December 13, 2024 • 40 mins
Geothermal is a promising technology to provide clean, low-cost, baseload power to the electricity grid. It works by getting heat from deep in the ground, using technology that is similar to that used in fracking. Despite this potential, however, geothermal still remains a very small percentage of the US power mix. So what will it take for it to scale up? One big challenge is the core problem of financing. Firms need customers in order to get financing. But customers don't want to sign up for projects unless firms can finance them and get them built. On this episode, recorded live onstage at the Department of Energy's Deploy24 conference in Washington DC, we speak with Tim Latimer, the founder and CEO of geothermal company Fervo Energy. Tim was previously in the fracking industry. He explained to us how geothermal works, what's being built, and what it will take from private and public actors in order to scale it up.
Read More:
A Green Reason to Drill, Baby, Drill: Renewable Energy That’s Always On
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:22):
I'm Jill Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:25):
Tracy, we were recently down in Washington, d C.
Speaker 3 (00:28):
I know, I really like DC. It has sort of
like old school vibe. Yeah, I have power lunches.
Speaker 2 (00:33):
I like it. It seems like a good city for
power lunches. It's also did you know, not to sidetrack
too much. Basically all the big fast casual innovation is
from DC as far as I can tell, so Sweet Green,
I think we've founded Kava. We talked to one of
the Both of those companies are from DC. And I'm
(00:54):
not gonna lie. When I think of this sort of
modal worker in DC, I think of someone who who
eats a lot of like fast casual lunches.
Speaker 4 (01:02):
At their desk. Yes, okay, which is no judgment.
Speaker 2 (01:04):
Because that's how I eat my lunch. So I just
want to make that clear. That's not a judgment done anyone, right, But.
Speaker 3 (01:10):
We are not actually here to talk about casual dining
and takeout lunches. We were in DC for a very
particular event, something very special. We were over at the
Department of Energies Deploy twenty four conference.
Speaker 2 (01:25):
That's right, So regular listeners will have heard we've done
multiple episodes in the past with the Jigger Shaw, who
is the head of the Loan Programs Office at the DOE,
who was the LPO part of the DOE that put
on this conference. And of course the big theme that
you know when you think about the Loan Program's Office
is this impulse to figure out a way to solve
the financing problem for early stage energy in which there's
(01:48):
some sort of proven technology out there, but the funding ecosystem,
for various reasons on familiarity, risk, et cetera, doesn't exist,
and so a lot of the conversations are like, how
do you solve that chicken and egg problem in energy finance?
Speaker 3 (02:02):
Absolutely, and we do, indeed have the perfect guest. We
spoke with Tim Latimer, the CEO of Fervo Energy, which
is that big geothermal startup that is doing some interesting
things with fracking technology. So take a listen.
Speaker 2 (02:17):
Hello, and welcome to a live episode of the Odd
Loss Podcast. I'm Jill Wisenthal and I'm Tracy Alloway, and
we are joined here by Tim Latimer, co founder CEO
of Fervo Energy, advanced geothermal?
Speaker 4 (02:31):
What is that?
Speaker 2 (02:32):
And when we think about America's energy mix or America's
energy portfolio, how big can advance geothermal be?
Speaker 4 (02:41):
Very big?
Speaker 5 (02:42):
That's the short answer. So, first off, great to be
with y'all. I'm a regular Odd Lots listener, so it's
a treat to be with y'all. Geothermal. What is geothermal
and what is advanced geothermal?
Speaker 4 (02:51):
It's a great question.
Speaker 5 (02:52):
So geothermal isn't new, and even power generation from geothermal
isn't new. The first power plant for geothermal came online
at over one hundred years ago in Italy, so it's
been something that's been around for a long time. But historically,
even though it has really everything you want in an
energy resource, it's carbon free, low environmental footprint, it works
twenty four to seven, it's been very limited to very
(03:14):
specific geologies. So up until very recently, the story of
geothermal is you either have the geology of Iceland where
steam is literally coming out of the ground, or certain
hot spots like northern California or New Zealand, or you
don't have geothermal, And those were kind of the only
two options. So those places blessed with it had a
great energy resource, but it certainly wasn't widespread. Advanced geothermal
(03:36):
or enhanced geothermal systems is really the whole concept that
you could use new technology to go to deeper resources
or in permeable rock where the hot water the steam
wouldn't flow on its own, and still make geothermal work.
And so in enhanced geothermal systems oftentimes you're going deeper.
In many cases you're doing something to create permeability in
the reservoir so it can work in more places. And
(03:57):
the key there is you get all the positive attributes
of geotl thermal, but you're not limited as doing it
in places like Island's geology, So the opportunity is huge.
In the US today geothermal only accounts for about three
gigawatts of power, so lead less than one percent of
the US electric grid, but the resource potential is massive.
You know, we just worked on a paper that was
published as a collaboration with Princeton that actually showed pathways
(04:18):
to get up to seven hundred and fifty gigawatts of
geothermal power by mid century. So if we unlock it
with the right technology, this could be an enormous resource.
Speaker 3 (04:27):
So you're a fracking guy. What's the technological overlap between
fracking for oil and gas in like the Permian Basin
or somewhere like that, versus doing fracking for geothermal in
Utah or something like that. And I have to admit here,
my only knowledge of drilling comes from like Bruce Willis
and Armageddon, which I assume was an accurate depiction of
(04:48):
the industry.
Speaker 4 (04:49):
But you tell me that's right, yeah, Armageddon.
Speaker 5 (04:51):
Actually I thought it was a documentary the first time
I saw it, Oky, And you're right. I actually started
my career as a drilling engineer in the oil and
gas industry. And there's a lot of technology overlap between
oil and gas and geothermal, and that's why the shale
revolution and all the technological development that's happened as a
result of that has had spillover effects that have moved
the needle on geothermal technology. But there's also a lot
(05:12):
that's different. And actually the origins of FERVO. I got
the ideas for this when I was drilling in the
Eagle for shale in South Texas, and the Eagle Ferd
had been a resource that people had known about for
over one hundred years, but it lacked the permeability to
produce economic quantities of oil, and so it was ignored
really until the late two thousands. And really it was
the process of horizontal drilling where you could drill deep
(05:34):
and then horizontally across the shale layer and the hydraulic
fracturing process to create permeability that allowed those wells to
be economic and kind of launched the shale boom. And
I was looking at what I was doing in my
career as a drilling engineer there and I learned what
geothermal was at the time, and I got really excited
because I realized that the technological gap of getting high
floor rates out of low permeability formations really was the
(05:56):
exact same whenever you looked at geothermal. That's what held
shale back, was holding geothermal back. And the fact that
these new technologies had opened up oil and gas meant
it could be done for geothermal too. But the process
of taking that technique and applying it to geothermal has
involved an enormous amount of technical work because there's a
lot different between oil and gas and geothermal. The first
thing that's probably pretty obvious is we look for much
(06:18):
higher temperatures, so you know, the Eagle Ferd when I
was drolling in South Texas is actually considered very hot
for an oil and gas based and on shore, but
it's only like three hundred degrees fahrenheit that's considered cold
for geothermal, and so we needed to figure out how
to develop the tools and techniques to go much higher
temperature than that. We're now doing products up to four
hundred and forty degrees fahrenheit and our drilling, and that
(06:38):
has taken an enormous amount of tech development to make
that happen. And it's also turns out that the places
that are hot geologically overlap very often with granite, which
is a much.
Speaker 4 (06:48):
Harder rock type than shale.
Speaker 5 (06:49):
So in order to take these technologies from oil and
gas and make them work in geothermal, we had to
develop techniques to deal with the fact that the geology
is different and it's much harder oftentimes a much more
challenging engineering environment. And so our company has been around
for seven years now and a lot of that work
has been trying to figure out what are now solve
problems in oil and gas, how do you solve them
in a completely different contact, oftentimes where the rock is
(07:11):
harder and the temperatures are hotter, and the operation of
the reservoir's very different.
Speaker 2 (07:15):
What do you have today in operation such that you
could say these tech problems are provably solved. Because obviously,
as you think about the future, there are many things.
You have to get the financing right, you have to
get the customers lined up, you have to figure out
how to scale it. But just in terms of like, okay,
where we are December twenty twenty four, what can you
show us if we were on a site, Let's say, Okay,
(07:37):
we've shown that we can solve the tech set.
Speaker 4 (07:39):
So the gold.
Speaker 5 (07:40):
Standard for new tech deployment is actually an operating project, right,
So since this is a deploy tech focus conference, I'll
say TRL nine technology right in this level nine the
final hurdle along that way, which is actually the project
working in its intended environment and operating conditions. And that's
something we achieved with enhanced geothermal Systems. Actually just over
(08:00):
a year ago when we brought our first project online.
So going back to twenty twenty one, we created a
partnership with Google as part of their twenty four to
seven Carbon Free Energy initiative, and we actually selected a
site in northern Nevada, where there was an existing producing
geothermal power plant there, but it had been troubled by
the same challenges that had held back geothermal for decades,
principally what we call dry whole risk that actually drilled
(08:22):
a bunch of wells.
Speaker 4 (08:23):
Some of the wells were successful, a lot of the wells.
Speaker 5 (08:25):
Weren't, and so as a result, the power plant wasn't
producing as much as it could based off its capacity.
So we actually partnered with the operator there and we
drilled a set of new wells, including the first two
horizontal well pair for geothermal, and we actually created that
project and brought that power online in late twenty twenty three.
And so we really needed to prove a few things.
(08:45):
One that we can actually drill and deliver those wells,
even though it was through granite and much higher temperature. Two,
that we could get highly productive flow rates out of
those wells. And the important one and the one that's
harder to prove because it takes time, is that the
temperature profile and the production profile those wells would stay
content over time. So one of the really exciting things
for Fervo. In October we actually hit the twelve month
mark where not only did we achieve all the technical
(09:07):
objectives of the project, but it was actually producing geothermal
energy connected to the grid, producing electrons for over a
year and we saw no evidence of production decline in
that year. So we can say with a lot of
confidence now this is a completely proven technology, mainly because
we've actually done it. We have a product that's producing
electricity for the grid today.
Speaker 3 (09:25):
So what's your funding mix like at the moment, because
I imagine part of the reason you want a working
project that you could show everyone is so that you
can issue more debt, like sort of more traditional energy companies,
older energy companies, and maybe move away from equity.
Speaker 5 (09:39):
Yes, that's exactly right, and we've had an interesting funding
journey that's probably very similar to many of the companies
here at Deploy. You know, early on we were backed
from many grant contributions from the Department of Energy. We
partnered on many aspects of new geothermal technology development. We
actually were part of the ACTIVATE program at the Lawrence
Berkeley National Lab, so we were back in twenty eight.
(10:00):
Team got kind of our start through some DEE research
programs and grant funding, and on the private side, it
was really venture capital funding. So funds like Breakthrough Energy
Ventures and Congruent Ventures stepped in and got us up
early on. You know, those funds that specialized and looking
at companies that were so early in their development that
it was really just an idea, a PowerPoint slide, but
would sit in and understand the technology with you. And
(10:21):
then as we expanded, what we've brought in is a
lot more institutional investors. We've actually gotten an investment from
the oil and gas industry. Now, we raised the Series
D round in February of this year. That was a
two hundred and forty four million dollars Series D and
that was actually led by Devin Energy, one of the
leading independent oil and gas producers out of Oklahoma City,
with one hundred million dollar investment. So the investment mix
has changed over time. But for a lot of new technologies,
(10:43):
there's this crossing the chasm level where you know, a
venture capitalist or a Doe grant writer will sit with
you and understand the ins and outs of your technology
and they'll see is this feasible or not and you
can actually have a good conversation around that institutional money
that wants to do project debt, they don't really want
understand how your technology works. They just want to see
that you've done it many, many times before. And that
(11:05):
kind of gets to the chicken and egg problem that's
with this funding.
Speaker 4 (11:08):
You know.
Speaker 5 (11:08):
So often when we approach those larger infrastructure sources of funding,
the answer is, we'll bring us twelve months of data
or bring us an independent engineering report that says zero
percent chance this will ever ever fail. And that's kind
of a big hurdle to jump. So we finally crossed
that chasm earlier this year because we brought that project online.
We announced in July one hundred million dollar construction loan
(11:29):
from Excalibur Rural Capital. That was the first time we
brought in project finance, you know, so we're finally moving
away from the expensive venture capital sources of funding and
down into the more sustainable, long term infrastructure style of funding.
But it took us seven years from inception an operating,
fully successful project and a lot more work to finally
cross over that funding mixed barrier.
Speaker 2 (12:06):
So obviously we want to talk more about the chicken
and egg problem because in a way, I mean, that's
the entire premise of all of this.
Speaker 4 (12:12):
But just before we dive.
Speaker 2 (12:13):
More into that you know, you mentioned shale, and there
is this story that people tell and I only maybe
like fifty percent believe it or sixty percent believe it
that the shale boom was like partly a tech story
and partly a low interest rate story, or that a
funding story. And there are various theories about how the
FED helped cause the shale boom. Again, not totally sure
if I buy it. That being said, for any sort
(12:35):
of renewable or clean energy project or anything that has
a lot of upfront capital costs, the rate conditions in
the beginning matter quite a bit to the math. And
I imagine here in twenty twenty four versus when you're
seven years ago, that picture looks very different. Talk to
us about the sort of I guess mathematical implications of
where we are with interest rates in terms of making
(12:56):
geothermal projects pencil up.
Speaker 4 (12:58):
Yeah, it's a great question.
Speaker 5 (13:00):
The fact that we've gone through such a big movement
and interest rates over the last five years has been
we've kind of gone through multiple business cycles in this
sector in a very compressed period of time. You know,
as interest rates started to rise a couple of years ago,
there were two sectors or areas that sort of bubble
to the surfaces.
Speaker 4 (13:15):
Being challenged by a high interest rate environment.
Speaker 5 (13:17):
That was number one startups that were based on very
long term growth and number two, capital intensive businesses where
it's a lot of capital upfront with a long payback period.
That was a double whammy because we were running a
capital intensive startup and so the interest rate environment was
very challenging to try to get new capital to come
into the space as those interest rates went up. And
you know, one of the things about renewable energy, and
(13:38):
this is true about solar and win but also true
about geothermal, is these are oftentimes high capex but long
payback period projects. And there are also projects that are
interesting because you end up with a different profile than
a lot of other energy infrastructure projects. Because you know,
all of our projects we build, we have fifteen year
off take agreements with locked in pricing, so we don't
have to worry five years from now, what you know,
(13:59):
it's the price of our product going to go up
or down. We also don't have any fuel cost and
so we're not exposed if there's a big run up
in fuel costs, and so we eliminate a lot of
that volatility so as a result, renewable energy projects like
geothermal have always been viewed as historically much safer investments
because you're not exposed to a lot of the volatility
mix that impact other infrastructure investments. That's a good thing
(14:21):
in general because it means you can bring low cost
capital in the space because it's perceived as safer investments,
but it also means you're spread off. The risk free
rate is a lot tighter than if you were talking
about a fossil fuel project or a project with more
risk in it, and so when those rates move, the
sort of relative impact for something with a low spread
is a lot bigger. And so the interest rate environment,
(14:41):
it hits startups and it hits infrastructure projects, particularly renewable
infrastructure projects, in a big way. And that's one of
the things that companies are navigating now. There's so many
tailwinds looking for more and more power. We need more
reliable power. We need more power period, everything from data
centers to industrialization, to ensuring and manufacturing to I mean,
the AI world is with driving so many of our
(15:02):
conversations right now. So there's all these tailwinds helping the
sector out, but the headwind that interest rate environment is
still something that's limiting both deployments of new innovation and
also broadly the renewable sector overall.
Speaker 3 (15:14):
I mean, presumably this is when someone like the DOE
could step in and potentially help. What kind of support
have you seen from the DOE so far?
Speaker 4 (15:24):
Yeah, so we've gotten great support from the DOE.
Speaker 5 (15:26):
As I mentioned, we've gotten multiple grants over the years
to work on anything from high temperature tools to novel
data sensing methods. Earlier this year, you know, there was
a provision in the bipartisan Infrastructure Law where there was
eighty four million dollars earmarked for geothermal energy development. FERVO
is actually the recipient of the largest grant of that,
(15:46):
which was a twenty five million dollar grant, And so
that kind of early demonstration funding can be very critical
for a technology that's just taking off. I don't want
to make any enemies, and there's a lot of different
technologies out in the audience here. But if you read
the Department of Energies Commercial lift off report for geothermal,
they've got a nice chart in there where it almost
looks like a data error because they put the eighty
four million dollars that geothermal got up against the ten
(16:08):
billion dollars for nuclear, and the nine billion dollars for
carbon capture, and the several billions for longeration energy storage
and other things. So I think other technologies benefited far
more than geothermal did. But even that kind of move
was sort of catalytic to get things off the ground.
And then, of course the DOE has a big message
and a big audience that reads these things. So actually,
this lift Off report that came out earlier this year
(16:30):
changed a lot of people's minds because one of the
problems with the chicken and egg problem is there's so
many investor meetings that we don't even get to have
because we reach out and they say geothermal. I know, geothermal,
we're not looking at that, and the media never even happens.
And you have something like the geothermal lift Off Report
come out that's got the DOE logo on it. They
know it's been well vetted, well researched work, and all
(16:51):
of a sudden, it may be there's some investors who
may have written off geothermal. Let's say, well, maybe there's
a new shot here, there's new data that we weren't
aware of, And so that kind of awareness in technology,
validation is pretty critical as well.
Speaker 2 (17:02):
So one of the obviously nice things about your technology
is that it's cleaned, it's carbon free. There are some
people that don't care about that, particularly March. They don't
rank that particularly highly. You know, for some people the
biggest priority is cheap energy. When you think about the future,
how important is it that either the public sector or
private sector actors who've made various commitments over the years
(17:25):
about net zero other sounding things, how important is it
that those priorities stay firm or if they're sort of
changing moods where in the private sector this is not
as important to us as it was a few years ago.
Speaker 4 (17:37):
How does that affect your outlook?
Speaker 5 (17:39):
Yeah, it's a good question, And honestly, my view on
this is I don't think people actually there's not really
that much of a divide. I think in what people
actually want out of their energy resources. I think it
can get politicized and there's a lot of food fights
and political fights in this, but people want three things
out of their energy resources. They want the energy to
be cleaner, they want the energy to be more and
(18:00):
then want the energy to be more reliable.
Speaker 4 (18:02):
And does everyone really want it to be cleaner.
Speaker 2 (18:05):
I'm just serious because like I get totally cheaper and
reliable seem unambiguous when it comes to cleaner. I could imagine,
like I could see if.
Speaker 4 (18:14):
I were anyone.
Speaker 2 (18:16):
I don't know, it is less important.
Speaker 5 (18:17):
I do think everybody wants it to be cleaner, and
that's true if you talk to people on both sides
of the aisle. I don't think it matters where it is.
I think where a lot of the debates come up
is where is the trade off between clean and affordable
and reliable. But I think you'd be hard pressed to
find anyone other than maybe some very French people who
are just trying to institution.
Speaker 3 (18:35):
Show you stand alone on that one.
Speaker 4 (18:38):
I don't have an opinion here, no opinion. You're the
one out there that doesn't want cleaner energy. I'm a journalist,
all right, journalist. I like it. But I think that
what happens is that be on where people are.
Speaker 5 (18:48):
Coming from, you know which side of the aisle they're on,
what their priorities are. They may rank those three things differently,
and then there's a lot in the macro environment where
those things get ranked differently, like very clearly affordability is
top of mind for everyone right right now, and so
what you see is over time, depending on what's going
on in the geopolitical environment, the macro environment, the political environment,
those orders may get flipped. But I think what most
(19:10):
people here are working on is something that is cleaner,
is reliable, and is more affordable. And the thing is
it's not going to get there overnight, but everybody's working
on technologies that are on a path to tiev one
of those three things on a better dimension. And I
think one of the things about geothermal is we emphasize
it checks all three boxes. It's cleaner, it's reliable, and
we're on a cost trajectory where this is going to
(19:32):
become one of the most affordable ways to get energy
in the near future. It doesn't matter if you're talking
clean or dirty, or intermittent or baseload or whatever jargon
you want to put on it.
Speaker 4 (19:41):
Geothermal.
Speaker 5 (19:42):
The cost trajectory is moving so quickly that we're going
to get a great answer on the affordability very very soon.
And so I think emphasizing that we do those three things,
and it doesn't matter what is going on in the
macro environment, those three things are still the things that
matter is kind of how we stay resilient through the
different cycles.
Speaker 3 (19:58):
So you make a very and pitch, and I guess
I'm kind of wondering when you go to talk to
potential off take customers and you say, well, we have cheap,
clean and reliable energy that ticks all the bosses boxes.
Excuse me? Do they immediately jump and go like, yes,
we'll take it. I imagine that can't be the case, right,
because this is still new technology. They probably presumably you
(20:22):
don't have geologists on staff who can review all this stuff.
What are those conversations actually like and what are I
guess the sticking points to everyone becoming your customer.
Speaker 5 (20:32):
Yeah, you know, I mentioned this a little bit before,
where it's a chicken and egg problem. This is a
lot in a lot of ways entrepreneurship, particularly if you're
doing a real hard tech development like what we're doing
at Fervo is trying to solve dozens of simultaneous chicken
and egg problems all at once, you know, because you've
got to get the financers to believe in it, you
got to get the customers to believe in it. And
it's fascinating and I can talk through our journey. You know,
(20:54):
our first off take agreement was with Google, and that
went back all the way into twenty twenty one that
we announced that deal. And it wasn't an accident that
it was Google that did that. You know, they'd put
out a white paper in twenty eighteen, and nobody was
paying attention to geothermal back then.
Speaker 4 (21:08):
It was written off as a dead sector. But they
put out a white.
Speaker 5 (21:11):
Paper in twenty eighteen that said they had actually achieved
their one hundred percent renewable energy goal, and so they
were looking at what is the next target we want
to get to, and they came up with a new
concept of twenty four to seven carbon free energy, which
is actually hourly matching the concept of one hundred percent
renewable energy. It's more of an accounting exercise where you
add up how much energy use for the year, you
add up how much energy you source for the year,
(21:31):
and if those numbers are equal at the end of
the year, you can consider it one hundred percent renewable energy.
A much more stricter standard is twenty four to seven
carbon free energy, and that's looking at, okay, where I'm
actually building these facilities and when they're actually using energy,
am I sourcing that electricity from clean areas? And what
they were making the point on is that wind and
solar had been phenomenal technologies to move the future of
(21:52):
low carbon forward, but that we were going to need
a new toolkit from storage to nuclear, to hydrogen to
geothermal to get there, and I can. I'll tell you
that the biggest point of market validation we had when
we were raising our Series A was in this twenty
page paper that Google wrote. They mentioned geothermal one time,
and we're like, see what we're on the map? People
are talking about it, And actually that caused us to
reach out to them and we started this relationship that
(22:14):
turned into our first development agreement with Google as an
off taker, and they've now become a large customer of
ours and we've announced several more deals there. But it
was interesting it took a company like Google to get
there because you know, in a lot of ways, the
same way that financiers want to see a track record,
utilities want to too. And I don't fault the utilities
for this. They have an incredibly important job where they're
the ones that are responsible for keeping the lights on,
(22:36):
and so they need to make sure that if they're
going to invest the time to prepare the grid and
go through all the work to get an energy resource
to come online, that it needs to get there. And
so most utilities won't even look at something until it
has a multi year development track record, and the utilities
are the big power buyers. And so this is why
it's a chicken and egg problem. How do you get
a new tech to market when your customers require a
(22:57):
multi year track record to develop it? But how do
you get a multi year track record until you develop it?
And so it was a very difficult thing to overcome
in the beginning. And you're right, not everybody has geologists
sitting around, but a company like Google that has access
to the resources and the technical expertise that they had,
was able to work with us over a multi year
period to learn how our technology work, get excited about it,
and that's what kind of unlocked that first operation for us.
(23:20):
You know, now we've actually announced multiple utility deals because
we've sort of crossed that chasm, But it was incredibly
difficult to get there in the beginning.
Speaker 2 (23:28):
Part of the premise of the loan Program's office, I'd
take it is that there's proven technologies that exist in
the world, but a lot of traditional sources of debt
financing do not have the expertise to evaluate them or
evaluate the risks. What happens today or maybe two years
ago or something, because now you know, you're known, you've
(23:48):
been around for a while. You walk into a normal bank,
you walk into a Wall Street bank, and you try
to explain the case for a project financing for geothermal.
Does that expertise exist or is it we just don't
know about this. What happens if you try to walk
in the door, pick up a phone call to them.
Speaker 5 (24:03):
You know, now it's changed because the perception of geothermal
has changed. But I can tell you, you know, anecdotes from
my years of this. As we as we move forward,
I would one of three things would happen actually as
we went and approached investors to talk to them about geothermal.
Speaker 4 (24:17):
One is they would ignore us. I actually literally had
one time.
Speaker 5 (24:19):
I was an investor conference and I walked up to
somebody who was actually a corporate venture capitalist for a
large oil company, told him I was doing geothermal, had
a startup doing that, and he literally puts his hand
up and says, let me stop you right there. We've
looked at geothermal not going to work. Let's say both
of our time. I'll see you later.
Speaker 3 (24:35):
Wait, how many people think when you say geothermal it's
like putting the.
Speaker 4 (24:39):
Heat of.
Speaker 5 (24:42):
I'm actually glad that you asked this. Yeah, be very clear,
this is different deep geothermal. I should say this first off,
I'm a big fan geothermal heat pumps or groundsource heat pumps.
Really cool technology, but has nothing to do with what
we do. So those are, you know, good for home heating, cooling,
or larger buildings, shallower wells where you're using the ground
(25:02):
as a heat exchange. To be clear, we drill wells
that are thousands of feet deep and they won't exactly,
they're not going to go in your basement. And then
we reach rock that's four hundred degrees fahrenheit, and then
we produce energy from that. What we're doing is actually
recirculating that geothermal brine through the reservoir and then capturing
the heat at the surface through an organic ranking cycle
system to produce electricity by spinning a turbine. And so
(25:25):
we're not going to go in your basement because for
an example, the project we're building in Utah right now
is a four hundred megawap project, and this is enough
power to power a city sized energy demand, So it
wouldn't go well in your basement. But I'm glad you
asked that because actually I can tell that the tightest
turning because up until maybe a year ago, the most
common website request we got was hey, can you do this.
Speaker 4 (25:46):
In my backyard?
Speaker 5 (25:48):
Because people don't think of geothermal power. It's a quirk
of history that they're named the same way.
Speaker 3 (26:08):
One other thing we definitely wanted to talk to you
about is permitting reform. So you know, when Donald Trump
says he's going to make everything easier in terms of regulation,
or when Elon Musk says that nowadays, what do they
mean exactly? What does that mean from your perspective making
things easier?
Speaker 5 (26:25):
Yeah, permitting is definitely the long pole in the tent,
not just for geothermal, but transmission, which is really important
to hardening the grid and bringing new resources online and
a whole host of other things.
Speaker 4 (26:35):
I'm not as much of an expert.
Speaker 5 (26:36):
In those things as I am in geothermal, so I
can speak to some of the challenges we have in geothermal.
One thing is through you know, a quirk of history,
the best geology for geothermal is located in the Western
United States. The Western United States is predominantly owned by
the US federal government. It's not private landowners, it's actually
the US government that owns most of the land, and
so that puts US by default into a federal permitting
(26:56):
regime on pretty much every project that we do in
a way that is true of necessarily other energy resources,
and so we've had to go through you know, multi
year NEPA approval processes for everything we've developed. We also
simultaneously have to go through the transmission or an interconnection
process for that. And there's a whole host of other
things that are there as well. I'll be very clear,
I think these are good things. We need to be
(27:17):
doing projects with the right environmental standards. But whenever you
look at how these things have been implemented over time,
there's a lot of things that are redundant, or a
lot of times there's just offices that are not staffed well.
So you submit permits and you just never hear back.
So typical time for permitting the geothermal project in the
Western United States is about six to eight years to
permit to be able to start the project. And so
that's not really commensurate with the data center companies that
(27:40):
are banging down our door asking if we can bring
in power by next year. I say, well, once we
get through the eight year permitting process, we can get there.
So there's things that we're trying to do to improve that.
One of the funny things about geothermal is even though
we're drilling wells, just like the oil and gas industry,
is we haven't always benefited from the same permitting.
Speaker 3 (27:57):
Yeah, they have some exclusions, that's right.
Speaker 5 (27:59):
So in one example, you know, there's certain early activities
in the expiration phase or just doing extensions to existing
projects that don't really have a huge impact, don't really
change the scope of the project itself. And so if
you were an oil and gas company, there's legislatively developed
categorical exclusions where there's a whole category of things that
if you're drilling in oil well, you don't have to
(28:20):
go through the full process for the environmental reviews for
certain kind of redundant routine things. The law that was
passed in two thousand and five that granted that didn't
just say drilling, it's a specifically oil and gas drilline.
So that's been interpreted to say geothermal is not included
in that. So there's actually a lot of examples of
places where the permitting structure, even though geothermal is a
(28:41):
lower impact resource, it's a no emission resource, it actually
has a much more extensive permitting program than a lot of.
Speaker 2 (28:49):
Oil and gas doing on federal permitting reform build that's
currently being talked about. Would that change it to what
would be ideal for you? Well, would under let's say
this bill passes at some point, what does the timeline
then look for?
Speaker 5 (29:00):
Yeah, it would make a big difference. You know, there's
many bills that have passed. Actually, this is one of
our big success cases in geothermal. I used to joke
that we were bipartisan in the sense that both parties
ignore geothermal. Now I can say we're bipartisan because I
think both parties recognize.
Speaker 4 (29:14):
The huge opportunity there is for geothermal.
Speaker 5 (29:16):
So there's actually been five bills passed in the House
this year for geothermal permitting reform, and the current Mansion
Barrosso bill that's in discussion in the Senate has a
bunch of provisions in there around geothermal. And this is
truly bipartisan there's groups on both sides of the aisle
that have sponsored these bills and it's gotten great votes,
and so it depends on which bill we're talking about. Generally,
it does provide parity on these things, and it does
(29:38):
actually remove a lot of the redundant permitting. And there's
been good studies out there by ENRAAL the National Renewal
Energy Laboratory that says these reforms can probably take the
permitting process from six to eight years down to two
to four years. And so it's not again, it's not
like we're doing these projects with no environmental review. But
I can tell you when I go out in the
market and try to raise capital to do a new project,
I say, hey, give me the money today, we'll start
(30:00):
drilling in twenty thirty one. That's a little bit less
of a compelling pitch. Then give me an you're.
Speaker 2 (30:05):
Paying you know so for plus whatever for all those
years exactly.
Speaker 5 (30:08):
So this is these changes because it's not just when
the projects come online, but it's the investment horizon that
you have to burden these projects with. Moving it from
seven years to three years can make the difference between
a project being investable or not being investable.
Speaker 4 (30:24):
So it's a massive difference.
Speaker 3 (30:26):
This might be an unfair question, but if you were
going to sort of like choose the biggest impediment to
scaling up geothermal at the moment, I mean there's financing,
which we talked about, there's getting customers on board. Presumably
there's some aspect of the technology that could be improved
as well. Give us that hierarchy, like what's number one
in terms of impediments.
Speaker 5 (30:46):
Oh, it's a good question because I feel like over
the seven years since we started Fervo, the answer has
been different every year, which I think is the right thing.
There should be an impediment, you should be knocking it
down and getting out of the next one.
Speaker 4 (30:57):
So the early days where there's.
Speaker 5 (30:59):
Fundamental question if this would even work, and that took
us several years to address, and thankfully the answer is yes.
If you would have asked me a few months ago,
I would have said funding was the big barrier, because
you still ran into that situation where people thought they
knew geothermal and thought it was yesterday's news and so
didn't even want to look at it.
Speaker 4 (31:15):
But that's shifted dramatically.
Speaker 5 (31:17):
We see a lot of interest from capital providers and
did geothermal now and then we've actually had a lot
of success on improving the permitting even before these bills
passed through. So if you would have asked me a
few months ago, I would have said transformers in high
voltage electrical equipment.
Speaker 2 (31:29):
Oh yeah, it always comes back to transformers.
Speaker 5 (31:31):
It does always come back to transformers. I would have
said permitting, and I would have said funding. Funding is
becoming a much.
Speaker 4 (31:37):
More solved issue.
Speaker 5 (31:38):
Permitting is something that I think we've made a lot
of administrative progress on and we're anticipating legislative progress on.
So now I think about supply chain, you know, because
I think we've got the money, we've got the off
take agreements, we've got everything there. You are thinking about
how do we get the supply chain in place for this?
Transformers being a big part of that, but there's also
other pieces of equipment that are important as well.
Speaker 3 (31:57):
Joe, it's so crazy that we basically had four years
of transformers.
Speaker 2 (32:01):
Right as of the most recent ISM manufacturing report, electrical
components have been in shortage for fifty straight months, so
four years and two months. I actually would love to
talk more about that, just on private sector financing, specifically,
what is the ecosystem that's emerged that wasn't in place.
If you said, okay, a year ago or two years ago,
that would have been the big thing. What does it
(32:22):
look like today on the private sector side, such that
you can raise capital for these projects?
Speaker 4 (32:27):
Yeah, yeah, I mean there's been big changes in the
last year or two.
Speaker 5 (32:29):
I think some of that is changing investors sentiment around
you etermal, but some of it is that the ecosystem
is changing. You know, if you think back a.
Speaker 2 (32:36):
Lot of times, banks is it private, is private cats.
Speaker 5 (32:38):
Banks, it's private capital, It's it's really all of the above.
You know, if you think back fifteen years ago into
the what they call the clean tech one point out bust.
I think that one of the failure modes. There was
a bunch of venture capital went into technologies that took
a long time to develop, and there wasn't really a
past the baton of who was the next source of
capital that was going to keep these technologies going, And
that's what really led to the bust. But that the
(33:00):
bust also, I think created a bunch of people who
learned hard lessons about what that was like, and a
lot of them have gone out and created the.
Speaker 4 (33:05):
Ecosystem that's there.
Speaker 5 (33:06):
So you know, for example, that Activate program that was
at the Lawrence Berkeley National Lab that let us have
two years to get our feet under us before we
really got going as a company didn't exist in the
first one, so that was really important. What we've seen
is we get bigger and bigger. You know, people have
talked about the missing middle or the value of death,
and that's one of the things that the LPO is
very instrumental in filling. But you know, market in efficiencies,
(33:27):
if there's money to be made, don't last for long.
And so what we're seeing right now is there's a
bunch of venture capitalists who historically would have only played
in the series ABC range who've recognized that there's a
capital gap for second of a kind, third of a
kind deployment, and a lot of them have raised continuity
or growth funds to piggyback off their successful companies. Meanwhile,
those like traditional companies that infrastructure investors that only wanted
(33:51):
to do the tenth project realized that if they actually
wanted to sell their LPs on getting a differentiated return,
they needed to do something that was differentiating and step
into products earlier. So a lot of them have raised
funds that will come in one click earlier, and so
that value of death is closing from both sides, because
you're seeing traditional private equity and growth equity and infrastructure
investors create new vehicles to come in one click earlier,
(34:14):
and you're seeing the venture capitalists create continuity investments and
growth estimates to carry you one click forward. And so
there used to not really be capital between like the
Series B and the infrastructure side, and now there's still
a gap, but it's getting converged on from both sides.
Speaker 3 (34:30):
I want to talk more about transformers. Actually, yeah, where
are you getting those from? Because I imagine as a
relatively new company with at least heretofore limited funding, it
might be hard to get on the wait list for
this very desirable equipment. And I get the sense that
big utility providers are probably you know, number one in
the line, or they already have a lot of existing
(34:50):
transformers that they can kind of move around. How are
you actually sourcing those?
Speaker 4 (34:55):
It's a good question, and you're right.
Speaker 5 (34:56):
It's highly competitive to get to and the lead times
can be multi year, especially for the larger transformers. You know,
I was in an investment meeting a couple months ago
where somebody walked in, very experienced investor and said, first
question out of their gate, have you sourced your GSU
transformers yet? We said, yes, we have, and he says
four out of five times the answer that's no, And
I don't have to take the rest.
Speaker 4 (35:17):
Of the meeting investor to ask that.
Speaker 5 (35:18):
It is a good discipline investor. They knew the right
question to ask. And it's also an irony too, because
data centers are growing, everybody's trying to figure out the
equipment for that, and then everybody's trying to get the
grid going. Everybody's trying to get the generation going. Oftentimes,
what we hear from the transformer suppliers is the slots
are taken by the data center companies that we're trying
to sell the power to. So it's a bit of
a circular problem there, which is interesting. We didn't have
(35:40):
a really creative solution other than ordering early. So we
found a couple of US space manufacturers. We're sourcing a
couple of our transformers from Taiwan as well, And there's
not really a creative answer other than get in line
three or four years in advance.
Speaker 2 (35:52):
Is any more manufacturing capacity being built anywhere.
Speaker 5 (35:56):
It's being talked about, and this is one that I
think is something that I just sort of expected people
to look at three, four or five year lead times
and say there's money to be made here, We're going
to expand. But I think the transformer companies have gone
through a lot of boom and busts before, so they're
quite reticent there.
Speaker 4 (36:13):
This isn't quite my area of expertise.
Speaker 5 (36:14):
I don't know how many new facilities are being built,
but what we're hearing from our suppliers is they're doing
the low hanging fruit of adding new lines, adding extra shifts,
adding extra hours. So you're starting to see the supply
come up a little bit. But is it going to
be enough to meet the unprecedented demand coming from all
different sources that need this clinical electrical equipment.
Speaker 4 (36:33):
I don't know. I still think that's going to be
one of the long poles in the tent for a while.
Speaker 3 (36:36):
If Joe and I started making transformers because it's so easy,
could we exchange transformers for equity in up and coming
power companies and solve the chicken and egg problem?
Speaker 5 (36:47):
I think you would. I think you would when you're
running a startup. A lot of times you're trying to
solve the problem of the day, and you also don't
have the balance sheets put down long term orders. Not
a lot of startups out there that are ordering things
four years in advance, so definitely a missing part of
the market.
Speaker 2 (37:01):
This is a really good idea. Yeah, what about the
labor component? How much skills transfer is there? We talked
about the tech transfer from hill to geothermal.
Speaker 4 (37:12):
Is there a labor transfer as well? Yes? Yeah.
Speaker 5 (37:15):
And in fact, just as an example, the drilling rig
that we're using for our site right now is a
Helmber campaign H ANDP Flex three rig.
Speaker 4 (37:22):
I'm actually wearing H ANDP Si cool suck.
Speaker 5 (37:26):
That's right, socks, So this is actually what the rig
looks like.
Speaker 4 (37:30):
So you can see.
Speaker 5 (37:32):
No, but if you call them, I'm sure they'll give
them to you. So yeah, And it's actually the same
exact style of drilling rigs, the most technologically sophisticated drilling
rig that you can get for on shore drilling. And
it's the same exact style of drilling rig that I
used when I started my career over a decade ago
in South Texas. And I was insistent on that because
I wanted to use the best technology and the crews there.
They were just before we picked up that rig a
(37:53):
year and a half ago, they were drilling in the
back end in North Dakota, and so people really were
drilling oil wells one day and they were geothermal wells
the next. And there's differences there, But the skills in
the workforce is there, and this is one of the
things that I think makes geothermal quite scalable. Today there's
roughly six hundred drilliing rigs operating in North America. We're
growing at a huge rate. You know, we're going to
bring on one hundred megawat projects and just eighteen months
(38:15):
from now, we're doing that with just one drilling rig.
And so you know, we can ten x our growth
and still only be a single digital percentage of the
oil field services market because we have such overlap with them.
So among the many things that I think has advantaged
geothermal among the different options you have for emerging technologies,
is the fact that there's such a ready supply chain
(38:36):
and workforce of skilled people who know.
Speaker 4 (38:38):
How to execute on these projects.
Speaker 5 (38:40):
And we can tenx our growth rate or one hundred
x our growth rate and not run into workforce issues
because there's already such a deep bench of technical talent
and technician talent that control these wells.
Speaker 3 (38:52):
So if they remade Armageddon, Bruce Willis would be a
geothermal driweller instead of an oil rig driller.
Speaker 2 (38:59):
That's right, excellent, Tim Latimer. That was fantastic, Thank you
so much, Thank you for having me.
Speaker 3 (39:18):
So that was our conversation with Tim Latimer, the CEO
of Fervo Energy, recorded live at the does Deploy twenty
four event. I'm Tracy Alloway. You can follow me at
Tracy Alloway.
Speaker 2 (39:30):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our guest Tim Latimer, He's at Tim m Latimer.
Follow our producers Kerman Rodriguez at Kerman armand dash Ol
Bennett at Dashbot and cal Brooks at cal Brooks. Thank
you to our producer Moses Adam from our odd Lads content.
Go to Bloomberg dot com slash odd lots. We have
transcripts of blog and the newsletter and you can chat
(39:52):
about all of these topics twenty four to seven in
our discord Discord dot gg slash odlock.
Speaker 3 (39:57):
And remember, if you are a Bloomer subscriber, you can
listen to all of our episodes absolutely ad free. All
you need to do is connect your Bloomberg account with
Apple Podcasts. In order to do that, just find the
Bloomberg channel on Apple Podcasts and follow the instructions there.
Thanks for listening.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:22):
I'm Jill Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:25):
Tracy, we were recently down in Washington, d C.
Speaker 3 (00:28):
I know, I really like DC. It has sort of
like old school vibe. Yeah, I have power lunches.
Speaker 2 (00:33):
I like it. It seems like a good city for
power lunches. It's also did you know, not to sidetrack
too much. Basically all the big fast casual innovation is
from DC as far as I can tell, so Sweet Green,
I think we've founded Kava. We talked to one of
the Both of those companies are from DC. And I'm
(00:54):
not gonna lie. When I think of this sort of
modal worker in DC, I think of someone who who
eats a lot of like fast casual lunches.
Speaker 4 (01:02):
At their desk. Yes, okay, which is no judgment.
Speaker 2 (01:04):
Because that's how I eat my lunch. So I just
want to make that clear. That's not a judgment done anyone, right, But.
Speaker 3 (01:10):
We are not actually here to talk about casual dining
and takeout lunches. We were in DC for a very
particular event, something very special. We were over at the
Department of Energies Deploy twenty four conference.
Speaker 2 (01:25):
That's right, So regular listeners will have heard we've done
multiple episodes in the past with the Jigger Shaw, who
is the head of the Loan Programs Office at the DOE,
who was the LPO part of the DOE that put
on this conference. And of course the big theme that
you know when you think about the Loan Program's Office
is this impulse to figure out a way to solve
the financing problem for early stage energy in which there's
(01:48):
some sort of proven technology out there, but the funding ecosystem,
for various reasons on familiarity, risk, et cetera, doesn't exist,
and so a lot of the conversations are like, how
do you solve that chicken and egg problem in energy finance?
Speaker 3 (02:02):
Absolutely, and we do, indeed have the perfect guest. We
spoke with Tim Latimer, the CEO of Fervo Energy, which
is that big geothermal startup that is doing some interesting
things with fracking technology. So take a listen.
Speaker 2 (02:17):
Hello, and welcome to a live episode of the Odd
Loss Podcast. I'm Jill Wisenthal and I'm Tracy Alloway, and
we are joined here by Tim Latimer, co founder CEO
of Fervo Energy, advanced geothermal?
Speaker 4 (02:31):
What is that?
Speaker 2 (02:32):
And when we think about America's energy mix or America's
energy portfolio, how big can advance geothermal be?
Speaker 4 (02:41):
Very big?
Speaker 5 (02:42):
That's the short answer. So, first off, great to be
with y'all. I'm a regular Odd Lots listener, so it's
a treat to be with y'all. Geothermal. What is geothermal
and what is advanced geothermal?
Speaker 4 (02:51):
It's a great question.
Speaker 5 (02:52):
So geothermal isn't new, and even power generation from geothermal
isn't new. The first power plant for geothermal came online
at over one hundred years ago in Italy, so it's
been something that's been around for a long time. But historically,
even though it has really everything you want in an
energy resource, it's carbon free, low environmental footprint, it works
twenty four to seven, it's been very limited to very
(03:14):
specific geologies. So up until very recently, the story of
geothermal is you either have the geology of Iceland where
steam is literally coming out of the ground, or certain
hot spots like northern California or New Zealand, or you
don't have geothermal, And those were kind of the only
two options. So those places blessed with it had a
great energy resource, but it certainly wasn't widespread. Advanced geothermal
(03:36):
or enhanced geothermal systems is really the whole concept that
you could use new technology to go to deeper resources
or in permeable rock where the hot water the steam
wouldn't flow on its own, and still make geothermal work.
And so in enhanced geothermal systems oftentimes you're going deeper.
In many cases you're doing something to create permeability in
the reservoir so it can work in more places. And
(03:57):
the key there is you get all the positive attributes
of geotl thermal, but you're not limited as doing it
in places like Island's geology, So the opportunity is huge.
In the US today geothermal only accounts for about three
gigawatts of power, so lead less than one percent of
the US electric grid, but the resource potential is massive.
You know, we just worked on a paper that was
published as a collaboration with Princeton that actually showed pathways
(04:18):
to get up to seven hundred and fifty gigawatts of
geothermal power by mid century. So if we unlock it
with the right technology, this could be an enormous resource.
Speaker 3 (04:27):
So you're a fracking guy. What's the technological overlap between
fracking for oil and gas in like the Permian Basin
or somewhere like that, versus doing fracking for geothermal in
Utah or something like that. And I have to admit here,
my only knowledge of drilling comes from like Bruce Willis
and Armageddon, which I assume was an accurate depiction of
(04:48):
the industry.
Speaker 4 (04:49):
But you tell me that's right, yeah, Armageddon.
Speaker 5 (04:51):
Actually I thought it was a documentary the first time
I saw it, Oky, And you're right. I actually started
my career as a drilling engineer in the oil and
gas industry. And there's a lot of technology overlap between
oil and gas and geothermal, and that's why the shale
revolution and all the technological development that's happened as a
result of that has had spillover effects that have moved
the needle on geothermal technology. But there's also a lot
(05:12):
that's different. And actually the origins of FERVO. I got
the ideas for this when I was drilling in the
Eagle for shale in South Texas, and the Eagle Ferd
had been a resource that people had known about for
over one hundred years, but it lacked the permeability to
produce economic quantities of oil, and so it was ignored
really until the late two thousands. And really it was
the process of horizontal drilling where you could drill deep
(05:34):
and then horizontally across the shale layer and the hydraulic
fracturing process to create permeability that allowed those wells to
be economic and kind of launched the shale boom. And
I was looking at what I was doing in my
career as a drilling engineer there and I learned what
geothermal was at the time, and I got really excited
because I realized that the technological gap of getting high
floor rates out of low permeability formations really was the
(05:56):
exact same whenever you looked at geothermal. That's what held
shale back, was holding geothermal back. And the fact that
these new technologies had opened up oil and gas meant
it could be done for geothermal too. But the process
of taking that technique and applying it to geothermal has
involved an enormous amount of technical work because there's a
lot different between oil and gas and geothermal. The first
thing that's probably pretty obvious is we look for much
(06:18):
higher temperatures, so you know, the Eagle Ferd when I
was drolling in South Texas is actually considered very hot
for an oil and gas based and on shore, but
it's only like three hundred degrees fahrenheit that's considered cold
for geothermal, and so we needed to figure out how
to develop the tools and techniques to go much higher
temperature than that. We're now doing products up to four
hundred and forty degrees fahrenheit and our drilling, and that
(06:38):
has taken an enormous amount of tech development to make
that happen. And it's also turns out that the places
that are hot geologically overlap very often with granite, which
is a much.
Speaker 4 (06:48):
Harder rock type than shale.
Speaker 5 (06:49):
So in order to take these technologies from oil and
gas and make them work in geothermal, we had to
develop techniques to deal with the fact that the geology
is different and it's much harder oftentimes a much more
challenging engineering environment. And so our company has been around
for seven years now and a lot of that work
has been trying to figure out what are now solve
problems in oil and gas, how do you solve them
in a completely different contact, oftentimes where the rock is
(07:11):
harder and the temperatures are hotter, and the operation of
the reservoir's very different.
Speaker 2 (07:15):
What do you have today in operation such that you
could say these tech problems are provably solved. Because obviously,
as you think about the future, there are many things.
You have to get the financing right, you have to
get the customers lined up, you have to figure out
how to scale it. But just in terms of like, okay,
where we are December twenty twenty four, what can you
show us if we were on a site, Let's say, Okay,
(07:37):
we've shown that we can solve the tech set.
Speaker 4 (07:39):
So the gold.
Speaker 5 (07:40):
Standard for new tech deployment is actually an operating project, right,
So since this is a deploy tech focus conference, I'll
say TRL nine technology right in this level nine the
final hurdle along that way, which is actually the project
working in its intended environment and operating conditions. And that's
something we achieved with enhanced geothermal Systems. Actually just over
(08:00):
a year ago when we brought our first project online.
So going back to twenty twenty one, we created a
partnership with Google as part of their twenty four to
seven Carbon Free Energy initiative, and we actually selected a
site in northern Nevada, where there was an existing producing
geothermal power plant there, but it had been troubled by
the same challenges that had held back geothermal for decades,
principally what we call dry whole risk that actually drilled
(08:22):
a bunch of wells.
Speaker 4 (08:23):
Some of the wells were successful, a lot of the wells.
Speaker 5 (08:25):
Weren't, and so as a result, the power plant wasn't
producing as much as it could based off its capacity.
So we actually partnered with the operator there and we
drilled a set of new wells, including the first two
horizontal well pair for geothermal, and we actually created that
project and brought that power online in late twenty twenty three.
And so we really needed to prove a few things.
(08:45):
One that we can actually drill and deliver those wells,
even though it was through granite and much higher temperature. Two,
that we could get highly productive flow rates out of
those wells. And the important one and the one that's
harder to prove because it takes time, is that the
temperature profile and the production profile those wells would stay
content over time. So one of the really exciting things
for Fervo. In October we actually hit the twelve month
mark where not only did we achieve all the technical
(09:07):
objectives of the project, but it was actually producing geothermal
energy connected to the grid, producing electrons for over a
year and we saw no evidence of production decline in
that year. So we can say with a lot of
confidence now this is a completely proven technology, mainly because
we've actually done it. We have a product that's producing
electricity for the grid today.
Speaker 3 (09:25):
So what's your funding mix like at the moment, because
I imagine part of the reason you want a working
project that you could show everyone is so that you
can issue more debt, like sort of more traditional energy companies,
older energy companies, and maybe move away from equity.
Speaker 5 (09:39):
Yes, that's exactly right, and we've had an interesting funding
journey that's probably very similar to many of the companies
here at Deploy. You know, early on we were backed
from many grant contributions from the Department of Energy. We
partnered on many aspects of new geothermal technology development. We
actually were part of the ACTIVATE program at the Lawrence
Berkeley National Lab, so we were back in twenty eight.
(10:00):
Team got kind of our start through some DEE research
programs and grant funding, and on the private side, it
was really venture capital funding. So funds like Breakthrough Energy
Ventures and Congruent Ventures stepped in and got us up
early on. You know, those funds that specialized and looking
at companies that were so early in their development that
it was really just an idea, a PowerPoint slide, but
would sit in and understand the technology with you. And
(10:21):
then as we expanded, what we've brought in is a
lot more institutional investors. We've actually gotten an investment from
the oil and gas industry. Now, we raised the Series
D round in February of this year. That was a
two hundred and forty four million dollars Series D and
that was actually led by Devin Energy, one of the
leading independent oil and gas producers out of Oklahoma City,
with one hundred million dollar investment. So the investment mix
has changed over time. But for a lot of new technologies,
(10:43):
there's this crossing the chasm level where you know, a
venture capitalist or a Doe grant writer will sit with
you and understand the ins and outs of your technology
and they'll see is this feasible or not and you
can actually have a good conversation around that institutional money
that wants to do project debt, they don't really want
understand how your technology works. They just want to see
that you've done it many, many times before. And that
(11:05):
kind of gets to the chicken and egg problem that's
with this funding.
Speaker 4 (11:08):
You know.
Speaker 5 (11:08):
So often when we approach those larger infrastructure sources of funding,
the answer is, we'll bring us twelve months of data
or bring us an independent engineering report that says zero
percent chance this will ever ever fail. And that's kind
of a big hurdle to jump. So we finally crossed
that chasm earlier this year because we brought that project online.
We announced in July one hundred million dollar construction loan
(11:29):
from Excalibur Rural Capital. That was the first time we
brought in project finance, you know, so we're finally moving
away from the expensive venture capital sources of funding and
down into the more sustainable, long term infrastructure style of funding.
But it took us seven years from inception an operating,
fully successful project and a lot more work to finally
cross over that funding mixed barrier.
Speaker 2 (12:06):
So obviously we want to talk more about the chicken
and egg problem because in a way, I mean, that's
the entire premise of all of this.
Speaker 4 (12:12):
But just before we dive.
Speaker 2 (12:13):
More into that you know, you mentioned shale, and there
is this story that people tell and I only maybe
like fifty percent believe it or sixty percent believe it
that the shale boom was like partly a tech story
and partly a low interest rate story, or that a
funding story. And there are various theories about how the
FED helped cause the shale boom. Again, not totally sure
if I buy it. That being said, for any sort
(12:35):
of renewable or clean energy project or anything that has
a lot of upfront capital costs, the rate conditions in
the beginning matter quite a bit to the math. And
I imagine here in twenty twenty four versus when you're
seven years ago, that picture looks very different. Talk to
us about the sort of I guess mathematical implications of
where we are with interest rates in terms of making
(12:56):
geothermal projects pencil up.
Speaker 4 (12:58):
Yeah, it's a great question.
Speaker 5 (13:00):
The fact that we've gone through such a big movement
and interest rates over the last five years has been
we've kind of gone through multiple business cycles in this
sector in a very compressed period of time. You know,
as interest rates started to rise a couple of years ago,
there were two sectors or areas that sort of bubble
to the surfaces.
Speaker 4 (13:15):
Being challenged by a high interest rate environment.
Speaker 5 (13:17):
That was number one startups that were based on very
long term growth and number two, capital intensive businesses where
it's a lot of capital upfront with a long payback period.
That was a double whammy because we were running a
capital intensive startup and so the interest rate environment was
very challenging to try to get new capital to come
into the space as those interest rates went up. And
you know, one of the things about renewable energy, and
(13:38):
this is true about solar and win but also true
about geothermal, is these are oftentimes high capex but long
payback period projects. And there are also projects that are
interesting because you end up with a different profile than
a lot of other energy infrastructure projects. Because you know,
all of our projects we build, we have fifteen year
off take agreements with locked in pricing, so we don't
have to worry five years from now, what you know,
(13:59):
it's the price of our product going to go up
or down. We also don't have any fuel cost and
so we're not exposed if there's a big run up
in fuel costs, and so we eliminate a lot of
that volatility so as a result, renewable energy projects like
geothermal have always been viewed as historically much safer investments
because you're not exposed to a lot of the volatility
mix that impact other infrastructure investments. That's a good thing
(14:21):
in general because it means you can bring low cost
capital in the space because it's perceived as safer investments,
but it also means you're spread off. The risk free
rate is a lot tighter than if you were talking
about a fossil fuel project or a project with more
risk in it, and so when those rates move, the
sort of relative impact for something with a low spread
is a lot bigger. And so the interest rate environment,
(14:41):
it hits startups and it hits infrastructure projects, particularly renewable
infrastructure projects, in a big way. And that's one of
the things that companies are navigating now. There's so many
tailwinds looking for more and more power. We need more
reliable power. We need more power period, everything from data
centers to industrialization, to ensuring and manufacturing to I mean,
the AI world is with driving so many of our
(15:02):
conversations right now. So there's all these tailwinds helping the
sector out, but the headwind that interest rate environment is
still something that's limiting both deployments of new innovation and
also broadly the renewable sector overall.
Speaker 3 (15:14):
I mean, presumably this is when someone like the DOE
could step in and potentially help. What kind of support
have you seen from the DOE so far?
Speaker 4 (15:24):
Yeah, so we've gotten great support from the DOE.
Speaker 5 (15:26):
As I mentioned, we've gotten multiple grants over the years
to work on anything from high temperature tools to novel
data sensing methods. Earlier this year, you know, there was
a provision in the bipartisan Infrastructure Law where there was
eighty four million dollars earmarked for geothermal energy development. FERVO
is actually the recipient of the largest grant of that,
(15:46):
which was a twenty five million dollar grant, And so
that kind of early demonstration funding can be very critical
for a technology that's just taking off. I don't want
to make any enemies, and there's a lot of different
technologies out in the audience here. But if you read
the Department of Energies Commercial lift off report for geothermal,
they've got a nice chart in there where it almost
looks like a data error because they put the eighty
four million dollars that geothermal got up against the ten
(16:08):
billion dollars for nuclear, and the nine billion dollars for
carbon capture, and the several billions for longeration energy storage
and other things. So I think other technologies benefited far
more than geothermal did. But even that kind of move
was sort of catalytic to get things off the ground.
And then, of course the DOE has a big message
and a big audience that reads these things. So actually,
this lift Off report that came out earlier this year
(16:30):
changed a lot of people's minds because one of the
problems with the chicken and egg problem is there's so
many investor meetings that we don't even get to have
because we reach out and they say geothermal. I know, geothermal,
we're not looking at that, and the media never even happens.
And you have something like the geothermal lift Off Report
come out that's got the DOE logo on it. They
know it's been well vetted, well researched work, and all
(16:51):
of a sudden, it may be there's some investors who
may have written off geothermal. Let's say, well, maybe there's
a new shot here, there's new data that we weren't
aware of, And so that kind of awareness in technology,
validation is pretty critical as well.
Speaker 2 (17:02):
So one of the obviously nice things about your technology
is that it's cleaned, it's carbon free. There are some
people that don't care about that, particularly March. They don't
rank that particularly highly. You know, for some people the
biggest priority is cheap energy. When you think about the future,
how important is it that either the public sector or
private sector actors who've made various commitments over the years
(17:25):
about net zero other sounding things, how important is it
that those priorities stay firm or if they're sort of
changing moods where in the private sector this is not
as important to us as it was a few years ago.
Speaker 4 (17:37):
How does that affect your outlook?
Speaker 5 (17:39):
Yeah, it's a good question, And honestly, my view on
this is I don't think people actually there's not really
that much of a divide. I think in what people
actually want out of their energy resources. I think it
can get politicized and there's a lot of food fights
and political fights in this, but people want three things
out of their energy resources. They want the energy to
be cleaner, they want the energy to be more and
(18:00):
then want the energy to be more reliable.
Speaker 4 (18:02):
And does everyone really want it to be cleaner.
Speaker 2 (18:05):
I'm just serious because like I get totally cheaper and
reliable seem unambiguous when it comes to cleaner. I could imagine,
like I could see if.
Speaker 4 (18:14):
I were anyone.
Speaker 2 (18:16):
I don't know, it is less important.
Speaker 5 (18:17):
I do think everybody wants it to be cleaner, and
that's true if you talk to people on both sides
of the aisle. I don't think it matters where it is.
I think where a lot of the debates come up
is where is the trade off between clean and affordable
and reliable. But I think you'd be hard pressed to
find anyone other than maybe some very French people who
are just trying to institution.
Speaker 3 (18:35):
Show you stand alone on that one.
Speaker 4 (18:38):
I don't have an opinion here, no opinion. You're the
one out there that doesn't want cleaner energy. I'm a journalist,
all right, journalist. I like it. But I think that
what happens is that be on where people are.
Speaker 5 (18:48):
Coming from, you know which side of the aisle they're on,
what their priorities are. They may rank those three things differently,
and then there's a lot in the macro environment where
those things get ranked differently, like very clearly affordability is
top of mind for everyone right right now, and so
what you see is over time, depending on what's going
on in the geopolitical environment, the macro environment, the political environment,
those orders may get flipped. But I think what most
(19:10):
people here are working on is something that is cleaner,
is reliable, and is more affordable. And the thing is
it's not going to get there overnight, but everybody's working
on technologies that are on a path to tiev one
of those three things on a better dimension. And I
think one of the things about geothermal is we emphasize
it checks all three boxes. It's cleaner, it's reliable, and
we're on a cost trajectory where this is going to
(19:32):
become one of the most affordable ways to get energy
in the near future. It doesn't matter if you're talking
clean or dirty, or intermittent or baseload or whatever jargon
you want to put on it.
Speaker 4 (19:41):
Geothermal.
Speaker 5 (19:42):
The cost trajectory is moving so quickly that we're going
to get a great answer on the affordability very very soon.
And so I think emphasizing that we do those three things,
and it doesn't matter what is going on in the
macro environment, those three things are still the things that
matter is kind of how we stay resilient through the
different cycles.
Speaker 3 (19:58):
So you make a very and pitch, and I guess
I'm kind of wondering when you go to talk to
potential off take customers and you say, well, we have cheap,
clean and reliable energy that ticks all the bosses boxes.
Excuse me? Do they immediately jump and go like, yes,
we'll take it. I imagine that can't be the case, right,
because this is still new technology. They probably presumably you
(20:22):
don't have geologists on staff who can review all this stuff.
What are those conversations actually like and what are I
guess the sticking points to everyone becoming your customer.
Speaker 5 (20:32):
Yeah, you know, I mentioned this a little bit before,
where it's a chicken and egg problem. This is a
lot in a lot of ways entrepreneurship, particularly if you're
doing a real hard tech development like what we're doing
at Fervo is trying to solve dozens of simultaneous chicken
and egg problems all at once, you know, because you've
got to get the financers to believe in it, you
got to get the customers to believe in it. And
it's fascinating and I can talk through our journey. You know,
(20:54):
our first off take agreement was with Google, and that
went back all the way into twenty twenty one that
we announced that deal. And it wasn't an accident that
it was Google that did that. You know, they'd put
out a white paper in twenty eighteen, and nobody was
paying attention to geothermal back then.
Speaker 4 (21:08):
It was written off as a dead sector. But they
put out a white.
Speaker 5 (21:11):
Paper in twenty eighteen that said they had actually achieved
their one hundred percent renewable energy goal, and so they
were looking at what is the next target we want
to get to, and they came up with a new
concept of twenty four to seven carbon free energy, which
is actually hourly matching the concept of one hundred percent
renewable energy. It's more of an accounting exercise where you
add up how much energy use for the year, you
add up how much energy you source for the year,
(21:31):
and if those numbers are equal at the end of
the year, you can consider it one hundred percent renewable energy.
A much more stricter standard is twenty four to seven
carbon free energy, and that's looking at, okay, where I'm
actually building these facilities and when they're actually using energy,
am I sourcing that electricity from clean areas? And what
they were making the point on is that wind and
solar had been phenomenal technologies to move the future of
(21:52):
low carbon forward, but that we were going to need
a new toolkit from storage to nuclear, to hydrogen to
geothermal to get there, and I can. I'll tell you
that the biggest point of market validation we had when
we were raising our Series A was in this twenty
page paper that Google wrote. They mentioned geothermal one time,
and we're like, see what we're on the map? People
are talking about it, And actually that caused us to
reach out to them and we started this relationship that
(22:14):
turned into our first development agreement with Google as an
off taker, and they've now become a large customer of
ours and we've announced several more deals there. But it
was interesting it took a company like Google to get
there because you know, in a lot of ways, the
same way that financiers want to see a track record,
utilities want to too. And I don't fault the utilities
for this. They have an incredibly important job where they're
the ones that are responsible for keeping the lights on,
(22:36):
and so they need to make sure that if they're
going to invest the time to prepare the grid and
go through all the work to get an energy resource
to come online, that it needs to get there. And
so most utilities won't even look at something until it
has a multi year development track record, and the utilities
are the big power buyers. And so this is why
it's a chicken and egg problem. How do you get
a new tech to market when your customers require a
(22:57):
multi year track record to develop it? But how do
you get a multi year track record until you develop it?
And so it was a very difficult thing to overcome
in the beginning. And you're right, not everybody has geologists
sitting around, but a company like Google that has access
to the resources and the technical expertise that they had,
was able to work with us over a multi year
period to learn how our technology work, get excited about it,
and that's what kind of unlocked that first operation for us.
(23:20):
You know, now we've actually announced multiple utility deals because
we've sort of crossed that chasm, But it was incredibly
difficult to get there in the beginning.
Speaker 2 (23:28):
Part of the premise of the loan Program's office, I'd
take it is that there's proven technologies that exist in
the world, but a lot of traditional sources of debt
financing do not have the expertise to evaluate them or
evaluate the risks. What happens today or maybe two years
ago or something, because now you know, you're known, you've
(23:48):
been around for a while. You walk into a normal bank,
you walk into a Wall Street bank, and you try
to explain the case for a project financing for geothermal.
Does that expertise exist or is it we just don't
know about this. What happens if you try to walk
in the door, pick up a phone call to them.
Speaker 5 (24:03):
You know, now it's changed because the perception of geothermal
has changed. But I can tell you, you know, anecdotes from
my years of this. As we as we move forward,
I would one of three things would happen actually as
we went and approached investors to talk to them about geothermal.
Speaker 4 (24:17):
One is they would ignore us. I actually literally had
one time.
Speaker 5 (24:19):
I was an investor conference and I walked up to
somebody who was actually a corporate venture capitalist for a
large oil company, told him I was doing geothermal, had
a startup doing that, and he literally puts his hand
up and says, let me stop you right there. We've
looked at geothermal not going to work. Let's say both
of our time. I'll see you later.
Speaker 3 (24:35):
Wait, how many people think when you say geothermal it's
like putting the.
Speaker 4 (24:39):
Heat of.
Speaker 5 (24:42):
I'm actually glad that you asked this. Yeah, be very clear,
this is different deep geothermal. I should say this first off,
I'm a big fan geothermal heat pumps or groundsource heat pumps.
Really cool technology, but has nothing to do with what
we do. So those are, you know, good for home heating, cooling,
or larger buildings, shallower wells where you're using the ground
(25:02):
as a heat exchange. To be clear, we drill wells
that are thousands of feet deep and they won't exactly,
they're not going to go in your basement. And then
we reach rock that's four hundred degrees fahrenheit, and then
we produce energy from that. What we're doing is actually
recirculating that geothermal brine through the reservoir and then capturing
the heat at the surface through an organic ranking cycle
system to produce electricity by spinning a turbine. And so
(25:25):
we're not going to go in your basement because for
an example, the project we're building in Utah right now
is a four hundred megawap project, and this is enough
power to power a city sized energy demand, So it
wouldn't go well in your basement. But I'm glad you
asked that because actually I can tell that the tightest
turning because up until maybe a year ago, the most
common website request we got was hey, can you do this.
Speaker 4 (25:46):
In my backyard?
Speaker 5 (25:48):
Because people don't think of geothermal power. It's a quirk
of history that they're named the same way.
Speaker 3 (26:08):
One other thing we definitely wanted to talk to you
about is permitting reform. So you know, when Donald Trump
says he's going to make everything easier in terms of regulation,
or when Elon Musk says that nowadays, what do they
mean exactly? What does that mean from your perspective making
things easier?
Speaker 5 (26:25):
Yeah, permitting is definitely the long pole in the tent,
not just for geothermal, but transmission, which is really important
to hardening the grid and bringing new resources online and
a whole host of other things.
Speaker 4 (26:35):
I'm not as much of an expert.
Speaker 5 (26:36):
In those things as I am in geothermal, so I
can speak to some of the challenges we have in geothermal.
One thing is through you know, a quirk of history,
the best geology for geothermal is located in the Western
United States. The Western United States is predominantly owned by
the US federal government. It's not private landowners, it's actually
the US government that owns most of the land, and
so that puts US by default into a federal permitting
(26:56):
regime on pretty much every project that we do in
a way that is true of necessarily other energy resources,
and so we've had to go through you know, multi
year NEPA approval processes for everything we've developed. We also
simultaneously have to go through the transmission or an interconnection
process for that. And there's a whole host of other
things that are there as well. I'll be very clear,
I think these are good things. We need to be
(27:17):
doing projects with the right environmental standards. But whenever you
look at how these things have been implemented over time,
there's a lot of things that are redundant, or a
lot of times there's just offices that are not staffed well.
So you submit permits and you just never hear back.
So typical time for permitting the geothermal project in the
Western United States is about six to eight years to
permit to be able to start the project. And so
that's not really commensurate with the data center companies that
(27:40):
are banging down our door asking if we can bring
in power by next year. I say, well, once we
get through the eight year permitting process, we can get there.
So there's things that we're trying to do to improve that.
One of the funny things about geothermal is even though
we're drilling wells, just like the oil and gas industry,
is we haven't always benefited from the same permitting.
Speaker 3 (27:57):
Yeah, they have some exclusions, that's right.
Speaker 5 (27:59):
So in one example, you know, there's certain early activities
in the expiration phase or just doing extensions to existing
projects that don't really have a huge impact, don't really
change the scope of the project itself. And so if
you were an oil and gas company, there's legislatively developed
categorical exclusions where there's a whole category of things that
if you're drilling in oil well, you don't have to
(28:20):
go through the full process for the environmental reviews for
certain kind of redundant routine things. The law that was
passed in two thousand and five that granted that didn't
just say drilling, it's a specifically oil and gas drilline.
So that's been interpreted to say geothermal is not included
in that. So there's actually a lot of examples of
places where the permitting structure, even though geothermal is a
(28:41):
lower impact resource, it's a no emission resource, it actually
has a much more extensive permitting program than a lot of.
Speaker 2 (28:49):
Oil and gas doing on federal permitting reform build that's
currently being talked about. Would that change it to what
would be ideal for you? Well, would under let's say
this bill passes at some point, what does the timeline
then look for?
Speaker 5 (29:00):
Yeah, it would make a big difference. You know, there's
many bills that have passed. Actually, this is one of
our big success cases in geothermal. I used to joke
that we were bipartisan in the sense that both parties
ignore geothermal. Now I can say we're bipartisan because I
think both parties recognize.
Speaker 4 (29:14):
The huge opportunity there is for geothermal.
Speaker 5 (29:16):
So there's actually been five bills passed in the House
this year for geothermal permitting reform, and the current Mansion
Barrosso bill that's in discussion in the Senate has a
bunch of provisions in there around geothermal. And this is
truly bipartisan there's groups on both sides of the aisle
that have sponsored these bills and it's gotten great votes,
and so it depends on which bill we're talking about. Generally,
it does provide parity on these things, and it does
(29:38):
actually remove a lot of the redundant permitting. And there's
been good studies out there by ENRAAL the National Renewal
Energy Laboratory that says these reforms can probably take the
permitting process from six to eight years down to two
to four years. And so it's not again, it's not
like we're doing these projects with no environmental review. But
I can tell you when I go out in the
market and try to raise capital to do a new project,
I say, hey, give me the money today, we'll start
(30:00):
drilling in twenty thirty one. That's a little bit less
of a compelling pitch. Then give me an you're.
Speaker 2 (30:05):
Paying you know so for plus whatever for all those
years exactly.
Speaker 5 (30:08):
So this is these changes because it's not just when
the projects come online, but it's the investment horizon that
you have to burden these projects with. Moving it from
seven years to three years can make the difference between
a project being investable or not being investable.
Speaker 4 (30:24):
So it's a massive difference.
Speaker 3 (30:26):
This might be an unfair question, but if you were
going to sort of like choose the biggest impediment to
scaling up geothermal at the moment, I mean there's financing,
which we talked about, there's getting customers on board. Presumably
there's some aspect of the technology that could be improved
as well. Give us that hierarchy, like what's number one
in terms of impediments.
Speaker 5 (30:46):
Oh, it's a good question because I feel like over
the seven years since we started Fervo, the answer has
been different every year, which I think is the right thing.
There should be an impediment, you should be knocking it
down and getting out of the next one.
Speaker 4 (30:57):
So the early days where there's.
Speaker 5 (30:59):
Fundamental question if this would even work, and that took
us several years to address, and thankfully the answer is yes.
If you would have asked me a few months ago,
I would have said funding was the big barrier, because
you still ran into that situation where people thought they
knew geothermal and thought it was yesterday's news and so
didn't even want to look at it.
Speaker 4 (31:15):
But that's shifted dramatically.
Speaker 5 (31:17):
We see a lot of interest from capital providers and
did geothermal now and then we've actually had a lot
of success on improving the permitting even before these bills
passed through. So if you would have asked me a
few months ago, I would have said transformers in high
voltage electrical equipment.
Speaker 2 (31:29):
Oh yeah, it always comes back to transformers.
Speaker 5 (31:31):
It does always come back to transformers. I would have
said permitting, and I would have said funding. Funding is
becoming a much.
Speaker 4 (31:37):
More solved issue.
Speaker 5 (31:38):
Permitting is something that I think we've made a lot
of administrative progress on and we're anticipating legislative progress on.
So now I think about supply chain, you know, because
I think we've got the money, we've got the off
take agreements, we've got everything there. You are thinking about
how do we get the supply chain in place for this?
Transformers being a big part of that, but there's also
other pieces of equipment that are important as well.
Speaker 3 (31:57):
Joe, it's so crazy that we basically had four years
of transformers.
Speaker 2 (32:01):
Right as of the most recent ISM manufacturing report, electrical
components have been in shortage for fifty straight months, so
four years and two months. I actually would love to
talk more about that, just on private sector financing, specifically,
what is the ecosystem that's emerged that wasn't in place.
If you said, okay, a year ago or two years ago,
that would have been the big thing. What does it
(32:22):
look like today on the private sector side, such that
you can raise capital for these projects?
Speaker 4 (32:27):
Yeah, yeah, I mean there's been big changes in the
last year or two.
Speaker 5 (32:29):
I think some of that is changing investors sentiment around
you etermal, but some of it is that the ecosystem
is changing. You know, if you think back a.
Speaker 2 (32:36):
Lot of times, banks is it private, is private cats.
Speaker 5 (32:38):
Banks, it's private capital, It's it's really all of the above.
You know, if you think back fifteen years ago into
the what they call the clean tech one point out bust.
I think that one of the failure modes. There was
a bunch of venture capital went into technologies that took
a long time to develop, and there wasn't really a
past the baton of who was the next source of
capital that was going to keep these technologies going, And
that's what really led to the bust. But that the
(33:00):
bust also, I think created a bunch of people who
learned hard lessons about what that was like, and a
lot of them have gone out and created the.
Speaker 4 (33:05):
Ecosystem that's there.
Speaker 5 (33:06):
So you know, for example, that Activate program that was
at the Lawrence Berkeley National Lab that let us have
two years to get our feet under us before we
really got going as a company didn't exist in the
first one, so that was really important. What we've seen
is we get bigger and bigger. You know, people have
talked about the missing middle or the value of death,
and that's one of the things that the LPO is
very instrumental in filling. But you know, market in efficiencies,
(33:27):
if there's money to be made, don't last for long.
And so what we're seeing right now is there's a
bunch of venture capitalists who historically would have only played
in the series ABC range who've recognized that there's a
capital gap for second of a kind, third of a
kind deployment, and a lot of them have raised continuity
or growth funds to piggyback off their successful companies. Meanwhile,
those like traditional companies that infrastructure investors that only wanted
(33:51):
to do the tenth project realized that if they actually
wanted to sell their LPs on getting a differentiated return,
they needed to do something that was differentiating and step
into products earlier. So a lot of them have raised
funds that will come in one click earlier, and so
that value of death is closing from both sides, because
you're seeing traditional private equity and growth equity and infrastructure
investors create new vehicles to come in one click earlier,
(34:14):
and you're seeing the venture capitalists create continuity investments and
growth estimates to carry you one click forward. And so
there used to not really be capital between like the
Series B and the infrastructure side, and now there's still
a gap, but it's getting converged on from both sides.
Speaker 3 (34:30):
I want to talk more about transformers. Actually, yeah, where
are you getting those from? Because I imagine as a
relatively new company with at least heretofore limited funding, it
might be hard to get on the wait list for
this very desirable equipment. And I get the sense that
big utility providers are probably you know, number one in
the line, or they already have a lot of existing
(34:50):
transformers that they can kind of move around. How are
you actually sourcing those?
Speaker 4 (34:55):
It's a good question, and you're right.
Speaker 5 (34:56):
It's highly competitive to get to and the lead times
can be multi year, especially for the larger transformers. You know,
I was in an investment meeting a couple months ago
where somebody walked in, very experienced investor and said, first
question out of their gate, have you sourced your GSU
transformers yet? We said, yes, we have, and he says
four out of five times the answer that's no, And
I don't have to take the rest.
Speaker 4 (35:17):
Of the meeting investor to ask that.
Speaker 5 (35:18):
It is a good discipline investor. They knew the right
question to ask. And it's also an irony too, because
data centers are growing, everybody's trying to figure out the
equipment for that, and then everybody's trying to get the
grid going. Everybody's trying to get the generation going. Oftentimes,
what we hear from the transformer suppliers is the slots
are taken by the data center companies that we're trying
to sell the power to. So it's a bit of
a circular problem there, which is interesting. We didn't have
(35:40):
a really creative solution other than ordering early. So we
found a couple of US space manufacturers. We're sourcing a
couple of our transformers from Taiwan as well, And there's
not really a creative answer other than get in line
three or four years in advance.
Speaker 2 (35:52):
Is any more manufacturing capacity being built anywhere.
Speaker 5 (35:56):
It's being talked about, and this is one that I
think is something that I just sort of expected people
to look at three, four or five year lead times
and say there's money to be made here, We're going
to expand. But I think the transformer companies have gone
through a lot of boom and busts before, so they're
quite reticent there.
Speaker 4 (36:13):
This isn't quite my area of expertise.
Speaker 5 (36:14):
I don't know how many new facilities are being built,
but what we're hearing from our suppliers is they're doing
the low hanging fruit of adding new lines, adding extra shifts,
adding extra hours. So you're starting to see the supply
come up a little bit. But is it going to
be enough to meet the unprecedented demand coming from all
different sources that need this clinical electrical equipment.
Speaker 4 (36:33):
I don't know. I still think that's going to be
one of the long poles in the tent for a while.
Speaker 3 (36:36):
If Joe and I started making transformers because it's so easy,
could we exchange transformers for equity in up and coming
power companies and solve the chicken and egg problem?
Speaker 5 (36:47):
I think you would. I think you would when you're
running a startup. A lot of times you're trying to
solve the problem of the day, and you also don't
have the balance sheets put down long term orders. Not
a lot of startups out there that are ordering things
four years in advance, so definitely a missing part of
the market.
Speaker 2 (37:01):
This is a really good idea. Yeah, what about the
labor component? How much skills transfer is there? We talked
about the tech transfer from hill to geothermal.
Speaker 4 (37:12):
Is there a labor transfer as well? Yes? Yeah.
Speaker 5 (37:15):
And in fact, just as an example, the drilling rig
that we're using for our site right now is a
Helmber campaign H ANDP Flex three rig.
Speaker 4 (37:22):
I'm actually wearing H ANDP Si cool suck.
Speaker 5 (37:26):
That's right, socks, So this is actually what the rig
looks like.
Speaker 4 (37:30):
So you can see.
Speaker 5 (37:32):
No, but if you call them, I'm sure they'll give
them to you. So yeah, And it's actually the same
exact style of drilling rigs, the most technologically sophisticated drilling
rig that you can get for on shore drilling. And
it's the same exact style of drilling rig that I
used when I started my career over a decade ago
in South Texas. And I was insistent on that because
I wanted to use the best technology and the crews there.
They were just before we picked up that rig a
(37:53):
year and a half ago, they were drilling in the
back end in North Dakota, and so people really were
drilling oil wells one day and they were geothermal wells
the next. And there's differences there, But the skills in
the workforce is there, and this is one of the
things that I think makes geothermal quite scalable. Today there's
roughly six hundred drilliing rigs operating in North America. We're
growing at a huge rate. You know, we're going to
bring on one hundred megawat projects and just eighteen months
(38:15):
from now, we're doing that with just one drilling rig.
And so you know, we can ten x our growth
and still only be a single digital percentage of the
oil field services market because we have such overlap with them.
So among the many things that I think has advantaged
geothermal among the different options you have for emerging technologies,
is the fact that there's such a ready supply chain
(38:36):
and workforce of skilled people who know.
Speaker 4 (38:38):
How to execute on these projects.
Speaker 5 (38:40):
And we can tenx our growth rate or one hundred
x our growth rate and not run into workforce issues
because there's already such a deep bench of technical talent
and technician talent that control these wells.
Speaker 3 (38:52):
So if they remade Armageddon, Bruce Willis would be a
geothermal driweller instead of an oil rig driller.
Speaker 2 (38:59):
That's right, excellent, Tim Latimer. That was fantastic, Thank you
so much, Thank you for having me.
Speaker 3 (39:18):
So that was our conversation with Tim Latimer, the CEO
of Fervo Energy, recorded live at the does Deploy twenty
four event. I'm Tracy Alloway. You can follow me at
Tracy Alloway.
Speaker 2 (39:30):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our guest Tim Latimer, He's at Tim m Latimer.
Follow our producers Kerman Rodriguez at Kerman armand dash Ol
Bennett at Dashbot and cal Brooks at cal Brooks. Thank
you to our producer Moses Adam from our odd Lads content.
Go to Bloomberg dot com slash odd lots. We have
transcripts of blog and the newsletter and you can chat
(39:52):
about all of these topics twenty four to seven in
our discord Discord dot gg slash odlock.
Speaker 3 (39:57):
And remember, if you are a Bloomer subscriber, you can
listen to all of our episodes absolutely ad free. All
you need to do is connect your Bloomberg account with
Apple Podcasts. In order to do that, just find the
Bloomberg channel on Apple Podcasts and follow the instructions there.
Thanks for listening.
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Joe Weisenthal
Tracy Alloway
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