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