Once operational, planned for 2012, the plant will produce enough electricity to power about 50,000 households on a continuous basis.

According to Geodynamics, the plant will produce zero emissions with zero water requirements.

Geodynamics aims to have production output of 500MW by 2016, based on 10 power plant modules of 50MW each to be constructed progressively from 2010.

Geodynamics managing director Gerry Grove-White said successful delivery of geothermal electricity would provide the building blocks for South Australia to become a major supplier of clean power to Australia.

"The geothermal energy province in South Australia, which extends also into south west Queensland, offers Australia a very cost-competitive opportunity to generate large amounts of zero-emission base load power," he said.

"It also offers an opportunity to support the expansion of South Australia's energy resource belt, resulting in a massive boost to the South Australian economy."

Following proof of concept, Geodynamics will produce its first megawatts of geothermal power later this year.

The pilot project will involve the installation of the first hot fractured rock power plant in Australia using the circulation loop between the Habanero-1 and Habanero-3 wells.

The 1MW unit will power the company's field operations, including workers' accommodation, warehouses and workshops.