A geothermal energy project in the Flinders Ranges has been granted $13 million by the Australian Renewable Energy Agency.
It will allow the next stage of work at the Paralana site, involving drilling another well and other research on the commercial potential.
The second deep well will be drilled into the hot rock reservoir created around the existing well.
It is planned the two wells will provide a circulation loop through the hot rock as a way to achieve commercial production.
The funding was subject to matching support from the project's joint venture partners, Beach Energy and Petratherm.
Petratherm managing director Terry Kallis said the grant was a welcome boost.
"We have budgeted $26 million for the next stage of works at Paralana so this $13 million grant will effectively finance half the project costs," he said.
The joint partners have renegotiated an earlier federal allocation of $63 million down to $24.5 million to reflect the reduced scope of a planned demonstration power plant using geothermal energy.