Lots of Potential, Still No Geothermal

Issue 4 and Volume 119.

With the international geothermal energy industry experiencing near record growth in 2014, it is curious that not a single megawatt of geothermal power is being produced in Canada.

In fact, Canada is nearly the only developed country on the Pacific Rim not producing geothermal power. This is despite British Columbia possessing world-class resources that have been identified by CanGEA’s Internationally Peer Reviewed Geothermal Favourability Maps and Resource Estimates. Indeed, this viability should not come as a surprise since Western Canada is dotted with over 150 known hot springs, which are surface manifestations of geothermal activity.

While the more conventional resources located in BC represent a missed opportunity for clean base load geothermal power generation, so too do Hot Sedimentary Aquifers (HSA). HSA occur across Canada with the largest stemming from BC and extending east to Manitoba.

As Canada neglects these resources, countries such as Germany have aggressively tapped into HSA resources. In addition to power, Germany uses geothermal energy as a source of heat for various commercial, industrial and residential uses, including district and greenhouse heating.

A geothermal power project in the town of Kirchwerdach recently began drawing 90°C water from an HSA 3.5 km underground. Heat from the well is used in a greenhouse, which just produced its first harvest: 3,300 tonnes of tomatoes and 1,100 tonnes of peppers. This also produced 100 jobs, and the project will also provide heat and power to the town.

Alberta could learn something from Germany, as close to 90 percent of Alberta’s power generation comes from the combustion of fossil fuels.

This reliance contributes to Alberta’s distinction as the largest source of GHG emissions in Canada. Aside from an estimated $300 million in annual healthcare costs from the burning of coal calculated by the Pembina Institute, there are also political costs that result from this.

This raises questions as to why Canada is so woefully behind in terms of utilizing its geothermal resources. First, it is hard to develop geothermal projects without a geothermal permitting scheme. Aside from BC, no jurisdiction in Canada has a formal system for acquiring geothermal leases. As anyone in business knows, investors seek certainty. Having a legally recognized title to one’s resource is indispensible in attracting investment.

As mentioned, BC is the only province in Canada with a geothermal permitting system, the Geothermal Resources Act (GRA). However, developers have found the GRA to be poorly crafted, and even more ineffective in the manner that it is implemented.

Instead of simplifying and providing certainty to geothermal developers, the GRA has actually been found to do the opposite. Rather than introduce a single-window regulator, the GRA actually creates a whole new level of “red-tape,” while failing to replace existing hurdles. For instance, in order to drill, a geothermal developer must seek approval from traditional oil and gas drilling regulators in addition to GRA regulators. For many small- to medium-sized enterprises, this results in delays, which consumes valuable time and operating capital.

However permitting is not the only roadblock for geothermal developers. Geothermal projects have an extremely front-end loaded risk profile, highlighted by the fact that drilling alone can comprise up to 30 percent of a geothermal project’s overall cost. This makes capital at the early stages of geothermal energy development indispensible.

Many provinces have crafted standing offer or feed-in tariff type programs that have been molded to the needs of renewable energy projects such as wind and solar. While suitable to these technologies, geothermal energy projects would benefit more from support mechanisms that help them get over the early stages of project development. Therefore, much more useful would be assistance granted upfront in the form of a Net Present Value grant that aides in overcoming drilling and exploration costs.

Governments have also failed to value the benefit of baseload geothermal power to the grid, which is more akin to nuclear and natural gas power plants in terms of reliability. As more intermittent sources of energy such as solar and wind are installed, grids risk becoming unstable especially in terms of serving peak demand. This is a problem that has been experienced in both Germany and California. California has addressed the benefit of base load renewable power by mandating that utilities add the cost of integrating intermittent forms of energy when awarding power purchase agreements.

Despite all this, there is a silver lining. Given Canada’s excellent resources, with a little determination on the part of the government, the country can easily become a world leader in clean and reliable geothermal energy.