The increased need for energy by AI is making geothermal energy startups popular with major tech companies looking for clean energy for their AI data centers. Currently, geothermal electricity startups have formed some strategic alliances with Meta, Alphabet’s Google, and others because the two companies require a lot of energy to run their businesses. This particular interest is boosting another round of investments in this sector.
AI Demand Fuels Geothermal Growth, But Natural Gas Dominates Energy Mix
The drive to harness clean energy sources in data centers has started, as the biggest players seek to satisfy the energy demands of AI. Meeting these demands, several energy options have been proposed, between which geothermal energy was considered to be more viable and less fluctuating than other renewable resources. It is a reliable source of energy that does not have any challenges similar to those facing wind and solar, and therefore it is ideal for companies that use a lot of power.
Talking to Energy Compass, Trey Lowe, the CTO of the US-based shale gas supplier Devon Energy, pointed to the increasing importance of geothermal power and natural gas for the future power-generation fundamentals. Devon will support the development of Fervo Energy, the start-up developing geothermal technology to power data centers. Lowe said, echoing the proponents of an “all of the above” strategy—where renewables and plenty of natural gas are needed to meet the growing demand for AI energy.
Although this seemed quite promising for geothermal energy, the initiative has some challenges, such as high capital-intensive projects and long timetables for approval of projects. Drilling for geothermal power is costly, and regulatory approval for the project can take years. While the commensurate investments are yet to be fully realized due to the above-mentioned challenges, some of the initial excitement generated by geothermal energy has been tamed, slowing down the growth of this industry.
Hitherto, the investment in geothermal projects has remained quite small, with the analysts projecting that the geothermal energy investment has been at slightly above $700 million since the year 2020. This is a huge sum of money, yet it is dwarfed by the tens of billions being pumped into natural gas and other energy technologies. This led to this disparity, which shows that there is still more doubt as to whether geothermal energy is set to be a major player in the energy sector.
Shale Oil Giants Back Natural Gas, Geothermal for Emissions Reduction
Leading shale oil producers such as Chevron, Diamondback Energy, and Exxon Mobil have recently been promoting natural gas as a main power-generation fuel, especially where it is paired with carbon capture and storage initiatives to embrace environmentally friendly sources of power generation. These companies are hoping to be strategic players in defining the next generation of clean energy by partnering with utilities on carbon capture projects. Their efforts come at this time when there is pressure to deal with climate change and the constantly increasing energy demand globally.
There is also more renewed interest among the independent producers of oil and gas and service companies in geothermal energy, said Cindy Taff, Sage Geosystems. Taff also said that, while such players as Chevron and Shell are actively involved in the discussions, many more of the so-called ‘supermajors’ are actually much more passive, opting rather for a ‘let’s see’ strategy. This underlines the heterogeneity of measures and approaches across the industry as energy companies investigate renewable energy sources.
Sage Geosystems completed an equity round for $30 million in September with the support of Expand Energy, a former division of Chesapeake Energy; the second round is planned for January, Series B. Currently, the company is involved in energy storage and geothermal located at the deep well bored in the underground, and the firm is among the few companies investing in geothermal baseload power. The increased attention to these technologies is due to the shift of energy sources to indigenous with natural gas, carbon sequestration, and geothermal solutions.
Another encouraging development is the work of Gradient Geothermal, a Coloradan company that adapts geothermal generation to the existing schemes of the oil and gas industry. This year it declared its intention to lend services to Chord Energy to produce geothermal energy at one of its oil and gas fields in North Dakota. For her part, Gradient’s Chief Operating Officer, Johanna Ostrum, noted that while many mid-size and smaller energy firms have explored geothermal energy in the past for electricity resale purposes, this is no longer the case as more firms start using it for their own power requirements.
At the same time, there is a shift towards geothermal energy, while the improving investment climate points to more than 60 start-ups in the last two years. Bryant Jones, the executive director of Geothermal Rising, makes remarks on this sector's growth. Texas also identified geothermal resources, a relatively straightforward permitting process, and regulatory stability, says Matt Welch, the Texas Geothermal Energy Alliance. This places Texas into the future pool of provider states in geothermal energy, aptly for the fact that.
Texas Leads Geothermal Startup Growth Amid Bipartisan Support
Texas has now emerged as a prime state for geothermal startups; 10 out of 22 US-based companies that started between 2016 and 2022 are based in Texas. This trend shows how the state is slowly becoming more and more relevant in the generation of geothermal power due to its natural resources and enabling business climate. Geothermal energy can also become a popular type of clean energy in the future, and Texas is preparing for this today.
The current condition of reduced prices for the commodities may also push the shale companies to product differentiation. Since the revenue from the conventional oil and gas resources is learnt to be more unpredictable, many producers are now turning towards geothermal power as a more reliable and sustainable power source. This shift could assist to offset dangerous activities connected with the instability of fossil fuel markets while at the same time exploiting a newly explored market in renewable power systems.
The geothermal subsector is on the rise under the support of the private investor as well as support from both sides of the political spectrum in parliaments. There has been some legislative activity of late; Cleaning LINE-21 (Clean Act) and Heating and Energy Efficiency (HEATS Act) have been passed by the House of Representatives. When passed, these bills would help to reduce the regulatory hurdles concerning geothermal projects and hasten the pace of the industry by providing an easier way for firms to start new geothermal power projects.
Devon Energy’s Chief Technology Officer, Trey Lowe, said rising government incentives and private investments are driving interest in geothermal energy. As identified by Lowe, geothermal energy is considered to be a “low decline asset” with high confirmation of the price from investors seeking constant profitability. The availability of the above factors of production at lower costs and government support is encouraging more firms to consider geothermal power.
With the development of the geothermal sector, industrialization, the sector is considered a major component of the energy sector in the United States of America. Texas that provided a favorable environment for geothermal exploration is in the forefront in this shift to clean energy. There is greater potentiality when there is more policy interest and investment in the geothermal energy that can help the country to make a considerable reduction of carbon emissions to approach a sustainable energy regime.
