Tim Latimer on Solving the Financing Problem for Geothermal
Dec 13, 2024
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Tim Latimer, Founder and CEO of Fervo Energy, dives into the complexities of financing geothermal energy projects. He discusses how fracking technology can transform geothermal into a sustainable energy source, yet faces funding hurdles. Latimer highlights the transition from venture capital to institutional funding and the impact of interest rates on project viability. He also addresses misconceptions in the financial sector about geothermal technology and the importance of streamlining federal permitting processes for broader adoption.
Geothermal energy, though historically limited, is expanding due to innovations like enhanced geothermal systems that utilize deeper rock formations.
The 'chicken and egg' financing dilemma persists in geothermal projects, where investors and customers hesitate to commit without proven frameworks.
Streamlining permitting processes for geothermal projects is crucial, as current timelines of six to eight years hinder investment and deployment.
Deep dives
Community Investment and Philanthropy
Wells Fargo is dedicated to making a significant impact in the communities it serves, focusing on sustainable and inclusive growth. Over the past five years, the bank has contributed nearly $2 billion to support critical community needs, including housing affordability, small business development, and financial health. This philanthropic approach highlights the company's commitment to forging partnerships that address local challenges. By investing in these areas, Wells Fargo aims to create long-lasting benefits for a diverse range of community members.
Advanced Geothermal Technologies
Geothermal energy has been a reliable energy resource for over a century, but advances in technology, particularly through enhanced geothermal systems, are expanding its potential. Historically, geothermal power generation has been limited to regions with favorable geology, making it a niche resource. However, new techniques allow for the use of deeper and previously inaccessible rock formations to harness geothermal energy effectively. This development significantly increases the resource potential in the U.S., which could see geothermal power reach as much as 750 gigawatts by mid-century.
The Funding Landscape for Geothermal Projects
Securing funding for geothermal projects presents a unique challenge, often referred to as the chicken and egg problem. On one hand, investors are reluctant to finance projects without a proven track record, while potential customers are hesitant to commit without established energy generation capabilities. To navigate this landscape, companies like Fervo Energy are moving from equity financing towards more traditional project debt through institutional investment. Establishing reliable operational projects is key to attracting the long-term capital needed to scale geothermal energy offerings.
Challenges in Permitting and Regulatory Framework
Permitting geothermal projects, especially in federally-owned land areas, can take six to eight years, significantly delaying project timelines. This lengthy permitting process can deter potential investors and hinder the swift deployment of renewable energy solutions. Ongoing discussions around legislative reforms aim to streamline permitting for geothermal and other clean energy projects, potentially reducing timelines to just two to four years. Such reforms are crucial for making geothermal development more competitive and viable in the current energy landscape.
Market Perception and Public Engagement
Changing market perceptions regarding geothermal energy is essential for maximizing its potential as a clean and reliable energy source. The industry's history, marked by technological stagnation, has led many investors and utilities to overlook geothermal as a viable solution. However, as companies demonstrate successful projects and public awareness grows, investors are beginning to reconsider geothermal's place in the energy mix. Engaging high-profile companies for partnerships, like Google for power purchase agreements, can further bolster geothermal's credibility and potential for widespread adoption.
Geothermal is a promising technology to provide clean, low-cost, baseload power to the electricity grid. It works by getting heat from deep in the ground, using technology that is similar to that used in fracking. Despite this potential, however, geothermal still remains a very small percentage of the US power mix. So what will it take for it to scale up? One big challenge is the core problem of financing. Firms need customers in order to get financing. But customers don't want to sign up for projects unless firms can finance them and get them built. On this episode, recorded live onstage at the Department of Energy's Deploy24 conference in Washington DC, we speak with Tim Latimer, the founder and CEO of geothermal company Fervo Energy. Tim was previously in the fracking industry. He explained to us how geothermal works, what's being built, and what it will take from private and public actors in order to scale it up.
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