Geothermal Escapes Trump’s Renewable Crackdown, Boosts Fervo’s IPO Bid

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Drilling wells is the costliest part of geothermal, and Fervo’s success hinges on how often it will have to build new ones. That will in part be dictated by how much the rocks around the fractures cool, a process known as thermal decline, which can cause a drop in power output and necessitate drilling new wells. 

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A year of production data from Fervo’s Nevada pilot shows a small amount of thermal decline. But that project is much smaller in scope than its Utah plant and the sparse data has given some pause. “None of them have operated for long enough to know how long the wells will stay productive and when they will need to re-drill and how often,” said Mike Matson, a partner and associate director at Boston Consulting Group. 

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There’s also the delicate issue of community relations. As with any large infrastructure project, enhanced geothermal systems face risk from local opposition, particularly over water use and earthquake risk. 

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Studies have shown that as much as 20% of the water in an enhanced geothermal system can be lost to porous rock, a bad look in the parched Southwest. Latimer stresses that Fervo only consumes a “minimal” amount of brackish water that can’t be used for growing crops or supplying cities. The company expects higher water recapture rates as its well designs improve. 

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In the worst-case scenario, enhanced geothermal systems could induce an earthquake by triggering a nearby fault line, a risk that’s also been well-documented in areas with widespread fracking. Researchers have recorded imperceptible tremors during enhanced geothermal experiments, but a few have been strong enough to raise alarms. The most notable occurred in South Korea in 2017, where a system caused widespread damage and injured 135. 

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Fervo says it follows the Energy Department’s best practices to reduce the risk of earthquakes. The bigger challenge, Latimer said, is public perception. “You don’t want to be the next nuclear and have NIMBYism.”

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Fervo’s commercial pilot came online in 2023, just as ChatGPT became a household name and the AI race took off in earnest. That, along with the rapid electrification of homes and cars and other factors, means the world’s electricity demand is expected to surge 75% by midcentury, according to BloombergNEF. 

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The surge in demand has sent power prices soaring. About four years ago, purchase agreements for geothermal averaged about $60 to $70 per megawatt-hour. Today, they can go much higher, said Doron Blachar, Ormat’s chief executive officer. “Whatever we can build, we can sell,” he added.

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Still, “the most important thing in electricity production is the cost per kilowatt-hour,” said venture capitalist Vinod Khosla, and neither traditional nor enhanced geothermal systems are cheap enough to compete with gas at the moment. Fervo says its technology is already cost-competitive with other forms of clean, firm power.

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That hasn’t stopped a wave of next-generation geothermal startups. They include Quaise Energy Inc. and Mazama Energy, both backed by Khosla, which are attempting to drill deeper than Fervo and access superhot rocks using unconventional techniques. By tapping higher temperatures deeper underground, producers could potentially harness more energy with fewer wells, bringing down costs. 

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Oil and gas majors like Occidental Petroleum Corp. and SLB have also started investing in enhanced geothermal. “Geothermal for us is moving faster than we’ve seen anything happen in decades,” Gavin Rennick, president of new energy, SLB, said at a BNEF conference in September. 

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While Fervo has benefited from a first-mover advantage, it will have to keep raising money to stay ahead. The company announced Thursday it secured a $421 million debt package to finish construction for the first phase of its Utah plant. It’s also aiming for a $2 billion to $3 billion IPO, according to Axios. Fervo declined to comment on its target.

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Latimer, for his part, welcomes more competition. At last year’s New York Climate Week, he said that the geothermal pie is so big, it’s fine if others take a slice. 

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“You look at the shortfall and how much electricity is needed just in the United States over the next few years and then how much even our wildest ambitions can fill,” he said. “We’re still not going to close that gap.”

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—With assistance from Kyle Kim.

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