🌍 🔥 ⚡Geothermal Energy: The Untapped Market of Heat Beneath Our Feet
Growing up in India, I witnessed how lack of energy impacted health, knowledge, and opportunity. Today, millions still toil in the dark, unable to see the world beyond the dimly lit edges of old technology. My ultimate goal in my career is to solve this problem by supporting equitable energy transition through cutting edge innovation.
We are going through a once-in-a-lifetime energy transition, and we need to invest in developing multiple scalable, reliable, and affordable renewable energy resources. Geothermal energy is one such resource without any intermittency or storage dependency. This article dives deep into why I think now is the time to invest in Geothermal startups and the ecosystem fostering the cutting edge innovations. Before you say that this is too far fetched of an idea that only works in a controlled laboratory environment, let me put your mind at ease.
Investing in Geothermal 💰🔬
Let’s start by looking at the geothermal innovators based on total amount of funding raised. I have also included a brief description about all of these startups later in this article.
🌍🌎A Tale of Two Worlds as Old as Time
Developed economies such as Iceland, Norway, Canada, and the United States consume as much energy as 12 times the average person in some of the developing economies. We are at a critical point in human civilization when we need to meet the additional demand for energy while simultaneously decarbonizing the existing infrastructure at a rapid pace.
The energy transition brings immense opportunities for climate-tech investors to invest in renewable technologies beyond wind and solar.
As the non-OECD countries continue to develop and more and more people come out of poverty, the global energy demand is expected to increase by 39% by 2030. On the other hand, we need to achieve carbon neutrality by 2050 to avoid a climate catastrophe. Simultaneously, approximately 900M people in the world do not have access to electricity, the majority of these people live in sub-Saharan Africa.
However, we are nowhere close to carbon neutrality; the war in Ukraine has shown our dependency on carbon-intensive fuels as well as the intermittency and storage issues with the predominant renewable energy sources like solar and wind. Additionally, the recent anti-dumping measures on solar panels have created uncertainty among resource developers and exposed our reliance on Chinese manufacturing. Adding to the strained supply chain, a shortage of lithium has driven electric car prices higher and slowed down renewable integration.
Well, what about nuclear energy? Sure, it eliminates the intermittency problem, but it’s not scalable for various reasons including the lack of available resources and the huge cost and time needed to build a nuclear power plant. In fact, many countries are slowly transitioning away from nuclear energy post-Fukushima.
Geothermal 🌍 🔥 is always on, so that you don’t have to turn your AC off⚡
Geothermal energy is simply the natural heat energy of the earth. We can use this heat energy to generate electricity without burning down the planet.
What do we need to extract the heat?
Essentially three things:
- A natural heat source.
- A reservoir with adequate permeability or faults (for the heat to convect to our wells).
- An impermeable cap rock (to prevent the escape of the heat).
The heat can then be converted to electricity with steam turbines and heat exchangers.
Therefore, we can say that it’s a renewable source of energy since it (1) cannot be depleted and (2) is able to supply a continuous source of clean energy.
Reasons to invest in Geothermal 🚀
👉 📉 We are at a crucial inflection point where the technology is mature enough and the levelized cost of electricity (LCOE) to build a geothermal plant will decrease significantly. LCOE is commonly used in the energy industry to assess generation technologies and it refers to the estimated revenue required to build and operate an energy generator over a specific cost recovery period. Cost of wind and solar has significantly reduced in the past decade with technological advances (as seen in the graph below).
According to the Annual energy outlook published by the US EIA, we are going to see a similar trend, i.e. geothermal will be comparable to solar and wind. In fact, with the production tax credits in place, geothermal will be cheaper than wind, assuming a 2027 COD (commercial operation date)!
👉 💸 It’s a $300B Untapped Market
The largest chunk of cost of a Geothermal project comes from drilling wells. There is a huge number of geothermal resources co-located with oil and gas reservoirs which could be reconfigured for power generation and other purposes.
According to a 2013 study published by Stanford University, about 32% of the total abandoned wells in China may be served as geothermal wells. The potential geothermal resource in the abandoned oil and gas reservoirs is significant. In the US, Texas has thousands of oil and gas wells that are deep enough to achieve temperatures of over 121°C and sometimes 204°C.
According to a Reuters report, there are approximately 3 million abandoned oil and gas wells in the United States.
If we assume an average cost of $100,000 to plug a well; that’s a $300B untapped market.
Recently, some startups also focus on offering screening services for geothermal potential in abandoned wells, which I plan to explore in my next article.
In summary, the primary advantage of developing geothermal resources in abandoned wells is because of the significant reduction in capital cost as the infrastructure, including wells, pipes, roads, and even grid, is already present.
👉 🔌 No Battery Required
The challenge with solar or wind energy is that they are highly intermittent and dependent on weather conditions. Hence, we need a battery to pair a solar or a wind farm with to store and use the stored energy when the sun isn’t shining, or the wind isn’t blowing. But, in case of geothermal energy, the earth itself acts as a battery, providing heat energy as and when needed, making geothermal a great source of renewable baseload energy. In fact, geothermal power plants have 2–3X the capacity factor of a typical solar or a wind farm as shown in the graph below.
👉👷👩🏿💻🛠️ There is an untapped market of workforce and skillset.
The answer to accelerate decarbonization and harness this natural source of energy lies with one of the oldest industries in the world — Oil and Gas.
With the advent of hydraulic fracturing and horizontal drilling it is now possible to extract hydrocarbon from the most impermeable rocks. Fluctuating oil prices and higher cost of capital the oil & gas industry has refined the drilling technologies to reduce operating costs and increase efficiency without compromising safety and environmental guidelines. Some of these advancements include horizontal drilling, multilateral drilling, extended reach drilling (ERD), complex path drilling, casing drilling technology, positive displacement motor technology, and laser technology.
According to a peer-reviewed study published in 2021, these novel technologies significantly improve decision making, tracking new business opportunities, reorganizing operations, and significantly reduce well control risks and operational costs. As the collaboration between ‘oil–gas–geothermal’ industries and academia increases, there are high probabilities of developing more novel technologies to address more challenging drilling problems which will lead to increasing discoveries of ‘oil–gas–geothermal’ sources in previously impenetrable locations.
👉🏝 Low land footprint
Wind turbines and PV panels take up huge amount of land, which is often agricultural. In comparison geothermal requires very little amount of space since most of the components are buried underground. Below is a graph comparing the land footprint of some common energy generators.
According to the US DOE (Department of Energy), a geothermal field uses 1–8 acres per megawatt (MW) versus 5–10 acres per MW for a nuclear plant and 19 acres per MW for coal power plants.
👉🔇 No noise problem
Wind turbines often produce noise and therefore it needs to be away from a house by about 300 meters or farther. Wind farms can also interfere with certain radio frequencies. Geothermal on the other hand is silent, except of course during construction, when noise is inevitable.
👉💎🔋 The Cleanest Way of Lithium Mining
Some geographies’ geothermal fluids contain trace amounts of lithium (about 100 ppm). Lithium has wide applications ranging from batteries in your shiny new EV to medicines.
Research has shown that lithium could be extracted from the hot geothermal brine while simultaneously using it for energy production. In fact, geothermal brine is the cleanest and most sustainable way of producing Lithium.
Warren Buffet’s Berkshire Hathaway Energy had secured a $15M grant from the US DOE to demonstrate lithium extraction from a geothermal plant at the Salton Sea in California, which has one of the highest concentration of geothermal lithium.
Some methods of extracting geothermal lithium include high-capacity selective sorbents, integrated Lithium adsorption desorption, electrodialysis, solid-phase extraction with nanocomposite sorbent and bioengineered rare earth-adsorbing bacteria. These technologies show the untapped potential for geothermal energy resources beyond electricity production.
The demand for Lithium has increased significantly due to the energy transition and the versatile use of the mineral from electric vehicles to wind turbines and solar panels. United States is primarily reliant on Latin America for most of its supply. Geothermal fluids can greatly reduce dependence of the U.S. on foreign mineral supply.
If these reasons did not convince you yet, let’s explore the Geothermal energy startups that are working towards accelerating the critical and once-in-a-lifetime energy transition.
💡Geothermal Innovators
Based on the depth of drilling there are 4 primary types of Geothermal systems as shown below. As we are able to drill deeper, the rock gets hotter and we are able to produce 5–10 times more energy than the shallow wells.
Based on the definitions on the picture above, I have classified the main players into 3 categories in the market map below. I have added a 4th category for closed-loop geothermal which circulates a particular type of fluid through the drilled pipeline to extract the heat from the earth.
Furthermore, I have added a new Utility Scale Developer category specifically for Baseload Capital which develops geothermal power plants across different continents.
If you are interested in ‘digging’ further, here’s a brief description of every company in the Geothermal market map:
💰 Geothermal Investors
“Talent knows talent.” Let me explain why. Below is a chart showing the top geothermal investors who have invested in the startups above.
I noticed a couple of trends analyzing these startups and those who invested in them:
- CVCs dominate the space. Nabors, Chevron Technology Ventures, BHP Ventures are all CVCs of well known oil companies who has domain expertise. It also resonates with my earlier comment about the untapped labor market in the oil and gas industry to accelerate decarbonization.
- Some well known investors and HNIs have also invested in geothermal startups. Well known angels include Masayoshi Son, Richard Branson, and Jeff Bezos. Well known VCs include Bill Gates backed Breakthough Energy Ventures, GV (Google Ventures), Khosla Ventures, and Plug and Play Tech Center. Needless to say that some of the biggest players are trying to tap this untapped heat.
Given the small number of players in the ecosystem it is needless to say that the market is still in its early stages and any new innovators and early movers will have a huge upside. For hard tech hesitant investors, investing in geothermal modeling software leveraging AI and domain knowledge to optimize energy resource assessment and development could be very lucrative.
Conclusions
💡The energy transition requires affordable, reliable, and scalable energy solutions, other than wind and solar, to achieve carbon neutrality by 2050 and simultaneously meet the additional demand for energy.
💡Geothermal offers a scalable and reliable source of clean energy with a high capital cost; the capital cost will significantly decrease in the next 5–6 years with a comparable LCOE to wind and solar energy. Potential applications also include extraction of minerals like Lithium.
💡Abandoned oil and gas wells provides a huge untapped market for geothermal scientists, entrepreneurs, and investors who can leverage subsurface technologies and decades of learnings from the oil and gas industry.
💡Although still in its early stages the geothermal ecosystem will continue to evolve beyond CVCs, and early innovators with domain knowledge and analytical expertise are poised to succeed.
I am a petroleum engineer from The University of Texas at Austin with knowledge of drilling, geochemistry, modeling, and simulation. I started my career working at BRITE Energy Innovators — an energy-tech incubator supporting scientist-entrepreneurs building energy storage and mobility solutions. I am also a member of the Included VC’s highly selective 2022 global cohort where I learn everything about Venture Capital and supporting the next generation of diverse entrepreneurs innovating for an equitable energy transition.
👉 If you would like to chat or discuss further you can connect with me on LinkedIn or Twitter. The views expressed here are personal and do not represent the views of any of my past, present or future employers.
