Every time there is a spike in the cost of energy such as the ’73 crisis and the ’79/80 oil price spike — and then again in Ëœ07/08 — alternative energy sources get a renewal of interest. This time, reaction to the high oil price has been further supported by widespread anxiety about the future of nuclear power, particularly in geologically active areas such as the Pacific ring of fire. Japan, for example, is battling to control, never mind save (they will never operate again), the six boiling water reactors at Fukushima 1 with a combined power of 4.7 GWe. In addition, Japan was planning to build 13 more reactors, plans that must now be in severe doubt as large parts of the country could, potentially, suffer similar geological activity to last month’s earthquake and tsunami. But that very geologic instability has a flip side: Japan is sitting on an estimated 23.5 GW of geothermal power potential. Electricity and heating potential that even in the event of an earthquake would present zero ecological or human health hazard, but which (like nuclear) has a high capital upfront cost and therefore struggles without some form of government guarantees.
Perversely, while many countries in Asia have invested heavily in nuclear power, the region is better placed than almost anywhere to make use of geothermal power for the reasons stated above. Asia runs about 112 nuclear power reactors in six countries and has more than 264 planned for construction, according to the World Nuclear Association. Although many of those will be in China, a number are in Indonesia, also home to 40 percent of the world’s total geothermal reserves even though less than 4 percent is being developed. Encouragingly, Indonesia has plans to develop these resources and triple production this decade, but the challenge is finance. Up-front costs are high, much like oil and gas exploration. In the US, a Reuters article estimates, one megawatt of geothermal energy requires an investment of about $3.5 million, versus $1.2 million for coal energy. The time from planning to production is 5-7 years because of drilling and environmental planning approval geothermal sites are often in forests or national parks. By comparison, a wind or solar farm can be up and running from scratch in 12-18 months – except in Nevada.
Consequently, private funds have been thin on the ground, and investors like a quicker payback. Plagued by overly optimistic expectations last year, project delays and cost overruns, geothermal companies listed on the Toronto Stock Exchange, which is home to a large contingent of the world’s publicly listed geothermal businesses, have lost 20 30 percent of their market value in the last year. Some high profile investment vehicles in the space such as Magma have tended to invest in existing businesses rather than attempt Greenfield developments.