Geothermal energy, long a niche electricity source primarily confined to regions like California and Iceland, is now poised for significant expansion. A new wave of startups is leveraging advanced drilling techniques, adapted from the oil and gas industry, to tap the Earth’s subsurface heat and generate power in a far greater number of locations, aiming to establish geothermal as a global energy workhorse.
Fervo Energy, a leading startup in this sector, recently capitalized on growing investor enthusiasm for geothermal technology, which promises round-the-clock clean and abundant electricity. The company’s initial public offering this week exceeded expectations, raising $1.89 billion. Fervo sold 70 million shares at $27 each, valuing the company at approximately $7.7 billion. Its stock, now trading on Nasdaq, opened at $36 on Wednesday—33 percent above its offering price—and closed at $36.54.
“This marks a significant vote of confidence for the entire industry,” noted Kate Adie, a research analyst at Wood MacKenzie. “It signals to investors that this technology is reliable, repeatable, and scalable.”
Houston-based Fervo is currently constructing its inaugural commercial geothermal power plant in Utah, with plans for additional facilities across the Western U.S. The company anticipates that escalating electricity demand, particularly from the rapid expansion of data centers, will drive geothermal’s growth. Fervo Energy CEO Tim Latimer told The New York Times that the new capital infusion enables the company to “grow at the pace we’ve always wanted to, to grow in terms of putting gigawatts on the grid and solving this energy challenge.”
Nationwide, technology firms and utilities are actively seeking energy solutions to power the booming artificial intelligence sector, investing tens of billions in solar, batteries, natural gas plants, and advanced nuclear power technologies.
Geothermal energy enjoys bipartisan support due to its ability to provide emission-free, 24/7 power, a significant advantage over intermittent wind and solar projects. The Trump administration, for example, previously endorsed the technology, allocating $171 million for field tests.
Kyle Haustveit, an assistant energy secretary and former petroleum engineer, remarked at a March conference that “We’re at the very beginning of this potential revolution that I think we’re entering into in a big way,” drawing parallels to the transformative early days of the shale revolution.
Historically, geothermal power generation relied on naturally occurring underground hot water reservoirs near the Earth’s surface, limiting its deployment to a few geologically favorable areas like parts of California and Nevada. Consequently, geothermal currently accounts for only 0.4 percent of U.S. electricity. However, the recognition that abundant heat exists deep beneath the surface virtually everywhere is inspiring dozens of startups to develop methods to access it.
Mr. Latimer noted that a lack of investor confidence previously hindered the expansion of geothermal energy. He elaborated, “There was such deep skepticism from investors that it was hard not only for Fervo but the entire geothermal ecosystem to actually capitalize the business.” However, he believes this perception is shifting, with people realizing “we’re going to need all kinds of new technologies to close the gap of how much power we need.”
Fervo’s technology involves drilling pairs of wells thousands of feet deep into hot, dry granite. Controlled explosives and high-pressure fluids are then used to create a network of cracks between these wells. Water is subsequently injected into one well, circulates through the heated rock fissures, reaches temperatures exceeding 300 degrees Fahrenheit, and returns to the surface through the second well as steam, which then drives turbines to generate electricity.
Founded in 2017, Fervo anticipates its Utah-based Cape Station power plant will begin supplying electricity to the grid this year, eventually reaching a capacity of at least 500 megawatts. This power is slated for sale to clients including Google and Southern California Edison. The theoretical potential for enhanced geothermal is vast; while the U.S. currently possesses approximately 3,800 megawatts of conventional geothermal capacity, primarily in the West, Fervo has secured leases for lands offering over 40,000 megawatts of potential capacity.
Despite its promise, enhanced geothermal power faces significant hurdles, notably the high costs associated with drilling and plant construction. Fervo’s IPO filing revealed Cape Station’s projected cost at approximately $7,000 per kilowatt of electricity produced, making it more affordable than new nuclear plants but still over twice as expensive as natural gas facilities. Industry executives, however, foresee rapid cost reductions as drilling and well optimization techniques improve, mirroring advancements in the oil and gas sector. Analysts predict this could bring geothermal costs in line with natural gas plants in some Western regions within five to ten years.
A primary concern is the potential for geothermal wells to cool off prematurely after water circulation, which would necessitate drilling new wells and significantly increase operating costs. “One of the biggest question marks that the big capital providers are still waiting to see is the decline rate,” Mr. Haustveit commented, emphasizing the need for “real field data.”
Critics also voice concerns that geothermal drilling could heighten seismic activity or lead to groundwater contamination. Jeff Deyette, deputy director for clean energy at the Union of Concerned Scientists, acknowledged that “No energy source is completely devoid of environmental or public health risk,” while also noting that it is “very much a good thing to see a company like Fervo and its piloting of next-generation geothermal technologies be successful.”
Fervo’s IPO filing outlined additional risks, such as lower-than-anticipated energy demand from data centers or customers opting for alternative technologies like nuclear reactors. The company has not yet achieved profitability. Currently, most U.S. geothermal power plants are owned by diversified energy companies. Ormat Technologies, a Reno, Nevada-based firm, stands as the leading developer and operator in the sector, valued by investors at $7.5 billion—just under Fervo’s initial valuation—and also engaged in waste heat and energy storage.
While Fervo leads the pack, other geothermal startups are rapidly advancing their own innovations. Houston’s Sage Geosystems is developing a method to inject water into hydraulically fractured wells, utilizing heat and pressure for both electricity generation and storage. Calgary-based Eavor Energy is constructing a vast underground “radiator” in Germany to supply heat and power to a town. Meanwhile, Controlled Thermal Resources plans an IPO this fall for its geothermal energy plant at California’s Salton Sea, which will also host data centers and extract critical minerals from its brine byproduct.
“There’s a lot of innovation in this space, and very few companies are trying the exact same thing,” observed Ann Garth, a geothermal researcher at the Clean Air Task Force. “We’re still in the early stages, so it’s good to see so many people trying different things.”
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