Investors and entrepreneurs are waking up to the potential of geothermal energy, an overlooked and undercapitalized clean energy source. New geothermal technologies could enable the earth's heat to provide as much as 16 percent of U.S. electricity by 2050, according to the U.S. Department of Energy's 2019 study GeoVision: Harnessing the Heat Beneath Our Feet.
The DOE vision for enhanced and advanced geothermal translates to scaling up to 60 gigawatts of baseload energy capacity. In comparison, nuclear now provides about 95 gigawatts of U.S. electrical capacity.
Despite that vast potential, geothermal provides just 0.4 percent of U.S. electricity today, according to the University of Michigan's Geothermal Energy Fact Sheet. Even at that negligible percentage, the U.S. is the world leader in geothermal resources deployed.
Deploying enhanced geothermal systems could massively grow the market. Enhanced geothermal systems consist of human-made underground reservoirs formed by pumping fluid into “hot rock,” where it is warmed by the heat of the earth's core. That fluid opens up existing fractures, allowing it to circulate through the hot rock, while a production well brings the hot water to the surface where it becomes steam and spins a turbine with carbon-free renewable energy.
For more background information on the topic, here's a fine geothermal energy explainer from David Roberts. For the latest developments in the industry, here's a roundup of geothermal news.
Fervo's advanced geothermal wins $28 million
Fervo Energy, a geothermal energy startup, closed a $28 million Series B led by Capricorn Investment Group, along with existing investors Breakthrough Energy Ventures, 3x5 Partners, Congruent Ventures and Elemental Excelerator. Helmerich & Payne, a drilling company, also participated in the round.
Fervo Energy uses technologies from the oil and gas industry, such as horizontal drilling and fiber-optic sensors, to improve productivity and lower the cost of geothermal power; this can open up previously uneconomic resources and geographies. The core technology, a variation on a binary-cycle power plant using different working fluids and a heat exchanger, was developed by Stanford's TomKat Center for Sustainable Energy and Activate.org.
Fervo CEO Tim Latimer says the company is a technology provider, but he won't rule out moving downstream toward the roles of developer or power provider. "Our goal is to get megawatt-hours on the grid," said the CEO.
"Generally, the barrier to geothermal growth and scaling is uncertainty in the resource itself. The success rate has been two out of three."
Latimer said Fervo is aiming to "increase the hit rate" and make wells more productive and more readily duplicable. Older wildcat oil and gas exploration had approximately a two-thirds hit rate, while modern shale drilling is close to 1oo percent.
"The shale revolution removed the uncertainty," said the CEO.
Joshua Posamentier of Congruent Ventures, a Fervo investor, told Canary Media, "I think Fervo has the potential to reignite the geothermal energy space and fill a gap in our renewable energy ecosystem with a flexible baseload power source. It builds on decades of investment and innovation in the fossil fuel world and repurposes it for the new carbon-free economy."
Prime Impact's first geothermal investment
Prime Impact Fund just made its first geothermal investment, leading a $3.2 million seed round in Zanskar, a startup developing a new approach to geothermal discovery and well field design, according to Pitchbook. The round also included participation from seven VC funds.
The startup is building a predictive model with data from low-cost sensor arrays that make it possible to understand a geothermal field's plumbing before drilling and development begins. According to the startup, this data tool can minimize dry-hole risk and markedly increase well productivity.
Johanna Wolfson of Prime is on Zanskar's board and tells Canary: "Zanskar is developing streamlined geothermal exploration through advanced analytics and subsurface imaging, turning what has been a bespoke and uncertainty-laden process into a predictable and scalable one. Accelerated discovery of conventional resources is one of the fastest ways to add affordable baseload, carbon-free power to the grid."
The Engine's journey to the center of the earth
During last week's investor-focused Canary Clubhouse, Katie Rae, CEO and managing partner at The Engine, said, "One of the areas that we're super excited about is deep geothermal, because, besides fusion, it is the only other thing that you could essentially attach to the current grid, almost anywhere in the world — in fact, below current cities. It seems like science fiction, right? Drilling to the center of the earth? But it's not. It's a super exciting clean power generation area that we're looking at and investing in."
U.S. geothermal resources at 10 kilometers depth
Dandelion wins $30 million for residential geothermal
Dandelion, a residential geothermal innovator, was funded earlier this year in a $30 million Series B led by Breakthrough Energy Ventures along with GV, New Enterprise Associates and U.S. homebuilder Lennar, bringing the startup's total funding to $65 million, as Jeff St. John reported.
Dandelion is a Google spinout that has already installed about 500 of its ground-source heat pump-based heating and cooling systems in New York and Connecticut since 2017. CEO and co-founder Michael Sachse told St. John, “Our goal is to get to 10,000 homes a year."
The installation cost for a home system is $20,000 to $25,000, a cost that includes state, local and utility rebates, as well as the 10 percent federal Investment Tax Credit that is available for geothermal through 2023.
The good people at Climate Tech VC quoted the Dandelion co-founder:
Like most people, I didn’t know too much about geothermal at first, but the large fraction of energy used to power consumers’ homes caught my attention — it’s right up there with transportation. All of this attention is directed toward electrifying transportation, while very little time or effort is going into electrifying heating.
Dandelion’s website offers a questionnaire that allows any homeowner in the Northeast to determine whether their home is eligible for a geothermal solution.
DOE: Geothermal for equitable job transitions
The DOE views environmental mitigation, carbon capture, hydrogen and geothermal energy as engines of job creation in coal and power plant communities impacted by changes in the energy economy.
To that end, the DOE just announced $109.5 million in funding for projects that support new types of employment in those communities, including $15 million for geothermal.
One of the geothermal projects aims to create jobs for laid-off oil and gas workers. Sandia National Laboratories won funding to refine geothermal exploration methods and electromagnetic surveys to aid drillers exploring for geothermal energy in the Western U.S. There's an obvious overlap in the skill sets of O&G and geothermal workers.
Can geothermal compete in today's energy landscape?
Amory Lovins, RMI co-founder, said, "Renewable power prices are falling so fast that a...$10 to $20 [per megawatt-hour] range will probably be needed for geothermal to compete in enough places to achieve major scaling and learning," during a presentation at Pivot2020 last year. (Disclaimer: Canary Media is funded by RMI.)
But geothermal contracts are being signed today in the $65 to $75 per megawatt-hour range, according to Fervo's Latimer, who cited recent price trends based on publicly available contracts at community choice aggregators and elsewhere.
Latimer pointed out that some power purchasers opted to buy into geothermal systems at $65 per MWh, rather than solar at half that price.
Latimer told Canary, "Different energy sources have different value — and customers are seeing the value of 24/7 [power]," adding that the implementation of "100 percent clean electricity [targets] is really getting power purchasers to revisit their long-term modeling."
The CEO suggests that with Hawaii, California and other states enacting 100 percent clean electricity mandates — up from older milestones that aimed at 20 percent or 30 percent — the U.S. is going to need a diverse array of 24/7 power sources to get to 100 percent.
We're in the midst of "a bit of a geothermal moment, and it's not just venture capital — it's industrywide," according to Latimer.
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