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6 May 2021

Breakthrough finds its own geothermal project to back in Fervo

Yet another geothermal company in the US, Fervo Energy, has raised a funding round of $28 million in Series B financing. The round was led by Capricorn Investment, and existing investors including Breakthrough Energy Ventures, 3X5 Partners, Congruent Ventures, and Elemental Excelerator and Helmerich & Payne, a drilling systems company which has a technology partnership with Fervo.

In February this year BP and Chevron jointly backed a similar Canadian company Eavor, with $40 million.  Both companies seem to have the same idea – take drilling platforms designed for fracking and drill down around 2 kilometers, and then two horizontal layers of about the same distance, and then complete the drilling with another vertical drop, so that water or a specialized heat transfer solution, can flow entirely due to its temperature gradient (thermosiphoning), and hot solvent can bubble up and have the heat extracted from it for either heat provision or to turn a turbine.

However it looks to us that Fervo is focused on locating a geothermal heat source, rather than rely purely on the difference in temperature as the drill bore goes lower. The focus seems to be on making previously uneconomic drill holes work financially, by applying some specialized hole sealants.

In this instance the famous Bill Gates backed Breakthrough Ventures is part of the funding round, and we would not be surprised if Gates saw the Eavor announcement and went looking for a similar company. Fervo is also partnering with an equipment supplier in Helmerich & Payne. This oil and gas drilling specialist is currently loss-making on the back of a long pandemic, losing $121 million last quarter on revenues of $296 million and in 2020 losing some $494 million on revenues of $1.8 billion. It has access to over $1.3 billion in cash and credit, and is clearly looking for a new revenue stream.

If geothermal turns out to be that revenue stream, it is the type of company that could scale geothermal drilling overnight and guide Fervo to scale and profit in double quick time.

Eavor’s investment was supposed to be enough cash to fully commercialize and build its first project and it wants to slowly ramp its projects to 2030 by which time it says it can provide power to 10 million homes.

The key difference between what both of these companies are doing and past geothermal players is that this type of geothermal can be done on a far wider scale, almost anywhere, drilling and sealing the wellbores, and creating what is almost a pipeline, in a “closed-loop,” that neither leaks fluid outside or lets fluids get in.

The Eavor technology behaves like a big u-shaped pipe, and the idea eventually is to string these next to one another, saving money by using each vertical bore hole twice. Because the geothermal does not rely on an acquifer, it can do no harm to surrounding water supplies.  Much the same can be said of the Fervo technology except it requires a recognized geo-thermal heat source, but not the extreme temperature gradients found in volcanic geothermal sources in Canada and Iceland.

Fervo Energy says it too has developed a suite of proprietary systems for this process to lower the cost of geothermal power generation but relies on existing technologies from the oil and gas industry, such as horizontal drilling and distributed fiber optic sensing, in geothermal reservoirs and it means that it can drill in places that would previously been uneconomic. But here’s the mantra – this is all about renewables that provide, round-the-clock, carbon-free energy 24/7, which many believe is the right way to balance intermittent wind and solar.

Fervo tells us that a recent DOE GeoVision study found that geothermal could provide as much as 16% of US electricity and studies such as the LA100 study, released last month, underscore the importance of geothermal in achieving 100% clean electricity.

“We’ve long been believers in geothermal energy but have waited until we’ve seen the right technology and team to drive innovation in the sector,” said Ion Yadigaroglu of Capricorn Investment Group. “Fervo’s technology capabilities and the partnerships they’ve created with leading research organizations make them the clear leader in the new wave of geothermal.”

Fervo’s technology was developed at Stanford University and a fellowship sponsored by the Lawrence Berkeley National Laboratory. Fervo has since been funded by the US Department of Energy Geothermal Technology Office and works with partners including Schlumberger, Rice University, and the Berkeley Lab.

Fervo has filed US patents on methods and systems to control flow and heat transfer between subsurface wellbores connected hydraulically by fractures. This patent application is currently assigned to Form Energy, the other Breakthrough Ventures company which is working on multi-day energy storage and we are fairly sure that the patents, which are credited to Timothy Latimer and Jack Norbeck who are both founders of Fervo, will be transferred to Fervo at some point.

Reading through those patents they seem very similar to those talked up by Eavor and really talk about how to seal fractures and how to optimize the recovery of geothermal energy, from a 40 Kg/s (kilograms of fluid/second) flow.

One key element that the patent talks about, refers to a “proppant” which is a solid material, typically sand, treated sand or man-made ceramic materials, designed to keep an induced hydraulic fracture open, during or following a fracturing treatment.