AI's Energy Demand Sparks Geothermal Startup Boom, Faces Natural Gas Competition

AI's energy hunger fuels geothermal startups but natgas rivalry clouds future

(Reuters) - Geothermal energy startups are on the upswing with Big Tech companies looking to feed their power-intensive AI data centers, but long-term investments remain uncertain as oil majors double down on natural gas. Meta and Alphabet's Google are among the tech companies partnering with startups proposing to produce geothermal electricity, to power their data centers. Large data-center operators are also racing to meet the energy needs of artificial intelligence, accelerating a range of clean technologies in the process. "We believe geothermal, along with abundant natural gas, can be part of the all-of-the-above energy mix we need to meet the demand," said Trey Lowe, chief technology officer at U.S. shale gas producer Devon Energy, an investor in geothermal startup Fervo Energy. Geothermal has been promoted as a faster way to generate carbon-free electricity than nuclear, and without the intermittency of wind and solar. But the startups still face high upfront costs, particularly for drilling, and long project approval times. That has soured some of the initial enthusiasm, with limited investments so far - analysts estimate just over $700 million in financing has been contributed to overall geothermal projects since 2020. Top shale oil producers Chevron, Diamondback Energy and Exxon Mobil have also begun advocating for natural gas as the mainstay fuel for electric power, offering to work with utilities to couple their power plants with carbon sequestration projects that cut greenhouse emissions. "In general, (there is) a lot more interest from smaller oil and gas producers as well as service companies ... we've talked to Chevron and Shell but the supermajors seem to be taking more of a wait-and-watch view," said Cindy Taff, CEO of Sage Geosystems, which is developing energy storage and geothermal baseload technologies deep in the earth. Sage recently closed a $30 million fundraising led by U.S. shale gas producer Expand Energy, formerly Chesapeake Energy, and plans to launch its Series B round in January. In December, Colorado-based Gradient Geothermal - which generates geothermal energy using existing oil and gas infrastructure - announced it was providing Chord Energy services to help generate power at one of its oil and gas sites in North Dakota. Gradient Chief Operating Officer Johanna Ostrum said most mid-size and smaller independent energy firms were interested in geothermal energy for their own power needs, not to create electricity for resale. Geothermal aims to compete on cost. The average levelized cost of electricity (LCOE) of the conventional geothermal projects in the U.S. is around $64 per megawatt-hour (MWh), which is competitive with other dispatchable energy sources such as combined cycle gas, which is around $77/MWh on average, and nuclear, which is around $182/MWh, according to energy consultancy Rystad Energy. Thanks to an improving investment landscape, more than 60 startups have sprung to life in the last two years, said Bryant Jones, executive director of industry association Geothermal Rising. "Texas is becoming the 'place to be' for geothermal exploration and development across the board," said Matt Welch at the Texas Geothermal Energy Alliance (TxGEA). "Much of this is due to an abundance of identified geothermal resources, 1-stop shopping permitting process and our regulatory certainty." Ten of the 22 geothermal startups launched in the U.S. between 2016 and 2022 were headquartered in Texas, according to a report published last year. The current lower commodity prices could also encourage more shale companies to diversify their revenue streams by tapping geothermal power. The sector is receiving increased bipartisan interest as well. The CLEAN Act and HEATS Act recently passed the House and are awaiting Senate approval. If they become law, it would make it easier to set up geothermal projects in the country. "Government incentives and private investments are increasing...combination of a low decline asset with high certainty on pricing piques the interest of many investors," said Devon's Lowe. (Reporting by Mrinalika Roy and Seher Dareen in Bengaluru; Editing by Devika Syamnath)

AI's energy hunger fuels geothermal startups but natural gas rivalry clouds future

Geothermal energy startups are on the upswing with big tech companies looking to feed their power-intensive AI data centres, but long-term investments remain uncertain as oil majors double down on natural gas. Meta and Alphabet's Google are among the tech companies partnering with startups proposing to produce geothermal electricity, to power their data centres. Large data centre operators are also racing to meet the energy needs of artificial intelligence, accelerating a range of clean technologies in the process. "We believe geothermal, along with abundant natural gas, can be part of the all-of-the-above energy mix we need to meet the demand," said Trey Lowe, chief technology officer at U.S. shale gas producer Devon Energy, an investor in geothermal startup Fervo Energy. Geothermal has been promoted as a faster way to generate carbon-free electricity than nuclear, and without the intermittency of wind and solar. But the startups still face high upfront costs, particularly for drilling, and long project approval times. That has soured some of the initial enthusiasm, with limited investments so far - analysts estimate just over $700 million in financing has been contributed to overall geothermal projects since 2020. Top shale oil producers Chevron, Diamondback Energy and Exxon Mobil have also begun advocating for natural gas as the mainstay fuel for electric power, offering to work with utilities to couple their power plants with carbon sequestration projects that cut greenhouse emissions. "In general, (there is) a lot more interest from smaller oil and gas producers as well as service companies ... we've talked to Chevron and Shell but the supermajors seem to be taking more of a wait-and-watch view," said Cindy Taff, CEO of Sage Geosystems, which is developing energy storage and geothermal baseload technologies deep in the earth. Sage recently closed a $30 million fundraising led by US shale gas producer Expand Energy, formerly Chesapeake Energy, and plans to launch its Series B round in January. In December, Colorado-based Gradient Geothermal - which generates geothermal energy using existing oil and gas infrastructure - announced it was providing Chord Energy services to help generate power at one of its oil and gas sites in North Dakota. Gradient Chief Operating Officer Johanna Ostrum said most mid-size and smaller independent energy firms were interested in geothermal energy for their own power needs, not to create electricity for resale. Geothermal aims to compete on cost. The average levelized cost of electricity (LCOE) of conventional geothermal projects in the US is around $64 per megawatt-hour (MWh), which is competitive with other dispatchable energy sources such as combined cycle gas, which is around $77/MWh on average, and nuclear, which is around $182/MWh, according to energy consultancy Rystad Energy. Thanks to an improving investment landscape, more than 60 startups have sprung to life in the last two years, said Bryant Jones, executive director of industry association Geothermal Rising. "Texas is becoming the 'place to be' for geothermal exploration and development across the board," said Matt Welch at the Texas Geothermal Energy Alliance (TxGEA). "Much of this is due to an abundance of identified geothermal resources, 1-stop shopping permitting process and our regulatory certainty." Ten of the 22 geothermal startups launched in the US between 2016 and 2022 were headquartered in Texas, according to a report published last year. The current lower commodity prices could also encourage more shale companies to diversify their revenue streams by tapping geothermal power. The sector is receiving increased bipartisan interest as well. The CLEAN Act and HEATS Act recently passed the House and are awaiting Senate approval. If they become law, it would make it easier to set up geothermal projects in the country. "Government incentives and private investments are increasing...combination of a low decline asset with high certainty on pricing piques the interest of many investors," said Devon's Lowe.

AI Power Needs Fuel Geothermal Startups, But Natural Gas Remains a Rival

Geothermal energy startups are on the upswing with Big Tech companies looking to feed their power-intensive AI data centers, but long-term investments remain uncertain as oil majors double down on natural gas. Meta and Alphabet's Google are among the tech companies partnering with startups proposing to produce geothermal electricity, to power their data centers. Large data-center operators are also racing to meet the energy needs of artificial intelligence, accelerating a range of clean technologies in the process. "We believe geothermal, along with abundant natural gas, can be part of the all-of-the-above energy mix we need to meet the demand," said Trey Lowe, chief technology officer at U.S. shale gas producer Devon Energy, an investor in geothermal startup Fervo Energy. Geothermal has been promoted as a faster way to generate carbon-free electricity than nuclear, and without the intermittency of wind and solar. But the startups still face high upfront costs, particularly for drilling, and long project approval times.

Why Google and Meta are partnering with geothermal startups

Geothermal energy startups are on the upswing with Big Tech companies looking to feed their power-intensive AI data centers, but long-term investments remain uncertain as oil majors double down on natural gas. Meta and Alphabet's Google are among the tech companies partnering with startups proposing to produce geothermal electricity, to power their data centers. Large data-center operators are also racing to meet the energy needs of artificial intelligence, accelerating a range of clean technologies in the process. "We believe geothermal, along with abundant natural gas, can be part of the all-of-the-above energy mix we need to meet the demand," said Trey Lowe, chief technology officer at U.S. shale gas producer Devon Energy, an investor in geothermal startup Fervo Energy. Geothermal has been promoted as a faster way to generate carbon-free electricity than nuclear, and without the intermittency of wind and solar. But the startups still face high upfront costs, particularly for drilling, and long project approval times.

AI's energy hunger fuels geothermal startups but natgas rivalry clouds future

Dec 19 (Reuters) - Geothermal energy startups are on the upswing with Big Tech companies looking to feed their power-intensive AI data centers, but long-term investments remain uncertain as oil majors double down on natural gas. Meta (META.O), opens new tab and Alphabet's (GOOGL.O), opens new tab Google are among the tech companies partnering with startups proposing to produce geothermal electricity, to power their data centers. Large data-center operators are also racing to meet the energy needs of artificial intelligence, accelerating a range of clean technologies in the process. "We believe geothermal, along with abundant natural gas, can be part of the all-of-the-above energy mix we need to meet the demand," said Trey Lowe, chief technology officer at U.S. shale gas producer Devon Energy (DVN.N), opens new tab, an investor in geothermal startup Fervo Energy. Geothermal has been promoted as a faster way to generate carbon-free electricity than nuclear, and without the intermittency of wind and solar. But the startups still face high upfront costs, particularly for drilling, and long project approval times. That has soured some of the initial enthusiasm, with limited investments so far - analysts estimate just over $700 million in financing has been contributed to overall geothermal projects since 2020. Top shale oil producers Chevron (CVX.N), opens new tab, Diamondback Energy (FANG.O), opens new tab and Exxon Mobil (XOM.N), opens new tab have also begun advocating for natural gas as the mainstay fuel for electric power, offering to work with utilities to couple their power plants with carbon sequestration projects that cut greenhouse emissions. "In general, (there is) a lot more interest from smaller oil and gas producers as well as service companies ... we've talked to Chevron and Shell (SHEL.L), opens new tab but the supermajors seem to be taking more of a wait-and-watch view," said Cindy Taff, CEO of Sage Geosystems, which is developing energy storage and geothermal baseload technologies deep in the earth. Sage recently closed a $30 million fundraising led by U.S. shale gas producer Expand Energy (EXE.O), opens new tab, formerly Chesapeake Energy, and plans to launch its Series B round in January. In December, Colorado-based Gradient Geothermal - which generates geothermal energy using existing oil and gas infrastructure - announced it was providing Chord Energy (CHRD.O), opens new tab services to help generate power at one of its oil and gas sites in North Dakota. Gradient Chief Operating Officer Johanna Ostrum said most mid-size and smaller independent energy firms were interested in geothermal energy for their own power needs, not to create electricity for resale. Geothermal aims to compete on cost. The average levelized cost of electricity (LCOE) of the conventional geothermal projects in the U.S. is around $64 per megawatt-hour (MWh), which is competitive with other dispatchable energy sources such as combined cycle gas, which is around $77/MWh on average, and nuclear, which is around $182/MWh, according to energy consultancy Rystad Energy. Thanks to an improving investment landscape, more than 60 startups have sprung to life in the last two years, said Bryant Jones, executive director of industry association Geothermal Rising. "Texas is becoming the 'place to be' for geothermal exploration and development across the board," said Matt Welch at the Texas Geothermal Energy Alliance (TxGEA). "Much of this is due to an abundance of identified geothermal resources, 1-stop shopping permitting process and our regulatory certainty." Ten of the 22 geothermal startups launched in the U.S. between 2016 and 2022 were headquartered in Texas, according to a report, opens new tab published last year. The current lower commodity prices could also encourage more shale companies to diversify their revenue streams by tapping geothermal power. The sector is receiving increased bipartisan interest as well. The CLEAN Act and HEATS Act recently passed the House and are awaiting Senate approval. If they become law, it would make it easier to set up geothermal projects in the country. "Government incentives and private investments are increasing...combination of a low decline asset with high certainty on pricing piques the interest of many investors," said Devon's Lowe. Reporting by Mrinalika Roy and Seher Dareen in Bengaluru; Editing by Devika Syamnath Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Carbon MarketsSustainable MarketsGrid & InfrastructureExploration & ProductionGas Mrinalika Roy Thomson Reuters Mrinalika is a business reporter. She has covered the energy and mining industry in North America for Reuters since 2022 and is based in India. Seher Dareen Thomson Reuters Seher oversees and writes market reports with the commodities and energy team in Bangalore round-the-clock and monitors newsworthy events in the resources space.