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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, we were recently down in Washington, d C.

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Speaker 3: I know, I really like DC. It has sort of

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Speaker 3: like old school vibe. Yeah, I have power lunches.

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Speaker 2: I like it. It seems like a good city for

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Speaker 2: power lunches. It's also did you know, not to sidetrack

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Speaker 2: too much. Basically all the big fast casual innovation is

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Speaker 2: from DC as far as I can tell, so Sweet Green,

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Speaker 2: I think we've founded Kava. We talked to one of

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Speaker 2: the Both of those companies are from DC. And I'm

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Speaker 2: not gonna lie. When I think of this sort of

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Speaker 2: modal worker in DC, I think of someone who who

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Speaker 2: eats a lot of like fast casual lunches.

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Speaker 4: At their desk. Yes, okay, which is no judgment.

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Speaker 2: Because that's how I eat my lunch. So I just

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Speaker 2: want to make that clear. That's not a judgment done anyone, right, But.

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Speaker 3: We are not actually here to talk about casual dining

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Speaker 3: and takeout lunches. We were in DC for a very

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Speaker 3: particular event, something very special. We were over at the

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Speaker 3: Department of Energies Deploy twenty four conference.

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Speaker 2: That's right, So regular listeners will have heard we've done

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Speaker 2: multiple episodes in the past with the Jigger Shaw, who

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Speaker 2: is the head of the Loan Programs Office at the DOE,

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Speaker 2: who was the LPO part of the DOE that put

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Speaker 2: on this conference. And of course the big theme that

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Speaker 2: you know when you think about the Loan Program's Office

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Speaker 2: is this impulse to figure out a way to solve

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Speaker 2: the financing problem for early stage energy in which there's

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Speaker 2: some sort of proven technology out there, but the funding ecosystem,

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Speaker 2: for various reasons on familiarity, risk, et cetera, doesn't exist,

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Speaker 2: and so a lot of the conversations are like, how

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Speaker 2: do you solve that chicken and egg problem in energy finance?

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Speaker 3: Absolutely, and we do, indeed have the perfect guest. We

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Speaker 3: spoke with Tim Latimer, the CEO of Fervo Energy, which

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Speaker 3: is that big geothermal startup that is doing some interesting

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Speaker 3: things with fracking technology. So take a listen.

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Speaker 2: Hello, and welcome to a live episode of the Odd

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Speaker 2: Loss Podcast. I'm Jill Wisenthal and I'm Tracy Alloway, and

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Speaker 2: we are joined here by Tim Latimer, co founder CEO

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Speaker 2: of Fervo Energy, advanced geothermal?

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Speaker 4: What is that?

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Speaker 2: And when we think about America's energy mix or America's

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Speaker 2: energy portfolio, how big can advance geothermal be?

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Speaker 4: Very big?

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Speaker 5: That's the short answer. So, first off, great to be

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Speaker 5: with y'all. I'm a regular Odd Lots listener, so it's

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Speaker 5: a treat to be with y'all. Geothermal. What is geothermal

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Speaker 5: and what is advanced geothermal?

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Speaker 4: It's a great question.

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Speaker 5: So geothermal isn't new, and even power generation from geothermal

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Speaker 5: isn't new. The first power plant for geothermal came online

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Speaker 5: at over one hundred years ago in Italy, so it's

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Speaker 5: been something that's been around for a long time. But historically,

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Speaker 5: even though it has really everything you want in an

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Speaker 5: energy resource, it's carbon free, low environmental footprint, it works

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Speaker 5: twenty four to seven, it's been very limited to very

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Speaker 5: specific geologies. So up until very recently, the story of

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Speaker 5: geothermal is you either have the geology of Iceland where

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Speaker 5: steam is literally coming out of the ground, or certain

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Speaker 5: hot spots like northern California or New Zealand, or you

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Speaker 5: don't have geothermal, And those were kind of the only

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Speaker 5: two options. So those places blessed with it had a

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Speaker 5: great energy resource, but it certainly wasn't widespread. Advanced geothermal

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Speaker 5: or enhanced geothermal systems is really the whole concept that

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Speaker 5: you could use new technology to go to deeper resources

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Speaker 5: or in permeable rock where the hot water the steam

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Speaker 5: wouldn't flow on its own, and still make geothermal work.

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Speaker 5: And so in enhanced geothermal systems oftentimes you're going deeper.

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Speaker 5: In many cases you're doing something to create permeability in

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Speaker 5: the reservoir so it can work in more places. And

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Speaker 5: the key there is you get all the positive attributes

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Speaker 5: of geotl thermal, but you're not limited as doing it

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Speaker 5: in places like Island's geology, So the opportunity is huge.

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Speaker 5: In the US today geothermal only accounts for about three

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Speaker 5: gigawatts of power, so lead less than one percent of

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Speaker 5: the US electric grid, but the resource potential is massive.

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Speaker 5: You know, we just worked on a paper that was

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Speaker 5: published as a collaboration with Princeton that actually showed pathways

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Speaker 5: to get up to seven hundred and fifty gigawatts of

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Speaker 5: geothermal power by mid century. So if we unlock it

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Speaker 5: with the right technology, this could be an enormous resource.

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Speaker 3: So you're a fracking guy. What's the technological overlap between

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Speaker 3: fracking for oil and gas in like the Permian Basin

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Speaker 3: or somewhere like that, versus doing fracking for geothermal in

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Speaker 3: Utah or something like that. And I have to admit here,

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Speaker 3: my only knowledge of drilling comes from like Bruce Willis

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Speaker 3: and Armageddon, which I assume was an accurate depiction of

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Speaker 3: the industry.

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Speaker 4: But you tell me that's right, yeah, Armageddon.

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Speaker 5: Actually I thought it was a documentary the first time

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Speaker 5: I saw it, Oky, And you're right. I actually started

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Speaker 5: my career as a drilling engineer in the oil and

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Speaker 5: gas industry. And there's a lot of technology overlap between

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Speaker 5: oil and gas and geothermal, and that's why the shale

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Speaker 5: revolution and all the technological development that's happened as a

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Speaker 5: result of that has had spillover effects that have moved

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Speaker 5: the needle on geothermal technology. But there's also a lot

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Speaker 5: that's different. And actually the origins of FERVO. I got

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Speaker 5: the ideas for this when I was drilling in the

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Speaker 5: Eagle for shale in South Texas, and the Eagle Ferd

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Speaker 5: had been a resource that people had known about for

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Speaker 5: over one hundred years, but it lacked the permeability to

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Speaker 5: produce economic quantities of oil, and so it was ignored

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Speaker 5: really until the late two thousands. And really it was

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Speaker 5: the process of horizontal drilling where you could drill deep

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Speaker 5: and then horizontally across the shale layer and the hydraulic

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Speaker 5: fracturing process to create permeability that allowed those wells to

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Speaker 5: be economic and kind of launched the shale boom. And

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Speaker 5: I was looking at what I was doing in my

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Speaker 5: career as a drilling engineer there and I learned what

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Speaker 5: geothermal was at the time, and I got really excited

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Speaker 5: because I realized that the technological gap of getting high

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Speaker 5: floor rates out of low permeability formations really was the

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Speaker 5: exact same whenever you looked at geothermal. That's what held

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Speaker 5: shale back, was holding geothermal back. And the fact that

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Speaker 5: these new technologies had opened up oil and gas meant

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Speaker 5: it could be done for geothermal too. But the process

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Speaker 5: of taking that technique and applying it to geothermal has

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Speaker 5: involved an enormous amount of technical work because there's a

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Speaker 5: lot different between oil and gas and geothermal. The first

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Speaker 5: thing that's probably pretty obvious is we look for much

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Speaker 5: higher temperatures, so you know, the Eagle Ferd when I

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Speaker 5: was drolling in South Texas is actually considered very hot

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Speaker 5: for an oil and gas based and on shore, but

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Speaker 5: it's only like three hundred degrees fahrenheit that's considered cold

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Speaker 5: for geothermal, and so we needed to figure out how

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Speaker 5: to develop the tools and techniques to go much higher

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Speaker 5: temperature than that. We're now doing products up to four

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Speaker 5: hundred and forty degrees fahrenheit and our drilling, and that

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Speaker 5: has taken an enormous amount of tech development to make

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Speaker 5: that happen. And it's also turns out that the places

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Speaker 5: that are hot geologically overlap very often with granite, which

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Speaker 5: is a much.

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Speaker 4: Harder rock type than shale.

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Speaker 5: So in order to take these technologies from oil and

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Speaker 5: gas and make them work in geothermal, we had to

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Speaker 5: develop techniques to deal with the fact that the geology

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Speaker 5: is different and it's much harder oftentimes a much more

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Speaker 5: challenging engineering environment. And so our company has been around

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Speaker 5: for seven years now and a lot of that work

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Speaker 5: has been trying to figure out what are now solve

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Speaker 5: problems in oil and gas, how do you solve them

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Speaker 5: in a completely different contact, oftentimes where the rock is

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Speaker 5: harder and the temperatures are hotter, and the operation of

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Speaker 5: the reservoir's very different.

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Speaker 2: What do you have today in operation such that you

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Speaker 2: could say these tech problems are provably solved. Because obviously,

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Speaker 2: as you think about the future, there are many things.

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Speaker 2: You have to get the financing right, you have to

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Speaker 2: get the customers lined up, you have to figure out

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Speaker 2: how to scale it. But just in terms of like, okay,

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Speaker 2: where we are December twenty twenty four, what can you

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Speaker 2: show us if we were on a site, Let's say, Okay,

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Speaker 2: we've shown that we can solve the tech set.

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Speaker 4: So the gold.

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Speaker 5: Standard for new tech deployment is actually an operating project, right,

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Speaker 5: So since this is a deploy tech focus conference, I'll

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Speaker 5: say TRL nine technology right in this level nine the

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Speaker 5: final hurdle along that way, which is actually the project

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Speaker 5: working in its intended environment and operating conditions. And that's

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Speaker 5: something we achieved with enhanced geothermal Systems. Actually just over

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Speaker 5: a year ago when we brought our first project online.

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Speaker 5: So going back to twenty twenty one, we created a

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Speaker 5: partnership with Google as part of their twenty four to

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Speaker 5: seven Carbon Free Energy initiative, and we actually selected a

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Speaker 5: site in northern Nevada, where there was an existing producing

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Speaker 5: geothermal power plant there, but it had been troubled by

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Speaker 5: the same challenges that had held back geothermal for decades,

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Speaker 5: principally what we call dry whole risk that actually drilled

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Speaker 5: a bunch of wells.

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Speaker 4: Some of the wells were successful, a lot of the wells.

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Speaker 5: Weren't, and so as a result, the power plant wasn't

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Speaker 5: producing as much as it could based off its capacity.

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Speaker 5: So we actually partnered with the operator there and we

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Speaker 5: drilled a set of new wells, including the first two

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Speaker 5: horizontal well pair for geothermal, and we actually created that

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Speaker 5: project and brought that power online in late twenty twenty three.

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Speaker 5: And so we really needed to prove a few things.

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Speaker 5: One that we can actually drill and deliver those wells,

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Speaker 5: even though it was through granite and much higher temperature. Two,

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Speaker 5: that we could get highly productive flow rates out of

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Speaker 5: those wells. And the important one and the one that's

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Speaker 5: harder to prove because it takes time, is that the

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Speaker 5: temperature profile and the production profile those wells would stay

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Speaker 5: content over time. So one of the really exciting things

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Speaker 5: for Fervo. In October we actually hit the twelve month

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Speaker 5: mark where not only did we achieve all the technical

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Speaker 5: objectives of the project, but it was actually producing geothermal

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Speaker 5: energy connected to the grid, producing electrons for over a

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Speaker 5: year and we saw no evidence of production decline in

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Speaker 5: that year. So we can say with a lot of

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Speaker 5: confidence now this is a completely proven technology, mainly because

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Speaker 5: we've actually done it. We have a product that's producing

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Speaker 5: electricity for the grid today.

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Speaker 3: So what's your funding mix like at the moment, because

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Speaker 3: I imagine part of the reason you want a working

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Speaker 3: project that you could show everyone is so that you

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Speaker 3: can issue more debt, like sort of more traditional energy companies,

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Speaker 3: older energy companies, and maybe move away from equity.

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Speaker 5: Yes, that's exactly right, and we've had an interesting funding

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Speaker 5: journey that's probably very similar to many of the companies

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Speaker 5: here at Deploy. You know, early on we were backed

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Speaker 5: from many grant contributions from the Department of Energy. We

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Speaker 5: partnered on many aspects of new geothermal technology development. We

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Speaker 5: actually were part of the ACTIVATE program at the Lawrence

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Speaker 5: Berkeley National Lab, so we were back in twenty eight.

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Speaker 5: Team got kind of our start through some DEE research

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Speaker 5: programs and grant funding, and on the private side, it

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Speaker 5: was really venture capital funding. So funds like Breakthrough Energy

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Speaker 5: Ventures and Congruent Ventures stepped in and got us up

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Speaker 5: early on. You know, those funds that specialized and looking

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Speaker 5: at companies that were so early in their development that

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Speaker 5: it was really just an idea, a PowerPoint slide, but

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Speaker 5: would sit in and understand the technology with you. And

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Speaker 5: then as we expanded, what we've brought in is a

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Speaker 5: lot more institutional investors. We've actually gotten an investment from

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Speaker 5: the oil and gas industry. Now, we raised the Series

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Speaker 5: D round in February of this year. That was a

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Speaker 5: two hundred and forty four million dollars Series D and

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Speaker 5: that was actually led by Devin Energy, one of the

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Speaker 5: leading independent oil and gas producers out of Oklahoma City,

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Speaker 5: with one hundred million dollar investment. So the investment mix

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Speaker 5: has changed over time. But for a lot of new technologies,

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Speaker 5: there's this crossing the chasm level where you know, a

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Speaker 5: venture capitalist or a Doe grant writer will sit with

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Speaker 5: you and understand the ins and outs of your technology

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Speaker 5: and they'll see is this feasible or not and you

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Speaker 5: can actually have a good conversation around that institutional money

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Speaker 5: that wants to do project debt, they don't really want

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Speaker 5: understand how your technology works. They just want to see

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Speaker 5: that you've done it many, many times before. And that

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Speaker 5: kind of gets to the chicken and egg problem that's

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Speaker 5: with this funding.

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Speaker 4: You know.

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Speaker 5: So often when we approach those larger infrastructure sources of funding,

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Speaker 5: the answer is, we'll bring us twelve months of data

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Speaker 5: or bring us an independent engineering report that says zero

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Speaker 5: percent chance this will ever ever fail. And that's kind

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Speaker 5: of a big hurdle to jump. So we finally crossed

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Speaker 5: that chasm earlier this year because we brought that project online.

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Speaker 5: We announced in July one hundred million dollar construction loan

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Speaker 5: from Excalibur Rural Capital. That was the first time we

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Speaker 5: brought in project finance, you know, so we're finally moving

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Speaker 5: away from the expensive venture capital sources of funding and

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Speaker 5: down into the more sustainable, long term infrastructure style of funding.

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Speaker 5: But it took us seven years from inception an operating,

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Speaker 5: fully successful project and a lot more work to finally

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Speaker 5: cross over that funding mixed barrier.

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Speaker 2: So obviously we want to talk more about the chicken

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Speaker 2: and egg problem because in a way, I mean, that's

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Speaker 2: the entire premise of all of this.

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Speaker 4: But just before we dive.

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Speaker 2: More into that you know, you mentioned shale, and there

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Speaker 2: is this story that people tell and I only maybe

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Speaker 2: like fifty percent believe it or sixty percent believe it

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Speaker 2: that the shale boom was like partly a tech story

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Speaker 2: and partly a low interest rate story, or that a

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Speaker 2: funding story. And there are various theories about how the

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Speaker 2: FED helped cause the shale boom. Again, not totally sure

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Speaker 2: if I buy it. That being said, for any sort

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Speaker 2: of renewable or clean energy project or anything that has

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Speaker 2: a lot of upfront capital costs, the rate conditions in

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Speaker 2: the beginning matter quite a bit to the math. And

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Speaker 2: I imagine here in twenty twenty four versus when you're

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Speaker 2: seven years ago, that picture looks very different. Talk to

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Speaker 2: us about the sort of I guess mathematical implications of

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Speaker 2: where we are with interest rates in terms of making

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Speaker 2: geothermal projects pencil up.

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Speaker 4: Yeah, it's a great question.

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Speaker 5: The fact that we've gone through such a big movement

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Speaker 5: and interest rates over the last five years has been

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Speaker 5: we've kind of gone through multiple business cycles in this

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Speaker 5: sector in a very compressed period of time. You know,

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Speaker 5: as interest rates started to rise a couple of years ago,

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Speaker 5: there were two sectors or areas that sort of bubble

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Speaker 5: to the surfaces.

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Speaker 4: Being challenged by a high interest rate environment.

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Speaker 5: That was number one startups that were based on very

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Speaker 5: long term growth and number two, capital intensive businesses where

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Speaker 5: it's a lot of capital upfront with a long payback period.

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Speaker 5: That was a double whammy because we were running a

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Speaker 5: capital intensive startup and so the interest rate environment was

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Speaker 5: very challenging to try to get new capital to come

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Speaker 5: into the space as those interest rates went up. And

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Speaker 5: you know, one of the things about renewable energy, and

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Speaker 5: this is true about solar and win but also true

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Speaker 5: about geothermal, is these are oftentimes high capex but long

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Speaker 5: payback period projects. And there are also projects that are

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Speaker 5: interesting because you end up with a different profile than

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Speaker 5: a lot of other energy infrastructure projects. Because you know,

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Speaker 5: all of our projects we build, we have fifteen year

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Speaker 5: off take agreements with locked in pricing, so we don't

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Speaker 5: have to worry five years from now, what you know,

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Speaker 5: it's the price of our product going to go up

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Speaker 5: or down. We also don't have any fuel cost and

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Speaker 5: so we're not exposed if there's a big run up

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Speaker 5: in fuel costs, and so we eliminate a lot of

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Speaker 5: that volatility so as a result, renewable energy projects like

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Speaker 5: geothermal have always been viewed as historically much safer investments

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Speaker 5: because you're not exposed to a lot of the volatility

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Speaker 5: mix that impact other infrastructure investments. That's a good thing

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Speaker 5: in general because it means you can bring low cost

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Speaker 5: capital in the space because it's perceived as safer investments,

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Speaker 5: but it also means you're spread off. The risk free

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Speaker 5: rate is a lot tighter than if you were talking

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Speaker 5: about a fossil fuel project or a project with more

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Speaker 5: risk in it, and so when those rates move, the

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Speaker 5: sort of relative impact for something with a low spread

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Speaker 5: is a lot bigger. And so the interest rate environment,

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Speaker 5: it hits startups and it hits infrastructure projects, particularly renewable

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Speaker 5: infrastructure projects, in a big way. And that's one of

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Speaker 5: the things that companies are navigating now. There's so many

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Speaker 5: tailwinds looking for more and more power. We need more

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Speaker 5: reliable power. We need more power period, everything from data

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Speaker 5: centers to industrialization, to ensuring and manufacturing to I mean,

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Speaker 5: the AI world is with driving so many of our

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Speaker 5: conversations right now. So there's all these tailwinds helping the

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Speaker 5: sector out, but the headwind that interest rate environment is

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Speaker 5: still something that's limiting both deployments of new innovation and

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Speaker 5: also broadly the renewable sector overall.

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Speaker 3: I mean, presumably this is when someone like the DOE

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Speaker 3: could step in and potentially help. What kind of support

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Speaker 3: have you seen from the DOE so far?

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Speaker 4: Yeah, so we've gotten great support from the DOE.

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Speaker 5: As I mentioned, we've gotten multiple grants over the years

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Speaker 5: to work on anything from high temperature tools to novel

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Speaker 5: data sensing methods. Earlier this year, you know, there was

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Speaker 5: a provision in the bipartisan Infrastructure Law where there was

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Speaker 5: eighty four million dollars earmarked for geothermal energy development. FERVO

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Speaker 5: is actually the recipient of the largest grant of that,

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Speaker 5: which was a twenty five million dollar grant, And so

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Speaker 5: that kind of early demonstration funding can be very critical

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Speaker 5: for a technology that's just taking off. I don't want

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Speaker 5: to make any enemies, and there's a lot of different

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Speaker 5: technologies out in the audience here. But if you read

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Speaker 5: the Department of Energies Commercial lift off report for geothermal,

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Speaker 5: they've got a nice chart in there where it almost

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Speaker 5: looks like a data error because they put the eighty

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Speaker 5: four million dollars that geothermal got up against the ten

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Speaker 5: billion dollars for nuclear, and the nine billion dollars for

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Speaker 5: carbon capture, and the several billions for longeration energy storage

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Speaker 5: and other things. So I think other technologies benefited far

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Speaker 5: more than geothermal did. But even that kind of move

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Speaker 5: was sort of catalytic to get things off the ground.

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Speaker 5: And then, of course the DOE has a big message

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Speaker 5: and a big audience that reads these things. So actually,

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Speaker 5: this lift Off report that came out earlier this year

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Speaker 5: changed a lot of people's minds because one of the

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Speaker 5: problems with the chicken and egg problem is there's so

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Speaker 5: many investor meetings that we don't even get to have

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Speaker 5: because we reach out and they say geothermal. I know, geothermal,

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Speaker 5: we're not looking at that, and the media never even happens.

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Speaker 5: And you have something like the geothermal lift Off Report

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Speaker 5: come out that's got the DOE logo on it. They

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Speaker 5: know it's been well vetted, well researched work, and all

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Speaker 5: of a sudden, it may be there's some investors who

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Speaker 5: may have written off geothermal. Let's say, well, maybe there's

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Speaker 5: a new shot here, there's new data that we weren't

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Speaker 5: aware of, And so that kind of awareness in technology,

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Speaker 5: validation is pretty critical as well.

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Speaker 2: So one of the obviously nice things about your technology

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Speaker 2: is that it's cleaned, it's carbon free. There are some

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Speaker 2: people that don't care about that, particularly March. They don't

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Speaker 2: rank that particularly highly. You know, for some people the

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Speaker 2: biggest priority is cheap energy. When you think about the future,

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Speaker 2: how important is it that either the public sector or

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Speaker 2: private sector actors who've made various commitments over the years

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Speaker 2: about net zero other sounding things, how important is it

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Speaker 2: that those priorities stay firm or if they're sort of

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Speaker 2: changing moods where in the private sector this is not

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Speaker 2: as important to us as it was a few years ago.

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Speaker 4: How does that affect your outlook?

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Speaker 5: Yeah, it's a good question, And honestly, my view on

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Speaker 5: this is I don't think people actually there's not really

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Speaker 5: that much of a divide. I think in what people

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Speaker 5: actually want out of their energy resources. I think it

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Speaker 5: can get politicized and there's a lot of food fights

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Speaker 5: and political fights in this, but people want three things

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Speaker 5: out of their energy resources. They want the energy to

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Speaker 5: be cleaner, they want the energy to be more and

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Speaker 5: then want the energy to be more reliable.

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Speaker 4: And does everyone really want it to be cleaner.

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Speaker 2: I'm just serious because like I get totally cheaper and

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Speaker 2: reliable seem unambiguous when it comes to cleaner. I could imagine,

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Speaker 2: like I could see if.

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Speaker 4: I were anyone.

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Speaker 2: I don't know, it is less important.

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Speaker 5: I do think everybody wants it to be cleaner, and

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Speaker 5: that's true if you talk to people on both sides

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Speaker 5: of the aisle. I don't think it matters where it is.

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Speaker 5: I think where a lot of the debates come up

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Speaker 5: is where is the trade off between clean and affordable

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Speaker 5: and reliable. But I think you'd be hard pressed to

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Speaker 5: find anyone other than maybe some very French people who

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Speaker 5: are just trying to institution.

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Speaker 3: Show you stand alone on that one.

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Speaker 4: I don't have an opinion here, no opinion. You're the

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Speaker 4: one out there that doesn't want cleaner energy. I'm a journalist,

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Speaker 4: all right, journalist. I like it. But I think that

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Speaker 4: what happens is that be on where people are.

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Speaker 5: Coming from, you know which side of the aisle they're on,

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Speaker 5: what their priorities are. They may rank those three things differently,

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Speaker 5: and then there's a lot in the macro environment where

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Speaker 5: those things get ranked differently, like very clearly affordability is

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Speaker 5: top of mind for everyone right right now, and so

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Speaker 5: what you see is over time, depending on what's going

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Speaker 5: on in the geopolitical environment, the macro environment, the political environment,

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Speaker 5: those orders may get flipped. But I think what most

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Speaker 5: people here are working on is something that is cleaner,

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Speaker 5: is reliable, and is more affordable. And the thing is

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Speaker 5: it's not going to get there overnight, but everybody's working

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Speaker 5: on technologies that are on a path to tiev one

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Speaker 5: of those three things on a better dimension. And I

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Speaker 5: think one of the things about geothermal is we emphasize

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Speaker 5: it checks all three boxes. It's cleaner, it's reliable, and

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Speaker 5: we're on a cost trajectory where this is going to

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Speaker 5: become one of the most affordable ways to get energy

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Speaker 5: in the near future. It doesn't matter if you're talking

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Speaker 5: clean or dirty, or intermittent or baseload or whatever jargon

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Speaker 5: you want to put on it.

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Speaker 4: Geothermal.

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Speaker 5: The cost trajectory is moving so quickly that we're going

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Speaker 5: to get a great answer on the affordability very very soon.

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Speaker 5: And so I think emphasizing that we do those three things,

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Speaker 5: and it doesn't matter what is going on in the

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Speaker 5: macro environment, those three things are still the things that

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Speaker 5: matter is kind of how we stay resilient through the

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Speaker 5: different cycles.

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Speaker 3: So you make a very and pitch, and I guess

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Speaker 3: I'm kind of wondering when you go to talk to

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Speaker 3: potential off take customers and you say, well, we have cheap,

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Speaker 3: clean and reliable energy that ticks all the bosses boxes.

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Speaker 3: Excuse me? Do they immediately jump and go like, yes,

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Speaker 3: we'll take it. I imagine that can't be the case, right,

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Speaker 3: because this is still new technology. They probably presumably you

438
00:20:22,840 --> 00:20:26,240
Speaker 3: don't have geologists on staff who can review all this stuff.

439
00:20:26,280 --> 00:20:28,679
Speaker 3: What are those conversations actually like and what are I

440
00:20:28,680 --> 00:20:32,280
Speaker 3: guess the sticking points to everyone becoming your customer.

441
00:20:32,720 --> 00:20:34,959
Speaker 5: Yeah, you know, I mentioned this a little bit before,

442
00:20:35,240 --> 00:20:37,280
Speaker 5: where it's a chicken and egg problem. This is a

443
00:20:37,280 --> 00:20:39,560
Speaker 5: lot in a lot of ways entrepreneurship, particularly if you're

444
00:20:39,560 --> 00:20:42,680
Speaker 5: doing a real hard tech development like what we're doing

445
00:20:42,680 --> 00:20:46,240
Speaker 5: at Fervo is trying to solve dozens of simultaneous chicken

446
00:20:46,240 --> 00:20:48,320
Speaker 5: and egg problems all at once, you know, because you've

447
00:20:48,320 --> 00:20:50,520
Speaker 5: got to get the financers to believe in it, you

448
00:20:50,560 --> 00:20:52,399
Speaker 5: got to get the customers to believe in it. And

449
00:20:52,680 --> 00:20:54,679
Speaker 5: it's fascinating and I can talk through our journey. You know,

450
00:20:54,720 --> 00:20:56,800
Speaker 5: our first off take agreement was with Google, and that

451
00:20:56,800 --> 00:20:58,520
Speaker 5: went back all the way into twenty twenty one that

452
00:20:58,520 --> 00:21:01,480
Speaker 5: we announced that deal. And it wasn't an accident that

453
00:21:01,520 --> 00:21:03,280
Speaker 5: it was Google that did that. You know, they'd put

454
00:21:03,280 --> 00:21:06,639
Speaker 5: out a white paper in twenty eighteen, and nobody was

455
00:21:06,680 --> 00:21:08,119
Speaker 5: paying attention to geothermal back then.

456
00:21:08,160 --> 00:21:10,439
Speaker 4: It was written off as a dead sector. But they

457
00:21:10,480 --> 00:21:11,200
Speaker 4: put out a white.

458
00:21:11,040 --> 00:21:13,200
Speaker 5: Paper in twenty eighteen that said they had actually achieved

459
00:21:13,240 --> 00:21:15,760
Speaker 5: their one hundred percent renewable energy goal, and so they

460
00:21:15,760 --> 00:21:18,040
Speaker 5: were looking at what is the next target we want

461
00:21:18,080 --> 00:21:19,440
Speaker 5: to get to, and they came up with a new

462
00:21:19,440 --> 00:21:22,120
Speaker 5: concept of twenty four to seven carbon free energy, which

463
00:21:22,160 --> 00:21:24,320
Speaker 5: is actually hourly matching the concept of one hundred percent

464
00:21:24,359 --> 00:21:27,359
Speaker 5: renewable energy. It's more of an accounting exercise where you

465
00:21:27,400 --> 00:21:29,320
Speaker 5: add up how much energy use for the year, you

466
00:21:29,359 --> 00:21:31,120
Speaker 5: add up how much energy you source for the year,

467
00:21:31,440 --> 00:21:33,240
Speaker 5: and if those numbers are equal at the end of

468
00:21:33,240 --> 00:21:35,760
Speaker 5: the year, you can consider it one hundred percent renewable energy.

469
00:21:36,000 --> 00:21:38,040
Speaker 5: A much more stricter standard is twenty four to seven

470
00:21:38,080 --> 00:21:41,360
Speaker 5: carbon free energy, and that's looking at, okay, where I'm

471
00:21:41,359 --> 00:21:44,360
Speaker 5: actually building these facilities and when they're actually using energy,

472
00:21:44,600 --> 00:21:47,520
Speaker 5: am I sourcing that electricity from clean areas? And what

473
00:21:47,560 --> 00:21:49,159
Speaker 5: they were making the point on is that wind and

474
00:21:49,160 --> 00:21:52,600
Speaker 5: solar had been phenomenal technologies to move the future of

475
00:21:52,640 --> 00:21:54,840
Speaker 5: low carbon forward, but that we were going to need

476
00:21:54,880 --> 00:21:57,679
Speaker 5: a new toolkit from storage to nuclear, to hydrogen to

477
00:21:57,720 --> 00:22:00,359
Speaker 5: geothermal to get there, and I can. I'll tell you

478
00:22:00,400 --> 00:22:02,800
Speaker 5: that the biggest point of market validation we had when

479
00:22:02,800 --> 00:22:05,359
Speaker 5: we were raising our Series A was in this twenty

480
00:22:05,359 --> 00:22:08,000
Speaker 5: page paper that Google wrote. They mentioned geothermal one time,

481
00:22:08,040 --> 00:22:09,800
Speaker 5: and we're like, see what we're on the map? People

482
00:22:09,840 --> 00:22:12,320
Speaker 5: are talking about it, And actually that caused us to

483
00:22:12,320 --> 00:22:14,280
Speaker 5: reach out to them and we started this relationship that

484
00:22:14,320 --> 00:22:16,919
Speaker 5: turned into our first development agreement with Google as an

485
00:22:16,920 --> 00:22:19,320
Speaker 5: off taker, and they've now become a large customer of

486
00:22:19,359 --> 00:22:21,679
Speaker 5: ours and we've announced several more deals there. But it

487
00:22:21,720 --> 00:22:23,560
Speaker 5: was interesting it took a company like Google to get

488
00:22:23,600 --> 00:22:25,359
Speaker 5: there because you know, in a lot of ways, the

489
00:22:25,400 --> 00:22:28,320
Speaker 5: same way that financiers want to see a track record,

490
00:22:28,520 --> 00:22:30,800
Speaker 5: utilities want to too. And I don't fault the utilities

491
00:22:30,800 --> 00:22:34,240
Speaker 5: for this. They have an incredibly important job where they're

492
00:22:34,240 --> 00:22:36,119
Speaker 5: the ones that are responsible for keeping the lights on,

493
00:22:36,600 --> 00:22:38,560
Speaker 5: and so they need to make sure that if they're

494
00:22:38,600 --> 00:22:41,439
Speaker 5: going to invest the time to prepare the grid and

495
00:22:41,480 --> 00:22:43,719
Speaker 5: go through all the work to get an energy resource

496
00:22:43,720 --> 00:22:45,919
Speaker 5: to come online, that it needs to get there. And

497
00:22:46,000 --> 00:22:48,520
Speaker 5: so most utilities won't even look at something until it

498
00:22:48,520 --> 00:22:51,200
Speaker 5: has a multi year development track record, and the utilities

499
00:22:51,200 --> 00:22:53,320
Speaker 5: are the big power buyers. And so this is why

500
00:22:53,400 --> 00:22:55,239
Speaker 5: it's a chicken and egg problem. How do you get

501
00:22:55,280 --> 00:22:57,919
Speaker 5: a new tech to market when your customers require a

502
00:22:57,960 --> 00:22:59,919
Speaker 5: multi year track record to develop it? But how do

503
00:22:59,920 --> 00:23:02,119
Speaker 5: you get a multi year track record until you develop it?

504
00:23:02,160 --> 00:23:04,680
Speaker 5: And so it was a very difficult thing to overcome

505
00:23:04,800 --> 00:23:07,400
Speaker 5: in the beginning. And you're right, not everybody has geologists

506
00:23:07,400 --> 00:23:09,719
Speaker 5: sitting around, but a company like Google that has access

507
00:23:09,760 --> 00:23:12,560
Speaker 5: to the resources and the technical expertise that they had,

508
00:23:12,640 --> 00:23:14,440
Speaker 5: was able to work with us over a multi year

509
00:23:14,480 --> 00:23:17,639
Speaker 5: period to learn how our technology work, get excited about it,

510
00:23:17,840 --> 00:23:20,280
Speaker 5: and that's what kind of unlocked that first operation for us.

511
00:23:20,440 --> 00:23:23,440
Speaker 5: You know, now we've actually announced multiple utility deals because

512
00:23:23,480 --> 00:23:25,800
Speaker 5: we've sort of crossed that chasm, But it was incredibly

513
00:23:25,840 --> 00:23:27,760
Speaker 5: difficult to get there in the beginning.

514
00:23:28,480 --> 00:23:31,520
Speaker 2: Part of the premise of the loan Program's office, I'd

515
00:23:31,600 --> 00:23:34,919
Speaker 2: take it is that there's proven technologies that exist in

516
00:23:34,960 --> 00:23:38,119
Speaker 2: the world, but a lot of traditional sources of debt

517
00:23:38,160 --> 00:23:41,639
Speaker 2: financing do not have the expertise to evaluate them or

518
00:23:41,720 --> 00:23:46,119
Speaker 2: evaluate the risks. What happens today or maybe two years

519
00:23:46,160 --> 00:23:48,520
Speaker 2: ago or something, because now you know, you're known, you've

520
00:23:48,520 --> 00:23:50,520
Speaker 2: been around for a while. You walk into a normal bank,

521
00:23:50,560 --> 00:23:52,280
Speaker 2: you walk into a Wall Street bank, and you try

522
00:23:52,280 --> 00:23:56,320
Speaker 2: to explain the case for a project financing for geothermal.

523
00:23:56,760 --> 00:23:59,480
Speaker 2: Does that expertise exist or is it we just don't

524
00:23:59,520 --> 00:24:01,560
Speaker 2: know about this. What happens if you try to walk

525
00:24:01,600 --> 00:24:03,160
Speaker 2: in the door, pick up a phone call to them.

526
00:24:03,240 --> 00:24:05,800
Speaker 5: You know, now it's changed because the perception of geothermal

527
00:24:05,800 --> 00:24:08,440
Speaker 5: has changed. But I can tell you, you know, anecdotes from

528
00:24:08,440 --> 00:24:11,120
Speaker 5: my years of this. As we as we move forward,

529
00:24:11,160 --> 00:24:13,520
Speaker 5: I would one of three things would happen actually as

530
00:24:13,560 --> 00:24:17,080
Speaker 5: we went and approached investors to talk to them about geothermal.

531
00:24:17,200 --> 00:24:19,080
Speaker 4: One is they would ignore us. I actually literally had

532
00:24:19,080 --> 00:24:19,400
Speaker 4: one time.

533
00:24:19,440 --> 00:24:21,840
Speaker 5: I was an investor conference and I walked up to

534
00:24:21,880 --> 00:24:24,040
Speaker 5: somebody who was actually a corporate venture capitalist for a

535
00:24:24,080 --> 00:24:26,960
Speaker 5: large oil company, told him I was doing geothermal, had

536
00:24:26,960 --> 00:24:29,600
Speaker 5: a startup doing that, and he literally puts his hand

537
00:24:29,680 --> 00:24:31,800
Speaker 5: up and says, let me stop you right there. We've

538
00:24:31,800 --> 00:24:34,360
Speaker 5: looked at geothermal not going to work. Let's say both

539
00:24:34,359 --> 00:24:35,400
Speaker 5: of our time. I'll see you later.

540
00:24:35,560 --> 00:24:38,600
Speaker 3: Wait, how many people think when you say geothermal it's

541
00:24:38,680 --> 00:24:40,080
Speaker 3: like putting the.

542
00:24:39,880 --> 00:24:40,480
Speaker 4: Heat of.

543
00:24:42,000 --> 00:24:45,400
Speaker 5: I'm actually glad that you asked this. Yeah, be very clear,

544
00:24:45,480 --> 00:24:49,000
Speaker 5: this is different deep geothermal. I should say this first off,

545
00:24:49,040 --> 00:24:51,959
Speaker 5: I'm a big fan geothermal heat pumps or groundsource heat pumps.

546
00:24:52,280 --> 00:24:56,080
Speaker 5: Really cool technology, but has nothing to do with what

547
00:24:56,119 --> 00:24:59,320
Speaker 5: we do. So those are, you know, good for home heating, cooling,

548
00:24:59,480 --> 00:25:02,120
Speaker 5: or larger buildings, shallower wells where you're using the ground

549
00:25:02,119 --> 00:25:04,600
Speaker 5: as a heat exchange. To be clear, we drill wells

550
00:25:04,600 --> 00:25:08,400
Speaker 5: that are thousands of feet deep and they won't exactly,

551
00:25:08,440 --> 00:25:10,200
Speaker 5: they're not going to go in your basement. And then

552
00:25:10,400 --> 00:25:13,399
Speaker 5: we reach rock that's four hundred degrees fahrenheit, and then

553
00:25:13,440 --> 00:25:16,080
Speaker 5: we produce energy from that. What we're doing is actually

554
00:25:16,119 --> 00:25:19,480
Speaker 5: recirculating that geothermal brine through the reservoir and then capturing

555
00:25:19,480 --> 00:25:21,600
Speaker 5: the heat at the surface through an organic ranking cycle

556
00:25:21,840 --> 00:25:25,280
Speaker 5: system to produce electricity by spinning a turbine. And so

557
00:25:25,400 --> 00:25:27,080
Speaker 5: we're not going to go in your basement because for

558
00:25:27,080 --> 00:25:29,480
Speaker 5: an example, the project we're building in Utah right now

559
00:25:29,960 --> 00:25:32,440
Speaker 5: is a four hundred megawap project, and this is enough

560
00:25:32,480 --> 00:25:36,439
Speaker 5: power to power a city sized energy demand, So it

561
00:25:36,440 --> 00:25:38,520
Speaker 5: wouldn't go well in your basement. But I'm glad you

562
00:25:38,560 --> 00:25:41,520
Speaker 5: asked that because actually I can tell that the tightest

563
00:25:41,560 --> 00:25:44,080
Speaker 5: turning because up until maybe a year ago, the most

564
00:25:44,080 --> 00:25:46,880
Speaker 5: common website request we got was hey, can you do this.

565
00:25:46,840 --> 00:25:47,600
Speaker 4: In my backyard?

566
00:25:48,200 --> 00:25:51,200
Speaker 5: Because people don't think of geothermal power. It's a quirk

567
00:25:51,240 --> 00:25:53,120
Speaker 5: of history that they're named the same way.

568
00:26:08,640 --> 00:26:10,480
Speaker 3: One other thing we definitely wanted to talk to you

569
00:26:10,480 --> 00:26:14,960
Speaker 3: about is permitting reform. So you know, when Donald Trump

570
00:26:15,040 --> 00:26:18,400
Speaker 3: says he's going to make everything easier in terms of regulation,

571
00:26:18,560 --> 00:26:21,719
Speaker 3: or when Elon Musk says that nowadays, what do they

572
00:26:21,760 --> 00:26:24,280
Speaker 3: mean exactly? What does that mean from your perspective making

573
00:26:24,320 --> 00:26:25,200
Speaker 3: things easier?

574
00:26:25,400 --> 00:26:27,960
Speaker 5: Yeah, permitting is definitely the long pole in the tent,

575
00:26:28,000 --> 00:26:30,600
Speaker 5: not just for geothermal, but transmission, which is really important

576
00:26:30,640 --> 00:26:33,240
Speaker 5: to hardening the grid and bringing new resources online and

577
00:26:33,240 --> 00:26:34,560
Speaker 5: a whole host of other things.

578
00:26:35,000 --> 00:26:36,359
Speaker 4: I'm not as much of an expert.

579
00:26:36,119 --> 00:26:38,119
Speaker 5: In those things as I am in geothermal, so I

580
00:26:38,119 --> 00:26:40,520
Speaker 5: can speak to some of the challenges we have in geothermal.

581
00:26:40,880 --> 00:26:43,359
Speaker 5: One thing is through you know, a quirk of history,

582
00:26:43,720 --> 00:26:45,919
Speaker 5: the best geology for geothermal is located in the Western

583
00:26:46,000 --> 00:26:49,280
Speaker 5: United States. The Western United States is predominantly owned by

584
00:26:49,320 --> 00:26:51,960
Speaker 5: the US federal government. It's not private landowners, it's actually

585
00:26:51,960 --> 00:26:54,080
Speaker 5: the US government that owns most of the land, and

586
00:26:54,119 --> 00:26:56,840
Speaker 5: so that puts US by default into a federal permitting

587
00:26:56,880 --> 00:26:59,280
Speaker 5: regime on pretty much every project that we do in

588
00:26:59,320 --> 00:27:02,760
Speaker 5: a way that is true of necessarily other energy resources,

589
00:27:02,920 --> 00:27:05,359
Speaker 5: and so we've had to go through you know, multi

590
00:27:05,440 --> 00:27:08,640
Speaker 5: year NEPA approval processes for everything we've developed. We also

591
00:27:08,640 --> 00:27:11,280
Speaker 5: simultaneously have to go through the transmission or an interconnection

592
00:27:11,359 --> 00:27:13,440
Speaker 5: process for that. And there's a whole host of other

593
00:27:13,480 --> 00:27:15,600
Speaker 5: things that are there as well. I'll be very clear,

594
00:27:15,800 --> 00:27:17,520
Speaker 5: I think these are good things. We need to be

595
00:27:17,560 --> 00:27:20,359
Speaker 5: doing projects with the right environmental standards. But whenever you

596
00:27:20,400 --> 00:27:22,600
Speaker 5: look at how these things have been implemented over time,

597
00:27:23,080 --> 00:27:24,800
Speaker 5: there's a lot of things that are redundant, or a

598
00:27:24,840 --> 00:27:27,200
Speaker 5: lot of times there's just offices that are not staffed well.

599
00:27:27,240 --> 00:27:29,240
Speaker 5: So you submit permits and you just never hear back.

600
00:27:29,359 --> 00:27:32,399
Speaker 5: So typical time for permitting the geothermal project in the

601
00:27:32,440 --> 00:27:35,320
Speaker 5: Western United States is about six to eight years to

602
00:27:35,400 --> 00:27:37,359
Speaker 5: permit to be able to start the project. And so

603
00:27:37,440 --> 00:27:40,679
Speaker 5: that's not really commensurate with the data center companies that

604
00:27:40,720 --> 00:27:42,480
Speaker 5: are banging down our door asking if we can bring

605
00:27:42,520 --> 00:27:44,560
Speaker 5: in power by next year. I say, well, once we

606
00:27:44,600 --> 00:27:46,800
Speaker 5: get through the eight year permitting process, we can get there.

607
00:27:46,840 --> 00:27:48,680
Speaker 5: So there's things that we're trying to do to improve that.

608
00:27:49,080 --> 00:27:51,880
Speaker 5: One of the funny things about geothermal is even though

609
00:27:51,880 --> 00:27:54,120
Speaker 5: we're drilling wells, just like the oil and gas industry,

610
00:27:54,200 --> 00:27:56,840
Speaker 5: is we haven't always benefited from the same permitting.

611
00:27:57,000 --> 00:27:58,960
Speaker 3: Yeah, they have some exclusions, that's right.

612
00:27:59,040 --> 00:28:03,280
Speaker 5: So in one example, you know, there's certain early activities

613
00:28:03,280 --> 00:28:06,400
Speaker 5: in the expiration phase or just doing extensions to existing

614
00:28:06,440 --> 00:28:09,199
Speaker 5: projects that don't really have a huge impact, don't really

615
00:28:09,280 --> 00:28:11,959
Speaker 5: change the scope of the project itself. And so if

616
00:28:12,000 --> 00:28:15,240
Speaker 5: you were an oil and gas company, there's legislatively developed

617
00:28:15,280 --> 00:28:18,200
Speaker 5: categorical exclusions where there's a whole category of things that

618
00:28:18,400 --> 00:28:20,439
Speaker 5: if you're drilling in oil well, you don't have to

619
00:28:20,480 --> 00:28:24,359
Speaker 5: go through the full process for the environmental reviews for

620
00:28:24,560 --> 00:28:28,399
Speaker 5: certain kind of redundant routine things. The law that was

621
00:28:28,400 --> 00:28:31,119
Speaker 5: passed in two thousand and five that granted that didn't

622
00:28:31,160 --> 00:28:33,720
Speaker 5: just say drilling, it's a specifically oil and gas drilline.

623
00:28:33,760 --> 00:28:36,520
Speaker 5: So that's been interpreted to say geothermal is not included

624
00:28:36,520 --> 00:28:38,840
Speaker 5: in that. So there's actually a lot of examples of

625
00:28:38,960 --> 00:28:41,920
Speaker 5: places where the permitting structure, even though geothermal is a

626
00:28:41,960 --> 00:28:46,040
Speaker 5: lower impact resource, it's a no emission resource, it actually

627
00:28:46,120 --> 00:28:49,560
Speaker 5: has a much more extensive permitting program than a lot of.

628
00:28:49,480 --> 00:28:52,080
Speaker 2: Oil and gas doing on federal permitting reform build that's

629
00:28:52,120 --> 00:28:54,479
Speaker 2: currently being talked about. Would that change it to what

630
00:28:54,760 --> 00:28:57,040
Speaker 2: would be ideal for you? Well, would under let's say

631
00:28:57,040 --> 00:28:59,280
Speaker 2: this bill passes at some point, what does the timeline

632
00:28:59,360 --> 00:28:59,920
Speaker 2: then look for?

633
00:29:00,520 --> 00:29:02,720
Speaker 5: Yeah, it would make a big difference. You know, there's

634
00:29:02,720 --> 00:29:04,600
Speaker 5: many bills that have passed. Actually, this is one of

635
00:29:04,600 --> 00:29:07,360
Speaker 5: our big success cases in geothermal. I used to joke

636
00:29:07,440 --> 00:29:09,800
Speaker 5: that we were bipartisan in the sense that both parties

637
00:29:09,840 --> 00:29:13,120
Speaker 5: ignore geothermal. Now I can say we're bipartisan because I

638
00:29:13,120 --> 00:29:15,360
Speaker 5: think both parties recognize.

639
00:29:14,760 --> 00:29:16,400
Speaker 4: The huge opportunity there is for geothermal.

640
00:29:16,480 --> 00:29:18,480
Speaker 5: So there's actually been five bills passed in the House

641
00:29:18,480 --> 00:29:22,080
Speaker 5: this year for geothermal permitting reform, and the current Mansion

642
00:29:22,120 --> 00:29:24,600
Speaker 5: Barrosso bill that's in discussion in the Senate has a

643
00:29:24,600 --> 00:29:27,720
Speaker 5: bunch of provisions in there around geothermal. And this is

644
00:29:27,760 --> 00:29:30,120
Speaker 5: truly bipartisan there's groups on both sides of the aisle

645
00:29:30,160 --> 00:29:33,080
Speaker 5: that have sponsored these bills and it's gotten great votes,

646
00:29:33,120 --> 00:29:36,160
Speaker 5: and so it depends on which bill we're talking about. Generally,

647
00:29:36,200 --> 00:29:38,520
Speaker 5: it does provide parity on these things, and it does

648
00:29:38,560 --> 00:29:41,080
Speaker 5: actually remove a lot of the redundant permitting. And there's

649
00:29:41,080 --> 00:29:43,440
Speaker 5: been good studies out there by ENRAAL the National Renewal

650
00:29:43,560 --> 00:29:46,920
Speaker 5: Energy Laboratory that says these reforms can probably take the

651
00:29:46,920 --> 00:29:49,680
Speaker 5: permitting process from six to eight years down to two

652
00:29:49,680 --> 00:29:51,480
Speaker 5: to four years. And so it's not again, it's not

653
00:29:51,480 --> 00:29:54,040
Speaker 5: like we're doing these projects with no environmental review. But

654
00:29:54,080 --> 00:29:55,720
Speaker 5: I can tell you when I go out in the

655
00:29:55,720 --> 00:29:58,080
Speaker 5: market and try to raise capital to do a new project,

656
00:29:58,160 --> 00:30:00,480
Speaker 5: I say, hey, give me the money today, we'll start

657
00:30:00,520 --> 00:30:02,840
Speaker 5: drilling in twenty thirty one. That's a little bit less

658
00:30:02,840 --> 00:30:05,360
Speaker 5: of a compelling pitch. Then give me an you're.

659
00:30:05,240 --> 00:30:07,880
Speaker 2: Paying you know so for plus whatever for all those

660
00:30:07,960 --> 00:30:08,680
Speaker 2: years exactly.

661
00:30:08,800 --> 00:30:11,680
Speaker 5: So this is these changes because it's not just when

662
00:30:11,680 --> 00:30:15,600
Speaker 5: the projects come online, but it's the investment horizon that

663
00:30:15,640 --> 00:30:18,320
Speaker 5: you have to burden these projects with. Moving it from

664
00:30:18,320 --> 00:30:21,240
Speaker 5: seven years to three years can make the difference between

665
00:30:21,240 --> 00:30:23,960
Speaker 5: a project being investable or not being investable.

666
00:30:24,040 --> 00:30:25,360
Speaker 4: So it's a massive difference.

667
00:30:26,000 --> 00:30:27,920
Speaker 3: This might be an unfair question, but if you were

668
00:30:27,960 --> 00:30:31,120
Speaker 3: going to sort of like choose the biggest impediment to

669
00:30:31,240 --> 00:30:34,600
Speaker 3: scaling up geothermal at the moment, I mean there's financing,

670
00:30:34,680 --> 00:30:38,480
Speaker 3: which we talked about, there's getting customers on board. Presumably

671
00:30:38,520 --> 00:30:41,000
Speaker 3: there's some aspect of the technology that could be improved

672
00:30:41,040 --> 00:30:44,440
Speaker 3: as well. Give us that hierarchy, like what's number one

673
00:30:44,960 --> 00:30:46,360
Speaker 3: in terms of impediments.

674
00:30:46,680 --> 00:30:50,000
Speaker 5: Oh, it's a good question because I feel like over

675
00:30:50,000 --> 00:30:52,760
Speaker 5: the seven years since we started Fervo, the answer has

676
00:30:52,760 --> 00:30:54,920
Speaker 5: been different every year, which I think is the right thing.

677
00:30:54,960 --> 00:30:56,680
Speaker 5: There should be an impediment, you should be knocking it

678
00:30:56,720 --> 00:30:57,920
Speaker 5: down and getting out of the next one.

679
00:30:57,960 --> 00:30:59,440
Speaker 4: So the early days where there's.

680
00:30:59,400 --> 00:31:02,320
Speaker 5: Fundamental question if this would even work, and that took

681
00:31:02,400 --> 00:31:04,760
Speaker 5: us several years to address, and thankfully the answer is yes.

682
00:31:05,080 --> 00:31:06,360
Speaker 5: If you would have asked me a few months ago,

683
00:31:06,400 --> 00:31:08,440
Speaker 5: I would have said funding was the big barrier, because

684
00:31:08,440 --> 00:31:11,200
Speaker 5: you still ran into that situation where people thought they

685
00:31:11,280 --> 00:31:14,400
Speaker 5: knew geothermal and thought it was yesterday's news and so

686
00:31:14,480 --> 00:31:15,640
Speaker 5: didn't even want to look at it.

687
00:31:15,840 --> 00:31:17,160
Speaker 4: But that's shifted dramatically.

688
00:31:17,200 --> 00:31:19,320
Speaker 5: We see a lot of interest from capital providers and

689
00:31:19,320 --> 00:31:21,560
Speaker 5: did geothermal now and then we've actually had a lot

690
00:31:21,600 --> 00:31:24,240
Speaker 5: of success on improving the permitting even before these bills

691
00:31:24,240 --> 00:31:26,200
Speaker 5: passed through. So if you would have asked me a

692
00:31:26,200 --> 00:31:28,320
Speaker 5: few months ago, I would have said transformers in high

693
00:31:28,360 --> 00:31:29,480
Speaker 5: voltage electrical equipment.

694
00:31:29,560 --> 00:31:31,400
Speaker 2: Oh yeah, it always comes back to transformers.

695
00:31:31,720 --> 00:31:33,720
Speaker 5: It does always come back to transformers. I would have

696
00:31:33,720 --> 00:31:36,760
Speaker 5: said permitting, and I would have said funding. Funding is

697
00:31:37,080 --> 00:31:37,880
Speaker 5: becoming a much.

698
00:31:37,760 --> 00:31:38,720
Speaker 4: More solved issue.

699
00:31:38,920 --> 00:31:41,000
Speaker 5: Permitting is something that I think we've made a lot

700
00:31:41,040 --> 00:31:44,239
Speaker 5: of administrative progress on and we're anticipating legislative progress on.

701
00:31:44,640 --> 00:31:46,640
Speaker 5: So now I think about supply chain, you know, because

702
00:31:46,680 --> 00:31:48,280
Speaker 5: I think we've got the money, we've got the off

703
00:31:48,360 --> 00:31:51,360
Speaker 5: take agreements, we've got everything there. You are thinking about

704
00:31:51,400 --> 00:31:53,080
Speaker 5: how do we get the supply chain in place for this?

705
00:31:53,560 --> 00:31:55,520
Speaker 5: Transformers being a big part of that, but there's also

706
00:31:55,600 --> 00:31:57,400
Speaker 5: other pieces of equipment that are important as well.

707
00:31:57,680 --> 00:32:00,400
Speaker 3: Joe, it's so crazy that we basically had four years

708
00:32:00,440 --> 00:32:01,800
Speaker 3: of transformers.

709
00:32:01,680 --> 00:32:05,960
Speaker 2: Right as of the most recent ISM manufacturing report, electrical

710
00:32:06,000 --> 00:32:08,920
Speaker 2: components have been in shortage for fifty straight months, so

711
00:32:09,040 --> 00:32:11,640
Speaker 2: four years and two months. I actually would love to

712
00:32:11,680 --> 00:32:15,600
Speaker 2: talk more about that, just on private sector financing, specifically,

713
00:32:15,800 --> 00:32:19,680
Speaker 2: what is the ecosystem that's emerged that wasn't in place.

714
00:32:19,720 --> 00:32:21,440
Speaker 2: If you said, okay, a year ago or two years ago,

715
00:32:21,440 --> 00:32:22,880
Speaker 2: that would have been the big thing. What does it

716
00:32:22,920 --> 00:32:25,240
Speaker 2: look like today on the private sector side, such that

717
00:32:25,280 --> 00:32:27,120
Speaker 2: you can raise capital for these projects?

718
00:32:27,160 --> 00:32:29,120
Speaker 4: Yeah, yeah, I mean there's been big changes in the

719
00:32:29,160 --> 00:32:29,719
Speaker 4: last year or two.

720
00:32:29,760 --> 00:32:32,360
Speaker 5: I think some of that is changing investors sentiment around

721
00:32:32,400 --> 00:32:34,360
Speaker 5: you etermal, but some of it is that the ecosystem

722
00:32:34,400 --> 00:32:36,400
Speaker 5: is changing. You know, if you think back a.

723
00:32:36,400 --> 00:32:39,160
Speaker 2: Lot of times, banks is it private, is private cats.

724
00:32:38,960 --> 00:32:41,640
Speaker 5: Banks, it's private capital, It's it's really all of the above.

725
00:32:42,120 --> 00:32:44,480
Speaker 5: You know, if you think back fifteen years ago into

726
00:32:44,480 --> 00:32:46,320
Speaker 5: the what they call the clean tech one point out bust.

727
00:32:46,480 --> 00:32:48,400
Speaker 5: I think that one of the failure modes. There was

728
00:32:48,400 --> 00:32:51,440
Speaker 5: a bunch of venture capital went into technologies that took

729
00:32:51,440 --> 00:32:53,600
Speaker 5: a long time to develop, and there wasn't really a

730
00:32:53,640 --> 00:32:55,520
Speaker 5: past the baton of who was the next source of

731
00:32:55,560 --> 00:32:58,120
Speaker 5: capital that was going to keep these technologies going, And

732
00:32:58,120 --> 00:33:00,040
Speaker 5: that's what really led to the bust. But that the

733
00:33:00,080 --> 00:33:02,240
Speaker 5: bust also, I think created a bunch of people who

734
00:33:02,320 --> 00:33:04,280
Speaker 5: learned hard lessons about what that was like, and a

735
00:33:04,280 --> 00:33:05,720
Speaker 5: lot of them have gone out and created the.

736
00:33:05,680 --> 00:33:06,760
Speaker 4: Ecosystem that's there.

737
00:33:06,840 --> 00:33:09,680
Speaker 5: So you know, for example, that Activate program that was

738
00:33:09,680 --> 00:33:11,800
Speaker 5: at the Lawrence Berkeley National Lab that let us have

739
00:33:11,840 --> 00:33:13,600
Speaker 5: two years to get our feet under us before we

740
00:33:13,640 --> 00:33:16,000
Speaker 5: really got going as a company didn't exist in the

741
00:33:16,000 --> 00:33:18,280
Speaker 5: first one, so that was really important. What we've seen

742
00:33:18,360 --> 00:33:20,120
Speaker 5: is we get bigger and bigger. You know, people have

743
00:33:20,160 --> 00:33:22,520
Speaker 5: talked about the missing middle or the value of death,

744
00:33:22,560 --> 00:33:23,880
Speaker 5: and that's one of the things that the LPO is

745
00:33:23,960 --> 00:33:27,080
Speaker 5: very instrumental in filling. But you know, market in efficiencies,

746
00:33:27,120 --> 00:33:29,000
Speaker 5: if there's money to be made, don't last for long.

747
00:33:29,080 --> 00:33:31,520
Speaker 5: And so what we're seeing right now is there's a

748
00:33:31,560 --> 00:33:34,920
Speaker 5: bunch of venture capitalists who historically would have only played

749
00:33:34,920 --> 00:33:38,240
Speaker 5: in the series ABC range who've recognized that there's a

750
00:33:38,280 --> 00:33:40,640
Speaker 5: capital gap for second of a kind, third of a

751
00:33:40,720 --> 00:33:43,040
Speaker 5: kind deployment, and a lot of them have raised continuity

752
00:33:43,120 --> 00:33:46,719
Speaker 5: or growth funds to piggyback off their successful companies. Meanwhile,

753
00:33:46,960 --> 00:33:51,720
Speaker 5: those like traditional companies that infrastructure investors that only wanted

754
00:33:51,720 --> 00:33:54,959
Speaker 5: to do the tenth project realized that if they actually

755
00:33:55,000 --> 00:33:58,440
Speaker 5: wanted to sell their LPs on getting a differentiated return,

756
00:33:59,000 --> 00:34:01,200
Speaker 5: they needed to do something that was differentiating and step

757
00:34:01,240 --> 00:34:03,400
Speaker 5: into products earlier. So a lot of them have raised

758
00:34:03,440 --> 00:34:05,959
Speaker 5: funds that will come in one click earlier, and so

759
00:34:06,120 --> 00:34:08,759
Speaker 5: that value of death is closing from both sides, because

760
00:34:08,800 --> 00:34:11,480
Speaker 5: you're seeing traditional private equity and growth equity and infrastructure

761
00:34:11,480 --> 00:34:14,480
Speaker 5: investors create new vehicles to come in one click earlier,

762
00:34:14,680 --> 00:34:17,279
Speaker 5: and you're seeing the venture capitalists create continuity investments and

763
00:34:17,320 --> 00:34:20,080
Speaker 5: growth estimates to carry you one click forward. And so

764
00:34:20,360 --> 00:34:22,799
Speaker 5: there used to not really be capital between like the

765
00:34:22,840 --> 00:34:26,960
Speaker 5: Series B and the infrastructure side, and now there's still

766
00:34:26,960 --> 00:34:29,960
Speaker 5: a gap, but it's getting converged on from both sides.

767
00:34:30,640 --> 00:34:33,040
Speaker 3: I want to talk more about transformers. Actually, yeah, where

768
00:34:33,040 --> 00:34:35,440
Speaker 3: are you getting those from? Because I imagine as a

769
00:34:35,480 --> 00:34:39,799
Speaker 3: relatively new company with at least heretofore limited funding, it

770
00:34:39,880 --> 00:34:42,000
Speaker 3: might be hard to get on the wait list for

771
00:34:42,080 --> 00:34:44,960
Speaker 3: this very desirable equipment. And I get the sense that

772
00:34:45,160 --> 00:34:48,640
Speaker 3: big utility providers are probably you know, number one in

773
00:34:48,719 --> 00:34:50,840
Speaker 3: the line, or they already have a lot of existing

774
00:34:50,880 --> 00:34:54,040
Speaker 3: transformers that they can kind of move around. How are

775
00:34:54,120 --> 00:34:55,200
Speaker 3: you actually sourcing those?

776
00:34:55,400 --> 00:34:56,759
Speaker 4: It's a good question, and you're right.

777
00:34:56,800 --> 00:34:59,560
Speaker 5: It's highly competitive to get to and the lead times

778
00:34:59,560 --> 00:35:02,520
Speaker 5: can be multi year, especially for the larger transformers. You know,

779
00:35:02,560 --> 00:35:04,600
Speaker 5: I was in an investment meeting a couple months ago

780
00:35:05,000 --> 00:35:08,640
Speaker 5: where somebody walked in, very experienced investor and said, first

781
00:35:08,719 --> 00:35:10,840
Speaker 5: question out of their gate, have you sourced your GSU

782
00:35:10,880 --> 00:35:13,479
Speaker 5: transformers yet? We said, yes, we have, and he says

783
00:35:13,719 --> 00:35:15,840
Speaker 5: four out of five times the answer that's no, And

784
00:35:15,920 --> 00:35:17,600
Speaker 5: I don't have to take the rest.

785
00:35:17,440 --> 00:35:18,719
Speaker 4: Of the meeting investor to ask that.

786
00:35:18,960 --> 00:35:20,719
Speaker 5: It is a good discipline investor. They knew the right

787
00:35:20,800 --> 00:35:23,280
Speaker 5: question to ask. And it's also an irony too, because

788
00:35:23,520 --> 00:35:25,640
Speaker 5: data centers are growing, everybody's trying to figure out the

789
00:35:25,640 --> 00:35:27,560
Speaker 5: equipment for that, and then everybody's trying to get the

790
00:35:27,560 --> 00:35:30,640
Speaker 5: grid going. Everybody's trying to get the generation going. Oftentimes,

791
00:35:30,640 --> 00:35:33,280
Speaker 5: what we hear from the transformer suppliers is the slots

792
00:35:33,320 --> 00:35:35,560
Speaker 5: are taken by the data center companies that we're trying

793
00:35:35,560 --> 00:35:36,960
Speaker 5: to sell the power to. So it's a bit of

794
00:35:37,000 --> 00:35:40,000
Speaker 5: a circular problem there, which is interesting. We didn't have

795
00:35:40,040 --> 00:35:42,600
Speaker 5: a really creative solution other than ordering early. So we

796
00:35:42,640 --> 00:35:45,440
Speaker 5: found a couple of US space manufacturers. We're sourcing a

797
00:35:45,440 --> 00:35:48,479
Speaker 5: couple of our transformers from Taiwan as well, And there's

798
00:35:48,520 --> 00:35:51,000
Speaker 5: not really a creative answer other than get in line

799
00:35:51,000 --> 00:35:52,200
Speaker 5: three or four years in advance.

800
00:35:52,360 --> 00:35:56,320
Speaker 2: Is any more manufacturing capacity being built anywhere.

801
00:35:56,719 --> 00:35:58,880
Speaker 5: It's being talked about, and this is one that I

802
00:35:58,920 --> 00:36:02,120
Speaker 5: think is something that I just sort of expected people

803
00:36:02,120 --> 00:36:04,200
Speaker 5: to look at three, four or five year lead times

804
00:36:04,239 --> 00:36:06,279
Speaker 5: and say there's money to be made here, We're going

805
00:36:06,320 --> 00:36:09,359
Speaker 5: to expand. But I think the transformer companies have gone

806
00:36:09,360 --> 00:36:11,759
Speaker 5: through a lot of boom and busts before, so they're

807
00:36:11,800 --> 00:36:12,880
Speaker 5: quite reticent there.

808
00:36:13,400 --> 00:36:14,800
Speaker 4: This isn't quite my area of expertise.

809
00:36:14,840 --> 00:36:17,000
Speaker 5: I don't know how many new facilities are being built,

810
00:36:17,160 --> 00:36:19,400
Speaker 5: but what we're hearing from our suppliers is they're doing

811
00:36:19,480 --> 00:36:22,040
Speaker 5: the low hanging fruit of adding new lines, adding extra shifts,

812
00:36:22,080 --> 00:36:24,600
Speaker 5: adding extra hours. So you're starting to see the supply

813
00:36:24,840 --> 00:36:26,600
Speaker 5: come up a little bit. But is it going to

814
00:36:26,640 --> 00:36:29,960
Speaker 5: be enough to meet the unprecedented demand coming from all

815
00:36:30,280 --> 00:36:33,040
Speaker 5: different sources that need this clinical electrical equipment.

816
00:36:33,320 --> 00:36:34,840
Speaker 4: I don't know. I still think that's going to be

817
00:36:34,920 --> 00:36:36,480
Speaker 4: one of the long poles in the tent for a while.

818
00:36:36,920 --> 00:36:40,360
Speaker 3: If Joe and I started making transformers because it's so easy,

819
00:36:40,719 --> 00:36:44,640
Speaker 3: could we exchange transformers for equity in up and coming

820
00:36:44,680 --> 00:36:47,680
Speaker 3: power companies and solve the chicken and egg problem?

821
00:36:47,880 --> 00:36:50,200
Speaker 5: I think you would. I think you would when you're

822
00:36:50,239 --> 00:36:51,680
Speaker 5: running a startup. A lot of times you're trying to

823
00:36:51,680 --> 00:36:54,279
Speaker 5: solve the problem of the day, and you also don't

824
00:36:54,280 --> 00:36:57,400
Speaker 5: have the balance sheets put down long term orders. Not

825
00:36:57,440 --> 00:36:59,040
Speaker 5: a lot of startups out there that are ordering things

826
00:36:59,080 --> 00:37:01,400
Speaker 5: four years in advance, so definitely a missing part of

827
00:37:01,400 --> 00:37:01,800
Speaker 5: the market.

828
00:37:01,840 --> 00:37:04,759
Speaker 2: This is a really good idea. Yeah, what about the

829
00:37:04,840 --> 00:37:08,480
Speaker 2: labor component? How much skills transfer is there? We talked

830
00:37:08,480 --> 00:37:13,200
Speaker 2: about the tech transfer from hill to geothermal.

831
00:37:12,800 --> 00:37:15,520
Speaker 4: Is there a labor transfer as well? Yes? Yeah.

832
00:37:15,680 --> 00:37:18,560
Speaker 5: And in fact, just as an example, the drilling rig

833
00:37:18,600 --> 00:37:20,600
Speaker 5: that we're using for our site right now is a

834
00:37:20,680 --> 00:37:22,520
Speaker 5: Helmber campaign H ANDP Flex three rig.

835
00:37:22,520 --> 00:37:26,359
Speaker 4: I'm actually wearing H ANDP Si cool suck.

836
00:37:26,440 --> 00:37:30,359
Speaker 5: That's right, socks, So this is actually what the rig

837
00:37:30,400 --> 00:37:30,719
Speaker 5: looks like.

838
00:37:30,840 --> 00:37:31,800
Speaker 4: So you can see.

839
00:37:32,040 --> 00:37:33,839
Speaker 5: No, but if you call them, I'm sure they'll give

840
00:37:33,880 --> 00:37:36,520
Speaker 5: them to you. So yeah, And it's actually the same

841
00:37:36,680 --> 00:37:39,840
Speaker 5: exact style of drilling rigs, the most technologically sophisticated drilling

842
00:37:39,880 --> 00:37:41,680
Speaker 5: rig that you can get for on shore drilling. And

843
00:37:41,719 --> 00:37:43,520
Speaker 5: it's the same exact style of drilling rig that I

844
00:37:43,560 --> 00:37:45,399
Speaker 5: used when I started my career over a decade ago

845
00:37:45,400 --> 00:37:47,960
Speaker 5: in South Texas. And I was insistent on that because

846
00:37:48,000 --> 00:37:50,799
Speaker 5: I wanted to use the best technology and the crews there.

847
00:37:50,920 --> 00:37:53,120
Speaker 5: They were just before we picked up that rig a

848
00:37:53,200 --> 00:37:55,360
Speaker 5: year and a half ago, they were drilling in the

849
00:37:55,400 --> 00:37:58,480
Speaker 5: back end in North Dakota, and so people really were

850
00:37:58,560 --> 00:38:00,879
Speaker 5: drilling oil wells one day and they were geothermal wells

851
00:38:00,880 --> 00:38:03,320
Speaker 5: the next. And there's differences there, But the skills in

852
00:38:03,360 --> 00:38:05,319
Speaker 5: the workforce is there, and this is one of the

853
00:38:05,320 --> 00:38:08,359
Speaker 5: things that I think makes geothermal quite scalable. Today there's

854
00:38:08,440 --> 00:38:11,399
Speaker 5: roughly six hundred drilliing rigs operating in North America. We're

855
00:38:11,400 --> 00:38:13,000
Speaker 5: growing at a huge rate. You know, we're going to

856
00:38:13,000 --> 00:38:15,719
Speaker 5: bring on one hundred megawat projects and just eighteen months

857
00:38:15,719 --> 00:38:17,879
Speaker 5: from now, we're doing that with just one drilling rig.

858
00:38:18,320 --> 00:38:20,680
Speaker 5: And so you know, we can ten x our growth

859
00:38:21,040 --> 00:38:23,520
Speaker 5: and still only be a single digital percentage of the

860
00:38:23,560 --> 00:38:26,600
Speaker 5: oil field services market because we have such overlap with them.

861
00:38:26,920 --> 00:38:29,440
Speaker 5: So among the many things that I think has advantaged

862
00:38:29,440 --> 00:38:33,520
Speaker 5: geothermal among the different options you have for emerging technologies,

863
00:38:33,600 --> 00:38:36,200
Speaker 5: is the fact that there's such a ready supply chain

864
00:38:36,200 --> 00:38:38,479
Speaker 5: and workforce of skilled people who know.

865
00:38:38,400 --> 00:38:39,880
Speaker 4: How to execute on these projects.

866
00:38:40,280 --> 00:38:42,680
Speaker 5: And we can tenx our growth rate or one hundred

867
00:38:42,800 --> 00:38:46,200
Speaker 5: x our growth rate and not run into workforce issues

868
00:38:46,239 --> 00:38:49,120
Speaker 5: because there's already such a deep bench of technical talent

869
00:38:49,360 --> 00:38:52,319
Speaker 5: and technician talent that control these wells.

870
00:38:52,719 --> 00:38:56,920
Speaker 3: So if they remade Armageddon, Bruce Willis would be a

871
00:38:56,960 --> 00:38:59,240
Speaker 3: geothermal driweller instead of an oil rig driller.

872
00:38:59,400 --> 00:39:03,120
Speaker 2: That's right, excellent, Tim Latimer. That was fantastic, Thank you

873
00:39:03,560 --> 00:39:05,239
Speaker 2: so much, Thank you for having me.

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Speaker 3: So that was our conversation with Tim Latimer, the CEO

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Speaker 3: of Fervo Energy, recorded live at the does Deploy twenty

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Speaker 3: four event. I'm Tracy Alloway. You can follow me at

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00:39:29,560 --> 00:39:30,840
Speaker 3: Tracy Alloway.

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Speaker 2: And I'm Jill Wisenthal. You can follow me at the Stalwart.

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Speaker 2: Follow our guest Tim Latimer, He's at Tim m Latimer.

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Speaker 2: Follow our producers Kerman Rodriguez at Kerman armand dash Ol

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Speaker 2: Bennett at Dashbot and cal Brooks at cal Brooks. Thank

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Speaker 2: you to our producer Moses Adam from our odd Lads content.

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