GEOTHERMAL ENERGY

Mr KENYON (Newland) (14:24): Can the Premier update the house on the significance of the geothermal steam venting conducted last week by Panax Geothermal Ltd in the Otway Basin?

The Hon. M.D. RANN (Ramsay—Premier, Minister for Economic Development, Minister for Social Inclusion, Minister for the Arts, Minister for Sustainability and Climate Change) (14:24): I would like to recognise the member for Newland's passion for the mining industry—in this case it is mining hot water—which in recent days has been recognised nationally. I think people would be aware of my passion for geothermal renewable energy. In fact, when I was in Penola last week I was able to inform those who attended—and it is a shame that the local member was unable to be there—that I visited my first geothermal power plant 47 years ago.

I want to recognise in the house today a very distinguished visitor from New Zealand, the Right Honourable Darren Hughes MP, who, of course, has a very significant interest in renewable energy, in tackling climate change and, indeed, in geothermal energy, given that New Zealand is a leader in that area, starting many years ago at Wairakei, which is near Orakei Korako, which is not far from Lake Taupo near Huka Falls.

Last Thursday 18 May, I travelled to South Australia's Otway Basin to witness the successful steam venting of Panax Geothermal Limited's Salamander 1 well. This well is part of the Panax Penola project, which is currently the most advanced hot sedimentary aquifer project in Australia.

The Penola project steam release event was part of a series of flow tests being completed on the Salamander well. These flow tests are being conducted to clean the well bore and evaluate the flow potential of the aquifer. Proving flow rate is an essential part of determining the viability of geothermal projects. Completion of this test indicates further progress of the Penola project.

The Penola project is within an area along the Limestone Coast that is estimated to represent one of the nation's most significant geothermal resources. It targets a hot sedimentary aquifer that is within sandstones approximately 3,500 metres below the surface. This type of geothermal project relies on heat that is stored in water in an existing reservoir and thus enables relatively fast development using commercially proven technology.

The drilling and production testing of the Penola project has been moving at a rapid pace. The project was launched on 5 March 2010, during the election campaign, and as of 18 May the Salamander 1 well has been drilled to 4,025 metres and the second flow test has now been completed. Due to the type of stone that this project is drilling, the process is benefiting from long-term expertise of the petroleum industry, which is accustomed to similar conditions.

Panax aims to ultimately generate an estimated 60 megawatts of emissions-free, baseload electricity from this project. The company has further estimated that the potential of their total geothermal exploration licences in the Otway Basin could be more than 1,500 megawatts of electricity. To put this into perspective, South Australia's peak electricity demand is approximately 3,490 megawatts.

In addition to the quality of its geothermal resource and ability to make rapid progress, the Penola project will also benefit from its proximity to existing transmission infrastructure. This has been one of the problems: we all want geothermal energy to be part of our baseload generation, but one of the problems that is hampering development, even though 94 per cent of the development in Australia is occurring in South Australia, is that, obviously, proximity to upgraded transmission lines remains an issue.

That is the advantage of the Penola project, that while many remote areas of our state offer world-class renewable resources—such as the wind resource of our Eyre Peninsula, which is the focus of the government-commissioned Green Grid Study—tapping those resources is a challenge because of their distance from the national electricity grid. The fact that the Penola project is located within a few kilometres of the major transmission grid will greatly assist the process of delivering its geothermal power.

A recent report completed by the World Wildlife Fund and the Australian Geothermal Energy Association outlined some of the potential long-term benefits of geothermal developments. The report estimates that an Australian geothermal industry capable of generating 2,200 megawatts of power would create a projected 3,800 full-time equivalent jobs. It also maintains that by 2050 geothermal energy could cut around 60 million tonnes of carbon dioxide per annum, which is the equivalent of more than 25 per cent of Australia's current emissions from electricity generation. The potential benefits of emissions-free base load energy, along with jobs creation, highlight why the geothermal industry offers such significant hope for the future.

There are now three deep geothermal projects in South Australia, each seeking to evaluate and demonstrate the commercial potential of geothermal energy. Geodynamics has concluded proof of concept at its hot fractured rock resource in the Cooper Basin. Later this year Petratherm plans to drill its second well at Paralana, near Arkaroola, in the northern Flinders Ranges. As I say, we are delighted that 94 per cent of the development, worth many hundreds of millions of dollars, is occurring in this state.