Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Link to this | Hansard source

by leave—Australia’s geothermal energy resources have tremendous potential for Australia’s clean energy, both in terms of our future and our long-term energy security—the possibility of supplying low-emission baseload electricity for thousands of years. Geoscience Australia estimates that if we were able to extract just one per cent of Australia’s geothermal energy, it would be equivalent to 26,000 times Australia’s total annual energy consumption. These are staggering numbers.

Australia’s geothermal resources are different from those typically utilised for localised projects in other parts of the world. Australia’s resources are in the form of deep hot rocks—rather than shallow volcanic systems—and they are huge. The nature of geothermal energy is often poorly understood, with some erroneous claims that it is non-renewable and even radioactive.

Geothermal energy is produced by pumping water deep into the earth’s crust—sometimes as deep as five kilometres—where it is circulated through high-temperature rock formations and returned to the surface as very hot fluid that is passed through a surface heat exchanger in a power plant to generate electricity. This is a very clean source of energy with water circulation occurring in a closed loop system; there is no waste produced.

The challenge Australia faces is to develop the technologies and techniques needed to produce this heat from deep below the earth’s surface, to convert it into power and to get it to market economically. The good news is that the Australian government, state governments and the private sector are working in partnership and paving the way to make this a reality.

In fact it is possible that we could see Australia’s first commercially viable geothermal power plants in place within five years. Around Australia, governments have either established their geothermal exploration and production regimes or are in the process of doing so. The centre of activity obviously at the moment is in the Cooper Basin in South Australia. There are also prospective geothermal resources in the Hunter Valley in New South Wales, near Cloncurry in Queensland, in the Otway and Gippsland Basins in Victoria, in Tasmania and in Western Australia.

Geodynamics Limited is working to demonstrate proof of concept for the production of geothermal energy by circulating fluids between two deep wells at its Habanero project in the Cooper Basin. The company is also drilling a deep well at a second site nearby and plans to drill at a third site before deciding where to build a one-megawatt pilot power plant to supply the local township of Innamincka. The company’s proposal is to scale-up to 500 megawatts by 2015. Others are also working on proof-of-concept projects, including Petratherm, which has secured a drilling rig for December this year to complete the first of two deep wells at its Paralana project in the Arrowie Basin. Petratherm’s drilling rig will also be made available to others in the market and thereby help accelerate exploration and proof-of-concept drilling. Projects in the Gippsland and Otway Basins by companies including Panax, Greenearth and Granite Power are also being progressed.

Ongoing exploration investment is vital if we are to realise the opportunity to establish Australia as a world leader in geothermal energy. That is why, on 20 August 2008, I launched the government’s $50 million Geothermal Drilling Program on behalf of the Australian community. The Geothermal Drilling Program is the first program to be launched under the government’s $500 million Renewable Energy Fund announced in the 2008 budget. The program, following proper consultation with industry, will provide grants of up to $7 million on a matching funding basis to support the high cost of drilling deep geothermal wells for proof-of-concept projects. These are the projects that will demonstrate, hopefully, that it is possible to drill into the deep, hot rocks, circulate fluids between two wells and produce sufficient heat for electricity generation.

Proof of concept is a critical step for the industry. Once proof of concept is demonstrated, geothermal energy will be much more attractive to private investors. According to a recent report for the Australian Geothermal Energy Association, the emerging Australian geothermal energy industry can be expected to provide up to 2,200 megawatts of baseload capacity by 2020. That is about five percent of Australia’s generating capacity today. Moreover, the cost of generating electricity from geothermal resources is expected to move rapidly down the cost curve to about $90 per megawatt hour for commercial-scale plants by 2020. Cost competitiveness, as we all appreciate, will be vital to the future development of this key industry, and so will government policies to promote the establishment of this sunrise energy industry generally. Policies such as the Carbon Pollution Reduction Scheme and the Renewable Energy Target will go a long way to promoting its development.

Geoscience Australia’s Geothermal Energy Project is another very important initiative of the Australian government. Under the Onshore Energy Security Program, the Geothermal Energy Project will compile a single dataset to give us a better understanding of the distribution of temperature in the continent’s upper crust and other geological factors. This ‘national heat mapping’ will provide precompetitive geoscience information to lower the risk to explorers and investors as they decide which areas to target for commercial exploration and demonstration activities. Geoscience Australia, I am pleased to report, is also working collaboratively with state and territory geological surveys, as well as industry, to add to this data collection.

The Ministerial Council on Energy, of which I am the chair, has directed the Australian Energy Market Commission to conduct a review of the energy market frameworks to determine whether amendments are needed to accommodate the introduction of the Carbon Pollution Reduction Scheme and the Renewable Energy Target. Given the remoteness of many geothermal resources from markets, transmission is one area the review will obviously have to consider.

The industry will have other policy challenges as the regulatory framework for the industry develops in areas from land access to resource taxation. To start to address these issues, I released a draft Geothermal Industry Development Framework in August. The framework, to be finalised before the end of the year, was developed in close consultation with industry, researchers and state and territory governments, and recognises the challenges facing the industry including:

• attracting private investment to the sector
• building networks within Australia and overseas
• making sure that the necessary skills and expertise are available to the industry
• making sure that the community understands the potential of geothermal energy, and
• understanding and contributing to the development of the institutional framework, which is so vital to the future operation of the industry.

The framework proposes a range of actions on these and other issues, which companies, researchers and governments can pursue. As one of the first outcomes, the Australian government is exploring opportunities to build international linkages on geothermal technology. The framework recommends Australian governments and industry learn from experiences in other countries by building strong international linkages. To this end, the Australian government is about to enter into an international partnership on geothermal technology with the United States and Iceland. A strong private sector involvement in the partnership is vital to its success. The main goal of the partnership will be to give Australian companies a chance to leverage from efforts in other countries.

The United States Department of Energy estimates that more than 100,000 megawatts of economically viable capacity from engineered geothermal systems will be available in the continental United States. Interestingly, that is about 10 per cent of the overall US generation capacity today. The United States has large domestic programs underway to demonstrate technologies and develop these resources.

Iceland’s Deep Drilling program is exploring the techniques and technologies to drill wells four to five kilometres deep into geothermal systems of 400 to 600 degrees Celsius. Australian companies may well benefit from information sharing with their counterparts in the United States and Iceland, and our governments may also benefit from shared policy discussions about energy market frameworks to accommodate geothermal energy. Of course, greater investment will follow market confidence, and all of these initiatives will contribute to this outcome.

The Australian Geothermal Energy Group and the Australian Geothermal Energy Association have created a geothermal reporting code which will set the standard for ASIC reporting and initial public offers. In my view, it is very timely and it is good to see the industry taking such an active role in ensuring the integrity of corporate governance frameworks for its future. The code provides a methodology for public reporting of the estimation, assessment and quantification of geothermal resources and reserves to promote transparency, consistency and confidence.

But the code is more than that. It is the sign of an industry maturing and coming of age. Geothermal is now ready to present itself to the market with a new level of transparency, a level we have come to expect from mining and energy companies seeking to raise capital from their unrealised deposits. In addition, the Australian government’s Geothermal Drilling Program will give the industry the push it needs to bridge the gap between being a good idea and being an important contributor to Australia’s clean energy future and its long-term energy security. I commend the statement to the House. I ask leave of the House to move a motion to enable the member for Groom to speak for a period not exceeding 13 minutes.

Leave granted.

I move:

That so much of the standing and sessional orders be suspended as would prevent Mr Macfarlane speaking for a period not exceeding thirteen minutes.

Question agreed to.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I join with the Minister for Resources and Energy in acknowledging that Australia’s geothermal resources have great potential for Australia and will play an enormous role in Australia’s clean energy future. I also give all strength to his arm to ensure that his efforts continue to see energy market reform through the Ministerial Council on Energy, which he chairs. He is a great supporter of reform in that area. It is very unfortunate, though, that, when push comes to shove, the Prime Minister does not share that same conviction. In fact, the Prime Minister allowed the New South Wales privatisation of its electricity assets to fall in a heap because, quite frankly, he did not have the courage to put his words into action.

Australia has in its interior a vast and untrapped geothermal resource that could ultimately deliver big, clean energy dividends. Unlike other energy sources, such as solar and wind power, geothermal offers the potential to deliver baseload electricity with zero emissions, around the clock, 24/7. The minister spoke about advances that were being made overseas in both types of geothermal energy. In the long run, I think it is a blessing that we do not have the volcanic activity that now gives other countries geothermal electricity. Those other countries are continuing to explore the opportunities of hot rocks geothermal power. I see real potential in that, as does the minister. There are of course always challenges in that regard. The biggest challenge is to ensure that there is the ability to deliver that electricity into areas of high population growth or, alternatively—and it is not out of the question—to actually move some industries to those parts of Australia where that geothermal electricity may be produced.

Not only is a wide range of companies involved in funding these projects—the minister mentioned a few, and I will come back to them—but there are also companies where predominantly men, but also women, operate rigs that drill up to five kilometres into the earth. One of those companies, which I cannot not mention, is the Easternwell Group, based in Toowoomba. It is a family company that has built its operation primarily in the gas industry but is now showing the world, by using a rig imported from Canada, how to drill down into these rock substructures. I invite the minister, next time he comes to Toowoomba, to visit Troy and his team. I am sure that he would be more than welcome, and they would show him just how well we can do things in the great town of Toowoomba.

It is important in the current national debate to recognise that geothermal produces energy without greenhouse gas emissions and therefore will play a major role in lowering Australia’s carbon dioxide emissions. That is going to be very important as we move forward with the Prime Minister’s carbon trading scheme, a scheme that is still fundamentally flawed but which will also see the biggest economic reform in Australia. We need to use every piece of technology we can lay our hands on. We certainly do not need another committee or inquiry to tell us that we will have to work hard on it. When we talk about lowering greenhouse gas emissions, and the role that geothermal will play in that, it is important that we acknowledge the work that has already been done. There is a great myth being promoted by most of those on the other side that in fact the Howard government, in the 11½ years that we were in government, did nothing about lowering greenhouse gas emissions. I cannot pass up this opportunity to again point out to those opposite just exactly what was done.

When we were in government we realised that greenhouse gas emissions had to be lowered and that it would require a broad suite of energy sources. We invested some $3.5 billion in lowering greenhouse gas emissions, and the results speak for themselves. Australia is probably the only country not using nuclear energy that will reach its Kyoto target because of the work that has already been done and, I hope, will continue to be done. From what has already been done, we will reduce our emissions by some 85 million tonnes of carbon dioxide per year by the end of next year. But that will not be enough. Ross Garnaut, that doyen of climate change and carbon trading, gave credit where it was due when, in an address to the National Press Club, he said that, in Australia, ‘we have been punching above our weight on climate change for the last seven years’. So, much has been done in this area.

In the area of geothermal, back in March 2007 I, as the Minister for Industry, Tourism and Resources, along with the Leader of the Opposition, the then Minister for Environment and Water Resources, hosted the inaugural meeting of the geothermal industry roundtable here at Parliament House in Canberra. Can I again digress for a moment and congratulate the member for Wentworth for attaining his goal of becoming Leader of the Opposition. I look forward to working with him and I am sure he will make life interesting for those who sit opposite.

At that meeting in March 2007 we gave the industry the commitment that the Howard coalition government would work collaboratively with them to prepare a Geothermal Industry Development Framework that could act as a guide to the long-term development of the sector—setting the framework, if you like, to ensure the industry moved forward. The commitment we gave was not just for the 24-hour news cycle that seems to drive those opposite. As the Minister for Resources and Energy would appreciate, the geothermal industry has always been supported by the coalition, both in government and now in opposition. In fact, we went into the last federal election with a commitment to promoting and advancing this alternative form of energy. We were fully committed to the establishment of a national research institute for geothermal energy, to be hosted in South Australia, and we were prepared to commit $20 million over five years to that end.

This is in contrast to the Labor Party and its first budget cutbacks. In May, the Labor Party failed to allocate any funding for geothermal in this current year. The previous coalition government had already invested some $28 million in hot rocks geothermal energy research and development, which has stood the industry in good stead during the current period. We put $5 million into Geodynamics Limited for the Innamincka hot fractured rock power plant, which Easternwell, the company I mentioned earlier, is drilling for. We also put $3.9 million into Scopenergy Limited for a proof-of-concept project on the Limestone Coast. Geothermal Resources Limited were awarded $2.4 million for a project entitled ‘Heat generating capacity of buried hot radiogenic granite’. Proactive Energy Developments Limited were awarded some $1.2 million and Petratherm Ltd were awarded some $5 million to further develop their groundbreaking approach to using geothermal energy at their Paralana site in the Flinders Ranges. And if those opposite have any criticism of my pronunciation of ‘Paralana’, I refer them to the Speaker’s effort on Chinese names during question time! I think he got about five out of 10 right, according to the look on the Prime Minister’s face. This is a comprehensive range of programs, and I am confident that the Minister for Resources and Energy will ensure that they continue to grow.

There is, of course, one technology that those opposite do not consider—although there are some who harbour secret support for it. I will not embarrass anyone today by asking them to put up their hand. In the absence of nuclear power in Australia, there will need to be a very strong commitment to zero-emission technology that can produce baseload electricity. Baseload electricity from hot rocks is such an option.

The Labor Party, in opposition, promised $50 million out of its $500 million Renewable Energy Fund to assist geothermal energy companies to drill into these hot rocks. We now know that the Treasurer’s razor gang was unleashed and that that funding was deferred until the end of next year, significantly affecting the plans of companies who seemingly had been conned during the 2007 election campaign. The resources minister is indeed a sensible man most of the time, unlike many, if not all, of those who sit around him on the other side. We now know that he borrowed $20 million from the Energy Innovation Fund, which is essentially a research fund, to patch up the mess. At least, I hope he borrowed it. I am sure the resources minister, if his predecessor is anything to go by, would never have stolen money out of Treasury while no-one was looking. So, despite boasting of a $2.3 billion climate change budget, the $500 million for the Renewable Energy Fund included $0 in 2008-09.

In conclusion, I welcome the minister’s announcement on 20 August 2008 of the $50 million Geothermal Drilling Program. It is unclear how this will work without any money just yet. We can only hope that the $20 million will go some of the way. I also commend the people in the geothermal industry. It is a tough industry. It is an industry that operates primarily in outback Australia. It is an industry that is breaking new ground. It is an industry that, as Sir Nicholas Stern acknowledged when he came to Australia the year before last, is leading the world. Nicholas Stern also acknowledged the work that was being done on clean coal in Australia, again saying that we are world leaders. The future of the geothermal industry is not only important, it is critical to Australia and the rest of the world if we are to produce low- and zero-emission electricity.