Geothermal energy will play a big part in any attempt to adjust our economy into a low-emission model to meet obligations. Brian White, geothermal commentator, East Harbour Energy.
OVER ITS MORE than 60 years’ history of research and development, the geothermal industry has been through some difficult phases, the exit from which has been marked by the implementation of niche projects. These projects are now starting suggesting that some developers have seen the weight of evidence tipping towards appropriate growth conditions.
Drilling is an indicator of activity, with drilling required both to maintain capacity and as a prerequisite for development. Geothermal drilling for both purposes picked up in 2016 and is expected to increase further in the coming year.
Eastland Generation with Kawerau A8D Ahu Whenua Trust have commenced the 25 MW Te Ahi O Maui geothermal project on the Kawerau geothermal field. They have tested the electricity market, considered thermal retirements, and have found suppressed capital costs for new developments. Eastland believed its project had the lowest marginal cost of any project and took first mover advantage.
Over this past year, a successful drilling programme was undertaken, and civil works are now being completed ready for the EPC contractor (Ormat) to mobilise early 2017 ready for commercial operation in 2018.
In Northland, Top Energy has proceeded with its Ngawha Expansion Project which will eventually consist of two 25 MW stages. This niche opportunity is being driven by transmission losses and pricing issues. Top Energy has the necessary consents, has purchased land or reached agreement with land owners and will commence earthworks in the coming year ready for drilling in 2018 with a view to generation in 2020.
Top Energy will provide funding for Nga Waiariki pools development but has also looked at supply of steam for industrial facilities that could be attracted to the area, and has purchased land for this possibility. Thus, its project takes into account wider energy interests as well as general electricity supply issues into the Northland region.
Contact Energy believes its Tauhara II consents are already banked as they are linked to other Tauhara I consents which have been used. It has looked for heat markets, thinking as a wider energy provider, but this has proved a hard area to break into, despite attractive pricing.
Geothermal heat pumps
At a different scale and temperature, geothermal heat pumps continue to be selected for the Christchurch CBD rebuild, including some elements of district heating.
It is the combination of shallow predictable aquifer, ready consents and clean slate coupled with some small EECA incentives that swing geothermal heat pumps as the preferred space conditioning means for larger commercial premises. Our national heat pump industry is maturing, so a question for it will be “where to after Christchurch?”
A few domestic applications are being developed for luxury housing but real growth will happen when national developers recognise the attractiveness of this option for large commercial buildings. These can tap both shallow groundwater or our harbours and rivers, and a significant portion of large “new builds” should find this economic.
Companies retained staff, but natural attrition is being used to reduce numbers where services are not critical. Developer staff are undertaking normal maintenance activities, and investigating efficiency measures and long-term security of assets. Companies retain readiness for development.
Hiatus periods are often a time for mergers and acquisitions or new directions. We are seeing our electricity companies taking broader energy views.
In the geothermal space, Contact has a long-term interest in direct heat use. Mercury also has in-house skills that can be adapted to heat as well as electricity, and several of its recent industry partners (including Tauhara North No 2 Trust and Ngati Tuwharetoa Geothermal Assets) are actively looking for heat projects to host and/or supply.
In terms of acquisitions, one of the more interesting has been the purchase of MB Century operations by Tuaropaki Trust (better known for its assets at Mokai). MB Century has roots in Crown drilling programmes, owning modern drilling rigs, but has wider interests including an experienced design team, plant maintainers, measurements skills, environmental services and laboratories, heavy manufacturing and construction services while operating internationally. Tuaropaki is building a strong vertically integrated team which it can use in a variety of scenarios.
Our consultants continue with international work, but have capacity for more. Construction efforts have been frustrated so rethinking will be needed.
The government’s signing of the Paris Climate Change Agreement marks a major turning point for New Zealand.
Now, government money (actually ours) is on the line and will either have to pay for other countries’ emissions reductions – or our own – with forestry continuing an important role. There is real opportunity for business growth and emissions reductions agendas to come together in the stimulation of low emissions energy options.
It is understood that the refreshed NZEECS will include the obvious low hanging fruit of energy efficiency coupled with emphasis on the emissions reductions we are now committed to. EECA will be socialising the growing wave of electric vehicles, which our low emission renewable generation can energise.
I have now left the Geothermal Association, but believe the various renewable industry associations can be valuable partners with government in terms of a two-way flow of information. For a long time officials have given a polite “no” to many industry initiatives, or to financially supporting these despite calls on the association’s limited resources for advice or information. The ‘user pays’ principle breaks down when government is the user – this needs to change.
Various people are developing a geothermal research road map, and a range of useful programmes has continued and is bearing fruit.
My opinion is that key decision makers are not properly aware of existing development options, so there is great value in just spreading the known information closer to the work front and to developers – particularly to building services or heat industries for geothermal applications – and ‘yes’ that costs money too. The coming year is likely to see a socialisation of a “Geoheat Strategy” that will assist this goal.
New geothermal regulations are required – but are still coming.
With the regulatory reforms over the past couple of years, current geothermal regulations (dated 1961) are held up as an example of archaic and orphaned regulation desperately needing reform. In practice, the industry is highly self-regulated and safety-conscious so that geothermal sits in the middle of a long prioritised list of possible regulations. The industry itself may need to advance regulation ahead of government attention.
The coming year is an election year. We expect that energy will be highlighted as an enabler for our economy with many low emission, sustainable and commercially viable options available. Geothermal energy will play a role in that.