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Cleantech magazine, a Cleantech Investor publication

Geothermal Power

First published in Cleantech magazine, September 2008. Copyright Cleantech Investor Ltd., 2008

A suite of investments from Google.org in a new generation of geothermal technology may be the start of a fresh wave of investment.

by Tim Chapman

Tim Chapman is a business and technology journalist, who tracks cleantech VC at www.cleanventures.co.uk

Geothermal power may be the sleeping giant of cleantech venture capital. It's regularly tipped as one of the next big things for venture investment, but, because the basic technology is already well established, early-stage and growth funding deals have been rare. A recent suite of investments from Google.org in a new generation of geothermal technology may be the start of a fresh wave of investment.

The basic idea of using hot water or steam from deep underground to power electricity-generating turbines has been around for over a century. Globally, there's around 10GW of utility-scale geothermal generation, providing round-the-clock clean electricity at a cost comparable to coal.

However, the spread of geothermal has been limited by geology. The plants need to be in places where there's an underground heat source which can be tapped cheaply and reliably.

Around a third of current global capacity is in the western states of the US, although projects currently in the pipeline could double national capacity. Iceland is also well served by its volcanic geology - as well as a growing geothermal electricity sector, heating for 90% of homes is derived directly from the heat of the Earth's crust.

In late August, the US, Iceland and Australia launched the International Partnership for Geothermal Technology (IPGT) to promote a new kind of geothermal technology. Engineered or enhanced geothermal systems (EGS) can vastly expand the scope of geothermal generation. Rather than relying on natural hot springs or steam vents, EGS creates its own reservoirs of hot subterranean water.

EGS: potential to generate geothermal power almost anywhere

An EGS project typically involves drilling several holes down through hard rock to a depth of several miles. Here, where the temperature is around 220°C, the drillhead can create a network of fractures through the rock. Water is pumped down one shaft, circulated through these fractures to absorb heat energy from the rock, and brought back up another shaft. When the hot water comes back to the surface, its heat is extracted and used to drive a turbine. The water is then pumped back down in a continuous cycle. Potentially, EGS offers the opportunity to generate geothermal power just about anywhere.

A brace of investments in EGS by Google.org

Earlier in August, Google.org, the philanthropic investment arm of the search engine giant, announced a brace of investments in companies developing EGS technology. As part of its 'renewable energy cheaper than coal' initiative, Google.org also gave a $490,000 grant to Southern Methodist University Geothermal Lab to study the potential for EGS across North America. Current estimates suggest that EGS could supply 10% of electricity requirements, providing a reliable base-load for other renewable sources.

Geothermal technology developer AltaRock Energy Inc. netted $6.25 million from Google.org. Commercial VCs, including cleantech heavyweights Kleiner Perkins Caufield & Byers and Khosla Ventures, invested a further $20 million in AltaRock's second round.

The California-based firm says it is developing innovative technologies to reduce costs and improve performance in EGS projects, although it remains tightlipped about exactly what those technologies are. Company executives have revealed that key areas to address include increasing the amount of rock that can be fractured, thus increasing the energy yield from each hole, and improving the efficiency of the above-ground generators.

AltaRock has also licensed geothermal technology which uses liquid carbon dioxide instead of water from Los Alamos National Laboratory. This would potentially combine power generation with carbon sequestration, for an emissions-cutting double whammy.

AltaRock is currently preparing to test the fundamentals of its EGS technology at a trial site in the US. The firm aims to drill a pair of shafts, fracture the rock between them, and produce steam at the surface.

Separately, AltaRock has secured geothermal rights totalling 667,000 acres in Northern California, south-central and western Oregon and western Washington through agreements with Weyerhaeuser Company and the Weyerhaeuser Company Foundation. The rights provide AltaRock with an exclusive option to assess the geothermal potential. Up to 40% of the total acreage may be converted to geothermal development leases within two years.

EGS: Drilling poses a technical challenge

Probably the biggest technical challenge in EGS is the ability to bore shafts several miles deep. The sophisticated drilling techniques developed in the oil and gas industries aren't necessarily appropriate, because the hard crystalline rock favoured for EGS is very different from the soft sedimentary rocks associated with hydrocarbon deposits.

Potter Drilling, which received a $4 million investment from Google.org, is developing a drilling technique known as hydrothermal spallation which it exclusively licenses from MIT. The California-based company's co-founder, Bob Potter, was one of the pioneers of the EGS concept while at Los Alamos in the 1970s.

Hydrothermal spallation uses a drillhead which squirts out a high-pressure stream of fluid. This expands the crystalline grains within the hot rock, creating micro-fractures and breaking the rock apart. A similar spallation technique using high pressure air has been used for mining since the 1940s, but the hydrothermal version promises several advantages for drilling the deep holes required for EGS, including improved shaft stability.

Potter says its technique can be used to drill shafts of 4-10km depth, and expects to have a prototype ready for field trials next year.

There are other signs of growing investor interest in companies offering supporting services for geothermal projects.

Also in August ThermaSource, a California-based engineering consultancy, closed a $41.5 million growth funding round from Riverstone Holdings, US Renewables Group and Rustic Canyon Partners. The firm provides project management and engineering resources for geothermal projects in the western US.

ThermaSource is using the investment to develop its capabilities in drilling services, and to acquire geothermal drilling rigs. The high price of oil and gas means that conventional drilling contractors, which have been the main providers of equipment and skills to geothermal projects, are busy elsewhere.

There are likely to be more venture deals in the geothermal space as the sector heats up. As well as utility-scale developers, expect to see some innovative technology from both research-based start-ups and established drilling and pumping companies.

Lithium mining/geothermal combination

A growing geothermal sector can also offer spin-off benefits for enterprising cleantech firms.

Simbol Mining, the joint winner of the Cleantech Group's Most Promising Technology award this summer, subsequently raised a $7.6 million first round from Mohr Davidow Ventures and Firelake Capital in August. The California company is developing technology to extract metals from the mineral-rich water raised by geothermal installations. Its main interest is in lithium, which is much in demand for smart batteries, fuel cells and other cleantech applications. A low-impact mining technique piggybacking on clean energy generation promises another environmental win-win situation.