Is Geothermal Really Going to be a Thing?

2021 July 5 Twitter Substack See all posts

Why geothermal isn't ubiquitous and how it might get that way.

Why We Don't Run Everything on Geothermal

Geothermal seems so simple, endless heat out of the ground. It is currently a niche electricity source, generating 0.4% of electricity in the United States. Several factors have kept geothermal from scaling.

Some definitions:

Basement rock is the thick foundation of metamorphic and igneous rock that forms the crust of continents, often made of granite.

Sedimentary rocks form by the accumulation or deposition of mineral or organic particles at the Earth's surface. They include sandstones, shales, and limestones.

Slow Heat Transfer

If you have a glass of cold, ice-free water outside on a hot day, it doesn't warm up instantly. It takes time for the heat to transfer from the air to your water.

Underground rocks are the same way. Just because a rock is hot doesn't mean it instantly gives you unlimited heat at that temperature. Heat flows from hot to cold. The higher the difference in temperatures, the faster the heat can flow. Pumping a cold fluid down into the rock causes a chain reaction where the fluid heats up, the rock cools, and heat from surrounding rocks start reheating the rock the water has cooled.

The concept is relatively simple, but the actual math gets very complicated.

The thermal conductivity of rock is relatively low. The thermal conductivity of copper is 100 times higher. It takes a large volume of rock to extract the necessary amount of heat. Heat can only flow so fast. A lower exit temperature for the water, caused by increasing the pump rate, can gain more heat. There are tradeoffs.

Heat Gradients and Heat Engine Efficiency

The average geothermal plant converts ~12% of its heat into electricity, and few perform better than 20%. A modern combined-cycle natural gas power plant turns 65% of its heat into electricity. Lower efficiency plants are more expensive to set up and run because they need larger equipment to get the same amount of power. They use more heat for the same output.

The laws of thermodynamics set how efficient a heat engine can be. A heat engine turns heat into work. In this case, work is creating electricity by spinning a generator. The efficiency achieved is determined by the difference between the temperature of the heat source and the ambient temperature. The bigger the differential, the higher efficiency that physics allows. Natural gas burning at thousands of degrees can be much more efficient than geothermal water at several hundred degrees.

So not only do we need to access a lot of rock area to get our heat, but we need way more heat and equipment than an equivalent natural gas, coal, or nuclear plant. The way to get higher temperatures in geothermal is to go deeper. A rule of thumb is that temperature increases by 25C every kilometer of depth.

Conventional Drilling Cost Increases Exponentially with Depth

Drilling costs are not linear with the depth. They are exponential. Drilling deep is expensive, time-consuming, and technically challenging for conventional drilling techniques.

Conventional drilling uses drilling fluid that has a higher hydrostatic pressure than the surrounding rock to maintain the stability of the wellbore. The higher pressure prevents fluid from the rock from entering the wellbore. Deep drilling causes a problem where the hydrostatic pressure of the drilling fluid higher up the wellbore is enough to fracture the surrounding rock. Fracturing the wellbore causes a loss of drilling fluid and can cause the drill string to get stuck. As a result, deep wells need intermediate steel pipes, known as casing, set every so often to protect already drilled wellbore. Expensive! And each time you add a casing string, your drill string has to get smaller to fit inside it. If the well requires many casing strings, you have to start with a giant hole. Even more expensive.

High temperatures also require more expensive drilling equipment designed to withstand hotter temperatures.

Drilling deep gives us higher temperatures. Our electricity generating plant can be more efficient. But drilling deep is expensive.

Possible Technologies to Solve the Conundrums

Each geothermal technology deployed has to manage these three problems.

Open Loop Systems

Open-loop systems increase the volume of rock impacted by taking advantage of a reservoir outside the wellbore.

Conventional Geothermal

Conventional geothermal drills wells into hot, wet rock. Geologists identify a hot spot, usually near tectonic activity. Then they look for rock that has big holes filled with water, called a geothermal reservoir. Think of it as an underground cave full of water. A Company drills into the reservoir and pumps the hot water out. The company drills other wells to inject cool water back into the reservoir. The larger the reservoir, the larger the volume of rock it contacts for heat transfer to reheat the injected water.

  1. A large fluid reservoir solves rock volume.
  2. The rock is hot from tectonic activity, meaning deep drilling is not required.

Virtually all existing geothermal electricity comes from this type of plant. There are a limited number of locations where these conditions exist, limiting the scale of conventional geothermal.

Enhanced Geothermal

Enhanced geothermal (EGS) is an idea to tap geothermal in hot, dry rock. It is the next step from conventional geothermal.

EGS uses hydraulic fracturing to create a reservoir and expand the viable locations for geothermal. A company drills three wells near each other. High-pressure fluid is pumped in one well to fracture the rock, connecting the wells. The company pumps water down one wellbore. It is heated as it flows through the fractured reservoir. It flows out of the other two wellbores.

Tests of this technology have rarely been successful. Many projects fail to connect the wells. Projects that do manage to get connectivity often have another problem. It is hard to control where the fluid flows when pumped into the reservoir. The fluid flows the path of least resistance. Some fractures tend to be bigger than others. There might be 100 fractures, but most water is going through 10 of them, lowering productivity. Fluid favoring a few fractures over others is known as short-circuiting. EGS requires a level of control in fracturing that oil and gas development does not need.

Cost and efficiency are issues. The wells typically need horizontal laterals to get enough rock area and achieve connectivity, adding cost and limiting the depth. Tools that steer horizontal drilling are on the drill string near the drill bit. They have electronics with temperature limits. EGS ends up with expensive wells limited on max temperature, causing lower efficiency on conversion to electricity.

EGS must be away from faults because injecting near them can cause earthquakes. Seismic activity has shut down projects near faults.

I may be too pessimistic about EGS, but I think it has limited application. Max temperature limitations and difficulty in preventing short-circuiting make the technology technically risky while limiting upside. Attempts to correct this limit scope of the technology. It will be interesting to see if any startup can clear the technical obstacles.

Closed Loops Systems

Closed-loop systems circulate a fluid that never leaves the wellbore, improving on EGS's flaws. Closed-loop requires solutions to access a larger volume of rock for heat transfer.

Classic Case

In closed-loop systems, the heat transfer from the rock immediately surrounding the wellbore is a barrier.

One idea is to drill more wellbores! A Canadian company named Eavor has adapted technical knowledge from steam-assisted gravity drainage (SAGD) oil sands projects for geothermal. Eavor drills 10-20 directional wellbores to circulate fluid. The technology is de-risked.


Each additional wellbore increases the volume of rock and surface area available for heat transfer. The closed-loop system eliminates problems with connectivity, short-circuiting, and earthquakes. Being able to use clean circulating fluid is an advantage for equipment lifetime and maintenance. Closed-loop systems can use fluids with better properties than water. The output of the system is very predictable.

On the downside, the cost goes up with more drilling. Requiring horizontal steering tools limits the max temperature. Eavor is limited to niche areas with shallow hot, dry rock and high (or subsidized) electricity prices. Eavor's long-term cost goal of $0.05/kWh is above current wholesale prices in many US markets. Its latest project is earning a subsidized price of over $0.20/kWh.

Hybrid Case

What if a closed-loop system could access large volumes of rock without drilling all those wellbores? That is the hope of hybrid closed-loop systems.

If the fluid in the reservoir can move freely around the well, it can contribute to convective heat transfer. Modeling suggests heat transfer can double with wellbore stimulation compared to a pure closed-loop system.

Sage Geosystems is one company pursuing this path. Sage saves money by being able to use a vertical well. Its technology is currently limited to geo-pressured sedimentary basins. These basins have higher temperatures and have highly permeable sandstone reservoirs that assist in fluid convection. Most of the suitable US basins are along the Texas coast and in S. Louisiana. Sage's long-term cost goal is $0.04/kWh. It is not pursuing new drilling technology.

Hybrid closed-loop systems need cheaper drilling costs and deeper wells to have wider use. Projects outside of sedimentary basins need to manage seismic risks if they include a fracking component.

What to Do

Is This Industry Trying to Punch Holes in the Ground or Virtue Signal?

Nuclear and hydropower provide roughly 30% of the United State's electricity generation. Under most models, this is enough to convert the rest of the grid to wind, solar, and batteries without too many issues. You can even do cheap, emissions-free baseload power with natural gas nowadays. So we don't need more emission-free, baseload power unless it is dirt cheap.

At a recent geothermal conference, famed energy researcher Amory Lovins warned the crowd that they needed to be skating to where the puck is going, which he thought was under $0.02/kWh because wind and solar are continuing to decline in cost. As you've seen, no one in geothermal is credibly trying to reach that number on a continental scale. There is lots of talk about political benefits and other virtue-signaling topics.

If geothermal is a fashionable way to replace big hydro and big nuclear in markets like California, it doesn't matter what it costs or how it works. I apologize for wasting your time with this. Drill some Eavor loops at $0.20/kWh and get on with your life. Pat yourself on the back when the cost comes down to $0.10/kWh after decades of drilling. California already shut down 2.2 GW of depreciated nuclear power because they didn't want to fix some heat exchangers. They are paying $4 billion for the pleasure. They plan to do another 2.2 GW with Diablo Canyon closing. That 4.4 GW is equivalent to 120% of the current US geothermal capacity.

If you are curious about how geothermal might skate to where the puck is going, let's think about how to punch some holes.

Interview with an Ideal Geothermal Startup Founder

A reporter comes to interview our founder about his geothermal startup:

Reporter: How do you feel about potentially putting the oilfield back to work?

Founder: Have you been through an oil and gas boom and bust cycle? Most people don't save money. They have debt. When these guys lose their jobs in a bust, they come close to losing everything. If you call them up to come back to work in the next boom, they won't come back. They'd rather work at Wal-Mart or a hot dog stand than go through that again. New workers are trained every boom.

Reporter: What are your ESG practices?

Founder: We aren't an EGS startup. You mean EGS, enhanced geothermal, right? There is too much technical risk with EGS. The locations are limited. I don't want some rock licker telling me where I need to drill.

Reporter: No, Environmental-Social-Governance.

Founder: Oh, right. That is what the big oil companies talk about to distract people when they are drilling bad wells, right? I'm trying to drill good wells. I won't need all that. If I start drilling so many bad wells that I need that stuff, I know it is time to retire or apply at the hot dog stand.

Reporter: Then why are you doing this?

Founder: I like making hole. Nothing like a rig when it's turning to the right.

Reporter: Uh, ok. So you don't care about clean, 24/7 baseload power that isn't nuclear, hydro, or natural gas?

Founder: All I know is geothermal means lots of drilling, and I can get paid to do it.

Reporter: It seems like the recent revolution in oil and gas technology has opened up geothermal for investment. What do you think about that?

Founder: I think people telling you that are selling you a bill of goods. All the advances are optimized for shallow, low-temperature drilling. Geothermal means hot. We can use some of the PDC and mud motor technology at first, but once the heat comes up it is all oddball stuff. Geothermal has to figure out its own path to lower the cost of turbine motors and generate enough revenue to justify the design of bits for abrasive and hard rock. No one had a reason to drill the granite before, so there are no specific tools to do it.

Reporter: Do you plan to use Hydroshearing as an alternative to fracking?

Founder: Hydroshearing, what a bunch of gobbly gook. Trying to rename fracking "hydroshearing" is like if you confronted your wife for cheating and she said, "Don't worry honey, it was just the tip!" We're going to break the rock to get permeability. Call it whatever you like, I guess.

Reporter: Right, thank you for your time.

Founder: You don't want to talk more about drilling? Or debate K&M?

Reporter: I've got enough here, thanks.

Founder: Suit yourself.

This fellow may sound a little stubborn and rough around the edges, but he is the right man for the job. He doesn't need to woo investors because he linked up with a money man in New York for that. When the investors come and visit for their dog and pony show, he can give an authentic drilling rig experience with a cast of colorful characters that will be worth its weight in gold at cocktail parties. That might be all the investors get out of this high-risk investment.

The Technology Path

Our man is right for the job because we need someone that loves being on the floor of a drilling rig.

If there is a desire for competitive geothermal with few geographical boundaries, there is a dominant path to getting there.

Going deeper makes the surface equipment more efficient and profitable, biasing towards deeper drilling. The practical efficiency increases roughly 1.5% every kilometer deeper.

Horizontal footage does not increase heat value. Figuring out how to make the cost of vertical footage more linear would make horizontal footage a waste. Any horizontal footage could have been vertical footage that increases the value of the heat for the same or lower cost.

If you can drill the hole for cheap, whether you use closed-loop, hybrid, or try something else becomes less relevant. The simplest and lowest risk is to start with a closed-loop and experiment with minimal fracture treatments to aid with convection heating while avoiding faults.

Investors need to spend up to a few hundred million dollars to punch holes in the ground to test and improve drilling and completion techniques in deep granite. The first few wells will have a low probability of success, but improvement is likely in the first 10-20 wells.

Drilling Technologies

All of these potential vertical drilling strategies rely on avoiding deep sedimentary basins for drilling. Sedimentary rock is complex and changes rapidly. Conventional drilling is almost exclusively in sedimentary basins, meaning the existing techniques may be overkill.

The granite basement is relatively shallow in most of the world. It is much more homogenous than the sedimentary rock. This homogeneity offers the opportunity for drilling systems that do not require increasing sets of casing strings. Eliminating the need for extra casing strings makes deep vertical drilling footage cheaper than horizontal footage, even if drilling is slow.

You cannot eliminate the tyranny of local geology, but learning how to drill the granite is the best way to limit it.

Old School Techniques Dominate

Drilling deep vertical wells is something the oil and gas industry practiced regularly in the 1980s and 1990s. Drilling rigs are on locations for long periods. Drilling is relatively slow. Reducing costs means:

  1. Have the bare minimum of services on site.

    Having the bare minimum amount of equipment and rentals is necessary. An easy way to judge the mentality of a drill site is how many rental trailers are on location. A tight operation will have barely any. A company like Shell might have so many trailers that they have a gym trailer for crews to work out.

  2. Trip fast.

    Tripping is taking the drill string in or out of the hole. Drilling in the granite will mean plenty of drill bit changes, which require tripping. Tripping fast is like a dance. It means getting a four-man crew to coordinate perfectly over and over hours at a time.

  3. Make adjustments on the fly.

    Drilling rates are likely to be as low as 10'-20'/hr. Making adjustments or modifications to the rig or bottom hole assembly to squeeze a few extra feet an hour out would make a big difference. There has been limited drilling in granite. The opportunity to improve fast is immense for a leadership team on the rig floor.

  4. Brush off oddball technologies.

    Drilling deep in hot, hard rock means things like turbine motors and alternative bit designs need to get dusted off. Using a bit and motor designed to fly in a 180F shale will not replicate that performance in 400F granite.

Drilling with Water

It may be possible to drill a single hole through the basement granite without additional casing strings, using conventional methods. The drilling fluid would be water, which has a similar pressure gradient to the Earth. Depending on how the Earth's gradient changes in the drilling location, different risks present themselves. Low permeability rock minimizes these risks. Low permeability basement rock should be the norm outside of geologically active areas.

The Mississippian Limestone in Northern Oklahoma is also a low porosity and permeability fractured rock. Operators regularly drilled this formation with only water as a drilling fluid and zero fluid returns (hydrostatic pressure of water exceeded formation pressure). Fluid and cuttings go into fractures or faults. Hitting permeable rock in these conditions could lead the drill string to become differentially stuck to the wellbore wall, like a suction cup.

Hitting a permeable section where the Earth's pressure gradient is higher could result in having to handle additional fluid and pressure at the surface.

A challenging part is getting a motor that can withstand the heat. Modern mud motors can't go over 300F or 150C for long. Motors are required because PDC bits need consistent rotation to prevent damage in hard rock, and other options need high RPMs to drill. There are other options like turbine motors. Matching bits, motors, and the rig equipment are critical to controlling cost and getting a decent penetration rate.

The economics could work drilling as slow as 10'/hour, even skating to the puck. Assumptions are at the bottom. For geothermal to be more than a niche, drilling will need to improve on the 10'/hr by increasing the penetration rate and durability of bits and motors.

Drilling with water is not "by the book." This method could reduce costs and complexity if it works. Service companies would design drill bits and motors especially for this application if the market existed.

Fluid Hammer

Using air as the drilling fluid is a common choice in hard and abrasive rocks, like granite. Air drilling happens under-balanced and tends to be faster than conventional drilling. Compressors provide pressurized air. Air pressure runs a reciprocating air hammer.

Air drilling has the advantages of being a mature technology and being fast. It has the disadvantage of increasing drilling difficulty at great depths because the pressure required to run the drill increases. If fluid flows into the wellbore, it can raise the pressure to the point where drilling has to stop. Air drilling requires compressors that raise costs, meaning it must be much faster to justify using it.

There are new hybrid versions of fluid hammer drilling that attempt to overcome these problems for drilling deep wellbores in granite. One Australian company has already drilled relatively deep granite wells using its technology. The current cost per foot is about 5x what would make the economics solid.

Plasma/Laser Drilling

Plasma or laser drilling is the holy grail of drilling technology. While the more conventional methods are vulnerable to pockets of permeability, plasma drilling melts the rock on the wall of the wellbore, causing it to harden and form a protective "melt liner." The melt liner is like its own casing, reducing the risk of drilling problems and increasing the probability of success.

A startup named Quaise is testing this technology in the lab. It is an exciting milestone but a long way from a reliable tool. Quaise designed the tool to work in granite.

Surprisingly, if drilling with air or water is feasible, they may limit the need for this magic technology. Simple technologies tend to win in drilling.

Summing it Up

Geothermal power needs to be dirt cheap to provide more than niche value.

Wells need to be deep to provide cheap power.

Drilling needs to be cheap.

Drilling inexpensive deep wells are the key. Few have tried to do this in deep granite in areas that are not geologically active. Certainly not someone like our ideal geothermal founder. There is a lot of uncertainty, but also the possibility of a breakthrough and rapid improvement. Contrary to the platitudes, the technology and experience to do this are nascent. That is why there is an opportunity.

Most current efforts need a lot to go right just to reach mediocrity.

It is very much an open question if geothermal can scale. Gas, solar PV, wind, and batteries are cheap and getting cheaper, providing a limited window for geothermal to scale without intervention.

  1. Geothermal Efficiency

  2. Water drilling assumptions: 10,000' of snowbank sedimentary rock costs $1 MM to drill and case. 22,000' of granite, drilled at 10'/hr on bottom p-rate, 75% on bottom rate, and $40,000 a day for the rig, water, consultant, rentals, and bits/motors. Granite is not cased/cemented. Tubing is run in the open hole for fluid circulation. 5 MWe of power delivered at $0.02/kWh. Yes, this is probably optimistic.