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Geothermal electricity: Alberta's new energy ace card

Friday, April 25, 2014

TODD HIRSCH

Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

When most of us think of geothermal energy, we think of the small-scale heat pump systems used to heat a building or a few homes. But large-scale geothermal projects tap heat much deeper in the Earth's crust to produce electricity, a technique that works well in places such as Iceland and the Philippines.

Alberta's geology is not like Iceland's and geothermal energy resources here are, at best, marginal. But the province has a long history of taking marginal resources and making them world leaders.

John Palliser, the geographer and explorer, reported back to the British Parliament in the 1860s that the land here was completely unsuitable for agriculture. Oil was discovered in the 1940s only after a frustrating series of dry holes. And Alberta's bitumen is probably as good a definition as any of a "marginal" resource. But in all three cases - through perseverance and determination - Alberta became a world leader.

Could geothermal electricity be Alberta's next ace card? There are three reasons why developing large-scale geothermal technology could be a fantastic opportunity for the province.

The first is that we already have considerable expertise in drilling through kilometres of rock to get at something valuable. The engineering capabilities in Alberta's oil and gas industry are easily transferable to the technical challenges in deep geothermal projects. In fact, some geothermal systems very much resemble the steam-assisted gravity drainage oil sands designs that were developed and perfected in Alberta.

The second is that it would help diversify Alberta's economy. Since the 1970s, the province has fretted over being too dependent on its petroleum industry. But greater diversity within the energy sector is just as beneficial as diversifying away from the energy sector. This is already happening. Conventional crude in the 1970s has been joined by natural gas, oil sands, shale oil and a variety of renewable energy sources, such as wind. Large-scale geothermal expertise in an area with only marginal geothermal resources could be the next jewel in the energy crown that would lead to greater diversity and less reliance on hydrocarbons.

The third reason has to do with the risk to Alberta's reputation. Companies understand risk to reputation very well and do everything they can to protect and promote their name brand. Alberta should be doing the same. Our energy sector is the target of a growing amount of criticism, much of it undeserved. The province could gain tremendous respect and attention internationally if it became a world leader in clean, renewable energy technology.

Despite these advantages, geothermal power is rarely spoken of in Alberta - something that the Canadian Geothermal Energy Association (CanGEA) is trying to fix. There are a couple of hurdles preventing geothermal taking off in a big way.

The main stumbling block is cost. At the moment, the province's cheap and plentiful carbon deposits make coal-fired electricity by far the most cost effective. Viewed only through this lens, it's no contest between coal and geothermal.

But today's cost advantage is not the correct lens through which to view the issue - the lens should be where Alberta's economy wants to be in a decade or two. Coal will still be cheaper than geothermal in 2024, but the rest of the world won't be clamouring for more carbon-fired electricity. It will, however, be seeking the best technologies in clean and renewable energy. As well as selling our hydrocarbons to the rest of the world, we'd have the chance to sell something far more powerful: technological know-how, developed and perfected in Alberta.

Another barrier is financial. Geothermal projects in Alberta have a hard time attracting investment capital, not because the projects don't work, but because the regulatory environment doesn't yet recognize subsurface rights for geothermal. Without these, companies have few assets they can lever to attract investors. That can be solved, however, with some regulatory improvements. There are plenty of countries around the world that recognize subsurface geothermal rights. Best practices could easily be borrowed and applied in Alberta.

Diversifying Alberta's economy can come by taking what we already know (i.e., drilling through rock) to provide the world with what it needs (i.e., clean energy). The fact that our geothermal resources are marginal might just present the optimal challenge. Never tell an Albertan something can't be done.