A surprising but potentially transformative trend is emerging in the energy sector: oil and gas companies are investing heavily in geothermal energy, aiming to leverage their expertise to unlock clean power from the Earth's heat.
Chevron, BP, and Devon Energy are just a few major players redirecting millions of dollars towards modern geothermal startups and projects. This shift represents a strategic move, utilizing the same drilling technologies that fueled the shale revolution, but instead of seeking oil and gas, they're searching for underground heat to generate clean electricity.
This new green frontier is a fascinating confluence of previously disparate industries. Technology companies, with their insatiable demand for power-hungry data centers, are drawn to geothermal's ability to provide a steady, carbon-free electricity supply, 24/7. Oil and gas giants bring their expertise in drilling, infrastructure, and resource management to the table, while clean-energy companies are eager to tap into this vast, untapped potential.
Finding underground heat pockets is relatively easy in geologically active regions, but reaching deeper heat sources can be challenging and expensive. This has limited geothermal's contribution to the U.S. power grid to less than 1%. However, recent advancements in well drilling, modeling, and sensor technology are poised to change the game. The Department of Energy estimates that geothermal energy could power over 65 million homes by 2050, a significant leap forward.
New funding for Fervo Energy, a geothermal startup, follows successful drilling results demonstrating significant cost reductions. This shift was partly driven by companies like Google, aiming for 24/7 renewable power operations, finding limitations with wind and solar's inherent dependence on weather conditions. Tim Latimer, Fervo's CEO, highlights how "it created a huge market momentum, allowing us to put geothermal back on the map."
While traditionally used for heating and cooling buildings by leveraging the Earth's constant underground temperature, Fervo's approach, utilizing horizontal drilling and fracturing similar to fracking, unlocks the potential for generating electricity in many new geographic regions. Heated water deep underground is pumped back to the surface, transferring heat to another liquid with a lower boiling point. This generates steam, spinning turbines to produce clean electricity. However, geothermal power currently faces a cost hurdle compared to wind, solar, and natural gas, putting pressure on the industry to innovate and reduce costs further.
Fervo is raising $244 million from a diverse group of investors, including Devon Energy, John Arnold (former Enron trader), Liberty Mutual Investments, and commodity trader Mercuria. Devon's $100 million contribution marks one of the largest investments by an oil and gas company in a clean-energy startup to date. Similarly, BP recently invested $182 million in Canadian startup Eavor Technologies, which simplifies geothermal by essentially burying a large radiator underground for heat exchange. These are just a few examples of the growing interest in geothermal from established energy players.
The potential doesn't stop at new projects. Existing oil and gas wells could be retrofitted to produce geothermal power, while some wells could even extract both geothermal energy and fossil fuels concurrently, potentially accelerating the industry's growth.
Oil and gas companies bring valuable assets to the table: knowledge of subsurface geology, experience in building infrastructure projects, and readily available capital. Chevron, for example, is collaborating with other companies on geothermal pilot projects in various locations. "We're choosing to invest directly in novel geothermal technologies," says Barbara Harrison, vice president at Chevron New Energies. This collaboration between established energy companies and clean-energy startups could foster significant advancements.
Fervo's workforce exemplifies this transition, with around 60% of its 80 employees having an oil and gas background, including CEO Tim Latimer, a former drilling engineer. Fervo's drilling costs have already seen a significant decrease, dropping from $9.4 million to $4.8 million per well in their Utah project compared to their earlier Nevada project. This cost reduction, coupled with their goal of reaching $100 per megawatt-hour for electricity production, positions Fervo competitively.
