BY SAUL ELBEIN - 04/20/24
With its nation-leading renewables fleet and oil and gas industry, Texas is poised to dominate what boosters hope will be America’s next great energy boom: a push to tap the heat of the subterranean earth for electricity and industry.
That technology, known as geothermal energy, has demonstrated the rare ability to unite the state’s warring political camps — and is fueling a boom in startups that seek to take it national.
While other forms of renewable energy lost ground during Texas’s 2021 and 2023 legislative sessions before a legislature that combined a hard-right political bent with a focus on building more “dispatchable” power, the geothermal industry advanced. State lawmakers passed four key bills in 2023 that helped lay the foundation for a new generation of drilling — with just one vote against.
In the 2023 session, “we didn’t get put into the renewable bucket, we didn’t really get put into the oil and gas bucket,” said Barry Smitherman, former Republican head of the state Railroad Commission and head of the Texas Geothermal Energy Alliance.
Instead, “we became this hybrid that was acceptable to people on both sides of the aisle”
The regulatory clarity established by those bills has laid the groundwork for a new generation of startups powered by the state’s urgent need for reliable electricity in the face of increasingly extreme weather, as well as a growing trickle of oil and gas veterans leaving an industry they see as plagued by boom-and-bust cycles. As of last year, Texas had 11 of the 27 total geothermal startups in the US.
On Wednesday, startup Bedrock Energy unveiled a new geothermal-powered heating and cooling system at a commercial real estate complex in Austin. Earlier this month, next-generation drilling company Quaise — which uses high powered radio waves to drill through hard rock — filed a permit with the state energy regulator to begin field testing its drills, years ahead of what industry insiders had thought was possible. Houston-based Fervo is building a 400-megawatt project in Utah. Military bases across the state are looking into geothermal as a potential source of secure electricity in an era of price spikes and cyberattacks.
And later this year, Sage Geosystems, a company founded by three former Shell executives, will begin using a fracked well as a means of storing renewable energy — which CEO Cindy Taff said will get the company most of the way towards the ultimate goal of commercially viable geothermal electricity.
The rise in geothermal startups comes alongside a broader surge in Texas renewable energy. Last month, solar generation eclipsed coal both in terms of power generation and market share. Texas also has more utility-scale wind and solar capacity than any other state, though it lags California when it comes to rooftop solar.
The Sage project shows the conceptual benefits of geothermal energy to the Texas grid, which increasingly runs on wind and solar energy. When the sun is high, the wind is blowing and demand is low, Sage will pump water into subterranean wells, creating zones of high pressure that utilities can tap as “batteries” when other energy supplies fall.
Though it lags California in total capacity, Texas is set to add the most utility scale batteries in the country in 2024, but these can only store power for two to six hours — creating a niche for projects like Sage, which aim to store power for up to a day.
In building out its projects, Sage benefited from that nearly-unanimous package of legislative reforms passed by the during the notably acrimonious 2023 session, which opened the way to operators like Taff — and offered a potential roadmap to other oil and gas states looking to set up geothermal industries of their own.
In its campaign for those pivotal laws, the geothermal lobby benefited from a recent traumatic experience for Texas: the brutal, deadly and staggeringly expensive legacy of 2021’s Winter Storm Uri.
In addition to resulting in hundreds of deaths from freezing temperatures and carbon monoxide poisoning from generators, the storm left tens of millions across the state without power for nearly a week and caused electricity prices in Texas’s spot markets to soar to an unheard-of $9,000 per megawatt hour — costing ratepayers an estimated $17 billion in overcharges, a court ruled in 2023.
The total cost was even higher: an estimated $300 billion, higher than that of Hurricane Katrina, according to the American Society of Civil Engineers.
That tragedy was weaponized by both sides in the state’s frenetic culture wars. Republicans blamed the wind industry, which had 27 percent of its turbines freeze, according to a report from the Federal Energy Regulatory Commission (FERC). Meanwhile, Democrats blamed the lack of weatherization in the natural gas industry, which FERC found had lost 58 percent of its generation or pipeline capacity during the storm — undercutting the “firm” or “dispatchable” supply of energy needed to avert blackouts.
As Republicans sought to restrict the state’s burgeoning renewables industry, geothermal threaded the needle — aided by its lobbyists’ deep ties to the oil industry and the Republican establishment.
The lobby pushed the message of “geothermal as firm, dispatchable, 24/7, on-off switch, clean,” Smitherman told The Hill. “And it just resonated with everyone.”
Lobbyists were “playing offense on three bills,” Smitherman said. First, in S.B. 785, the industry tackled the question of who owns geothermal heat — the subterranean energy that future projects will want to tap for industrial use or to generate electricity.
That was a thorny question, because Texas law divides up surface rights — which include rights to land and the groundwater beneath — and mineral rights, which govern commodities like oil and gas below the surface.
During the fracking boom, that division created ugly situations in which mineral-rights holders allowed drilling rigs to operate on — and pollute — lands that they didn’t live on, sometimes against the wishes of the people on the site.
In S.B.785, legislators agreed with the industry that heat is legally more like water than oil — which makes the process of exploration substantially easier. For operators like Sage, Taff said, “that means we go in and we just really have to have an agreement with a landowner,” rather than having to sign separate deals with the mineral rights holder and landowner.
S.B. 786 clarified that the geothermal industry is regulated by the Texas Railroad Commission, the state’s confusingly-named oil and gas regulator — rather than a mix of the commission, the state environmental regulator and the state utility commission for different aspects of the industry.
And in S.B. 1210, the legislature overwhelmingly voted that the state’s thousands of “orphaned wells” — inactive, non-producing oil and gas wells — can be converted to geothermal wells without an additional permit. (As The Texas Tribune reported, Sage used one of these for a test well in south Texas.)
Finally, in what Smitherman called “a defensive play,” the lobby worked to ensure through H.B. 5 that geothermal energy was eligible for the same tax breaks as other forms of dispatchable power — a privilege that would otherwise have only been available to coal, nuclear and natural gas.
Together, these laws mean that a geothermal startup now just has to talk to a single regulator and a single rights holder; can cut costs on drilling using an existing well; and can realize tax breaks previously available only to far more established forms of power generation.
It can also take advantage of the state’s burgeoning startup scene and huge oil and gas workforce — a necessary ingredient in a sector that is built on exploring the subsurface and drilling holes.
For oil and gas workers, geothermal offers its own appeal. Part of this is emotional: Taff told the Tribune about how she moved to geothermal after a decade of being pressured by her daughter to leave the “dark side” of oil and gas for renewables — and found that geothermal offered her a chance to use her downhole experience in a way that wind and solar would not.
”That redemption arc is really, really inspiring for oil and gas people,” said Jamie Beard of Project Innerspace, a nonprofit geothermal advocacy group. Involvement in the industry lets former oil and gas workers “feel like they can use their entire life’s work for something that they’re going to be respected for — and right now they are villainized for,” she said.
But in a state — and an energy sector — where belief in climate change remains controversial, geothermal can also make a more prosaic pitch: a stable job after the rollercoaster of oilfield work.
“Oil and gas is very feast and famine,” Joselyn Lai, the CEO of Bedrock Energy, told The HIll.
“It’s good times — and then it’s like everyone’s unemployed for like six months. There’s definitely this hope and belief that the clean energy future will be one where there’s more consistent jobs, and that it’s where growth is happening.”
That pitch comes as automation and efficiency have cut oilfield jobs — and as many projections suggest that oil demand will peak this decade, even as production is currently at record levels.
One Bedrock employee who had specialized in well completions — the process of inserting pipe and bringing out oil and gas — described being laid off from an oil company because his job could be done by a worker in South Asia at a tenth the price.
By drilling so many wells and dialing in their efficiency so much, he said, “we drilled ourselves out of a job.” Now he helps Bedrock drill 1,000 foot wells into the stable temperature of the subsurface, which can be used to dump heat in the summer or retrieve warmth in the winter — potentially offering commercial real estate clients a way to cut their heating and air conditioning costs by two to four times.
That kind of project exemplifies a main part of geothermal’s appeal: It is a consistent product, which despite being zero-carbon offers the kind of electricity that utilities are used to working with.
The industry also faces serious challenges — particularly when it comes to securing financing to roll out and develop prototypes. First-of-their-kind geothermal projects often struggle to get across what the startup industry calls the “valley of death” — the dangerous period when they have secured initial investment and are paying for operations and payroll but aren’t yet making any money. (All of the companies listed in this article are in this difficult zone.)
Despite the promise of geothermal, many potential corporate partners “want to be first to go fifth,” Bedrock investor Gabriel Scheer of Elemental Excelerator, a nonprofit investment firm focused on climate technologies.
But for those investors who take the risk, Scheer said, there is the upside of getting a jump on a new technology — and getting to shape the way it unfolds.
And in Texas specifically, the geothermal industry has certain distinct advantages. First, the experience of Winter Storm Uri means state businesses may be more focused on securing reliable heat and electricity than other states.
Geothermal also benefits not just from the need to buttress the large wind and solar fleet, but also from the trail that those industries have blazed in terms of innovative forms of financing.
In particular, virtually every wind and solar project in the state is built after developers sign a “power purchase agreement” with potential customers — something that the geothermal industry can easily adapt, said Dennis Wamsted of the Institute for Energy Economics and Financial Analysis.
In Texas, Wamsted said, “Geothermal has the ability to come in and say, ‘You guys are familiar with all these contracts? Here, we are doing exactly the same thing.”
Beard, the industry advocate, argued that Texas offers a model for other fossil fuel-rich states — like North Dakota or Pennsylvania — that want to transition their own industries. She was one of more than a dozen coauthors of “The Future of Geothermal in Texas,” a landmark 2023 report by five state universities that helped establish the industry’s bonafides before that year’s legislative session.
In the next six months, her team intends to replicate that report in ten such states, including Oklahoma and Pennsylvania. “The idea is, if you go into a state that has a big, significant oil and gas industry and you catalyze geothermal — you all of a sudden have a bipartisan solution,” she said.
Geothermal, she conceded “has really struggled on a federal level, with things like permitting and incentives.”
But if such a research and lobbying effort were replicated across “all the oil and gas states, all of a sudden you have a federal coalition. You have movement on the federal level, and that’s the eventual outcome of all of the state work.”
A national boom in geothermal would offer significant climate benefits. And in a world where the past pollution from oil and gas production is already anticipated to cut mid-century incomes by nearly 20 percent — even with aggressive climate action — it also has notable economic appeal.
But in her pitch to investors or clients, Lai told The Hill, she doesn’t make the environmental pitch — because she doesn’t need to. At the end of the day, she said, “it’s about the financial benefits.”
With its nation-leading renewables fleet and oil and gas industry, Texas is poised to dominate what boosters hope will be America’s next great energy boom: a push to tap the heat of the subterranean earth for electricity and industry.
That technology, known as geothermal energy, has demonstrated the rare ability to unite the state’s warring political camps — and is fueling a boom in startups that seek to take it national.
While other forms of renewable energy lost ground during Texas’s 2021 and 2023 legislative sessions before a legislature that combined a hard-right political bent with a focus on building more “dispatchable” power, the geothermal industry advanced. State lawmakers passed four key bills in 2023 that helped lay the foundation for a new generation of drilling — with just one vote against.
In the 2023 session, “we didn’t get put into the renewable bucket, we didn’t really get put into the oil and gas bucket,” said Barry Smitherman, former Republican head of the state Railroad Commission and head of the Texas Geothermal Energy Alliance.
Instead, “we became this hybrid that was acceptable to people on both sides of the aisle”
The regulatory clarity established by those bills has laid the groundwork for a new generation of startups powered by the state’s urgent need for reliable electricity in the face of increasingly extreme weather, as well as a growing trickle of oil and gas veterans leaving an industry they see as plagued by boom-and-bust cycles. As of last year, Texas had 11 of the 27 total geothermal startups in the US.
On Wednesday, startup Bedrock Energy unveiled a new geothermal-powered heating and cooling system at a commercial real estate complex in Austin. Earlier this month, next-generation drilling company Quaise — which uses high powered radio waves to drill through hard rock — filed a permit with the state energy regulator to begin field testing its drills, years ahead of what industry insiders had thought was possible. Houston-based Fervo is building a 400-megawatt project in Utah. Military bases across the state are looking into geothermal as a potential source of secure electricity in an era of price spikes and cyberattacks.
And later this year, Sage Geosystems, a company founded by three former Shell executives, will begin using a fracked well as a means of storing renewable energy — which CEO Cindy Taff said will get the company most of the way towards the ultimate goal of commercially viable geothermal electricity.
The rise in geothermal startups comes alongside a broader surge in Texas renewable energy. Last month, solar generation eclipsed coal both in terms of power generation and market share. Texas also has more utility-scale wind and solar capacity than any other state, though it lags California when it comes to rooftop solar.
The Sage project shows the conceptual benefits of geothermal energy to the Texas grid, which increasingly runs on wind and solar energy. When the sun is high, the wind is blowing and demand is low, Sage will pump water into subterranean wells, creating zones of high pressure that utilities can tap as “batteries” when other energy supplies fall.
Though it lags California in total capacity, Texas is set to add the most utility scale batteries in the country in 2024, but these can only store power for two to six hours — creating a niche for projects like Sage, which aim to store power for up to a day.
In building out its projects, Sage benefited from that nearly-unanimous package of legislative reforms passed by the during the notably acrimonious 2023 session, which opened the way to operators like Taff — and offered a potential roadmap to other oil and gas states looking to set up geothermal industries of their own.
In its campaign for those pivotal laws, the geothermal lobby benefited from a recent traumatic experience for Texas: the brutal, deadly and staggeringly expensive legacy of 2021’s Winter Storm Uri.
In addition to resulting in hundreds of deaths from freezing temperatures and carbon monoxide poisoning from generators, the storm left tens of millions across the state without power for nearly a week and caused electricity prices in Texas’s spot markets to soar to an unheard-of $9,000 per megawatt hour — costing ratepayers an estimated $17 billion in overcharges, a court ruled in 2023.
The total cost was even higher: an estimated $300 billion, higher than that of Hurricane Katrina, according to the American Society of Civil Engineers.
That tragedy was weaponized by both sides in the state’s frenetic culture wars. Republicans blamed the wind industry, which had 27 percent of its turbines freeze, according to a report from the Federal Energy Regulatory Commission (FERC). Meanwhile, Democrats blamed the lack of weatherization in the natural gas industry, which FERC found had lost 58 percent of its generation or pipeline capacity during the storm — undercutting the “firm” or “dispatchable” supply of energy needed to avert blackouts.
As Republicans sought to restrict the state’s burgeoning renewables industry, geothermal threaded the needle — aided by its lobbyists’ deep ties to the oil industry and the Republican establishment.
The lobby pushed the message of “geothermal as firm, dispatchable, 24/7, on-off switch, clean,” Smitherman told The Hill. “And it just resonated with everyone.”
Lobbyists were “playing offense on three bills,” Smitherman said. First, in S.B. 785, the industry tackled the question of who owns geothermal heat — the subterranean energy that future projects will want to tap for industrial use or to generate electricity.
That was a thorny question, because Texas law divides up surface rights — which include rights to land and the groundwater beneath — and mineral rights, which govern commodities like oil and gas below the surface.
During the fracking boom, that division created ugly situations in which mineral-rights holders allowed drilling rigs to operate on — and pollute — lands that they didn’t live on, sometimes against the wishes of the people on the site.
In S.B.785, legislators agreed with the industry that heat is legally more like water than oil — which makes the process of exploration substantially easier. For operators like Sage, Taff said, “that means we go in and we just really have to have an agreement with a landowner,” rather than having to sign separate deals with the mineral rights holder and landowner.
S.B. 786 clarified that the geothermal industry is regulated by the Texas Railroad Commission, the state’s confusingly-named oil and gas regulator — rather than a mix of the commission, the state environmental regulator and the state utility commission for different aspects of the industry.
And in S.B. 1210, the legislature overwhelmingly voted that the state’s thousands of “orphaned wells” — inactive, non-producing oil and gas wells — can be converted to geothermal wells without an additional permit. (As The Texas Tribune reported, Sage used one of these for a test well in south Texas.)
Finally, in what Smitherman called “a defensive play,” the lobby worked to ensure through H.B. 5 that geothermal energy was eligible for the same tax breaks as other forms of dispatchable power — a privilege that would otherwise have only been available to coal, nuclear and natural gas.
Together, these laws mean that a geothermal startup now just has to talk to a single regulator and a single rights holder; can cut costs on drilling using an existing well; and can realize tax breaks previously available only to far more established forms of power generation.
It can also take advantage of the state’s burgeoning startup scene and huge oil and gas workforce — a necessary ingredient in a sector that is built on exploring the subsurface and drilling holes.
For oil and gas workers, geothermal offers its own appeal. Part of this is emotional: Taff told the Tribune about how she moved to geothermal after a decade of being pressured by her daughter to leave the “dark side” of oil and gas for renewables — and found that geothermal offered her a chance to use her downhole experience in a way that wind and solar would not.
”That redemption arc is really, really inspiring for oil and gas people,” said Jamie Beard of Project Innerspace, a nonprofit geothermal advocacy group. Involvement in the industry lets former oil and gas workers “feel like they can use their entire life’s work for something that they’re going to be respected for — and right now they are villainized for,” she said.
But in a state — and an energy sector — where belief in climate change remains controversial, geothermal can also make a more prosaic pitch: a stable job after the rollercoaster of oilfield work.
“Oil and gas is very feast and famine,” Joselyn Lai, the CEO of Bedrock Energy, told The HIll.
“It’s good times — and then it’s like everyone’s unemployed for like six months. There’s definitely this hope and belief that the clean energy future will be one where there’s more consistent jobs, and that it’s where growth is happening.”
That pitch comes as automation and efficiency have cut oilfield jobs — and as many projections suggest that oil demand will peak this decade, even as production is currently at record levels.
One Bedrock employee who had specialized in well completions — the process of inserting pipe and bringing out oil and gas — described being laid off from an oil company because his job could be done by a worker in South Asia at a tenth the price.
By drilling so many wells and dialing in their efficiency so much, he said, “we drilled ourselves out of a job.” Now he helps Bedrock drill 1,000 foot wells into the stable temperature of the subsurface, which can be used to dump heat in the summer or retrieve warmth in the winter — potentially offering commercial real estate clients a way to cut their heating and air conditioning costs by two to four times.
That kind of project exemplifies a main part of geothermal’s appeal: It is a consistent product, which despite being zero-carbon offers the kind of electricity that utilities are used to working with.
The industry also faces serious challenges — particularly when it comes to securing financing to roll out and develop prototypes. First-of-their-kind geothermal projects often struggle to get across what the startup industry calls the “valley of death” — the dangerous period when they have secured initial investment and are paying for operations and payroll but aren’t yet making any money. (All of the companies listed in this article are in this difficult zone.)
Despite the promise of geothermal, many potential corporate partners “want to be first to go fifth,” Bedrock investor Gabriel Scheer of Elemental Excelerator, a nonprofit investment firm focused on climate technologies.
But for those investors who take the risk, Scheer said, there is the upside of getting a jump on a new technology — and getting to shape the way it unfolds.
And in Texas specifically, the geothermal industry has certain distinct advantages. First, the experience of Winter Storm Uri means state businesses may be more focused on securing reliable heat and electricity than other states.
Geothermal also benefits not just from the need to buttress the large wind and solar fleet, but also from the trail that those industries have blazed in terms of innovative forms of financing.
In particular, virtually every wind and solar project in the state is built after developers sign a “power purchase agreement” with potential customers — something that the geothermal industry can easily adapt, said Dennis Wamsted of the Institute for Energy Economics and Financial Analysis.
In Texas, Wamsted said, “Geothermal has the ability to come in and say, ‘You guys are familiar with all these contracts? Here, we are doing exactly the same thing.”
Beard, the industry advocate, argued that Texas offers a model for other fossil fuel-rich states — like North Dakota or Pennsylvania — that want to transition their own industries. She was one of more than a dozen coauthors of “The Future of Geothermal in Texas,” a landmark 2023 report by five state universities that helped establish the industry’s bonafides before that year’s legislative session.
In the next six months, her team intends to replicate that report in ten such states, including Oklahoma and Pennsylvania. “The idea is, if you go into a state that has a big, significant oil and gas industry and you catalyze geothermal — you all of a sudden have a bipartisan solution,” she said.
Geothermal, she conceded “has really struggled on a federal level, with things like permitting and incentives.”
But if such a research and lobbying effort were replicated across “all the oil and gas states, all of a sudden you have a federal coalition. You have movement on the federal level, and that’s the eventual outcome of all of the state work.”
A national boom in geothermal would offer significant climate benefits. And in a world where the past pollution from oil and gas production is already anticipated to cut mid-century incomes by nearly 20 percent — even with aggressive climate action — it also has notable economic appeal.
But in her pitch to investors or clients, Lai told The Hill, she doesn’t make the environmental pitch — because she doesn’t need to. At the end of the day, she said, “it’s about the financial benefits.”
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