Government sets aside $60m to explore ‘deep geothermal’; why former Mercury boss was cautious

Thursday, 14 November 2024

Former Mercury boss Vince Hawksworth described the economics as challenging in February, suggesting NZ might have easier options.

The Government will set aside $60 million to explore the opportunity to tap geothermal energy from hot rocks deep underground, closer to the Earth’s layer of molten magma, Resources Minister Shane Jones has announced.

Conventional geothermal wells were drilled to a maximum depth of about 3.5 kilometres, but scientists believed that by drilling to a depth of 6km more energy would be available, Jones said.

So-called supercritical or “deep well” geothermal has the potential to generate near limitless power and has long generated interest internationally, particularly in counties with few conventional renewable sources of electricity.

Challenges include the very high cost of drilling deep wells, given that costs rise exponentially the deeper they go.

Former Mercury Energy chief executive Vince Hawksworth told Parliament’s Transport and Infrastructure select committee in February that it had been doing some work on the technology but that it would be too strong to say it was “exploring” it.

Announcement comes after Shane Jones says he hopes the fast-track consenting regime can be most permissive in the OECD.

“We have been building relationships offshore with some start-up companies who are drilling much deeper.”

GNS was looking at doing a pilot well then, he noted.

“The question for us though, is ‘is it possible to commercialise that in New Zealand in a way that is socially responsible and takes into account the more volcanic nature of the central North Island?’,” Hawksworth said.

“In our discussions with people offshore, they think there is opportunity, but it's going to take some time to work through some of those questions.”

Hawksworth described the economics of deep-well geothermal as “still challenging”.

“If you think about the US, they have massive oil gas infrastructure that drives drilling costs down and they also have much higher electricity prices.

“We still have a lot of resources in New Zealand that are easily accessible, whether that's solar, wind, or geothermal. There's still a lot of opportunity in what we might call the more traditional geothermal space.”

Jones said the $60 million would be “ring-fenced from the Regional Infrastructure Fund”.

$5m would be drawn down for work on the detailed design and cost to drill the first of three exploratory deep wells in the Taupō volcanic zone,“ he said.

The initiative would be led by GNS Science and the Ministry of Business, Innovation and Employment, he said.

BusinessNZ advocacy director Catherine Beard said if the technology panned out it could be a “game-changer for New Zealand in terms of providing abundant energy that is climate-friendly and reliable”.

Energy Resources Aotearoa, which represents businesses with involvement in the oil and gas industry, described it in similar terms.

“New Zealand has been a leader in geothermal technology for decades and will now join the US and Iceland in advancing supercritical geothermal technology and the valuable intellectual property that goes with it,” he said.