Closed-loop geothermal systems are gaining traction as a ubiquitous, globally scalable method for producing geothermal energy. The concept of closed-loop is broad and encompasses several different methodologies, including “pipe in pipe” configurations pursued by Greenfire Energy, deep extreme temperature and even supercritical loops of the type pursued by GEO members at UT Austin, and Eavor-Loops, as the company calls them, drilled by Eavor Technologies (Eavor), explored here today. No matter the methodology, the broad concepts are the same: “radiator” style wells are drilled, fluid is circulated through those wells, and electricity is produced with the resulting output. Notably, closed-loop systems do not utilize hydraulic fracturing to create subsurface reservoirs, and thus avoid many of the regulatory and public relations hurdles that EGS and other geothermal concepts face. Closed-loop systems are also not expected to present risk of seismicity, a topic that has landed EGS in the news.
To explore the closed-loop system being pursued by Eavor, I talked with John Redfern, President and CEO. This interview has been edited for length and clarity.
JB: Let’s dig right in. About half of Houston googled “closed-loop” after the recent interview we published with former Halliburton CTO Vik Rao, who mentioned closed-loop systems as one of two strategic plays he saw for the oil and gas industry in geothermal. Are you getting interest from the oil and gas industry?
JR: Yes. Even in the current downturn with COVID-19 and the oil price collapse, we’re seeing a lot of interest from the oil majors, whether it be in terms of potential equity stakes or joint projects. Now that people are recognizing the potential of closed-loop as a globally scalable concept, both oil companies and governments are taking a fresh look at geothermal as part of their overall strategy. Governments view it as a means to transition oil service workers and their know-how to a new green purpose. Oil companies are thinking of it more as a way to pivot some of their key assets and skillsets toward new clean energy sources, and as a tool and input to help “green” their traditional hydrocarbon revenue streams. In fact, in Canada, and to a lesser extent in the US, we’ve seen green activists and oil service companies make common cause to promote geothermal as a key part of the coming energy transition. To be honest though, I was a bit disappointed that your interview with Vik let the “cat out of the bag” as soon as it did. For the last few years, once we had the financial backing we needed, I was more than happy to keep our little “closed-loop is the future” secret to ourselves (and a few others like yourself Jamie).
JB: Well, you know what they say about secrets. But now that the concept is becoming ‘mainstream,’ I’m sure you have encountered the doubt, particularly in geothermal industry circles, about whether closed-loop will work. What say you?
JR: First of all, I wouldn’t classify closed-loop as mainstream (yet), and I’d be worried that our technology wasn’t as disruptive as I’d like if there was no resistance. Traditional geothermal players who have reviewed our thermodynamic models and field validation eventually come around, but it often takes them time to overcome deeply held convictions and entrenched gut reactions vis-à-vis the feasibility of conduction-only systems like closed-loop. From what I can see as an outsider, there is also a significant bias against closed-loop coming from an entrenched ecosystem, which has incurred significant sunk costs in EGS over the years. I’ll note that we do not typically encounter this same disbelief when speaking to the oil and gas industry, and I don’t find that surprising. There is a large experience gap between the geothermal and oil and gas industries, and an entirely different view of risk. The oil and gas folks, by and large, agree that the concept of closed-loop is sound, achievable, and interesting. Their main concern is cost reduction for well development.
JB: What temperatures is Eavor targeting for its loops, and will the economics work in your current targeted temperature range?
JR: Given that we’re leveraging oil and gas technology, our first commercial projects are all targeting the operating range of our key technologies (i.e. 180C or lower). The economics work in the short-term, as we are initially targeting relatively high-priced (but still large) international markets. Costs will come down over time based on planned innovations in our product development road map, as well as the typical learning curve and scale effects – same as we’ve seen over the last decades in solar, wind and unconventionals.
JB: What is the energy output for an Eavor-Loop?
JR: Between 2 MWs and several hundred MWs in any one location depending on how densely we stack the Eavor-Loops.
JB: Where can you drill? Are there geographical limitations?
JR: Eavor-Loops generally have a negligible surface footprint compared to other energy sources. As such, we can implement Eavor-Loops close to where there is demand – like population centers. Our initial demo was performed to prove up our solution for sedimentary basins. We hope new demos going on in Norway now, and one that will launch in Nevada later this year, will prove up the same solution in igneous rocks. Once that is done (and the early results are very encouraging), we should be geologically agnostic and be able to drill Eavor-Loops practically anywhere.
JB: Where is the low hanging fruit for you in terms of project development?
JR: Honestly, in terms of time to market, failed geothermal projects are the best. If someone has all the permitting completed, the geology fully analyzed and the offtake PPA signed up, then, the first well(s) come up “hot but dry”, it’s a perfect win-win for Eavor to step in and drill Eavor-Loops. Fortunately for us, these sorts of opportunities are more numerous than you might imagine.
JB: What’s your beef with EGS?
JR: I have no beef with EGS. In fact, I’d personally prefer if everyone kept investing in EGS and not competing with us. The real issue is EGS is going to encounter public resistance and outright bans in some countries because of its reliance on hydraulic fracturing. Even if we presume the concept works, these regulatory and PR issues are going to slow it down. Secondly, whether you’re working on EGS or closed-loop, the technology is immature enough that like with any innovation we need to drive down that learning curve before any of us are delivering our ultimate goal of sub $50/MWh power. In other words, we need some high-priced early-adopter markets to pay the bills while we’re driving down the cost curve. EGS (and fracking) is unfortunately generally unacceptable in the key high-priced intermediate markets (e.g. Europe, Japan, Island and/remote locations) so it has no paid runway on which to run down its learning curve. That said, I’m not an impartial observer and I know there are a lot of smart people and a lot of smart money still pursuing EGS, so I’ll be intrigued to see where it goes.
JB: Oil and gas companies haven’t quite decided out how to view scalable geothermal concepts in terms of project valuation and risk. How do you address this issue?
JR: The closed-loop ‘conduction only’ solution is much easier to forecast accurately and reliably than other geothermal project types, dependent as it is solely on the relatively predictable heat conductivity of the surrounding rock - a property that isn’t going to change over the life of the project. As an example, Eavor’s thermodynamic model of the Eavor-Lite demo is performing within 2% of actuals and should continue in a predictable manner for decades to come. If you consider that against both the high initial exploratory and significant ongoing operational risks and uncertainties of other forms of geothermal energy, closed loop presents a much more straightforward valuation process and risk profile.
JB: Is Eavor planning on making some of its data and outcomes public? I presume interested partners would love to ‘kick the tires.’
JR: We speak publicly in general terms. As a start-up with a proprietary technology, the juicy details are naturally kept for our investors, partners or others with formal observation agreements.
JB: You claim dispatchability. Explain that in the context of geothermal.
JR: It’s a key innovation now that wind and solar have basically eaten the baseload market in most jurisdictions as they go green. The size and volume of our subsurface “radiator” is such that the working fluid itself acts as our battery. This “Earth Battery” can allow us to shape our output so that we can load follow. In California for example, we could shut down around midday when power prices tend to zero because of excess solar capacity and then ramp up 2 to 3 times over our baseload capacity to cover the evening demand surge (the “duck neck”) just as the sun sets. We are able to do this without any material degradation of our overall energy production in terms of annual KWhs produced. This is a unique capability compared to other geothermal solutions, or even any other clean energy solution (other than hydro, but that is neither scalable nor even that green).
JB: Have you done this, or is this a theory? What about inefficiencies created by stopping and starting the system, and I presume well degradation resulting from large temperature variations?
JR: We’ve modeled it and done it. There are minor inefficiencies introduced by the load shaping (circa 5%), but there are some small counter efficiencies that make the overall dispatchable power output a wash compared to a baseload output profile. The only real cost to dispatchability versus baseload is that dispatchability requires some oversizing of the ORC system (but not the subsurface radiator), to accommodate the higher peak output of a dispatchable system.
JB: What about solar and wind?
JR: Eavor-Loop is very complementary with intermittent renewables. In places like California, you are no longer allowed to propose what I’d call “naked” solar projects. All new utility-scale solar farms now need to include a reliable element of capacity. Most developers are accomplishing this by bundling in some batteries with their new solar projects. A better cleaner option may be to put Eavor-Loops under existing solar farms. The most important point here for oil and gas companies who have already invested heavily in intermittent renewables is that there is now a means for competitive differentiation based on their core competencies if (as we believe) Eavor integrated with solar turns out to be a more competitive solution than solar on its own.
JB: What are you looking for when considering strategic partnerships with oil and gas industry partners?
JR: The Eavor-loop is built on already proven oil and gas technologies. So who better to help us scale our implementations than a major international oil company (or two).
JB: What does the next 12 months look like for Eavor?
JR: We’ve got an aggressive multi-year R&D plan lined up and a good pipeline of development prospects. Fortunately, with a top-up round of $11.4 M CAD last month and a $30M CAD round later this year with great traction, funding isn’t an obstacle. The next hurdle will be project finance for individual projects, but we’re feeling pretty confident about that as well. Stay tuned.
Comments