Hot-rock industry stakes a claim

The figures, compiled by Geoscience Australia, were such a surprise to the office of the Minister for Resources, Martin Ferguson, that staff had them checked six times before releasing them.

"The potential of the geothermal industry in Australia is truly staggering … It provides clean baseload power and is potentially a very important contributor to Australia's energy mix in a carbon-constrained world," Mr Ferguson said.

Although its potential has been identified, the geothermal industry needs more funding to start large-scale production.

At the first conference of the industry - which begins in Melbourne today - the Australian Geothermal Energy Association will release modelling showing it could produce 5 per cent of all of Australia's energy by 2020.

That is likely to be a conservative estimate, the industry says, because the rate of research and production is growing quickly.

The research also shows geothermal energy has a great advantage over some other forms of renewable energy because it is able to produce baseload power, the type that can be produced 24 hours a day, seven days a week.

The association's chief executive, Susan Jeanes, said people should feel confident about the need to find power sources other than coal as the world struggles to tackle the challenge of climate change.

"Over the next few years people will see the solutions and they will be less concerned about how we get there [reducing greenhouse gas emissions]," Ms Jeanes said.

The cost of geothermal energy is likely to be expensive at first but would quickly drop by 2020, by which time it is projected to be the cheapest form of renewable energy.

Sites in every state have been identified as having the potential for geothermal power stations, but most of the existing work is taking place in South Australia.

Geothermal energy is created when water is pumped as far as five kilometres below the surface and heated by the dry hot rocks underground. The heat is then used to generate electricity.

The Federal Government is giving $50 million to the industry to help cover the cost of hiring the heavy drilling equipment needed to reach the layers of hot rock.

The geothermal industry is keen to be considered as the Federal Government draws up the rules covering its target of having 20 per cent of energy come from environmentally-renewable sources by 2020. Geothermal companies argue that some of the permits created by such a scheme need to be kept for later years so that they can use them.

Unlike other technologies being investigated to tackle climate change, geothermal energy has already been proved at the research level. But it is not ready for large-scale commercialisation. "The industry is evolving rapidly, but it is not capable of deploying any capacity," the association says.

"While it is established that there are resources at sufficiently high temperatures to generate electricity, it has not been demonstrated that these can be the basis of viable generation."