Artificial intelligence’s energy demand fuels geothermal startups, but competition from natural gas clouds future

Author: Mrinalika Roy and Seher Dareen

Geothermal energy startups are on the rise as big tech companies look to power their electricity-intensive artificial intelligence data centers, but long-term investment remains uncertain as oil majors double down on natural gas.

Tech companies such as Meta and Alphabet’s Google are teaming up with startups to propose producing geothermal electricity to power their data centers.

Large data center operators are also racing to meet the energy needs of artificial intelligence, accelerating the development of a range of clean technologies.

“We believe that geothermal energy, along with abundant natural gas, can be part of the mix of all of the above that we need to meet our needs,” said investor Trey Lowe, chief technology officer of U.S. shale gas producer Devon Energy. Fervo, a geothermal startup Energy employees.

Geothermal energy is considered a faster, carbon-free way to generate electricity than nuclear power, and without the intermittency of wind and solar power. But startups still face high upfront costs (especially drilling costs) and lengthy project approval times.

That has dampened some initial enthusiasm, and investment so far has been limited — analysts estimate just over $700 million has been raised in geothermal projects overall since 2020.

Top shale producers Chevron, Diamondback Energy and Exxon Mobil have also begun advocating for natural gas as the primary fuel for electricity and have offered to work with utilities to combine their power plants with carbon sequestration projects that reduce greenhouse gas emissions. stand up.

“In general, there’s more interest from smaller oil and gas producers and service companies… We’ve had conversations with Chevron and Shell, but the supermajors seem to be taking more of a wait-and-see approach,” Sage Geosystems CEO The company is developing energy storage and geothermal baseload technology deep in the Earth, said Cindy Taff.

Sage recently completed a $30 million round of financing led by U.S. shale gas producer Expand Energy (formerly Chesapeake Energy) and plans to launch a Series B round in January.

In December, Colorado-based Gradient Geo Thermal, which uses existing oil and gas infrastructure to generate geothermal energy, announced it would provide Chord Energy services to help generate electricity at one of its oil and gas sites in North Dakota.

Gradient chief operating officer Johanna Ostrum said most mid-sized and small independent energy companies are interested in geothermal energy to meet their own power needs, not to resell power.

The goal for geothermal is to compete on cost. The average levelized cost of electricity (LCOE) for traditional geothermal projects in the United States is approximately $64 per megawatt hour (MWh), which is competitive with the average cost of other dispatchable energy sources such as combined cycle natural gas, which is approximately $77/MWh. According to energy consultant Rystad Energy, nuclear power costs about $182/MWh.

Bryant Jones, executive director of industry association Geo Thermal Rising, said that due to the improvement in the investment environment, more than 60 new startups have sprung up in the past two years.

“Texas is becoming the ‘go-to’ place’ for full-scale geothermal exploration and development,” said Matt Welch of the Texas Geothermal Energy Alliance (TxGEA). “This is a big deal. This is due to our abundant discovered geothermal resources, one-stop shopping permitting process and our regulatory certainty.”

According to a report released last year, 10 of the 22 geothermal startups launched in the United States between 2016 and 2022 are headquartered in Texas.

The current low commodity prices may also encourage more shale oil companies to diversify their revenue streams through the use of geothermal energy.

The industry is also receiving increasing bipartisan attention. The Clean Act and the HEAT Act recently passed the House and are awaiting Senate approval. If they become law, they will make it easier to establish geothermal projects in the country.

“Government incentives and private investment are increasing…the combination of low drawdown assets and high pricing certainty is stimulating interest among many investors,” Devon’s Lowe said.

(Reporting by Mrinalika Roy and Seher Dareen in Bengaluru; Editing by Devika Syamnath)