Geothermal Energy Could be Huge. But We Need Oil and Gas Companies to Build It

Back in September, Karine Kleinhaus, a director at the Environmental Defense Fund, addressed an auditorium of suit-clad oil industry executives at Halliburton’s Houston headquarters. It was a bit of an awkward scene. “We’re looking to tackle climate change, which means stopping greenhouse gas emissions, which means transitioning away from fossil fuels,” Kleinhaus said onstage. “We can sugarcoat it or not, but that’s where I’m coming from.” That may have been Kleinhaus’s starting point, but the primary topic of discussion was one where the interests of the fossil fuel companies and environmental groups may align: how to use oil companies’ money, infrastructure, and expertise to rapidly scale up a new generation of geothermal power.

The basic methods of generating clean electricity from heat deep beneath the earth’s surface have been around for decades—the first-ever geothermal plant was built in Italy in 1904. Geothermal power is reliable, uses only a small land footprint, and produces a constant stream of power, akin to a base load natural gas or nuclear power plant. It’s often expensive, though, and has tended only to prove cost-effective in certain regions with hot rocks close to the earth’s surface, like at the edge of the continental plate in California. Those limitations have for the most part prevented geothermal from being more than a bit player in the decarbonization discussion. Currently, geothermal accounts for just 1.6% of the U.S.’s energy mix.

In the past few years, however, there’s been growing interest both in the world of oil and gas and among environmentalists about the potential of so-called “next generation” geothermal technologies. These new methods could make use of drilling methods pioneered during the 2010s shale oil boom to expand geothermal power far beyond its traditional geographic confines. Potentially, geothermal wells could be drilled far deeper, far more cheaply to access hot rocks below the surface. And instead of being limited to vertical wells, geothermal drillers could turn their drill bits sideways deep underground to access more hot rocks, and even use fracking techniques to get at more heat by pumping water, sand, and chemicals down into the wells to crack open hot, porous geologic formations.

Unlocking these new sources of geothermal energy could be critically important. Wind and solar energy are taking off around the world, thanks to dramatically falling prices. But those energy sources only generate power when the sun is shining or the wind is blowing. Without better, cheaper batteries or other technologies to store huge amounts of power for weeks or months, there’s still a need for constant baseload power. This could come either from polluting fossil fuel plants, expensive and difficult to build nuclear reactors, or, possibly, a new generation of widespread, cheap geothermal.

If such geothermal systems could be scaled up quickly, the benefits could be enormous. According to the Department of Energy, there could be enough accessible, affordable geothermal energy in the U.S. to power 65 million homes by 2050. The Biden Administration has taken notice, announcing an initiative last year seeking to bring down the cost of building next generation geothermal energy. This September, the department awarded $165 million to a coalition of groups aiming to apply oil and gas industry expertise to geothermal. (Still, geothermal energy has not received nearly the same level of government support as other novel green technologies like hydrogen and carbon capture and storage, which were generously funded in the Inflation Reduction Act passed last year.)

Read more: How a Former Oil Guy Is Using Fracking Tech to Boost Geothermal Energy

Some environmentalists don’t think there’s much room for oil companies in the green transition. But Kleinhaus and others say that oil companies and industry veterans are likely the best-positioned players to rapidly scale up new, more efficient forms of geothermal energy. A constellation of North American startups, many staffed and founded largely by ex-oil industry folks, has jumped on the opportunity. At Fervo Energy, for instance, 60% of the startup’s 70-person staff came from the oil and gas industry. This summer, the company made news with the first successful test of a commercial-scale next-gen geothermal plant in northern Nevada, an area known for its geothermal resources—“We’re able to tap into that growing part of that workforce that is thinking deeply about climate change,” the company’s CEO Tim Lattimer, told TIME in July. “Recruiting from the oil and gas industry is a major part of our strategy.”

Project Innerspace, a nonprofit, has been trying to get oil companies and people in the fossil fuel industry to go full-bore into geothermal in recent years. Jamie Beard, the group’s founder and director, says she began trying to get engineers and executives at oil and gas companies to take a closer look at geothermal back in 2020. She started an annual conference devoted to the subject (Kleinhaus spoke at its 2023 session). In three years, it grew to 6,000 attendees. “That is 100% because oil and gas people started talking to [other] oil and gas people about how to get geothermal to work,” Beard says.

It’s not just former oil workers starting to enliven this burgeoning field. There’s also oil money funding some of the new startups. Chevron invested $25 million in Swedish geothermal developer Baseload power in 2021, for instance. Fervo’s funding sources include oil players Liberty Energy, Helmerich & Payne, and Devon Energy. Drilling contractor Nabors has invested $10 million in geothermal startup Sage, while oil and gas companies OMV and BP have invested millions of dollars in Canadian geothermal startup Eavor Technologies. Those numbers, though, are mostly small potatoes compared to fossil fuel companies’ continued investments in oil and gas. Chevron, for instance, says it’s planning to spend $4 billion on new oil extraction in the Texas permian basin alone next year.

Geothermal startups are a good way to bring the technology to market. But some observers doubt if they will be able to grow fast enough to make a dent in the world’s decarbonization problem in time. Debbie Gorden, a senior principal at energy transition nonprofit RMI, says that for all the excitement around startups, it’s the big oil companies that have the capital, expertise, and equipment to scale new geothermal projects quickly. “I don’t know who else to turn to, honestly,” she says.

Among some oil companies, the interest is there. “The scale is big,” says Irlan Amir, director of the geothermal business at SLB, an oilfield service company (formerly known as Schlumberger). “This is what everyone is trying to go after.’”

Some companies are working on the tech in-house, though finding out exactly how big their financial commitments are is challenging. Chevron, for instance, which is working on projects like an advanced geothermal pilot in Japan, would not confirm how much it was spending on the technology overall. SLB has touted its work in geothermal energy, but Amir declined to provide figures on total investments, though he did say that SLB has increased geothermal funding about 50% each year in recent years.

Read more: Silicon Valley Is Betting on Carbon Capture. Meet the Company Leading The Race

There are a couple forces pushing oil companies toward developing geothermal energy. For one thing, there are growing fears that the most productive fracked wells have been tapped out. It will take more money to drill new wells, with less payoff in valuable fossil fuels. Executives also say there is a genuine desire for “low carbon” growth. A lot of oil companies plan to keep extracting and selling oil long past the point where international scientists say humanity needs to cease emitting greenhouse gasses. But at the same time, many are also interested in at least cutting emissions from their drilling operations. Some say that developing geothermal energy projects is part of that strategy, since that zero-carbon energy would, in theory, replace fossil fuel plants and offset direct emissions from their drilling (though it wouldn’t offset emissions from the oil and gas they’re selling).

But the fact that the future of geothermal energy rests largely in oil companies’ hands also comes with some awkward realities. For one thing, building power plants and selling electricity is a business sector far outside of the traditional oil company wheelhouse, where oil and gas are commodities that usually leave the company’s hands after they are extracted or refined. More crucially, perhaps, some industry insiders say they are not actually in a position to invest a lot of money in new, untested technologies that will take many more years of R&D to prove profitable—if they ever do at all. Simply putting money into taking more oil and gas out of the ground is a safer bet in the eyes of the oil sector’s financial backers.

“Any money that you have to invest in geothermal is competing with other projects,” says Jim Grant, head of new energy ventures at Chesapeake Energy, an oil and gas company.

Asking a question at the Houston event, a Chevron representative laid out the problem with geothermal more bluntly. “We care about [the] environment just as well as anybody else… But at the end of the day, oil and gas companies are going to invest in projects that can give [them] returns that are competitive with oil and gas,” he said. Then he challenged Kleinhaus to make a business case for geothermal technology. “Show me the competitiveness. How will you do that?”

Therein lies the rub. Oil companies are the only ones with the skills and equipment to scale up geothermal. But they’re unlikely to bring it to life unless they’re going to get profits akin to what they’re used to seeing from developing new oil and gas, which seems unlikely.

“If it was clearly profitable, someone else would already be doing this,” Grant says. “It would already be happening.”

Amir, of SLB, says things aren’t so bleak. He says good financial returns from geothermal aren’t there yet, but they’re close. He compares the current state of the technology to expensive horizontal drilling and fracking operations in the early 2000s. Those prices quickly fell, launching the U.S. shale oil boom. “I believe we will get there,” Amir says. “It’s a matter of when; it’s not a matter of if. And I think with the learning from oil and gas, we can get there faster.”

Others, however, say the same level of money that supported fracking simply isn’t there for geothermal. Oil companies need co-investment from green funders, particularly tech companies with gobs of cash for renewables projects, according to Grant. “We’re willing to take some risk; we’re not going to take all the risk,” he says.

A few investors have been open to that. Google, for instance, played a big part financially in getting Fervo’s project off the ground. But that’s also where another problem comes into play: the matter of navigating oil companies’ legacy as the archvillain of the environmental movement.

Co-investing in a project with an oil company doesn’t look good to many observers in the climate world, even if the project itself is green: a reality that has made co-investments with new smaller geothermal startups a potentially more acceptable proposition for big green funders.

Even among oil companies with money to spare, oil executives say they’re struggling to get the public kudos they feel is due for helping bring forward crucial new energy tech.

“People don’t like us,” said Matthew Foder, a senior vice president at oilfield services company Weatherford, at the talk in Houston. “We have the technology, the workforce, and the investment capability to deploy [geothermal energy] at scale. How do we convey that message to the public in a way that isn’t viewed as greenwashing?”