((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Mrinalika Roy and Seher Dareen
Geothermal energy startups are on the rise thanks to Big Tech companies looking to power their power-hungry AI data centers, but long-term investments remain uncertain as oil majors are falling back on natural gas.
Meta META.O and Alphabet’s GOOGL.O Google are among the technology companies partnering with startups offering to produce geothermal electricity to power their data centers.
Large data center operators are also working to meet the energy needs of artificial intelligence, accelerating the implementation of a range of clean technologies.
“We believe geothermal, like abundant natural gas, can be part of the complete energy mix we need to meet demand,” said Trey Lowe, chief technology officer at U.S. shale gas producer Devon Energy DVN.N , which invested in geothermal startup Fervo Energy.
Geothermal energy has been touted as a faster way to produce carbon-free electricity than nuclear, and without the intermittency of wind and solar. But startups still face high upfront costs, especially for drilling, and long project approval times.
Analysts estimate that just over $700 million in financing has been provided to all geothermal projects since 2020.
Major shale oil producers Chevron
CVX.N , Diamondback Energy FANG.O and Exxon Mobil carbon sequestration that reduces greenhouse gas emissions. ) “Generally speaking, there is a lot more interest from smaller oil and gas producers and service companies… We have spoken to Chevron and Shell
SHEL.L , but the supermajors seem more wait-and-see,” said Cindy Taff, chief executive of Sage Geosystems, which develops geothermal baseload and energy storage technologies deep within the earth.
Sage recently closed a $30 million fundraising round led by U.S. shale gas producer Expand Energy EXE.O , formerly Chesapeake Energy, and plans to launch its Series B round in January.
In December, Colorado-based Gradient Geothermal, which produces geothermal energy using existing oil and gas infrastructure, announced it was providing Chord Energy CHRD.O with services to help it produce electricity at one of its oil and gas sites in North Dakota.
Johanna Ostrum, chief operating officer of Gradient, said most small and medium-sized independent energy companies are interested in geothermal energy for their own electricity needs, not to create electricity for resale. .
Geothermal energy aims to be cost competitive. The average cost of electricity (LCOE) for conventional geothermal projects in the United States is approximately $64 per megawatt hour (MWh), which is competitive with other dispatchable energy sources such as gas. combined cycle, which is around $77/MWh on average, and nuclear, which is around $182/MWh, according to energy consultancy Rystad Energy.
Thanks to improving investment conditions, more than 60 start-ups have emerged in the past two years, said Bryant Jones, executive director of industry association Geothermal Rising.
“Texas is becoming the ideal location for geothermal exploration and development across the board,” said Matt Welch at the Texas Geothermal Energy Alliance ( TxGEA ). “This is largely due to the abundance of identified geothermal resources, the one-stop permitting process and regulatory certainty
Ten of 22 geothermal startups launched in the United States between 2016 and 2022 were headquartered in Texas, according to a report released last year.
The current decline in commodity prices could also encourage more shale companies to diversify their revenue streams by exploiting geothermal energy.
The sector is also benefiting from increased bipartisan interest. The CLEAN and HEATS Acts were recently passed by the House of Representatives and must still be approved by the Senate. If adopted, they will facilitate the implementation of geothermal projects in the country.
“Government incentives and private investment are increasing…the combination of a low decline asset and high price certainty is attracting interest from many investors,” Mr Lowe of Devon said.
