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Hot Rock - Steady Progress Towards a New Source of Renewable Energy
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News this month that Australian geothermal hot rock specialist Geodynamics (GDYMF.PK) has attracted India's Tata Power as a new cornerstone investor is further evidence of the encouraging progress being made by Geodynamics in its quest to develop a new resource of low-cost, renewable, zero-emission power.
Tata Power, India's largest private utility, is a flagship company of the giant Tata group. It is to acquire an 11.4% stake in Geodynamics, and will take one seat on the board of directors.
Geodynamics is a world leader in the development of renewable energy generation from hot fractured rocks deep under the ground. Its geothermal tenements in central Australia have been classified as the hottest accessible non-volcanic region in the world.
After several years of work, the company is now on the verge of completing Stage One of its three-stage business plan. It has drilled two wells, Habanero 1 and Habanero 3, and has successfully developed an underground heat exchanger. In March it completed an open circulation test between the two wells.
All that remains for Stage One is the completion of a six-week closed-loop circulation test, followed by independent data validation. If all goes to plan, this will be finalized by the end of next month.
Next comes the construction of a 1MW pilot power plant which will provide electricity to a nearby town from 2009, followed by a 50MW plant - to be completed by 2011 - which will be connected to the national grid.
With the acquisition of a second drilling rig, and an active drilling program, Geodynamics believes it will have as many as ten 50MW plants in operation by 2015, generating zero-emissions power at a price that will be competitive with power generated from coal, oil or gas.
Geodynamics also expects eventually to be able to apply its technology elsewhere in Australia and it has announced that it plans to use its new relationship with Tata Power to investigate geothermal projects around the world.
For most investors Geodynamics will remain very much a speculative buy. It may start generating electricity next year, but it is still some years away from generating much income. In fact, its long-term plans will require more injections of large amounts of capital.
Yet this is undeniably an exciting story. Hot fractured rock technology has the potential - eventually - to deliver zero-emission power on a giant scale, and at a price that could be substantially cheaper than other forms of renewable energy, and competitive with mainstream power generation.
Disclosure: no positions.
September 15th, 2008
* Thank you to Our Fourpence Worth for including this post in the Finance Fiesta blog carnival.
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