Six years ago a small Maori trust in the central North Island faced a big decision. Either sit back as passive landlords and collect the rent on the land while a power company tapped its geothermal riches or take a risk and take an equity stake in what is the country's fastest growing electricity source.
Tauhara North No 2 Trust chose what it knew would be the tougher path - but one which it says is already paying dividends. The trust - held by about 800 owners who affiliate to Ngati Tahu - borrowed more than $100 million to take a 25 per cent stake in the $430 million Nga Awa Pura geothermal station, in partnership with state owned enterprise Mighty River Power.
"We were the land owners and knew the resource was there. It was a matter of understanding its true value and wanting to do something ourselves and participate in the venture instead of just leasing the land," said the trust's chief executive, Aroha Campbell.
The station was commissioned early this year and the investment is on track to deliver gross revenue of $20 million a year to the trust, she says.
"The key for the trust is providing a balance between our economic investment which ultimately we want to end up with jobs for our owners and beneficiaries - we want to maintain a balance."
The trust is set to take a further 10 per cent of Nga Awa Purua and has the option of taking an equity stake in an even bigger Mighty River project, Ngatamariki.
"We have been there and we understand what the risks are."
At Mokai a 113MW power station is 75 per cent owned by the Tuaropaki Trust, the rest owned by Mighty River.
Further development is under investigation.
Further north, on the shores of Lake Rotoiti, Maori land owners Taheke 8c Incorporated of Ngati Pikiao have partnered with Contact Energy and exploratory drilling has begun.
Maori have tapped the geothermal resources of the North Island for centuries, first for cooking and warmth, then tourism and now power. And right now energy from the earth is the most cost-effective way of generating it.
From the 1950s to the 1970s it was hydro - massive public works schemes were built on rivers and canals.
Huge dams were built for the ultimate in green energy. For the next two decades, cheap and plentiful Maui shone, providing peaking and then baseload generation for the next two decades before wind became viable around the turn of the century.
For the past 50 years geothermal was chugging in the background and largely under the radar.
But with all the easy hydro sources tapped, gas prices up sharply and the best wind sites built on or consented, the focus over the past five years has been on new geothermal plants exploiting fields and technology New Zealand helped pioneer at Wairakei.
Contact Energy and Mighty River have been at the forefront of the geothermal renaissance.
Mighty River's development general manager Mark Trigg says when the company began its life in 1998 with predominantly hydro assets on the Waikato River, it determined that strategically, it needed to diversify its fuel base and embarked on a programme of geothermal development.
It was not until the 2000s and the realisation that Maui gas was coming to an end if not physically, then contractually, that the playing field was levelled for other fuel sources.
"In the past few years the fossil fuels tax impost has made geothermal even more attractive as is the case for all other renewables. The advantage over other renewables in that geothermal is baseload, much more manageable and easier to quantify and justify economically," Trigg says.
Geothermal projects are clustered around the Taupo area, and in contrast to South Island hydro projects are close to population centres and near the national grid which is being upgraded.
Latest data from the industry group, the Geothermal Association, shows the the most recent capacity additions have lifted the contribution of geothermal electricity from around 6 per cent of generation (in terms of gigawatt-hours) in 2004 to current levels of around 10 per cent.
Projected development curves based on announced projects now suggest geothermal energy could be generating 20 per cent of New Zealand's electricity possibly as early as 2020.
Power stations have been developed on geothermal fields at Wairakei, Kawerau, Ohaaki, Rotokawa, Ngawha and Mokai. Community-owned Ngawha is at the stage of being able to supply 70 per cent of the Far North's electricity demand, the association says. And the geothermal is not limited to electricity generation.
The latest technology is geothermal heat pumps. These are like the air-source heat pumps available from specialists and local hardware stores, but exchange heat with the ground or groundwater rather than air.
Mighty River Power has invested more than $1 billion that it has made over the past five years in geothermal generation. New capacity has resulted in a 400 per cent increase in geothermal output since 2007, was a major contributor and driver of the 22 per cent increase in the company's earnings to $233.6 million for the second half of last year and has underpinned two announcements on a lift in earnings guidance since.
Enthusiasm, expertise and the availability of capital to invest has encouraged the company overseas. Global demand for geothermal is also outstripping the comparatively low demand for electricity in New Zealand.
Mighty River has so far deployed about half of US$250 million capital committed through international partner GeoGlobal Energy (GGE) to projects in California, Chile, and into Bavaria in Germany.
Trigg says the company has a genuine competitive advantage on a global scale; the same couldn't be said for wind, hydro or gas. "Around 0.3 per cent of global generation is fragmented and therefore what we bring is technical expertise and the business development expertise of our partners and, most importantly, the ability to apply risk capital.
"Going offshore provides a very strategic diversification or our growth. From a Mighty River Power business perspective the fact demand growth is only around 2 per cent means it pretty much limits the rate of new generation development that will be able to be achieved domestically and that's on the assumption you just get your market share of growth," he says.
In New Zealand generators face a big variable - the price they receive - but in most other countries there are long-term power price agreements with retailers and, in a carbon conscious world, subsidies and other incentives from governments.
"That eliminates a significant risk you have in New Zealand."
Trigg warns that easy geothermal is almost at an end. Beyond the next "tier one" projects, Contact's Te Mihi and Tauhara and Mighty River's Ngatamariki, developments will be tougher.
"Once you move beyond those you probably get to a stage where it's project by project - there's not a clear fuel source that is superior to all fuel classes. That's about the time when the wind projects that are currently being consented will come into play as the best economically viable."
Contact's general manager of renewable development James Kilty says his company's focus is definitely in New Zealand. "I see five to six years of heavy lifting here in New Zealand and that's where our priorities lie."
"There's a lot of claim-staking around the world on geothermal, but in terms of actual projects a lot of the development has been in our back yard."
Geothermal projects commissioned in the past decade or under development:
Mighty River Power
The company is active in three geothermal fields - at Rotokawa, Mokai and Kawerau - and significant potential exists for further development within the Taupo volcanic zone
Kawerau: Off-take agreement with Norske Skog Tasman Paper, 100MW, cost $200 million
Mokai: 25 per cent stake in 113MW station, cost $310m
Rotokawa: JV with Tauhara North No. 2 Trust, 35MW, $100m
Nga Awa Pura: JV with Tauhara, 132MW, $430m
Ngatamariki: Being built, JV with Tauhara, initially 82MW, $466m
Contact Energy - currently generating 225MW
Te Mihi: Expands Wairakei field, 166MW, $750 million
Tauhara: No construction date, 225MW, up to $1 billion
Taheke: early phase of JV with Taheke 8c Incorporated
In 2008 completed upgrade of Ngawha to 25MW, $77 million
Grant Bradley is the Herald's energy reporter