🔥 Reference Newsflash April 2024
― By Reference Capital | April 2024 ―
General Technologies | Sustainability | Blockchain & Crypto | Life Sciences
🌋 Scratching the Surface: Uncovering Geothermal Energy’s Potential
By Hélène van Berchem ,Reference Capital
In his pivotal book “Speed & Scale”, John Doerr* underscores the crucial role of electrification in achieving net-zero emissions by 2050, with a staggering 35% of necessary emission reductions hinging on this transition to renewable energy sources. Yet, as electricity demand surges, the growth of renewable energy sources often trails behind, inadvertently heightening our reliance on fossil fuels.
Amidst this pressing energy dilemma, geothermal energy emerges as a largely underexplored resource with monumental potential. A 2017 report by the International Renewable Energy Agency reveals that the energy stored just 10 kilometers below the Earth’s surface could exceed the energy supplied by all the world’s oil and gas reserves — by over 50,000 times! This revelation presents a significant market opportunity for visionary entrepreneurs and investors.
⛏️ What is Geothermal Energy?
A geothermal system harnesses the Earth’s warmth (99% of our planet is at temperature above 1000°C; subsurface temperature is typically hotter than 100 starting at 3 kilometers under our feet), utilizing water or steam to transport energy from a hot rock reservoir through brines or working fluids circulated into production wells. It employs a heat exchanger and power generation equipment to convert this heat into electricity, with a cooling system that recycles the fluid to sustain the reservoir. Geothermal energy provides a stable, weather-independent source of power, unlike the intermittent supply from wind and solar. It not only generates electricity and power industrial processes but can also supply industrial heating and cooling at the community level.
🤔 Why Isn’t Geothermal Everywhere Already?
Despite its ancient roots and significant benefits, geothermal energy’s widespread adoption faces substantial obstacles:
💰 Capital-Intensive Projects: High upfront investments are often required, usually before the feasibility of the projects is fully assessed, which has traditionally limited growth.
🚧 Technical Challenges: As drilling ventures deeper into the Earth’s crust, it encounters formidable subsurface layers like quartz, which ranks as the second hardest mineral after diamond. Tackling these challenges demands enhanced drilling technologies, significantly inflating both costs and risks associated with the process. In fact, drilling alone can account for up to 50% of the total project expenses.
📍 Geographical Limitations: Due to current technological limitations in harnessing deeper and hotter subsurfaces, geothermal ventures frequently concentrate on areas with conspicuous geological activity, such as volcanic regions or hot springs. However, even in these prime locations, the process is often hindered by extensive regulatory requirements, adding complexity and delays to project timelines.
⚖️️ Regulatory Delays: In the U.S., for instance, regulations like the National Environmental Policy Act (NEPA) can extend project timelines from an expected 4–5 years to 7–10 years, inflating costs and delaying progress.
🌱 So, Why Now?
Despite only contributing 0.4% to the current U.S. electricity output, geothermal energy shows immense potential for growth. Projections suggest that by 2050, its capacity could increase twentyfold, potentially accounting for 10% of today’s electricity capacity. Here’s why the sector might see such dynamic growth:
💸 Governmental Subsidies: Initiatives like the Inflation Reduction Act offer incentives such as production tax credits for geothermal electricity and tax credits for home geothermal systems. For instance, the US Department of Energy has initiated the “Enhanced Geothermal Shot,” an ambitious program aimed at reducing the costs of Enhanced Geothermal Systems by 90% by the year 2035.
🛠️ Advancements in Technology: Breakthroughs in sensor technology and drilling techniques have significantly improved efficiency and reduced costs, unlocking previously inaccessible geothermal resources.
🌎 Market & Impact Opportunity: With growing awareness of climate change and the need for sustainable energy sources, geothermal energy presents a significant market opportunity while contributing to global efforts to reduce carbon emissions.
As a result, both public and private sectors are committing substantial investments to advance geothermal technologies, paving the way for rapid growth and innovation.
🛠️ Main Advancements in Geothermal Technology
Conventional Geothermal
Hydrothermal Systems — Beside traditional geothermal installations deployed near tectonic plates or volcanoes, hydrothermal systems are currently the most prevalent form of geothermal energy extraction. These systems target aquifers (naturally occurring subsurface water) with temperatures usually ranging between 60°C to 150°C, making them suitable for heating and cooling applications and eventually electricity generation if the temperature is high enough (water should exceed 120°C to generate electricity). Effective operation requires specific conditions: high permeability in the rock layer and the presence of hot fluids. These conditions are relatively rare, especially at the depths required for sufficiently high temperature, which limits the broader application of this (mature) technology.
Next-Gen Geothermal (80°C-200°C+) — Pursuing Geothermal Anywhere
To scale geothermal energy globally, a wide consensus is emerging about the necessity to develop next-gen geothermal technologies, capable of harvesting the heat stored into hot dry rock (HDR) reservoirs within the Earth’s crust. Enhanced and Advanced Geothermal Systems (EGS/AGS) both pursue “geothermal anywhere” for the (co-)generation of baseload electricity and district heating (/cooling).
1. Enhanced Geothermal Systems (EGS)
🔹 What is EGS? — Unlike traditional geothermal systems that rely on naturally occurring permeable rock formations, EGS creates or enhances the permeability of underground rocks artificially. This is achieved through various techniques such as hydraulic fracturing with proppants (typically sand material designed to keep the fractures open), thereby increasing fluid flow and heat extraction.
🔹 Innovations in EGS — EGS technology has been explored since the 1970s, but its adoption has accelerated with recent innovations. Companies like Fervo Energy, founded in 2017, are leading the charge by incorporating advanced techniques such as horizontal drilling, multi-zone completions, and distributed fiber optic sensing. These innovations help tackle challenges like limited and inhomogeneous reservoir capacity and the complexities of deep drilling.
🔹 Challenges and Risks — Despite its potential, EGS faces hurdles such as the risk of induced seismic activity. However, ongoing research and technological advancements aim to mitigate these risks and enhance system efficiency and safety.
🔹 Growing Acceptance — The adoption of EGS is particularly notable in regions like the US, where familiarity with fracking technologies aids in the implementation of EGS. Furthermore, some EGS projects are exploring synergies such as lithium extraction during the geothermal process, which can significantly improve the economic returns of these projects.
2. Advanced Geothermal Systems (AGS)
🔹 What is AGS? — AGS operates as a deep, engineered closed-loop system extending several kilometers beneath the Earth’s surface. Well pairs (multilaterals) are deviated and connected at heat depth to create series of loops into which a working fluid is circulated to collect heat from the surrounding rocks. This innovative design allows for precise control over heat extraction, removes the risks of induced seismic activity (no fracking is used), minimizes water usage, and provides greater deployment flexibility compared to other geothermal methods.
🔹 Advantages of AGS –
- Long-Term Viability — Despite the higher initial costs, AGS are designed for longevity, with the potential to operate sustainably for up to 400 years, presenting a significant long-term investment opportunity.
- Precise Control: The closed-loop system enables better management of the heat extraction process.
- Reduced Seismicity Risks: Minimizes the likelihood of induced earthquakes, a common concern with other geothermal techniques.
- Lower Water Use: Uses less water, making it suitable for arid regions.
🔹 Challenges and Risks — While AGS offers numerous benefits, it faces challenges such as the need for extended well bores and therefore higher drilling costs. Projects typically demand greater investments for AGS compared to EGS due to the need for deeper drilling. However, this additional investment can result in significantly higher energy capacity.
🔹 Growing Acceptance — In addition to recent progresses in drilling faster, deeper and harder rock layers, further technological advancements, such as improved selection of working fluids, could increase power outputs and enhance the commercial viability of AGS. In Europe, the preference for AGS is also driven by public resistance to fracking, making AGS’s fracking-free, closed-loop system particularly appealing.
🚀 Some of the Key Innovators
Currently, the geothermal industry is small but growing, with approximately 12 to 20 relevant projects globally. The transition to a more structured and unified industry could lower risks and encourage more consistent investment.
🔮 Going Forward
While geothermal energy holds immense promise, each drilling endeavor carries inherent risks stemming from the unpredictability of subsurface conditions. This uncertainty often leads to inconsistent repeatability, prolonged project lifecycles, and perceptions of investment risk influenced by past project failures. Consequently, project execution frequently encounters additional delays and costs. However, advancements in materials and the development of more resilient and efficient exploitation systems are gradually improving the risk-return ratio. As highlighted by the US Department of Energy, “Next-generation geothermal technologies transfer risk from resource identification to engineering capabilities, creating the potential to sidestep issues that have traditionally held back the geothermal industry.” By investing in research and innovation today, we can mitigate these risks and unlock the full potential of geothermal energy as a sustainable and dependable power source for the future. As eloquently stated by Dr. Naomi Vouillamoz, CEO at EAPOSYS, “Geothermal, the warmth of the Earth, represents a unique source of renewable energy that is permanently available in the subsurface, anywhere on the planet. We simply need to drill a few kilometers below our feet to access (and produce) the heat. This can be done by transferring the know-how and the rigs of the Oil and Gas into a new, perennial industry. So let’s phase-out fossils by switching on the Earth’s power to secure a reliable energy-climate future for all.”
Read more on the subject ⬇️
The heat beneath our feet — CTVC
Geothermal is the hottest thing in clean energy. Here’s why — Canary Media
The Pathway to Next-Generation Geothermal Power Commercial Liftoff — US Department of Energy
La géothermie dans le mix énergétique suisse de demain : option ou nécessité? — Naomi Vouillamoz, EAPOSYS
*John Doerr is an engineer, venture capitalist, and chairman of Kleiner Perkins, with over 40 years of experience supporting innovative entrepreneurs. He is the author of bestsellers “Measure What Matters” and “Speed and Scale,” and a key figure in Silicon Valley’s cleantech movement, investing in zero-emissions technologies since 2006. Beyond his role at Kleiner Perkins, he collaborates with social entrepreneurs addressing climate, public health, and education issues.
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General Technologies 🚀
📱President Biden’s Latest Law Puts TikTok’s U.S. Future at Risk
President Biden has signed a new law that may drastically alter TikTok’s future in the U.S.! Due to concerns over its Chinese owner, ByteDance, TikTok is now under pressure to secure a new owner within nine months or face a possible ban. With 170 million users in the U.S., TikTok is fighting to maintain its operations, citing First Amendment rights. However, the sale process faces multiple challenges, including a high valuation and limited buyers due to anti-monopoly regulations. Moreover, potential interference from the Chinese government, particularly regarding TikTok’s crucial technology, could complicate matters. In response ByteDance, has declared it has no plans to sell. TikTok’s CEO, Shou Chew, has reaffirmed their commitment to defending their presence in the U.S. through legal avenues. These developments underscore significant geopolitical tensions between the U.S. and China and raise serious concerns about data security and international influence in an election year.
🍏 Apple Takes a Giant Leap in A.I. with OpenELM Release
The EU has launched probes under the Digital Markets Act (DMA) against Apple, Alphabet, and Meta for potentially breaching tech regulations. Apple’s past violation resulted in a €1.8 billion fine for restricting developers from informing iOS users about alternative and cheaper music subscription services available outside of the app. The new investigations challenge practices around user choice in app stores and services. Alphabet faces scrutiny over its search results’ fairness, and Meta is examined for its ad-free subscription models. Fines could reach up to 10% of annual global turnover, increasing to 20% for repeat offences. The EU aims to conclude these investigations within 12 months, underscoring its commitment to enforcing digital market laws. A complete description of the probes is available here.
🧠 Sequoia Capital Backs Elon Musk’s xAI Project in Multi-Billion Dollar Push
Sequoia Capital is backing Elon Musk’s new A.I. project, xAI. This boost helps Musk in his big push to raise up to $6 billion to take on the giants of the A.I. world like OpenAI, Meta, and Google. Founded in 2023, xAI has an ambitious goal to “unlock the mysteries of the universe”. Musk is now aiming for a valuation over $18 billion for xAI to enhance xAI’s tech, gathering the best chips and bringing in top engineers, some from Tesla, to build their A.I. chatbot, Grok. This chatbot will compete against OpenAI, while Elon Musk has also filed a lawsuit against the A.I. leader, alleging that they have deviated from the startup’s original mission of developing A.I. systems for the betterment of humanity. OpenAI has dismissed the lawsuit as ‘frivolous’. Read more about xAI here.
🎧 What We’ve Been Listening To This Week
Harry Stebbings from 20VC discusses with Sam Altman and Brad Lightcap (CEO & COO of OpenAI) the future of foundation models, the need for computing power, and the debate around Open vs. Closed A.I. models here.
Sustainability 🌍
🚗 Global EV Outlook 2024 — IEA
Electric vehicle sales are on the rise, expected to reach 17 million units in 2024 and account for over 20% of global car sales, despite challenges like high inflation and volatile battery metal prices. Growth is anticipated to climb to 45% in China, 25% in Europe, and 11% in the US, driven by fierce competition, falling battery costs, and robust policy support. Additionally, the number of public charging stations surged by 40% in 2023, with plans to increase this infrastructure sixfold by 2035, further bolstering the shift to electric mobility.
Read more on the topic: Global EV Outlook 2024 — Analysis — IEA
📈 Impressive Growth in Climate Fund Investments
Despite a tough fundraising environment, climate-focused funds have thrived, raising $82 billion since September 2023, including $28.2 billion across 31 new funds in 2024 alone. 2024 is on track to surpass the total assets under management (AUM) from 2021 by 75%. The number of new funds has almost doubled year-over-year, from 16 in the first quarter of 2023 to 31 in the same period of 2024. Investment is largely concentrated in mega-funds, with 22 funds each over $500 million launched recently, accounting for about 95% of total AUM and 46% of the new funds. With $41 billion in investable funds still available, the outlook for climate initiatives remains robust.
Read more on the topic: Stockpiling $82bn of dry powder for climate
🏭 Decarbonizing Heavy Industry
By 2035, industries such as steel, cement, and chemicals, which rely on high-temperature heat from fossil fuels, are set to become the main sources of U.S. climate emissions as the electricity and transportation sectors reduce theirs. To facilitate decarbonization, the Inflation Reduction Act subsidizes technologies like hydrogen and carbon capture, while the Biden administration has funded projects like the first U.S. hydrogen-based green steel facility through the $6 billion Industrial Demonstrations Program.
Read more on the topic: Heavy industry is the next big climate problem to tackle
Blockchain & Crypto 💸
⚖️ Regulations
- Hong Kong approves both Bitcoin and Ethereum ETFs, with the Bitcoin ETF to start trading on April 30th.
- Consensys is suing the SEC in an attempt to prove that Ethereum is a commodity and not a potential security.
- SEC Issues Enforcement Notice to DeFi Exchange Uniswap.
- SEC asked public feedback on spot Ethereum ETF filings from Grayscale, Bitwise, and Fidelity.
🏦 Financial Institutions
- Fintech giant Stripe opens doors to crypto-payments, starting with USDC transactions on Solana, Ethereum and Polygon.
- Coinbase has partnered with Lightspark to add Bitcoin Lightning Network functionality to its platform.
- PayPal has introduced stablecoin functionality to its global remittance service, Xoom.
🔥 Top Stories
- Bitcoin Halving happened this month and Bitcoin mining revenue peaked at $107m
- Token2049 took place in Dubai with the promise of incoming liquidity(!)
🔎 Research
📄 a16z published their token launch playbook, to help founders understand the challenges & solutions behind token mechanisms.
📄 Nichanan Kesonpat (1kx) discusses programmable ownership through 1kx’s latest investment in Safe.
Videos
📹 Bankless discusses Bitcoin Halving.
📹 Bankless invited BlackRock to discuss the launch of their latest on-chain Fund.
Life Sciences 🔬
🤖 The fusion of two powerful technologies: AI and CRISPR
Profluent, a Berkeley-based startup, has published a research paper introducing OpenCRISPR-1. Mimicking how ChatGPT learns to generate language by analyzing Wikipedia articles or books, Profluent’s technology innovatively creates new gene editors by analyzing vast amounts of biological data, including the microscopic mechanisms scientists currently use to edit human DNA. CRISPR has been a transformative tool for more than a decade, making it possible to edit DNA with unprecedented precision. OpenCRISPR-1 takes this technology to a new era by:
- Enhancing Precision Medicine: OpenCRISPR-1 is a step forward in precision medicine, enabling highly targeted therapies with minimized off-target effects. This is crucial to improving the safety and efficacy of gene therapies.
- Breaking Biological Barriers: It facilitates the overcome of evolutionary constraints, enabling the design of novel proteins with desired functionalities. This could significantly accelerate the development of treatments for diseases that are currently difficult or impossible to treat.
- Encouraging Global Innovation: The open release of OpenCRISPR-1 fosters global collaboration and innovation, expanding the potential applications of this technology in medicine, agriculture, and biotechnology.
Learn more here.
💰 The latest computational bio mega-deal unveiled
Marc Tessier-Lavigne, former president of Stanford and a renowned neuroscientist, is leading Xaira Therapeutics. The company, which has been in stealth mode for about six months, recently secured more than $1 billion from prominent biotech-focused venture capital firms.
Tessier-Lavigne, who has extensive experience in both academia and industry at places like Genentech and Rockefeller University, said, “We raised such a large amount of capital because we believe the technology is at an inflection point where it can have a transformative effect on the field.” Te foundational models driving Xaira Therapeutics come from the University of Washington’s Institute for Protein Design, led by David Baker, one of Xaira’s co-founders. Like the diffusion models used in image generators like OpenAI’s DALL-E, these models don’t create art, but design molecular structures that can be built in the real, three-dimensional world. The company is now poised to develop drugs that would not have been possible without the recent advances in AI.
🚀 Get ready for the upcoming ChatGPT moment in biotech
Dive into this interesting article by Eric Schmidt, former CEO of Google. He discusses his views on the AI-driven bio-revolution for life sciences such as fertility, treatment and aging, as well as agriculture and energy. He also addresses the need for the U.S. to remain competitive and highlights the potential risks associated with these breakthroughs.
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