Energy Department goes all in on clean form of on-demand energy embraced by fossil fuel industry

Correction: This story has been updated to accurately reflect the current cost of next-generation geothermal energy.

Advances in oil and gas drilling have cut costs for a form of clean power that could help replace fossil fuels, according to the Department of Energy.

Now the agency is going all in on geothermal energy, which uses heat from deep within the Earth to produce largely pollution-free electricity.

The agency projects that geothermal could supply the energy equivalent of 4 million households by 2030 — and that its investment could help achieve “liftoff” for an industry that could be a core bulwark of the power sector in coming decades. 

Geothermal energy excites the power sector because it offers a means of getting on-demand energy without heating the planet — and without major technological advancement. 

That gives geothermal a big advantage over other forms of “baseload” clean energy, most of which will rely on significant technological advances — or in the case of nuclear, huge amounts of money — to reach deployment.

By 2050, the Department of Energy hopes to have installed between 90 gigawatts and 300 gigawatts of geothermal power — enough to power between 80 million and 260 million homes. 

And even this may be an understatement, as Jigar Shah, director of the department’s Loan Programs Office, told The Hill at CERAWeek by S&P Global, a conference in Houston sometimes described as “the Super Bowl of energy.” 

“The numbers could be quite a bit larger,” Shah said. Part of the Department of Energy’s 2030 goal is to get the cost of next-generation geothermal electricity to $70 per megawatt-hour by the end of the decade — down from a current level of about $120 per megawatt-hour. 

That’s part of a broader departmental “earthshot” initiative that seeks to cut the price to $45 per megawatt-hour by 2035, or in just more than a decade — an endeavor that a Monday report by the department estimated could ultimately be worth at least $250 billion to investors.

“If you can get 24/7 clean, firm power at anything close to that price — I think the demand will be huge,” Shah told The HIll. 

“And that’s the thing about technology: As it gets better and better, the market size gets bigger and bigger.”

Next-generation geothermal energy also marks a rare point of convergence between renewables and the oil and gas industry — a virtually zero-carbon form of power production that relies on the ability to map and accurately drill beneath the earth.

Exxon CEO Darren Woods, for example, told CERAWeek attendees that while the company wasn’t currently invested in geothermal, “we’re keeping a very close eye on it, recognizing there is a very strong alignment and synergies with what we already know how to do.” Chevron’s CEO Mike Wirth, meanwhile, promoted geothermal pilots his company is operating in Japan and California.

It’s also a form of nearly zero-emission energy that has managed to escape the extreme political polarization that now hampers right-wing support for wind and solar. Last week, a bipartisan group of Western senators announced the Geothermal Energy Optimization Act, which would extend Bush-era legislation that makes it easier to drill for oil to reduce the need for permits for geothermal wells.

And in December 2020, a divided Congress under the Trump administration passed the Energy Act, one provision of which allowed oil and gas companies to convert their old fossil fuel wells to geothermal ones without applying for new permits.

Energy Secretary Jennifer Granholm promoted that policy change in Monday remarks at CERAWeek. “Many of you can repurpose your permits and use your existing workforce, literally today, to build new geothermal projects,” Granholm told the conference, which is typically dominated by the fossil fuel industry.

“The oil and gas industry is incredibly well-positioned to lead in geothermal,” she added.

In concept, geothermal energy works much like any other form of on-demand thermal power, whether it be coal, fuel oil, natural gas, nuclear or even most forms of fusion. It uses heat to produce steam, which can either be used to turn an electromagnetic turbine — sending electric current down a wire — or tapped for industrial applications.

But unlike all those forms of energy, geothermal energy doesn’t require a power producer to create the heat. Instead, power producers drill down to it.

In traditional geothermal energy of the sort that powers the nation of Iceland — and in whose production the U.S. currently leads the world, Shah noted — that means driving a borehole down to channels of boiling underground water, and tapping the steam.

But that form of geothermal energy requires a readily available fault line close to the surface, which is accessible in geologically active places like Japan, California or Iceland, but much less elsewhere.

And like exploring for oil and gas, drilling for such “hydrothermal” resources means targeting a resource that may or may not exist, or may not be accessible — meaning that the possibility of a dry hole, and a costly failure, is ever-present.

That’s why the Energy Department is targeting what it calls “enhanced” or “next generation” geothermal, which takes advantage of the fact that if you drill down far enough the subsurface region is suitably hot everywhere. 

In enhanced geothermal, companies drill shafts or frack channels down to the hot rock layers below, then pipe in water and use the resulting steam to spin a turbine. 

Geothermal startups are already underway across the country, many of them funded by the Energy Department’s Geothermal Technologies Office. Last year, Houston-based startup Fervo Energy — a department grantee — announced it had achieved 3.5 megawatts in clean electricity production from one of its Nevada test wells.

By repurposing oil and gas technology, Fervo proved it could produce round-the-clock carbon-free energy “in new geographies across the world,” Fervo CEO Tim Latimer said at the time.

Other innovations are on the horizon that seek to bridge the gap between oil and gas drilling and geothermal drilling. Geothermal, for example, will ultimately require penetrating much harder rocks (fossil fuels typically lie within softer rocks like shales), and geothermal wells and technology must withstand far higher levels of heat than fossil fuels.

As such, ARPA-E, the Energy Department’s cutting-edge research arm, is looking into fiber optics cables and sensors that can withstand higher temperatures, and forms of drilling that use directed energy — rather than a drill bit — to vaporize hard rock.

But the main challenge for geothermal isn’t technological, Shah told The Hill — it’s financial. After more than a decade of rapid wind and solar development, banks and private capital have a good understanding of how that business works and what the risks are. 

Geothermal, however, is a different proposition: a new industry, with new risks that wind and solar investors are generally not used to taking on. Getting the financial industry to the point where it’s willing to invest in new geothermal “requires confidence building — people understanding that this is new, and that it takes some totally different steps,” Shah said. 

This is a road that the Loan Programs Office has walked before with another now-ubiquitous technology: commercial solar energy. Utility-scale solar added about 18 gigawatts of new power to the grid in 2023 and may add 36 gigawatts in 2024 — with CERAWeek host Houston standing out as the nation’s largest urban consumer of solar power.

But commercial solar largely did not exist in 2011, when the Loan Programs Office funded the first five 100 megawatt-plus solar plants in U.S. history — playing a key role in “de-risking” an industry that by 2017 was sufficiently safe to attract the interest of big banks.

With the ability to guarantee as much as $400 billion in early-stage loans to new energy startups, the Energy Department is “hoping to shrink” that time scale for both geothermal and its other “earthshot” technologies, Shah said. 

“With climate change where it’s at today, we need to figure out these next 10 technologies, we need to figure out how to make it not take, you know, 12 years, but incentivizing them in six years.”

The goal, he said, is not just to design new technologies. “We need to get people actually deploying them and figuring out how well they work in the field.”

— Updated March 25 at 11:05 a.m.