Is this the answer to India's energy woes? - Views on News from Equitymaster

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Is this the answer to India's energy woes?

Mar 25, 2011

The earthquake and subsequent nuclear crisis in Japan has raised questions on the future of nuclear power in the world. Countries have awakened to the risks of nuclear plants, especially those built on high seismic zones. As a result, they are exploring alternate power sources. The obvious choices have been to look at gas and hydropower.

But there is one more source that could be explored. And that source is "geo-thermal" energy.

Geothermal energy refers to the power derived from the heat stored in the earth. The energy is derived from the rock and water that is heated by their contact with the molten matter (magma) deep in the core of the earth. This heat is extracted and used for heating or for generating electricity. The hot water or steam below the Earth's surface is used to run the turbines of a conventional power plant to generate electricity.

There are several advantages of using geothermal energy to generate electricity. It does not create pollution. The costs of running the plant are much lower as it does not require fuel. Consequently, the operating costs are much lower.

But the biggest problem is finding a suitable location which has the amount of energy that can generate power. A geothermal project is like an oil or mining project. The size of the resources are not known till one starts drilling. The cost of developing the project is high. The cost of setting up a geothermal project could go up to US$ 3.5 m for each mega-watt (MW) of electricity to be produced. This compared to the US$ 1.2 m for setting up a coal energy plant seems astronomically high. However, one should remember that coal resources are limited and expensive. And eventually countries will have to look at alternate energy sources. And geothermal energy would be explored.

Asia geothermal reservoirs are amongst the highest in the world. Countries like Indonesia hold almost 40% of the total reservoir of the world. But only 4% of this is being developed currently. This should indicate the huge opportunity that can arise in the geothermal space. So how does India feature in this?

As per a research study done by IIT, India has the geothermal capacity to produce 10,600 MW of electricity. This is a whopping five times more than the combined power being produced from other non-conventional sources like wind, solar, etc. But there is not one geothermal power plant that is operational in the country. One may ask as to why this is the case. The biggest reason is the easy availability of coal in the country.

India has the fifth largest reserves of coal in the world (197 bn tonnes of deposits) and is the third largest producer of coal in the world. No wonder that 67% of India's energy requirements are met from coal. As a result, alternate sources like geothermal energy were not given that much importance till now. However, in recent times, coal has come under a lot of criticism due to the environmental problems associated with it. As a result, India has started to concentrate more towards the non-conventional resources for generating energy.

With the new policies, the Government has been incentivizing the non-conventional energy sectors. These would help to create a brighter future for India's geothermal energy sector. And if this were to happen, then it would create a totally new investment opportunity for companies and investors alike.

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1 Responses to "Is this the answer to India's energy woes?"

Dean Mendes

Mar 27, 2011

Yes, geo thermal is another green alternative. However there is another source which could be even better...its we already have the hydrogen car....the advantages of this source are as follows:
1) abundantly available in our atmosphere
2) in the combustion process hydrogen combines with oxygen and the bi product is H2O (water vapor). So it is a green alternative.

For hydrogen to be viable however it would need to be easily available; which would mean setup of hydrogen fuel pumps (which could hopefully replace the petrol/diesel pumps of today). Hydrogen could be the future and could offer some great investment opportunities...

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