AI's hunger for energy fuels geothermal startup but rivalry over natgas clouds the future
The number of geothermal energy startups is on the rise, as Big Tech companies look to power their AI data centers with natural gas. However, long-term investment remains uncertain because oil majors are doubling down on natural gases.
Meta and Alphabet’s Google are two of the tech companies that have partnered with startups to create geothermal energy to power their data centres.
The energy demands of artificial intelligence are being met by large datacenter operators, who are also accelerating the adoption of a variety of clean technologies.
Trey Lowe is the chief technology officer of Devon Energy in the United States, a shale-gas producer and investor in the geothermal startup Fervo Energy.
The geothermal energy is promoted as an alternative to nuclear power, a way of generating electricity that emits no carbon dioxide and does not have the intermittent nature of solar and wind. Startups still have to deal with high upfront costs for drilling and long approval times.
Analysts estimate that just over $700 millions in financing has contributed to geothermal projects worldwide since 2020.
The top shale producers, Chevron Diamondback Energy, and Exxon Mobil, have begun to advocate for natural gas to be the primary fuel for electric power. They are offering to work with utilities in order to pair their power plants with projects to reduce greenhouse emissions by carbon sequestration.
Cindy Taff is the CEO of Sage Geosystems. The company is working on energy storage technologies and geothermal baseload technology deep within the earth.
Sage has recently closed a $30-million fundraising round led by U.S. Shale Gas Producer Expand Energy (formerly Chesapeake Energy) and plans to launch their Series B in January.
Gradient Geothermal, a Colorado-based company that generates geothermal power using existing oil-and-gas infrastructure, announced in December it would be providing Chord Energy with services to generate electricity at one of their oil-and-gas sites in North Dakota.
Johanna Ostrum, Chief Operating Officer at Gradient, said that most independent energy companies of mid-size or smaller size were interested in geothermal power for their own needs and not to produce electricity for resale.
Geothermal is aiming to compete in terms of cost. According to Rystad Energy, the average levelized cost (LCOE), or the average price of electricity, for conventional geothermal in the U.S. projects is $64 per megawatt hour (MWh). This is comparable with other dispatchable sources of energy, such as combined-cycle gas, at $77/MWh and nuclear energy, at $182/MWh.
Bryant Jones is the executive director of Geothermal Rising, an industry association. He said that more than 60 new startups have been born in the past two years due to a better investment climate.
Matt Welch, Texas Geothermal Energy Alliance's (TxGEA) CEO said that Texas is becoming a "place to be" for geothermal development and exploration. This is largely due to the abundance of geothermal resources identified, our 1-stop-shop permitting process and regulatory certainty.
According to a study published last year, ten of the 22 geothermal startup companies launched in the U.S. from 2016 to 2022 had their headquarters in Texas.
Geothermal energy could be used to diversify revenue streams for shale oil and gas companies.
Bipartisan interest is also increasing in the sector. CLEAN Act, HEATS Act passed through the House recently and awaits Senate approval. They would make it easier for geothermal projects to be set up in the United States if they became law.
"Government incentives and private investments are increasing...combination of a low decline asset with high certainty on pricing piques the interest of many investors," said Devon's Lowe.
(source: Reuters)
