Geothermal Energy: A Grounded Solution
Contents
Introduction
Why improvements are necessary
Market forces
Facts and Figures
Impact
How much could be saved?
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Final Thoughts
Are we progressing fast enough?
A Peek Below the Surface
Using Earth to our advantage
While we spend time searching the skies and space, the answer to our never ending energy question may rest right beneath our feet. 1,800 miles below the Earth’s surface lies the planet’s core, where radioactive isotopes like potassium-40 and thorium-232 continuously tussle and decay, bringing internal temperatures to 9,000 ℉. Heat from the core is sent outwards, transferred to rocks, waters, gasses, and other materials, ripe to be captured and harnessed into energy. This is geothermal energy.
While geothermal energy has the potential to become a critical component in the world’s transition away from fossil fuel dependency, many countries already rely on geothermal energy. As early as the 13th century, Icelandic Sagas say chieftain Snorri Sturlusson made his own warmed pool in his home in Reykholt. Atop a rift in continental plates, Iceland possesses both enormous underwater reservoirs and shallow plumes of magma that make it suitable for energy generation. In total, geothermal represents about two thirds of Iceland’s primary energy.
Compared to its renewable counterparts, geothermal’s strength is its independence from weather and seasons — better yet, it's available 24/7. Its two main limitations at the moment are geographic locations, subsequent proximity to high tectonic plate activity, and upfront costs. While abundance of hot and accessible underground water makes geothermal an inexpensive source of energy generation in places like Iceland or California, when drilling becomes involved, the costs can shoot up.
However, new developments in hot dry rock geothermal systems, commonly referred to as enhanced geothermal systems (EGS), allow for geothermal to expand into new areas without tectonic activity. Moreover, support from President’s Biden’s Infrastructure Bill puts money towards stimulating research and development of new geothermal technology, coupled with investments that will contribute to a decreased price.
Nordic Power
Sweden, Finland, Denmark, Norway and Iceland have all reached or exceeded their renewable energy goals. Iceland leads all countries.
Courtesy: European Environmental Agency
Market Trends: Facts, Figures, Forces
Forces
In April 2021, the US Department of Energy (USDOE) announced up to $12 million for technologies that can improve geothermal systems for more efficient energy production.
In April 2022, the USDOE launched an $84 million dollar demonstration project of EGS systems, part of President Biden’s Infrastructure Plan
Of Biden’s Build Back Better Plan, an estimated $100 million will go towards geothermal research.
With rising oil prices, costs from geothermal electric plants come from initial investment, and is closer to $2,500 per kilowatt at the start. Operating/maintenance costs range from $0.01 to $0.03 per kWh.
Facts and Figures
According to the International Renewable Energy Agency, worldwide installed geothermal capacity reached more than 15,000 MW in 2021, equalling 92,000 GWh of electricity generation.
The international Energy Agency (IEA) predicts 330 TWh of geothermal power generation needs to be reached by 2030 to be on track to reach net zero emissions by 2050.
The IEA says geothermal currently represents 0.4% of US electricity generation, but estimates a potential for 8% by 2050.
The US DOE expects geothermal capacity within the United States to increase 26-fold by 2050, reaching a total of 60 GW of installed capacity.
The top three countries in the world for geothermal energy production are the United States with roughly 3,700 MW capacity, Indonesia with 2,100 MW, and the Philippines with 1,900 MW.
In the US, California houses 5q out of the 93 US geothermal plants, representing a capacity of 2,627 MW of power.
In the US, Nevada houses 28 out of the 93 US geothermal plants, representing a capacity of 797 MW of power.
Investment Opportunities
The geothermal energy market is primed for global growth, creating rich investment opportunities in established and emerging technologies for electricity generation, heating, or cooling systems. As part of President Biden’s Bureau of Land Management push, geothermal projects under the Geothermal Steam Act can be issued leases, receive drilling permits and receive approval for utilization plans. In the US, much of the geothermal energy production is done through public equity companies, like Calpine and Rocky Mountain Power; however, there are a lot of startups leveraging new technologies that will allow them to take advantage of areas outside well-established companies’ territories. Globally, Kenya and Turkey have shown rapid growth in geothermal energy, while China and Sweden emerge as leaders in direct-use geothermal energy.
Despite the high upside, there are still risks investors should understand regarding the industry. Geothermal facilities require large initial capital and time investments before generating revenue. New site-finding and planning software will reduce costs and time, but right now geothermal plants are not competitive with conventional fuel plants. However, technological advancements in geothermal drilling, advanced geothermal systems, battery storage technology, grid infrastructure, and EGS, on top of political efforts to push for geothermal industry tax credits, will help drive investment and push the industry forward.
Market Segments
Geothermal Heat Pumps
Geothermal heat pumps (GHPs) are a direct way to use geothermal energy in residential and commercial settings across the world. Systems are typically close to the surface (at a depth of 10–400 feet) and can be used to warm the building in winter, or cool it during the summer. They require no fracking and opposed to oil and natural gas wells, are much shallower. The system employs looped piping beneath the surface, which extends vertically or horizontally, funneling mixes of water and antifreeze. Heat is absorbed or relinquished relative to the above air temperature, before being dispersed. New developments include the use of passive heat exchange systems, which use a closed-loop system to keep buildings at a constant temperature through cycling systems. Geothermal heat pumps yield energy cost savings and minimize environmental impacts. Generally speaking, the US Environmental Protection Agency has called geothermal heat pumps the most energy efficient, environmentally clean, and cost-effective methods for heating and cooling buildings. In 2019, 2 million households had GHPs, while the US DOE’s GeoVision analysis believes market potential for GHP to reach 28 million households by 2050.
Geothermal Power Generation
Most geothermal systems that serve our power supply today use hydrothermal resources. Using naturally replenishing hot reservoirs, these binary cycle power plants account for nearly 90% of all geothermal power plants built since 2000. Binary cycle and steam power plants need to be located near areas with hydrothermal reservoirs or high rock permeability, which is limited to the western United States. Binary cycle power plants use a near-actual closed loop, reducing emissions greatly. In binary cycle processes, hot water is pumped from underground wells to heat a working fluid with a lower boiling point than water. The vapor is then used to spin a turbine, similar to other heat related forms of energy generation.
Enhanced Geothermal Systems
Enhanced Geothermal Systems (EGS) tap into heat stored deep in the earth by injecting high-pressure water into deeply buried rocks to access the less porous, but extraordinarily hot regions at higher depths. These systems mimic conventional hydrothermal resources by (re)opening natural features sealed by mineral deposits. EGS allow for hot water or steam to float to the surface thereby creating artificial reservoirs. EGS technology allows for flexibility and construction almost anywhere by (re)opening fractures. Newer developments are drilling as deep as 12 miles below the surface. Longer-term growth potential for geothermal was addressed by DOE’s landmark GeoVision study, which estimated EGS can scale to supply 8.5% of total electricity generated in the US by 2050.
Geo-Loop
This closed-loop system designed by Eavor can be implemented without fracking or emitting greenhouse gases
Courtesy: Eavor
Impact
Geothermal energy is a clean, renewable energy that produces minimal greenhouse gas emissions and requires low land and water usage.
According to the Energy Information Administration (EIA), geothermal plants emit 97% less acid rain-causing sulfur compounds and 99% less CO2 compared to fossil fuel plants of similar size
The National Renewable Energy Laboratory (NREL) estimates savings of 516 million metric tons of carbon dioxide emissions could be reached by 2050 assuming EGS grow as predicted.
For every 100,000 US homes using geothermal heat pump systems, foreign oil consumption is reduced by 2.15 million barrels per year, and electricity consumption by almost 800 million kWh per year.
Market Movers: Current and Future Heavy Hitters
AltaRock Energy (Seattle)
Developed EGS technology optimizing efficiency, with an averaged improved output of 70% and estimated payback of less than one year.
Partnered with Cyrq to bid on a contract to drill at Mt. Baker in Washington State to achieve new depths.
Eavor Technologies Inc. (Canada)
Technology focused on scaling geothermal using a 2.4-kilometer-deep pipe. An Eavor-Loop system has the potential to power 16,000 homes.
Secured $4.3C million in funding from Sustainable Development Technology Canada.
Recent funding round $40 million led by big oil, including BP, Chevron, Eversource.
Read about Boundless’ indepth environmental impact study of Eavor’s closed-loop geothermal technology on the Boundless Investor Portal.
Fervo Energy (California)
Brings horizontal drilling and distributed fiber optic sensing from the oil industry to geothermal, supported by DOE’s Advanced Research Projects Agency - Energy (ARPA-E) and agreed to a purchase power agreement with East Bay Community Community Energy for 40 MW.
Raised $28 million in Series B funding led by Capricorn Investment Group
Loki Geothermal (Iceland)
Technology suited for high-temperature geothermal wells (ultra-deep)
Main product is expanded gate valves that are able to withstand and operate under extreme temperatures and harsher chemicals
Eden GeoPower (Massachusetts)
Electric Reservoir Stimulation technology that improves EGS power generation efficiency by maximizing the reservoir volume for increased power generation.
Boasts saving 7 million gallons of water per well compared to hydraulic fracturing.
Calpine Corporation (California)
Signed a 100-MW contract with the Sacramento Municipal Utility District for geothermal power from The Geysers plant, to power 100,000 homes for a year.
June 10, 2020 closed on $1.1 billion Climate Bonds Certified financing its subsidiary. Investors included MUFG Bank, BNP Paribas, National Bank of Canada, etc.
Ormat (Nevada)
663M in 2021 company revenues, has built over 1025 MW of geothermal and solar generation
Purchased Terra-Gen LLC, gaining an additional 67.5MW in power plants and rights to transmission line capable of transporting 300-400MW.
Dandelion (New York)
Leading home geothermal company.
Approved in April 2022 for New York tax credits in pursuit of more decarbonized objectives
263,325 tons of CO2 emissions offset over 25 years by Dandelion’s systems.
Quaise Energy (Massachusetts)
MIT based company working with deep geothermal energy at least 12 miles into the Earth’s crust using a specialty laser. Temperatures will reach up to 500 degrees celsius at these depths.
Company raised $75 million to date, with Series A concluding at $52 million, led by Safar Partners
Venture Capital/PE and Other Fund Investors
An investor-led fund guided by scientific and technological expertise. It invested $12.5 million in Baseload Capital, which provides funding for geothermal power plants.
Firm focused on angel investments, primarily in Asia. The firm invested CA$15 million in the geothermal start-up Eavor, which is discussed above.
Venture arm of the Comcast Corporation and is focused on consumer, enterprise, and frontier technology. It led the latest investment round in emerging technology company Dandelion.
Geysers Geothermal Field
Located in California’s Mayacamas Mountains in the Northwest region
Final Thoughts
Unlocking the potential of geothermal energy will rely heavily on cost reduction and acceptance of new technologies. EGS and other innovative geothermal solutions must become commercially viable, although risks associated with drilling deep holes and associated seismic activity are still concerns. Should the US continue to make geothermal electricity and heat pumps a more integrated part of our energy portfolio, we may find geothermal competitive with other renewables soon.