GEOTHERMAL ENERGY IS AN OPTIONS PLAY

April 16, 2020 § Leave a comment

I used to think geothermal energy was a niche play.  And it was, until fairly recently.  Or, to be fair, I became aware recently that multiple approaches were being investigated, all of which were scalable, albeit to different degrees.  I define scalability to mean the ability to supply a material portion, and in the limit, a majority, of the electricity needs of the world at a price competitive with conventional alternatives.

The source of geothermal energy is the core of earth.  Essentially a nuclear reactor, where temperatures approach those at the surface of the sun.  The heat is conducted to the earth’s surface and eventually dissipates into our atmosphere.  Harnessing this heat is the essence of geothermal energy production.  Utility scale geothermal energy involves drilling a well, not unlike an oil well, pumping a fluid down, usually water, and then recovering the fluid heated by the subsurface rock to perform some work.  That work is usually the generation of electricity.  In short, we are mining for heat rather than oil or gas.  The operations to accomplish this, and the underlying technologies, are identical to those used to prospect for oil and gas, except for the final power generation bit. To the extent that step out technologies are needed, these too are in the general realm of oil industry capability.

Oil and gas companies have recognized the need to diversify and become energy companies.  Over a dozen years ago, BP’s CEO famously declared that BP stood for “beyond petroleum”. While premature, the sentiment still led to forays into solar and wind.  Except for offshore wind having some synergy with oil company core competencies, these areas were not good fits as portfolio components.  Accordingly, to this day, they comprise small portions of the companies.

Geothermal offerings fall into two buckets: those that operate in rock at 200 C plus and ones that require 300 C plus.  In the former category fall Engineered Geothermal Systems (EGS).  Because the heat content of the rock is relatively modest, inducements are needed for the heat to transfer to the fluid being circulated.  This is accomplished with standard hydraulic fracturing.  The twist is that existing natural fracture networks are utilized to advantage.  The energy required to open existing fractures is much less than that to create new ones.  Consequently, induced seismicity (the risk of creating an earthquake, and a concern that has been raised by observers) is very unlikely. 

Induced seismicity requires a high energy input into an active fault.  An active fault is roughly defined as a fault likely to move in response to an energy input.  A fault is a mismatch between two bodies of rock, often created due to a movement (known as slip) of one body relative to another adjoining one.  Continued movement in response to an energy input can create a seismic event, an earthquake.  The magnitude of the earthquake is directly proportional to the length of the fault.  As noted above, the energy from opening natural fractures (a common geological feature not to be confused with faults), is small.  Furthermore, EGS operations require a thorough knowledge of the earth stresses, and so detecting faults and their lengths is straightforward. Avoiding operating in proximity to long active faults would mitigate earthquake concerns.

The second bucket is that of hotter zones, exceeding 300 C, most preferably 350 C. High thermal pickups by the fluid in the well can be achieved with well architecture that maximizes contact with the rock, and no hydraulic fracturing is involved.  This would be a closed loop system, with the working fluid not entering the rock.  If the temperature exceeds 374 C and pressure 221 bar, any water present in the reservoir would be in the supercritical state.  This is a state in which it behaves like both a liquid and a gas.  When CO2 is sequestered in porous rock, it is in a supercritical state, taking advantage of this dual property.  A more mundane example is CO2 decaffeination of coffee beans: the supercritical state allows easy entry into the bean as a gas and dissolves the caffeine like a liquid.  Supercritical water will produce more power than would steam.

EGS operations can be executed with the latest current technology. The deeper stuff needs development.  The oil and gas industry is well positioned to do both.  In fact, an aspect of the development of deeper systems is an extension of recent advances by the industry in high temperature, high pressure systems.  One could argue that they are the only ones who could reasonably pull it off.

Now is the time.  The oil industry (especially including oil service companies) is positioned to put geothermal energy into high gear.  This would not have the appearance of greenwashing even to the most jaded.  The federal government ought to help, although in the midst of Covid 19 recovery efforts, that might be tough.  And yet, that pandemic is the reason (now that the Russia/Saudi spat is resolved) that the US oil and gas rig count has plummeted over 30% in just one month. Continued demand destruction could ensure a long-lived drop at some scale.  That then, would be the time, to put people to work doing something else productive.  If at the same time this work moves the needle on a renewable energy source the appeal is to both sides of the congressional aisle. 

For the oil and gas companies, a sizeable geothermal portfolio (eventually) provides optionality.  Since essentially the same crews can be used to drill for either oil or heat, portfolio shifts driven by market conditions are feasible.  Forecasting the speed of adoption of electric vehicles will no longer be important.  Good for the industry and good for the environment.  Large scale win wins are often mirages; not this one.

Vikram Rao

April 16, 2020

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