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Geothermal Power Heats Up in Germany


By Tobias Lill
BusinessWeek
June 3, 2008


With oil prices on the rise, investment in this alternative energy plant outside
Munich may pay off sooner than expected

In a small town outside of Munich, a major investment in a pioneering new type
of geothermal energy looks like it may pay off sooner than expected. With oil
prices on the rise, Unterhaching's plant could be a model for others worldwide.
The geothermal energy plant in Unterhaching, Bavaria, is Germany's biggest and
most modern. Beginning in mid-June—one year later than planned—the plant will
begin supplying power from deep within the Earth's crust to the German energy network.

The plant is only the second in the world to make use of the so-called Kalina
system, which uses a combination of water and ammonia to maximize the amount of
power generated by the massive turbines. "This is the most effective way to get
electricity out of geothermal energy," says Reinhard Galbas, the plant's
technical manager.

As oil prices worldwide soar, experts say geothermal energy's time has come—even
in places like Germany, which is hardly known for volcanic hot springs or
spurting geysers. As a result, the small town's efforts are being closely
watched. The plant is capable of generating 3.4 megawatts of electricity—or
enough to power 10,000 homes, the company claims. That's more than any other
German geothermal plant. "Unterhaching's doing pioneering work," says Benjamin
Richter, whose firm Rödel und Partner is handling the business aspects of the plant.

Geothermal energy has one big advantage over other forms of renewables. Since it
uses the heat of the Earth's deep crust to heat water for power, it is available
around the clock—unlike solar and wind energy. The Unterhaching plant's heart is
the pump house. Here, a thousand liters of 120 degree (248 degrees F) water is
pumped up from more than 3,350 meters (11,000 feet) below the surface of the
Earth per minute. There's no waste: a second pump sends the water straight back
where it came from, to prevent the super-heated underground reservoir from emptying out.

The system wasn't cheap. when the project was planned, drilling the holes
Unterhaching needed cost €1,000 per meter. Because of sharply rising steel
prices and other factors, Unterhaching paid €1,800 ($2,790) per meter for its
drill holes, almost double what they originally planned. In the end, the two
holes cost close to €20 million, and had to be completed by American firms with
other demands on their resources. "Geothermal drilling competes with oil and
natural gas drilling," explains Rolf Katzenbach, an expert in geothermal energy
at Darmstadt Technical University. Katzenbach says Germany needs to develop its
own drilling capacity to make itself truly energy-independent.

Unterhaching's planners say the environmental and economic benefits of the new
plant will be worth the price. First is the non-electrical benefits: Generating
electricity leaves surplus heat, which can be used to warm local communities.
Two thousand households in Unterhaching have been using heat generated from the
plant for a year now. Just keeping those houses off the heating grid has kept
more than 7,000 tons of carbon dioxide out of the atmosphere.

The benefits go beyond the environment. With oil prices high, switching from oil
heating to centrally-produced geothermal heat pays off quickly. "For many
customers who are heating their home with oil, switching over pays off within
one to two years," says Erwin Knapek, a former mayor of Unterhaching who began
the effort to build a geothermal plant in Unterhaching in the 1990s.

Knappek has been trying to make the case for geothermal energy for decades.
Sharply rising oil prices have made his job a lot easier. In the 1990s, when he
first floated the idea of a geothermal plant in the town, oil cost less than $20
a barrel. At those prices, a multi-million dollar geothermal plant made no
sense. Knappek had to fight hard with sceptical local citizens and with the
Bavarian economic ministry alike to keep his vision alive. Even in 2004, when
drilling began, oil cost a bargain $40 per barrel.

Today oil costs more than triple that. Knappek suddenly looks like a visionary,
and the €80 million Unterhaching invested in the geothermal plant doesn't look
like not so much money after all. "Those costs should be amortized in less than
20 years," Knappek says. If oil prices rise any more, the plant could pay itself
off in much less time than that.

So far, geothermal power has supplied just one percent of Germany's renewable
energy. But "that could change with higher oil prices," Katzenbach says. Twenty
years from now, Germany could be producing enough energy from geothermal sources
to power the equivalent of two to four nuclear power plants. Already, Germany
has an estimated 150 geothermal plants in the works, 90 of which are located in
Bavaria. Richter, the energy expert responsible for the Unterhaching plant's
business plan, says that could mean €6 billion worth of investment in Bavaria
alone over the next 10 years.

 

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