has selected a new business to develop that is matched to its capacity and existing technology.

    the market tends to overshoot on both upside and downside, so when gdy was a billion dollar hope, the numbers didn’t work, but the herd piled in.

    now gdy is a 20 million dollar market cap company, the herd is dumping for tax write offs.

    closer to positive news flow, expect a name change to remove the taint of old gdy.

    warning, ‘island time’ –people that know how things work out there also know that no hurry is possible.

    http://www.abc.net.au/news/2014-06-30/an-powerful-volcano-could-be-solution-to-solomon-islands-electr/5560820

  15. manalive

    In the Treasury paper ‘Strong growth, low pollution’ published by Wayne Swan and Greg Combet to support the carbon tax argument, the government endorsed the view of consultants that geothermal power generation could fuel up to 23 per cent of mid-century electricity production, helping to shove coal to the sidelines of base load supply …

    You have to simultaneously hold in mind the fact that Australia is the largest exporter of coal, that it is our principle commodity export, to fully comprehend the utter insanity of all these costly Labor-Green ‘low emission’ ventures.
    ‘Insanity’ is not strong enough, maybe ‘criminal insanity’.

  16. Chris M

    Yes Geothermal is a combination of fracking and nuclear energy – yet greenies love it. Go figure…

    Better have build a nuclear power station, have controllable amounts of power in the location you need it.

  17. deiseal

    I know that the contractors did well out of at least one of the hot dry rock projects.

  18. JohnA

    Chris M #1408516, posted on August 8, 2014 at 11:09 am

    Yes Geothermal is a combination of fracking and nuclear energy – yet greenies love it. Go figure…

    Better have build a nuclear power station, have controllable amounts of power in the location you need it.

    Easy to figure.

    Such people are into slogans, not substance, and certainly not the hard slog of actually doing stuff that matters.

    So they think “geo-thermal”, not nuclear-created heat, and fracking to release it – well, what’s that eh?

  19. nerblnob

    Yes, geothermal drilling uses all the techniques and chemicals of oil & gas drilling, including the “controversial” (oblig.) process known as fracking. Never seen a Greenie protestor near a geothermal site though.

    Basically because
    a) they haven’t got a scooby about anything technical and just parrot propaganda from activist websites and
    b) despite all the pseudo-knowledgeable guff they come out with, they don’t really object specifically to “fracking” or CSG or give a shit about farmers . It’s their big pantomime villain “fossil fuels” which is the Devil they wish to cast out from society with their “renewables” voodoo.

    Rather ironic when you consider it was fanatical opposition to “renewable” energy in the shape of hydro-electric in Tasmania that was the genesis of the political Green movement.

    But, like I said, they haven’t got a scooby.

    I almost feel sorry for the disposable minions and useful idiots that really swallow the anti-fracking stuff.

  20. egg_

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=abSJNnq_AqVk

    Tata Power Ltd., India’s biggest non-state electric utility and Sydney-based Origin are Geodynamics’ biggest shareholders. The incident involved “a rapid release of pressurized water and steam” detected in the well “cellar,” a seven-meter deep concrete box set into the ground through which the well is drilled, Managing Director Gerry Grove-White said on a conference call.

    A chemical leak at the surface and shares plummeted.

  21. egg_

    I almost feel sorry for the disposable minions and useful idiots that really swallow the anti-fracking stuff.

    Barnaby Joyce is pushing for adequate compensation for (large) farms, on behalf of his constituents?

  22. egg_

    Tata Power Ltd., India’s biggest non-state electric utility

    Raj Pachouri of IPCC infamy.

  23. john constantine

    the original drill was a learning curve, a 9 digit in the number learning curve.

    the next wells drilled had the advantage of that experience.

    drilling deep shale wells in the cooper basin are also hideously expensive,so there are layers of challenges here ‘regulatory’ as well as depth, pressure,hostile corrosive bottom of hole conditions.

    spending billions for hot rocks power doesn’t work, but the position that australia would have been better off backing hot rocks over windmills and solar panels is quite arguable. [baseload].

    the shale gas/ deep coal gas potential of the cooper basin is an energy reserve that the country needs to
    ‘not stuff up’. given that there is existing infrastructure to transport gas from the cooper to market, and that the ‘neighbors’ are used to hydrocarbon extraction it is interesting, but it is jaw dropping to see how little change there is from one hundred million dollars to drill and complete for sale of gas just one cooper basin deep shale well, there must be a way to smooth the path for the resource somehow……

    http://www.atse.org.au/Documents/Events/SA%20Manufacturing/nick-panagolpoulos-sa-shale-gas.pdf

  24. Bill

    I would think much less than $100m per well with experience, and rigs that were owned (not hired)?

    Cooper certainly ought to be better prospect than the other basins – geology extremely well known. excellent infrastructure, zero population.

  25. nerblnob

    The Habanero-3 blowout was caused by hydrogen embrittlement of the casing leading to cracks. As a result they had to use a softer grade metal casing which brings a whole heap of other issues and led to them abandoning some of teh planned wells.

    australia would have been better off backing hot rocks over windmills and solar panels is quite arguable

    No it’s not. The hot granite layer only comes within drillable depth (+/- 5000m) in a few locations worldwide – Central Australia is one of them. Geothermal elsewhere is either volcanic, like NZ & Iceland & Japan, or hot aquifers that maybe have indirect communication with the hot granite. The problem then is delivering power to customers but the efficiency losses over long distances are too great to go anywhere of consequence. Assuming you think the Innamincka pub is of no consequence.

    There was an idea – a fantasy maybe – that Google could put a server farm out there because data losses over a fibre optic cable are negligible. But Google weren’t interested for long. And one of the optimum conditions of server farms is coolness as well as dryness , which is why several are on the Oregon or Northern California high plain .

  26. nerblnob

    I would think much less than $100m per well with experience, and rigs that were owned (not hired)?

    Bill, there’s no point owning the rig unless you can keep it busy. You’re right – they might have got it down to $20m per well or less, but the technological demands of drilling deep wells in such high temperatures are expensive.

    Your average Cooper basin well is a relatively shallow horizontal, not a deep deep S-shaped or vertical like the required GeoD wells. They’re doable, but not cheaply.

  27. nerblnob

    Sorry, muddled up the discussion of hot dry rock with Cooper shale by not reading posts thoroughly. Mea culpa.

  28. Dave Wane

    Has Flannery ever had a real job? I mean one that was not funded by the taxpayer from the public purse?
    Therefore Judith’s comment: “I guess the only good news about this story is that Flannery must have really done his dough by investing in Geodynamics. ” whilst in most cases this would be correct, it is however, kind of incorrect, given that, as far as I know Flannery has never been a net producer of taxation. A lifetime feeding at the taxpayer-funded-trough renders any person who has done that, a net consumer of the nation’s wealth.

    But obviously, this scheme should never have had a cent of taxpayer’s funds applied to it.

    By all means try other more unusual methods to produce electricity, if you think they have a possibility of economic success, but do it with your own money and the funds of any investors you can sell shares to. But never with public funds.

  29. john constantine

    the majority of funding for gdy hot rocks funding was punters funds, but the last 8.5 million of government money came through this year.

    there are top tier accounting firms that can structure a company’s accounts in a way that can qualify a lot of drilling ‘to investigate a concept’ as research and development, to access the governments r and d incentives. some accountants take a percentage of the funds they can qualify the company for.

    http://www.asx.com.au/asxpdf/20140131/pdf/42mfgl79pgn9lg.pdf

  30. Robert O.

    Hot rocks, wave energy, schemes to pump CO2 down mineshafts…… illustrates the gullibility of our ruling class of lawyers, ex party staffers and unionists who have unlikely done a day of real work in their lifetime: a non solution to a non problem created by computer programmes and peddled by snake oil salesmen which have plainly failed the reality test.

  31. nerblnob

    Yes I believe the govt funding was as “R&D” which the Innamincka scheme was since it did not have any way of selling the power profitably. The $90m they got a few years ago was an open secret beforehand so a few people I know bought shares just before. However the Habanero blowout happened soon after, if I remember correctly, so I doubt any of them cashed in.

    I’m not sure if even the geothermal in NZ is competitive without some taxpayer assistance.

    This contractor didn’t make anything off them – with spectacular bad timing I arrived at the Brisbane office just as the wild well control expert came racing in from the airport, cowboy boots, hat and all.

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