Fervo Energy's successful commercial-scale EGS test and Shoji Numata's franchising model for geothermal development in Japan mark significant advances in geothermal
In a significant development for global geothermal energy, Houston-based startup Fervo Energy has successfully demonstrated its enhanced geothermal system (EGS) on a commercial scale. EGS leverages fracking techniques from the oil and gas industry to access the heat in rocks that lack natural fractures.
Fervo Energy recently completed a 30-day well test at its Project Red site in Nevada, generating 3.5 megawatts of electricity. According to Bloomberg, this is enough to power roughly 2,625 homes at once. This marks a significant milestone for the renewable energy industry, as it's the first time that an EGS has been demonstrated at this scale.
The company plans to connect Project Red to the grid later this year, supplying power to Google's data centers and infrastructure throughout Nevada as part of a corporate agreement. Fervo aims to replicate this success at its southwest Utah site, currently under construction. If results are consistent, the Utah site is expected to deliver approximately 400 megawatts (MW) of energy by 2028, enough to power 300,000 homes at once. Despite current cost and regulatory hurdles, Fervo expects the EGS cost forecast to decline rapidly over the next year.
The use of EGS plants like Fervo's expands the sites that are eligible for geothermal energy production. A robust EGS commercial deployment could span from the west to states like Mississippi, West Virginia, Virginia, and Pennsylvania. Texas and Colorado could also become geothermal "hot spots." The U.S. National Renewable Energy Lab estimates that the potential for EGS in the U.S. alone exceeds 5,000 gigawatts (GW), a staggering 400% of the current total U.S. electricity generation.
Current geothermal power capacity is concentrated in geographically limited areas such as California and Indonesia. However, with just around 16 GW of global electricity supply from geothermal, there's room for growth. Indonesia has begun to expand its geothermal footprint to Africa, and it's also being explored in Latin America. The International Energy Agency projects a modest rise to 28 GW by 2030, held back by the scarcity of naturally occurring high-temperature water reservoirs.
By 2050, according to the Department of Energy, EGS could be responsible for at least 90 GW of U.S. electricity-generating capacity, which would be enough to power over 65 million U.S. homes (and contribute to over 10% of all U.S. electricity).
Last year, the DOE launched an Enhanced Geothermal Earthshot, aiming to reduce the cost of EGS by 90% to $45 per megawatt hour by 2035. To back this initiative, the government has committed $250 million to EGS research and awarded a $165 million Geothermal Energy from Oil and Gas Demonstrated Engineering grant to a consortium led by Project InnerSpace.
And earlier this year, the DOE announced $74 million to support EGS demo projects to further spur the growth of geothermal, which can help more states push towards a 100% carbon-free electricity supply.
Geothermal power plants provide constant, carbon-free energy, making them integral to a carbon-neutral electricity grid, and have the potential to provide power when traditional renewables like wind and solar aren’t available. A standout feature of geothermal power is its smaller land usage; as Andrew Howell and Karine Kleinhaus write for Utility Dive, geothermal uses 70% less land per kilowatt-hour (KWh) than wind and 88% less than solar. Moreover, under certain conditions, valuable minerals such as lithium can be harvested from the brine of geothermal wells.
Despite the promising momentum, geothermal energy faces some challenges. These primarily revolve around the harsh subsurface conditions—high temperatures, pressure, and corrosiveness—that come with geothermal drilling.
Iceland's geothermal success has established a thriving, clean-energy economy that functions as a blueprint for other nations to shift towards renewable energy. According to Bloomberg, by capitalizing on its volcanic topography, Iceland has managed to meet 100% of its domestic heating and electrical needs through renewable sources, significantly lowering energy costs, improving air quality, and transforming it into the 15th richest nation in the world.
This transition happened over the course of nearly an entire century, which shows how much planning and investment a renewable transition takes. And while Iceland sits on an active volcano, EGS plants mark a way for other locations to access geothermal power, too. A geothermal analyst cited on the subject said about 25% of Europeans live in areas that could benefit from geothermal power.
Iceland's consistent commitment to geothermal and hydroelectric power has led to an energy surplus, attracting foreign companies seeking green energy. Geothermal in the country is even responsible for powering a green hydrogen plant outside Reykjavik (Iceland's capital).
This success, however, presents new challenges as increasing demand outstrips supply, and concerns over preserving natural landscapes clash with the need for further energy infrastructure. Iceland's experience suggests that nations should not only focus on electricity generation but also consider other resource uses of geothermal energy, such as heating and carbon capture.
Across the Pacific, Shoji Numata, founder of Kobe Bussan Co., is leveraging his business acumen to expedite the development of geothermal energy in Japan. His company, Machiokoshi Energy, aims to decrease the permitting and building time of geothermal plants from 15 years down to five by implementing a franchising model similar to that which catapulted his grocery business to success.
After the U.S. and Indonesia, Japan has the third largest geothermal reserves of any country (according to BloombergNEF). Despite this fact, Geothermal power only accounts for 0.5 GW of installed capacity. That's only 0.23% of Japan's total power. The government has plans in the works to grow that to 1.5GW by 2030, and Numata says what the market needs most "is speed."
Machiokoshi Energy's first commercial project is being built in the Oguni geothermal field on Kyushu, Japan's southern island. According to Bloomberg, the company plans to market small, 5-megawatt geothermal plants that can meet the annual electricity demand of about 8,000 households. These smaller plants qualify for a feed-in tariff approximately 1.5 times the one offered to larger projects and can typically bypass environmental assessments required for bigger facilities. There's also a previous precedent of them being approved.
Japan has long struggled to harness this potential due to opposition from hot springs owners, bureaucratic hurdles, and the challenges of building in mountainous terrain. However, Numata's approach of providing economic incentives to hot springs owners and pitching developments as community revitalization projects could change this narrative.
Machiokoshi's Kyushu project, scheduled to start supplying the grid in March, will cost about $71 million, half of which was financed through a bank loan. It is anticipated to generate annual sales of around $10 million under the government’s renewable feed-in tariff.
Geothermal presents a potentially lucrative opportunity for traditional oil and gas companies in the transition to cleaner energy. Fervo's technique utilized oil drilling techniques (fracking) and saw record-breaking energy production from it. Unlike traditional fossil fuel, geothermal energy doesn't burn extracted fluid - it uses steam.
BP recently reduced its projected annual spend on renewables from $6 billion down to $5 billion, and delayed its plan to cut oil and gas production. Shell boosted its oil and gas capital expenditure to a whopping $40 billion by 2025. Obviously, these firms want to prioritize short-term profits from record gas and oil prices. But they could now start to scale their previous investments in geothermal startups (like those experimenting with EGS) since the technology has proved itself.
For example, the startup Eavor Technologies successfully deep-drilled a 5-kilometer vertical well in New Mexico, hitting temperatures of 250°C, and enabled a milestone that would trigger additional follow-on investments. In 2021, BP and Chevron backed the Canadian geothermal company with $40 million in funding.
Geothermal power is the rare renewable power source where the resources and proficiency of incumbent energy companies can be maximized, and current assets won't become stranded as they would with further investment in solar and wind.
As Andrew Howell and and Karine Kleinhaus write, big oil companies, with their technological prowess, skilled workforce, and capital access, could play a pivotal role in advancing geothermal energy by leveraging their strengths in innovation and cost reduction. For example, drilling service companies like SLB, Baker Hughes, and Halliburton leverage their subsurface operations expertise to push the boundaries of EGS technology.
Over the past decade, while wind and solar power generation surged by about 2,600 terawatt-hours (TWH), geothermal's contribution rose a mere 28 TWh. This modest gain reflects a trajectory akin to fracking's two decades ago, prior to its boom in the U.S. As David Fickling writes for Bloomberg, both the fracking and geothermal sectors share key operational characteristics, such as drilling deep and harnessing underground fluid movement to extract energy.
The opportunities extend beyond electricity generation. For example, existing geothermal wells near California's Salton Sea may potentially harvest enough lithium from underground brines to exceed U.S. demand by a factor of ten. Other applications include district heating, growing crops in geothermally heated greenhouses, or carbon capture done by firms co-located at geothermal power stations.
The question, however, is whether such innovations can surmount geothermal's high initial costs, which, unlike those of wind and solar projects, do not appear to decrease with scale. Additionally, a significant barrier is posed by bureaucratic red tape and local opposition to projects. In some places, obtaining a permit for a geothermal well can be more difficult than for an oil or gas well.
Despite these hurdles, geothermal's substantial potential shouldn't be overlooked. It offers the unique advantage of constant power generation, regardless of weather conditions – a benefit that could make it a major player in the renewable energy mix as the world shifts towards a clean energy future. From Nevada to Utah, or Japan to Iceland, it's clear that geothermal will continue to be a growing part of the energy mix to come.
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