The competition for access to geothermal resources is currently heating up in the Taupō-Rotorua region. In the second of a three-article series, Damian Stone explores the risks and rewards associated with geothermal development.
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Geothermal power, and the associated opportunities, present a golden opportunity - especially for landowners.
However, building any power station is not without risks.
From an environmental perspective, sustainability of the resource is a key issue. As the science is relatively new, it is not yet clear what impact extracting hot geothermal fluids from kilometres underground and injecting cooler injectate elsewhere will have, long-term, on geothermal reservoir heat and stability.
Subsidence is also a common concern. This is often a key focus in seeking the necessary resource consents to construct and operate a geothermal power station.
Knowing what you are doing is also important. Not many people can say they have built a geothermal power station, so it pays to get help from someone who has. Most recent geothermal power stations have been built through joint ventures between the landowners and electricity generators with the skills and experience.
Financial risks also need to be considered. From the landowner's perspective, the key considerations are often the level of any royalty earned from use of the geothermal fluid and, in some cases, the level of equity investment in the power station itself.
Timing is also important. The number of organisations in New Zealand, and worldwide, with the necessary experience to build a geothermal power station is limited. Many of them are fully committed with existing projects and there is a risk development of a particular geothermal resource could be stalled or delayed because of a lack of available expertise.
Not all fields can sustain multiple power stations. Although fields are still being discovered - including the recent exciting discovery under Lake Rotomahana - a geothermal field is essentially a limited resource that ought to be utilised efficiently and effectively. Landowners may need to consider working together to maximise the resource within a field, rather than taking a piecemeal approach to its development.
However, with risk comes reward. With New Zealand's growing power consumption, electricity will always be an essential commodity. Generating and selling electricity is big business, with commensurate financial benefits. Further, New Zealand has a goal to have 90 per cent renewable energy by 2025.
Geothermal energy will play a key role in New Zealand's ability to reach that target and, as most of New Zealand's geothermal generation will be centred in the Taupō-Rotorua region, the local economy will reap those rewards.
- Damian Stone is a partner at Kahui Legal, a law firm that provides legal advice on geothermal and commercial issues to businesses, individuals and iwi in the Rotorua/Taupō region.
Geothermal power struggle: What it means for us
http://www.rotoruadailypost.co.nz/business/news/geothermal-power-struggle-what-it-means-for-us/3942053/