Energy generation is the largest business on Earth. It is bigger than all the "telco's" in the world combined.

On the basis of renewable energy incentives established in Australia, Hot Fractured Rock (HFR) geothermal energy is considered to be competitive with wind and hydro power generated energy. The cost of electricity generated by HFR geothermal power plants is independent of future fossil fuel costs. HFR geothermal energy has the added advantage of being available 24 hours a day and has the capacity to "load follow".

It is not easy to compare worldwide electricity costs (capital costs and operating costs) of traditional power generators (coal, gas and uranium) and the main forms of renewable energy. The fossil fuel and nuclear power industries are mature technologies and have received many hidden benefits and subsidies from governments. Examples are:

	Infrastructure subsidies such as roads, rail networks and harbour facilities for the development of coal mines and coal transport;
	Special concessions such as favourable depreciation and amortization rates for large fossil fuel based projects.
	The nuclear power industry does not fully account for the cost of the long term management and disposal of radioactive spent fuel or the costs of rehabilitation after the "life" of a nuclear power plant.

All these hidden costs generally are not accounted for in the cost of electricity generated. In addition, renewable energy generation "has large upfront capital expenditure" but this includes all its future "fuel" requirements. In contrast, fossil fuel electricity generators have to purchase their fuel on an ongoing basis. A new coal fired power plant does not have to buy all the required coal for its 30 year life upfront, however, renewable energy plants, such as wind, solar, hydropower and HFR, require all their energy and infrastructure upfront for the life of the project. Moreover, the electricity cost of a fossil fuel power plant is dependent on the cost of its future fuel (think of California and the recent increases in the costs of electricity relating to the increase in gas prices), whilst a renewable energy plant is independent of the future fuel costs.

All the above issues relate to the "cost of capital" and this makes a direct cost comparison (apples with apples) difficult.

A comparison of the costs of various types of renewable energy shows that geothermal and HFR geothermal energy are cost competitive with wind and hydro power generation. The ranges in costs per kWh shown in the table relate to the size and scope of the project. Often, the larger the project the lower the cost per unit of electricity generated.

Total Electricity Costs (A$/MWh)

Coal 35 Natural Gas 40 Hydro 60 Biomass 60 Nuclear 70 (Not full life cycle costs) Wind 80 Photovoltaic 150 Geothermal 20-40 HFR Geothermal 40-60 (depending on scale)

The total cost of conventional geothermal energy generation is quite well known as about 9000 MW of electricity capacity is installed on a worldwide basis. It ranges in costs from 2 - 4 US cents per kWh which is competitive with fossil fuels. There are as yet no operating HFR geothermal power plants in the world. This is expected to change soon as there are several projects in an advanced stage of development.

The main capital costs of development in HFR geothermal power plants is in deep drilling, in the development of the underground heat exchanger, and in the building of the power plant. Underground costs make up about 50% of the total capital required for a small-scale plant. Underground costs decrease to 20% or less of the total capital for larger scale developments (100's MWe). It is because of these high upfront costs, combined with the fact that tests cannot be carried out on a laboratory scale (after all, one has to drill at least to a depth of 4km), that progress has been slow. However, with various renewable incentives in place this in now rapidly changing.

The cost of developing a demonstration HFR geothermal energy power plant with an output of 10 - 15 MWe has been estimated at A$45 to 50 million for a stand alone system (= US$25 - 26 million). This equates to A$3 million to A$5 million per megawatt net output. An independently reviewed economic model for a demonstration plant at a Cooper Basin site indicates that the total cost of electricity generation (capital and operating costs) equals 6.18 cents/kWh for a power plant with an installed capacity of 13MWe. These capital costs compare well with large-scale (10 - 100 MWe) wind farm technology which costs around A$5 million per megawatt installed. For example, the Albany Wind Farm in Western Australia (an excellent site for wind power) has an installed capacity of 21.6 MWe developed at a capital cost of A$45 million. This project has a capacity factor of 43% (this is high for wind but the wind does not always blow) and this translates to A$4.8 million capital requirements per megawatt output. This shows that the capital cost estimate for a demonstration HFR geothermal power plant compare well with the cost of one of the best wind power projects in Australia.

The overall objective of Geodynamics is to build much larger HFR geothermal power plants than the demonstration plant. By scaling up HFR geothermal power plant to 100 MWe or more, considerable savings will be achieved, particularly in drilling cost (shared wells between reservoirs, lower cost per metre drilled) as well as by the installation of larger power stations, all benefiting from economies of scale. This is because a scale up will have the benefit of an increase in flow per production well. Flow rate is one of the fundamental economic drivers. For example the electricity production per well drilled is 4.33MWe for the demonstration plant, but increase to 7.61MWe per well for a 300MWe scale-up, an increase of more than 75%. Independent expert analysis of scaling up to 300MWe indicates a total generation cost of $40/MWh is achievable

The operating cost in HFR geothermal power plants are low and mainly relate to the costs of pumping water through an underground heat exchanger and the maintenance of an above ground geothermal power plant. These costs are estimated at 1 - 2 cents per kWh depending on scale. The operating cost of conventional geothermal power plants are well established and these range in the order of 0.5 - 1 cents per kWh.

The Cooper Basin has been selected as the favoured site for development since our tenements there are the hottest known rocks in the world at economic drilling depths outside of volcanic centres. Because of previous oil and gas exploration in this region, Geodynamics directly benefits from $15 million to $25 million of "open file" exploration results in the form of well data, temperature measurements, seismic and gravity surveys.