Geothermal, or hot rock, energy generation has the potential to supply Australia with emissions free, renewable and base load energy for centuries to come. While the Australian geothermal industry is in its early stages of development, first generation has been projected as soon as 2012.

South Australia has been in the spotlight for its vast resources and for the ongoing development of the state’s projects. Less talked about is geothermal company KUTh Energy and its significant exploration tenement holding in Tasmania, which occupies most of the eastern half of the state and is the largest geothermal tenement in the country.

KUTh is confident about its exploration and development of geothermal power in Tasmania. KUTh’s tenement, covering over 14,000 square kilometres, has an outstanding exploration play in an area where the transmission grid passes overhead, with connections into the National Power Grid via Basslink.

KUTh Energy Chief Operations Manager Malcolm Ward says that the company recognised the commercial possibility of geothermal power when it took up the tenement in 2006.

The company’s tenement has the highest recorded borehole heat flow in Australia within the tenement area – almost 2.5 times the norm.

Mr Ward says that in Tasmania there are known hot granites in good cover sequences and strong heat flow from existing boreholes.

“We’re now doing a systematic shallow drilling program right across the tenement, consisting of about 40 drill holes and well over $1 million of expenditure, to measure heat flow additionally on a systematic basis throughout eastern Tasmania,” he adds.

From this, KUTh will determine exactly where the hot spots are and eventually drill some deep production wells into the hot reservoirs it discovers.

Mr Ward says the project is going very well. The drilling program is proceeding faster than anticipated and the company is looking forward to getting some good results in the second quarter of this year, with first generation targeted for within five years.

“Five years might sound a long way off but if you think of any hydro project or any coal-fired project, when they begin planning first generation, there is usually well over five years planning and building development. So, it is not that far off. Other companies, such as Geodynamics, may get a pilot plant going sooner, but there should certainly be several pilot stage generation plants in Australia by 2012 and we would all be ramping up very quickly after that,” says Mr Ward.

Geothermal energy is relatively new in Australia, although worldwide installed capacity is currently in excess of 8,900 megawatts of electrical output. Karl Gawell of the Geothermal Energy Association in the United States says geothermal energy is today meeting the total electricity needs of more than 60 million people worldwide and growing at a rate of 9 per cent per year.

KUTh, like other Australian geothermal companies, is developing engineered geothermal power (EGP). EGP is a relatively new concept in the geothermal industry, in which ambient temperature water is injected into fractured, high temperature granites at depth. Superheated water, returned to the surface via adjacent production wells, then uses standard steam turbine technology to generate electricity.

The technology may be new, but Australia is at the forefront of EGP with a number of ASX-listed companies actively working on the ‘standard’ concept or modifications of it. In terms of technology, Mr Ward says Australia’s geothermal industry is up to speed.

“There is nothing that we are doing in the Australian industry which hasn’t been done before. The drilling of deep holes is quite viable and has been done both in Australia and overseas. The production of hot fluids – having passed through hot granite and returned to the surface – is quite established,” he explains.

However, he says that Australia is one of the first nations to develop geothermal energy on a commercial basis.

“The overseas programs have nearly all been government or research institute projects. What we’re doing in Australia – there are about seven or eight listed geothermal companies now – is we are using shareholder funds to explore and develop these fields and to sell electricity into the grid. So there are no technological barriers, there is just a barrier of putting it all together and making it work on a commercial basis.”

As with all developing energy generation technologies, proving the commercial viability of EGP is important. KUTh has a market capitalisation value of over $14 million and while its exploration program is not dependent on it, the company has applied for a $4.9 million Federal Government Renewable Energy Development Initiative grant to explore an innovative variant of the main target.

Mr Ward believes the hot rock industry has quite a lot in store for the Australian energy sector.

“The potential for geothermal energy is absolutely enormous,” he says. “The amount of energy contained in hot granites, even if you extract a tiny fraction of it, is extremely large. As an industry we need to prove it on a commercial basis and we’re working very hard to do that.”

Mr Ward says that once people can see that geothermal energy is able to work commercially, there are a huge number of known sites and probably a greater number of yet unknown sites that can be developed. “Once we get the technology working and the system working fairly smoothly, we can develop these sites and we should be able to develop quite a large generation capacity,” he says.

While he is not one to exaggerate the industry’s development, Mr Ward is keen to dispel one issue raised against geothermal energy.

“An assumption that many people seem to make is that geothermal energy companies have to make a choice – locate way out west, miles from infrastructure and customers, where the high-heat flow is, or locate closer to urban infrastructure and settle for lower temperature, less efficient power generation. This assumption of an either/or situation is inaccurate, as the exploration and discovery of the best geothermal areas has only just begun,” he says.

“The reason KUTh Exploration applied for the tenement it did in Tasmania is precisely because it has hot granites, high heat flows – one of the highest recorded borehole heat flows in Australia of 159 milliwatt per square metre – good insulating blanket and an abundance of low and high-voltage transmission lines criss-crossing the tenement.”

KUTh’s tenement includes the city of Hobart, the industrial area in the north of the state and a connection through to the National Electricity Market, which Mr Ward says represents a solid and easily accessible customer base. He explains that this is in stark contrast to the infrastructure required to connect some projects in other states to the grid and highlights a critical commercial advantage to KUTh over the longer term.

Looking forward, Mr Ward says that there should be many more sites on the mainland which are also close to the grid. “The ones that are now being developed in South Australia just happen to be away from the grid – which is a problem for those companies – but we’re sure that they’ll overcome those [problems] in due course. So there is a very, very large future for geothermal energy in the country and we hope that investors and the government will see fit to continue to support looking for it.”

Geothermal energy also has direct use applications, which have the advantage of reducing energy consumption and, therefore, lowering greenhouse gas emissions.

Mr Ward says that part of the reason KUTh is exploring metropolitan Hobart and Launceston and the industrial areas of Tasmania is because the company is also looking for these direct use applications.

“Rather than generating electricity,” he explains, “you tap hot fluids, hot reservoirs quite shallowly and you can use that hot water between 50 and 150°C for many industrial uses such as industrial heating, drying and space heating for large buildings.”

While he admits that direct use is “less sexy” than power generation, he says it is something that more of the geothermal companies should be investigating, because it is has the potential to be very significant.

“It is potentially quite an important use of geothermal fluid and is much cheaper to access. Of course, drilling the deeper holes is quite expensive and developing a power station is very expensive, but if you can get a cheaper direct use application of course you benefit by not even having to generate electricity in the first place,” Mr Ward says.

Geothermal energy is a burgeoning source of clean and renewable energy generation in Australia. Like other exploration and production companies delving into hot rock energy, KUTh and its Tasmanian development is testament to all that Australia’s hidden heat has to offer.