Geothermal Energy

Case for Geothermal Energy & Market Overview

By Drew Hooper

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October 2023

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Overview / Table of Contents

California Independent System Operator (CAISO) and “Duck Curve”

• CAISO approaches energy grid net negative loads and 20 GW daily swings due to solar & wind intermittency

Case for Geothermal Energy

• Geothermal energy has advantages among clean energies (baseload, dispatchable, low footprint, able to scale) with addressable limitations (cost, time to build, geographic constraints)

Current State and Potential for Geothermal Energy

• US geothermal energy generation totaled 3.8 GW during 2022 (70% in CA, 25% in NV, 3% in UT, etc.)
• NREL projected 90.5 GW of geothermal energy by 2050 in the US, and Fervo Energy projects >200 GW sooner

BIA Funding, IRA Tax Incentives, and Geothermal Energy Project Costs

• BIA 2021 and IRA 2022 allocated $475B+ to clean energy and climate projects
• IRA tax incentives applicable to clean/geothermal energy can offset project/investment costs by up to 50%

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Reality for Utilities: More Intermittent, Less Baseload

California’s CAISO data shows that certain intermittent renewables (solar, wind, hydro) fluctuate in generation monthly/seasonally up to total 6 GW–utilities presently lean on fossil fuels to manage.

Source: CAISO, p.7 (2023)

Intermittent Challenges at Scale and Need for Dispatchable

CAISO data shows intermittent renewable power generation daily fluctuates ~10 GW (max ~18 GW) –energy storage contributes <2.5 GW (and increasing) and natural gas, imports, and hydro the remainder.

Source: CAISO, p.8 (2023) and EIA / CAISO (2023)

Geothermal Compared to Other Sources

Strengths and limitations

Strengths

1. Able to scale now (clean hydrogen, OCET, and fission may yet be years/decades)
2. Baseload at lower cost (than Nuclear Fission–and Natural Gas CC)--and dispatchable
3. Integrates with Oil & Gas industry (e.g. workforce, equipment & methods, well repurposing)
4. Less land use (by 40x-267x than NG/hydrogen, utility solar, and onshore wind)

Disadvantages

1. Currently higher LCOE & Cost of Capital (1.1x-3x than utility solar & onshore wind+storage)
2. Geographic constraints (low-depth prevalence in Western US–yet universal potential if deeper)
3. Currently longer plant build time (3x-12x longer)–and more so on Federal land

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US Renewable Energies Compared

Solar and wind are lowest cost, yet intermittent, mineral reliant, and land-intensive. Whereas nuclear and geothermal are slightly higher cost, but baseload and more efficient. Hydro has greater limits to scaling.

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(1) Estimated from EIA reported 10.4% for onshore + offshore wind

US Renewable Energies Compared (cont.)

CCS Natural Gas is not yet as cost effective as solar, wind, nuclear fission, nor geothermal–and, biomass at scale is highly land-intensive–nuclear fusion, OCET, and clean hydrogen are still in R&D.

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(1) Includes Gas Peaking, (2) DOE estimates 95% emissions capture for NG CCS, (3) Uses Nuclear Fission as proxy, (4) Uses Natural Gas plants as proxy, considering similar turbine engines and plant layout

Current State & Potential for Geothermal Energy in the US

NREL 2023 estimated 38GW US geothermal energy by 2035 and 10-15% of total US energy by 2050. Since its publication, Fervo Energy demonstrated ‘near field EGS’ and projected >20% US energy sooner.

NREL “Enhanced Geothermal Shot” (2023):

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Source: NREL (2023) and Above

US Current State - Geothermal Energy

2050 Projections - Geothermal Energy

Source: ThinkGeoEnergy (2022); EIA (2023)

US Geothermal Electricity Generation, by State (2022)

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Source: EIA (2023)

Bipartisan Infrastructure Act – Clean Energy & Power

The Bipartisan Infrastructure Act (aka Infrastructure and Investment Jobs Act “IIJA”) of 2021 allocated ~$75B to clean energy and power programs–including research and demonstrations for geothermal, CCUS, & DAC.

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DOE Funding Overview

DOE-specific funding totals $63.9B across four major areas:

1. Delivering clean power (~$21.3 billion)
2. Clean energy demonstrations (~$21.5 billion)
3. Energy efficiency and weatherization retrofits for homes, buildings, and communities ($6.5 billion)
4. Clean energy manufacturing and workforce development ($8.6 billion)

Legend: Geothermal and Carbon Removal

Source: The White House – Bipartisan Infrastructure Law Guidebook (2022)

All Clean Energy & Power Programs

Inflation Reduction Act – Energy & Climate Incentives

The IRS Dept. of the Treasury manages all incentive programs (but DOE loans & Adv Energy Credits) potentially relevant to Fervo Energy (shown in a below selection of programs, from The White House IRA CE Guidebook).

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Source: The White House – Clean Energy (Jan 2023)

Legend: Geothermal, Carbon Removal, and Equipment

Selection of IRA Funding, as relevant to Fervo Energy:

Investment Tax Credit (ITC) and Production Tax Credit (PTC)

The IRA updates long-standing tax credits for clean energy projects: ITC entails a tax credit on the basis of % project investment cost and PTC a set rate per kWh of electricity produced (for 10 years).

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*See next slide for details and rates during Phaseout years

Source: The White House – Clean Energy (Jan 2023), IRS Treasury 2023-38, and IRS Treasury 2022-23

ITC, PTC, and Adder Rates – Total for Geothermal Energy

Geothermal energy projects could recoup 50% of total costs through qualifying for full rate tax incentives

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Source: HEAPY (Feb 2023)

APPENDIX

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Source: Lazard (Apr 2023)

US/WW Geothermal Current State, Potential, and Projections

Currently US geothermal plants generate 3.8 GW (0.4% of US total), and projections for 2050 range from 3-5% of US energy to >100% of WW energy–MIT & Stanford estimated immense total potential.

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US Current State:

2050 Projections:

Potential:

Source: ThinkGeoEnergy (2022); EIA (2023)

ITC, PTC, and Adder Rates by Year – Full and Phaseout

Phaseout of ITC and PTC ‘applicably’ takes effect for projects starting construction in 2034-2036–unless US emissions have not reduced to 75% of 2022 levels, which could push back phasehout.

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Source: DOE (Jun 2023)