Investor Presentaiton
RISK ANALYSIS
Spa*ark Energy_13
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Resource risk. Geothermal generators have a wide range of outputs: from
sub-megawatts to several tens of megawatts per well. Almost certainly
Lemont has sufficient extractable energy to produce electricity, but prior
to drill-testing, the extractable rate of energy is difficult to predict.
In the unlikely event there is insufficient energy to profitably produce
electricity, there will almost certainly be more than enough to develop
thermal hot springs -something Tasmania sadly lacks -plus other direct
applications such as greenhouses, etc.
Drilling risk. In a global study covering 2,613 geothermal boreholes, 78%
were judged to be 'successful'; i.e., they produced electricity, and the
average success of exploration holes was close to 70% (IFC, 2013; Sanyal &
Morrow, 2012). Given the well-defined target at Lemont, there is a low
risk of an unsuccessful confirming test hole.
Design/build risk. Plant construction, including heat-exchangers, turbines,
generators, piping, etc. will use standard off-the-shelf equipment. On-
going expansion is likely with incremental improvements. This is regarded
as a very low risk activity.
Project Risk
High
Moderate
Low
Pre-Survey
Exploration
Test Drilling
F/S Planning
Drilling
Bankability
Construction
Cost
Start-up
Operation &
Maintenance
Risk
0
Risk-cost curve for geothermal energy (ESMAP, 2012).
Lemont is at the stage of major de-risking by test drilling.
100%
50%
Cumulative Cost
Revenue risk. Australia has a history of inconsistent incentives for renewable energy. The current 'LGCs' (previously worth nearly as much
as the NEM spot price) are due to be phased out; however, it seems likely some kind of carbon abatement incentive will replace them. Also,
synchronous generators such as geothermal are expected to earn increasingly larger premiums as the need for firming supply and FCAS
increases with increasing market penetration by VRGS such as wind and pv_solar.
Further on price, State-owned Hydro Tasmania has been, until recently, the sole significant operator and price setter in Tasmania, but is
now finding increasing competition from VRGs. A proposed second interconnector to Victoria, the 1500MW Marinus Link, has been
declared a priority project and this will allow Tasmania to realise its goal of becoming Australia's main supplier of reliable, renewable
energy. Thus demand for Lemont's power is regarded as a low risk, with price a moderate risk in the short-term, but a long-term low risk.
Lemont is being developed as a conventional, hydrothermal play; however, even conventional projects sometimes use hydraulic
stimulation to improve productivity, and it is worth noting that whilst the Tasmanian government has announced a moratorium on fracking,
it specifically excludes geothermal.View entire presentation