CLEANTECH : Geothermal gold

Is New Zealand making the most of its long history and expertise in geothermal power generation?
Already ahead in the renewable energy game, we have global reputation in geothermal and the opportunities to capitalise on that can be measured in billions. But it’s already becoming competitive space and grabbing our share may require more concerted effort.
One local company already leveraging its geothermal development expertise offshore is Mighty River Power. It now has multimillion-dollar investments in projects in the US and Chile through its international partner US-based Geo­Global Energy – of which Mighty River Power is the cornerstone and, currently, sole investor.
CEO Doug Heffernan says the formula it’s pursuing is that of informed capital provider – and he believes the rapidly growing offshore demand for such expertise will quickly outstrip Mighty River Power’s present investment capacity.
“The global opportunity is much much bigger than our existing business model could fund. It’s as simple as that. There is billions worth of opportunity. We have currently committed US$250 million (through GGE) but could see that fund needing more capital quite quickly in order to grow with the opportunities that come to it.”
The advantage of geothermal is that it offers reliable base-load energy, and New Zealand is rare in having such long history of large-scale production, says Heffernan.
“It’s particular aspect of cleantech in which New Zealand is one of very few countries that has competence because we’ve been in it for so long. Our reputation is very high globally but could be improved. Certainly the recent flurry of activity in geothermal – lot of it stuff MRP is doing – has raised prominence in global sense and that is an opportunity to leverage off.”
It’s not like we haven’t been down this track before. New Zealand’s history for exporting geothermal expertise dates back several decades, notes James Muir, clean energy finance manager for Sinclair Knight Merz – an engineering firm with well-established expertise in the geothermal space.
“New Zealand was helping the Philippines set up their geothermal industry 30 years ago and we do very similar work around the world now – so globally we are definitely on par with the Icelandics and the US West Coast.”
There are limited number of countries that have both geothermal resource and existing expertise. Of those, the US base is bit scattered, while the Philippines and Indonesia are mainly focused on their own economies, suggests Heffernan. Iceland has, however, already spotted the economic opportunity and is putting concerted effort into establishing itself as an international centre of geothermal excellence.
It has, suggests Heffernan, been “bit more global” in the way it’s approached the market than New Zealand has to date. But it’s not alone. Countries like Germany are competing in what is starting to become crowded space, says Muir.
“Geothermal concessions attract bids from around the world so you have to make very strong play to get those.”
Both Muir and Heffernan see value in taking more “joined-up” approach to going after such business. Linking up the value chain from exploration to development and project management expertise would make NZ Inc much more effective, says Heffernan.
“If you look at country like Chile trying to start geothermal industry – how do you get people trained, create workforce that can sustain an industry in Chile? How do they get rules, regulation, environmental standards up to where they can be world class. The expertise that we have in our Crown Research Institutes, our universities – all can help that country accelerate its efforts and help New Zealand companies that are participating get over the line faster.”
NZ Inc was investing in this space 20 years ago says Muir and could do it again.
“There are some entities investing overseas, but not at the scale they could be if there was concerted push from public and private sector together. There are great opportunities out there. We’re very keen about getting involved – beyond just providing services.”
Exactly how, is the next question – but taking equity stakes in offshore projects leveraging off local expertise is certainly one option. If we were to develop an NZ Inc strategy, we already have the expertise and resources to deliver, says Muir.
“I guess what other governments do around the world is support their geothermal industry more proactively in their bid to be international players. We do quite lot of work with Germany and the issue for them is that they are really keen to get into the renewable space and can see downstream benefits.
“If we took similar approach in New Zealand, the benefits would probably be much more immediate.”
A lot of what New Zealand has done in the geothermal space is contract for service or bodies for hire – whether through universities, Crown Research Institutes or consulting firms, says Heffernan.
“There hasn’t been any leveraging of capital against that intellectual talent. And geothermal and renewable energy is capital intensive. It’s about finding some way you can get multiplier value effect for New Zealand by deploying capital against that talent. If we’re just going to hire bodies, that’s not sustainable proposition in the long run.”

• Sinclair Knight Merz is running lunchtime seminars on cleantech opportunities and how to finance them in Wellington, October 8, and Auckland, October 11.

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