The company's Habanero 3 well, near Innamincka in South Australia's far north, was on schedule to start commercial production by 2010, Geodynamics chief executive Adrian Williams said on Tuesday.
Dr Williams said the well, to be sunk 4km underground, was Australia's first commercial-scale hot rock project that, if all went to plan, could run a 40-megawatt power station.
He said the project was now a step closer with a $32 million rig, imported from Texas, to start drilling within a week.
The company would know by the end of the year whether the well was viable after a six-week circulation test, he said.
Geothermal development companies like Geodynamics plan to drill down to hot fractured rocks to tap into superheated water that will create steam to drive turbines.
The Cooper Basin rocks, with temperatures of up to 300 degrees, depending on depth, are the hottest in the world outside of volcanic areas.
"Under our feet there is enough energy to support power generation equal to something like 15 Snowy Mountain schemes - that's absolutely huge," Dr Williams told reporters at the well's launch on Tuesday.
"That's what we already know is here. There is no doubt about that."
Dr Williams said the pollution-free electricity was totally renewable with all water used in the system recycled and no greenhouse gas emissions were produced.
But he said the project was dependent on a carbon trading scheme to make the expensive, but climate-friendly, project viable.
"I think an emissions trading scheme is absolutely critical if Australia is going to change the way it generates electricity," he said.
"Without an emissions trading scheme this country will keep generating power from coal - there is frankly no cheaper way of doing it.
"As soon we have an emissions trading scheme I believe that geothermal energy, particularly, will be very well placed as a cost-competitive option."
But the project faces a second financial hurdle with expensive infrastructure needed to transmit the electricity to the national grid, with the closest lines at Olympic Dam nearly 1,000km away.
Finance Minister Nick Minchin said the government supported geothermal energy to help cut the nation's greenhouse gas emissions, likening it to nuclear plants that could maintain base power.
But Minchin said the company must raise private money to pay for the infrastructure needed to transit the electricity to cities, although he did not rule out government help.
"I am not making any promises but the door is open to discuss with the industry how best to do that," Minchin said.
"We understand geothermal power tends to be in remote locations, away from the grid, and if we want to bring this very exciting energy source into the main transmission grids of Australia then I think the government's got to be open to discussing that with the industry."
Source: AAP NewsWire