‘Geothermal is America’s untapped energy giant,’ the U.S. Department of Energy said in a report last year, highlighting in its analysis that this kind of “always-on” flexible renewable energy resource could grow 26-fold to generate 8.5 percent of U.S. electricity by 2050.
Unlike wind and solar, geothermal energy is a 24/7 energy resource, but the technologies to explore and drill for resources and build facilities make geothermal energy more expensive than other renewables.
Technology improvements and cost cuts in geothermal energy could come from what some would think is a most unexpected source—the oil industry, analysts and geothermal specialists say.
The oil price crash is already hurting the oil industry, and it is set to hurt oilfield services providers even more, as U.S. exploration and production companies jammed on the brakes and announced 20-30 percent cuts in capital spending.
It could be those services companies specialized in oil and gas drilling that could help geothermal development with their expertise in drilling in the ground, according to Tim Latimer, co-founder of geothermal assets developer and operator Fervo Energy.
The geothermal supply chain significantly overlaps with oil and gas, because geothermal development initially consists of drilling wells into hot areas to produce steam, Latimer said in a Twitter thread after oil prices crashed and oil industry players began announcing cost and capex cuts en masse.
“As much as 50% of the cost of geothermal comes from drilling, so a plunge in oil prices can drop costs dramatically,” Latimer said.
According to the executive, rig count could be a proxy for the cost impact. The U.S. rig count has been collapsing in recent weeks as producers idle rigs at an unprecedented pace.
“In the last crash US Rig Count fell rapidly to below 400. This one will be even deeper. As a result, oil field services costs will likely drop 20-40% or more,” Latimer says.
A drop in costs could be a key incentive for geothermal development, alongside optimizing permitting timelines, DOE says in its GeoVision analysis.
Geothermal resources in the U.S. are enormous, but geothermal energy accounted for just 0.4 percent of total utility-scale electricity generation in the United States in 2019, according to EIA data. Globally, America leads in geothermal electricity generation, but on a U.S. scale, geothermal is a negligible part of total electricity generation.
According to DOE, this could change, and geothermal could end up generating 8.5 percent of all U.S. electricity and account for 3.7 percent of total U.S. installed capacity in 2050, if costs drop significantly and if technology continues to improve.
The oil price crash and the expected reduction of drilling costs could reduce geothermal energy costs, Fervo Energy’s Latimer argues.
“The drop in oil field services costs alone may send geothermal costs lower by 20% or more,” he said.
Lower drilling costs for geothermal, combined with lower interest rates and the retroactive revival and extension of the full Production Tax Credit (PTC) for geothermal facilities from December 2019, could lead to a 20 to 30-percent decline in geothermal from the $65-75/MWh at the start of this year, Latimer says.
Not only can geothermal energy benefit from lower drilling and development costs, but it could benefit from increased interest from the oil and gas sector in geothermal development.
“Oil and gas has the funding and capability and knowhow to quickly advance technology and deployment of geothermal,” Kate Young, the geothermal program manager at the National Renewable Energy Laboratory, told Grist last week.
On the other hand, oilfield services, which are already suffering in this oil price collapse, could benefit from geothermal—this could be their way out, according to Latimer.
“This downturn will likely send the rig count into the 200s, so geothermal development at 100+ rigs could put as much as a third of the oil field sector back to work developing a 24/7 clean energy resource,” says the geothermal energy executive, noting that “100% clean energy just got a lot more possible in a way that will also put the oil field back to work.”
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Trump Strikes Deal With Mexico To Help Cut Oil Production In OPEC+ Deal
- Oil Prices Tank Despite 10 Million Barrel Per Day Production Cut
- Rig Count Collapse Continues Despite Historic Global Oil Deal