melbourne energy institute victorian geothermal assessment report...

MELBOURNE ENERGY INSTITUTE Victorian Geothermal Assessment Report 2016

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Authors Graeme Beardsmore Irina Dumitrescu Ben Harrison Mike Sandiford Rachel Webster

Contributors to VGAR Stephen de Belle (Granite Power) Charles Davidson (Peninsula Hot Springs) Mark Elliot (HRL Holdings) Edwin van Leeuwen Sam Marks (Greenearth Energy) Caitlin McGrane Guillermo Narsilio Susannah Powell Chris Scanlan (Visualism Design) David Taylor (Geological Survey of Victoria)

© The University of Melbourne

Enquires for reprinting information contained in this publication should be made to Melbourne Energy Institute, The University of Melbourne, Victoria 3010

Views expressed are not necessarily endorsed or approved by the University. The information in this publication was correct at the time of printing. The University reserves the right to make changes as appropriate.

For further information visit: energy.unimelb.edu.au

http://www.visualism.com.au

http://energy.unimelb.edu.au

Victorian Geothermal Assessment Report 2016

Contents

1 Executive summary 4

2 List of acronyms 5

3 Purpose and structure of the report 6

4 Why geothermal energy? 9

5 What are geothermal resources? 14

6 How do we find unconventional geothermal resources? 20

7 Frequently asked questions about geothermal energy 24

8 Context 29

9 Victorian geothermal stakeholders and projects 43

10 Developing Geothermal Energy in Victoria: SWOT Analysis 50

11 Key findings and concluding remarks 53

12 Glossary 56

13 Recommended reading 58

14 Appendix – SWOT analyses 59

3Victorian Geothermal Assessment Report 2016

1 Executive summary

The use of geothermal energy is increasing around the world in order to achieve CO2 emissions reduction, reduce energy costs, and improve energy security and energy efficiency.

While these same drivers apply in Victoria, Victoria’s unique geological and economic conditions require a unique consideration of how geothermal energy might cost-effectively address these drivers.

Geothermal energy already represents an economic resource for direct heat in a number of Victorian locations. Warm aquifers are known to underlie many parts of the state including the Bellarine and Mornington Peninsulas, the Werribee Plains, and the Latrobe Valley. There is strong technical potential for harvesting the heat in these aquifers, with little impact on the quantity and quality of the water itself, for direct use in a range of industrial applications. Identification of economic geothermal resources is currently limited by inadequate knowledge of aquifer temperature and distribution, sustainable extraction rates, and a lack of public awareness of the possibilities.

The Victorian climate everywhere lends itself to the deployment of energy efficient ground source heat pumps. GSHPs provide efficient heating in winter and cooling in summer, with additional environmental and public health benefits, compared to roof mounted HVAC systems. The challenge to developing a sustainable GSHP industry in Victoria lies largely in overcoming initial high capital costs through economies of scale. This could be partially addressed by incorporating GSHPs in large buried infrastructure projects and by modifying building efficiency codes to recognize GSHPs.

The established energy supply network represents a barrier to the development of geothermal power generation in Victoria. While economic forecasts continue to predict that geothermal electrical power could be cost competitive with established technologies at scale, initial pilot and demonstration geothermal projects will not be cost competitive. The cost, risk and time frame for demonstrating the technology in Victoria, as well as elsewhere in Australia, have so far proven too daunting for commercial investment markets, even when incentivised by previous subsidy programs.

However, unlike other parts of Australia, geothermal energy also represents an opportunity to ‘repurpose’ existing energy infrastructure and expertise in Victoria. For example, skilled power industry personnel, drilling contractors, transmission lines and large energy consumers are all co-located in the Latrobe Valley, which is also one of the most prospective locations for geothermal energy in the state.

No single body coordinates the activities of the disparate range of organisations with an interest in geothermal energy in Victoria. A centralised body would provide a focal point for coordinated geothermal research, the dissemination of information, the identification of specific development opportunities, and a conduit to the broader national and international geothermal sectors. It could also form the nucleus of a broad geothermal service industry hub for the Asia Pacific region. Without such a body, it is likely that Victoria will continue to disregard its geothermal energy endowment.

4 Victorian Geothermal Assessment Report 2016

2 List of acronyms

ARENA: Australian Renewable Energy Agency

ATES: Aquifer thermal energy storage

BTES: Borehole thermal energy storage

CCFRED: Climate Change Fund Renewable Energy Development Program (New South Wales)

CDI: Collaborative Drilling Initiative (Queensland)

CSIRO: Commonwealth Scientific and Industrial Research Organisation

EGS: Engineered geothermal system

EIF: Education Investment Fund (Australia)

EIS: Exploration Incentive Scheme (Western Australia)

ERP: Emerging Renewables Program (ARENA)

ETIS: Energy Technology Innovation Strategy Program (Victoria)

GDP: Geothermal Drilling Program (ARENA)

GEP: Geothermal Exploration Permit (Victoria)

GGAP: Greenhouse Gas Abatement Program (Australian Greenhouse Office)

GSA: Geothermal systems assessment

GSHP: Ground source heat pump

GSV: Geological Survey of Victoria

HSA: Hot sedimentary aquifer

HVAC: Heating, ventilation and cooling

IGEG: International Geothermal Expert Group (ARENA)

LCOE: Levelised cost of electricity

LEED: Low Energy Emissions Development Fund (Western Australia)

LVSGP: Latrobe Valley Shallow Geothermal Project

MWe: Megawatts of electrical power

MWt: Megawatts of thermal power

NICTA: National Information and Communication Technology, Australia (Now Data 61, a business unit of CSIRO)

ORC: Organic rankine cycle

PACE: Plan for Accelerating Exploration Fund (South Australia)

PEDB: Portable electronic divided bar

QGECE: Queensland Geothermal Energy Centre of Excellence

RDIF: Regional Development Infrastructure Fund (South Australia)

RECP: Renewable Energy Commercialisation Program (Australian Greenhouse Office)

REDI: Renewable Energy Development Initiative (AusIndustry)

REDP: Renewable Energy Demonstration Program (ARENA)

REEF: Renewable Energy Equity Fund (Australian Greenhouse Office)

RET: Renewable Energy Target

SACGER: South Australian Centre for Geothermal Energy Research

SEPD: Sustainable Energy Pilot Demonstration Program (Victoria)

SERD2: Sustainable Energy Research and Development Fund, Round 2 (Victoria)

SME: Small to medium enterprise

SWOT: Strengths, weaknesses, opportunities, threats


3 Purpose and structure of the report


A stable, affordable and effective energy network is the cornerstone of any robust economy. Such a network demands a portfolio of energy generators capable of providing constant base load power while also meeting peak demand when required.

Energy efficiency measures complement energy supply networks by minimising base load demand and tempering the magnitude and duration of peak events. While Victoria’s energy supply has historically been dominated by large centralised electricity generators (coal, gas and hydro) and a reticulated gas network, distributed intermittent generators (photovoltaic solar and wind) and energy storage (batteries) are now rapidly changing this landscape. Global pressures will continue to drive Victoria away from its historical reliance on fossil fuels, which presents the state with a profound challenge to ensure it transitions to a new stable, affordable and effective energy network.

It is critical to understand and consider all energy supply and efficiency options in this period of structural rearrangement. Geothermal energy could potentially have a significant positive impact on Victoria’s energy system, but has to date received relatively little attention. This document, the Victorian Geothermal Assessment Report (VGAR), provides an introduction to geothermal energy in a Victorian context. The first half of the VGAR presents general information about the nature and applications of geothermal energy. The report begins by defining geothermal energy and describing its different uses around the world. Geothermal energy can play a role in both energy supply and energy efficiency. Applications range from residential and commercial heating and cooling, through industrial heat supply, to electrical power generation.

The report makes clear that heat in the ground is not enough; geothermal energy should only be considered a resource if it provides an economically attractive energy solution for a given application at a given location. In this context, the report examines the circumstances under which heat can be economically extracted from the ground to provide thermal power for each ‘family’ of applications — power generation, industrial heat, and space heating and cooling.

Geothermal resources are largely hidden from view beneath the ground. This aspect of geothermal energy is often identified as a barrier to its acceptance. Discovering where geothermal resources lie requires greater investigation than for wind and solar resources.

A section is also included in the report, therefore, on the geological and engineering factors that control whether a geothermal resource is likely to exist at a given location. This includes a discussion of the geological factors that control the temperature of the ground, the ability to efficiently produce geothermal energy to the Earth’s surface, and exploration techniques for identifying optimal sites to drill.

As a relatively unknown technology in Victoria, people first hearing of geothermal energy in Victoria are naturally curious, and sometimes nervous, about the possible implications of exploiting geothermal resources. Information found on the internet relating to geothermal energy in other parts of the world can be very misleading in relation to the Victorian geological and economic context. One full section of this report, therefore, provides explicit answers to questions that commonly arise when geothermal energy is mentioned in Victoria.

The second half of the VGAR presents information specific to Victoria. It recognises that the Victorian energy sector is influenced by global trends and national legislation, but must operate within its own geological and economic frameworks. It points to regions of the state where geothermal energy might represent an economic resource. Sections are included that broadly summarise the current level of knowledge about the distribution of geothermal energy in Victoria, the regulatory framework that governs the use of geothermal energy in the state, and a summary of government research and development support for geothermal energy.

A small number of companies and organisations already have an interest in geothermal energy in Victoria. Their interests range from a current reliance on geothermal resources for commercial operations, to active involvement in research and development for new technology and opportunities for geothermal energy, to provision of geothermal energy related goods and services, to ambitions of generating geothermal power. Short descriptions of a range of these Victorian stakeholders are provided to illustrate the diverse industries that geothermal energy can support.


No single energy source can provide a total solution to all energy requirements. There are places and applications where geothermal energy represents a resource, and others where it should not or cannot compete with alternatives. But the unique characteristics of geothermal energy should always be considered when assessing its value relative to other options. In an effort to explicitly consider these characteristics, the VGAR includes a ‘SWOT’ analysis for developing each of four segments of the geothermal sector in Victoria – power generation, direct use of heat, ground source heat pumps, and a service industry.

The VGAR concludes with a summary of key findings relating primarily to the challenges and opportunities for geothermal energy to make a significant contribution to Victoria’s economy. It can do so by providing low emission, renewable power, improving energy efficiency, reducing peak power demand and giving rise to new industries, but must first overcome some barriers to entry into the mainstream energy market.

The VGAR is not a ‘roadmap’. It recommends no specific plan or timeline to increase the use of geothermal energy in Victoria. Nor is the report a comprehensive historical record of all previous studies and uses of geothermal energy in Victoria. It provides, instead, a snapshot of what we presently understand about geothermal energy in a global and national context, the suspected distribution of geothermal reservoirs in Victoria, the landscape of Victorian organisations with an interest in this space, and points to opportunities that might exist to further develop the resource for the benefit of Victoria.


4 Why geothermal energy?


‘Geothermal Energy’ is heat stored within the accessible portions of the Earth’s crust. It includes heat contained within both solid rock and the fluids that fill the fractures and pores of the rock.

Geothermal energy is just one of many energy options available to Victoria, but it deserves serious consideration within a total energy management framework.

Classed amongst the ‘renewable’ and ‘clean’ energy technologies, the specific characteristics of geothermal energy, and the range of uses to which it can be put, give it its own special place amongst the other members of these classes. There are three broad application areas for geothermal energy—electricity generation, direct heat supply and energy efficient space heating and cooling. This section examines the particular benefits that geothermal energy provides in each of these areas.

4.1 Electricity generation

4.1.1 DescriptionGeothermal energy has been used to generate electrical power since the first decade of the 20th century. Today, more than 12,600 MWe1 of generating capacity

is installed around the world. Most of that capacity is powered by geothermal resources that exist as either natural steam or superheated water at temperatures >200°C in the ground. Steam is produced at the surface through boreholes, where it turns turbines attached to generators in much the same way as conventional thermal power plants the world over.

Electricity is also increasingly generated from geothermal water at temperatures less than 200°C using ‘binary plants’ (Figure 1). Rather than passing geothermal steam directly through turbines, binary plants use geothermal heat to boil a refrigerant fluid within a secondary closed loop. The high pressure vapour then turns a turbine to generate power before being condensed back into a liquid and recycled through the loop. Binary plants are thermodynamically more efficient than steam turbines at converting lower temperature geothermal heat into electricity. Any geothermal power production in Australia is likely to utilise a binary plant.

Figure 1. A binary geothermal power plant at Wairakei, New Zealand. Source: Graeme Beardsmore.

1 Bertani, R. (2015). Geothermal Power Generation in the World 2010-2014 Update Report. Proceedings World Geothermal Congress, Melbourne, Australia, 19–25 April 2015.


Figure 2. Left – a geothermally heated greenhouse growing capsicums in Turkey. Right – the plant room of a geothermal district heating system in Germany. Source: Graeme Beardsmore.

4.1.2 BenefitsGeothermal energy presents a number of compelling and complementary advantages over other means of generating electricity.

• Geothermal energy allows continuous, load-following power. Geothermal energy is available to generate electricity 24 hours a day. It can react to changes in load in less than 30 minutes.

• Geothermal plants have minimal visual and environmental impact. Geothermal power plants are typically low buildings with small surface footprints, serviced by a modest network of well heads, pipes and roads.

• Geothermal power is reliable and requires no storage. Geothermal energy is available 24 hours a day, 365 days a year, regardless of weather conditions. It require no storage or backup generators.

• Geothermal power has stable production costs. No transport, mining or fuel is required after the boreholes are drilled. Production costs are restricted to the operation and maintenance of the power plant.

• Geothermal plants generate electricity at very high capacity factors. Geothermal plants typically operate at greater than 90% availability. Since they are load-following, they are also highly efficient.

• Geothermal energy can supply stable, distributed power. Geothermal plants can be local and small, so can help stabilise the transmission network.

• Geothermal power plants create regional development opportunities. Local power stations can be developed wherever geothermal resources exist. Resources are likely to be regionally extensive across southern Victoria.

4.2 Direct heat supply

4.2.1 DescriptionHumans directly harnessed the heat of natural hot springs for useful purposes millennia before the discovery of electricity. In the modern day, the direct use of geothermal heat is growing through the extraction of natural hot water to the surface through boreholes to provide thermal energy for a range of processes. Once the useful heat has been extracted, the cooled water is usually recirculated back underground through a second borehole to sustain the groundwater system. The extracted and cooled water can alternatively be used at the surface when natural groundwater recharge is sufficient to replenish the reservoir.

Groundwater at a temperature <150°C is well suited as a source of direct heat supply. Different direct heat applications require different temperatures. It is, therefore, possible to develop a cascading portfolio of direct heat applications in which the geothermal water passes through successive processes requiring progressively lower temperatures.

Popular direct uses for geothermal heat around the world include the heating of buildings and domestic hot water, water desalination, bathing and balneology, ice melting, and industrial processes such as vegetable dehydration, fish farming and greenhouse heating (Figure 2).


4.2.2 BenefitsThe direct use of geothermal heat provides a number of benefits to businesses and regions.

• Geothermal heat reduces cost volatility. The cost of producing geothermal energy is low and constant once the borehole system is established. Geothermal energy can eliminate increases and fluctuations in energy costs.

• Geothermal heat offsets fossil fuel or electricity usage. Most businesses which require a reliable supply of heat rely on electric heaters or fossil fuel burners. Geothermal heat can reduce direct energy costs and supply risks for a business, while also reducing greenhouse gas emissions.

• Geothermal heat can foster the development of new businesses and industries. The projected cost of electricity or fossil fuels for heat can prevent new businesses and industries from developing. Where geothermal heat is available, however, it can actually foster the development of new industries. Peninsula Hot Springs is an example of a thriving Victorian business that only exists because of the availability of natural hot water2.

4.3 Energy efficient heating and cooling

4.3.1 DescriptionThe second law of thermodynamics dictates that heat always moves from higher temperature to lower temperature regions. This presents a challenge to maintain a space at a steady temperature warmer or cooler than its surroundings. Heat pumps are a mature, established technology that exploits compressors and latent heat of vaporisation of fluids to overcome this challenge.

Most households already have at least one heat pump in the form of a kitchen refrigerator. Most air conditioners also exploit heat pumps. On a very hot day when the outside temperature is 40°C and the desired room temperature is 22°C, a wall or roof mounted air

conditioner must constantly remove heat from the 22°C room and reject it to the 40°C air outside; a temperature difference of 18°C. This requires the air conditioner to consume a substantial amount of electrical energy to run pumps, compressors and fans to overcome the heat’s natural tendency to flow into the cool room.

Ground source heat pumps (GSHPs) are an energy-efficient variation of heat pump technology for heating and cooling domestic or large buildings. A GSHP exchanges heat with the ground, rather than the air. Deeper than five to ten metres, the ground stays at relatively the same temperature throughout the year, typically close to the annual mean air temperature. In the example given in the previous paragraph, a GSHP would reject heat from the 22°C room into 15°C ground in Victoria. This is far easier to achieve because it takes advantage of the heat’s tendency to flow to a cooler region. Far less electrical energy is required relative to a roof-mounted air conditioner.

The trade-off for much lower energy costs for running a GSHP is the requirement for capital expenditure to install underground circulation loops. These can be in boreholes of 100 m depth or more (Figure 3), or in horizontal trenches about two metres deep (when land is available.) The underground loops are additional costs that other ‘heating, ventilation and cooling’ (HVAC) technologies do not have. These additional capital costs are dramatically reduced, however, when GSHP loops are incorporated into geostructures such as foundations, retaining walls and tunnel linings, which have already incurred the drilling/trenching/excavation costs.

While still a nascent industry in Australia, an estimated 1.4 million GSHP units were already installed in the United States by 2015, with an estimated 80,000 new installations per year3. There were more than 1.3 million units installed across Europe in 2012, with expected strong ongoing growth in numbers4. There is no known evidence of detrimental structural effects when GSHP loops are incorporated into geostructures, but strength implications must be carefully considered when dealing with sites on soft soils.

2 http://www.peninsulahotsprings.com/home/about-us/our-story-so-far3 Boyd, T.L., Sifford, A. and Lund, J.W. (2015). The United States of America Country Update 2015. Proceedings World Geothermal Congress,

Melbourne, Australia, 19–25 April 2015.4 Antics, M., Bertani, R. and Sanner, B. (2013). Summary of EGC 2013 Country Update Reports on Geothermal Energy in Europe. Proceedings

European Geothermal Congress, Pisa, Italy, 3–7 June 2013.


4.3.2 BenefitsGSHP systems have some inherent advantages over conventional heating and cooling systems.

• Less energy required to heat or cool. In Australia, heating and cooling accounts for an average of about 40% of household energy consumption. On Australia’s hottest days, air conditioners consume up to 22% of all the electricity generated nationwide5. GSHPs can reduce this demand by 30%–60%.

• Reduced base and peak load demand. By making use of constant ground temperatures, regardless of the daytime air temperatures, GSHPs contribute far less to peak load demands associated with air conditioning systems.

• Reduced CO2 emissions. Households account for about one quarter of the nation’s greenhouse gas emissions. A GSHP system offsets one kilogram of CO2 emissions for every 2.5 hours of use, relative to a conventional heating and cooling system.6

• Quiet operation. GSHP systems have fewer moving parts so are much quieter than conventional systems that utilize, for example, elevated fans.

• Improved public health and safety. GSHP systems have no flues, chimneys or cooling towers, eliminating associated health risks such as Legionnaire’s disease.

• More flexible design options. GSHP systems have much smaller above-ground footprints than conventional heating and cooling systems, and no need for rooftop units. This allows them to be integrated into a greater variety of buildings, including heritage and historical buildings.

Figure 3. A GSHP loop (left) installed in a vertical borehole in a field (centre) in front of the Korean Institute of Geoscience and Mineral Resources (Daejeon, Korea). This is one of several loops that feed into a central system housed within the building (right). Source: Graeme Beardsmore.

5 ABS, Australian Social Trends, September 2012: http://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/4102.0Main+Features10Sep+20126 Geoexchange Australia Pty Ltd: http://www.geoexchange.com.au/technology/benefits/


5 What are geothermal resources?


‘Geothermal Resources’ are accumulations of geothermal energy that can be economically extracted to the surface. Geothermal Resources might be discovered in a range of conditions: from the shallow ground, to hot water and rocks a few kilometres beneath the surface, and to even deeper and hotter resources of molten rock (magma).

Earth’s internal heat arises primarily from energy released through the ongoing radioactive decay of unstable isotopes in rocks—particularly uranium, thorium, and potassium—over millions of years. A significant portion of the heat can also be attributed to primordial energy released during the formation of the planet. As the planet formed, heavier elements settled to the core and lighter elements rose into the crust, converting gravitational potential energy into heat. Heat from both sources escapes from the Earth’s interior to its surface through conduction and convection. In the shallow few metres of the Earth, the geothermal heat is overprinted by the regular ebb and flow of solar radiation into and out of the ground with the days and seasons.

The rate at which internal heat flows through Earth’s outer layer (the crust) is largely determined by the ability of the solid rocks and pore fluids to conduct the heat. The interplay between heat flow and thermal conductivity results in the geothermal gradient—the rate of increase in temperature with depth. The average geothermal gradient in continental areas is about 25°C/km. However, natural variation in both the heat flow and the thermal conductivity of crustal rocks means that the geothermal gradient varies a lot from location to location and with depth, from as little as 10°C/km to more than 200°C/km.

In some locations heat is brought more efficiently to the Earth’s surface by upwelling magma or groundwater. Such locations are often associated with tectonic or volcanic activity. In these locations, superheated water or steam may be economically produced directly from the ground and harnessed for the production of electricity. Some power plants tap the steam directly to turn turbines to generate electricity, while others employ binary plants to exploit lower temperature resources.

The lack of significant tectonic or volcanic activity in Victoria means that any Geothermal Resources for power generation will be relatively deep and categorised as ‘hot sedimentary aquifers’ (HSA) or ‘engineered geothermal systems’ (EGS). Beyond power generation, however, any underground reservoir of warm or hot groundwater constitutes a Geothermal Resource if it can be produced economically for direct heat supply. Such reservoirs are already supplying cheap heat for commercial ventures in Victoria.

In the top few metres of the Earth, daily heating by the sun has a much greater impact on ground temperature than the natural geothermal gradient. However, deeper than 5–10 m, the ground everywhere tends to maintain a steady temperature to within 1–2°C throughout the year. This means that the ground can be used as either a heat source or sink, depending on the industrial or seasonal requirement. This ability of the ground to absorb or release heat can represent a Geothermal Resource accessible from boreholes, building foundations or tunnels.

5.1 ‘Conventional’ Geothermal Resources for Power GenerationMost of the world’s current production of electricity from Geothermal Resources is in regions associated with volcanic or active tectonic activity. These include the Pacific ‘Ring of Fire’ countries (Figure 4), Iceland, the Great Rift Valley countries of Africa, Turkey and Italy. In these regions, mid-crustal magma, cooling granite plutons or elevated mantle locally heats shallow groundwater to in excess of 200°C. The superheated water or steam is typically used directly to turn a turbine connected to a generator. The condensed steam is usually returned to the underground reservoir. In most of these locations, geothermal energy provides the cheapest local option for electrical power.

While geographically close to the Ring of Fire, Australia actually lies in the interior of a tectonic plate so is not generally considered prospective for conventional Geothermal Resources.


5.2 ‘Unconventional’ Geothermal Resources for Power Generation I — Hot Sedimentary AquifersPower is increasingly being generated from Geothermal Resources away from active magmatic and volcanic zones. Many of the rocks containing those Geothermal Resources (most notably in Germany) are naturally porous and permeable sedimentary rocks with pore water conductively heated by the Earth. The weight of overlying sediments tends to reduce the porosity of sedimentary rocks through compaction as they are buried, so aquifers hot and productive enough to generate power tend to be found at relatively shallow to medium depth (usually between 2.0 and 3.5 km). Some limestone and other carbonate rocks maintain porosity and permeability to as deep as 5.0 km.

Hot Sedimentary Aquifers (HSA) are typically cooler than conventional Geothermal Resources (Figure 5), holding water between 100°C–180°C. But HSAs can still provide economic geothermal power using binary plants if the value of the power exceeds the drilling and reservoir development costs. The rate of delivery of hot water from the aquifer to the power plant is a key factor in the financial viability of an HSA system. Higher flow rates deliver greater thermal power to the heat exchanger,

allowing conversion to electricity at a greater rate. While HSA reservoirs are, by definition, porous and permeable, reservoir stimulation techniques can sometimes enhance the rock permeability to provide even higher flow rates and greater economic return. The enhancement is likely to be greater if the reservoir is already naturally faulted or fractured.

Australia already has an example of an HSA Geothermal Resource used for power production. The Birdsville (Queensland) power plant uses hot water from the Great Artesian Basin. The water is extracted through a 1280 m deep well at a temperature of about 98˚C and supplies 80 kWe of electricity to the town7. Panax Geothermal Ltd drilled Salamander 1 and encountered temperatures greater than 170°C at about four kilometres depth in sediments in the Otway Basin in southeastern South Australia, but was unable to demonstrate sustainable, economic rates of flow.

In 2011, a joint venture between Origin Energy and Geodynamics Ltd drilled Celsius 1 into the Hutton Sandstone at 2,360 m depth in the Cooper-Eromanga Basin (SA). The well achieved its target temperature >145°C, but the flow rate was below target. Both Salamander 1 and Celsius 1 tested non-fractured sandstone.

Figure 4. The Pacific ‘Ring of Fire’ hosts much of the world’s geothermal energy production. Source: https://en.wikipedia.org/wiki/Ring_of_Fire.

7 Ergon Energy Corporation Limited, https://www.ergon.com.au/network/network-management/network-infrastructure/renewable-energy-sources


5.3 ‘Unconventional’ Geothermal Resources for Power Generation II — Engineered Geothermal SystemsIn some places, rocks are as hot as conventional Geothermal Resources but their natural levels of porosity and permeability are not high enough to produce superheated water or steam at useful rates. In these cases, where there are no naturally occurring productive aquifers, porosity and permeability enhancement techniques can sometimes provide artificial fluid pathways through the hot rock to extract the heat at an economic rate. Using these techniques, many more rocks potentially become hosts of Geothermal Resources. Geothermal Resources developed in such a way are called ‘Engineered Geothermal Systems’ (EGS).

To enhance porosity and permeability in hard rocks such as granite, water can be pumped at high pressure (but in a controlled manner) into thin natural fractures in the rocks surrounding an injection well. Like a hydraulic jack, the water opens the fractures until they are able to slip slightly in response to the Earth’s natural stresses. The rocks do not fit neatly back together when the water pressure is removed, which has the effect of increasing the porosity and permeability of the rock. Once the natural porosity and permeability are enhanced, water can be circulated through a system of two or more wells similar to an

HSA system. Injected water percolates through, and is heated by, the hot rocks before being extracted through a production well to the surface. There it can be used in a power plant or for direct heat before being returned to the subsurface through an injection well.

Compared to an HSA system, an EGS Geothermal Resource will typically lie at greater depth, will require enhancement of its natural porosity and permeability, and will need additional water to prime the system. But it will also typically be a higher temperature than HSA systems (Figure 5). An EGS project will only be economic if the substantial costs of drilling and reservoir enhancement are exceeded by the value of the high temperature water produced.

Exploration activities, including deep drilling, have already demonstrated several EGS prospects in Australia. For example, drilling by Geodynamics Ltd in the Cooper Basin in northeastern South Australia revealed temperatures in excess of 240°C in granitic basement at a depth of about four and a half kilometres. Heat extracted from those rocks powered a 1 MWe pilot power plant for several months in 2013, but at a sub-economic price. At Paralana, also in South Australia, Petratherm Ltd detected temperatures of about 190°C at four kilometres depth, but was unable to finance the next stage of development.

Figure 5. Transmissivity (permeability x thickness) and temperature characteristics of conventional versus unconventional Geothermal Resources. Relative to conventional resources, HSA resources are typically lower temperature but comparable transmissivity, while EGS resources are lower transmissivity but comparable temperature. Source: Graeme Beardsmore.

Tem

per

atu

re (

ºC)

Transmissivity (darcy-metres) – ‘FLOW’

UNPROSPECTIVE

EGS:increasing

depth

HSA:increasing

depth

Volcanic systems:

increasing depth

UNCONVENTIONAL

CONVENTIONAL


5.4 Geothermal Resources for Direct HeatMany human activities require a supply of relatively low grade heat (<150°C). Examples include heated swimming pools and public baths, space heating, pasteurisation, greenhouses, industrial drying, aquaculture, sterilisation and adsorption chillers. It makes economic sense in some locations to source this heat directly from an aquifer. Warm, productive aquifers can supply constant, reliable and sustainable thermal power for industrial applications.

There is no minimum temperature that defines whether or not an aquifer represents a Geothermal Resource. Almost any aquifer represents a Geothermal Resource if it is able to deliver cost-competitive and reliable thermal power for a specific application. This definition has two elements. Firstly, geothermal energy must be the cheapest8 local source of thermal power at the required temperature; and, secondly, geothermal energy must make the industrial process economic within the broader market at that location.

The first point depends on the aquifer’s characteristics of location, temperature, depth, transmissivity and chemistry, which together control the cost of accessing the warm water, extracting the heat, and then disposing of the water. If the cost of the geothermal energy is lower than other options (e.g. gas or electric heating, including any possible penalties for greenhouse gas emissions) over the lifetime of the project, then the aquifer might be considered a Geothermal Resource.

The second point, however, must also be considered. The industrial process itself must be economic within the market. Geothermal energy might represent the cheapest supply of heat for an industrial greenhouse at a given location, but if the cost of the product grown in the greenhouse is not competitive within the market then the aquifer should not be considered a Geothermal Resource for the purpose of heating greenhouses.

Geothermal Resources within the Yarragadee aquifer beneath Perth (Western Australia) are increasingly being utilised to heat aquatic leisure centres. Pujol et al. (2015)9 found that geothermal heating of a typical swimming pool in Perth results in savings of $6 million (versus electric

air-to-water heat pumps) to $10 million (versus gas-fired heating) over 30 years, with a payback time of 6–11 years. Each geothermal swimming pool project also offsets up to 33,000 tonnes of CO2 emissions over its lifetime.

There are several examples of Geothermal Resources currently being utilised for industrial purposes in Victoria. In each case, the Geothermal Resource represents the most cost-effective source of thermal power at the specific location, and in some cases is the only reason the industry is able to exist where it does. Examples include Mainstream Aquaculture10 and Peninsula Hot Springs11.

5.5 Ground Source Heat PumpsGround source heat pumps (GSHP) represent another way to exploit ground temperature for economic purposes. Suitable for district scale, large buildings, industrial processes or domestic dwellings, GSHPs are an established technology for the storage of thermal energy in the ground from one seasonal temperature peak to the next. Heat can be sequestered underground in summer and recovered in winter to directly warm buildings with minimal additional energy input. Likewise, the ground can be chilled in winter and accessed to cool buildings in summer at relatively low running cost.

‘Aquifer thermal energy storage’ (ATES) represents one type of GSHP system. ATES uses water to transport thermal energy into and out of aquifers. A typical ATES system includes at least two boreholes, where each borehole can be used for either production or injection. In that way, the system can be reversed depending on the season. In general, ATES systems are large scale, with capacities ranging from 500 kWth to 5000 kWth

12. For example, the Reichstag building of the Bundestag (buildings of the German Parliament in Berlin) has relied on an ATES system for its heating and cooling since 1999. The system uses two aquifers, a shallow one (~60 m depth) for cool water storage, and a deeper one (~300 m) for warm water storage. Water is drawn from the shallow aquifer and injected into the deep aquifer in summer, and the reverse in winter.

8 Over the lifetime of the project and, ideally, including all externalities9 Pujol, M., Ricard, L.P. and Bolton, G. (2015). 20 years of exploitation of the Yarragadee aquifer in the Perth Basin of Western Australia for direct-use

of geothermal heat. Geothermics, 57, 39–55.10 http://www.mainstreamaquaculture.com/11 http://www.peninsulahotsprings.com/12 For example, Gehlin, S., Andersson, O., Bjelm, L., Alm, P.-G. and Rosberg, J.-E. (2015). Country update for Sweden. Proceedings World Geothermal

Congress, Melbourne, Australia, 19–25 April 2015.13 Seibt, P. and Kabus, F. (2006). Aquifer thermal energy storage—projects implemented in Germany. Proceedings of ECOSTOCK 2006: Conference on

Energy Storage Technology, Pomona, NJ (Vol. 31).


Seibt and Kabus (2006)13 identified the key characteristics of aquifers suitable for ATES as:

• A confined aquifer;

• Ideal depth to 200 m to control drilling costs;

• Maximum depth of 1,500 m;

• Maximum effective aquifer thickness of about 30 m to inhibit horizontal ‘leakage’ of stored heat;

• Homogeneous medium to achieve best performance;

• Low regional base flow to minimise movement of the thermal front;

• A chemistry that is unaffected by changes to the reservoir temperature.

‘Borehole thermal energy storage’ (BTES) is a second type of GSHP system, which utilises the thermal bulk of the ground surrounding sealed boreholes, instead of an aquifer, for heat storage and recovery. BTES systems can be used where either a suitable aquifer is not available, or for heating and cooling capacities less than about 500 kWth. A surface heat pump can be added to both ATES and BTES systems to exaggerate the upper and lower temperatures of the system.

GSHP systems can be considered Geothermal Resources if they make ‘economic sense’. The principal benefit of GSHP systems is their energy efficiency. A GSHP system installed at the Sustainable Buildings Research Centre at the University of Wollongong in NSW substantially reduced the building’s year-round energy needs to the point that, integrated with other renewable energy systems such as solar, the building now produces more energy than it requires.14 GSHP systems typically operate with a ‘coefficient of performance’ (COP)15 of around 3–57,8,9. Conventional air conditioning systems operate at a COP of around 2–416,17,18. In many parts of the world, such efficiency benefits coupled with high fuel costs result in total lifecycle costs of GSHP systems lower than conventional roof-mounted HVAC systems.

The case is less clear in Victoria, which has historically enjoyed relatively low natural gas and electricity prices (by global standards). The COP figures quoted above for GSHP systems are consistent with recent measurements at monitored GSHP installations around Victoria19,20, which confirm savings on heating and cooling running costs of 30% to 60%, depending on primary energy prices, GSHP efficiency, the technology replaced, the local

climate and the specific application21. The average daily wholesale gas price in Victoria jumped from about $4 per gigajoule (where it had been steady for about four years) to almost $7 per gigajoule in the quarter to June 2016. With an increasing proportion of Victorian households and businesses converting to electricity for heating22, however, the economics of HVAC systems in Victoria is becoming more sensitive to electricity prices. Any sustained upward movement on gas or electricity prices will make GTES systems more competitive across the state.

14 University of Wollongong: http://media.uow.edu.au/news/UOW189363.html15 COP is the ratio of the heating/cooling power output to the electrical power input.16 Oklahoma State University (2009). Ground source heat pump residential and light commercial design and installation guide. http://www.powerknot.

com/how-efficient-is-your-air-conditioning-system.html17 Southard, L, Liu, X. and Spitler, J. (2004). Performance of HVAC Systems at ASHRAE HQ - Part Two. ASHRAE Journal, December 2004.18 Saner, D., Juraske, R., Kübert, M., Blum, P., Hellweg, S. and Bayer, P. (2010). Is it only CO2 that matters? A life cycle perspective on shallow

geothermal systems. Renewable and Sustainable Energy Reviews, 14, 1798–1813.


6 How do we find unconventional geothermal resources?


Conventional Geothermal Resources have been exploited for direct heat for millennia, and for electrical power since 1904. Even so, the global geothermal community has only recently begun to compile ‘best practice’ guides to aid exploration for conventional Geothermal Resources (e.g. IGA, 201419).

Unconventional Geothermal Resources (EGS and HSA) have only been investigated for about 40 years, so there is less global experience upon which to draw. However, the differences between conventional and unconventional Geothermal Resources are really in their temperature and transmissivity characteristics (Figure 5). The fundamental principles underpinning exploration are the same for all Geothermal Resource types, although the specific tools employed might vary.

As heat exists naturally everywhere underground (as opposed to discrete fossil energy accumulations), exploration for all Geothermal Resources is about identifying locations with the most attractive characteristics for heat extraction. There are two main considerations: high temperature at shallow depth, and reservoir quality. The following sections describe strategies for finding adequate temperature and reservoir conditions for unconventional, conduction dominated Geothermal Resources of the type expected in Victoria.

6.1 Temperature at DepthThe only way to determine rock temperature with certainty is to drill to the desired depth and insert a thermometer. In most cases, however, drilling is a significant financial commitment with respect to the total cost of a geothermal project. An initial estimate of temperature is needed in order to justify the drilling itself. At some locations and depths, previous drilling results might provide temperature data. For example, temperatures recorded in existing petroleum exploration wells provide formation temperature estimates in areas of the Otway and Gippsland Basins. However, such data become less reliable with depth and age of the wells. In most cases, heat flow theory provides the best basis for estimates of rock temperature.

Rarely does temperature increase at a constant rate with depth; rather, the gradient varies with the thermal conductivity of the rocks and with natural aquifer processes. The first goal should be to rank broad regions for their relative geothermal energy potential. Regions more likely to have elevated temperature at a given depth can be identified through qualitative means.

Rock temperatures tend to be higher (a) in areas of high background heat flow, and (b) beneath layers with high thermal resistance (thick, low thermal conductivity layers). Either of these conditions can lead to higher crustal temperatures, but maximum temperatures are achieved where both conditions are met.

High background heat flow can be associated with (for example):

• Thin crust;

• Mantle ‘hot spots’;

• High heat producing crust;

• Young magmatic intrusions in the mid to deep crust;

• Deep-seated sub-vertical permeable structures;

• Heat refraction through elevated, high-conductivity basement.

High thermal resistance can be associated with relatively thick accumulations of low conductivity rocks such as (for example):

• Coal, lignite, peat;

• Claystone, mudstone, shale;

• Basalt, mafic intrusives;

• Clastic carbonates;

• Chalk.

Using these as a guide, a high level review of the geology of a continent, state or region can focus attention on locations where elevated background heat flow might coexist with rock layers of high thermal resistance. Once such a location is identified, the local temperature conditions are ideally estimated using the following six steps:

1. Determine the conductive heat flow at the surface. If available, regional heat flow maps can provide broad estimates for specific locations, but local exploration work at the geothermal permit or project level should be carried out to confirm the regional estimate.

2. Determine the thermal conductivity structure of the rocks down to the depth of interest. Ideally, the geological structure is reasonably well understood, and the in situ thermal conductivity of the relevant rocks

19 International Geothermal Association (2014). Best Practices Guide for Geothermal Exploration. IGA Service GmbH, 194 pp. http://tinyurl.com/zjb9lxv


has been measured or estimated. Usually this requires geophysical data and/or laboratory measurements on representative core specimens.

3. Determine the in situ heat generation. Heat generated within the rock through the natural decay of radioactive isotopes is combined with background heat flow and increases the total heat flow in the shallower sections. This value is typically measured in a laboratory on specimens obtained from surface outcrops or core.

4. Estimate the mean surface temperature. The average temperature of the ground surface is typically 0–5°C warmer than the mean annual air temperature, which can be derived for most locations in Australia from Bureau of Meteorology records.

5. Estimate the temperature at depth. Conductive heat flow theory can be applied to extrapolate the surface temperature to the target depth. Ideally this would be achieved with 3D inversion-type software tools incorporating the parameters estimated in Steps 1–4 above.

6. Consider possible departures from conductive conditions. Input 3D geology and predicted conductive temperature distribution into a dynamic heat flow/fluid flow modelling package (e.g. FEFLOW, TOUGH2). Assign expected porosity and permeability values to key geological horizons and run different scenarios to estimate the probability of spontaneous convection and disruption of pure conductive conditions.

Each of these six steps introduces uncertainties into the temperature estimate. Predictions of temperature at depth, therefore, typically have significant uncertainty margins. The first step arguably introduces the greatest uncertainty. Reliable heat flow measurements themselves require boreholes of at least 100 m depth. While such boreholes exist and are widely distributed (eg groundwater monitoring bores, mineral exploration bores, groundwater extraction bores etc), gaining physical access to bores for specialist heat flow measurements, and access to information about the geological sections the bores intersect, can be difficult.

6.2 Reservoir QualityThe ‘quality’ of a geothermal reservoir controls its ability to provide a sustainable supply of thermal power. It is effectively a measure of the rate at which a production bore can sustainably flow. Factors that influence reservoir quality include thickness, lateral extent, the degree of

interconnected permeability, porosity, and the presence or absence of mobile fine-grained material. Similar to temperature, the only way to determine reservoir quality with certainty is to drill to the desired depth and perform extended flow tests. But, also as with temperature, some prima facie evidence of reservoir quality is usually required in order to justify the drilling.

Harvey et al. (2016)20 discussed the geological controls on porosity and permeability and presented a range of geoscientific tools to explore for these prior to drilling. They stated that unconventional geothermal reservoirs are either relatively thick, naturally porous and permeable sedimentary formations; hydraulically ‘open’ fracture and fault networks; naturally fractured rocks amenable to enhancement through stimulation; or a combination of these.

The natural porosity and permeability of sedimentary formations tend to diminish with depth of burial due to compaction. Heating and diagenesis can either amplify or suppress the compaction effect. The rate at which natural porosity and permeability diminishes is largely a function of burial rate, temperature and lithology, and can be investigated with sedimentation and burial history models. Possible diagenetic effects can sometimes be predicted by considering fluid and rock chemistry and temperature histories.

Critically stressed faults are also prime targets for unconventional geothermal reservoirs21. Secondary fracture networks accompanying such faults are often relatively permeable because any mineralization is continuously broken up by regular small movements. While dilational normal faults are likely to be permeable at depths less than two kilometres, critically stressed faults are more prospective at greater depths22,23.

Exploration techniques that specifically address questions of porosity and permeability include:

• Seismic sequence stratigraphy for porosity/permeability prediction;

• Diagenesis investigation;

• Seismic wave attributes for porosity estimates;

• Magnetotelluric polarization for identifying fractured rock;

• Seismic shear wave splitting for identifying fractured rock;

• Mapping the locations and orientations of faults and fracture zones with respect to the present day stress field;

• Stress field analysis and geo-mechanical modelling.

20 Harvey, C., Beardsmore, G., Moeck, I. and Rüter, H. (2016). Geothermal Exploration: Global Strategies and Applications. IGA Service GmbH, Bochum, Germany.

21 Barton, C.A., Zoback, M.D. and Moos, D. (1995). Fluid flow along potentially active faults in crystalline rock. Geology, 23(8), 683–686.22 Ferrill, D.A. and Morris, A.P. (2003). Dilational normal faults. Journal of Structural Geology, 25, 183–196.23 Moeck I., Schandelmeier, H. and Holl, H.G. (2009). The stress regime in Rotliegend reservoir of the Northeast German Basin. Int. J. Earth. Sci. (Geol.

Rundsch.), 98(7), 1643–1654.


6.3 Drilling and circulationRegardless of how carefully temperature and reservoir quality are investigated, the existence of a geothermal reservoir can only ultimately be verified through drilling. Furthermore, the existence of a viable Geothermal Resource can only be confirmed by circulating thermal energy to the surface at an economic rate.

Sperber et al. (2010)24 described some of the specific requirements for drilling boreholes for geothermal energy. Firstly, borehole design must take into account the expected temperature, pressure and chemistry of the fluid that will circulate should the boreholes intersect a geothermal reservoir. Given that all of these remain uncertain until the first borehole is drilled, borehole designs should account for all likely scenarios. In most cases, that means over-designing the first exploration boreholes into a new geothermal target, which in turn results in a relatively high cost for the first few boreholes.

Secondly, geothermal production and injection boreholes must be designed to be functional for the life of the project, and they must deliver a high level of operational performance. Geothermal projects (power generation or direct use) typically run for decades, which is much longer than the typical life of a petroleum borehole, for example.

Known or possible drilling hazards need to be evaluated, and these are mostly derived from offset data. Offset data are obtained from boreholes drilled close by. It is therefore important to have as much information available as possible, in order to minimize the risks.

Each production borehole must maximise the heat extraction and productivity over the life of project. Therefore, borehole objectives such as target depth, fluid flow rate, data acquisition, lifetime and so on need to be clearly defined so that the return on investment is optimised.

If a geothermal reservoir is to be enhanced or artificially charged with the introduction of additional fluid, then the choice of fluid is critical for the overall performance of the system. Water is the only practical choice at present, but even then there are choices. Ideally, the chemistry of the water introduced into the reservoir should take into account the natural chemical structure of the reservoir. Water becomes an increasingly powerful solvent for

mineral salts as temperature increases. This can result in strong dissolution and precipitation and lead to significant technical difficulties related to closure of circulation pathways, formation plugging and corrosion. However, modifying the injection water chemistry or changing operational parameters can mitigate mineral scaling and corrosion.

The choice of water chemistry is also influenced by factors beyond the reservoir chemistry. Resources of fresh water are limited and very much in demand, which provides an incentive to use brine or seawater. Even if the salinity is different to the natural reservoir, this might not be a major issue as far as interaction with the reservoir rocks is concerned. However, brine and seawater are more viscous than fresh water, which makes them harder to pump. Salt also reduces the specific heat capacity of a solution. Together, these effects translate into less efficient heat extraction compared to fresh water, which needs to be factored into any economic assessment of the project.

Careful consideration also needs to be given to the potential fluid losses within the system during circulation. Such losses can represent a major economic liability if makeup water must be purchased.

Supercritical CO2 has been proposed as an interesting alternative to water as a circulation fluid. In theory, it presents a number of potential advantages over water:

• Reduces or even eliminates the issue of scaling and corrosion, since it is a poor solvent of mineral salts;

• Has greater flow capacity than water, due to lower viscosity to density ratio;

• Reduces or even eliminates the need for pumping in the system, due to a thermosiphon effect that occurs naturally when supercritical CO2 is circulated at depth.

Freifeld et al. (2016)25 reported that the world’s first production scale experiment of a supercritical CO2 thermosiphon, to a depth of 3.2 km and a temperature of 127°C, produced geothermal energy to the surface but “did not meet predicted flow rates or energy production rates.” The authors hypothesised about possible reasons for the large divergence between theory and practical observation, but the key conclusion is that supercritical CO2 cannot yet be considered a viable geothermal working fluid.

24 Sperber, A., Moeck, I. and Brandt, W. (2010). Drilling into Geothermal Reservoirs, in Geothermal Energy Systems: Exploration, Development, and Utilization (ed E. Huenges), Wiley-VCH Verlag GmbH & Co. KGaA, Weinheim, Germany. doi: 10.1002/9783527630479.ch3

25 Freifeld, B.M., Pan, L., Doughty, C., Zakem, S., Hart, K., and Hostler, S. (2016). Demonstration of geothermal energy production using carbon dioxide as a working fluid at the SECARB Cranfield site, Cranfield, Mississippi. Proceedings, 41st Workshop on Geothermal Reservoir Engineering Stanford University, Stanford, California, February 22–24, 2016.


7 Frequently asked questions about geothermal energy


Geothermal energy is hidden underground, so the vast majority of people lack an intuitive sense of its potential until it is harnessed and demonstrated.

It lacks familiar tangible sensations such as those associated with solar and wind energy; it lacks the pervasive prevalence of fossil energy sources; and it tends to miss out on the same level of media coverage as nuclear power or biofuels. It is not surprising, therefore, that half truths and misconceptions circulate about geothermal energy. This section addresses the more common questions that arise when people first become aware of the potential for geothermal energy, particularly in Victoria.

Q. Does it cause earthquakes?Perhaps. Earthquakes are triggered or induced by many human activities that alter the stress and/or pore pressure distribution in the rocks, including the filling of large water reservoirs, mining, underground wastewater disposal, oil-field extraction activities, and geothermal energy operations.

An ‘induced’ earthquake is a seismic event that is wholly caused by the human activity. It is highly unlikely that a geothermal project could induce an earthquake large enough to cause structural damage at the surface (Richter magnitude > 5.0). A ‘triggered’ earthquake, however, is a seismic event that would happen naturally, but where the human activity brings forward the timing of the event. The risk of triggered earthquakes is related to the level of natural seismicity in the vicinity. If a geothermal project injected water into a stressed fault, it could trigger an earthquake along that fault. This would only affect the timing of the earthquake, not its magnitude. For example, there is some evidence26 that a geothermal project triggered a magnitude 6.6 earthquake in the Imperial Valley in southern California in 1979, at a time and location that such an event was statistically likely to occur naturally.

The energy released by induced events is limited to the energy injected into the rock volume. Fluid injection in geothermal projects can induce many thousands of small seismic events, most of which are barely noticeable at the surface (Richter magnitude < 3.0). The largest recorded events induced by geothermal projects are about Richter magnitude 3.7. Such events, by definition, are “often felt by people, but very rarely cause damage. Shaking of indoor objects can be noticeable.”27

The Habanero Geothermal Project in the Cooper Basin in South Australia induced many thousands of small seismic events within a volume less than three cubic kilometres. A single rupture releasing the same amount of energy would have had a Richter magnitude a little over 4.0.

Q. Does it cool the Earth’s core?No. When water from a geothermal direct use or power generation project is reinjected after use, it cools the rocks immediately surrounding the reinjection borehole; maybe a few tens of metres for a direct use project, and a few hundred metres for a power generation system. GSHP systems are, ideally, balanced so that heat extracted from the ground in winter is reinjected in summer. In practice, there might be some long term warming or cooling within a few metres of the boreholes. In no case can cooling extend to the deep recesses of the Earth, and in all cases the ground will warm up again when the geothermal system ceases to operate.

Q. Does it damage the groundwater?Not in Victoria. Geothermal boreholes have no intrinsic quality that makes them more or less likely to damage groundwater reservoirs than any other drilling activity. Regulations in Victoria require that any borehole must be isolated by cement from groundwater aquifers it passes through. Experienced, licensed drillers are very capable of adhering to these regulations.

Q. Does it release noxious gases?Not in Victoria. Fluids produced from volcanic geothermal systems overseas can certainly contain noxious gases and other substances released from cooling magma bodies. These can include carbon dioxide, hydrogen sulphide, mercury, arsenic and others. Strict conditions for capturing and safely disposing of these substances (including sometimes reinjecting them underground) are generally imposed on geothermal developments associated with volcanoes.

26 Glowacka, E. and Nava, F.A. (1996). Major earthquakes in Mexicali Valley, Mexico, and fluid extraction at Cerro Prieto Geothermal Field. Bulletin of the Seismological Society of America, 86(1A), 93–105.

27 https://en.wikipedia.org/wiki/Richter_magnitude_scale#Richter_magnitudes


The Geothermal Resources expected in Victoria are associated with Hot Sedimentary Aquifers. These often have some degree of salinity, and carbon dioxide is known to accumulate in some parts of the Otway Basin. However, geothermal water and any contained gases remain sealed within pipes and heat exchangers at the surface for a binary plant system, which will almost certainly be used for any geothermal power projects in Victoria. The chemistry of hot water for direct use applications in Victoria is very likely benign, or even beneficial, as is the case with the geothermal water extracted and used for its health benefits by Peninsula Hot Springs.

Q. Does it make a lot of noise?Some. The highest levels of noise associated with geothermal developments are produced during the drilling and testing of exploration and production boreholes, and during the construction of the power plant. Standard construction equipment noise controls can be used to shield the community from these relatively short duration events. During normal operation, noise comes principally from cooling tower fans, and is typically below general background noise levels at a moderate distance from the plant.

Q. Does it require a lot of water?No. A modern geothermal system is essentially ‘closed’ once it is running; water is recirculated underground through the rocks after the heat has been utilised at the surface. Depending on the type of geothermal system being developed, this could be water naturally occurring underground, or water artificially injected from the surface. Any water lost from the circulation system needs to be balanced with additional water. RPS Aquaterra and Hot Dry Rocks (2012)28 concluded that “these water-use requirements are consistent with those required for most mining operations and thus could be managed under existing [water management] arrangements.”

Q. Is it truly renewable?Depends on the definition of ‘renewable’. If ‘renewable’ is defined as a resource for which the energy is naturally replenished at the same rate as it is used, then many geothermal energy applications are not strictly renewable. The main source of heat replenishment in the interior of the Earth is the radioactive decay of isotopes of elements such as uranium, thorium and potassium. This heat flows by conduction to the surface of the Earth then radiates into space. The natural rate of this heat loss is

typically less than 100 kWt per square kilometre of the Earth’s surface. This is high enough to indefinitely sustain many ‘direct use’ applications, but is too low for fully renewable commercial electrical power.

The shear magnitude of heat stored within the rock and fluid of the Earth, however, means that heat can be extracted at a rate much greater than its natural replenishment from below. Only a very small portion of the total stored heat can ever be removed through a borehole. Once production ceases, the temperature of the rock recovers to close to its original value over a period similar to the extraction period, making geothermal power ‘renewable’ over project timeframes.

Q. Are the best Geothermal Resources in Central Australia?Depends on the definition of ‘best’. The rocks beneath the Cooper Basin in the northeast of South Australia are the hottest yet encountered at depths greater than 3,000 m in Australia. Higher temperature rocks are often thought to be ‘better’ for geothermal projects because they contain more embedded geothermal energy. By this definition, the rocks beneath the Cooper Basin can be considered the ‘best’ in Australia. However, the ‘best’ Geothermal Resources are really those that provide the greatest economic benefit. Geothermal Resources close to existing infrastructure and markets, although perhaps cooler than the rocks beneath the Cooper Basin, could ultimately prove to be the ‘best’ in Australia.

Q. Can it generate significant amounts of electricity?It can. Many geothermal power plants around the world have a capacity in excess of 100 MWe. Geothermal energy is diffuse but extensive. Thermal energy (heat) stored within a rock is proportional to temperature, which almost always increases with depth. In some parts of the world, geothermal energy is concentrated at shallow depths by hydrothermal convection, but in most places the energy is widely dispersed. It is usually possible to generate electricity anywhere the heat can be ‘mined’ to the surface as hot water or steam >100°C using a production borehole.

In 2013, the International Finance Corporation published a global review of geothermal borehole productivity29. The review found that the record for electrical power generated from a single borehole is 52 MWe, with a global average of 6.7 MWe per borehole (Figure 6). Production from a geothermal

28 RPS Aquaterra and Hot Dry Rocks (2012). Geothermal Energy and Water Use. Waterlines Report Series, No 72. National Water Commission, Canberra.29 International Finance Corporation (2013). Success of Geothermal Wells: A Global Study. IFC, World Bank Group, Washington, DC. 80pp.


Figure 6. Distribution of electrical power output from individual geothermal production wells around the world, cropped at three standard deviations from the mean. Source: International Finance Corporation (2013)30.

Figure 7. Distribution of the number of wells in individual geothermal fields around the world. Source: International Finance Corporation (2013)30.

reservoir is generally scalable, where the total output is the sum of the output of individual boreholes. Several dozen boreholes are typically drilled in a productive geothermal field (Figure 7). Geothermal projects in Victoria might generate net output of only 3–5 MWe per production borehole, but the Geothermal Resources could potentially cover tens of thousands of square kilometres. Distributed plants drawing on clusters of boreholes at a spacing of about one per square kilometre could accrue to hundreds of megawatts of power.

Q. How much does it cost?The cost of geothermal energy is intimately linked to the location, depth and temperature of the Geothermal Resource. The most expensive cost element is the drilling of boreholes to produce and reinject the fluid. The cost of ‘failed’ boreholes (those that do not produce at the required rate) must also be factored into the overall project cost. However, once one or more boreholes have been established with an economic flow, production can typically continue with a low operations and maintenance cost for at least 30 years. This is true for all applications of geothermal energy.

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The financial viability of different means of electricity generation is most commonly compared using the ‘levelised cost of electricity’ (LCOE). The full investment cost for the lifetime of the operation is considered in an LCOE analysis, along with any incentives (e.g. renewable energy certificates) that might affect the financial equation. The Australian Renewable Energy Agency (ARENA) found in 201430 that geothermal power can become the lowest cost base-load generating technology in Australia by 2030 if Australia moves with the rest of the world to introduce an aggressive price on greenhouse gas emissions (Figure 8). Hot Sedimentary Aquifer systems, such as might be expected in Victoria, lie at the lower end of the cost spectrum for geothermal

It is difficult to generalise about the cost of direct geothermal heat other than to point out that costs per megajoule of heat will be lower where the Geothermal Resource is shallower, hotter or flows at a higher rate. The 2014 ARENA study cited above found that geothermal heat is already competitive with the price of gas at Moomba in South Australia, and is likely to be cheaper than Moomba gas by 2020. In specific locations for specific purposes, direct geothermal heat already represents the most economic source of thermal energy. An example is Peninsula Hot Springs on the Mornington Peninsula, where geothermal heat provides constant year-round hot water for bathing. Heating the water with natural gas, for example, would be prohibitively expensive

The cost of GSHP systems in Victoria is relatively high compared to other HVAC options at present, mainly because the industry is new. With a mature industry, however, there is every reason to believe that costs in Victoria will be similar to the several million systems that are already installed around the world. It is common for commercial systems, where deep building foundations can incorporate ‘ground heat exchangers’, to recoup all system capital costs in about 3 to 4 years. This means that the cost of heating and cooling for the rest of the life of the building is only a small fraction of a conventional HVAC system. With a mature industry, it is likely that a residential GSHP system could be installed on an average house for $10,000 to $20,000, with capital costs recovered in about 5 to 7 years. Thereafter, savings of the order of $2,000 to $3,000 per year would be possible.

Q. Does it provide jobs?A survey conducted by the Geothermal Energy Association in the United States in 200431 found that geothermal power plants provide 1.7 direct full time jobs and 6.4 person-years of employment per installed megawatt. When indirect and induced employment is also taken into account, those figures rise to 4.25 full time jobs and 16 person-years of employment per installed megawatt.

Direct geothermal heat can sustain new industries providing new jobs. For example, Peninsula Hot Springs employs hundreds of local staff.

30 Australian Renewable Energy Agency (2014). Looking Forward: Barriers, risks, and rewards of the Australian Geothermal Sector to 2020 and 2030. Commonwealth of Australia (Australian Renewable Energy Agency), Canberra, ACT. 114 pp.

31 http://geo-energy.org/geo_basics_employement.aspx

Figure 8. Predicted cost of power generation technologies in Australia in 2030 with and without a price on greenhouse gas emissions. Source: Australian Renewable Energy Agency (2014)34.

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8 Context


The value of geothermal energy needs to be considered within the context of an entire energy management system.

There are drivers for and against different energy sources at the global, national, state, local and consumer level. Many of these drivers are conflicting, and have different weights at different times and locations. It is worth considering some of these drivers and how they influence decisions around geothermal energy development.

8.1 International ContextMost of the global and regional concerns for energy policy revolve around environmental protection, energy security, sustainable growth, energy diversity and cost minimisation. Geothermal heat and power can address all of these concerns. While geothermal energy only accounted for an estimated 600 PJ32 of the world’s approximately 389,000 PJ33 of primary energy consumption in 2013 (the most recent year for which statistics are available), the geothermal industry is on a growth curve internationally.

In 2011, the International Energy Agency (IEA)34 produced a technology roadmap for the accelerated development of geothermal heat and power within and beyond the IEA’s 28 member countries. In it, the IEA found the following:

• Geothermal energy can provide low-carbon baseload power and heat from high-temperature hydrothermal resources, deep aquifer systems with low and medium temperatures, and hot rock resources.

• By 2050, geothermal electricity generation could reach 1,400 TWh per year, i.e. around 3.5% of global electricity production, avoiding almost 800 megatonnes (Mt) of CO2 emissions per year.

• Geothermal heat could contribute 5.8 EJ (1,600 TWh thermal energy) annually by 2050, i.e. 3.9% of projected final energy for heat.

Many global organisations concerned with energy actively promote geothermal development. These include:

• International Energy Agency. IEA Geothermal35 is an ‘implementing agreement’ that coordinates research and development programs for geothermal energy between a number of IEA member countries (including Australia).

• The United Nations. The UN provides geothermal training courses through the United Nations University36, supports projects under the United Nations Environment Program37, and other initiatives.

• The World Bank Group. The World Bank retains a geothermal specialist within its Energy Sustainability Management Assistance Program (ESMAP). ESMAP coordinates the Global Geothermal Development Plan38 and provides financial assistance to governments to develop their geothermal resources. The International Finance Corporation, a member of the World Bank Group, also provides assistance to commercial geothermal projects.

• The International Geothermal Association. The IGA is an ‘association of associations’, representing over 5,000 individual members of 36 affiliated national geothermal associations around the world. It is the world’s peak representative body for the geothermal sector39. One of its major tasks is to organise the World Geothermal Congress once every five years; including the most recent congress held in Melbourne in April 2015.

• Regional development banks. These support geothermal development in specific regions. Examples of such banks include the Asian Development Bank, African Development bank, American Development Bank and the German Development Bank (KfW).

• National aid agencies. The governments of many countries with expertise in geothermal energy actively support geothermal development around the world through technical assistance and grant schemes. Such countries include Japan, New Zealand, Iceland, USA and Germany.

32 REN21 (2014). Renewables 2014 Global Status Report. REN21 Secretariat, Paris, France. 216 pp.33 International Energy Agency — http://www.iea.org/Sankey/ — accessed 5 April 201634 International Energy Agency (2011). Technology Roadmap—Geothermal Heat and Power. IEA Sustainable Energy Policy and Technology Directorate,

Paris, France. 52 pp.35 http://iea-gia.org/36 http://unu.edu/admissions/non-degree/geothermal-training-programme.html#overview37 e.g. http://www.unep.fr/energy/activities/frm/pdf/WG3FinalReport.pdf38 http://www.esmap.org/node/302739 http://www.geothermal-energy.org/index.html


8.1.1 Global drivers for development of geothermal energy• Environmental protection. The release of carbon

dioxide through the burning of fossil fuels is directly responsible for increased CO2 in the atmosphere, resulting in an increasing average global surface temperature driving climate change. The ‘Paris Agreement’ adopted by the consensus of 195 countries on 12 December 2015 states a global aim to “hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.” All forms of geothermal energy utilisation can assist with this aim because they all have very low greenhouse gas emission footprints.

• Energy security. Domestic energy sources provide security against the disruption of energy imports. All geothermal energy is, by its very nature, domestic. Heat cannot be efficiently transported large distances.

• Sustainable growth. Sustainability is an increasingly important consideration for global development. When properly managed, Geothermal Resources represent environmentally, socially and economically sustainable sources of energy.

• Energy diversity. Diversification of energy supply is a wise strategy for building a robust energy portfolio. Geothermal energy can play an important role in energy diversification.

• Cost minimisation. Low energy costs are essential for maintaining strong economies. Geothermal energy is the cheapest option for utility-scale power production or direct heat in some regions, and can offset energy costs by improving heating and cooling efficiency in most locations.

8.1.2 Current status and trends for power generationThe total installed global geothermal power generating capacity was close to 12,800 MWe at the end of 2014, with 640 MWe capacity added in 2014 alone40. This represented global growth of 4–5% for the third year in a row41. Several countries are experiencing especially strong growth in geothermal power developments, driven largely by specific government policy settings. These include Kenya, Turkey, Indonesia, the Philippines and Italy.

While these countries are all situated in tectonically active regions, Germany, a country lacking active volcanoes, is also seeing strong growth. Germany had seven geothermal power plants with a combined capacity of 27 MWe in operation in December 2014, with another 16 MWe under construction42. Most plants in Germany are in the 3–5 MWe size range, all are binary plants, and most sell heat as well as electricity. Germany’s first geothermal power plant only came online in 2008. The growth in the German geothermal sector is driven by government policies and incentives, including co-funded drilling and feed-in tariffs.

A World Bank report on geothermal financing in 201343 found that a strong and self-sustaining geothermal industry almost always requires dominant government involvement in the early stages to overcome the high risk barrier to private equity involvement. The form of government involvement varies from place to place. In many instances (eg New Zealand, Philippines, California, Mexico, Kenya), state-owned enterprises directly explored and developed the first high-risk projects to effectively derisk the technology. The state-owned agencies, or the geothermal branches of those agencies, were subsequently privatised as the nuclei of self-sustaining industries. The governments of many other countries introduced compelling market-based mechanisms specifically for geothermal power. For example, Büscher (2012)44 reported that 15 countries had feed-in tariff schemes with specific bands for geothermal power in 2012.

8.1.3 Current status and trends for direct use (excluding GSHP systems)The global installed thermal capacity of geothermal direct utilisation (excluding GSHP systems) reported for December 2014 was 20,400 MWt45; a 33% increase over 2010, representing a compound annual growth rate of nearly 6%. The total annual energy production was 263,000 TJt for 2014; a 17.5% increase over 2010, representing a compound annual growth rate of 3.3%. The majority of the energy was consumed for bathing/swimming (45%) and space heating (34%), with progressively smaller amounts consumed by greenhouses, aquaculture, industrial use, agriculture, and cooling/snow melting.

40 REN21 (2015). Renewables 2014 Global Status Report. REN21 Secretariat, Paris, France. 251 pp.41 Geothermal Energy Association (2014). Geothermal Energy in 2014: Emerging Economies Power Up. GEA Press Release, 16 December 2014. 42 Weber, J., Ganz, B., Schellschmidt, R., Sanner, B. and Schulz, R. (2015). Geothermal energy use in Germany. Proceedings World Geothermal

Congress 2015 Melbourne, Australia, 19-25 April 2015.43 Gehringer, M. and Loksha, V. (2013). Geothermal Handbook: Planning and Financing Power Generation. ESMAP Technical Report 002/12. The World

Bank Group, Washington DC. 164 pp.44 Büscher, E. (2012). Feed-in Tariffs: Blessing or Curse for Geothermal Energy? Worldwide Background and Overview. GRC Transactions, v36, 81–90.45 Lund, J.W., and Boyd, T.L. (2015). Direct utilisation of geothermal energy 2015 worldwide review. Proceedings World Geothermal Congress 2015,

Melbourne, Australia.


Space heating installations alone increased by 44% in the five year period from the start of 2010, with a global capacity of 7,556 MWt at the end of 2014. District heating networks in China, Iceland, Turkey, France and Germany accounted for most of this capacity. While energy usage for bathing and swimming is difficult to quantify, estimates of the installed capacity increased by 36.4% over the 2010–2014 period. The largest reported direct geothermal energy users were China, Japan, Turkey, Brazil and Mexico.

The technologies required for direct use of geothermal heat are well established. Barriers to its continued expansion as a source of renewable heat are political, environmental and economic. Given increasing global pressure for communities’ energy supplies to become more sustainable, it is likely that geothermal direct heat utilization will be the subject of increasing interest, innovation and regulation around the world.

8.1.4 Current status and trends for ground source heat pumpsThe estimated global installed capacity of GSHP systems was 50 GWt at the end of 2014, providing 325,000 TJt of heating/cooling energy annually. The energy provided by GSHP systems grew at a compound annual rate of 10% over the five year period to the end of 2014. This growth, in part, stems from their ability to efficiently heat and cool in almost any part of the world. In the USA for example, most GSHP systems are designed for a dominant cooling load, except in the northern states, and are thus oversized for heating. In contrast, in the cooler countries of Europe, most units are designed for a dominant heating load. If current trends continue, GSHPs could increase their contribution to around 5% of the world’s energy requirements by 205046; even more if serious emissions reduction targets are pursued.

Many governments, most notably in North America, Europe, China and South Korea, actively encourage and support GSHP systems. GSHPs have been an option for residential heating and cooling in these places for many years. Countries with the greatest installed capacity (MWt) of GSHPs at the end of 2014 were USA, China, Sweden, Germany and France. In terms of annual energy production (TJ/yr) from GSHP systems, the leading countries were China, USA, Sweden, Finland and Canada. When ranked according to installed capacity per head of population (MWt/capita), the Nordic countries dominated: Iceland, Sweden, Finland, Norway and Switzerland. By the alternative measure of installed capacity by land area (MWt/km2), the top five countries were Switzerland, Iceland, Netherlands, Sweden and Austria.

8.2 Australian ContextAustralia’s energy market has seen significant changes over the past decade, and is likely to undergo further change in the near future. Energy exports are set to increase, primarily due to several large new LNG processing facilities in Western Australia, Northern Territory and Queensland. This will have significant effects on domestic energy supply and prices. The proportion of intermittent power in the total mix is set to increase due to the Federal Government’s ‘Renewable Energy Target’ (RET), while the smoothing effects of energy storage, still an incipient industry in Australia, are yet to be seen.

Australia has committed to reducing its greenhouse gas emissions to 5% below the levels of 2000 by 2020. In 2011, the Productivity Commission reported on 230 emissions reduction policies implemented through a multitude of mechanisms around the world47. In Australia, greenhouse gas emissions policies exist at federal, state and local government levels to ensure reduction targets are met. As part of the Federal Government’s suite of measures to meet this target, the RET (as amended on 23 June 2015) is designed to deliver 33,000 GWh of renewable electricity generation per year over and above 1997 baseline levels by 2020. Eligible renewable electricity production in 2015 was 18,850 GWh, or 11.11% of Australia’s total power generation48. The RET therefore requires that power generation from renewable sources almost double over the five years to 2020. The relevant legislation includes geothermal energy in its definition of eligible renewable energy sources.

A great deal of uncertainty still remains over emission reduction policy at the federal level, with recent changes including the removal of a carbon price and implementation of the Direct Action policy (which might include an emissions trading scheme in the future). The Climate Change Authority released a Special Review report on policy options for Australia’s electricity supply sector on 31 August 2016. The report recommended “that Australia should implement a market mechanism of some form in the electricity sector.”49

Wind and solar power accounted for most of the growth in renewable power generation in Australia in the financial year 2013–14, along with bioenergy to a lesser extent50. Wind and solar power are intermittent by nature, so their increasing penetration increases the national challenge of maintaining a reliable supply of electricity to consumers.

46 Johnston, I.W., Narsilio, G.A. and Colls, S. (2011). Emerging geothermal energy technologies. KSCE Journal of Civil Engineering, 15(4), 643–653.47 Productivity Commission (2011). Carbon Emission Policies in Key Economies. Research report, Canberra. http://www.pc.gov.au/inquiries/

completed/carbon-prices/report/carbon-prices.pdf48 Clean Energy Regulator. Annual targets and the renewable power percentage. http://tinyurl.com/ho235hp49 Climate Change Authority (2016). Policy Options for Australia’s Electricity Sector. Special Review Research Report. August 2016. 109pp.50 Department of Industry and Science (2015). 2015 Australian Energy Update. Canberra, August.


The Australian Energy Resource Assessment, updated to its second edition in 201451, presented all of the known and potential primary energy resources in Australia. It accurately reported that the present utilisation of geothermal energy in Australia is limited to small, local-scale installations. The report stated, however, that Australia has substantial future potential for geothermal power production and direct-use applications, while recognising that there is incomplete knowledge of crustal temperatures and transmissivity. In contrast, the report identified that the established technology of GSHPs already has the capacity to be employed almost anywhere at a range of scales.

Both the CSIRO and Geoscience Australia had dedicated geothermal energy research teams for a period in the past decade, but both of these teams have since been disbanded. Research support for geothermal energy is now provided at the federal level mainly through the Australian Renewable Energy Agency.

8.2.1 Geothermal potentialThe second edition of the Australian Energy Resource Assessment listed all Geothermal Resource estimates that had been formally reported by companies in Australia under the ‘Australian Geothermal Reporting Code’52 as of December 2012. Ten companies had reported a total of 440,570 PJt of estimated recoverable heat across 51 licences in five states. This figure only represented the potential of geothermal reservoirs targeted by companies within their exploration licences for power generation; it omitted geothermal potential outside that limited geographic range, potential for direct-use of geothermal heat, and potential for GSHP systems.

The true geothermal potential of Australia remains unquantified. As defined earlier in this document, Geothermal Resources exist only where thermal energy can be recovered to the surface with groundwater at an economic cost. A reliable assessment of Geothermal Resources can only be derived from a reliable assessment of recoverable temperatures and flow rates and in the context of local heat or electricity market conditions. Each of these parameters remains largely uncertain across broad sections of the country, with recoverable flow rates particularly uncertain. In addition, the useful energy content of hot water depends on the application to which it will be applied. This means that the thermal energy recoverable from a given aquifer or hot rock (and hence the magnitude of the Geothermal Resource) will vary depending on the application.

For the reasons above, the best way to assess geothermal potential is on a project-by-project, location-by-location basis, with a national inventory quantified from the aggregate of all such projects.

8.2.2 Summary of legislationGeothermal energy is a natural resource and, as such, exploration and production of geothermal energy in Australia falls within the regulatory responsibility of the states. Once geothermal energy is produced at the surface, however, its sale could fall under federal jurisdiction. Regulation of wholesale and retail energy markets across Australia is in a reform phase, with the Australian Energy Regulator progressively replacing state regulators of these markets. This reform is being driven by the Council of Australian Governments, which has set in place a number of national agenda items to provide for energy efficiency, protection of the environment and actions to address climate change.

New South Wales is the only state to formally recognise GSHP systems in regulations. GSHP systems have been an eligible technology for meeting the ‘BASIX’ building sustainability index requirements for residential heating, cooling and hot water in NSW since mid-201453. A BASIX certificate is a necessary prerequisite to obtaining building approval in NSW. No other state yet formally recognises GSHP systems in building regulations.

8.2.3 Government R&D SupportAustralian federal and state government agencies have supported the geothermal industry through direct grants, tax rebates, collection of pre-competitive data, and funding to the research sector. A number of programs have provided financial or in-kind support to geothermal energy developments around the country since 2000. The following list of programs is largely reproduced from Huddlestone-Holmes (2014)54:

• Renewable Energy Equity Fund (REEF). The REEF was a $30 million fund established by the federal government in 1999. CVC REEF Ltd., part of The CVC Group, was granted the sole licence to manage the fund, intended to increase Australian private investment in renewable energy and enabling technologies through the provision of equity finance. Approximately $18 million of the available funding was provided via the Australian Greenhouse Office’s REEF licence and approximately $9 million from private sources. The fund’s portfolio was wholly acquired by the parent CVC Group in 2012.

51 Geoscience Australia and BREE (2014). Australian Energy Resource Assessment. 2nd Ed. Geoscience Australia, Canberra.52 Australian Geothermal Reporting Code Committee (2010). Australian Code for Reporting of Exploration Results, Geothermal Resources, and

Geothermal Reserves (2nd edition).53 https://www.basix.nsw.gov.au/basixcms/images/CompletedSampleCertificate.pdf54 Huddlestone-Holmes, C. (2014). Geothermal Energy in Australia. Report prepared for the ARENA International Geothermal Energy Group. CSIRO

Energy Flagship, July 2014. 81pp.


• Renewable Energy Commercialisation Program (RECP). Administered by the Australian Greenhouse Office, the RECP was launched in 1999 with $54 million in funding. The competitive grants program sought to provide support for strategically important renewable energy technology initiatives with strong commercial potential. Individual grants were between $100,000 and $1 million and grantees were required to fund at least 50% of the project costs from their own sources. Five bidding rounds were held between 1999 and 2004 and the program terminated in 2007.

• Strategic Assistance for Research and Development (R&D Start) Program. Administered by AusIndustry, the federal government introduced the R&D Start program in 1996 to assist Australian industry to undertake research, development and commercialisation. Grants of up to $15 million were available and grantees were required to fund at least 50% of the project costs from their own sources. $1.3 billion in grants were awarded before the program merged into the Commercial Ready program in 2004.

• Renewable Energy Development Initiative (REDI). Administered by AusIndustry, REDI provided grants of matching funding from $50 000 up to a limit of $5 m for eligible renewable energy technology projects of up to three years in duration. Grantees were required to match the grant from their own funds. The competitive and merit-based grant scheme aimed to support the development of new renewable energy technology products, processes or services with strong early stage commercialisation and greenhouse gas emissions reduction potential. Project applications were invited from the solar, wind, geothermal, biomass, hydro and ocean energy harnessing sectors. The program ran from 2005 to 2008.

• Greenhouse Gas Abatement Program (GGAP). Administered by the Australian Greenhouse Office, GGAP was introduced in 1999 and ran until 2009. $400 million was allocated to the program, but this was ultimately underspent. The program aimed at helping Australia meet its commitments under the Kyoto Protocol by funding the most cost-effective abatement opportunities across the economy as they arose.

• The Plan for ACcelerating Exploration (PACE). Administered by the South Australian Department of State Development (DSD), the PACE program was launched in April 2004 to fund collaborative exploration programs that address critical uncertainties in mineral, petroleum and geothermal exploration, and promote South Australia as a premier destination for mineral and energy investment. Grantees are required to fund at least 50% of the project costs from their own sources. Funding amounted to $30.9 million between 2004 and 2011, after which it was extended and expanded with an additional $10.2 million.

• NSW Climate Change Fund Renewable Energy Development Program (CCFRED). Established by the New South Wales government in 2007, CCFRED supported a single round of renewable energy projects to generate electricity or displace grid electricity use in NSW for stationary energy purposes.

• Geothermal Drilling Program (GDP). The GDP, launched in 2008, was administered in turn by the Department of Resources, Energy and Tourism; the Australian Centre for Renewable Energy; and ARENA. The program had $50 million to assist the geothermal industry to overcome the barrier of high drilling costs to demonstrate proof-of-concept for power generation. The GDP was a competitive, merit-based grant program. Funding was capped at $7 million per project and grantees were required to fund at least 50% of the project from their own sources. There were two rounds of funding (Round 1 in 2008/2009 and Round 2 in mid to late 2009).

• South Australian Regional Development Infrastructure Fund (RDIF). RDIF made available up to $3 million per year in grants to infrastructure projects in regional areas. The grants were awarded through a competitive merit-based application process. The scheme was superceded in 2014 by the Regional Development Fund which can distribute $15 million per annum.

• Renewable Energy Demonstration Program (REDP). The REDP, launched in 2009, was administered in turn by the Department of Resources, Energy and Tourism; the Australian Centre for Renewable Energy; then finally ARENA. The program had $435 million in available funds aimed at supporting the commercialisation and deployment of renewable energy in Australia. The REDP was a competitive, merit-based grants program, with funding provided on the basis of the applicant providing at least two dollars for every dollar of grant funding.

• Queensland Collaborative Drilling Initiative (CDI). The CDI is designed to stimulate exploration investment in under-explored parts of Queensland. The program co-funds the drilling costs of innovative exploration programs through grant rounds, up to a maximum of $150,000.

• Education Investment Fund (EIF). The EIF was announced in the 2008-09 federal budget. It ran from 2009 until the end of 2104. The role of the EIF was to build a modern, productive, internationally competitive Australian economy by supporting world-leading, strategically-focused infrastructure investments to transform Australian tertiary education and research.

• Energy Technology Innovation Strategy (ETIS). Established by the Victorian Government, ETIS aims to accelerate a variety of pre-commercial energy technologies through research, development, demonstration and deployment stages, so that they are ready for market-uptake.


• Low Energy Emissions Development Fund (LEED). Established by the Western Australian Government and administered by the WA Department of Environment and Conservation, LEED provided financial support for the demonstration and commercialisation of innovative low greenhouse emissions energy technologies in Western Australia. LEED funding support of around $30 million was invested in a range of projects. Successful applicants in the fourth and final round were announced in 2011. Every dollar of LEED funding was required to be matched by three dollars from other sources.

• Western Australian Royalties for Regions funded, Exploration Incentive Scheme (EIS). The EIS is a Western Australian government initiative that aims to encourage exploration in Western Australia for the long-term sustainability of the State’s resources sector. The $130 million initiative, funded by Royalties for Regions over the period 2009 to 2017, will stimulate increased private sector resource exploration and ultimately lead to new mineral and energy discoveries. Most of the activities in the EIS are focused in under-explored greenfield regions.

• Emerging Renewables Program (ERP). The ERP was first established by the Australian Centre Renewable Energy and was expanded by ARENA. The program aims to fund activities to support the development, demonstration and early stage deployment of renewable energy technologies with the potential to lower the cost, and thereby increase the supply, of renewable energy in Australia. The ERP has $215 million in funding available.

Grant programs originally administered by the federal Department of Resources, Energy and Tourism or the Australian Centre for Renewable Energy, have, since 1st July 2012, been administered by the Australian Renewable Energy Agency (ARENA). These programs have so far disbursed about $40 million across eight projects within the geothermal sector (Table 1). All except one of these projects have been completed or terminated. The only active funding for a geothermal project (announced on 19 January 2016) is $450,000 for the University of Adelaide to deliver a database and map of natural fractures and permeability for four Australian sedimentary basins prospective for geothermal energy.

Table 1. Funds committed or disbursed to geothermal projects for research and pre-commercial activities from programs administered by ARENA.

Status Lead organisation Project

ARENA funding provided / committed (000s)

Total project cost (000s)

Awarded University of Adelaide (South Australian Centre for Geothermal Energy Research)

Geothermal structural permeability map

$450 $1,620

Closed MNGI PTY LTD (Petratherm Ltd) Demonstration of geothermal heat exchanger in hot sedimentary rocks

$4,200

Closed MNGI PTY LTD (Petratherm Ltd) Construction of 7 MW EGS Project

$0 $73,000

Closed Geodynamics Ltd Cooper Basin EGS Heat and Power Development

$32,750 $144,220

Closed MNGI PTY LTD (Petratherm Ltd) Paralana EGS Project $0

Completed National ICT Australia (NICTA) Data fusion and machine learning for geothermal target exploration and characterisation

$1,878 $6,594

Completed University of Adelaide (South Australian Centre for Geothermal Energy Research)

Reservoir quality in sedimentary geothermal resources

$1,250 $3,540


8.2.4 Current state of developmentOver 40 Australian companies have pursued geothermal power generation through exploration programs since the year 2000. Most of those companies held geothermal exploration licences in one or more states, and most have since relinquished those licences without having drilled a deep borehole. Since the global financial crisis of 2007, investors have viewed geothermal power as an expensive and unproven technology in Australia, with most companies citing an inability to raise working capital as their reason for withdrawing from the sector.

Geodynamics Limited (GDY) advanced its geothermal power project the furthest. Since 2000, GDY drilled a total of four boreholes to depths exceeding 4,200 m at its Habanero Deeps Project in the Cooper Basin in northeast South Australia, and successfully completed an extended closed loop circulation test in 2013. GDY reported a sustained flow rate of 19 kg/sec between wells Habanero 1 and Habanero 4, with a production wellhead temperature of 215°C (and increasing) at the end of the trial55. Llanos et al. (2015) built on these and other test results to predict that the known Habanero geothermal reservoir could support flow rates of 35 kg/s per production borehole over 20 years56, sufficient to generate about 3 MWe of electrical power per production borehole. GDY considered this commercially unviable under existing market conditions, and formally pugged and abandoned the boreholes in 2016. The project’s location remote from the National Electricity Market was the major economic barrier to commercial power generation.

Petratherm Ltd and Panax Geothermal Ltd each drilled boreholes to about 4,000 m depth within a six month period from late 2009 to early 2010. Petratherm completed a successful fracture enhancement program in its borehole, Paralana 2 in central eastern South Australia, but subsequently suspended the project through lack of funding. Panax Geothermal suspended its project after its borehole, Salamander 1 in the Penola Trough in southeast South Australia, delivered poor sustained flow.

With respect to power generation, there is now very little activity in the Australian geothermal sector. Companies with geothermal projects at an advanced stage of exploration, other than the three mentioned above, are HRL Holdings (formerly Hot Rock Ltd) with permits in southwest Victoria, Greenearth Energy Ltd with its Geelong Geothermal Power Project, and Torrens

Energy (SA) Pty Ltd with a project at Port Augusta. These and other companies still holding geothermal permits around the country have suspended their geothermal operations and are generating revenue through other activities while waiting for policy and market conditions to improve to restart their geothermal operations. The two main reasons cited for this lull in the sector are financing difficulties and moratoria on hydraulic fracturing.

Beardsmore et al. (2015) listed 20 operations directly using hot water for spas and bathing, heating swimming pools, meat processing, and so on around the country. Swimming pool heating in Western Australia and artesian baths in New South Wales and Victoria are some examples of this direct heat use. While GSHP systems have been installed at buildings like Geoscience Australia (Canberra) and the Antarctic Centre (Hobart), the potential for extensive heating and cooling by GSHP systems and direct use of warm aquifers is much higher. The University of Melbourne recently installed demonstration GSHP systems at the university campus in Parkville, and at 22 properties across Melbourne and regional Victoria. The Sustainable Building Research Centre at the University of Wollongong has also installed a GSHP system, while the Australian Square Kilometre Array Pathfinder near Murchison in Western Australia, and the Pawsey Supercomputing Centre in Perth, both employ geothermal cooling systems.

Adoption of geothermal energy for direct heating and cooling is experiencing particularly strong growth in Western Australia (Figure 9). Data provided by Rockwater Pty Ltd57 indicate that the dollar value of gas and electricity savings due to geothermal installations in Western Australia is currently over $4.0 million per annum for direct-use geothermal systems and over $0.7 million per annum for GSHP systems. CO2 abatement from the systems is currently over 13,500 tonnes per annum for direct-use geothermal and over 4,300 tonnes per annum for GSHPs. These numbers are growing as more systems are installed.

The research sector maintains some activity through continuing efforts at various universities and at the CSIRO. There are two university centres of excellence for geothermal research: the Queensland Geothermal Energy Centre of Excellence (QGECE) based at the University of Queensland; and the South Australian Centre for Geothermal Energy Research (SACGER), part of the Institute for Mineral and Energy Resources at the University of Adelaide.

55 Hogarth, R.A. and Daniel Bour, D. (2015). Flow performance of the Habanero EGS closed loop. Proceedings World Geothermal Congress 2015, Melbourne, Australia, 19-25 April 2015.

56 Llanos, E.M., Zarrouk, S.J. and Hogarth, R.A. (2015). Simulation of the Habanero Enhanced Geothermal System (EGS), Australia. Proceedings World Geothermal Congress 2015, Melbourne, Australia, 19-25 April 2015.

57 Martin Pujol, Senior Hydrogeologist, Rockwater Pty Ltd. Pers. comm. 3 May 2016.


Figure 9. Growth in the installed capacity of geothermal heating and cooling systems in Western Australia since 1997. Data from Rockwater Pty Ltd.

58 Commonwealth of Australia (Australian Renewable Energy Agency) (2014). Looking forward: barriers, risks and rewards of the Australian Geothermal Sector to 2020 and 2030.

ARENA established the International Geothermal Expert Group (IGEG) in 2013 to advise on the performance and potential of geothermal power generation in Australia. In 2014, the IGEG presented ARENA with a detailed report on the barriers, risks and rewards of the Australian geothermal sector out to 2020 and 203058. In the view of the IGEG, a future cost-competitive geothermal sector will likely start with direct-heat applications and off-grid power generation from EGS.

The IGEG recommended the following specific areas for ARENA support:

• Resource characterisation, technology development and component technology demonstration;

• Direct heat applications and off-the-grid uses that have the greatest likelihood of achieving cost competitiveness by 2030;

• Co-operation and co-ordinated funding and research and development programs with the oil and gas sector, especially in locations such as the Cooper Basin where accessible geothermal energy and gas fields are co-located;

• International knowledge transfer to allow the Australian geothermal sector to ‘jump’ by learning pathways to cost competitiveness;

• A single national research centre or centre of excellence or collaborative research centre that has at its core:

– geothermal industry involvement,

– strong links to the oil and gas sector,

– a consortium of national universities and research organisations, and

– strong links to international geothermal research centres.

• Pre-competitive data collection and collation, possibly including deep drilling but only to test prior characterisation and modelling predictions.

The IGEG report recommended three options for ARENA to assist the geothermal power sector: ‘resume’, ‘reconsider’ and ‘reboot’. ARENA adopted the ‘reboot’ option “that restarts the funding by ARENA in ways that promote innovation and assist the geothermal sector towards a more cost-competitive path and with a strong emphasis on research and development in both finding (other than drilling) and flowing the resource.” Consistent with the ‘reboot’ option, ARENA announced funding of $450,000 to SACGER in early 2016 to produce maps of the distribution, orientation and connectivity of fractures in four key sedimentary basins around Australia to better understand their structural permeability. Future ARENA funding will similarly focus on overcoming the critical barriers for geothermal energy through research and development.

25000

Direct-use geothermal heating

15000

20000

Year

Co

mm

erci

al-s

ize

geo

ther

mal

inst

alle

d ca

pac

ity

in W

este

rn A

ust

ralia

(kW

th)

10000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

5000

0

GSHP geothermal heating

GSHP geothermal cooling and free-cooling


8.3 Victorian Context

8.3.1 Geothermal potentialVictoria lacks active volcanic systems, so high temperature geothermal reservoirs close to the surface are geologically unlikely. However, temperatures adequate for effective power generation using binary power plants (>125°C) have already been directly measured in a small number of boreholes between 2,500 m and 4,000 m deep in the Gippsland and Otway Basins (Figure 10).

Temperature data have been collected from many relatively shallow (to several hundred metres depth) boreholes across the state. In many cases, the temperature data provide a measure of the ‘geothermal gradient’ over the sampled depth interval. Simply extrapolating those gradients, however, is not a reliable method for predicting temperatures at greater depth. A more reliable estimate of deep temperature can be predicted using surface heat flow. Heat flow can also be estimated from measurements in relatively shallow boreholes, then extrapolated into the earth to predict temperature using the rock properties of internal heat production and thermal conductivity.

The Geological Survey of Victoria (GSV) carried out the ‘Geothermal Atlas Project’ between 2010 and 2015 to collate heat flow and related data for an initial statewide appraisal of deep temperatures. GSV created a heat flow map with reasonable coverage across the state (Figure 11) by compiling limited historical data, a larger amount of more recent geothermal exploration company data, and directly collecting new heat flow data.

The heat flow map provides a reliable basis for temperature predictions at depth. When combined with three dimensional geological models populated with estimates of rock thermal conductivity and internal heat generation, conductive heat flow modelling can produce maps of the anticipated temperature at certain depths, or the depths at which certain temperatures would be encountered.

Mather et al. (2015)61 produced maps predicting temperature across a wide area of Victoria (Figure 12). The maps support the observation from a limited number of direct historical measurements that temperatures of 150°C can be encountered as shallow as 3 km along parts of the Victorian coast in the Otway and Gippsland Basins. The Otway and Gippsland Basins represent a thick sequence of rocks, up to 4–5 kilometres thick in places, deposited into the rift that formed when Australia and Antarctica broke apart. The predicted high temperatures in the basins are largely due to good thermal insulation provided by the young, muddy basin rocks at shallower

levels, rather than high heat flow. Parts of these basin sequences are thick coal packages that provide excellent thermal insulation. Basin rocks are also typically good hosts for groundwater and so these basins provide good potential for extracting heat.

In the northwest of the state, the Murray Basin covers the bedrock as a thin veneer rarely more than a couple of hundred metres thick. These basin rocks tend to be sandy and rich in thermally conductive quartz and thus do not provide the same thermal insulation quality as the shallow Otway and Gippsland Basin rocks. The highest temperatures reached in the deepest parts of the Murray Basin are about 50°C, which could be attractive for some direct heat uses. Low grade geothermal resources are also available across coastal Victoria from Portland in the west to Lakes Entrance in the east. Specific regions of interest where geothermal resources could coincide with existing or prospective markets for low grade direct heat include the Latrobe Valley, the Mornington Peninsula and the Bellarine Peninsula.

Victoria, as a cooler climate state, is naturally suited to geothermal bathing tourism. In 2007, Tourism Victoria published a brochure62 to promote opportunities for hot spring spa developments in Victoria. The brochure included partial (but incomplete) lists of warm aquifer locations, depths, typical flow rates and temperatures across the Otway, Gippsland and Murray basins. In terms of economic potential, the benefits of hot spring developments could be substantial if even a small number were developed. Given the average revenue per visitor to the Peninsula Hot Springs on the Mornington Peninsula is close to $100, the potential direct market size of this niche tourism sector is $500–700 million per annum. The flow-on economic benefit of spa and bathing activity, by way of additional food, recreation, travel and accommodation expenditure, is estimated to be 5–7 times the direct generated revenue, offering a potential annual boost to the Victorian economy of $2.5–4.9 billion.

Elevated heat flow is observed in some areas of exposed bedrock in central Victoria (Figure 11). These areas are also spatially associated with parts of the young Newer Volcanics Basalts. The high heat flow is possibly a vestige of deep heat sources associated with the geologically recent volcanic eruptions throughout southwest Victoria. Such basaltic eruptions, however, tend to lack associated shallow magma chambers that might provide a concentrated heat source to power a convective geothermal system. Also, the high heat flow does not necessarily translate into high temperature at depth because the rocks are very thermally conductive and disperse the heat efficiently. Depths of 4–5 km are predicted for the 150°C isotherm in this region (Figure 12).

61 Mather, B., Moresi, L., Cruden, A. and Taylor, D. (2015). 3D numerical modelling of heat flow across heterogeneous geology in Southeast Australia. Proceedings World Geothermal Congress, Melbourne, Australia, 19–24 April 2015.

62 Tourism Victoria (2007). Victoria’s geothermal and natural mineral water tourism investment opportunities. Government information brochure. 40pp.


Figure 11. Surface heat flow in Victoria. Source: Taylor and Mather (in press)60.

Figure 10. Range of temperatures recorded at depth in Victorian boreholes. Source: Driscoll (2006)59

59 Driscoll, J. (2006). Geothermal Prospectivity of Onshore Victoria, Australia. Victorian Initiative for Minerals and Petroleum Report 85, Department of Primary Industries, 46pp.

60 Taylor D.H. and Mather B. (in press). Surface Heat Flow Map of Victoria. Geothermal Atlas Report No 1, Geological Survey of Victoria.

Measured temperature (ºC)

0

Otway Basin

Murray Basin

Gippsland Basin

500

1000

1500

2000

2500

3000

3500

4000

Dep

th (

mG

L)

20 40 60 80 100 120 140 1600


Figure 12. Predicted depth to 150°C in Victoria. Source: Ben Mather (2015).

Much of the exposed bedrock area through central Victoria can be viewed as unprospective for geothermal resources; temperatures are likely to be relatively low for any given depth, and porosity and permeability are also likely to be poor. There remains a finite possibility that there might be local high temperature pockets associated with the Newer Volcanics, but no such pockets have yet been found.

8.3.2 Regulatory frameworkExploration and extraction activities related to the development and operation of geothermal energy projects are regulated in Victoria by the Geothermal Energy Resources Act 2005 (“the Act”) as supplemented by the Geothermal Energy Resources Regulations 2016. Additionally, the Resources Legislation Amendment (BTEX Prohibition and Other Matters) Act 2014 prohibits the injection of restricted substances into bores for the purpose of stimulating a geological formation (hydraulic fracturing), which could impact a geothermal project.

The Act defines ‘geothermal energy’ as “heat energy contained or stored in rock, geothermal water or any other material occurring naturally within the earth”. The Act applies to projects targeting geothermal energy deeper than 1,000 m and hotter than 70°C. It does not apply to GSHP systems.

The Act defines three ‘primary authorisations’ for the purpose of exploration and/or extraction of geothermal energy:

• Geothermal Exploration Permit. An exclusive right to explore in an area subject to conditions;

• Geothermal Retention Lease. Applied where a geothermal reservoir has been discovered, but cannot as yet be commercially developed;

• Geothermal Extraction Licence. An exclusive right to extract geothermal energy from an area, subject to conditions.

It is an offense to explore for geothermal energy in Victoria without a Geothermal Exploration Permit (GEP). A GEP can only be awarded following a competitive tender process initiated by the relevant (Resources) Minister. Only two such tender processes have previously been held in Victoria (May 2007 and November 2008) and none are planned in the foreseeable future. This effectively blocks new entrants to the Victorian geothermal power sector.


8.3.3 Current Geothermal Exploration Permit holdersAfter an original 31 GEPs were gazetted across the state in 2006, evaluation of Victoria’s geothermal power potential rapidly narrowed attention to the Otway Basin, Torquay Sub-basin, the Gippsland Basin, and to the east of Port Phillip Bay. Six GEPs remain held by three companies in mid-2016 (Figure 13). HRL Holdings Ltd, Greenearth Energy Ltd and Granite Power Ltd have identified several highly prospective areas, but the companies are awaiting more favourable policy and market conditions before carrying out further work.

8.3.4 Government R&D SupportIn 2010, Granite Power Ltd was awarded $32,500 from the state government’s Rediscover Victoria Drilling Fund. The grant helped offset the cost of a 400 m borehole drilled by Granite Power in GEP 11 in the onshore Gippsland Basin to measure basal heat flow for potential EGS resources.

The state government has also supported two geothermal research and development projects in recent years through the Energy Technology Innovation Strategy (ETIS). Hot Dry Rocks Pty Ltd and project partner Green Thermal Energy Technologies (gTET) received $217,500 from the ETIS Sustainable Energy Research and

Development (SERD2) fund between 2011–2014 for the ‘Latrobe Valley Shallow Geothermal Project’ (LVSGP). The initial scope of the LVSGP was to establish the technical and commercial viability of using a small-scale ‘organic rankine cycle’ (ORC) power plant to generate electricity from a moderate temperature groundwater resource (90°C flowing at 100 kg/s) at about 900 m depth in the Latrobe Valley. The first part of the project was to complete a ‘geothermal systems assessment’ (GSA) of the valley to identify a preferred site to generate up to 500 kWe (gross; 350 kWe net) of electricity.

The GSA revealed that the probability of locating 90°C groundwater at the target depth was low, leading to a revised expectation of 75°C flowing from about 700 m depth at up to 100 kg/s. The ORC plant initially considered was unlikely to produce net power at the lower temperature. In consultation with ETIS, the scope of the project changed to investigate a novel power generation technology.

gTET subsequently designed, fabricated and tested an innovative ‘trilateral flash cycle’ heat engine that could generate electrical power from water as low as 70°C under the surface conditions expected in the Latrobe Valley. While only tested at 1 kWe capacity, the technology could be scaled up to 100s kWe for small-scale power systems in the Latrobe Valley and elsewhere in Australia and overseas.

Figure 13. Victorian Geothermal Exploration Permits (GEPs) held by companies HRL Holdings Ltd (GEP 6 and GEP 8 in the west of the state), Greenearth Energy Ltd (GEP 10 to the west of Port Phillip Bay; GEP 12 and GEP 13 in Gippsland) and Granite Power Ltd (GEP 11 to the east of Port Phillip Bay) as of late 2015. Map generated using GeoVic online mapping tool.


A partnership between the University of Melbourne, Geotech Pty Ltd and Direct Energy Australia Pty Ltd was awarded a little over $1.6 million from the ETIS Sustainable Energy Pilot Demonstration (SEPD) program for the period 2012–2016 for the ‘Direct Geothermal Energy Pilot Demonstration Project for Victoria’. The project was initiated through seed funding provided by the Melbourne Energy Institute and the University of Melbourne.

The project involved installing GSHP systems into more than 20 buildings around Victoria, providing a spread of locations, climates, geologies and building usage. A range of instruments were installed with each system to monitor the thermal performance and energy usage of the heat exchangers in the ground, the heat pumps and the buildings themselves. The data collected will be used to educate the public, community groups, industry, government, regulators, developers and the trades about the cost and energy efficiency of the systems. Other outcomes will be information on how GSHP systems work and are installed, better design rules for GSHP systems generally, and specific design rules for Victoria.

The project has already demonstrated that GSHP systems can make a major contribution to sustainable building design and to the reduction of greenhouse gas emissions in Victoria by significantly reducing the consumption of nonrenewable energy sources for heating and cooling. In the longer term, the project aims to make the technology an everyday sustainable alternative to conventional systems for heating and cooling buildings.

Leveraging the ETIS funding, the Australian Research Council awarded a further $720,000 to the University of Melbourne from 2015 to further develop detailed numerical models of a variety of ‘ground heat exchangers’ to predict the performance of the technology in cooling dominated climates. Other spin-off projects are developing to investigate how GSHP systems can improve heating and cooling outcomes in industrial processes. One such process involves animal breeding, where heating and cooling with natural gas is expensive and associated with high mortality rates.

In October 2015, the South Australian Centre for Geothermal Energy Research (SACGER) began a $1.62 million programme to deliver a national database and map of natural fractures and subsurface permeability in critical Australian basins to better exploit geothermal resources across Australia. The project has received $450,000 from ARENA’s Emerging Renewables program towards the research. The project will study the distribution, orientation, and connectivity of fractures in four key sedimentary basins around Australia, including the Otway Basin which extends into Victoria, to better understand their structural permeability. It is expected that the results of the project will be of benefit to geothermal explorers throughout the country, reducing the risk for exploration drilling.

Between 2007–2012, Regional Development Victoria managed the Four Seasons Energy Pilot Program, which provided funding to trial GSHP technology in six projects in regional Victoria. More than half of the $825,000 disbursed went to the flagship project at Wangaratta High School. The GSHP systems were generally financially viable, with a projected payback period for the program as a whole of just over 13 years. Individual payback times for the six projects ranged from 2.5 to 24 years63.

63 ACIL Allen Consulting (2014). Evaluation of the Four Seasons Energy Pilot Program. Report to Regional Development Victoria. 38pp.


9 Victorian geothermal stakeholders and projects


9.1 Melbourne Energy Institute—University of MelbourneThe Melbourne Energy Institute is one of five interdisciplinary research institutes at the University of Melbourne that aims to build capacity in meeting key societal challenges. The MEI has a focus on the challenges and opportunities of low emissions energy systems in the regional and local context. It works with external partners on issues to do with developing new low-emissions energy resources, mitigating emissions through carbon capture and storage, integration of new energy supply, energy market design, public policy and community expectations. Since its inception in 2010, the MEI has participated in a range of programs relevant to understand geothermal energy, with funding from the federal funding agencies EIF and ARENA, and state government ETIS program.

9.2 Data 61 (formerly National ICT Australia)Data 61 is CSIRO’s business unit for ICT research64. In 2014, Data 61 precursor NICTA worked with the Geological Survey of Victoria and HRL Holdings Ltd to apply cutting edge ‘data fusion’ and ‘Bayesian inference’ techniques to the challenge of exploring for geothermal aquifers within the deep geological formations of the Otway Basin near Koroit in western Victoria. The work

leveraged a $5 million, two-year project funded by the Australian Renewable Energy Agency to develop open source software and workflows to implement machine learning techniques for geothermal exploration.

The software developed in that project, ‘Obsidian’, provides insights into the probability of attractive geothermal conditions existing at depth, given a set of geoscientific data. The probabilistic approach is a departure from conventional geophysical inversion methods, which identify only a single possible geological explanation for a set of geoscientific data. The probabilistic approach provides a far more valuable outcome; identifying the full range of possible geological explanations and their relative likelihoods. It is then possible to answer questions such as, “What is the probability that Pretty Hill Formation rocks >150°C occur at depth beneath Koroit?” (Figure 14).

Data 61’s ‘machine learning’ group is ranked in the top five such groups in the world. The Obsidian software exploits cutting edge digital technology such as distributed multi-core cloud computing, parallel tempering markov chain monte carlo sampling algorithms, and innovative 3D visualisation. It is only through the integration of all these techniques that the geothermal data fusion project became feasible. Further development of the software could allow specific investigations into the probability of permeable rocks being present. This could dramatically improve the success rate of geothermal drilling.

Figure 14. Probability of Pretty HIll Formation >150°C beneath part of the Otway Basin in western Victoria. Figure courtesy of Data 61.

64 Data 61 was formed in 2016 from the merger of CSIRO’s Digital Productivity business unit with National ICT Australia.


9.3 HRL Holdings LtdHRL Holdings Limited (ASX Code: HRL), formerly Hot Rock Limited, holds two Geothermal Exploration Permits (GEP 6 and GEP 8) over the onshore Otway Basin in southwest Victoria to explore for geothermal energy for electricity generation. The permits cover over 4,600 km2 and are granted until September 2019. HRL has benefitted from extensive exploration for oil and gas in the Otway Basin since the 1960s. HRL assessed data from over 180 wells and 14,000 line kilometres of seismic reflection data to identify three HSA geothermal project areas; Koroit, Penola and Tantanoola (Figure 15). Well data, including direct temperature measurements, point to thick sequences of hot, faulted and fractured sandstone in the Lower Cretaceous aged Pretty Hill Formation at depths of 2,500 m to 4,500 m below surface. The overlying Eumeralla Formation acts as a thermal blanket, restricting upward flow of heat and geothermal fluids.

Reservoir prospectivity is confirmed by Data 61’s geothermal data fusion project on HRL’s flagship Koroit HSA Project highlighting the Pretty Hill Formation geothermal reservoir in red in Figure 15.

To investigate temperature throughout the Koroit project, thermal models were constructed for wells with Horner corrected bottom hole temperatures and other well temperature data. Variations in lithology downhole, thermal conductivity and different heat flows were taken into account in the models. Calibrated temperature profiles were constructed for two appraisal-production wells and pseudo-wells throughout the Koroit project to construct isothermal depth maps associated with a 3D geological model. A temperature of 150°C is estimated to occur at 3,200 m in HRL’s first appraisal well and at 3,020 m in its second well.

Consultants predict that primary core permeability at 3,500 m will likely range from 1.5–8 mD with an average of 15% porosity. At 3,000 m the average porosity is estimated to be around 17% with permeability in the order of 9–70 mD.

In HRL’s geothermal well designs, up to a 1,000 m section of Pretty Hill reservoir will be open for production to allow for high flow rates. On the upside, HRL is not relying on primary porosity but targeting large naturally open faulted and fractured zones within the reservoir to enhance flow rates, targeting 150 l/sec from a 34 cm (13 5/8 inch) diameter production well.

The anticipated average production temperature of 150°C is sufficient to generate electricity using a binary cycle power plant. The brine from the reservoir is not suitable for drinking or irrigating crops and will be recirculated. Table 2 gives estimates of the recoverable heat (5% of total heat in place) and estimated power generation potential over a 30-year period for a power plant with 12% conversion efficiency from heat to electricity and operating at 90% availability. The 1,028 MWe resources for the three projects were estimated using a probabilistic Monto Carlo algorithm with results shown for the P50 (50% probability) level.

After successful drilling and testing of two appraisal production wells at Koroit, a feasibility study will be conducted on the development and construction of a 50 MWe (net) binary cycle power plant.

HRL’s geothermal projects could provide hundreds of new jobs in southwest Victoria in the construction and operation of geothermal power plants. They could also provide low-cost heat for use by new industries, before reinjection of the spent water back into the reservoir.

www.hrlholdings.com

Figure 15. HRL’s geothermal permits showing outlined geothermal resources and major transmission lines. Figure courtesy of HRL.

Table 2. Estimated recoverable heat and electrical power for HRL’s three geothermal project areas in southwest Victoria.

Project Recoverable heat

Electrical power for 30 years

GEP8 Koroit 3,330 PJ 470 MWe

GEP6 Penola 2,835 PJ 400 MWe

GEP6 Tantanoola 1,100 PJ 158 MWe

Total 7,265 PJ 1,028 MWe


9.4 Greenearth Energy LtdGreenearth Energy Ltd (GER) holds three geothermal permits (GEP 10, GEP 12 and GEP 13) covering a total of ~18,795 km2. The permits are located in the Latrobe Valley / Gippsland area (GEP 12 and 13) and the Bellarine Peninsula / Surf Coast Shire / Geelong / Daylesford area (GEP 10). GER has undertaken significant preliminary research to estimate an Inferred Geothermal Resource in each area. Results to date warrant further investigations to fully understand the geology and resource characteristics for the commercial development of a Hot Sedimentary Aquifer system within each of the three permit areas.

The Geelong Geothermal Power Project (GGPP) in GEP 10 is GER’s flagship development opportunity. GER intends to develop the GGPP as multiple modular installations over time, gradually growing a geothermal power generation capacity in the Geelong area and delivering renewable energy into the Victorian energy grid. The three project stages are: Stage 1 — Proof of Concept, Stage 2 — Demonstration, and Stage 3 — Commercialisation. Given the innovative nature and the significant technical uncertainties associated with this project, each stage of the GGPP will require substantial research and development to achieve a successful outcome.

The contiguous GEP 12 and 13 permits cover the Latrobe Valley, sections of Palaeozoic basement, and a large part of the onshore Gippsland Basin to the coast. The sedimentary pile, consisting of Tertiary aged sediments (Latrobe Valley Group containing thick coals, and Seaspray Group containing only thin coals) overlying Cretaceous sediments (Strzelecki Group), is in the range 3,000–4,000 m thick or greater. The basal units of the Cretaceous (the Rintouls Creek Sandstone and Tyers Conglomerate) sitting on the Palaeozoic basement offer a porous and permeable geothermal reservoir target where they are most deeply buried. Current modelling suggests that where the Latrobe Valley Group is 500 m thick in the Latrobe Valley, temperatures of 150°C or more can be expected at ~3,000 m depth. Where the Strzelecki Group is overlain by the Latrobe and Seaspray groups in the southeast parts of GEP 13, 150°C is expected at depths between 3,250 – 4,000 m.

Four of Victoria’s major brown coal fired power stations lie within GEP 12 and 13, as well as various existing and potential large consumers of electricity and heat. The skilled labour force, infrastructure and support industries associated with those consumers can directly repurpose to geothermal energy should a strong sector develop. This could help mitigate the economic impacts should any of the large coal fired power stations be decommissioned in the future.

www.greenearthenergy.com.au

9.5 Granite Power LtdAs at 30 June 2016, Granite Power Limited (GPL) held Geothermal Exploration Permit GEP 11 covering 3,676 km2 of West Gippsland. GPL was planning a 300 MWe EGS power project, to offer Victoria low cost, low emissions electricity and a new foundation industry for the state’s economy.

GPL’s prior exploration program benefited from extensive pre-existing petroleum exploration data, supplemented by GPL’s own efforts. A formal Inferred Resource of 31,000 PJt (±7,000 PJt) was delineated in the North Narracan Trough, a geological structure to the south of Warragul. The resource estimate was based on an EGS target bounded by a minimum temperature of 150°C and a maximum depth of 6,000 metres, with a total areal extent of about 100 km2. GPL completed a pre-feasibility study using independent engineering cost estimates verified against US DoE and various other data (e.g. CSIRO), along with advice from relevant experts. These suggested that a 300 MWe project should provide an attractive return to institutional investors with a cost of electricity of about $50 per MWh.

This cost estimate was based on a 62 borehole, 300 MWe base load power station, where each production borehole would deliver a temperature of ~195°C from a depth <5,500 metres at an average flow rate of ~35 kg/s. Available data suggested these figures should be readily achievable. Importantly, the cost estimate factored in the savings that were to be achieved through scale. Unit costs were necessarily much higher for small, pilot projects, which should’ve been viewed accordingly.

At the time, GPL’s project was ready for appraisal drilling of three deep boreholes (two production boreholes and one injection borehole). These boreholes were to demonstrate the general technical and commercial feasibility of power production and, in particular, provide real data for a formal bankable feasibility study for a 300 MWe base load power station.

GPL made application to the Minister for the surrender of the tenement in July 2016. This followed an extended period of suspension, during which GPL awaited an enabling state policy and planning framework as a necessary precursor to securing private project funding.

www.granitepwr.com


9.6 Hot Dry Rocks Pty LtdHot Dry Rocks Pty Ltd (HDR) is a Victorian geothermal consultancy and laboratory services company. Registered in 2006, HDR has three parallel business streams; consulting services, field and laboratory services, and laboratory equipment sales. The consulting services are mainly aimed at characterising and quantifying geothermal resources, for which HDR developed its own proprietary software and workflows. Field and laboratory services are provided out of Australia’s only dedicated rock thermal properties laboratory, chiefly utilising a ‘Portable Electronic Divided Bar’ (PEDB); a specialist tool designed and manufactured by HDR for measuring thermal conductivity and specific heat capacity of rocks. HDR has retailed more than a dozen PEDBs to universities and research institutions around the world.

HDR carries on a continuous program of research and development focussing on new geothermal exploration and power generation technologies. Its main current project is the ‘Heat Needle’ for measuring conductive heat flow at the surface of the Earth (Figure 16).

HDR has counted among its clients NASA’s Jet Propulsion Laboratory, Google.org, the British Geological Survey, Geoscience Australia, the US Department of Energy, the International Energy Agency, most of the state geological agencies in Australia, CSIRO and many exploration companies.

www.hotdryrocks.com

Figure 16. Graeme Beardsmore of HDR tests a prototype ‘Heat Needle’ for measuring surface heat flow. Photo courtesy of Hot Dry Rocks.


9.7 Peninsula Hot SpringsJust over an hour’s drive south of Melbourne, Peninsula Hot Springs (PHS) is Victoria’s first commercial geothermal mineral springs development. The foundation of the business is natural 54°C geothermal water extracted from a 637 metre deep borehole for use in mineral springs bathing (Figure 17). A range of spa treatments and dining options are also offered on-site. PHS first opened for business on 28th June 2005. Over the ensuing decade, PHS has grown to become the largest private enterprise tourist attraction in Victoria, currently receiving 420,000 visitors annually and employing 248 staff. Of particular importance for the local economy is the all weather and all season nature of the bathing and associated spa treatment products, and the high level of employment they provide. There is very little seasonality in visitations, with less than 20% difference between the busiest and slowest months. January and July are the two peak months. Jobs are therefore more secure and less exposed to the high degree of seasonality experienced by other sectors of the peninsula economy. PHS is open daily all year from 7.30 am till 10:00 pm.

The business, and industry, is still in the early stage of evolution with an estimated annual market size in Melbourne of 5–7 million visitors. PHS is currently investing in an expansion of its bathing capacity and introducing a variety of accommodation options to the site. Visitations are anticipated to grow to 650,000 visitors per annum by 2018.

www.peninsulahotsprings.com

9.8 Mainstream AquacultureFounded in 2001, Mainstream Aquaculture has operated a barramundi farm at Werribee since 2004, using 28°C geothermal water from a depth of several hundred metres. The water is of such a quality and just the right temperature to use directly to grow barramundi babies, or ‘fingerlings’. The geothermal water feeds the largest recirculating aquaculture system on mainland Australia, allowing Mainstream to produce high quality barramundi year-round. Mainstream purchased the property in 2003 specifically so it could access the geothermal resource. It currently employs 15 staff.

www.mainstreamaquaculture.com

9.9 Midfield MeatsMidfield Meats in Warrnambool uses 45°C geothermal water as feedstock for washing down and sterilizing its industrial meat processing facility, which saves Midfield Meats substantial energy expenses each year.

www.midfield.com.au

Figure 17. Hilltop spa at sunset—Peninsula Hot Springs. Photo courtesy of Peninsula Hot Springs.


9.10 Quality Suites Deep BlueAt the Quality Suites Deep Blue geothermal spa resort at Warrnambool, a 735 m borehole produces 43°C water at a maximum of 50 litres per second. The borehole provides the resort’s domestic hot water and heats the resort’s 122 rooms via a system of hydronic radiators.

www.qsdb.com.au

9.11 Australian Geothermal Solutions Pty LtdAGS provides Australia with internationally recognised and proven ground source heat pump technologies to reduce energy costs by maximising energy efficiencies. All AGS’s products have a long and successful history of performance in the global market and the AGS team has an extensive record of achieving consistent project delivery.

www.geothermalsolutions.com.au

9.12 GeoFlow Australia Pty LtdGeoFlow Australia is a sustainable heating and cooling design and installation Company specialising in geothermal energy solutions. GeoFlow assists architects, designers, home owners, builders and developers all over Australia to satisfy regulatory building and planning permit requirements and deliver sustainable buildings. GeoFlow has designed and installed GSHP systems in all of Australia’s varied climates.

www.geoflow.com.au

9.13 Glenelg Shire CouncilGlenelg Shire Council in western Victoria has as one of its Priority Projects the ‘Portland Geothermal System Redevelopment’. Failure of a previous geothermal borehole and associated infrastructure in 2006 demanded temporary installation of natural gas heaters to replace the geothermal energy resource heating public buildings in the city of Portland. The redevelopment is focused on the construction of a new borehole to tap into the geothermal aquifer, the installation of flow control systems to ensure optimisation of the temperature/flow regime and minimisation of running costs, the installation of new heat exchange equipment at the borehole and building interface, and replacement of the pipework that delivers the hot water to facilities around Portland.

www.glenelg.vic.gov.au

9.14 Seacombe WestThe Seacombe West Project will create a new housing development on the southern shores of Lake Wellington in Gippsland, Victoria, on land reclaimed from an encroaching salt layer. The multifaceted development will demonstrate the three pillars of sustainable development to provide positive environmental, social and economic outcomes. The project developers are investigating how to incorporate geothermal power and direct heat into the project.

seacombewest.com.au/#home

9.15 AGL Energy LtdIn 2014, AGL Energy Ltd announced that it would provide Maroondah Sports Club with a geothermal cooling and heating system that would assist the club “to save hundreds of thousands of dollars on its energy bills over the next decade.”65 AGL acted as local retail agent for the ‘GeoAir’ system produced by QPS Geothermal (Queensland), and intended to offer geothermal solutions for domestic and small commercial heating and cooling more broadly in Victoria.

www.agl.com.au

65 http://tinyurl.com/gup8hs7


10 Developing Geothermal Energy in Victoria: SWOT Analysis

A strong geothermal sector has so far failed to emerge in Victoria in spite of a natural bounty of accessible heat and the unique advantages presented by geothermal energy.

When compared with developments elsewhere within the broader national and international context, it is clear that the geothermal sector is facing significant challenges from an ever evolving policy and economic landscape in this state. A strengths, weaknesses, opportunities, threats (‘SWOT’) analysis was carried out to help identify the extent to which the sector’s internal characteristics and external environment are impacting its growth in Victoria.

10.1 SWOT Analysis

‘SWOT’ Analysis (Strengths, Weaknesses, Opportunities and Threats) gained popularity in the 1950s and 1960s as a business tool primarily to illuminate the possibilities open to an organisation within the limitations imposed by the environment in which it operates. A SWOT analysis seeks to identify, in turn, positive and negative aspects of the subject’s internal characteristics (strengths and weaknesses) and external environment (opportunities and threats). The SWOT framework can also be applied to analyse an individual, a product, a sector, or any entity that can be defined by a unique set of attributes.

We applied the SWOT Analysis technique to the geothermal sector in Victoria to identify how the characteristics of the sector intersect with Victoria’s prevailing economic and policy frameworks.

10.2 Previous work

In 2014, the International Geothermal Expert Group (IGEG) commissioned by the Australian Renewable Energy Agency (ARENA) completed a SWOT analysis of geothermal power generation in Australia and published the results in the Looking Forward report66. In its analysis, the IGEG considered the potential for geothermal power generation at the national scale, and divided the SWOT into four themes:

1. Policy, social, and community issues, jobs, and employment

2. Markets, finance, and electric systems operation

3. Technology and engineering

4. Environmental issues and externalities

The IGEG identified nine specific strengths, fourteen weaknesses, eleven opportunities and ten threats. Many of the items identified in the IGEG SWOT analysis are relevant to geothermal power generation in Victoria, and provided a valuable starting point for our more specific focus on Victoria. We also extended our investigation to consider geothermal products beyond power generation. We divided our analysis into four themes:

1. Power generation

2. Direct-use of low grade heat

3. Ground source heat pumps

4. Service industry base for Australia and the Asia-Pacific region

Details of our analyses are presented in the Appendix. The sections below summarise the key outcomes for each theme.

10.3 Power generationAn abundant reserve of brown coal supplying an entrenched fleet of coal-fired generators is the dominant threat to geothermal power development. An inability for new entrants to secure Geothermal Exploration Permits under the current state legislation is also a major barrier. Another threat is the availability of process water (subject to rights granted by the relevant minister under Victoria’s Water Act, 1989) in regions that already experience high usage from existing power generators, intensive agriculture, and so on. Recently, several factors combined to cause a period of falling power demand

66 ARENA (2014). Looking Forward: Barriers, risks and rewards of the Australian Geothermal Sector to 2020 and 2030. Commonwealth of Australia.


across Australia, leading to some commentary that Australia has an overabundance of capacity. Unless there are closures of [poorly performing] plants, such a situation also reduces interest in developing new, clean power generators.

Deep geothermal reservoir stimulation and development may also induce adverse seismicity. The proximity of buildings and population centres to deep geothermal sites is an issue of public concern, but the Victorian industry can benefit from best practice protocols developed following such events in other countries.

International pressure to transition to zero emissions power is increasing, and opportunities for geothermal power will inevitably arise in response to policy or market mechanisms for restricting CO2 emissions. There is extensive experience in government and in the research workforce to readily and effectively support any new geothermal power developments, and established energy infrastructure in locations aligned with recognised geothermal potential. The Otway and Gippsland Basins (and in particular the Latrobe Valley in the Gippsland Basin) are known to reach temperatures attractive for geothermal power generation, including in some sedimentary formations with favourable permeability characteristics. Despite geological uncertainties that must be managed across all earth resource sectors, geothermal resources in Victoria’s major sedimentary basins would enjoy rapid paths to commercialisation with amenable legislative, policy and economic settings. The current downturn in the petroleum sector provides a window of opportunity to explore deep geothermal energy options with little competition for drilling rigs.

10.4 Direct use of low-grade heatThere is a reasonably long record of direct use of geothermal heat in Victoria. Hot water from the Dilwyn Formation aquifer was used for 14 years in a district heating network in Portland from 1983 to 2006. More recently, the popular Peninsula Hot Springs has been exploiting 54°C water since 2005, and the Deep Blue Hotel geothermal development in Warrnambool has been operating since 2007, also using warm water from the Dilwyn Formation.

Low to medium temperature aquifers are distributed broadly throughout Victoria, but especially in the three onshore sedimentary basin areas where a large proportion of the state’s population lives: the Gippsland, Otway and Murray basins. The exact distribution of the resources in terms of location, depth, temperature and potential flow rates remains poorly understood, which contributes to a lack of public awareness of the potential and benefits of direct geothermal heat.

A growing domestic and international tourism industry provides a market for businesses to directly use geothermal water in hot springs resorts. The Peninsula Hot Springs is already an exemplar of this class of resort, winning a number of prestigious local and international awards. Opportunities within other industries (eg aquaculture, horticulture, agriculture) remain largely unexplored in Victoria. Known warm aquifers beneath the Latrobe Valley, for example, could provide the impetus for entirely new industries to flourish in that region. Likewise, prima facie evidence suggests the Mornington Peninsula, Bellarine Peninsula and Murray Basin could reduce their reliance on fossil fuels or support the development of new industries based on geothermal resources.

10.5 Ground source heat pumpsGround source heat pumps, although relatively unknown to the general populace in Australia, present enormous greenfields potential in residential housing and industrial developments in Victoria’s growth corridors. Large existing or planned subsurface infrastructure projects also present attractive prospects for large-scale GSHP systems (eg the City Loop, Melbourne Metro Rail Project).

The major barrier to the uptake and growth of a local GSHP industry is high up-front capital costs and long payback times relative to gas heating and air source HVAC systems. The high costs are largely due to the lack of a local market ecosystem. There is only a small workforce of qualified installers and manufacturers, and few researchers. The situation is perpetuated because GSHP systems are ineligible for market incentives (eg tax breaks, rebates, SRECs) available to competing technologies such as rooftop solar and solar hot water.

As gas charges rise in Victoria, however, householders will consider alternatives to gas heating. GSHPs offer an alternative renewable option for new builds, but are more challenging for retrofits. Rooftop solar with battery storage will also increasingly compete with GSHPs in the low emissions heating and cooling market.

Victoria, in principle, has optimal climatic conditions for GSHPs across the state, with strong seasonality (cold winters and warm to very hot summers) balancing the heating and cooling demand. Monitoring of 22 Victorian demonstration sites by the University of Melbourne’s School of Engineering will provide essential performance data to support the design and operation of new systems.

Additionally, power supply companies are beginning to realise the potential for collaborating with their customers on systems like GSHPs that are able to reduce peak load demand.


10.6 Service industry base for Australia and Asia-Pacific regionVictoria has abundant local, relevant expertise in fields that are directly applicable to the geothermal sector. These skills include geothermal resource assessment, geothermal energy research, geotechnical engineering, borehole completions, and power conversion technology. The state boasts individuals and organisations whose expertise is globally recognised and respected, and who have close associations with the global geothermal sector. At present, however, these skills are distributed across a number of local expert SMEs and research organisations, with no central point of coordination or critical mass.

Perhaps the greatest challenge for building a local geothermal service sector is the lack of any geothermal power generation in the state, and little or no local direct heat or GSHP demand at present. This is a ‘chicken and egg’ problem, with a vibrant service sector a prerequisite for strong industry growth, and vice versa. Effective measures of support or promotion of geothermal energy from government could break this deadlock. A service base could grow with specific, comprehensive, centralised support at policy and regulatory levels.

South Australia has shown (eg through RenewablesSA) that the right support and promotion can make a huge difference to a renewable energy sector. Renewables are blossoming in South Australia due primarily to strong state support. SA is becoming a small powerhouse for the solar and wind industries (predominantly).

All states in Australia lack a coordinated geothermal industry. Organisations and SMEs providing specific services in the geothermal field are scattered across the country with no central coordination. The opportunities open to Victoria through an expanded and coordinated local geothermal service sector are, firstly, the potential for skilled jobs growth and, secondly, the potential for the development of a local manufacturing base as a support industry. A coordinated geothermal support industry could service not only Victoria, but the rest of Australia and the Asia Pacific region with specific expertise in ‘unconventional’ geothermal power generation, direct use of geothermal heat, and ground source heat pumps.

A coordinated geothermal support base would provide advice and services specific to geothermal energy, backed up by strong connections to the global geothermal service sector. They would be distinct from services designed for other commodities. For example, some of the issues around cost and reservoir performance of geothermal power projects attempted in other states can arguably be attributed to applying petroleum drilling and reservoir enhancement techniques unsuited to geothermal reservoirs.


11.1 Power Generation1. Geothermal energy provides zero-emissions,

baseload power. That puts it in the same category as biofuel, nuclear and hydro power. However, geothermal power does not suffer from supply chain, waste disposal or seasonal management issues.

2. Geothermal power is an established technology of increasing importance around the world. Over 12,000 MWe of capacity is already installed, with 100s of MWe of additional capacity coming online each year. Installed capacity includes a number of projects exploiting ‘Hot Sedimentary Aquifers’ at greater depth and lower temperature than those expected in Victoria.

3. Geological evidence points to Victoria having technically viable reservoirs for geothermal power in the Otway and Gippsland basins. Coarse clastic formations at the base of the sediment piles are expected to reach > 150°C and retain primary and secondary permeability capable of producing commercial flow rates.

4. Geological risks are high in new geothermal power markets. Globally, 50% of ‘greenfield’ geothermal wells fail to produce commercial rates of thermal power. A minimum of three test wells are typically required to prove/disprove the existence of a viable geothermal reservoir. For example, Geodynamics Ltd generated geothermal power in the Cooper Basin (South Australia) using a loop connecting its first and sixth wells.

5. Greenfield projects are inherently more expensive than projects within established geothermal power markets. Commercial capital markets are generally unwilling to invest in greenfield geothermal projects. Limited suppliers, learning curves and small scale combine to elevate the cost of projects in new geothermal markets. Open power markets do not reward early movers with new technology.

6. Every commercial geothermal power market in the world has had dominant government involvement in its early stages. Only governments are able to shoulder the investment risks inherent in de-risking geothermal power generation in a new location.

7. Current geothermal legislation in Victoria actively prevents new entrants to the geothermal power sector. It is not possible to obtain a new Geothermal Exploration Permit except through a competitive tender process initiated by the Minister for Resources. No such tender process is anticipated in the foreseeable future.

11.2 Direct use of low-grade heat1. Warm aquifers (or outlet water from a

geothermal power plant) can provide reliable, stable-cost heat for industrial use. Geothermal aquifers can produce constant temperature water at high availability for long periods of time. If responsibly managed, such heat sources are 100% sustainable with low operating overheads after initial capital investment.

2. A number of companies already make direct use of geothermal energy in Victoria. The most successful of these companies (Peninsula Hot Springs and Mainstream Aquaculture) deliberately sited their operations to take advantage of geothermal energy resources.

3. The specific characteristics of a warm aquifer (temperature, salinity, depth etc) dictate the uses most appropriate for the resource. Different applications are particularly suited to different resource temperatures. Understanding the heat and temperature requirements for specific use cases can assist in matching geothermal aquifers to potential uses.

4. Locations, depths, temperatures and productivities of Victoria’s warm aquifers are incompletely mapped. Partial collations of bore data have appeared in previous reports, but no comprehensive inventory of low-grade geothermal resources is available in the public domain.

5. Geothermal resources can be cascaded. A single geothermal reservoir can support a number of applications in series as the temperature of the water is progressively lowered by each application. Such combined applications can drastically improve the economics of the system as a whole.

11 Key findings and concluding remarks


6. Known warm aquifers beneath the Latrobe Valley could provide cheap, reliable heat for new industries to emerge in that region. The Latrobe Valley is known to contain productive geothermal aquifers at temperatures up to at least 70°C. At present, some of these aquifers are being dewatered but no benefit is being obtained from the contained thermal energy.

7. Low grade geothermal resources known on the Mornington Peninsula probably extend across to the Bellarine Peninsula. The Mornington Peninsula and Bellarine Peninsula share the same geological setting.

11.3 Ground source heat pumps1. GSHPs provide 30% to 60% savings on running

costs over roof-mounted systems. GSHPs are significantly more efficient for heating and cooling than roof-mounted HVAC systems.

2. GSHPs reduce base and peak power demand, reduce CO2 emissions and improve public health and safety. They achieve this through more efficient operation and no fans, flues, chimneys or cooling towers.

3. The major barrier to the uptake of GSHP systems is high up-front capital costs relative to alternative systems. High capital costs are a function of a small local market, inefficient design, and no local manufacturing.

4. Large subsurface infrastructure projects present attractive prospects for large-scale GSHP systems. At small marginal cost, GSHP ground loops can be embedded into excavations made as part of large infrastructure works. This substantially reduces the effective capital cost, and improves the economic case, for the GSHP system.

5. Victoria has optimal climatic conditions for GSHPs across the state. Heat stored underground during the summer cooling season can be reharvested for winter heating demand. GSHP systems are most efficient when these loads are balanced.

6. GSHP systems are currently not recognised in the national Six-Star Standard building efficiency rules adopted by the Victorian Building Authority. Solar hot water systems count towards building efficiency targets. There is no such incentive for GSHP systems in Victoria’s building regulations.

11.4 Service industry base for Australia and Asia-Pacific region1. Victoria has abundant expertise in fields directly

applicable to the geothermal sector. This includes individuals and organisations whose expertise is globally respected. At present, this expertise is distributed across a number of SMEs and research organisations.

2. A coordinated local geothermal service industry could generate a skilled workforce and a local manufacturing base. Services could include geothermal exploration and site characterisation; system design and optimisation; material and components manufacturing and assembly; system installation and maintenance; training and accreditation; research and development.

3. Victoria could become a regional hub for geothermal energy services. No coordinated hub for geothermal expertise exists in the Asia-Pacific region to cover the whole spectrum of geothermal energy services.

11.5 Concluding remarksThe exploitation of geothermal energy is increasing around the world, with roughly equal rate of increase of both electrical and thermal, clean, base load power supply. CO2 emissions reduction, economics, energy security and energy efficiency are all driving this increase in uptake. The same drivers apply in Victoria, but Victoria’s unique geological and economic conditions affect the extent to which geothermal energy can provide a response.

Geothermal energy is accessible in Victoria and already represents an economic resource for direct heat in a number of locations. Warm aquifers are known to underlie many parts of the state. Specific locations include the Otway coast in the west of the state, the Bellarine Peninsula, the Mornington Peninsula, the Werribee Plains, the Latrobe Valley and east Gippsland. There is strong technical potential for harvesting the heat in these aquifers with little impact on the quantity and quality of the water itself. The heat could be used directly within a range of industrial applications, or, in some circumstances, could generate electricity using binary plants. Identification and exploitation of economic geothermal resources is held back by limited mapping of aquifer temperature and distribution, a lack of testing of sustainable extraction rates from deeper target reservoirs, a general lack of public awareness of the possibilities, and a major legislative barrier to new exploration projects.


The established energy providers in Victoria largely represent a barrier to the development of geothermal power generation because pilot geothermal projects are unlikely to be cost competitive without large subsidies. While economic forecasts predict that geothermal power could be cost competitive with established technologies at scale, the cost and risk of demonstrating the technology in Victoria has so far proven too high for commercial investment markets to fund.

However, geothermal energy also represents an opportunity to ‘repurpose’ the existing energy infrastructure and expertise in Victoria. For example, skilled power industry personnel, drilling contractors, transmission lines and large energy consumers are all colocated in the Latrobe Valley, which is also one of the most prospective locations for geothermal energy in the state.

The Victorian climate everywhere lends itself to the deployment of energy efficient ground source heat pumps. GSHPs provide efficient heating in winter and cooling in summer, with additional environmental and public health benefits, compared to roof mounted HVAC systems. The challenge to developing a sustainable GSHP industry in Victoria lies largely in overcoming initial high capital costs through economy of scale. This could be partially addressed by incorporating GSHPs in large buried infrastructure projects and by modifying building efficiency codes to recognise GSHPs.

No single body coordinates the activities of the disparate range of organisations with an interest in geothermal energy in Victoria. A centralised body could provide a focal point for coordinated geothermal research, the dissemination of information, the identification of specific development opportunities, and a conduit to the broader national and international geothermal sectors. It could also form the nucleus of a broad geothermal service industry hub for the Asia Pacific region. Without such a body, Victoria could continue to neglect its natural bounty of geothermal energy.


Aquifer Thermal Energy Storage: A system that uses water to transport thermal energy into and out of aquifers.

Balneology: The science or application of the therapeutic use of thermal baths.

Base Load: The sustained minimum load that a power supply system must provide for.

Binary Plant: A power plant in which hot water boils a secondary liquid (such as isopentane) with low boiling point and high vapour pressure. The secondary vapour is used to drive a turbine, producing electricity, before being condensed back to its liquid state and used again..

Borehole: A deep, narrow hole drilled into the ground (eg to locate hot water).

Borehole Thermal Energy Storage: A system that uses the thermal bulk of the ground surrounding sealed boreholes for heat storage and recovery.

Capacity Factor: The ratio of the actual output of an energy system over a period of time, to its potential output if operated continuously at full capacity over the same period of time.

Clean Energy Technology: An energy system that does not pollute the atmosphere when used.

Coefficient of Performance: The ratio of the heating/cooling power output, to the electrical power input, for an HVAC system.

Crust: The outer, rocky layer of the Earth.

Diagenesis: Chemical and physical changes undergone by sediment due to (for example) compaction, leaching, cementation and recrystallization caused by temperature, pressure and fluid interactions.

Direct Heat: The delivery of thermal power directly from geothermal water.

Engineered Geothermal System: A man-made reservoir within fractured hot rock. Cold fluid flows through the reservoir, is heated and transported to the surface where the thermal energy is used to generate electricity.

Energy Efficiency: Using less energy to achieve the same outcome.

Feed-in Tariff: A guaranteed payment of a set amount per kilowatt hour of generated electricity, normally set by a government as an incentive to generate power from a specific energy source.

Geomechanical Modelling: Using computer code to predict how a body of rock will respond to an applied stress.

Geothermal Energy: Heat stored within the accessible portions of the Earth’s crust.

Geothermal Field: A set of boreholes typically drilled into a single geothermal reservoir and providing thermal energy to a single power plant.

Geothermal Gradient: The rate at which temperature increases with depth in the Earth, usually stated in units of °C/km.

Geothermal Reservoir: A porous and permeable body of rock containing recoverable thermal energy.

Geothermal Resource: An accumulation of geothermal energy that can be economically extracted to the surface.

Ground Source Heat Pump: A heat pump that explicitly uses the ground as a source and/or sink of thermal energy.

Heat Pump: A device that uses electrical energy to move heat from a cooler location to a warmer one.

Hot Sedimentary Aquifer: A naturally porous and permeable reservoir of hot water, typically shallower than 3 km and at a temperature up to about 150°C.

Inferred Resource: A quantity of economically recoverable geothermal energy estimated from indirect geological, geochemical and geophysical evidence, assumed but not verified as to its extent or capacity to be delivered. Definition from the Australian Geothermal Reporting Code (2010).

Isotope: A form of an element with the same number of protons but different number of neutrons as the most common and stable form of the element. Some isotopes are naturally radioactive and generate heat as they decay.

Joule: Unit of energy in the S.I. system.

12 Glossary


Levelised Cost of Electricity: The average cost of generating each unit of electrical energy over the lifetime of a project, including the full cost of construction and operation. Usually quoted as c/kWh or $/MWh.

Magmatic Intrusion: A body of molten rock (magma) that rises into the crust from below.

Magnetotellurics: A geophysical survey method based on measurements of the natural variations of magnetic and electric fields at the Earth’s surface.

Mantle: The section of Earth making up the bulk of its volume, lying between the core and the crust.

Megawatt: One million watts. Usually contracted to MWe for electrical power, or MWt for thermal power.

Organic Rankine Cycle: A thermodynamic cycle in which an organic working fluid is evaporated using heat from a primary source (eg geothermal energy), passed through a turbine (or other expander), and then re-condensed and recycled through the process.

Peak Demand: The maximum load that a power supply system must provide for, typically occurring for short times at regular or irregular intervals.

Permeability: The degree with which a rock can transmit water through its pores and cracks. Usually stated in units of millidarcies.

Porosity: The ratio of intergranular space to the total volume of a rock, typically filled with fluid.

Radioactive Decay: The spontaneous breakdown of an atomic nucleus, typically to a more stable one, during which energy and smaller particles are released.

Renewable Energy: Energy that is derived from natural processes that are replenished at a higher rate than they are consumed. This is the United Nations Sustainable Energy for All (SE4ALL) definition.

Seismicity: The frequency and size of earthquakes in a region.

Supercritical CO2: A phase of carbon dioxide at temperature and pressure conditions above its critical point. Supercritical CO2 can flow through a rock like a gas but has a density and thermal properties more like a liquid.

Thermal Conductivity: The degree to which a material can conduct heat. Usually stated in units of watts per metre kelvin..

Transmissivity: The degree to which a unit thickness of a saturated aquifer can transmit water under the influence of one unit of hydraulic gradient. Sometimes called ‘permeability thickness’ because it is equivalent to the integral of permeability over the thickness of the aquifer.

Watt: Unit of power in the S.I. system. One watt equals one joule per second.

Working Fluid: A fluid that moves thermal energy from one location to another, typically within a cyclic process.


Australian Renewable Energy Agency (2014). Looking Forward: Barriers, risks, and rewards of the Australian Geothermal Sector to 2020 and 2030. Commonwealth of Australia (Australian Renewable Energy Agency), Canberra, ACT. 114 pp. Accessed online at http://arena.gov.au/files/2014/07/ARENA-IGEG-main-report.pdf

Gehringer, M. and Loksha, V. (2013). Geothermal Handbook: Planning and Financing Power Generation. ESMAP Technical Report 002/12. The World Bank Group, Washington DC. 164 pp. Accessed online at https://www.esmap.org/Geothermal_Handbook

International Energy Agency (2011). Technology Roadmap—Geothermal Heat and Power. IEA Sustainable Energy Policy and Technology Directorate, Paris, France. 52 pp. Accessed online at http://www.iea.org/publications/freepublications/publication/Geothermal_Roadmap.pdf

13 Recommended reading


http://arena.gov.au/files/2014/07/ARENA-IGEG-main-report.pdf

http://arena.gov.au/files/2014/07/ARENA-IGEG-main-report.pdf

https://www.esmap.org/Geothermal_Handbook

https://www.esmap.org/Geothermal_Handbook

http://www.iea.org/publications/freepublications/publication/Geothermal_Roadmap.pdf



‘SWOT’ Analysis (Strengths, Weaknesses, Opportunities and Threats) gained popularity in the 1950s and 1960s as a business tool primarily to illuminate the possibilities open to an organisation within the limitations imposed by the environment in which it operates.

A SWOT analysis seeks to identify, in turn, positive and negative aspects of the subject’s internal characteristics (strengths and weaknesses) and external environment (opportunities and threats). The SWOT framework can also be applied to analyse an individual, a product, a sector, or any entity that can be defined by a unique set of attributes.

When applied well, a SWOT analysis can reveal competitive advantages, determine prospects for development, help a company or industry prepare for problems, and facilitate the development of contingency plans. An analysis is divided into four quadrants that capture the subject’s particular strengths and weaknesses and the opportunities and threats within the subject’s environment.

Strengths are current positive and tangible attributes that lie within the control of the subject. They include such things as valuable know-how, assets (physical, human, intangible), core capabilities, reputation and alliances.

Weaknesses are current negative attributes within the control of the subject. They include activities that the subject does poorly but could improve, competitive disadvantages, deficiencies in expertise or competence, a lack of assets (physical, human, intangible) or capabilities.

Opportunities are attributes that lie outside the control of the subject but which bode well for future success. They include such things as providing a potential solution to a pervasive problem, an advantageous competitive landscape, or a supportive policy environment.

Threats are external factors that pose a risk to future success. They include external events that put operations at risk, the rise of a competitor offering a new product or service, changing demographics or market demand, or risks for which contingency plans may be needed.

This appendix presents the outcomes from our SWOT analyses of four themes within the broad geothermal sector, and how the specific characteristics of the themes interact with the social, economic and policy frameworks in Victoria. The four themes are:

1. Power generation

2. Direct-use of low grade heat

3. Ground source heat pumps

4. Service industry base for Australia and the Asia-Pacific region

Each theme is represented on a different chart below.

14 Appendix – SWOT analyses


Strengths• Zero emissions, baseload generation.

• Small surface footprint.

• Local capability and experience within government, industry and the research community to rapidly develop a power project.

• Legislative and regulatory framework is already in place.

• Several prospects are already at drill-ready stage for licence holders.

• Rapid path to commercialisation given the right policy settings.

• Local expertise in low- temperature power generation.

Weaknesses• Slow development route to power generation

compared to wind or solar.

• Geological uncertainties remain for deep resources.

• Risk of inducing seismic events by circulating water through aquifers at a high rate.

• Geographically limited locations for development.

• Industry reliance on Australian advice and services designed for other commodities such as petroleum, which might be inappropriate for geothermal energy.

Opportunities• Urgent need for zero emissions power in Victoria to

offset one of the highest emissions footprints in the world.

• Established energy supply infrastructure in some of the most prospective areas.

• Current downturn in other earth resource industries has lessened competition for drilling rigs.

Threats• Overwhelming dominance of coal-fired power

generation.

• Existing geothermal legislation and policy prohibits new exploration projects.

• Access to groundwater is needed to recover geothermal energy to the surface, but groundwater resources are fully allocated in some prospective regions.

• Power demand is falling in Victoria.

• Moratorium on onshore gas exploration could techniques could impact geothermal exploration.

• Appetite of commercial capital markets is very low for investment in geothermal projects.

• Renewable energy targets are more quickly reached with intermittent generators (wind and solar).

• Lack of feed-in-tariff or other pricing mechanism for geothermal power to remove revenue risk and encourage private investment at an early project stage.

• No grant schemes to offset the cost of drilling and testing programs.

14.1 Power Generation


Strengths• Reasonably long record of use in Victoria since early

1990s (Portland, Rosedale, Werribee, Rye).

• Accessible, broadly distributed geothermal energy sources.

• Removes energy price and supply risks for heat consuming industries.

• One of the most awarded geothermal resorts in the world is already in Victoria.

Weaknesses• Low public awareness of the resource and its

benefits.

• Relatively high up-front capital cost for heat delivery systems.

• Seasonal demand curves for heat.

• Warm aquifers are poorly mapped at present.

• Drilling is always a risk until flow (and reinjection) is demonstrated.

Opportunities• Geothermal resorts contribute to and benefit from

growing domestic and international tourism.

• Possible new industries (aquaculture, year-round horticulture, hot springs) for the Latrobe Valley, Gippsland and Otway coast.

• Gas prices are rising.

Threats• Limited access to 100% allocated and/or depleted

aquifers.

• Competition for water with other users.

• Regulatory compliance can impact the economic viability of small-scale operations.

14.2 Direct-use of low grade heat


14.3 Ground source heat pumps

14.4 Service industry base for Australia and the Asia-Pacific region

Strengths• High coefficient of performance relative to air source

heat pumps.

• Proven technology in large established markets across Europe and North America

• Optimal climatic conditions in terms of balanced annual heating and cooling loads.

• Can leverage existing and new subsurface infrastructure (eg City Loop and Melbourne Metro Rail Project).

• Some demonstration sites already established.

Weaknesses• Current high capital costs due to small scale local

market.

• Currently long payback times versus reticulated gas heating or reverse cycle AC.

• Limited skilled local workforce for design and installation.

• No local manufacturers.

Opportunities• Gas supply under threat for large heating load.

• Large greenfields potential for shared geothermal heating and cooling in housing and industrial developments (eg west of Melbourne).

• Potential source of SRECs.

• Ability to offset peak power demand in load-growth town and city centres.

• Energy company collaboration and investment.

Threats• Strong growth in rooftop solar PV with battery storage

could reduce the drive for energy efficiency.

• Installers without internationally recognised accreditation could damage the image of the technology.

• No incentives through market instruments (eg not eligible for SRECs).

• Building codes don’t address GSHP.

Strengths• Local, relevant expertise in resource assessment,

energy research, geotechnical engineering and power conversion.

• Local expert SMEs.

• Strong local links to international geothermal sector.

• Global recognition and respect for Australian expertise in unconventional geothermal.

Weaknesses• Lack of local industry demand to support local

experts.

• No geothermal power generation in Victoria.

• Lack of local expertise in well design and drilling practice for HSA geothermal wells.

Opportunities• Local manufacturing base could be repurposed.

• Strong international respect for Australian manufacturing standards.

• Potential for rapid skilled jobs growth.

Threats• Under-commitment of financial, regulatory and

promotional resources by state government (cf RenewablesSA).

• Permanent loss of local expertise through attrition.


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