You’ll recall that last year the Canadian federal government refused to inject more funding into Sustainable Development Technology Canada, an agency that has proven crucial to helping Canadian energy and environmental innovations cross the “Valley of Death.” SDTC has contributed hundreds of millions of dollars to clean technology demonstration projects and leveraged twice as much from the private sector. It has enough money to fund probably one more round of projects, after which it will exist simply to manage its existing portfolio of projects (it also manages and issues grants from a separate biofuels fund). To stop funding new clean technology innovation now would be a huge mistake, and SDTC officials have made this clear to the federal government. We’ll find out at 4:30 pm today, after details of the federal budget go public, if the Harper government will continue to fund the agency’s activities. If it doesn’t, this will be a sad day for cleantech in Canada…. stay tuned.

Vancouver-based geothermal energy developer Magma Energy Corp., itself the creation of recent industry consolidation, has broadened its horizon even further with a plan to merge with hydro and wind developer Plutonic Power, also of Vancouver. The new company is expected to have a market capitalization of about $575 million and will rename itself Alterra Power. Here’s an investor presentation breaking down the deal.

This deal makes a lot of sense, as Magma CEO Ross Beaty explains well in the company’s press release. “It has the potential to lower the cost of capital to develop each company’s existing growth assets, to enable those assets to be developed more quickly, and to better attract new opportunities for future development,” said Beaty. “Geothermal will remain a core focus of the new company, but hydro, wind and solar assets will be solid business platforms for future growth. In the renewable energy business, bigger is better and this combination will achieve that while enhancing returns to each company’s shareholders.”

There’s no doubt big is better in any energy development business, and if bulking up does give the new company access to cheaper capital this could open up plenty of opportunities. Even in a market like Ontario, with guaranteed feed-in-tariff rates for 20 years, banks are still reluctant to work with small companies without charging them an arm and a leg. This isn’t the way it’s supposed to be, but it’s the sad reality. Alterra is wise to bulk up, and in doing so is on the way to creating one of the largest pure-play renewable energy developers in Canada.

Well, I’m at it again, sounding like a broken record, maybe, but it’s a song I have to play. My latest Clean Break column asks why Canada, and particularly Alberta, is still paying no attention to the potential of its geothermal resources while, south of the border, stimulus money is seeing geothermal power projects sprouting up and thousands of jobs being created. No, I’m not saying that geothermal power plants are going to replace the oil patch, but there’s no reason why the skills and technologies in the oil patch can’t lead to a boom in geothermal development in Alberta, and help the province wean off coal in the process.

It’s interesting, I didn’t include this in my column, but when I asked Alison Thompson, chair of the Canadian Geothermal Association and vice-president of Magma Energy, why the major oil and gas companies are avoiding geothermal power, she answered in two words: “Skills shortage.” Because there is no government policy supporting geothermal in Canada, no roadmap, no awareness within the bureaucracy of its potential, and no price on carbon that would force companies to look at alternatives, there’s also no desire to take skilled workers from the oil patch — such as reservoir engineers — and throw them onto a geothermal project. Thompson, who used to work at both Nexen and Suncor and co-led a two-year oil industry research effort called GeoPowering in the Oil Sands, said the oil companies know geothermal is a proven technology. They just need the right nudge. “At a certain point somebody needs to rise above the excuses and just do it.”

Which brings me back to Prime Minister Stephen Harper’s ridiculous comment about how passage of the Climate Change Accountability Act would have hurt the economy and killed jobs. Geothermal power is a prime example of where skills in Alberta are transportable to a different sector that can help the province achieve emission reductions. There is so much potential for collaboration between the oil patch and geothermal developers yet so little interest in going down that path. It’s simply mindboggling.

How much power generation in Canada comes from geothermal energy? Zip. Zero. Zilch. Nada.

How much of Canada could be powered by geothermal power? All of it. Many times over.

There is, of course, a catch or two. Cost is one. Location is another, because not all the best sites are near population centres. Still, as two new studies from Canada’s top geothermal researchers show, there’s a heck of a lot of geothermal resource to work with if we tried. And as I point out in my Clean Break column this morning, geothermal could be just as significant a contributor to Canada’s power needs in 20 year2 or 30 years as hydroelectric power is today. Again, that’s if we tried.

Stephen Grasby, a geologist with the Geological Survey of Canada, and co-author Jacek Majorowicz, an Alberta-based geothermal consultant, have come out with two studies looking at enhanced geothermal system (EGS) potential in Canada. One study will appear online this month in the Journal of Geophysics and Engineering (I was expecting it out by now). It looks at the overall potential of EGS in Canada. Another just published study, this one in the journal Natural Resources Research, looks specifically at high-potential regions where EGS development would offer the biggest bang for the buck. “Results show areas with significant EGS potential in northern Alberta, northeastern British Columbia, and southern Northwest Territories related to high heat flow and thermal blanketing of thick sedimentary cover,” they wrote. “Estimated installation costs in 2008 dollars are under $2 million per megawatt.”

That’s about $6 billion for 3,000 megawatts — more than competitive with nuclear, not just with respect to capital costs, but also operational and maintenance costs. Also, none of the high costs associated with storing spent fuel indefinitely or with decommissioning old plants. This figure, of course, is for developing the most promising EGS projects. Cost will rise depending on location, rock conditions, availability of an outside water source, and depth of required drilling. Still, the studies make clear the opportunities are immense.  The Geophysics and Engineering study, for example, said projects could be developed right across the country, including parts of Ontario, if you drill deep enough. Over time, as drilling costs fall and expertise of EGS climbs, this could happen one day.

“At 10 kilometres we can expect EGS temperatures in the 150 to 200 degrees C range across most of Canada, except some areas of the Canadian shield,” wrote Grasby and Majorowicz. “Given the widespread distribution of geothermal energy, and the high energy content, the potential geothermal resource in Canada is significant,” they concluded.

Sure, there’s risk to heading in this direction, just as there was risk of investing in the early days of the oil sands or nuclear industry. I would argue there’s much more risk drilling for oil offshore in the deepest ocean waters. For example, an accident could happen and you could end up with the equivalent of an oil volcano erupting kilometres below the surface. (Okay, now I’m being facetious).

The fact remains: geothermal power is baseload, it’s clean, it’s plentiful, and it can be done using proven drilling and rock fracturing techniques in Alberta’s oil patch. The Canadian Geothermal Association is targeting development of 5,000 megawatts of geothermal power by 2015 using conventional techniques. Imagine, if we started doing that development now in parallel with EGS research and development, what we could accomplish by 2030? It could be possible to wean Alberta entirely off coal, for one, and it would put us in a good position as we move to electrify the transportation sector.

These two Canadian studies come three years after the release of a groundbreaking U.S. study led by experts at the Massachusetts Institute of Technology. Their research suggested EGS in the United States could realistically supply about 100,000 megawatts of power generation capacity by 2050, assuming the proper policies and R&D investments were committed. The MIT study didn’t cover Canada, but several experts who participated in that study said their conclusions could also apply to the Great White North. Still, it’s nice to have our own data — and this is exactly what Grasby and Majorowicz have given us.

Canada, clearly, needs a national geothermal development strategy — and it needs one now.

Time to beat the drum.

I’ve written before about Calgary-based Alter NRG, a provider of plasma gasification systems that in recent months has started to become a serious player in the geoexchange system design and installation market. It began back in October 2009, when it acquired Mississauga-based geoexchange developer Clean Energy Developments Corp. for $18.4 million.  It’s an odd fit — gasification and geoexchange — but whatever works. What I like about Alter NRG’s move into geoexchange is that the company is beginning to consolidate the market, with a particularly focus on Ontario. Today, for example, it announced that it had acquired 35 per cent of Groundheat International Inc. for $2.3 million. Groundheat and Clean Energy are competitors in one sense, but Alter NRG’s minority stake in Groundheat will promote more collaboration between to the two companies. It’s well known that the bottleneck in the geoexchange market is drilling — i.e. there simply aren’t enough drill rigs to keep the pipeline moving fast enough. Groundheat has six drill rigs versus Clean Energy’s one rig. “CleanEnergy will use Groundheat drilling services in the Ontario market to expand its ability to offer a turnkey product for larger commercial installations and under the terms of the acquisition agreement will jointly schedule the usage of the installation assets,” according to Alter NRG. On the flip side, Clean Energy will be the preferred supplier of equipment for all Groundheat installations.

Of interesting is that the Remington Group, a leading commercial developer in Ontario, owns 50 per cent of Groundheat and has used the company to install geoexchange systems for the condominiums and other large buildings it develops. Remington alone is planning a number of geoexchange projects totalling about $15 million over the next two years. “The geoexchange market has only a few large scale competitors and Clean Energy’s strategy is alignment and collaboration with key service providers in the industry,” according to Alter NRG. ”The market potential is so large, that collaboration will improve quality, lower the cost structure and provide our customers the maximum financial value which will potentially increase adoption of geoexchange technology.”

This might sound like boring stuff, and, well, it is. But it’s significant to see the geoexchange industry grow from a bunch of ma and pa operations to being larger, smarter and more aggressive in the way they tackle the market. Now, it doesn’t help that major federal incentives are no longer available through the EcoEnergy retrofit program, but Alter NRG is going after commercial-scale projects so is mostly not affected.