Andrew Howell is Environmental Defense Fund's senior director of sustainable finance and Karine Kleinhaus is EDF's director of sustainable finance.
There are troubling signs that the biggest players in the global energy industry are wavering in their commitments to the energy transition. In February, BP pushed back its plans to reduce oil and gas production by 2025. In June, Shell raised oil and gas capital expenditure guidance to $40 billion through 2025, far in excess of the $10 billion to $15 billion they anticipate going into low-carbon products. Such backtracking is especially concerning, as it comes from companies that had positioned themselves as industry leaders in the shift to lower carbon energy.
There are numerous technologies emerging today where the expertise and resources of incumbent energy companies confer a competitive advantage. One such technology stands out as a particularly attractive opportunity for those in the oil and gas business: geothermal power. Geothermal converts heat below the earth’s surface into clean, reliable power through wells drilled deep underground. Rather than burning the fluid drawn from the ground, as with oil, water is pulled to the surface and the heat transferred from it to generate clean, round-the-clock power.
In addition to being a source of always-on energy — a critical ingredient of a well-functioning electricity grid — geothermal offers a number of other benefits. It has a smaller footprint than renewables, using about 70% less land per KWh than wind, and 88% less than solar. In certain conditions, lithium and other rare minerals can be profitably harvested from the brine of geothermal wells. And thanks to its consistency, geothermal heat and power can enable other climate technologies such as direct air carbon capture and green hydrogen.
Hotter rocks, deeper wells
When it comes to geothermal power, most people think of installations like those in California and Indonesia, located along the tectonic plate boundary marked by the famed Pacific Ring of Fire. A few hundred such conventional geothermal plants exist, representing 16 GW of combined generation capacity or about 0.4% of global electricity supply. Further expansion of conventional geothermal is limited by the occurrence of natural reservoirs of high-temperature water in permeable rock close to the surface. Because of the scarcity of these conditions, the International Energy Agency forecasts only incremental growth in conventional geothermal power, to 28 GW by 2030.
However, newer technologies could see a much bigger role for geothermal. Enhanced geothermal systems, or EGS, use fracking techniques commercialized by the oil and gas industry to access heat within rock that lacks natural fractures, often at greater depths than conventional geothermal wells. This could dramatically expand the geographic range of geothermal electricity production.
There is a lot of energy to tap into: the U.S. National Renewable Energy Lab estimates an EGS resource potential in the US alone of over 5,000 gigawatts, more than 400% of total U.S. electricity generation. Another set of technologies known as advanced geothermal systems creates a closed-loop system of working fluid that is cycled through injection and power generation phases. Yet another emerging approach targets deeper, superhot rocks with higher energy density.
A recent Energy Department analysis found that by 2050, the total amount of installed geothermal (both conventional and EGS) could reach 90 GW in the U.S., providing over 10% of all US electricity generation. Under this scenario, commercial EGS deployment could stretch from the western U.S. to states including Mississippi, West Virginia, Virginia and Pennsylvania.
Encouraging momentum
These next-generation geothermal technologies are still in development today, and not yet producing power at scale. But there are numerous indications that they are getting closer to viability. A coterie of early-stage companies is deploying new technologies to harness geothermal, with some encouraging results. This week, venture-backed Fervo Energy shared data showing that it has created the most productive enhanced geothermal well ever, using familiar oil and gas extraction methods like horizontal drilling and hydraulic stimulation. Fervo plans to scale its approach to build a commercial-scale geothermal power plant within 3 years.
Another startup, Canada’s Eavor Technologies, recently provided evidence of success in deep-drilling technology, with a 5 kilometer vertical well in New Mexico that reached temperatures of 250°C. Alongside these private ventures, government-funded projects are also playing a role, with the DOE-funded Frontier Observatory for Research in Geothermal Energy laboratory testing new drilling and production technologies in Utah.
Federal investments into the energy transition are providing some support for geothermal. Last year, DOE launched an Enhanced Geothermal Earthshot, or EGS, with the aim of reducing the cost of EGS by 90%, to $45 per megawatt hour by 2035, and the government has committed $250 million to EGS research through various programs. This May, DOE awarded a $165 million Geothermal Energy from Oil and gas Demonstrated Engineering grant to a consortium formed by Project InnerSpace, the Society of Petroleum Engineers and Geothermal Rising. And while the Bipartisan Infrastructure Law and Inflation Reduction Act offer less funding for geothermal than for other energy transition technologies like hydrogen or carbon capture, there is support there too: $84 million for EGS demonstration projects and tax investment and production credits for geothermal deployment.
The opening for oil and gas
While this momentum is encouraging, a number of challenges need to be addressed if geothermal is to become more than a niche energy source. Some of these are engineering-related, linked with the difficult subsurface conditions that come with geothermal — high temperatures, pressure and corrosiveness. Drilling service companies like SLB, Baker Hughes and Halliburton are advancing EGS technology by leveraging their expertise in subsurface operations.
Large oil and gas operators can also play an important role in geothermal development, bringing technological expertise, a skilled workforce, and access to capital. There are signs that the industry is starting to wake up to the opportunity. Earlier this year, U.S. independent oil and gas producer Devon Energy invested $10 million in Fervo; the venture capital arms of bp and Chevron have invested a combined $40 million in Eavor. While these are steps in the right direction, they are dwarfed by the billions the oil companies are plowing back into fossil fuel development.
Rather than equivocating in their commitments to clean energy, oil and gas companies should draw on their strengths in innovation and cost reduction to bring energy solutions to market. In the case of geothermal energy, an important solution to the transition may lie, literally, just beneath our feet. It’s time to dig in.
