The News
The latest auction for leases to drill geothermal energy wells on federal land in the US was a bust, bucking the trend of more successful recent sales and showing the nascent technology still faces hurdles to becoming a clean energy powerhouse.
Geothermal energy, which uses subterranean heat to generate electricity with drilling hardware adapted from the oil and gas industry, is a rising star in the energy transition. In the last few weeks, a string of lease auctions in southwestern US states have been entirely or nearly sold out, with some drilling rights selling for more than $200 per acre, around 10 times the typical figure a few years ago.
Tuesday’s auction, for three plots in southern Utah, was a dive: Only one plot triggered bids, with Ormat Technologies sealing a win for just $2 per acre. The Nevada-based energy project developer has already been building a portfolio of geothermal projects in the surrounding area. The company didn’t immediately reply to a request for comment about its bid. But analysts for Project InnerSpace, a geothermal advocacy group, told Semafor the tepid auction was likely the result of the plots’ isolated, mountainous location and relatively low geothermal temperatures.
Jeanine Vany, executive vice president of corporate affairs at geothermal startup Eavor Technologies, said that despite the hype, lease auctions for the technology are still held back by grid bottlenecks, and because most geothermal projects are only economically viable with very high subsurface temperatures. That means auctions for cooler and more remote plots often go quiet.
“As costs come down, you’ll start to see more regions that are not hot get grabbed quicker at auction,” Vany said. “But today, geologists are just looking for hotter rocks.”
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Tim’s view
Notwithstanding Tuesday’s lackluster auction, geothermal stands to be a big winner under the incoming Trump administration. It has two things going for it: The scramble to power data centers, and a strong bipartisan support base.
For tech companies, geothermal promises to provide power that’s cleaner than fossil fuels, cheaper and faster to build than nuclear, and more consistent and with a smaller land footprint than wind or solar. The latest indication of the gaping power generation deficit facing the US came out this week, in a report from the research group Grid Strategies. It found that in 2022, grid planners expected the country’s power demand to increase about 23 gigawatts in the next five years. Today, the report said, the five-year demand forecast has leapt to 128 gigawatts, in large part because of data centers.
It’s an all-hands-on-deck situation in which geothermal is emerging as a popular solution. “Geothermal benefits in the near term because it’s reliable, relatively affordable, and selling electrons to people who need them is one of the simplest and most effective business models out there,” said Mike Schroepfer, partner at the venture capital firm Gigascale. His former employer, Meta, announced a plan in August to build geothermal systems for its data centers. Meanwhile Google is already tapping one advanced geothermal plant in Nevada and investing in another geothermal startup targeting home heating.
But industry advocates say US federal processes for pushing geothermal projects through environmental review are cumbersome, and that lease auctions are too few and far between. Lawmakers agree: The House of Representatives last month passed two bills, with bipartisan support, that aim to clear hurdles for geothermal development. Those are now being reconciled with permitting overhaul legislation in the Senate, so speeding up geothermal could be one of the first energy laws to land on President-elect Donald Trump’s desk next year.
Room for Disagreement
The results of federal lease auctions are a misleading indicator of geothermal’s momentum, said Jamie Beard, executive director of Project InnerSpace, because the bureaucratic hurdles discourage bidders. Companies may also be waiting to bid on new federal-land projects until Trump takes office, she said. A more interesting trend, she added, is the move to develop projects on state and private land in jurisdictions that have streamlined permitting processes, like Texas. “There’s a gold rush right now in terms of geothermal prospecting,” Beard told Semafor, “with entities seeking to avoid the delays and burden of federal red tape.”
Notable
- The Biden administration finalized plans for a controversial oil and gas lease auction in the Alaskan Arctic. The auction was mandated by a law passed during Trump’s first term, but Biden officials took steps to minimize its size. The last Arctic drilling auction, in 2021, was snubbed by major oil companies, and no exploration has taken place there yet.