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Hot rocks project cools down

Jun 20, 2013

A South Australian “hot rocks” renewable energy project has been scaled back and federal grants axed, reduced and replaced.

Petratherm, the proponents of a “hot rocks” concept in the Flinders Ranges, announced today it had been given a $13 million grant from the Australian Renewable Energy Agency (ARENA).

The grant is to assist in funding the next stage of works at Paralana in the northern Flinders Ranges, the company said.

The deal, however, comes with the termination of a previous $7 million grant and substantial reduction of a $62 million grant.

Petratherm and its project partner Beach Energy said they have renegotiated with ARENA two existing grants as follows: “The $7 million Geothermal Drilling Program grant has been terminated, with remaining balance of $2.8 million being relinquished”, and; “The $62.8 million Renewable Energy Demonstration Program grant for a 30 MW project has been varied to $24.5 million for a reduced 7 MW project.

“The changes to the existing grants have been implemented to ensure no crossover between the grants/programs and to reflect the latest information on the projects’ costs, in particular sub-surface costs,” the company said.

“That work will involve the drilling and stimulation of the Paralana 3 well – a producer well into the hot rock reservoir created around the existing Paralana 2 well, as part of an applied research project into the site’s commercial potential,” Petratherm said today in its announcement of the grant.

Geothermal technology is South Australia is still in its concept stage, Petratherm’s managing director Terry Kailis has previously said.

“The technology is still in its concept stage and we’re trying to make it work,” he told Sky Business News.

“What we’re doing here is to open up geothermal energy and market it worldwide.”

Internationally, geothermal energy a low cost conventional energy based around active volcanic regions.

Australia has no active volcanic sources so systems being tested are Engineered Geothermal Systems (EGS).

These projects require deeper drilling to source high enough rock temperatures and require engineering techniques to allow the circulation of water through the hot rock to extract the heat.

Patratherm’s exploration manager Peter Reid said last year in an interview with ecogeneration .com.au that EGS projects are “a higher risk to develop and have a higher cost than conventional geothermal systems due to the increased engineering involved.

“EGS are, however, very large. They could theoretically provide for all of Australia’s energy needs thousands of times over, and they have potential in many areas of Australia where new power generation is required.”

The grant announced today is provided on a matching funding basis and includes two key conditions: joint venture partner Beach Energy commits to fund its 21 per cent equity share of the matching funding project costs, and Petratherm secures an additional $5 million in equity within six months.

The company said it is confident that it can satisfy the conditions and commence the next stage of works at Paralana later this year.

The Paralana project JV has also agreed with ARENA to develop a comprehensive project knowledge sharing program with relevant Australian public research institutions (including the Geothermal Research Initiative).

The company said it views the awarding of the ERP grant by ARENA as a strong signal of continued support for the Paralana project and the broader development of geothermal energy in Australia.

The grant comes from the federal government Emerging Renewables Program – a $126 million grant program that seeks to assist emerging renewable projects such as ocean, geothermal, hybrids and storage.

Beach Energy farmed-in to the Paralana Project in January 2007.

Beach Energy holds a 21 per cent interest in the project and can earn up to 36 per cent subject to further funding at the development stage of the project.

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