AltaRock: Enhanced Geothermal Could Supply 20% of U.S. Electricity by 2043

This fall, renewable energy startup AltaRock Energy plans to launch what could be the first U.S. demonstration of Enhanced Geothermal Systems (EGS). Though technical hurdles and the risk of induced earthquakes remain, experts say EGS promises to swiftly becoming a reliable, continuous source of carbon-neutral power around the globe.

America's geothermal resource is "effectively unlimited," according to U.S. Energy Secretary Steven Chu, and AltaRock Energy President and Chief Technology Officer Susan Petty is on a mission to tap it. With federal policy support and increased access to capital, Petty believes geothermal could supply 20 percent or more of the nation's electricity by 2043.

EGS goes deeper than traditional geothermal, and Petty will first test its ability to work in tandem with conventional systems like those at The Geysers in Northern California where rigs are set to arrive this spring to begin work on the demonstration project. Early AltaRock Energy investors – including technology giants Kleiner Perkins, Vinod Khosla, Paul Allen and Google – are sure to be watching.

I sat down with Petty to go beneath the surface for the latest on this emerging green technology.

Q. A 2007 MIT-led study on the future of geothermal energy in which you were a contributor estimated that America's total geothermal resource is 14 million exajoules, and that we use approximately 100 exajoules of energy annually in the U.S. That's 140,000 years of carbon-neutral power, yes?

A. Yes. But then we did a more detailed calculation of what we thought was the recoverable resource and it's more like 12 million megawatts for 30 years.

Q. But that is still a huge number, and the report states that geothermal could supply up to 10 percent of the country's electricity needs by 2050. That might seem like a less than ambitious goal to some, given the vastness of the resource and the nation's urgent need for clean, renewable energy. What will it take to achieve even that 10 percent?

A. That was based on economics – how quickly we thought you could bring the cost down and then looking at market penetration. Let's put economics aside for a minute and just look at what it would take to get geothermal to 20 percent of U.S. energy supply – just electric power. I did an analysis and found that you don't have to produce more than about 10 percent more a year in order to get to 20 percent of the total by about 2043.

Right now, there's about 3,000 megawatts of conventional geothermal power online. And they are putting about 450 additional megawatts online a year. ...There's still plenty of supply of conventional geothermal out there, and by the time we get to the point where we're running out of conventional geothermal to meet that demand, we're already to the point where we should be having pretty mature technology for at least the best places to do EGS.

Q. It's really about demand and financing to get it to scale in order to fast track it to the 20 percent by 2043 then?

A. That's exactly right. It's not an unrealistic goal, and I think you could possibly do it even faster than that if you were really motivated. It would only take, for instance, about 15 percent of the U.S. land rig count. Those guys are idle right now because the price of oil is down, so it's not an unreasonable thing to expect that we could get 15 percent of the U.S. land rig count into geothermal over the next 20 years.

Q. What are the biggest remaining technological hurdles?

A. Right now, EGS is technically feasible most places. There are some places where we do not have the technology to do it, and that has to do with the rock stress. We can't do it in places where we don't have what's called shear stress – where the rocks move side to side against one another – or where we don't have normal faulting-type stress where the rocks would move and basically open up by themselves. The natural stress on the rocks is important to us, and we haven't really found a way to overcome that problem – that's kind of the next hurdle to make EGS extend everywhere.

Q. Is this a drilling technology issue?

A. It's about stimulating the reservoir. We're basically making a reservoir where none exists, so we drill the first well, and then we fracture by pumping cold water onto the hot rock. That initiates the fractures, and then we map those fractures by monitoring the popping and snapping sounds that the breaking rock makes, and we can figure out where the fractures went. Once we have those fractures mapped, we can drill into them with other wells, and if it's the right kind of environment with the right stresses, we seem to be able to fracture big systems consistently.

We can create fractures that have volumes of something like 2.5 cubic kilometers. And that is the key, that volume, to having the reservoir last and produce. That is the biggest technical hurdle that has been overcome – to be able to consistently fracture that volume of rock.

Q. And create those underground reservoirs, which will in turn create the steam and drive the turbines.

A. That's right. So the next big hurdle we have is being able to increase the production out of each production well without having the reservoir drop in temperature too quickly. On top of that, if you flow more water through so you can produce more out of each well, you also risk having more earthquakes that might be felt by people. So what we'd like to be able to do is access a bigger volume of rock for each well. ... We would like to be able to find ways to stimulate multiple zones in each well. That's the big focus of AltaRock's technology development efforts.

Q. While we are on the subject of earthquakes, In December 2006, drilling for an EGS project in Basel, Switzerland set off a series of minor earthquakes up to 3.4 magnitude. The project was delayed for years as a result. How serious of an issue are EGS related quakes and is there anything that can be done to mitigate the risk?

A. Here's what can be done to mitigate the risk. The reason that problem occurred in Switzerland is because that site was chosen based on proximity to the town. They wanted to be able to produce both heat and power for the town, so they wanted the project to be right in town.

Well, Basel has a major earthquake-producing fault that runs right through it that actually destroyed the town back in the 1300's. The size of earthquake you can generate is directly related to the length of the fracture that you can shift. So, if you locate near a great big fault that can move big distances like that fault in Basel, then you take the risk of generating an earthquake that could cause problems.

Right now, what we have to do – because we don't have the methods to control that – is locate these projects away from big faults. But the length of the fault versus the size of the earthquake is a very well known relationship that we can calculate. So you can go into an area, map the fault, and say, "oh, here's the longest fault that we might come close to with our stimulation." And then we can calculate what's the biggest earthquake that we could get if that fault moved.

Q. So at this stage, you don't see quakes significantly slowing EGS development?

A. Right. ...You mitigate the risk by site selection, and there are plenty of sites to select in the U.S. that would be excellent.

Our demo project is at The Geysers – an active geothermal field where they are producing geothermal power today. Our plan is to go beneath The Geysers – to drill down deeper than where they produce fluid from right now and to inject cold fluid into the rock, fracture it, and then drill a production well into those fractures and circulate. This would be into rock that is not producing now and would be significantly deeper than the current production.

The currently operating power plants at The Geysers are using treated sewage effluent that comes in a pipeline from several cities around the area as an injectant to get recharge for the steam that's in the ground naturally.

They pump it into the ground and use it to recover heat, and it's working very well for them. It's stopped the decline of production and they are seeing real benefits from it. But they say that using EGS technology might get them even more benefit and that we could use it still more efficiently by putting it into the hotter, deeper rock.

Q. And there is the benefit of existing infrastructure.

A. Yes. There is a supply of water to use for the fracturing and there are existing power plants that aren't producing at their full capacity.

 

Q. In 2007, you told U.S. News & World Report that EGS "brings an absolutely gigantic amount of power into the realm of economic feasibility." How and when do you think EGS will become cost-competitive with current carbon-based energies?

A. That's a real issue. We don't really compete with natural gas until the price gets above $6 or $7 per million Btu. If the price is lower than that, natural gas is cheaper. But it's not just about price. It's that geothermal is a natural resource that is typically developed by independent power producers. So, we're not just competing with coal or natural gas or whatever. We're competing with utilities that want to own that resource–that power plant–themselves.

What we think you can do with incremental technology improvements that might occur over the next five or six years – if we continue to have funding to do this kind of work – is bring the cost of the best resources down by 25 to 30 percent. Right now, you can probably develop them for cost to the developer – namely AltaRock – of somewhere around 10 or 11 cents per kilowatt-hour. With these technology improvements, you are talking maybe 7.5 or 8 cents a kilowatt-hour, which is competitive with many things. Then you would be able to sell it to markets like California, where they've regulated and it's easier for independent power producers to sell power.

Q. That brings us to the policy front. President Obama recently called for America to double production of renewable energy in the next three years with 25 percent of our energy coming from renewables by 2025. From a policy standpoint, what do you see as most critical to making this happen – for renewables in general, but particularly for EGS?

A. There are two things that are hard for developers to do. One is, it's hard to pay for research when your product isn't cost competitive, and so DOE, or federally funded research would speed the process.

The other thing that's really important ... this is a high capital cost technology. It costs a lot up front, and then it's cheap to run. So the issue here is we need to have access to capital, and it would be great if it were at low interest.

Because of this lack of access to capital, developers with good projects are taking loans right now to get new projects built that are just ridiculously expensive and having a really big impact on the viability of the project.

Q. How critical is introducing a market mechanism that sets a price for carbon?

A. We have to have carbon prices get up around $12 per ton before we begin to see an impact on our pricing, and we certainly haven't reached that in any of the voluntary markets.

Q. Aside from price, do you think it should be cap and trade, a carbon tax or some other mechanism?

A. I like a cap and trade system, but the problem is the way they've been implemented. In Europe they allowed too many credits to begin with, so the price for carbon has remained pretty low and it isn't really a driver in the market for renewables.

What's driving the market in Europe is feed-in tariffs. And I don't really care for feed-in tariffs because they're artificial. But they can get power online fast if that's what you really want. I like cap and trade because that means you are really letting the market drive the value. If you set the policy right and make it [carbon] a scarce commodity, the value will rise fast enough so that people will actually want to buy non-carbon producing power.

Q. And what about investments in energy infrastructure? We hear a lot of talk about how critical the smart grid is for wind and solar. How does this apply to EGS?

A. EGS is less dependent on the grid because it is more flexible about where we locate it. But some places are better than others ... and a lot of those places are in areas where there's already so much pressure on the existing transmission infrastructure that we can't move the power around at all. So fixing those problems is really crucial.

Q. There are considerable sums for infrastructure and green initiatives in the American Recovery and Reinvestment Act – at least to start addressing these issues. How do you feel these resources can best be utilized?

A. The thing that is going to benefit geothermal the most is low-cost, easy-access capital. Right now, we have a project that we think is economical – where we're pretty sure we'll be ready to start developing it in the next year or two – and we couldn't get capital to build this from the regular capital markets. There is just no way to borrow that money.

So I think the idea of the clean, renewable energy bank is fantastic, as long as it's not so fraught with bureaucracy and red tape that you can't actually borrow the money.

One of the big things that hasn't benefited geothermal very much is tax credits. The reason is that geothermal projects themselves don't have a big tax liability – because they are so capital intensive they tend not to be paying any taxes for the first seven, eight, nine years. ... A project that is going to take three years to get online obviously isn't going to get any benefit from a two-year tax credit.

Q. So, extended long-term tax credits would be of benefit?

A. That's right. But I see other kinds of things as being more helpful.

Q. For example?

A. Renewable portfolio standards have done more for motivating people to look at geothermal than anything else. ... And if there were a central renewable portfolio standard, that would create more market for the power, and geothermal is a nice renewable because it's baseload power. It's not intermittent, so you don't have to have other power to back it up.

Q. The same US News & World Report piece in 2007 stated that AltaRock plans to develop the first EGS demonstration project in the United States in the next two years. This fall marks two years.

A. I don't think there's a whole lot of risk that we won't make that. We've got our demonstration project [at The Geysers]. We should be moving the rig in by April or May. We're looking good on all of the technology that we are planning to test there. And it's not a matter of if it will work. It's a matter of how well it will work.

Q. What about job creation as a result of EGS coming on line?

A. Let's look at my 10 percent per year growth scenario for geothermal and getting us to 20 percent of the U.S. electric power supply by 2043. It's going to take about 7,000 people to operate the power plants. It's going to take about 7,500 people to operate the drilling rigs. It's going to take about 2,500 technical people on the resource side and about 2,000 people on the power plant technical side–engineers and other technical people. So that's a lot of jobs.

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