With the growth of the renewable energy sector, solar and wind are leading the market for clean energy by offering the lowest levelized costs of electricity (LCOE). The table below shows the estimated LCOE (unweighted) both for new renewable and non-renewable generation resources entering into service in 2025. However, both solar and wind energy have one big problem: they depend on the availability of sun and wind resources. Because of this, dispatchable sources of clean energy, such as hydroelectric, biomass and geothermal, are gaining increasing interest. Geothermal energy is especially compelling because it projects to have a low LCOE, and R&D in the field has been increasing due to its potential to produce energy almost anywhere in the world, since the Earth’s heat is always available. Of these emerging geothermal approaches, Enhanced Geothermal Systems (EGS) has caught our eye.

How does it work?

The technology involves extracting heat from underground by creating a subsurface fracture system (in a process called hydroshearing, similar to fracking but producing smaller fractures) to which clean water can be added through injection wells. The water is then heated by the rocks mainly through a convection process and flows up through production wells in the form of vapor or steam. The steam is used to drive a turbine and produce electricity. The remaining water is then reinjected and the process starts again.

How big might it get?

EGS has the opportunity to upend the geothermal sector because of its potential to produce dispatchable energy for low costs and almost anywhere in the world. A report by MIT, The Future of Geothermal Energy: Impact of Enhanced Geothermal Systems (EGS) on the United States in the 21st Century, stated that “a cumulative capacity of more than 100 GWe from EGS can be achieved in the United States within 50 years with a modest, multi-year federal investment for RD&D in several field projects”. Furthermore, according to the US Energy Information Administration projections for 2025, geothermal power plants will be one of the cheapest dispatchable sources of energy, with a projected LCOE of around US$ 0.035 per kWh.

Innovation is on the rise.

We are excited about new innovators in this space, such as AltaRock and Geothermal Technologies, who are currently undergoing pilot projects to test EGS. Recent findings from their projects showed that a typical single-zone EGS with one injection well and two production wells might produce on the order of 1.5 MW of power. Additionally, using multi-zone stimulation on the same 3 well layout would result in 10-15 MW of power production.

An opportunity for the Oil & Gas industry?

While EGS is an exciting new energy field on its own, we’re particularly interested in it due to the cross-over potential it may hold for the oil and gas industry. EGS requires a host of specialty skills and expertise that the industry has in spades: subsurface evaluation; drilling; a range of completion techniques and requirements; and well production management. While geothermal is often raised as a potential tangential industry for oil and gas companies to expand into, EGS is the field within geothermal that is clearly most promising and where the industry could potentially have the most immediate impact.

Another interesting opportunity for the industry, though one that requires much further investigation, is the conversion of abandoned wells into geothermal resources. Recent studies carried out by the Environmental Protection Agency (EPA) found out that there are over 3 million abandoned wells in the US, and those wells are producing more than 7 million metric tons of CO2 eq in methane emissions per year. Well abandonment, at the same time, is expensive. We covered this issue recently in a P&A Roundtable: the average cost of P&A, when everything goes according to plan, is between $50k and $100k.

Could geothermal generally and EGS in particular be an opportunity to produce energy from abandoned wells? Since 2017, a few promising papers have been published on the topic:

• In a study of oil and gas resources in Santa Clara, Monterey, and Santa Barbara, where thermal gradients ranged between 4 and 7.3 °C/100 m, the bottom of an abandoned hole had temperatures between 40 and 73 °C for an average 1000 m depth. These rock temperatures were proven sufficient for low-temperature direct use EGS such as district heating, greenhouse heating, and aquaculture.
• Another research paper published in March 2019 demonstrated economical electricity generation in Pakistan at three diverse source temperatures and concluded that a 12 in. borehole heat exchanger, at a depth of 3 km can extract suitable energy to run a 3.2 MW turbine.

Our view is that, at present, much of the discussion around well conversion is overly bullish and requires more study. In particular, most discussion is very general and does not adequately address the varied state of abandoned wells, the varied nature of different oil and gas wells, regional geothermal resource differences, and, perhaps most importantly, the challenge on the surface about what to do with that heat resource. If it’s lower temperature, is there an industrial user nearby? If it’s sufficient for power generation, what does the regional market look like, how close is an interconnection, and is there transmission capacity available? (Not to mention addressing electric utility procurement barriers.) All of these factors, and others, will drive a range of costs and impact the feasibility of any given site. Surely, geothermal and EGS are not a catch-all solution for abandoned wells, but that does not mean opportunity does not exist, and it certainly warrants closer evaluation. We would love to hear your opinions on the topic, so feel free to get touch.

We also hope you’ll join us for our February 24th Energy Transition Series event, where we will be covering EGS.