Hot rocks rock!

Australia can have zero net greenhouse emissions within ten years. The technology is available, the renewable energy resources are available and the conversion to a low carbon emissions regime will bring an increase in wealth for the whole country. All that is required is the political will and a movement away from orthodox economic thinking which directs through price rather than investment value.

First the energy sources. At different places in Australia hot rocks occur about 4km below the earth's surface. Exploratory oil drilling has exposed numerous places where these rocks occur at relatively shallow depths. The heat-retentive properties of hot rocks makes them suitable as the basis for geothermal power plants, and the cracks in the rocks enable us to use water to extract the energy. The town of Innamincka, for example, will have a geothermal power plant operating by Christmas 2008, providing the township with energy from the first hot rock wells drilled in an area near the Cooper basin gas fields.

Just how much energy is there in these hot rocks and how expensive is it to extract the energy? The area around Innamincka contains 4,000km3 of hot granite at a temperature of approximately 250C. The rock is fractured and contains hot water under pressure. To get the energy into a usable form and to cool the rocks requires the drilling of extraction and injection holes. That is, cold water is pumped down one hole and it comes up hot from another. The heat is then extracted and turned into electricity. In the process the water cools before once again being injected into the injection holes (perhaps after being pre-heated with a solar thermal surface facility).

Each cubic metre of rock contains about 150 kilowatt hours of energy, of which we can extract approximately 100 kilowatt hours as electricity. Australia consumes the total energy of 15km3 of granite each year. As there are at least 4,000km3 of granite available in the Innamincka hot rock field there is enough energy in this one area alone to supply Australia for 266 years.

The next question is how much does it cost? At the moment the largest expense is incurred drilling the holes but this will come down as more experience is gained. The main cost of drilling comes from the interest charge on the capital to buy drills and pipes. It is estimated that to drill the holes and build the power stations required for the nation's energy requirements it would cost a maximum of $600 billion. In reality, it is likely to be lot less than this with economies of scale and further experience. This capital cost equates to approximately $30,000 for every man woman and child. Spread over ten years it equals $3,000 per person per year or about four cents per kilowatt hour.

Ignoring the capital costs, the ongoing cost of running a geothermal power station is about one cent per kilowatt hour. This is at least less than half the cost of running fossil fuel power stations. As a geothermal power plant can be designed to run for at least 100 years the long term economic benefit from switching to geothermal sources is considerable.

To get $60 billion a year we need to increase the cost of energy by 4 cents per kilowatt hour. Can we afford to add an extra 4 cents per kilowatt hour to the price of electricity? Yes, if we give the 4 cents back to the population but require them to invest it in building the infrastructure to produce renewable energy. In the long term funds invested in renewables will return a lot more than the original outlay, so the real cost to the purchaser of energy is at worst the same as the cost of energy without the 4 cent increase and at best a considerable gain in long term wealth.

But won't adding 4 cents to every kilowatt hour increase inflation? It will but it will only be inflation of the money tagged for investment to save emissions. That is, let us tag the 4 cents and call it Energy Rewards. Energy Rewards will be negotiable and their price will reflect the fact that there is too much money for renewables. Thus inflation is restricted to Energy Rewards not to the rest of the financial system.

To tap into a new 15km3 section of rock will require about 700 holes each year. Since each hole takes two months to drill, it will require in the vicinity of 100 drill rigs - a quantity that is well within the capacity of industry to produce.

Solar thermal can be complementary to geothermal as solar thermal can pre-heat the cooled water before it is injected back into the holes. Each set of 700 holes will cover an area of about 70km2 which, if covered in solar thermal collectors, has the potential to add a considerable amount of energy and make the resource last longer.

Admittedly, Innamincka is a long way from where the energy is needed. However, with DC high voltage power lines, losses are only about 7 per cent to most places in Australia.

The same set of arguments can be made for solar thermal energy. The capital and running costs of producing solar thermal energy are about the same as geothermal energy. The land area required to produce Australia's needs is estimated at just 10,000km2, a small expanse considering Australia would have at least 1,000,000km2 of suitable area.

So there is clearly enough energy available in Australia's renewable energy sources to cover all our needs. The question is how to organise the economics so that the costs are minimised. The solution to this is to increase the price of energy but to give it back to the purchasers as tagged money and require them to invest in renewables. The person can then either sell the tagged money that they receive or invest it in renewable energy sources. Thus the price increase is effectively removed by the value of the tagged money as an investment.

The system will work because the running costs of renewable energy plants is less than the cost of fossil fuel. The system is transferrable to other countries and we can either export extra energy or we can export the technology and the systems. Either way Australia will be better off in an economic sense and at the same time we will stop our green house emissions.

The Innamincka field has been used as an illustration but it is only one of many ways to invest in renewable or energy saving technologies. There is already a thriving investment market for technologies to reduce greenhouse gas emissions and any of these solutions can be targets for our tagged money.

All we have to do is set a target, set the price increase required to give the investment needed and then let the market for renewable energy choose the least cost method of providing the energy.

This is guaranteed to work, could start tomorrow, will not put a cost burden on the economy and needs no regulation as the rules are built into the infrastructure trading system and are based on contract law. That is, people who say they have a technology to reduce emissions must deliver if they accept money from people who purchase that infrastructure.