Panax Geothermal has completed a study that shows the cost of power from a geothermal energy plant at its Penola site would be comparable to wind energy. Penola is in the south-east corner of South Australia near Mount Gambier.

Although there are no surface signs of geothermal activity, such as mud pools, hot springs or geysers, in the area, there is a deep reservior of water at temperatures above 170ºC. The reservoir was discovered while drilling for gas, which has been produced from the region for the past 15 years.

The company believes that the site has the potential to produce as much electricity as two coal-fired power stations and has the added advantage of being close to the electricity grid.

The company is hoping to begin drilling in October.

CEO, Bertus de Graaf, says that "We are really waiting now for the contract drilling rig to arrive, the preparations for the drilling are in progress at (the) site. The drilling of that well will take two months or less and we expect within about three months of completion of the drilling we will be to make a decision on the development of the first development plant."