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Tuesday, 4 November 2003
Page: 21944

Mr CHARLES (4:54 PM) —In his second reading speech introducing the Ozone Protection and Synthetic Greenhouse Gas Legislation Amendment Bill 2003 the minister said:

The Intergovernmental Panel on Climate Change and the CSIRO have concluded that the likely impacts of climate change for Australia include a warmer and drier climate, with more extreme hot days, cyclones and storms, droughts and floods. These changes are expected to be widespread, and may significantly impact on our society and economy.

I am not confident that the science on global warming and atmospheric change has been proved. I simply note that the last three weeks in Melbourne have been anything but warm.

In early 1974 I gave my first recorded speech in this House regarding the inevitability of the coming hydrogen economy. Carbon fuels—that is, coal, oil and gas—are not renewable. I point out to the House that future generations, future millennia, will not thank us if we burn up our reserves of coal and our reserves of oil and all the gas that we can find so that there is no solid or liquid carbon left for them to use for the myriad purposes that scientists and engineers in the future will come to grips with. It has taken the world hundreds of millions of years to produce coal and oil. Once we have dispensed with it, it is very hard to get it back. We can sit around and wait for another several hundred million years and we might get our coal back again.

Hydrogen will be this century's new energy carrier. It will be used for all of our energy needs: we will use it to produce electricity and we will use it to drive our vehicles, with fuel cells. I note to the House that hydrogen is not destructible; it is the world's most plentiful element. If we split water we get hydrogen and oxygen, and if we burn the hydrogen we get heat and we get water again, so hydrogen is renewable. Every scientist who knows anything about energy knows that the hydrogen economy is coming.

In the early 1990s I became interested in, and somewhat of a national spokesman for, the development of the enormous renewable energy potential of our super tides and narrow inlets in the Kimberley region of Western Australia. I have to note that, disappointingly, no-one has yet built the first pilot plant or the first tidal energy station in Australia, notwithstanding many efforts to get the first one up. That is a great disappointment to me, but that has not decreased at all my belief in the need for us to explore and develop renewable and non-depleting energy sources that do not pump carbon into the atmosphere. I am still hopeful that that first tidal energy plant will be built. Once it is, more will be built.

My contribution today, however, is on a new and very prospective technology. In the mid-1990s I read a newspaper article about the work of two ANU geologists, Dr Doone Wyborn and Dr Prame Chopra, in simulating and estimating the potential development of hot granites some five kilometres under the earth's surface to produce non-polluting base load energy electrical power. Those two geologists are now directors, along with others, of a new research and development start-up company known as Geodynamics Ltd. Geodynamics Ltd is developing a world-class, high-grade geothermal energy resource contained in high temperature granites—that is, above 250 degrees centigrade—in South Australia. The energy resource represents an extraordinary potential for supplying emission-free base load power to Australia. I declare a commercial interest in this research and development cum start-up company as I purchased shares in the company the day it listed and have purchased more since that day.

Hot dry rock—HDR—geothermal energy has a unique position within the renewable energy sector as it is capable of generating low-cost base load power on a very large scale to replace our reliance on coal, oil and gas. It does not depend on new technology; it relies on extracting heat from special hot granites at depths of less than five kilometres from the surface—that is, within the so-called `oil window'. The heat is extracted by means of circulating water from a deep surface well through an engineered underground heat exchanger, or reservoir, at depths of four to five kilometres, with the hot water returning to the surface through a second well. The underground heat exchanger is developed using standard oil engineering technologies, drilling and `fraccing'. The conversion of the hot water at 250 to 300 degrees Celsius to electricity relies on off-the-shelf geothermal power plant technology. HDR geothermal power generation operates in a closed loop system with superheated water and does not require a large water supply, so we can reuse the water over and over again.

HDR geothermal energy, or heat mining, has recently been recognised as a new resource class—in New South Wales in 2000 and in South Australia in 2001. Research in HDR geothermal started in the United States in the 1970s, followed by the UK in the 1980s and France, Japan and Germany in the 1990s, and commercialisation is now proceeding rapidly with projects in France, Germany, Switzerland, the US, El Salvador and, not least, Australia. Australia is well endowed with HDR geothermal prospects and has one established resource in the Cooper Basin, which represents the largest known geothermal resource in the world and has the potential to supply thousands of megawatts of low-cost power to the national grid. The resource is known to contain 12 times the energy equivalent of the North West Shelf gas reserve.

The Cooper Basin HDR resource is the hottest spot in the world outside of volcanic centres and has the potential to shift Australia's power generation away from fossil fuel. The known HDR resource in the Cooper Basin is currently in development, with the first deep well having reached a depth of over 4,400 metres and temperatures exceeding 250 degrees Celsius. The encountered conditions of the hot granite are more favourable than expected, which bodes well for the future. The economic feasibility of extracting heat from the granites in the Cooper Basin will be established through a circulation test at 4,500 metres, which is scheduled for 2004. It is believed that HDR geothermal energy is at the same stage of development as natural gas was 30 years ago. At that time gas was a commodity of no value and was regarded as a nuisance by oil explorers.

The cost of HDR geothermal power generation is directly linked to the temperature of the extracted heat. Economic modelling has indicated that the total cost—that is, the capital and operating costs—of large-scale power generation in the Cooper Basin is $A40 per megawatt. This is on par with gas-fired electricity costs. Connection to the national grid—a distance of approximately 450 kilometres—would add another $5 to $10 per megawatt transmitted. Operating costs are $5 to $10 per megawatt and are fully independent of fuel prices. Capital costs are $30 to $35 per megawatt, with approximately 40 per cent for drilling and underground heat exchanger development and the remaining 60 per cent for the above-ground binary geothermal power plant.

It is expected that HDR geothermal energy will become an important energy source in the next 10 years, not unlike the rapid development of hydro schemes in the second half of the 20th century. HDR geothermal energy generation will become even cheaper with the advent of advanced drilling techniques. The above-ground conversion of heat to power will benefit from the proven bankable Kalina Cycle technology. This will increase efficiencies, thereby reducing costs by about 25 per cent.

GDY's objective is to develop a large-scale—that is, between 275 and 1,000 megawatts—emission free, base load electric generator using renewable HDR geothermal energy from known high-heat production granites. To underpin this aim, Geodynamics has secured the right to extract heat from what could be classified as a world-class geothermal resource in the Cooper Basin in South Australia. This known resource contains heat with a thermal equivalent of 50 billion barrels of oil or 10.3 billion tonnes of hard coal. This is 15 times larger than the known Australian oil reserves and is equal to approximately 40 years of current Australian black coal production.

I am told that our field, when developed, will be in an order of magnitude larger than the world's current largest geothermal field, the geyser field in California, which has been operating successfully for 40 years and will continue to operate for several more decades. To reach its objective the company has developed a three-stage business plan based on the development of the known HDR geothermal resource in the Cooper Basin structure. Stage 1 is the demonstration of economic heat extraction and the development of an underground heat exchanger to produce 20 megawatts of thermal energy from a two-well circulation test. Drilling of the first well has now been completed and preparations are under way to commence hydraulic stimulation for the development of the underground heat exchanger. I am advised that temperature tests are under way in the well as I speak.

Stage 2 will be the completion of the underground heat exchanger by carrying out two extra hydraulic stimulations, drilling a third well and installing an off-the-shelf binary geothermal power plant for the production of 13 megawatts of electricity for proposed sale to the nearby Moomba Gas processing plant. The third stage will be the expansion of production to large-scale commercial HDR geothermal power generation—that is, at least 275 megawatts—for long-term sale of emission free electricity to the national grid. After raising the required funds to develop and demonstrate the economic viability of heat extraction, the company listed on the Australian Stock Exchange in September 2002. The company has raised a total of $25 million in funding for stage 1 of the development program in the Cooper Basin, including a $5 million R&D Start grant from the Commonwealth government, and has attracted two cornerstone investors—Woodside Petroleum and, most recently, Origin Energy.

Geodynamics has made remarkable progress over the past year towards a realisation of its unashamedly ambitious strategic goal to deliver a large-scale base load electricity supply into the national grid from what is potentially one of the world's most significant zero emission renewable energy resources. The most recent quarterly report from Geodynamics states:

During the quarter, Geodynamics received significant further support for realising its ... resource in the Cooper Basin ... It also developed initiatives to combine the world's largest geothermal resource with the world's best heat to power conversion technology. Habanero #1, Australia's first deep geothermal well, reached its minimum required depth and the hydraulic stimulation programme is now ready to proceed.

In August, the Company secured Origin Energy as its second cornerstone investor, thereby gaining an extra $5M in working funds as well as access to expertise on power markets and power transmissions. Origin Energy's expertise fully complements that of Motasource/Woodside and—

the company—

are pleased to have the input and support of two top fifty Australian Companies. Federal and State Government interest in HDR was demonstrated by Senator Nick Minchin's visit to the Habanero #1 drill site, and by the attendance of Hon Paul Holloway, at an information evening in Adelaide. The increasing interest in our plans in Geodynamics has resulted in a 77% increase in the number of shareholders.

Initiatives have been developed to acquire exclusive rights to Kalina Cycle Technology ... This proven technology ... has the potential to lower the power generation costs from the Cooper Basin HDR geothermal resource by 25% or more, making it potentially fully competitive with fossil fuel generating costs.

That is a very important point. We are talking about using current technology to tap a new resource which is likely to be able to compete on a cost basis with burning coal. That is very significant. The report continues, stating that the newly developed possibility of acquiring exclusive rights to the Kalina Cycle technology provides:

... insurance for the overall success of the Cooper Basin project. KCT also provides the basis for a new division of Geodynamics, generating revenues in the short to medium term from other sources of heat, (conventional geothermal and industrial waste heat), thus providing a cost effective way of reducing CO2 emissions whilst at the same time profitably producing electricity.

The Stage One programme made progress but at increased costs because of over-pressure conditions in the granite.

That has meant that drilling costs have increased over what the company had expected—but then this is a research and development project. This is unexplored territory. I am told that finding the very high water pressures down there means that this is no longer a hot dry rock technology; it is now hot wet rock technology. And the likelihood that the heat reservoir will be easier to produce by applying water pressure to the main drill hole—

Mr Fitzgibbon —They should have done it in the Hunter.

Mr CHARLES —They actually own a tenement in the Hunter and are drilling and exploring the temperatures there. I certainly hope that the Hunter does proceed as a geothermal energy development source for Australia. It would mean an awful lot to the Hunter Valley. It would mean a lot to the company and a lot to Australia. The report continues:

Our pioneering drilling and stimulation team has worked hard to overcome the various challenges and we remain confident that the over-pressures will prove to be highly favourable for the stimulation process.

I am advised that in the 1,000 square kilometres of the tenement location in Cooper Basin—that is, an area roughly 31 kilometres by 32 kilometres in size—there is enough energy potential at five kilometres down to drive Australia for 75 years. I am informed that, if they drill to six kilometres, that potential would probably more than double. At seven kilometres it becomes exponential. I am told that in the 13 square kilometres of country where the first drill hole went down—that is, a three-kilometre by four-point something kilometre area—there is enough energy potential in that granite to equal the full base load power output of the entire Snowy Mountain Hydro-Electric Scheme. That is very significant for Australia's resource energy development. As I said, the company is now doing temperature tests and will shortly start the hydraulic stimulation test and get on with developing this resource. I simply want to wish GDY all the best. I have put my money into this venture, knowing it is high risk, because I believe it has huge potential for Australia and, ultimately, for the world.