One of geothermal energy’s key advantages is that it’s always on.
But making money selling power increasingly requires being able to react to shifts in electric prices by adjusting production up and down.
The fact this is a concern now is an indication of the ambition of a new generation of companies that have shown it is possible to use horizontal drilling and fracturing to build subsurface heat exchangers to harvest large amounts of geothermal energy.
The geologic potential is huge—there are a lot of places with hot rock at a drillable depth.
But monetizing that potential will require grabbing a sizeable share of the market in big states such as California and Texas where the price of electricity can sink toward zero when sunny conditions allow maximum solar power production, and then rebound as the sun sets.
This is a pressing concern for Houston-based Fervo Energy because it is one of the first firms in a small pack of innovators to reach the point where it is building a large scale power plant using this emerging technology.
Unlike wind and solar, it can deliver power on demand, similar to coal, gas, and nuclear-powered plants that supply baseload power to the electric market.
Fervo’s founders play up its ability to deliver power on demand, but they resist the label baseload power provider because, as Jack Norbeck, chief technology officer and cofounder of Fervo, said, “In the future, baseload power will be a thing of the past.”
Baseload power plants are not yet an endangered species. There are still large, mostly old fossil-fueled plants providing baseload power that are still around because they were paid for long ago. However, their numbers are declining as they wear out and are hit with demands for costly emission reductions.
The initial sales by Fervo’s Cape Station project in Utah will provide baseload power to southern California power suppliers, complying with a unique California rule that requires them to source low-carbon power supplies that are available 24/7.
But for new geothermal companies to sell enough power to become significant players in US power markets, they will need to provide what the electricity business describes as “more flexible, dispatchable power.”
Big baseload plants ruled the power universe back when regulators set rates high enough to maintain a sizable surplus of generating capacity—ensuring the lights stayed on.
Now, in markets such as Texas and California, power pricing rises and falls based on supply and demand, with selling at all times sometimes resulting in very low payments during peak production periods for solar and wind.
This is particularly true during seasons where days tend to be sunny and windy with moderate temperatures.
“If you are consuming electricity, particularly in the spring and fall, it is an extremely clean grid you are pulling from,” said Christian Gradl, vice president of operations for Fervo during a panel at this year’s Offshore Technology Conference.
Everybody’s Doing It
So Fervo, and everyone else in the electric power business, needs to adapt.
As the influence of renewables grows, new gas-fired generating capacity is projected to rise by only 2.5 GW this year—the lowest rate in 25 years, according to a recent report from the US Energy Information Administration (EIA).
Nearly 80% of those new gas plants will be single-cycle designs which cost less and can react faster to price moves than combined cycle units, which are more energy efficient and cleaner burning.
At the top of the growth chart is solar. Developers are expected to add more than 36 GW of new “utility-scale electric capacity” in 2024, according to the EIA report.
