• Decarbonization
  • Oil and Gas
  • Department of Energy
  • COVID-19
  • Energy Technologies

Geothermal Energy Can Help Meet Climate Goals and Provide a Lifeline for Oil & Gas

Isabelle Branco-Lo
Jan 05, 2021

Guidehouse Insights

In October 2020, the Utah Frontier Observatory for Research in Geothermal Energy, funded by the US Department of Energy (DOE), announced drilling on its first highly deviated deep well for an Enhanced Geothermal Systems (EGS) project. EGS are a method for geothermal energy extraction that drills deep into solid, non-porous rock. The well is then injected with water that is heated by the earth, which can be used to make steam and create electricity. This process differs from conventional geothermal power projects that drill into preexisting hydrothermal reservoirs, which are concentrated near large tectonic faults. In the US, feasible locations for conventional geothermal projects have only been found in the west near California, Nevada, Hawaii, and Alaska. However, EGS projects could theoretically be located most places in the world as they don’t require existing hydrothermal reservoirs near tectonic faults.

In 2009, DOE announced funding of $84 million through Funding Opportunity Announcements and announced another $80 million under the American Recovery and Reinvestment Act specifically for EGS projects. However, drilling efforts were largely redirected to the shale industry as it took off in 2015. Now, EGS may play a key role in meeting clean electricity goals in the US.

The Biden Administration Can Encourage Geothermal Energy

While EGS is one of several techniques to extract geothermal resources to generate clean electricity, its market fungibility makes it attractive to some unlikely players in the industry. As oil markets reel from oversupply and subsequent low prices from pandemic-induced low demand, many skilled workers in the oil industry have lost their jobs. At the same time, geothermal startups need expertise in drilling to develop projects to scale. Investments in geothermal energy would give oil companies a way to shield their portfolios from the oil market, which is unlikely to ever recover to pre-pandemic levels. Incentives such as production and investment tax credits or favorable policies to streamline permitting processes from the incoming Biden administration could encourage investment.

States Look to Geothermal Energy for Heating

EGS and other geothermal extraction projects to create electricity often require large capital investments and have long project timelines. However, harnessing the earth’s heat for heating and cooling is a much simpler cost-effective option for many homeowners. In addition to building electrification and energy efficiency, cities and states are looking to geothermal network applications for heating and cooling to decarbonize their building sectors. In New York’s Westchester County, where there is a natural gas moratorium on new commercial and residential gas hookups, Con Edison will spend $175 million on incentives for air- and ground-source heat pumps over the next 6 years. This will be cheaper for homeowners in the long run, as DOE states that consumers could cut their energy bills by nearly 65% with geothermal heat pumps compared with traditional HVAC systems.

A Cambridge-based environmental nonprofit, the Home Energy Efficiency Team (HEET), found it would cost $9 billion over 20 years to fix aging infrastructure in Massachusetts. It has advocated for gas utilities in the state to install hot water loops instead of replacing damaged or aging gas pipes. As a result, Massachusetts’ Eversource Gas will pilot three of HEET’s geothermal projects over the next 3 years.

Whether for electricity or heating, big oil & gas companies could accelerate the adoption of geothermal energy through investment in project development and the transfer of skilled labor. Such unprecedented partnerships may define the next decade of the global clean energy transition.