Ladies and gentlemen thank you for this opportunity to speak to you about investment in the geothermal sector.
As Australia begins its transition to a low emissions economy, no single clean energy technology can be expected to dominate.
Rather, our energy supply will clearly rely on a mix of technologies—and geothermal technology will be one of them.
At the end of last year, the Bureau of Resources and Energy Economics (BREE) released its Energy Projections for 2034-2035.
BREE forecast that, in twenty-five years, geothermal could be providing four per cent of Australia’s total electricity generation.
That would make it equivalent to all the electricity provided by hydro in Australia by 2035.
Geothermal has the potential to offer significant benefits.
It has the prospect of providing the “holy grail” of power generation—clean and plentiful baseload power.
The challenges of geothermal
As I said last year at the AGEA Annual Conference, the industry is faced with a catch-22:
Investors are reluctant to invest in geothermal until it is proven, and yet it cannot be proven until investors are willing to invest.
Since the global financial crisis, financial markets have become more risk adverse, making it a difficult for new and innovative clean energy technologies to locate financing.
These difficulties have been mirrored in the share price fluctuations that many in the geothermal industry have experienced over the last three years.
At present, the geothermal industry is composed of a number of small companies with exploration licenses over areas that have been identified as prospective.
Although we saw a 'proof of concept' demonstration at Innamincka in South Australia in 2009, the industry still faces investment barriers in the form of high upfront costs involved in drilling and identifying the geothermal resource.
To overcome this challenge, the Australian Government in partnership with the geothermal industry must build confidence in the geothermal sector to investors.
This means sharing some of the early-stage risks with industry and setting a flexible policy framework that encourages private sector investment.
Role for Government
The Australian Government has already allocated around $200 million of funding to support geothermal and with the introduction of the Clean Energy Future package is providing an unprecedented level of support to attract investment in clean energy more generally.
I recognise that 2011 was a very challenging year for many in the geothermal sector but, with a suite of new policies coming into force, I am optimistic that geothermal can turn the corner in 2012.
Front and centre to this shift in momentum will be the introduction of a carbon price from the 1 July to provide greater certainty for business to invest in new forms of clean energy.
Also taking effect from July this year will be an immediate tax deduction for exploration of geothermal energy sources.
And the 20 per cent by 2020 Renewable Energy Target will continue to drive investment in renewable energy, including geothermal.
In addition to these measures, the Australian Renewable Energy Agency will also take effect from 1 July this year.
ARENA will draw together a variety of renewable energy programs and manage $3.2 billion in funding for renewable energy from the middle of this year.
It will be an independent statutory body run by a board with business, investment and commercial expertise.
Around $1.7 billion of ARENA’s funding is currently uncommitted, and will be available to assist renewable energy.
The operation of ARENA will be guided by the knowledge and experiences that have been gained by various bodies over the past few years, in particular the Australian Centre for Renewable Energy (ACRE).
ACRE commissioned several detailed reports on the geothermal sector in Australia in the past year and a half, with three of these being released in the last six months.
The lessons from these reports, and the ACRE Board’s experience in working with the geothermal sector, will be communicated to the new ARENA Board.
I want to thank ACRE for the contribution it has made – and continues to make – to the development of renewable energy technology in Australia.
A practical example of this in operation now is the Emerging Renewables Program.
The $126.6 million Emerging Renewables Program, which will become part of ARENA in July, is the brainchild of ACRE and I am confident that the flexibility and innovation in its design will lead to the success of many renewable energy projects and measures.
Importantly for the geothermal sector, the Emerging Renewables Program has a specific focus on geothermal with a minimum of a third of its funding earmarked for geothermal projects.
Several geothermal companies have already submitted expressions of interest, and the Government encourages more companies to apply for funding.
Today I am pleased to announce that, under the Emerging Renewables Program, the Australian Government has awarded a $1.9 million grant to National ICT Australia Ltd's $5 million project to provide enhanced data for targeted geothermal exploration.
The importance of National ICT Australia Ltd's initiative is in improving our understanding of the pre-competitive geothermal resource in Australia.
Before we unlock this immense resource we need to understand the properties that make the best geothermal resource so we can target the best sites for exploration.National ICT Australia Ltd's project will help to define the best potential sites, reducing the costs and risks associated with exploration and helping the geothermal industry to take the next step forward.
The importance of this initiative is underscored by the support it has received from several universities, key Australian industry players and the South Australian Government.
National ICT Australia Ltd's data fusion initiative will take existing geothermal data from a wide variety of sources and apply modern statistical machine learning and data fusion methods.
The result will be software that improves the process of exploration, discovery and characterisation of geothermal targets for the benefit of industry.
I congratulate National ICT Australia Ltd on obtaining the grant and wish it every success in developing its software.
This is a first step towards the pre-competitive data that I know the geothermal sector has been looking for.
Of course this is not the only opportunity the geothermal sector has to partner with the Australian Government.
In 2013/14 the Government is also establishing the new commercially-oriented $10 billion Clean Energy Finance Corporation to be located in Sydney as was announced yesterday.
The Clean Energy Finance Corporation will identify projects and remove barriers that would otherwise prevent the financing of large-scale renewable energy projects.
The Government will do its best to accelerate development, but we remain mindful that taxpayers’ dollars need to be spent prudently, and Governments must accordingly manage its risk carefully.
Given the long lead times, investors need to be committed to this technology, as the Government is, for the longer term.
Conclusion
The Australian Government will continue to support the transition to a lower emissions electricity generation sector through two market mechanisms: the RET and a price on carbon.
At the same time we will continue, through ARENA, to support the research, development and commercialisation of emerging renewable technologies such as geothermal.
As today’s announcements highlight the Australian Government is further assisting the geothermal sector to better understand and target the natural resources on offer here in Australia.
Provided we make the necessary technological breakthroughs and overcome current cost barriers, technologies like geothermal have the potential to be a significant source of clean baseload energy.
While I recognise there has been a tightening of capital markets globally, now is a good time to invest in geothermal technology.
We are entering what I hope will be a new era for geothermal investment in Australia.
The Government encourages you to closely study the progress that is being made, and to take full advantage of the supportive Australian environment.