Geodynamics' geothermal project stranded by distance from grid
by Dave Kimble at
www.peakoil.org.au
There are two kinds of geothermal heat sources - heat from volcanic sources close
to the surface, and heat from the radioactive decay of Uranium and Thorium in rocks
at great depth, overlaid with an insulating blanket.
Volcanic geothermal is up and running in over 20 countries around the world, but
there are no such sources in Australia. Australia has a lot of the second kind of
resource, but it is very difficult to engineer, and the sources are located far
away from electricity markets.
Geodynamics (GDY.AX
) has been developing its geothermal energy project at Innamincka in
far north-eastern South Australia since 2001, and listed on the ASX in September 2002.
In their 2003
Annual Report [1.3 MB pdf] their business plan showed a 13 MW demonstration plant
on-stream by June 2006, and a 275 MW commercial plant on-stream by June 2008.
Eight years later, none of this has eventuated. The latest business plan (published in May 2010 and confirmed
in December 2010) has the first electricity being generated in March 2012 - a 1 MW
pilot plant. A final investment decision on a 25 MW commercial demonstration plant
is expected to be made in March 2013.
Before that decision can be made, a major problem has to be overcome - who is to
fund the transmission network to connect this power to the national grid?
The following are snippets from a 2008 submission by Geodynamics to Infrastructure
Australia, who were looking into national infrastructure needs.
Geodynamics proposed a Transmission Super Highway (TSH) connecting national grid
nodes at Olympic Dam, northern Adelaide and western Brisbane via a hub within 100
Km of the Innamincka project site.
I estimate the length of this network at 2,500 Km.
There is the potential for many thousands of Megawatts of renewable generation to be
produced and supplied into the NEM. Geodynamics alone, believes its Cooper Basin
resource can generate up to 10,000MW of long term emission free, baseload power.
However, many of the potential developments alone cannot afford or support the
construction of high voltage transmission infrastructure to connect into the
NEM.
With a TSH, the transmission network would run through these remote
renewable energy provinces and if they ran within 100km of a development (as
opposed to 600km) the economics of these developments, such as in wind, solar
thermal and geothermal become much stronger.
These projects will not be developed without significant transmission backbone
infrastructure being constructed to support their route to market.
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If these issues are not resolved then the nation could be faced with a situation where
large scale renewable energy in remote areas does not eventuate. This is due to
the relatively small size of most renewable projects and the inability to
justify the construction of large scale transmission infrastructure from
individual projects.
It is very unlikely that individual projects will
proceed without guaranteed transmission infrastructure to market the electricity
generated, and it is unlikely that merchant operators will commit to large scale
infrastructure development without major projects already operating to utilise
the capacity.
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Large scale transmission infrastructure as
envisaged in the TSH concept takes many years to develop. Even if the project
were started in earnest today it would likely be at least ten years before it
would be completed.
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The simplest solution to the problem
is one where the Government pays for the construction of the TSH, although this
may also be the least palatable as this infrastructure will require a
multi-billion dollar investment.
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As you can infer from these comments, the future of the company depends on multi-billion
dollar investments being made by outside agencies.
Recent correspondence with Geodynamics' Commercial Manager indicates there has been
little progress on the TSH proposal, although it is slowly working its way onto
the agenda of AEMC for consideration.
Geodynamics thinks it is not economically feasible to connect the 25
MW plant to the grid, but the next scale up (from 2015/6) could be. In the
meantime they are looking at options like using the 25 MW on site and at gas
processing sites in the region, as well as co-locating new industries
nearby.
Of course this problem with electricity transmission was entirely predictable right
back before 2001, and will apply to any new geothermal prospects they may find in
this region in the future.
It is my prediction that geothermal in central Australia will NEVER be an economic proposition.
Updates
- Origin Energy has written down the value of its shares in Geodynamics, and their
auditors queried why their Financial Report didn't alert the shareholders to the
possibility that the value might have to be written off entirely.
- Geodynamics was removed from the Standard & Poor's ASX300 index early in 2011.
- In February 2011 Geodynamics' interim results for FY11 revealed a loss of $8.2m.
- On 4 April 2011, Origin/Geodynamics joint venture announced that the drilling
rig was moved to another site 18 Km from Innamincka, where it will be looking for
heat at shallower depths (still over 2,000 metres). The first hole (CEL1) was completed
on 20 April.
- On 20 May 2011, the results of testing CEL1 showed temperatures of 145°C (poor) and low permeability. The rig will now be moved to another
location in a different tenament.
- On 24 May 2011 Geodynamics announces the resignation of its Chief
Operations Officer.
- On 3 June 2011 GDY.AX shares closed at 19.5 cents, after a high of $2.10 in late 2007.
- On 28 June 2011 ASX asks Geodynamics if it was aware of any information which might be depressing the share price (then around 12 cents). Geodynamics said "no" and made a
a public statement to that effect.
- On 21 December 2011 Geodynamics announced that its Share Purchase Plan to raise $8 million to enable commencement of drilling Habernero #4 had only raised $3.8 million at a 20% discounted share price of 15 cents. It says it will try to raise the other $4.2 million with another SPP.
- On January 20 2012 the second SPP raised $6.2 million at 14.5 cents per share.
Dave Kimble
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