For decades, geothermal energy has been a niche source of electricity available in a few areas, such as California and Iceland.
But a new wave of start-ups aims to expand geothermal power into the backbone of the global energy system. They adopt advanced drilling techniques from the oil and gas industry to collect heat underground and generate power in many other places.
Fervo Energy, the most prominent of these start-ups, is riding a wave of investor enthusiasm for the technology, which offers the promise of clean and abundant electricity available 24 hours a day.
This week, Fervo raised $1.89 billion in its initial public offering, more than investors expected even after increased interest from Wall Street. The company, whose shares are now traded on the Nasdaq, sold 70 million shares at $27 eachgiving it an initial valuation of roughly $7.7 billion.
Fervo shares opened Wednesday at $36, up 33 percent from the offering price, and closed at $36.54.
“It’s a real sign of confidence in the industry,” said Kate Adie, a research analyst at Wood MacKenzie, an energy research firm. “It’s a signal to investors that this is something that there is confidence in and it can work and it can be repeatable and it can be scaled.”
Houston-based Fervo is building its first commercial geothermal plant in Utah and plans more throughout the West. The company is betting that growing demand for electricity in the United States, driven in part by the rapid growth of data centers, will fuel geothermal energy.
“What’s exciting for us is that it’s now filled us with the capital needed to really grow at the rate we’ve always wanted to grow in terms of delivering gigawatts to the grid and solving this energy challenge,” Tim Latimer, CEO of Fervo Energy, said in an interview with The New York Times.
Tech companies and utilities across the country are looking for energy to fuel the AI boom. They are pouring tens of billions of dollars into solar power, batteries and power plants that use natural gas. They are also investing in new types of nuclear power plants.
Geothermal has support across the political spectrum because it can generate electricity without any planet-warming emissions while operating 24 hours a day, unlike wind and solar projects. The Trump administration has also supported the technology, recently reported $171 million for field tests.
“We’re at the very beginning of this potential revolution that I think we’re entering in a big way,” Kyle Haustveit, a former petroleum engineer and now assistant secretary of energy, said of geothermal energy at a March conference. He likened it to the beginnings of the shale revolution, which released huge amounts of natural gas.
Traditionally, geothermal plants were located in places with underground reservoirs of warm water close to the earth’s surface. Few places are blessed with such geology, including parts of California and Nevada in the United States. As a result, geothermal energy provides only 0.4 percent of the country’s electricity.
Still, dig deep enough anywhere and you’ll find plenty of heat that dozens of startups are hoping to tap into.
Mr Latimer said that until recently many people did not believe that companies like his could successfully expand the footprint of geothermal energy.
“There was such deep skepticism from investors that it was difficult not only for Fervo but for the entire geothermal ecosystem to really value the business,” said Mr Latimer, who previously worked in the oil and gas industry. “I think people are waking up to the opportunity and seeing that we’re going to need all kinds of new technologies to fill the gap in how much energy we need.”
Fervo drills pairs of wells that extend thousands of feet down into the hot, dry granite. It then uses controlled explosives and high-pressure fluids to create cracks between the wells. Finally, Fervo injects water into one well so that it travels through these cracks, heats to more than 300 degrees Fahrenheit, and exits the other well as steam that turns turbines to generate electricity.
The company was founded in 2017 and expects its Utah power plant, called Cape Station, to start sending power to the grid later this year. It will eventually have the capacity to generate at least 500 megawatts of electricity — power that Fervo has agreed to sell to Google, Southern California Edison and others.
The theoretical potential is huge. The United States has about 3,800 megawatts of conventional geothermal capacity, mostly in the West. Fervo has leased land with the potential for more than 40,000 megawatts of capacity, the company said.
However, enhanced geothermal energy faces major obstacles.
Geothermal companies need to significantly reduce the cost of drilling and setting up their facilities. Fervo said in its filing that Cape Station would cost approximately $7,000 for each kilowatt of electricity it produced. That would be cheaper than new nuclear plants, but still more than twice as expensive as natural gas plants.
Geothermal executives say those prices will drop quickly as the industry becomes more efficient at drilling and optimizing wells, much like oil and gas companies. That could bring geothermal costs down to about the same level as natural gas plants in parts of the West within five to 10 years, analysts say.
One big concern, however, is how quickly geothermal wells can cool as water is pumped through them. If it cools after a few years, companies will have to drill new wells, increasing costs.
“I think one of the biggest question marks that large-cap providers are still waiting for is the downturn,” Mr. Hausveit said. “We need to get real data from the field.”
Some critics also worry that drilling for geothermal energy could increase the risk of seismic activity or contaminate local groundwater.
“No energy source is completely free of risk to the environment or public health,” said Jeff Deyette, deputy director for clean energy at the Union of Concerned Scientists. He added that it was “very good to see a company like Fervo and its piloting of next-generation geothermal technologies being successful”.
In its IPO, Fervo lists other potential risks, including the possibility that data centers may not use nearly as much energy as expected or that its customers will gravitate to other technologies, such as nuclear reactors. Fervo has yet to turn a profit.
Today, most of America’s geothermal power plants are owned by companies that also generate electricity in other ways.
Headquartered in Reno, Nevada, Ormat Technologies is a leading developer and operator of geothermal power plants. Investors value it at $7.5 billion, slightly less than Fervo’s initial valuation, although Ormat also has waste heat and energy storage projects.
While Fervo is a long way off, other geothermal start-ups are hoping to quickly follow suit.
Sage Geosystems, also based in Houston, is in the business of injecting water into hydraulically fractured wells and using heat and pressure to store and generate electricity. Eavour Energy, based in Calgary, Alberta, is essentially building a large underground radiator to provide heat and electricity to a city in Germany.
Another company, Controlled Thermal Resources, plans an initial public offering in the fall. It is developing a geothermal power plant off the Salton Sea in California. The company plans to locate data centers at the site and extract critical minerals from the brine that is a byproduct of its process.
“There’s a lot of innovation in this space, and very few companies are trying exactly the same thing,” said Ann Garth, a geothermal researcher with the Clean Air Task Force, an environmental group. “We’re still in the early stages, so it’s good to see so many people trying different things.”
