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Could geothermal be the energy of the future? Texas oil companies think maybe so

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WASHINGTON — Oil companies have been drilling holes in the ground for close to a century, burrowing through miles of rock to access an energy source deep underground.
So, with a new wave of geothermal startups feet beneath the earth’s surface, where temperatures run over 300 degrees Fahrenheit, oil companies would seem a natural partner. And attention on them has only ramped up after Energy Secretary Jennifer Granholm called on oil companies last month to use “all of the skills and infrastructure of traditional oil and gas drilling” to bring what has been a niche industry into the mainstream.
And with first wave of next generation geothermal projects scheduled to come online over the next two years, oil executives are watching closely to see if it’s worth risking the hundreds of billions of dollars the Department of Energy estimates is needed to get geothermal up to scale. 
“I would say they’re dipping their toe into geothermal,” said Cindy Taff, a longtime oil executive at Shell who is now CEO of Houston-based Sage Geosystems, a geothermal startup that uses hydraulic fracturing technology to drill geothermal wells in South Texas. “We need to crack the code on making it commercially viable. Until then they’re watching the technology evolve, and then they’ll decide which horse to put their money on.”
Geothermal has long been something of a golden ring for the energy sector, offering carbon-free electricity without the radioactive waste problem of nuclear plants or intermittency of wind and solar power. But conventional geothermal wells, which tap into extremely hot underground aquifers, were limited to a small number of locations around the globe such as Indonesia and California.
That all began to change a few years ago when companies began to experiment with using hydraulic fracturing and other technologies, injecting water underground to be heated up and brought back to the surface, allowing geothermal power plants in places that never would have made sense in the past, including Louisiana, Texas and New Mexico. After a series of successful pilot projects and available by Congress through the Inflation Reduction Act, a small group of startups like Sage are launching their first commercial-scale projects.
Fervo Energy, another Houston-based startup, is drilling wells for a 400-megawatt geothermal power plant in the Utah desert, with plans to have the first phase online in 2026. In Germany, Calgary, Alberta-based loop geothermal system more than 14,000 feet beneath the surface of the Earth to provide heating for the region as well as generate 84 megawatts of thermal power.
“We are watching the first attempts at commercial scale this year, and if they work well there’s a chance it’ll all take off,” said Andrew Latham, senior vice president at research firm Wood Mackenzie. “It could be fairly transformational.”
The question for oil companies is how cheaply these geothermal projects can generate heat and electricity. Analysts now put the cost of advanced geothermal at $200 per megawatt hour but forecast those costs will be down to around $70 per megawatt hour by 2050. That’s more expensive than wind and solar energy but likely cheaper than nuclear and clean hydrogen, Latham said.
Chevron and BP are starting to invest in advanced geothermal, with Chevron CEO Mike Wirth telling a crowd at CERAWeek earlier this year the company was studying the technology in hopes of finding ways to “prove them up and scale them up.”  “You’ve got to prove out, does it work? Is it technically feasible? Is it economically feasible? Are there unintended consequences that you need to be thoughtful about,” he said.
And hype is building among oil and gas executives. In February, Fervo announced it raised $244 million from investors including Oklahoma City-based oil and gas company Devon Energy and Houston energy trader and billionaire John Arnold. That same month Sage announced $17 million in funding led by another Oklahoma oil company with experience in hydraulic fracturing, Chesapeake Energy. And service companies Baker Hughes and SLB are developing specialized equipment for geothermal wells that would withstand the high temperatures and pressures deep under the Earth’s surface.
Not everyone is convinced. In a note to clients earlier this month, the consulting firm Clearview Energy Partners cautioned the new sector was likely to “struggle” to meet the Department of Energy’s target of 90 gigawatts of geothermal capacity by 2050 — 20 times what currently exists — because oil companies “may be hesitant to reallocate capital towards first-of-a-kind, next-generation geothermal, irrespective of skillset and staffing transferability.”
Also driving concerns are long permitting windows on federal lands in the Western United States, which has a lot of the most attractive geothermal resources, as well as a U.S. power market that currently offers little additional incentive for clean energy technologies that provide electricity 24 hours a day, forcing them to compete head on against lower cost but intermittent wind and solar.
Still, if the economic, legal and market hurdles can be overcome, there’s a growing legion of advocates who believe geothermal could be the next big energy revolution.  In a recent report, the Department of Energy speculated the geothermal sector could bring costs even lower than analysts are predicting, down to $45 a megawatt hour by 2035, allowing them to potentially reach more than 300 gigawatts of capacity by 2050 — about 25% of the entire U.S. power grid at present.
Driving that optimism are sharp declines in the cost of drilling geothermal wells, with Fervo reporting earlier this year that it had already cut the cost of its horizontally-drilled geothermal wells in half. If cost continues to decline at that rate, then it’s only a matter of time before oil and gas companies are drilling geothermal wells all over the world, said Andrei Utkin, an associate director at S&P Global Commodity Insights.
“It feels like this is really the moment,” he said. “We know the technology works. We know it’s not hard to scale it elsewhere. We just need to see how deep they can get costs down when you’re operating at a larger scale.”