Hot rock companies frozen in green plan

Archived News, Posted on 06 Jun 2011

HERE'S an energy story with a particularly nasty twist: the only renewable technology with the ability to provide base-load power gets king-hit (inadvertently) by a decision from a pro-renewable-energy federal Labor government.

And this sector's revival would be possible only if the Greens get their way and the proposed carbon tax is somewhere north of $40 a tonne, which is not going to happen.

That, in a nutshell, is the sad predicament in which geothermal companies find themselves. Their share prices had been falling before the federal blow: the technology had its challenges and there was considerable investor scepticism about both the enormous cost and long lead times involved in making the so-called hot rock technology commercial.

But it was the decision by Kevin Rudd last year, in a post-Copenhagen funk, to shelve the emissions trading scheme that tore the heart and soul out of the geothermal companies. The utilities which were taking a punt on geothermal as one possibility of meeting their renewable energy targets suddenly went cold on the sector. Support evaporated.

After all, the industry had got up partially on the belief that Canberra would keep ratcheting up the renewable energy threshold. Indeed, Julia Gillard might as well have said "There will be no geothermal industry under the government I lead" just before the last election instead of that very vow in relation to a carbon tax. It would be funny if it wasn't so damned tragic.

No one could say with certainty that the technology of drilling down thousands of metres and heating water from underground rock would have proved economic. But if it had, geothermal offered the only potential source of renewable energy available to Australia with both zero emissions and base-load power: the capability of pumping out electricity 24/7 and 365 days a year. All the other renewables operate at the whim of the sun, the winds, the waves and the tides.

And we are told authoritatively that even a $30/tonne carbon tax will not make the technology viable, which means it would be a brave investor to take a punt on the sector at this time.

To be fair, the federal government has become aware of the problem. It commissioned a review of the geothermal sector and that is now with the Australian Centre for Renewable Energy. And, to be fair also to the closest of our close friends, the Greens have been exercising their minds on the subject with public discussions on geothermal and not a little hand-wringing on various websites. But some drastic measures, rather than words, are needed. In most cases, companies have not been able to take up their $7 million federal grants because they cannot meet the condition of providing matching funds.

The corporate carnage has been pretty awful. Taking a three-year high with Friday's close, Petratherm (PTR) shares have fallen from 92c to 10.5c. Panax Geothermal (PAX) is down from 21.8c in 2008 to 2.1c and is now pinning many of its hopes on Indonesian geothermal; Greenearth Energy (GER), once at 26.5c, now sits at 7.2c; Hot Rock (HRL) is down from 18.4c to 4.3c and working in Chile and Peru; the fall at Geodynamics (GDY) has been from $1.85 to 19.5c.

There's both despair and hope. Torrens Energy (TEY) has watched its shares go from 50c to 5.5c. This company had the great advantage of its geothermal potential in South Australia lying close to the power grid, but has put the dust cloths over those projects and is looking at other sectors for a new life.

On the other hand, Petratherm said it was now looking at technology to lower solar energy costs through integration with geothermal, while Green Rock (GRK) -- it closed at just 1.9c -- is pressing on with geothermal in the North Perth basin.

The final twist is that you would have done so much better punting on dirty old coal. While many resources stocks have been sliding, Metrocoal (MTE) has risen from 28c in early March to 63c on Friday. East Energy Resources (EER) was selling at under 20c in March and hit 65.5c a month later. Many of the coal stocks have come back with the market, but not so severely as in other resource sectors.

Pure Speculation: Robin Bromby
From: The Australian
June 06, 2011 12:00AM