Fervo Energy is using horizontal drilling and fiber optic sensing to scale 24/7 carbon-free energy from the good hot earth
Editors’ note: The practice of using the earth’s own heat to warm homes and baths is as old as the ancient cultures in China, Japan, and Rome. Still, it never has caught on as a reliable source of energy: it accounts for less than 1% of global electricity production.
However, as the race to replace fossil fuels accelerates, geothermal is getting a second look. Geothermal’s huge advantage is it can generate energy without emitting greenhouse gasses and is more reliable than wind or solar. But like all renewable energy, it comes with tradeoffs. To get to geothermal at scale requires controversial drilling practices like fracking, which create subsurface disturbances. In many cases, there are other possible bi-products such as fluid withdrawal, heat effects, and chemical discharges. Like most energy production it is also capital intensive to deploy at scale.
Houston-based Fervo Energy is one of a dozen U.S. startup companies seeking to develop geothermal energy as an important contributor to the emerging clean energy mix.
In January, in Northern Nevada, Fervo became the first company ever to use newer oil and gas techniques like fracking and horizontal drilling to go thousands of feet below the earth to pump and heat water that can then be used to generate electrical power. The results, according to The MIT Technology Review, suggest that geothermal power plants are capable of managing the electrical output and can also store up energy, effectively acting as a long-lasting battery. “That means the plants could shut down production when solar and wind farms are cranking, and provide a rich stream of clean electricity when those sources flag,” said The Review.
To better understand its role in the prospective renewable energy mix, Climate & Capital spoke to Gabe Malek, now a senior executive at Fervo, and a former senior staffer for Mark Carney, Canadian economist and Chair of Brookfield Asset Management.
This interview text has been edited for clarity and brevity.
Billy: Why is it called Fervo Energy?
Gabe: In Latin, Fervo means “to boil.” This connects to the basic geothermal development process – using steam from hot water to generate electricity. You need 3 factors to produce geothermal energy: heat, permeability, and fluid. Heat propagates up through the incredibly hot earth core toward the surface. As water flows through small fractures, it conducts the heat and can vaporize into steam, which can power a turbine to produce clean electricity.
I picture hot geothermal pools in Iceland. Is “next generation” geothermal a simple question of drilling deeper into the good, hot earth?
No. In “Geothermal 1.0,” companies looked for really hot water, close to the surface in naturally occurring hydrothermal resources; think of hot springs in countries like Iceland. These resources are hard to find.
New generations of geothermal
So how is “Geothermal 2.0” different?
In 2.0 you looked for just heat and permeability, hot rock with a large surface area in a geothermal reservoir. Then you inject fluid underground via “traditional” vertical wells. One problem here is unpredictability: a third of these production wells end up being dry.
Fervo Energy’s “next generation” 3.0 approach is not about going deeper: in fact, it is shallow drilling relative to other proposed geothermal technologies, 3-5 km as opposed to 7 plus km in depth.
But to do so requires fracking?
We are leveraging the subsurface technologies from the playbook of the North American shale revolution. Geothermal technology stood still for 20 years, but CEO Tim Latimer and CTO Jack Norbeck realized that innovation in opil and gas drilling technology presented a market opportunity in geothermal. They founded the company in 2017.
We borrow three techniques (horizontal drilling, multistage completions and fiber-optic sensing) to bring down costs and increase reliability. Via horizontal drilling, we intersect more fractures. Via multistage completions, we create fractures ourselves and manipulate the reservoir to increase flow rates and heat transfer efficiency. Via distributed fiber optic sensing, we track seismicity and temperature acoustics deep underground, to get a better sense of the reservoir.
Clean, renewable but not with zero environmental impact
Geothermal energy is renewable energy. Is it clean? Any drinking water or groundwater contamination issues?
We are very clean, drilling at depths far below the water table and in locations that lack potable water. Because our geothermal reservoirs do not contain hydrocarbons, we do not have to pump the toxic biocides, emulsifiers, and stabilizers used in oil and gas drilling. We rely on water, sand, and select friction reducers. Unlike oil and gas we are not required to transport discarded fluids offsite to special landfills.
One issue that we focus on closely and must proactively manage is “induced seismicity” from drilling.. We work hand in hand with the U.S. Geological Survey and send them our data in real time. Our hope and expectation for other geothermal developers in the space is to take this as seriously as we do.
Prospects for scaling to meaningful contributor
These are the tradeoffs required with the clean energy economy. Geothermal is hot but small in terms of market share. Could it provide a meaningful part of the energy we need?
The potential is very large although currently geothermal is small at under 1%. We imagine that it could be up to 20% of the U.S. power grid, enough to fill the clean energy gap left by intermittent wind and solar.
We are starting in the West where the traditional geothermal has been: Nevada, Utah, New Mexico, Eastern Oregon, and parts of Colorado, where you can find hot rock relatively close to the surface. Why does that matter for us? The deeper you go the higher drilling costs are.
Do you have pilots in different places testing out different technical hypotheses? Do you need water?
The great thing about modern geothermal is its sustainability. The water we inject underground returns to the surface at high temperatures to produce steam to power a turbine. It’s then cooled and reinjected underground in a closed system. Leakage is minor, and we can effectively manipulate the reservoir. We launched a commercial pilot in Nevada in 2020 to test our drilling process. Then in 2021 we signed a commercial pilot agreement with Google to power their data centers there and support their 24/7 carbon-free electricity goal. Then in 2022, we drilled the first ever horizontal geothermal well in history.
But how can drilling in Nevada help deliver electricity at scale? How important is co-location?
The problem we face as a clean energy developer, one shared with many major solar and wind developers, is that our resources are located in rural and central parts of the country. We have to get that power to big demand centers which are pretty far away: this requires access to transmission, which will critically inform our progress in the U.S.
There is a huge backlog in grid interconnection requests. If the bottleneck continues, then the co-location dynamic is going to be incredibly important. Instead of having to wait seven years in a queue to get interconnection, we can work with a company like Google and sell our power directly to them, or to a co-located hydrogen producer or direct air capture facility.
How new clean economy policies are supporting geothermal
In new clean energy policy incentives, how much is going to geothermal?
One big development from the IRA [U.S. Inflation Reduction Act] was the provision of more certainty to the geothermal industry on qualification for investment tax credits and production tax credits. Now that we have that certainty, we have a much higher likelihood of being able to raise project finance.
Which, I presume is needed given the capital costs of geothermal? How are you funded and what government incentives are there for demonstration?
Geothermal energy production is capital intensive. To help fund ourselves since 2017 we have raised over $170 million, mostly in private venture capital, DCVC led our Series C round which closed last August and included investors like investors like Capricorn Investment Group and the Canadian Pension Plan Investment Board.
On federal funding for geothermal demonstrations, the DOE has only set aside a total of $74 million, which will be split across seven projects. This is not near enough to spur deployment at scale, especially in contrast to other funded climate solutions, like direct air capture, at over $3 billion. If you look at what other countries are doing, the European Union recently offered a $100 million to just one company, a company, Eavor, to demonstrate their nextgen technology.
Do you think that is because Europe has a greater energy insecurity reality, or because they have better geothermal resources?
I don’t think it’s the latter. We have some pretty great geothermal resources here in the U.S. Energy security challenges have certainly gotten EU legislators to act more on new clean energy demonstrations. Part of the challenge for us as an American industry is raising awareness.
The reaction of traditional oil and gas
What about traditional fossil industries? Aren’t they keen to use their expertise and market power in geothermal?
Geothermal really could be a natural option, and a potential sweet spot for oil and gas companies, to diversify in the energy transition. They have the most talented people in the world for what’s needed in geothermal. We draw heavily on industry expertise: it’s a really natural fit. Our 40-person team comes half from the oil and gas industry.
And we’re seeing much more interest. Producer Chevron recently announced a joint venture with Baseload Capital, a fund focused on U.S. geothermal development opportunities. Aramco announced they’ll look into geothermal in the Middle East. For oilfield services companies like Schlumberger, Halliburton, or Liberty Energy, whose bread and butter is drilling, there is even more interest.
Career and energy systems transitions
You switched careers from Deputy Chief of Staff to Mark Carney for COP27 and moved to Houston, America’s fossil fuel capital. Why?
It’s important to me as somebody who grew up in Houston to bring the oil and gas community along with us as we go about the energy transition — not just the people sitting in downtown Houston, but the people who are out in the field, whose jobs are directly implicated in this broader shift.
The next question in my mind became: what do you bring online to replace fossil fuel plants? That was really what led me to look to a company building real “hard technology” in energy, on the back of the huge momentum from the Biden administration’s IRA and Bipartisan Infrastructure Law.
I wanted to be a hands-on part of the energy transition. Previously I was at the Environmental Defense Fund. I worked with large U.S. banks and asset managers on net-zero energy transition strategies. We would provide high-level guidance on the climate risks facing oil and gas companies. However, I felt there was a fundamental limit on the level of detailed knowledge that I could provide to these institutions, without myself having spent time in energy operations.
Tell me a bit about your business. You are a small startup company from 2017. Are there bigger ones around?
We are the biggest next-generation company. There are some incumbent, traditional companies like Ormat, the one publicly traded geothermal company in the U.S., but their approach is quite different from ours — and they do all sorts of other things. There are other startups in the general space.
How are fossil fuel executives reacting to companies like yours?
Generally people I’ve spoken to are excited and say that this makes sense, and why haven’t we thought about doing this before? Also, you have other folks in oil and gas that want to see a company like Fervo try it first and derisk it, then they will come in with drilling expertise and scale it. So you have a mix, but overall it is enthusiasm.
Are there enough skilled people available?
At the field operations level, there are enough blue-collar workers out in the field that know how to drill these wells. It’s a matter of getting those workers to prioritize our projects when they might have a whole pipeline of oil and gas projects on their radar.
But you think the IRA will help in this area?
Yes. With the IRA’s wage and apprenticeship requirements, we’ll see more blue-collar and organized labor coming into the clean energy space. We are thinking about how we can bring more union workers into our projects, as they have historically been left out of oil and gas drilling. We are looking to work with unions in Utah and Nevada that have experience with blue-collar work supporting our projects, for example, unionized welding services to come out as we build the well pad and facility.
On the road to reliability, affordability, and sustainability
Exciting times. Are you worried about the energy transition in the United States?
The oil embargo in the 70s eventually catalyzed the shale revolution which moved the U.S. to energy independence. But now we know that the energy we depend on not only has to be reliable, it has to be clean, and oil and gas can’t provide that. Geothermal, using the exact same technology, can. And in the moment we are in today, where energy markets demand reliability, affordability, and sustainability, geothermal can provide all three. I think too often we’re focused on moonshots in the clean energy space, which are exciting and need attention and investment, but let’s also focus on opportunities today which can be deployed at scale. Geothermal is one of them.
But the devil is in the details.
There are still some structural barriers that need to be resolved if we actually want to hit our clean energy targets as a country.
The first one which I mentioned earlier is expediting transmission. If we’re forced to rely on behind-the-meter co-location, the electricity is not going to you and me and other households connected to the grid.
Permitting is also critical. Currently, geothermal project permitting typically takes 3 to 7 years, time we just don’t have.
Do you have any special message for our readers?
Yes. For people interested in getting experience in the clean energy transition and climate space, I would just really encourage folks to think about spending time at the operational level at a company trying to build out new technology. When you understand the day-to-day and week-to-week challenges that a climate solution provider faces, you’ll be much better equipped to think about systems-level recommendations down the road.
Featured photo: Fervo Energy