Oil report

Australia geothermal energy sector sees tax wins

SYDNEY, May 5 (Reuters) - Australia’s geothermal energy industry expects to get a boost from proposed changes to the country’s tax laws that will allow the sector to write-off exploration costs.

The changes, which were unveiled on Sunday, will make geothermal energy explorers eligible for a A$1.1 billion ($1 billion) resource exploration tax rebate package from July 1 next year.

“This decision will go a long way to helping Australia’s emerging geothermal energy industry play a major role in the transition to a low emission energy supply system,” said Brad Page, chief executive of the Electricity Supply Association of Australia.

The organisation supports the development of geothermal power as it has the potential to provide a new source of cheap, emissions-free baseload electricity generation in Australia.

Other emerging green energy sources such as wind and solar lack the technology to supply baseload power sought by electricity generators as they try to meet the country’s target of having 20 percent of its energy generated from renewable sources from 2020.

In Australia, a handful of companies hope to use sufficient “hot rock” resources that can generate energy by pumping cold water onto hot rocks deep beneath the surface and returning heated water to the surface to drive steam turbines.

The technology is yet to be proven on a commercial scale in Australia, making investors reluctant to fund development, said Susan Jeanes, chief executive of the Australian Geothermal Energy Association.

Jeanes said making geothermal explorers eligible for the tax rebate was a step in the right in direction but the delay in its introduction until July next year would slow development.

Geothermal energy has the potential to supply 1600 to 2400 megawatts of electricity by 2020 while the national electricity market, excluding Western Australia, is expected to require at least 5,000 megawatts of new energy over the next decade.

Investor reaction to the tax exploration incentives being applied to the geothermal sector has been lukewarm due to uncertainty over the detail.

Shares in Geoydnamics Ltd GDY.AX, one of the more advanced developers of the technology in Australia, have fallen nearly 7 percent since the tax review was unveiled on Sunday, to trade at 55 cents on Wednesday.

($1 = A$1.09)

Reporting by Bruce Hextall; Editing by Ed Davies