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Japan's nuclear crisis: An opportunity for geothermal energy?

March 24, 2011 |  1:10 pm

Japan is sitting on enough untapped geothermal power to replace all its planned nuclear stations over the next decade. But with plans to build 13 more nuclear power stations, it has yet to consider harnessing its estimated 23.5 gigawatts in geothermal potential -- other than to develop hot springs.

With the nuclear crisis in its Fukushima reactors, however, this may change. Geothermal energy has struggled in Asia, with limited government and funding support, but it is now likely to attract interest as investors rethink the outlook for nuclear power.

Straddled along the Pacific "Ring of Fire," an arc of seismic activity, Asia's geothermal reservoirs are among the world's largest. Indonesia alone holds about 40% of the world's total reserves, but less than 4% is being developed, leaving the sector wide open for growth.

Asia's leading, fast-growth economies have relied on nuclear power to feed their insatiable energy demands. About 112 nuclear power reactors run in six countries in Asia, and more than 264 are planned for construction, according to the London-based World Nuclear Assn.

As public scrutiny of the nuclear industry intensifies, Asian governments will likely come under pressure to reduce nuclear power's share in the energy mix. "The Japanese will be reviewing their nuclear capacity, and [so will] many other places in the world," said Jeffrey Higgs, managing director at Hong Kong-based asset management firm Environmental Investment Services Asia. "This will refocus attention on alternative energy. Others will begin to look at geothermal as an alternative, the safest, cleanest of all energy sources," Higgs said.

And that could benefit Japanese manufacturers more than most. Mitsubishi Corp., Toshiba Corp. and Fuji Electric supply nearly 70% of all steam turbines and power gear at geothermal plants worldwide.

Geothermal energy offers a steady source of power and, unlike solar or wind, is unaffected by unpredictable weather patterns. Once reserves are confirmed and a power plant built, the steam that fuels turbines at the plant is virtually free.

Japan ranks third behind the United States and Indonesia in geothermal potential, according to a Citigroup report. Heat within about six miles of the Earth's crust contains 50,000 times more energy than all the oil and natural gas resources in the world. That heat, once you tap into it, is free. But harnessing it is costly.

A geothermal project is like an oil or mining project. The size of a resource is unknown until drilling activity takes place. A 20-megawatt geothermal power plant requires an initial $7 million to assess, and then an additional $20 million to $40 million to drill. Until the resource proves out, the risk of losing that investment is high.

The five-to-seven-year gestation period from discovery to commercial operation presents another hurdle. Few funds are drawn to geothermal projects because of that long payback period. By comparison, a wind or solar farm can be up and running from scratch in 12 to 18 months. Geothermal "will need a clear government policy put in place, allowing for a clear understanding that [companies] can manufacture, build and operate in a country 10 years hence," Higgs said.

-- Leonora Walet and Tessa Dunlop / Reuters