For decades, geothermal energy has been a niche source of electricity available in a few areas like California and Iceland.
But a new wave of start-ups is aiming to expand geothermal into a workhorse of the global energy system. They are adopting advanced drilling techniques from the oil and gas industry to harvest the heat beneath the earth to generate power in many more places.
Fervo Energy, the most prominent of these start-ups, is tapping into a wave of investor enthusiasm about the technology, which offers the promise of clean, abundant electricity that is available around the clock.
On Wednesday, Fervo raised $1.89 billion in its initial public offering, more than what investors had expected even after a surge of interest from Wall Street. The company, whose stock will trade on Nasdaq, sold 70 million shares at $27 each, giving it an initial valuation of roughly $7.7 billion.
“It’s a real signal of confidence to the industry,” said Kate Adie, a research analyst at Wood MacKenzie, an energy research firm. “It’s signaling to investors that this is something that there’s confidence in, and it can work, and it can be repeatable and it can be scalable.”
Fervo, which is based in Houston, is building its first commercial geothermal power plant in Utah and planning others across the West. The company is betting that rising electricity demand in the United States, driven in part by the rapid growth of data centers, will propel geothermal.
“The exciting thing for us is this has now infused us with the capital needed to actually grow at the pace we’ve always wanted to, to grow in terms of putting gigawatts on the grid and solving this energy challenge,” Tim Latimer, chief executive of Fervo Energy, said in an interview with The New York Times.
Across the country, technology companies and utilities are hunting for energy to fuel the artificial intelligence boom. They are pouring tens of billions of dollars into solar energy, batteries and power plants that use natural gas. They are also investing in new kinds of nuclear power plants.
Geothermal has support across the political spectrum because it can produce electricity without any planet-warming emissions while operating 24 hours a day, unlike wind and solar projects. The Trump administration has also backed the technology, recently announcing $171 million for field tests.
“We’re at the very beginning of this potential revolution that I think we’re entering into in a big way,” Kyle Haustveit, a former petroleum engineer and now an assistant energy secretary, said about geothermal at a March conference. He compared it to the early days of the shale revolution that unlocked enormous amounts of natural gas.
Traditionally, geothermal plants have been in places with underground hot water reservoirs close to the earth’s surface. Only a few locations are blessed with such geology, including parts of California and Nevada in the United States. As a result, geothermal provides just 0.4 percent of electricity in the country.
Yet, dig deep enough anywhere and you will find lots of heat, which dozens of start-ups are hoping to tap.
Mr. Latimer said until recently many people did not have confidence that companies like his could successfully expand geothermal energy’s footprint.
“There was such deep skepticism from investors that it was hard not only for Fervo but the entire geothermal ecosystem to actually capitalize the business,” said Mr. Latimer, who previously worked in the oil and gas industry. “I think people are waking up to this opportunity and seeing that we’re going to need all kinds of new technologies to close the gap of how much power we need.”
Fervo drills pairs of wells that extend thousands of feet down into hot, dry granite. Then, using controlled explosives and high-pressure fluids, it creates cracks between the wells. Finally, Fervo injects water into one well so that it moves through those cracks, heats up to more than 300 degrees Fahrenheit, and comes out the other well as steam that turns turbines to generate electricity.
Founded in 2017, the company expects its Utah power plant, called Cape Station, to start sending power to the grid this year. It will ultimately have the capacity to generate at least 500 megawatts of electricity — power that Fervo has agreed to sell to Google, Southern California Edison and others.
The theoretical potential is enormous. The United States has about 3,800 megawatts of conventional geothermal capacity, mostly in the West. Fervo has leased lands with the potential for more than 40,000 megawatts of capacity, the company said.
Yet enhanced geothermal power faces major barriers.
Geothermal companies need to significantly lower costs of drilling and setting up their plants. In its filing, Fervo said that Cape Station would cost approximately $7,000 for each kilowatt of electricity it produced. That would make it cheaper than new nuclear plants but still more than twice as expensive as natural gas plants.
Geothermal executives say those prices will fall quickly, as the industry becomes more efficient at drilling and optimizing wells, similarly to the way oil and gas companies have. That, analysts said, could lower geothermal costs to roughly the same level as natural gas plants in parts of the West over five to 10 years.
One big concern, however, is how quickly geothermal wells might cool off as water is pumped through them. If they cool off after just a few years, companies will need to drill new wells, raising costs.
“I think one of the biggest question marks that the big capital providers are still waiting to see is the decline,” said Mr. Haustveit. “We need to get real field data.”
Some critics also worry that drilling for geothermal energy could increase the risk of seismic activity or contaminate local groundwater.
“No energy source is completely devoid of environmental or public health risk,” said Jeff Deyette, deputy director for clean energy at the Union of Concerned Scientists. He added that it was “very much a good thing to see a company like Fervo and its piloting of next-generation geothermal technologies be successful.”
In its I.P.O. filing, Fervo lists other potential risks, including the possibility that data centers might not use nearly as much energy as expected or that its customers will gravitate to other technologies like nuclear reactors. Fervo has yet to turn a profit.
Today, most U.S. geothermal power plants are owned by companies that also produce power in other ways.
Ormat Technologies, based in Reno, Nev., is the leading developer and operator of geothermal power plants. Investors value it at $7.5 billion, slightly less than Fervo’s initial valuation, though Ormat also has waste heat and energy storage projects.
While Fervo is pretty far along, other geothermal start-ups are hoping to follow quickly.
Sage Geosystems, also based in Houston, is pursuing a technique to inject water into hydraulically fractured wells and use heat and pressure to store and generate electricity. Eavor Energy, based in Calgary, Alberta, is building what is essentially a large underground radiator to provide heat and power to a town in Germany.
Another company, Controlled Thermal Resources, is planning an initial public offering in the fall. It is developing a geothermal energy plant at the Salton Sea in California. The company plans to locate data centers at the site and extract critical minerals from a brine that is a byproduct of its process.
“There’s a lot of innovation in this space, and very few companies are trying the exact same thing,” said Ann Garth, a geothermal researcher at the Clean Air Task Force, an environmental group. “We’re still in the early stages, so it’s good to see so many people trying different things.”
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