August 29, 2024 • 38 mins
Before he founded the geothermal startup Fervo in 2017, Tim Latimer was a drilling engineer for the oil and gas industry — a job he loved. “Honestly, if it wasn't for climate change, I probably wouldn’t have ever changed my career,” he says this week on Zero. Now Latimer is applying his drilling know-how to Fervo’s wells, supercharging their energy production in the process. The company opened its first power plant in Nevada late in 2023, and is now in the process of opening another plant in Utah. Latimer and Akshat Rathi chat about opportunities in geothermal, the infernal permitting process, and why Fervo has its sights on expanding into Kenya, Indonesia, Turkey and the Philippines.
Explore further:
- Past episode with the National Grid’s Sanjeet Sanghera about the need to update the grid on the path to net zero
- Past episode with Bill Gates about investing in nuclear power and other green energy plants
- Past episode with BNEF’s Claire Curry about how clean energy technology startups can succeed in a difficult investment climate
Zero is a production of Bloomberg Green. Our producer is Mythili Rao. Special thanks this week to Kira Bindrim and Monique Mulima. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to zero. I am Akshatrati. This week Drill, Baby, Drill.
Speaker 2 (00:14):
The drilling industry has come up with some of the
most creative job titles. Yeah, you could imagine tool pusher,
no driller, motorman, mudlogger, these are all. These are all
job titles. When you're out on a drilling site.
Speaker 1 (00:34):
And without one of them, you can't get the work done.
Speaker 2 (00:37):
You need everybody.
Speaker 1 (00:38):
I recently got up with Tim Latimer, CEO of Fervo,
a geothermal startup, and we got talking about the folksy
flare of oil and gas industry job titles, because he
is hiring and the geothermal plants he is building requires
the expertise of the mud lagger and the motorman, among others.
(01:00):
Geothermal power works by sending water to hot rocks underground,
using that heat to run a turbine, which creates electricity.
This kind of geothermal power has been around for more
than a century. What Tim is doing is a little
bit different. Fervo was founded in twenty seventeen and it
(01:21):
uses fracking technology from the oil and gas industry to
supercharge geothermal power plants.
Speaker 2 (01:27):
You know, drilling in a lot of ways is drilling
if you're a phenomenal driller for oil and gas, you're
going to do very well in geothermal, and so it
does create this great opportunity for us to tap into
that skill set.
Speaker 1 (01:38):
Fervo opened its first power plant in Nevada late in
twenty twenty three, and the company is quickly growing. It
raised two hundred and twenty million dollars in February and
is now in the process of opening another plant in Utah.
The way to get to zero emissions is to electrify
as much of our world as possible and produce that
electricity without emissions. Now, solar and wind power are solving
(02:02):
that problem, but only partially because they aren't available all
the time. Geothermal power is near zero emissions and is
available all the time. Geothermal has been around for longer
than modern solar or wind power, but until Furvok came along,
I hadn't seen its true potential. Iceland was a developing
(02:23):
country before it found a way to tap geothermal power,
and that kind of story could play out in Kenya, Indonesia,
and so many other developing countries. Geothermal power can also
solve the problem of intermittent solar and wind in developed countries.
I caught up with Tim at the Breakthrough Energy Summit
(02:45):
in London earlier this summer. We talked about the history
of geothermal, the challenges of making it work to day,
and his plans to build plants outside the US. Tim,
(03:07):
welcome to the show.
Speaker 2 (03:08):
Great to be here.
Speaker 1 (03:09):
Now, there's a long history of people using geothermal energy,
from indigenous people making use of hot springs to spa
towns like Bath. Here in England, people love using naturally
heated water for rest and restoration. But the first experiments
in capturing that geothermal heat to make it into electricity
(03:30):
happened in early nineteen hundreds. The first project, which happened
in Italy was just enough power to light four light bulbs.
So let's talk about geothermal plants and how do they work.
Speaker 2 (03:43):
Yeah, Yeah, that Italian project was pioneering just because it
showed that you could use the natural heat of the
earth to create electricity. And I'll point out even though
it was only four light bulbs, light bulbs were not
as efficient back then, so still a great proof point,
but relatively small. And I think what it was interesting
about that project is that it accessed the site in
Italy that geologically was so productive from a geothermal standpoint,
(04:07):
that the steam was naturally coming out of the ground,
and so there actually wasn't even any drilling involved. And
you see that there are places in the world where
steam will naturally escape the surface. But as we move
forward with geothermal, you know, the number of locations where
steam is just pouring out of the ground is not
that numerous. And so you started seeing some pioneering approaches
in Iceland, New Zealand, the United States that looked at, okay,
(04:30):
steam isn't coming out of the ground, but we could
drill a little bit down into the ground, could we
access more productive steam deposits. So you saw a ramp
up you know, in the sixties and seventies of that
technology is combining that surface, you know, capturing steam to
generate electricity using a turbine technology withdrilling, and so the
oldest forms of geothermal electricity generation we're just going to
(04:51):
these really naturally productive areas, drilling relatively shallow wells and
then using the steam to directly power a turbine.
Speaker 1 (04:57):
And so it went from sort of kilo wartz which
would power today a home or two homes, to megawarts,
but only tens of megawarts initially.
Speaker 2 (05:06):
Right, Yeah, but it started to expand. The largest geothermal
facility in the world is the Geysers in Northern California,
and it really started getting built out in the seventies
and eighties and at one point reached over two gigawatts
of power. So relatively early on, in these specific locations
with really suitable geology, geothermal scale to be a pretty
(05:26):
meaningful part of the electricity mix, but it was always
only narrowly applicable into these locations with perfect geology.
Speaker 1 (05:34):
And then the drilling technology itself. Initially you could drill
and tap into reservoirs that had steam, but after that
you had to start drilling two wells and pour water in,
heat it up, and bring it back up.
Speaker 2 (05:48):
Yeah. Well, interestingly enough, you really always should have been
doing that. It's just the first sites that people develop
in these great locations, there just seemed to be an
endless amount of steam that would come out of the ground. Actually,
to talk more specifically about that project in the Geysers
in Northern California, it actually peaked in the eighties at
two point two gigawatts, and for twenty years of development,
(06:10):
you know, you drill more wells, you get more power,
and everything seemed to be working just fine. But actually
one of the things that was happening is there were
multiple developers all tapping into the same steam resource and
producing but not actually providing the right reinjection of fluid.
And so after about twenty years of production, the field
started to decline, and declined quite rapidly, so by the
mid nineties it had declined to only about one gigawatt
(06:33):
of production. But in that time people figured out that
you really did need to not just produce hot steam
out of production wells, but reinject cold water back down
using injection wells to make sure you could maintain the
reservoir over time. So they started a reinjection project at
the geysers in the nineties and it's actually been very
stable since then, you know, producing roughly one gigwatt of electricity.
(06:56):
But from then on, I think the importance of making
sure that you weren't just producing steam but actually reinjecting
cold water back into the reservoir to maintain it, you know,
became standard practice in the industry, and.
Speaker 1 (07:06):
What you've been able to do with FERVO, where you
apply oil and gas technology horizontal drilling to be able
to access more heat from these areas expands the capacity
of energy and thus power that you could produce from
the same sites. So when you apply that lens that
this technology is now viable, you've actually built plants that
(07:28):
produce power. Does that fundamentally change the potential for geothermal
in the world? Yes? By how much?
Speaker 2 (07:37):
By orders of magnitude. So you know, even though geothermal
has been around for a long time, you look at
a market like the United States today and it's still
zero point four percent of the electricity mix. And the
reason for that is that the geysers is wildly productive.
Other sites in California are wildly productive. There's been new
technology that's opened up projects in Oregon and Nevada and elsewhere,
(08:00):
but it's still been limited historically to these areas that
have very specific geologic criteria. It has to be really hot,
it has to be hot close to the surface, you
don't have to drill that deep, and there has to
be natural permeability in the reservoir so that you could
get high flow rates out of the wells.
Speaker 1 (08:14):
And natural permeability just means that when you inject water
that it naturally flows through the geology because it's not
like there's a tank there. It's sort of rocks that
are porous and you need the water to naturally flow through.
Speaker 2 (08:27):
Them, exactly right. And that's a very locally specific criteria
for the rock. That really depends on what rock type
it is and what geologic setting it's in. And so
what people found is that sometimes you would drill geothermal
well and it would produce a lot of steam, and
sometimes you would drill geothermal well and it would produce
snow steam. And that was by and large because there
were areas that even though we knew the rocks were
(08:49):
hot and hot enough to provide temperatures that were viable
for commercial development of geothermal, you couldn't get the flow
rates needed. So, going back even to the nineteen seventies,
the Department of Energy in the US started working on
techniques to look at Okay, you know, let's say not
every site's the geysers, because the geysers is pretty unique.
But let's say you have to drill deeper and you
have to create your own flow pathways as opposed to
(09:11):
relying on natural ones. You know, if that works, you
start talking about a geothermal resource that isn't you know,
zero point four percent, but could be a factor of
one hundred times. You know, more than that. The potential
is I mean, for all intents and purposes limitless. But
going to deeper levels and then using the well stimulation
techniques to create your permeability even when there's not natural
(09:33):
permeability is something that adds significant cost. And so even
though everyone always knew the resource potential was massive, and
there's been experiments on what we call enhanced geothermal systems
going back to the nineteen seventies and there have been
many experiments all over the world since then, it never
meant the right cost criteria, and so geothermal was not
able to expand beyond just those niche resources that had
(09:56):
the perfect geology, you know, up until very recently.
Speaker 1 (09:59):
So going back to Fervo, the thing that you were
able to do uniquely is open up existing places that
did not have the floor rid the permeability, and make
them work through these techniques developed in the oil and
gas industry around hydraulic fracturing and produce power in a
(10:20):
new way. Let's start with your first plant that was
built in Nevada. It started producing power late in twenty
twenty three. What was the challenge that you had to
face and what did you learn from doing it?
Speaker 2 (10:34):
Yeah, so we wanted to be able to prove that
the new thing we were bringing to enhance geothermal systems,
which is actually the incorporation of horizontal drilling, would lead
to the transformative outcomes we were expecting when it came
to the metrics that make these products viable, mostly flow
rate and cost. And so we started looking for a
site that had very specific criteria. What we wanted to
(10:57):
find was an existing geothermal power plant because when we
drilled the wells, we wanted to be able to start
producing brine for electricity immediately, and we wanted to find
a place that was underperforming so it could support our brine.
And we also wanted to find a place that was
underperforming specifically because in its initial development it only used
conventional drilling technology and had dry holes. And so we
(11:19):
found a project in northern Nevada that met all those criteria.
It was developed about fifteen years ago and never quite
made it to its full potential because they actually had
drilled twenty plus wells at this site but found that
roughly half the wells were dry holes and so we
cited an area of the field where, going back fifteen
years ago, there'd been four conventional vertical geothermal wells drilled,
(11:43):
all unsuccessful, and we decided to put our pilot project
right in that spot because we thought, what better way
of showing it like for like comparison of what our
technology can do than providing a productive project in a
place that's exactly where a previously unsuccessful project ben And
so we located to an area that was to the
south of an existing geothermal field but was proven to
(12:07):
be subcommercial using conventional drilling technology, and we started a
program that involved drilling three wells. First the vertical monitoring
well that we could instrument with fiber optics and other
sensors so that we could really learn a lot more
about this project since it was a pilot project. And
then we drilled the first pair of horizontal wells ever
drilled in the geothermal industry, and so drilling horizontally for us,
(12:30):
what we did at that site is we drilled vertically
down to a depth of roughly seven to eight thousand feet,
and we get to that depth because that's where the
temperature gets above three hundred and fifty degrees fahrenheit, which
is which is perspective for geothermal production. And then we
turned the bit sideways and drill horizontally for three thousand feet.
And we did this with two different wells that we
cited a few hundred feet apart from each other. And
(12:50):
so what that means is rather than just a couple
of vertical wells and the flow going directly between two
points and these small vertical wells, we were actually able
to create over one hundred different flow zones between these
two horizontal wells that are eight thousand feet down and
run parallel to each other for three thousand feet. And
so what that creates as a situation where we can
pump down the injection well and actually distribute the flow
(13:13):
evenly across a three thousand foot area, and so it's
far more efficient for heat transfer and picking up the
heat and also importantly accesses as much bigger resource, so
the project can last a lot longer. And then that
water sweeps across the reservoir, collects the heat and comes
back up our production well that we then send to
the plant to generate electricity.
Speaker 1 (13:32):
And now you have a new announcement that with Southern California,
Edison you're going to be building another geothermal plant. This
one's going to be a lot bigger. And this came
about in part because of a new rule from California's regulators,
which to my mind, is a good example of how
governments and private companies have to coordinate in this energy transition.
(13:55):
As I understand it, the state of California is requiring
energy utilities to procure one gigawad of clean energy by
twenty twenty six. What made geothermal provider like Furvo so
attractive compared to say, wind or solar.
Speaker 2 (14:10):
Yeah, it's a great it's a great question and also
a great point about the important role of policy and
deploying new technologies. You know, we formed the company in
twenty seventeen and knew that California, especially given their emphasis
on climate action, was going to be a great market
for us. But one thing we found is we started
engaging with the power buyers of the load serving entities
(14:32):
in California is actually very few of them had experience
and procurement of geothermal. It's a very different technology than
wind or solar or natural gas that they're a lot
more familiar with. And even the ones that did have
experience you know, often hadn't negotiated those contracts in a
long time, so it was actually very difficult to engage
in an off take discussion with them because you know,
you could talk about cost and risk and reliability and
(14:54):
these things that in the environmental attributes, these things that
the power buyers care a lot about. But you know,
if they're not staff after motivated to valuate geothermal projects,
then could be hard for a new technology to like geothermal,
to break through. And so one of the important things
that happened is well, really two things. One on the
climate ambition side is SB one hundred pass in California
about five years ago, and California had been very successful
(15:17):
and meeting their initial renewable Portfolio standard targets, but those,
like most of the renewable portfolio standard targets in the
United States, typically targeted lower levels of renewable energy penetration,
you know, ten percent, twenty percent, thirty percent. But it
wasn't until about five years ago that people started getting
very serious about full decarbonization, you know, one hundred percent
(15:39):
clean electricity mix. And SB one hundred in California really
created a great vision for strong intermediate targets for decarbonization
in the next decade and then ultimately a target of
complete decarbonization of the electricity sector by twenty forty five.
And so that was the first sort of wake up
call I think to the power buyers in the state
that okay, we really you need to build on the
(16:00):
success of wind and solar deployment and start thinking about
energy storage and clean firm power to really make sure
we can achieve those goals of one hundred percent decarbonisation.
Speaker 1 (16:11):
So it's easy to understand that geothermal is not like
solar and wind because you can access geothermal all the time.
It's hard to understand why it's not like natural gas
because you're still using a steam turbine. You're still spinning
a turbine to produce power, and you can produce it
when you want it, just like a natural gas pop plant.
So why is it that utilities couldn't understand geothermal as
(16:34):
they understand gas.
Speaker 2 (16:36):
It's it's similar from an output standpoint, but the technology
is very different. And you know, when utilities procure, especially
large contracts of power, you know they build really detailed
integrated resource plans around that. So it's very important if
they procure the power then it actually shows up. And traditionally,
if they were in a diligence, you know, a natural
(16:57):
gas project, they need to make sure that the technology
is valid, that they've got the right engineering plans, it
has access to natural gas and a feed supply agreement
so that the power can get the fuel, and you
could sort of check the boxes on that and understand that,
all right, this project is a reasonable likelihood of success
when they started looking at geothermal. Now, if you're a
utility and you want to base your planning on this
(17:20):
resource showing up, you need to understand a lot more
about that technology, like you need to really have confidence
that the developer proposing the project can actually drill the
wells and get the resource output needed to be successful.
And unfortunately, using conventional technology of geothermal, there's been many
examples over the last several decades of people with great
(17:42):
plans of projects and ambitions that ran into that dry
hole challenge and as a result, the projects didn't show
up on time or didn't produce as much as they
were intending to. And so when you're talking to a
utility customer that really needs to make sure a project
is going to show up when they contract it the
fact that you know, they didn't have comfort around the
(18:03):
track record of success in geothermal. Not a lot of
utilities have a geology department sitting around, you know, and
so they just didn't really feel comfortable with taking on
the development risk that is inherent to geothermal using conventional technology.
Speaker 1 (18:16):
And so what did you have to do to convince
Southern California Edison to take on geotomal?
Speaker 2 (18:20):
Then, yeah, well there's another part of the resource, you know,
policy mix in California. So SB one hundred was very
powerful and setting the climate ambition. But then the rolling
blackouts that occurred in the state in August of twenty twenty,
you know, were a real wake up call for making
sure that reliability was a focus of the grid. And
(18:40):
so the California Public uti Utility Commission issued a ruling
called the Midterm Reliability Ruling that spelled out specific procurement
mandates for capacity and for energy storage to make sure
that California could meet its reliability goals. But also there
was an early recognition there that when solar and batteries
were going to get a lot of the job done,
but we are going to need an additional resource that's
(19:02):
a clean firm power solution, and clean firm is the
definition of technologies that don't produce carbon emissions but also
have dispatchability and are on all the time, So like geothermal, nuclear,
natural gas with carbon capture and sequestration, those are sort
of the technologies that people generally bucket into the clean
firm power mix. And so the CPUC actually created a
specific carve out for one thousand megawatts of clean firm power,
(19:27):
and so for the first time in a long time,
created a strong market signal that this was something that
the grid needs. A well functioning grid needs to have
a portion of its energy come from clean firm power,
and it pushed that mandate out actually to all of
the power buyers in the state of California, so all
of a sudden, they had a reason to make sure
that they could get smart about projects and look at geothermal.
So we engaged with a lot of community choice aggregators
(19:50):
and the specific utilities in California. They all ran, oftentimes
their first proposals to procure geothermal power in decades. In
some cases there for the first time ever for a
lot of these organizations. And we had been building since
twenty seventeen a portfolio of projects that we could market
to these customers that could meet the online date obligations
(20:11):
of the Public Utility Commission's requirements. So we first engaged
with SE for this deal as part of a procurement
process to meet those needs, and we were able to
show not only had we done the groundwork on the
permitting and transmission and citing of projects, but that in
parallel to that, we'd accomplished all of the technical objectives
needed at Project read our product in Nevada, and so
(20:34):
we were viewed by them and by our other customers
as a technology that meets the needs of this clean
firm power mandate, helps support California meet not only its
climate goals but its reliability goals, and actually could prove
that we were at technology with a track record of
success and the ability to scale up quickly in time
to meet these mandates. And I think we're fairly unique
(20:55):
in our ability to do that. So we found a
lot of success in the off take market now because
there's market demand for what we're selling, and we've also
gone through the steps of de risking the technology to
show that we're ready to scale to meet the need
of the grid in the very near term.
Speaker 1 (21:10):
So now you're working on a project in Utah, it's
going to be four hundred megawards and that could power
something like three hundred thousand homes. It's going to be
an expensive project because it's a first of a kind
at that scale. For you, just talk us through the financing.
How are you going to make it work? Yeah?
Speaker 2 (21:28):
Great, great question, because I think the first of a
kind project deployment and financing is I think the important
topic when it comes to climate tech deployment today because
it's an area that we as a financing ecosystem haven't
really solved well before. When you think about traditional renewable
project finance with wind and solar, which you're very proven
(21:48):
technologies a lot of times, once you kind of check
the boxes of development in terms of sighting and engineering
and customer off take, you can already bring in very
high percentages of debt for the project. So that's one
of the things that make these technologies very affordable is
the financing costs are very low.
Speaker 1 (22:03):
Right, and debt comes in cheap because debt is a
loan from typically a bank or maybe some investors, and
they'll charge you an interest rate, but it's typically lower
interest rate than you would pay if you raise that
money through equity, where they're looking for ten, twelve fifteen
percent return.
Speaker 2 (22:19):
Absolutely, And so when you think about a FERVO and
deploying rgothermal technology or really anything that's in the climate
tech deployment phase, people understand that the first project, or
the second project, or even the tenth project, you have
less of a track record, and so investors want to
see the potential for a higher return to compensate them
for the risk they're taking on because they may have
(22:41):
a couple projects in that portfolio. With their first of
a client projects they just don't return anything. And so
early projects are going to have a high cost of capital.
And then the goal is to build a track record
of success so you can progressively lower that cost of capital.
Speaker 1 (22:55):
And so to do this, you're splitting this project into
one hundred megabork plant and then upgrade to a four
hundred mega work on. That's right, So how much is
the first hundred mega what going to cost? And when
does it come online?
Speaker 2 (23:05):
Yeah, so phase one of this project, we call it
Project Cape in Utah, will be roughly one hundred megawatts.
At this point in time, we've already drilled several of
the wells. We've done all of the work to develop
and bring it online on our schedule, which is set
for twenty twenty six, and we'll spend over five hundred
million dollars to bring that first phase of that project
online by twenty twenty.
Speaker 1 (23:23):
Six, and some of it will come from debt.
Speaker 2 (23:26):
Yes, yes, So the goal for us or any technology
is to get to where these projects are so trusted
because of your track record that you can finance them
with a high degree of debt. We've checked a lot
of the boxes for traditional project development. We're very far
along in the engineering. We've already drilled half the well field,
we've got off take, we've got transmission, we've got the
(23:46):
permits we need. But since it's viewed as a newer technology,
we have to get a much lower percentage of debt
compared to if it was a more proven technology. So
in the industry we call this, you know, overequitizing a project.
You know, when you're a mature technology with a binding
off take agreement, you would hope to get fifty percent
or more of the project from debt. You know, on
our first project, we're looking at more like twenty to
thirty percent from debt, and that's great. It helps us
(24:08):
finance the project. But as we build more of a
track record, you know we'll be able to finance a
higher percentage of the project with debt and then translate
that into lower cost electricity for our customers.
Speaker 1 (24:18):
But it's also true that it's taken you a long
time to get the permits, and these days, at least
in the US, but also in Europe, building anything is
taking a long time. Getting planning and permits done is
taking a long time. Are there specific hurdles for geothermal projects.
Speaker 2 (24:36):
Yes. So it's a bit of a quirk of history
or geology or whatever you would call it that the
best locations in the United States for geothermal energy development
also happen to be on land that's owned by the
US federal government, and the federal land carries with it
very different permitting requirements than private or state land. The
(24:59):
majority of our projects are cited on federal land because
that's where the geology is the best. The vast majority
of the Western United States is owned by the federal government,
and the vast majority of the Western United States is
where the best geothermal projects are, and so for US
to be able to break ground on our project Kate
and drill the first well, which we did in the
summer of twenty twenty three. We actually started the leasing
(25:20):
and permitting process for that project back in twenty nineteen,
so it took us about forty years to get the
project in position to be able to drill the first well,
and a lot of that is an artifact of the
fact that it's on federal land. If it was just
on private land, you could probably shorten that to six
or twelve months. And it's particularly challenging for geothermal because
not only are we developing projects mostly on federal land
(25:43):
where we're subject to these requirements, but also there's actually
a lot of categorical exclusions that make permitting easier for
drilling in the United States that only apply to oil
and gas drilling. And so we have many examples where
going through our project development, if we were to call
it on gas project, or if we were drilling for
oil and gas, we can actually streamline the permitting to
(26:04):
go a lot faster. But those categorical exclusions don't extend
to geothermal development.
Speaker 1 (26:09):
You don't have the lobbing permit.
Speaker 2 (26:11):
It's not the lobbying power, and it's also something that
you know, geothermal always struggles to be top of mind
for people. I think there's been a longstanding conventional wisdom
that it's a great resource, but it can't scale, and
so people haven't really focused on it for policy efforts.
So you know, that shows up in the fact that
for much of the last decade we didn't have the
same tax credit that solar and wind dead and that
(26:34):
makes it challenging to develop. It also shows up in
the permitting side, where you know, I've talked to people
who were in the room when the provisions of the
Energy Act of two thousand and five that put in
these categorical exclusions for oil and gas drilling were developed,
and I asked, why did you exclude geothermal? And the
obvious answer is nobody had anything against geothermal. It's very
(26:57):
obvious the environmental impacts of drilling for geothermal are actually
less the environmental impacts of drilling for oil and gas.
It just didn't come up, you know, And so if
the law was specific to oil and gas drilling and
nobody thought to include geothermal, that's the situation we landed
ourselves at. And that's something that we find over and
over again, not just the US market, but internationally. Is
you're set up with policy structures that didn't really contemplate
(27:19):
rapid growth of geothermal and that's one of the barriers
to deployment.
Speaker 1 (27:22):
You are using hydraulic fracturing, which was a technology that
was pursued and supported heavily by the US government for
specifically oil and gas industry. Now, we've been using fracking
for a long time and it's been pretty productive for gas,
even for oil, but there have been issues around fracking
(27:45):
that are very specific to how it's done. Right, you
use a lot of fluids to try and break these
geological structures in a very specific way. You cause earthquakes.
Do any of those problems also translate to what you're
doing when you try and get geotoobar from fracking.
Speaker 2 (28:02):
Yeah, as with any development project, there are risks that
we have to address and handle through the development process.
You know, one of the concerns you raised is what
we in the industry call in dow seismicity. You know,
is there subsurface activity that you can do that can
cause earthquakes? And what we do is quite a bit
different from the oil and gas industry. You know, actually,
(28:23):
when you review. The majority of the earthquake activity that's
associated with shale oil and gas development in the United States,
that most common events come from saltwater disposal wells. It's
actually all the produced water that's generated from the operations
that then has to get reinjected as a disposal into
these wells that can cause pressure changes that can trigger
(28:44):
these earthquake activities. And so we actually don't you have
that as part of our process. You know, after we
finished drilling and completing the wells, all we're actually doing
then for an extended period of time is recirculating the
fluid through the reservoir. And so that actually doesn't cause
these pressure changes that disposal wells do, and so it
doesn't present the same high level of risk for seismic
(29:05):
activity that the oil and gas industry has. So I
would say, even though it doesn't carry a lot of
the same inherent risks, it's still something we focus on
quite a bit. So in the United States, the Department
of Energy has outlined a protocol called the indu Seismicity
Mitigation Protocol for Geothermal then actually walks through what are
the steps that you need to take for safe development
(29:27):
of geothermal power. So we follow all of those steps
in the protocol for every one of our projects. And
to give you some examples of what that means, we
actually partnered with the US Geological Survey. On our first project,
we analyzed that the seismic monitoring network in our area
wasn't really robust enough to get the really high fidelity
measurements we wanted to get to meet the indue Seismicity protocol.
(29:49):
So we actually partnered with the US Geological Survey to
augment and we installed seven local seismic monitoring stations around
our project so that we could monitor for levels of seismicity.
And what we know from years and years of development
and geothermal and oil gas and elsewhere is actually larger
seismic events that could co pause risks to people are
(30:10):
always preceded by smaller seismic events that can be picked
up with specialized instrumentation but can't be felt with the surface.
And so part of the protocol for indu seismicity and
geothermal is the adoption of what we call a traffic
light system, where we actually set very low thresholds for
these augmented seismic networks. The specialized sensor can detect low
(30:32):
levels of seismic activity, we can actually pause operations until
the seismic activity subsides, and as a result, you can
really mitigate against those risks of higher activity. So what
we do, you know, obviously borrows technology from oil and gas,
but it's both different technically. You know, the example I
gave here is we're not using those disposal wells, but
it's also something that we have a lot of tools
(30:53):
to mitigate against, and we have not had any issues
with seismicity.
Speaker 1 (30:58):
Now, with all of that context in mind, and you
are dreaming big, you want the US generation from geotheromal
to go fermer point four percent to twenty percent. Now,
if you're not dreaming big as a startup, you're not
doing right. So it's nice to have a big dream.
But this is going to happen at a time where
electricity demand is likely going to double. So you're really
(31:21):
thinking of scaling geothermal one hundred times from where it is.
What will it take to make that jump happen?
Speaker 2 (31:29):
Yeah, So I think we need to build on our
early pilot's success. I think the fact that we have
a project online in producing energy is something that you know,
honestly differentiates us a lot in the climate tech ecosystem.
A lot of companies have not got cross that important
milestone yet. But our next goal is to prove that
we can do it at one hundred times in the scale,
and that's this four hundred megawa project. And then as
(31:50):
we think going forward, you know, the nice thing about
our technology, as we've discussed, is it really does open
up so much more as sites to potential development. So
we actually have a pipeline just in the Western United
States where we have dozens of other projects we've cited
and identified locations for that are just as big, if
(32:11):
not bigger than our current four hundred megawap project. And
so what we need to do is bring this four
hundred megawa project online, show that this is a reliable, proven,
cost effective technology, and then scale the growth rate ten
or one hundred times so that we can achieve those goals.
So there's really no limit to the amount of geothermal potential,
and it just comes down to how much of it
(32:32):
can be accessed economically with today's technology.
Speaker 1 (32:35):
Now, we've been talking about the US because the US
is the place with the most geothermal power in the world,
but there is a lot of geothermal power capacity in
developing countries like Indonesia, Philippines, Kenya. If anything, over the
past two decades, Kenya has been able to build geothermal
and now almost fifty percent of its power comes from geothermal.
Are you looking to expand for outside the US and where.
Speaker 2 (32:57):
Yes, definitely. I think all of our current projects in
construction are in the US, and that's because we see
market demand for that. We understand that market. We're a
US based company, and so that's where we wanted to start.
But the technologies we're working on are globally applicable. The
US is the market leader in geothermal, but only about
twenty percent of the global capacity for geothermal is in
(33:17):
the US. A lot of it is in the markets
you mentioned Kenya, Indonesia, Turkey, the Philippines, and those are
all places we're looking at. You know, if you look
at how we've started in the US, we've gone to
locations that have a little bit of conventional geothermal and
used our technology to make it a lot of unconventional geothermal.
And so the markets we're looking at internationally actually are
very similar. What we're going to go to at first
(33:38):
as places with an established geothermal market, but then ten
x or one hundred x the potential of geothermal in
those markets given our technology. But ultimately, you know, every
country in the world has geology that's going to be
suitable for geothermal development using our technology approach, and so
we do think this can be a globally scalable solution.
Speaker 1 (34:01):
After the break, Tim tells me about the oil and
gas workers eager to find new jobs in the geothermal industry.
And by the way, if you've been enjoying this episode,
please take a moment to rate and review the show
on Apple Podcasts and Spotify. It helps other listeners find
the show. One thing that's always struck me about conversations
(34:25):
we've had online offline over the years with Geothermal and
Fervo is that you've been able to take an oil
and gas technology and apply to clean energy. You've been
able to take workers in the oil and gas industry
and get them to work in the clean energy sector.
I recently spoke to Bill Gates, who is opening a
nuclear power plant in a former coal town in Wyoming
(34:48):
and hoping to use not just infrastructure, but a lot
of the skills that come in that town maintaining a
power plant. So talk me through how it's been for
you to try and bring in the human resources from
the oil and gas industry into clean energy.
Speaker 2 (35:06):
Yeah, it's been a huge enabler for FERVO and also
core part of our mission from day one. You know,
you know from talking to me, I started my career
at oil and gas. You know, I grew up in
a small town in Texas and started working for as
a drilling engineer right out of college. And I always
found the work fascinating and I always enjoyed the people
I worked with, and honestly, if it wasn't for climate change,
probably would not have ever changed my career because it
(35:26):
was a fascinating career. But I got seriously interested in
climate change and it's just not that hard to think
through the logic of it. When you start realizing we
need to reinvent how we get energy in the world.
That does mean to transition away from fossil fuels and
what does that mean for all the people that work
in the industry, And you know, that was something that
was a big motivator for me and why I was
so excited about geothermal because it's a very seamless transition
(35:49):
to go from drilling oil and gas wells to drilling
geothermal wells, and in fact, the majority of the employees
at Fervo come from the oil and gas industry. And
the fact that we have such a large skilled work
forced to tap into and approven supply chain of the
kinds of equipment services we need has been one of
the things that's allowed for a voter to get to
market way faster than many of the other competing approaches,
(36:11):
you know, in the climate tech ecosystem. So it's been
a huge enabler. I mean, drilling is this amazingly orchestrated
engineering and scientific challenge, and it's taken one hundred and
fifty years of the oil and gas industry drilling to
get the technology and the place that it is today.
And there's no way we could be developing the sites
the way we're developing them. I mean, you just imagine
(36:33):
drilling a well. You need technical specialists and dozens of
sub disciplines. But the amount of knowledge and skills that
have been built up around this activity over the last
one hundred and fifty years is incredible. You know, I
was just out at our drilling location in Utah last
week and met somebody from you know, one of our
supply companies called mud Logging. The on site geologists that
(36:54):
analyzed the geology there, and the gentleman came up to
me and introduced himselves and told me how excited he was,
and he said that he'd specifically requested to be on
this project even though it made him have to move
halfway across the country for it, because he realized that
this was the future and this was something that he
could be in on the ground floor of something that
(37:16):
changes the world. And so it's somebody who's worked in
oil and gas their entire career and they're gravitating to this,
and the amount of excitement there is among the people
that look at this and see that it's something new,
see that it can be a huge part of the
energy mix of the future and solve climate change and
use the skills they already have to do. It is
something that just creates a lot of enthusiasm around our projects,
(37:37):
and it's always phenomenal for us to visit the hardworking
people out on our site and just see how excited
they are to be part of this project that's really
going to change things.
Speaker 1 (37:47):
Thank you, Tim, thank you, thank you for listening to
zero and now for the sound of the week. That
is geothermal energy from the geysers of Yellowstone National Park.
(38:07):
You could say it's geothermal energy being wasted for tourism.
If you like this episode, please take a moment to
rate and review the show on Ample podcasts and Spotify.
Share this episode with a friend or with someone who
needs a spa weekend. You can get in touch at
zero pod at Bloomberg dot net. Zero's producer is Mighty
Lee Rau. Bloomberg's Head of podcast is Stage Bowman and
(38:29):
head of Talk is Brendan Newnan. Our theme music is
composed by Wonderly. Thanks to break Through Energy for a
recording space for this episode, special thanks to Kirra Bindrim
and Monique Mulima. I am actual Rati back
Welcome to zero. I am Akshatrati. This week Drill, Baby, Drill.
Speaker 2 (00:14):
The drilling industry has come up with some of the
most creative job titles. Yeah, you could imagine tool pusher,
no driller, motorman, mudlogger, these are all. These are all
job titles. When you're out on a drilling site.
Speaker 1 (00:34):
And without one of them, you can't get the work done.
Speaker 2 (00:37):
You need everybody.
Speaker 1 (00:38):
I recently got up with Tim Latimer, CEO of Fervo,
a geothermal startup, and we got talking about the folksy
flare of oil and gas industry job titles, because he
is hiring and the geothermal plants he is building requires
the expertise of the mud lagger and the motorman, among others.
(01:00):
Geothermal power works by sending water to hot rocks underground,
using that heat to run a turbine, which creates electricity.
This kind of geothermal power has been around for more
than a century. What Tim is doing is a little
bit different. Fervo was founded in twenty seventeen and it
(01:21):
uses fracking technology from the oil and gas industry to
supercharge geothermal power plants.
Speaker 2 (01:27):
You know, drilling in a lot of ways is drilling
if you're a phenomenal driller for oil and gas, you're
going to do very well in geothermal, and so it
does create this great opportunity for us to tap into
that skill set.
Speaker 1 (01:38):
Fervo opened its first power plant in Nevada late in
twenty twenty three, and the company is quickly growing. It
raised two hundred and twenty million dollars in February and
is now in the process of opening another plant in Utah.
The way to get to zero emissions is to electrify
as much of our world as possible and produce that
electricity without emissions. Now, solar and wind power are solving
(02:02):
that problem, but only partially because they aren't available all
the time. Geothermal power is near zero emissions and is
available all the time. Geothermal has been around for longer
than modern solar or wind power, but until Furvok came along,
I hadn't seen its true potential. Iceland was a developing
(02:23):
country before it found a way to tap geothermal power,
and that kind of story could play out in Kenya, Indonesia,
and so many other developing countries. Geothermal power can also
solve the problem of intermittent solar and wind in developed countries.
I caught up with Tim at the Breakthrough Energy Summit
(02:45):
in London earlier this summer. We talked about the history
of geothermal, the challenges of making it work to day,
and his plans to build plants outside the US. Tim,
(03:07):
welcome to the show.
Speaker 2 (03:08):
Great to be here.
Speaker 1 (03:09):
Now, there's a long history of people using geothermal energy,
from indigenous people making use of hot springs to spa
towns like Bath. Here in England, people love using naturally
heated water for rest and restoration. But the first experiments
in capturing that geothermal heat to make it into electricity
(03:30):
happened in early nineteen hundreds. The first project, which happened
in Italy was just enough power to light four light bulbs.
So let's talk about geothermal plants and how do they work.
Speaker 2 (03:43):
Yeah, Yeah, that Italian project was pioneering just because it
showed that you could use the natural heat of the
earth to create electricity. And I'll point out even though
it was only four light bulbs, light bulbs were not
as efficient back then, so still a great proof point,
but relatively small. And I think what it was interesting
about that project is that it accessed the site in
Italy that geologically was so productive from a geothermal standpoint,
(04:07):
that the steam was naturally coming out of the ground,
and so there actually wasn't even any drilling involved. And
you see that there are places in the world where
steam will naturally escape the surface. But as we move
forward with geothermal, you know, the number of locations where
steam is just pouring out of the ground is not
that numerous. And so you started seeing some pioneering approaches
in Iceland, New Zealand, the United States that looked at, okay,
(04:30):
steam isn't coming out of the ground, but we could
drill a little bit down into the ground, could we
access more productive steam deposits. So you saw a ramp
up you know, in the sixties and seventies of that
technology is combining that surface, you know, capturing steam to
generate electricity using a turbine technology withdrilling, and so the
oldest forms of geothermal electricity generation we're just going to
(04:51):
these really naturally productive areas, drilling relatively shallow wells and
then using the steam to directly power a turbine.
Speaker 1 (04:57):
And so it went from sort of kilo wartz which
would power today a home or two homes, to megawarts,
but only tens of megawarts initially.
Speaker 2 (05:06):
Right, Yeah, but it started to expand. The largest geothermal
facility in the world is the Geysers in Northern California,
and it really started getting built out in the seventies
and eighties and at one point reached over two gigawatts
of power. So relatively early on, in these specific locations
with really suitable geology, geothermal scale to be a pretty
(05:26):
meaningful part of the electricity mix, but it was always
only narrowly applicable into these locations with perfect geology.
Speaker 1 (05:34):
And then the drilling technology itself. Initially you could drill
and tap into reservoirs that had steam, but after that
you had to start drilling two wells and pour water in,
heat it up, and bring it back up.
Speaker 2 (05:48):
Yeah. Well, interestingly enough, you really always should have been
doing that. It's just the first sites that people develop
in these great locations, there just seemed to be an
endless amount of steam that would come out of the ground. Actually,
to talk more specifically about that project in the Geysers
in Northern California, it actually peaked in the eighties at
two point two gigawatts, and for twenty years of development,
(06:10):
you know, you drill more wells, you get more power,
and everything seemed to be working just fine. But actually
one of the things that was happening is there were
multiple developers all tapping into the same steam resource and
producing but not actually providing the right reinjection of fluid.
And so after about twenty years of production, the field
started to decline, and declined quite rapidly, so by the
mid nineties it had declined to only about one gigawatt
(06:33):
of production. But in that time people figured out that
you really did need to not just produce hot steam
out of production wells, but reinject cold water back down
using injection wells to make sure you could maintain the
reservoir over time. So they started a reinjection project at
the geysers in the nineties and it's actually been very
stable since then, you know, producing roughly one gigwatt of electricity.
(06:56):
But from then on, I think the importance of making
sure that you weren't just producing steam but actually reinjecting
cold water back into the reservoir to maintain it, you know,
became standard practice in the industry, and.
Speaker 1 (07:06):
What you've been able to do with FERVO, where you
apply oil and gas technology horizontal drilling to be able
to access more heat from these areas expands the capacity
of energy and thus power that you could produce from
the same sites. So when you apply that lens that
this technology is now viable, you've actually built plants that
(07:28):
produce power. Does that fundamentally change the potential for geothermal
in the world? Yes? By how much?
Speaker 2 (07:37):
By orders of magnitude. So you know, even though geothermal
has been around for a long time, you look at
a market like the United States today and it's still
zero point four percent of the electricity mix. And the
reason for that is that the geysers is wildly productive.
Other sites in California are wildly productive. There's been new
technology that's opened up projects in Oregon and Nevada and elsewhere,
(08:00):
but it's still been limited historically to these areas that
have very specific geologic criteria. It has to be really hot,
it has to be hot close to the surface, you
don't have to drill that deep, and there has to
be natural permeability in the reservoir so that you could
get high flow rates out of the wells.
Speaker 1 (08:14):
And natural permeability just means that when you inject water
that it naturally flows through the geology because it's not
like there's a tank there. It's sort of rocks that
are porous and you need the water to naturally flow through.
Speaker 2 (08:27):
Them, exactly right. And that's a very locally specific criteria
for the rock. That really depends on what rock type
it is and what geologic setting it's in. And so
what people found is that sometimes you would drill geothermal
well and it would produce a lot of steam, and
sometimes you would drill geothermal well and it would produce
snow steam. And that was by and large because there
were areas that even though we knew the rocks were
(08:49):
hot and hot enough to provide temperatures that were viable
for commercial development of geothermal, you couldn't get the flow
rates needed. So, going back even to the nineteen seventies,
the Department of Energy in the US started working on
techniques to look at Okay, you know, let's say not
every site's the geysers, because the geysers is pretty unique.
But let's say you have to drill deeper and you
have to create your own flow pathways as opposed to
(09:11):
relying on natural ones. You know, if that works, you
start talking about a geothermal resource that isn't you know,
zero point four percent, but could be a factor of
one hundred times. You know, more than that. The potential
is I mean, for all intents and purposes limitless. But
going to deeper levels and then using the well stimulation
techniques to create your permeability even when there's not natural
(09:33):
permeability is something that adds significant cost. And so even
though everyone always knew the resource potential was massive, and
there's been experiments on what we call enhanced geothermal systems
going back to the nineteen seventies and there have been
many experiments all over the world since then, it never
meant the right cost criteria, and so geothermal was not
able to expand beyond just those niche resources that had
(09:56):
the perfect geology, you know, up until very recently.
Speaker 1 (09:59):
So going back to Fervo, the thing that you were
able to do uniquely is open up existing places that
did not have the floor rid the permeability, and make
them work through these techniques developed in the oil and
gas industry around hydraulic fracturing and produce power in a
(10:20):
new way. Let's start with your first plant that was
built in Nevada. It started producing power late in twenty
twenty three. What was the challenge that you had to
face and what did you learn from doing it?
Speaker 2 (10:34):
Yeah, so we wanted to be able to prove that
the new thing we were bringing to enhance geothermal systems,
which is actually the incorporation of horizontal drilling, would lead
to the transformative outcomes we were expecting when it came
to the metrics that make these products viable, mostly flow
rate and cost. And so we started looking for a
site that had very specific criteria. What we wanted to
(10:57):
find was an existing geothermal power plant because when we
drilled the wells, we wanted to be able to start
producing brine for electricity immediately, and we wanted to find
a place that was underperforming so it could support our brine.
And we also wanted to find a place that was
underperforming specifically because in its initial development it only used
conventional drilling technology and had dry holes. And so we
(11:19):
found a project in northern Nevada that met all those criteria.
It was developed about fifteen years ago and never quite
made it to its full potential because they actually had
drilled twenty plus wells at this site but found that
roughly half the wells were dry holes and so we
cited an area of the field where, going back fifteen
years ago, there'd been four conventional vertical geothermal wells drilled,
(11:43):
all unsuccessful, and we decided to put our pilot project
right in that spot because we thought, what better way
of showing it like for like comparison of what our
technology can do than providing a productive project in a
place that's exactly where a previously unsuccessful project ben And
so we located to an area that was to the
south of an existing geothermal field but was proven to
(12:07):
be subcommercial using conventional drilling technology, and we started a
program that involved drilling three wells. First the vertical monitoring
well that we could instrument with fiber optics and other
sensors so that we could really learn a lot more
about this project since it was a pilot project. And
then we drilled the first pair of horizontal wells ever
drilled in the geothermal industry, and so drilling horizontally for us,
(12:30):
what we did at that site is we drilled vertically
down to a depth of roughly seven to eight thousand feet,
and we get to that depth because that's where the
temperature gets above three hundred and fifty degrees fahrenheit, which
is which is perspective for geothermal production. And then we
turned the bit sideways and drill horizontally for three thousand feet.
And we did this with two different wells that we
cited a few hundred feet apart from each other. And
(12:50):
so what that means is rather than just a couple
of vertical wells and the flow going directly between two
points and these small vertical wells, we were actually able
to create over one hundred different flow zones between these
two horizontal wells that are eight thousand feet down and
run parallel to each other for three thousand feet. And
so what that creates as a situation where we can
pump down the injection well and actually distribute the flow
(13:13):
evenly across a three thousand foot area, and so it's
far more efficient for heat transfer and picking up the
heat and also importantly accesses as much bigger resource, so
the project can last a lot longer. And then that
water sweeps across the reservoir, collects the heat and comes
back up our production well that we then send to
the plant to generate electricity.
Speaker 1 (13:32):
And now you have a new announcement that with Southern California,
Edison you're going to be building another geothermal plant. This
one's going to be a lot bigger. And this came
about in part because of a new rule from California's regulators,
which to my mind, is a good example of how
governments and private companies have to coordinate in this energy transition.
(13:55):
As I understand it, the state of California is requiring
energy utilities to procure one gigawad of clean energy by
twenty twenty six. What made geothermal provider like Furvo so
attractive compared to say, wind or solar.
Speaker 2 (14:10):
Yeah, it's a great it's a great question and also
a great point about the important role of policy and
deploying new technologies. You know, we formed the company in
twenty seventeen and knew that California, especially given their emphasis
on climate action, was going to be a great market
for us. But one thing we found is we started
engaging with the power buyers of the load serving entities
(14:32):
in California is actually very few of them had experience
and procurement of geothermal. It's a very different technology than
wind or solar or natural gas that they're a lot
more familiar with. And even the ones that did have
experience you know, often hadn't negotiated those contracts in a
long time, so it was actually very difficult to engage
in an off take discussion with them because you know,
you could talk about cost and risk and reliability and
(14:54):
these things that in the environmental attributes, these things that
the power buyers care a lot about. But you know,
if they're not staff after motivated to valuate geothermal projects,
then could be hard for a new technology to like geothermal,
to break through. And so one of the important things
that happened is well, really two things. One on the
climate ambition side is SB one hundred pass in California
about five years ago, and California had been very successful
(15:17):
and meeting their initial renewable Portfolio standard targets, but those,
like most of the renewable portfolio standard targets in the
United States, typically targeted lower levels of renewable energy penetration,
you know, ten percent, twenty percent, thirty percent. But it
wasn't until about five years ago that people started getting
very serious about full decarbonization, you know, one hundred percent
(15:39):
clean electricity mix. And SB one hundred in California really
created a great vision for strong intermediate targets for decarbonization
in the next decade and then ultimately a target of
complete decarbonization of the electricity sector by twenty forty five.
And so that was the first sort of wake up
call I think to the power buyers in the state
that okay, we really you need to build on the
(16:00):
success of wind and solar deployment and start thinking about
energy storage and clean firm power to really make sure
we can achieve those goals of one hundred percent decarbonisation.
Speaker 1 (16:11):
So it's easy to understand that geothermal is not like
solar and wind because you can access geothermal all the time.
It's hard to understand why it's not like natural gas
because you're still using a steam turbine. You're still spinning
a turbine to produce power, and you can produce it
when you want it, just like a natural gas pop plant.
So why is it that utilities couldn't understand geothermal as
(16:34):
they understand gas.
Speaker 2 (16:36):
It's it's similar from an output standpoint, but the technology
is very different. And you know, when utilities procure, especially
large contracts of power, you know they build really detailed
integrated resource plans around that. So it's very important if
they procure the power then it actually shows up. And traditionally,
if they were in a diligence, you know, a natural
(16:57):
gas project, they need to make sure that the technology
is valid, that they've got the right engineering plans, it
has access to natural gas and a feed supply agreement
so that the power can get the fuel, and you
could sort of check the boxes on that and understand that,
all right, this project is a reasonable likelihood of success
when they started looking at geothermal. Now, if you're a
utility and you want to base your planning on this
(17:20):
resource showing up, you need to understand a lot more
about that technology, like you need to really have confidence
that the developer proposing the project can actually drill the
wells and get the resource output needed to be successful.
And unfortunately, using conventional technology of geothermal, there's been many
examples over the last several decades of people with great
(17:42):
plans of projects and ambitions that ran into that dry
hole challenge and as a result, the projects didn't show
up on time or didn't produce as much as they
were intending to. And so when you're talking to a
utility customer that really needs to make sure a project
is going to show up when they contract it the
fact that you know, they didn't have comfort around the
(18:03):
track record of success in geothermal. Not a lot of
utilities have a geology department sitting around, you know, and
so they just didn't really feel comfortable with taking on
the development risk that is inherent to geothermal using conventional technology.
Speaker 1 (18:16):
And so what did you have to do to convince
Southern California Edison to take on geotomal?
Speaker 2 (18:20):
Then, yeah, well there's another part of the resource, you know,
policy mix in California. So SB one hundred was very
powerful and setting the climate ambition. But then the rolling
blackouts that occurred in the state in August of twenty twenty,
you know, were a real wake up call for making
sure that reliability was a focus of the grid. And
(18:40):
so the California Public uti Utility Commission issued a ruling
called the Midterm Reliability Ruling that spelled out specific procurement
mandates for capacity and for energy storage to make sure
that California could meet its reliability goals. But also there
was an early recognition there that when solar and batteries
were going to get a lot of the job done,
but we are going to need an additional resource that's
(19:02):
a clean firm power solution, and clean firm is the
definition of technologies that don't produce carbon emissions but also
have dispatchability and are on all the time, So like geothermal, nuclear,
natural gas with carbon capture and sequestration, those are sort
of the technologies that people generally bucket into the clean
firm power mix. And so the CPUC actually created a
specific carve out for one thousand megawatts of clean firm power,
(19:27):
and so for the first time in a long time,
created a strong market signal that this was something that
the grid needs. A well functioning grid needs to have
a portion of its energy come from clean firm power,
and it pushed that mandate out actually to all of
the power buyers in the state of California, so all
of a sudden, they had a reason to make sure
that they could get smart about projects and look at geothermal.
So we engaged with a lot of community choice aggregators
(19:50):
and the specific utilities in California. They all ran, oftentimes
their first proposals to procure geothermal power in decades. In
some cases there for the first time ever for a
lot of these organizations. And we had been building since
twenty seventeen a portfolio of projects that we could market
to these customers that could meet the online date obligations
(20:11):
of the Public Utility Commission's requirements. So we first engaged
with SE for this deal as part of a procurement
process to meet those needs, and we were able to
show not only had we done the groundwork on the
permitting and transmission and citing of projects, but that in
parallel to that, we'd accomplished all of the technical objectives
needed at Project read our product in Nevada, and so
(20:34):
we were viewed by them and by our other customers
as a technology that meets the needs of this clean
firm power mandate, helps support California meet not only its
climate goals but its reliability goals, and actually could prove
that we were at technology with a track record of
success and the ability to scale up quickly in time
to meet these mandates. And I think we're fairly unique
(20:55):
in our ability to do that. So we found a
lot of success in the off take market now because
there's market demand for what we're selling, and we've also
gone through the steps of de risking the technology to
show that we're ready to scale to meet the need
of the grid in the very near term.
Speaker 1 (21:10):
So now you're working on a project in Utah, it's
going to be four hundred megawards and that could power
something like three hundred thousand homes. It's going to be
an expensive project because it's a first of a kind
at that scale. For you, just talk us through the financing.
How are you going to make it work? Yeah?
Speaker 2 (21:28):
Great, great question, because I think the first of a
kind project deployment and financing is I think the important
topic when it comes to climate tech deployment today because
it's an area that we as a financing ecosystem haven't
really solved well before. When you think about traditional renewable
project finance with wind and solar, which you're very proven
(21:48):
technologies a lot of times, once you kind of check
the boxes of development in terms of sighting and engineering
and customer off take, you can already bring in very
high percentages of debt for the project. So that's one
of the things that make these technologies very affordable is
the financing costs are very low.
Speaker 1 (22:03):
Right, and debt comes in cheap because debt is a
loan from typically a bank or maybe some investors, and
they'll charge you an interest rate, but it's typically lower
interest rate than you would pay if you raise that
money through equity, where they're looking for ten, twelve fifteen
percent return.
Speaker 2 (22:19):
Absolutely, And so when you think about a FERVO and
deploying rgothermal technology or really anything that's in the climate
tech deployment phase, people understand that the first project, or
the second project, or even the tenth project, you have
less of a track record, and so investors want to
see the potential for a higher return to compensate them
for the risk they're taking on because they may have
(22:41):
a couple projects in that portfolio. With their first of
a client projects they just don't return anything. And so
early projects are going to have a high cost of capital.
And then the goal is to build a track record
of success so you can progressively lower that cost of capital.
Speaker 1 (22:55):
And so to do this, you're splitting this project into
one hundred megabork plant and then upgrade to a four
hundred mega work on. That's right, So how much is
the first hundred mega what going to cost? And when
does it come online?
Speaker 2 (23:05):
Yeah, so phase one of this project, we call it
Project Cape in Utah, will be roughly one hundred megawatts.
At this point in time, we've already drilled several of
the wells. We've done all of the work to develop
and bring it online on our schedule, which is set
for twenty twenty six, and we'll spend over five hundred
million dollars to bring that first phase of that project
online by twenty twenty.
Speaker 1 (23:23):
Six, and some of it will come from debt.
Speaker 2 (23:26):
Yes, yes, So the goal for us or any technology
is to get to where these projects are so trusted
because of your track record that you can finance them
with a high degree of debt. We've checked a lot
of the boxes for traditional project development. We're very far
along in the engineering. We've already drilled half the well field,
we've got off take, we've got transmission, we've got the
(23:46):
permits we need. But since it's viewed as a newer technology,
we have to get a much lower percentage of debt
compared to if it was a more proven technology. So
in the industry we call this, you know, overequitizing a project.
You know, when you're a mature technology with a binding
off take agreement, you would hope to get fifty percent
or more of the project from debt. You know, on
our first project, we're looking at more like twenty to
thirty percent from debt, and that's great. It helps us
(24:08):
finance the project. But as we build more of a
track record, you know we'll be able to finance a
higher percentage of the project with debt and then translate
that into lower cost electricity for our customers.
Speaker 1 (24:18):
But it's also true that it's taken you a long
time to get the permits, and these days, at least
in the US, but also in Europe, building anything is
taking a long time. Getting planning and permits done is
taking a long time. Are there specific hurdles for geothermal projects.
Speaker 2 (24:36):
Yes. So it's a bit of a quirk of history
or geology or whatever you would call it that the
best locations in the United States for geothermal energy development
also happen to be on land that's owned by the
US federal government, and the federal land carries with it
very different permitting requirements than private or state land. The
(24:59):
majority of our projects are cited on federal land because
that's where the geology is the best. The vast majority
of the Western United States is owned by the federal government,
and the vast majority of the Western United States is
where the best geothermal projects are, and so for US
to be able to break ground on our project Kate
and drill the first well, which we did in the
summer of twenty twenty three. We actually started the leasing
(25:20):
and permitting process for that project back in twenty nineteen,
so it took us about forty years to get the
project in position to be able to drill the first well,
and a lot of that is an artifact of the
fact that it's on federal land. If it was just
on private land, you could probably shorten that to six
or twelve months. And it's particularly challenging for geothermal because
not only are we developing projects mostly on federal land
(25:43):
where we're subject to these requirements, but also there's actually
a lot of categorical exclusions that make permitting easier for
drilling in the United States that only apply to oil
and gas drilling. And so we have many examples where
going through our project development, if we were to call
it on gas project, or if we were drilling for
oil and gas, we can actually streamline the permitting to
(26:04):
go a lot faster. But those categorical exclusions don't extend
to geothermal development.
Speaker 1 (26:09):
You don't have the lobbing permit.
Speaker 2 (26:11):
It's not the lobbying power, and it's also something that
you know, geothermal always struggles to be top of mind
for people. I think there's been a longstanding conventional wisdom
that it's a great resource, but it can't scale, and
so people haven't really focused on it for policy efforts.
So you know, that shows up in the fact that
for much of the last decade we didn't have the
same tax credit that solar and wind dead and that
(26:34):
makes it challenging to develop. It also shows up in
the permitting side, where you know, I've talked to people
who were in the room when the provisions of the
Energy Act of two thousand and five that put in
these categorical exclusions for oil and gas drilling were developed,
and I asked, why did you exclude geothermal? And the
obvious answer is nobody had anything against geothermal. It's very
(26:57):
obvious the environmental impacts of drilling for geothermal are actually
less the environmental impacts of drilling for oil and gas.
It just didn't come up, you know, And so if
the law was specific to oil and gas drilling and
nobody thought to include geothermal, that's the situation we landed
ourselves at. And that's something that we find over and
over again, not just the US market, but internationally. Is
you're set up with policy structures that didn't really contemplate
(27:19):
rapid growth of geothermal and that's one of the barriers
to deployment.
Speaker 1 (27:22):
You are using hydraulic fracturing, which was a technology that
was pursued and supported heavily by the US government for
specifically oil and gas industry. Now, we've been using fracking
for a long time and it's been pretty productive for gas,
even for oil, but there have been issues around fracking
(27:45):
that are very specific to how it's done. Right, you
use a lot of fluids to try and break these
geological structures in a very specific way. You cause earthquakes.
Do any of those problems also translate to what you're
doing when you try and get geotoobar from fracking.
Speaker 2 (28:02):
Yeah, as with any development project, there are risks that
we have to address and handle through the development process.
You know, one of the concerns you raised is what
we in the industry call in dow seismicity. You know,
is there subsurface activity that you can do that can
cause earthquakes? And what we do is quite a bit
different from the oil and gas industry. You know, actually,
(28:23):
when you review. The majority of the earthquake activity that's
associated with shale oil and gas development in the United States,
that most common events come from saltwater disposal wells. It's
actually all the produced water that's generated from the operations
that then has to get reinjected as a disposal into
these wells that can cause pressure changes that can trigger
(28:44):
these earthquake activities. And so we actually don't you have
that as part of our process. You know, after we
finished drilling and completing the wells, all we're actually doing
then for an extended period of time is recirculating the
fluid through the reservoir. And so that actually doesn't cause
these pressure changes that disposal wells do, and so it
doesn't present the same high level of risk for seismic
(29:05):
activity that the oil and gas industry has. So I
would say, even though it doesn't carry a lot of
the same inherent risks, it's still something we focus on
quite a bit. So in the United States, the Department
of Energy has outlined a protocol called the indu Seismicity
Mitigation Protocol for Geothermal then actually walks through what are
the steps that you need to take for safe development
(29:27):
of geothermal power. So we follow all of those steps
in the protocol for every one of our projects. And
to give you some examples of what that means, we
actually partnered with the US Geological Survey. On our first project,
we analyzed that the seismic monitoring network in our area
wasn't really robust enough to get the really high fidelity
measurements we wanted to get to meet the indue Seismicity protocol.
(29:49):
So we actually partnered with the US Geological Survey to
augment and we installed seven local seismic monitoring stations around
our project so that we could monitor for levels of seismicity.
And what we know from years and years of development
and geothermal and oil gas and elsewhere is actually larger
seismic events that could co pause risks to people are
(30:10):
always preceded by smaller seismic events that can be picked
up with specialized instrumentation but can't be felt with the surface.
And so part of the protocol for indu seismicity and
geothermal is the adoption of what we call a traffic
light system, where we actually set very low thresholds for
these augmented seismic networks. The specialized sensor can detect low
(30:32):
levels of seismic activity, we can actually pause operations until
the seismic activity subsides, and as a result, you can
really mitigate against those risks of higher activity. So what
we do, you know, obviously borrows technology from oil and gas,
but it's both different technically. You know, the example I
gave here is we're not using those disposal wells, but
it's also something that we have a lot of tools
(30:53):
to mitigate against, and we have not had any issues
with seismicity.
Speaker 1 (30:58):
Now, with all of that context in mind, and you
are dreaming big, you want the US generation from geotheromal
to go fermer point four percent to twenty percent. Now,
if you're not dreaming big as a startup, you're not
doing right. So it's nice to have a big dream.
But this is going to happen at a time where
electricity demand is likely going to double. So you're really
(31:21):
thinking of scaling geothermal one hundred times from where it is.
What will it take to make that jump happen?
Speaker 2 (31:29):
Yeah, So I think we need to build on our
early pilot's success. I think the fact that we have
a project online in producing energy is something that you know,
honestly differentiates us a lot in the climate tech ecosystem.
A lot of companies have not got cross that important
milestone yet. But our next goal is to prove that
we can do it at one hundred times in the scale,
and that's this four hundred megawa project. And then as
(31:50):
we think going forward, you know, the nice thing about
our technology, as we've discussed, is it really does open
up so much more as sites to potential development. So
we actually have a pipeline just in the Western United
States where we have dozens of other projects we've cited
and identified locations for that are just as big, if
(32:11):
not bigger than our current four hundred megawap project. And
so what we need to do is bring this four
hundred megawa project online, show that this is a reliable, proven,
cost effective technology, and then scale the growth rate ten
or one hundred times so that we can achieve those goals.
So there's really no limit to the amount of geothermal potential,
and it just comes down to how much of it
(32:32):
can be accessed economically with today's technology.
Speaker 1 (32:35):
Now, we've been talking about the US because the US
is the place with the most geothermal power in the world,
but there is a lot of geothermal power capacity in
developing countries like Indonesia, Philippines, Kenya. If anything, over the
past two decades, Kenya has been able to build geothermal
and now almost fifty percent of its power comes from geothermal.
Are you looking to expand for outside the US and where.
Speaker 2 (32:57):
Yes, definitely. I think all of our current projects in
construction are in the US, and that's because we see
market demand for that. We understand that market. We're a
US based company, and so that's where we wanted to start.
But the technologies we're working on are globally applicable. The
US is the market leader in geothermal, but only about
twenty percent of the global capacity for geothermal is in
(33:17):
the US. A lot of it is in the markets
you mentioned Kenya, Indonesia, Turkey, the Philippines, and those are
all places we're looking at. You know, if you look
at how we've started in the US, we've gone to
locations that have a little bit of conventional geothermal and
used our technology to make it a lot of unconventional geothermal.
And so the markets we're looking at internationally actually are
very similar. What we're going to go to at first
(33:38):
as places with an established geothermal market, but then ten
x or one hundred x the potential of geothermal in
those markets given our technology. But ultimately, you know, every
country in the world has geology that's going to be
suitable for geothermal development using our technology approach, and so
we do think this can be a globally scalable solution.
Speaker 1 (34:01):
After the break, Tim tells me about the oil and
gas workers eager to find new jobs in the geothermal industry.
And by the way, if you've been enjoying this episode,
please take a moment to rate and review the show
on Apple Podcasts and Spotify. It helps other listeners find
the show. One thing that's always struck me about conversations
(34:25):
we've had online offline over the years with Geothermal and
Fervo is that you've been able to take an oil
and gas technology and apply to clean energy. You've been
able to take workers in the oil and gas industry
and get them to work in the clean energy sector.
I recently spoke to Bill Gates, who is opening a
nuclear power plant in a former coal town in Wyoming
(34:48):
and hoping to use not just infrastructure, but a lot
of the skills that come in that town maintaining a
power plant. So talk me through how it's been for
you to try and bring in the human resources from
the oil and gas industry into clean energy.
Speaker 2 (35:06):
Yeah, it's been a huge enabler for FERVO and also
core part of our mission from day one. You know,
you know from talking to me, I started my career
at oil and gas. You know, I grew up in
a small town in Texas and started working for as
a drilling engineer right out of college. And I always
found the work fascinating and I always enjoyed the people
I worked with, and honestly, if it wasn't for climate change,
probably would not have ever changed my career because it
(35:26):
was a fascinating career. But I got seriously interested in
climate change and it's just not that hard to think
through the logic of it. When you start realizing we
need to reinvent how we get energy in the world.
That does mean to transition away from fossil fuels and
what does that mean for all the people that work
in the industry, And you know, that was something that
was a big motivator for me and why I was
so excited about geothermal because it's a very seamless transition
(35:49):
to go from drilling oil and gas wells to drilling
geothermal wells, and in fact, the majority of the employees
at Fervo come from the oil and gas industry. And
the fact that we have such a large skilled work
forced to tap into and approven supply chain of the
kinds of equipment services we need has been one of
the things that's allowed for a voter to get to
market way faster than many of the other competing approaches,
(36:11):
you know, in the climate tech ecosystem. So it's been
a huge enabler. I mean, drilling is this amazingly orchestrated
engineering and scientific challenge, and it's taken one hundred and
fifty years of the oil and gas industry drilling to
get the technology and the place that it is today.
And there's no way we could be developing the sites
the way we're developing them. I mean, you just imagine
(36:33):
drilling a well. You need technical specialists and dozens of
sub disciplines. But the amount of knowledge and skills that
have been built up around this activity over the last
one hundred and fifty years is incredible. You know, I
was just out at our drilling location in Utah last
week and met somebody from you know, one of our
supply companies called mud Logging. The on site geologists that
(36:54):
analyzed the geology there, and the gentleman came up to
me and introduced himselves and told me how excited he was,
and he said that he'd specifically requested to be on
this project even though it made him have to move
halfway across the country for it, because he realized that
this was the future and this was something that he
could be in on the ground floor of something that
(37:16):
changes the world. And so it's somebody who's worked in
oil and gas their entire career and they're gravitating to this,
and the amount of excitement there is among the people
that look at this and see that it's something new,
see that it can be a huge part of the
energy mix of the future and solve climate change and
use the skills they already have to do. It is
something that just creates a lot of enthusiasm around our projects,
(37:37):
and it's always phenomenal for us to visit the hardworking
people out on our site and just see how excited
they are to be part of this project that's really
going to change things.
Speaker 1 (37:47):
Thank you, Tim, thank you, thank you for listening to
zero and now for the sound of the week. That
is geothermal energy from the geysers of Yellowstone National Park.
(38:07):
You could say it's geothermal energy being wasted for tourism.
If you like this episode, please take a moment to
rate and review the show on Ample podcasts and Spotify.
Share this episode with a friend or with someone who
needs a spa weekend. You can get in touch at
zero pod at Bloomberg dot net. Zero's producer is Mighty
Lee Rau. Bloomberg's Head of podcast is Stage Bowman and
(38:29):
head of Talk is Brendan Newnan. Our theme music is
composed by Wonderly. Thanks to break Through Energy for a
recording space for this episode, special thanks to Kirra Bindrim
and Monique Mulima. I am actual Rati back
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