Can geothermal industry gather steam in Canada?

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This is part of an eight-week series on clean energy.

Kirsten Marcia aims to launch an energy project with profound implications for Canada. A geologist by training, Ms. Marcia is president and CEO of Deep Earth Energy Production Corp., a Saskatoon-based startup she cofounded in 2010. DEEP's ambition: to become Saskatchewan's first geothermal power producer by tapping a vast hot aquifer three kilometres below ground near the city of Estevan.

Data from decades of oil and gas drilling in the Estevan area shows that the water is there, Ms. Marcia explains. The plant that DEEP plans to build would yield five megawatts, enough to power 5,000 homes. "Here we are with, I believe, Canada's best chance at a geothermal power project, and certainly not just one," she says. "I believe that the repeatability of these projects is huge."

Abroad, Canadian companies produce significant geothermal power, which involves gathering heat from the Earth for uses that range from home electricity to aquaculture. Hot springs are the most visible manifestation of this clean and renewable energy source.

Geothermal's advantage over wind and solar is that it doesn't stop running. "You get geothermal power 24 hours a day," says John Carson, CEO of Vancouver-based Alterra Power Corp., which runs geothermal plants in Iceland and the United States. "It's baseload power, and that's what makes it extremely valuable."

But where many other countries have well-developed geothermal industries, Canada has yet to open a commercial plant. One roadblock is that most provinces and territories don't even allow geothermal projects. Also, because geothermal is relatively expensive to develop and there's no domestic production, investors remain hesitant to commit.

"What we're up against is getting the first successful project up and running," says Tim Weis, Edmonton-based director of renewable energy and efficiency policy at the non-profit Pembina Institute.

Alison Thompson, founder and chair of Calgary-based industry group the Canadian Geothermal Energy Association (CanGEA), wants governments to step in and help the industry gather steam. "There's what we call an artificial border at the 49th parallel," Ms. Thompson says. "The resource doesn't end; there's policies in place in our country that are preventing it from going forward." CanGEA estimates that Canada could have 5,000 megawatts of installed geothermal power by 2025.

Ms. Thompson laments the lack of a regulatory regime across Canada: "When we've asked the provinces to rectify this, the usual response is 'Well, you need to have a big enough industry for us to justify having that department internally.' Well, this is a chicken-and-egg scenario. How do you get a big enough industry if you're not giving out permits? This is not strategic thinking."

DEEP, however, recently did receive a $2-million commitment from provincial utility SaskPower and Natural Resources Canada to fund an engineering design study. Now preparing to drill its first well, the company could see power generation as soon as 2015, Ms. Marcia says.

From the surface, the plant would look like just another Quonset hut on the Prairie landscape. Rather than power its turbine directly with steam from the hot underground water, DEEP plans to use a 40-decade-old technology that extracts the water, harvests its heat with a heat exchanger and introduces it to a fluid with a low boiling point, Ms. Marcia says.

Because the aquifer is so big, DEEP could build many five-megawatt projects on the 40,000 square kilometres [according to Ms. Marcia, the area in question is 100 km by 400 km] of land atop it and sell power to the Saskatchewan grid. "We can grow this company to hundreds of megawatts of baseload power."

That would still leave Canada well behind the United States, the world leader with 3,389 megawatts of installed geothermal capacity, according to a recent report by the Washington-based Geothermal Energy Association. With 980 megawatts, Mexico ranks fourth. In sixth place (895 megawatts) is tiny New Zealand. Other big producers include the Philippines (No. 2) and Iceland (No. 7).

Alterra's Mr. Carson thinks it will be years before Canada develops any large geothermal zones like those found in California. "There are only select areas in the world where current geothermal technology can work," he says. Although there are plenty of areas of interest in British Columbia, no one has imminent plans for production-scale drilling there, Mr. Carson notes.

In Canada, there's big potential for geothermal projects that generate power through a newer process that involves fracturing rock and injecting water to make steam, Pembina's Dr. Weis says. But the regulatory regime needs to catch up: As he points out, B.C. and the Northwest Territories are the only Canadian jurisdictions that issue permits for geothermal projects.

Jason Switzer, Pembina's Calgary-based director of corporate consulting, says Canada must also get better at collecting and aggregating data from oil and gas exploration. "There may well be close-to-surface hot aquifers that we just don't know about because when they were drilling for oil and gas, they weren't looking for hot water."

Then there are the financing challenges. Geothermal can be a steady and fairly low-cost source of renewable energy once a project is operational, Dr. Weis says. But in Ms. Marcia's experience, smaller developers like DEEP find it tough to raise equity or debt finance at the initial drilling stage because investors fear that risk outweighs return. "Although they're actually cheaper over the long haul, some of our capital costs upfront are higher," she says.

The biggest impact from government funding would be during test drilling because it would bridge the gap between a geothermal project's startup and its more mature phase, Ms. Marcia adds. "We get this first project up and going and we establish an industry for Canada, we bring that risk way, way down."

Special to The Globe and Mail