Top 5 Reasons Why Geothermal Power is Nowhere in Canada

Canada has no commercial geothermal power plants, despite having abundant potential and, ironically, Canadian energy companies running geothermal power plants around the world.

Canada’s west coast forms part of the Pacific Ring of Fire, a giant horseshoe of active volcanoes and earthquake zones stretching from New Zealand all the way around Alaska to the bottom of South America. The geology putting coastal cities at risk also makes the area great for developing geothermal resources.

Ring of Fire countries New Zealand, Indonesia, the Philippines, the United States and Mexico all have commercial geothermal plants, but not Canada. A groundbreaking 2010 study of Canada’s geothermal potential found the best locations were in British Columbia, Alberta and Saskatchewan, but even Ontario could produce geothermal power if someone dug deep enough.

To develop a geothermal power plant, a firm needs to drill a well deep into the ground to extract hot water to generate steam to turn an electrical turbine. The water is then recycled through another well back underground. The most important factors are the temperature of the extracted water and the flow rate – the hotter the water and the more of it, the better.

Under the right conditions, geothermal energy is generally cheaper than all other forms of electricity generation over the entire life span of a power plant, according to a 2009 report from investment bank Credit Suisse.

As solar and wind energy development has taken off in Canada in the last decade, geothermal – an energy that doesn’t depend on the weather – has not. DeSmog Canada asked Canadian geothermal companies and experts to find out why?

1. Blessed with cheap resources

Canada’s best geothermal plays, where you have to dig the least distance and the water is hottest, are in British Columbia and the Yukon. Both regions are also blessed with cheap and clean hydropower from long-running generating stations. B.C.’s power rate has been traditionally so low, new entrants face too steep a hurdle to compete with existing capacity.

“BC Hydro for 20-30 years has had three to five cents power and that is not something geothermal could have competed against,” Craig Dunn, chief geologist at Borealis GeoPower, a Calgary-based geothermal company, told Desmog Canada.

BC Hydro is trying to moved ahead with plans to develop a new massive hydro station, the Site C dam on the Peace River, which hits a cost point where geothermal is “at par or better,” says Dunn.

In its presentation to the joint review panel on Site C, the non-profit industry group, the Canadian Geothermal Energy Association (CanGEA), said geothermal would be cheaper, create more jobs and be more environmentally friendly than Site C. The argument does not appear to have persuaded BC Hydro, causing the industry to be in at a standstill in B.C.

“If there is no viable new place to sell power in the province, then no one is going to go out and locate those commercially viable wells because they cost millions of dollars,” John Carson, chief executive officer of Alterra Power Corp., told DeSmog Canada. Alterra is a renewable energy company based in Vancouver with run-of-the-river hydro projects in B.C. and geothermal power plants in Iceland and Nevada.

BC Hydro was contacted to comment on this story but did not reply to our request in time for publication.

In Saskatchewan, an area equally blessed with resources of a different kind — fossil fuels — the province hasn’t needed to look for alternatives until recently, Kirsten Marcia of Deep Earth Energy Production Corp. (DEEP) said. DEEP is a Saskatchewan-based company exploring the possibility of developing a geothermal power plant in southeast Saskatchewan.

“I am feeling very optimistic SaskPower will consider a power-purchase agreement when the time is right,” Marcia said.

2. Upfront cost and risk is high

Geothermal may be competitive over the 30-year lifespan of a plant, but it is risky, comes with high upfront capital costs and a slow payoff at the end, making investors wary.

The exploratory drilling for geothermal is as complex and uncertain as oil and gas drilling, but the resource at the end doesn’t return the level of energy density as a fossil fuel play, Jacek Majorowicz, a University of Alberta professor of physics, said.

“We can’t completely define the resource until we are drilling, so the project has front-end risk with long-term return,” Dunn, of Borealis, said. “You have to have a good geologist and a better banker.”

3. Limited government interest and support

As the fossil fuel industry gets $25 billion in subsidies each year and other alternatives have started to get support, the geothermal industry has been virtually frozen out of government support in developing the industry, CanGEA says. The organization formed in 2007 and is small, but recently crowd-funded over $50,000 to hire a policy advisor to work on removing the barriers to developing the industry.

Oil and gas regions are fertile ground for geothermal operations because a lot of the risky and uncertain exploratory drilling is already done by the fossil fuel industry. Marcia with DEEP says Saskatchewan is open to geothermal exploration of its oil and gas regions, but B.C. is not, Dunn says.

“I can’t get a geothermal lease in an oil and gas development in B.C,” says Dunn.

When the Ontario released its feed-in tariff program for alternative energy, allowing producers to sell their energy back into the grid, geothermal was left off the list.

4. Chicken or egg problem

With no commercial geothermal power plant, arguably Canada has no geothermal power plant industry, making their voice easily dismissed when decision makers are developing energy plans.

“We are going to have a lot easier time improving policy and achieving regulatory change when we are relevant, and one of the fastest ways to be relevant is to have active working projects,” Dunn says.

“You can’t do anything until you have a few pilot projects and you learn from them; it can’t all be theoretical,” says Majorowicz, who has published a number of papers on Canada’s geothermal potential, including co-authoring a recent study demonstrating geothermal is competitive with cheap natural gas for heating systems in Alberta.

5. No price on carbon

As a relatively clean energy source releasing a limited amount of greenhouse gases, developing geothermal energy resources would make more economic sense if Canada increased the cost to dump carbon dioxide into the atmosphere.

“We do all of our economic modeling with no price on carbon, because it has been so unstable for so long – most finance guys we deal with won’t accept it,” Dunn says.

With a carbon price, geothermal “goes from being profitable to being very profitable,” Dunn says.

With a viable carbon tax, oil and gas companies looking for alternatives to drilling for fossil fuels would quickly turn to geothermal. “It would be a saviour” because they have the necessary drilling experience to get the job done, Majorowicz says.