B (2:51)

Hey everybody, welcome to the show. I am Steven Lacy, the co founder and executive editor of Latitude Media and your co host in this wonderful trio. Jigar Shah is the co managing partner at Multiplier. How are you sir?

D (3:05)

I'm fantastic.

B (3:06)

Ready to deploy.

D (3:08)

Always, always deploying.

B (3:10)

Caroline Golan is the CEO of Envision Energy Advisors. How are you?

C (3:14)

I'm well, I'm well. I'm hopefully going to avoid getting the flu that everyone seems to have now.

B (3:20)

You seem to indicate that you are on the precipice.

C (3:23)

It's really a chess game and like how many herbs can you take and like how many people can you avoid in a matter of a month and a half?

B (3:30)

Yeah, well, this might be your last public appearance before you're horizontal on a bed for a few days.

C (3:36)

If I go down, you are the last who I talk to.

B (3:41)

Let's talk geothermal 2026 could be the year of the mega IPO with OpenAI, SpaceX and Anthropic all possibly going public. But what about all the hot rock lovers? There's an IPO for them too. Last month Fervo Energy, which is seen as the leader of the crop of next generation geothermal companies, started preparing for an IPO. The company has raised about $1.5 billion and has been on the IPO watch list recently. It caps a period of strong investment activity in geothermal, which wasn't getting much attention until a few years ago. And now over a billion dollars in venture capital has poured into startups in the last couple of years supporting Fervo, Sage Geosystems, Zanskar, Quaize, Ever, XGS and Dandelion. And all these companies are pretty different and we're not going to get into all of them, but I think we'll unpack a few. At the same time, some of these companies are signing contracts and partnerships with the large tech companies to serve future data center operations. And the industry's ties to the oil and gas sector put it in the good graces of the Trump administration. So there's a lot of alignment right now and the big question is whether geothermal is on a path to attract a bigger pool of investors. And I think we should just start with the Fervo ipo. Jigger, you have described this as a watershed moment, but not an unambiguously positive one. What do you mean by that?

D (5:01)

Well, look, I mean I am a big fan of Tim and, and, and the team over at Fervo. I saw them at, in Houston when we were there for the Power Resilience forum. And so, you know, just really rooting for them. But I think that, you know, we can be objective around what it takes to win. Right. I mean, the Department of Energy wrote a liftoff report for the General Power, showed that costs were coming down, that like a lot of the best practices out of the hydraulic fracturing effort has been transitioned over to the geothermal sector. Right. The Department of Energy has the forge facility in Utah that was used to test all this stuff out. But to really get their costs down, our estimates were that you had to build 5,000 megawatts of geothermal by 2030, which would cost at least $30 billion worth of CAPE. I would say that this IPO is on track to getting the first 400 megawatts completed. And then they, as we all know, have secured every good spot in Utah so they could build more. But I think that their mental frame is one of, let's do this one. Let's learn what we can learn from this one. Let's do the second one. Let's learn what we can learn from the second one. And that approach might miss the moment. The hyperscalers are willing to do the dance right now to sign contracts for power purchase agreements. I don't know where their headspace is going to be at in 2030 or 2031 in terms of signing these contracts. And right now, the prices are above $100amegawatt hour. So, like, you know, we're not on track to knowing whether, you know, folks are going to be in the mood for spending that kind of money in the future. Right. So. So part of my concern is that I think that the potential for geothermal is very high, but their appetite for risk and meeting the moment while the administration is super bullish on them, and the oil and gas industry is clearly sort of entering a trough, you know, seems difficult to parse out.

B (7:13)

Caroline, I want to get your initial thoughts. Like, you're very familiar with Fervo. Google was an early investor in Furbo when you were there. How are you evaluating this moment for the company?

C (7:24)

Yeah, I mean, I think same as Jigger. I'm a huge fan of Tim and his team. We spent a lot of time together. I think what Jigger is sort of zeroing in on, though, is that geothermal as an actual replicable resource at scale across the country, across the world, is going to need to move faster if it's going to sort of eclipse what could be new pipeline development and return sort of reliance on natural gas. And I think that Tim is an incredibly disciplined man, and I think that's the way he's built his company and I think he's had options to scale and maybe be more riskier. But he's pretty determined that he's going to prove that he can do what he said he was going to do and then he'll go from there. And that's, you know, I think that's an honorable way to build a business. I do tend to wonder, though, you know, when you have such a technology that's so high upfront capital costs and has a lower opportunity for scale, it's not just going to be Fervo. Right. And so I think we'll get into some of the other companies. But why that's all gone in, why the industry has rallied behind Fervo is I think, really because of Tim's discipline and potentially because of Google and the oil and gas industry. And I think that those are a mixed bag when it comes to signals about whether this is going to happen. And I think that we have to be really cautious when looking at the hyperscalers investment as a demonstrative signal on whether or not that technology is scalable and can be competitive on a national stage. And we can get into that, as I'm sure we will. But I think it's just, it's an interesting place. And I also think that Tim's now going to have to have a discipline to respond to sort of quarterly earnings. And he hasn't had to do things like that before. And so I think it's going to force maturity. And I think he'll get there. I mean, I have all the confidence that Fervo will get there. I think my question is, is that actually enough? I think no. The answer is no. And I think we have to think through what types of technologies should we be investing in that have low capital investments on the front end and can scale quickly. And that may not be this one.

B (10:04)

My understanding is that they're going public so that they can finish their flagship project in Utah.

C (10:11)

I think that's correct.

B (10:11)

How do we interpret that? Like, is there not enough low cost debt out there to support the project? Why go public?

D (10:18)

Public, you know, going public is just a financing decision. So I don't, I don't think it's anything other than that you've got five different options in front of you. This is one of them, and this might be the best option. So, like, I don't, I'm not, I'm not criticizing this, that or the other. I guess what I'm criticizing is really just the mental frame that the clean tech Sector often gets itself into around being disciplined. Right. I mean, the nuclear industry is clearly not disciplined in any way, shape or form. Like, if you look at, like, Nano or you look at, like, Nuscale or you look at, like, Oklo or all these other companies, like, I don't think that they actually think that they are, you know, sort of tied down to the same rule set that we're applying to Fervo. Certainly Tesla has never been tied down to the rule set that we're, you know, putting on Fervo. What about Rivian? Like, I just think that when you think about just how much potential this technology has, there's like 40 gigawatts of traditional geothermal that we think we can build through companies like Zanskar and others. That's a lot. 40 gigawatts of 24 by 7 power. Then you've got the enhanced geothermal stuff. You could build hundreds of gigawatts of that stuff one day. Right? This is exciting, cool stuff. And Lord Almighty, we're talking about it. It's the most boring thing on the planet. And so I just think that they are so disciplined that they're not, like, feeding the narrative. And the narrative matters, right? That's how a stock price goes up or down.

C (11:53)

Yeah, that actually, that's an interesting point, Jigger. Like, there's part of me that's always so reticent and paranoid about feeding the narrative as being a person who used to be just feeding a narrative sometimes. But I think that there, you know, you make an interesting point, which is that, listen, the rules have been thrown out across the board. And why do some politically advantaged or more reckless investment take center stage over the more disciplined and thoughtful companies? And is that just a news cycle? I don't know. I mean, I wonder for you, like, when you were at doe, I mean, how did you all approach sort of the endless, this insane news cycle around advancing one tech versus the other? And how did you manage that internally? And do you think that's really playing into this?

D (12:52)

Well, I mean, we certainly only gave loans to people that went through the proper process. Right? But ultimately those loans required you to raise equity. Right? And so if you were pumping your stock in a way to be able to then do it at the market vehicle by which you could then, you know, sell stock and raise $200 million. Like, I don't know that I cared all that much how you showed me that you had $200 million in the bank to meet your equity match for this $800 million. You were borrowing from us. Right? But like, but you had to show the equity match, right? And so like, look, I think that part of this for me is, is that we are in this weird place right now where on the one hand the oil and gas sector still has a terrible earnings multiple. They're still at being valued basically at runoff costs. The classic BCG cash cow model. How much money you're going to make in the future, you dividend it all out to shareholders. That's how much your stock price is worth. Fantastic. On this side, we clearly are entering an electricity super cycle, like clearly going into 3% growth per year, 4% growth per year. Right. We gotta meet it. Somehow the natural gas industry has overblown their ability. I just talked to two more people yesterday at this CSIS conference and they were like, yeah, behind the meter, natural gas won't work. We can't get beyond two or three nines reliability. But Lord almighty, that's not the narrative that the data center companies are putting out there. They're like, we can run this thing.

C (14:33)

Not the narrative they're giving to the data centers. Right?

D (14:35)

No, of course people are just lying. But like Caterpillar stock is up like 20% on the back of selling gas turbines. This is one of the largest corporations in the world who presumably have very smart stock analysts who are being told that you could just run a data center off of multiple 20 and 30 megawatt solar turbines. And so, so on this side they get to do whatever they want on the narrative side. But on our side, we have to judge harshly all of the entrepreneurs in our sector who might overblow the potential of their technology. I don't believe in that double standard.

B (15:15)

So if this goes well, what do you think the reasons are? What is the narrative for investors? Is it that Fervo has a fundamentally groundbreaking technology? Is it a load growth story and geothermal's role in serving it? Is it favorability from the Trump administration or a combination of all those three? What is the possible narrative for investors?

C (15:38)

To me, I think Fervo is an example of the boy scouts of the industry right now. I think that what Fervo has done and continues to do is sort of rebuke all this hype and narrative. That Jigger desperately wants to be out there, and I understand why, and sort of just put their heads down. They know we're going to just commit to drilling and to producing what we think we need to produce. And that's a long game. And I think there's still investment out there that is interested in disciplined engineering. I think the problem is that doesn't feed the 24 hour hype news cycle that makes or breaks stocks based on releasing an MOU that has no teeth to it, right? And so that's, that's sort of the difference that's going on here.

D (16:34)

So let me answer it a slightly different way, right? So if you're geothermal, right? The problem that geothermal has is the traditional investors, like, think of like Brookfield or Nextera or any of the other folks that are coming out, right? They don't want to buy your project at PPA signing, right? Because they're like, this looks really risky. So here's a list of six milestones we want you to reach, right? We want you to drill the well, want you to get this inspector to come out and say that the well was drilled properly to the code and we'll actually have this amount of heat production. Then you've got the turbine and things that you build on top of the ground to actually turn all that heat into electricity. At which point in that milestone list does Brookfield say, all right, this now meets the risk profile that I'm willing to have to buy the project and I'll recycle Fervo's capital back into the corporate parent, which then they can use to invest in the next set of risky milestones, right? And right now my sense is that it's going to be at a year after the project is completed and producing power and that they actually successfully produce power for a year. Right? The next stage might be, well, we'll buy it at cod, right? We'll buy it at closing, right? The next stage might be, we'll be will we willing to buy it after the drilling is completed and the inspector comes out, but before the plant on top gets built. Because that's actually really easy stuff and you can just hire Bechtel or somebody to do that, right? The faster that money that they've raised gets spun into the next project, the more projects they can build, right? And part of the way you do that is by creating a fear of missing out, like sort of vibe, right? You would like go to Brookfield, say you're an idiot because you are so conservative that you're not coming in. I got EQT to come in. I got this guy to come in. I got that guy to come in, right? And part of the way you do it is by saying, I'm going out and signing contracts with Meta, I'm signing contracts with Google, I'm signing contracts with Amazon, Right. I'm doing all this stuff. Do I know how to do it? Yes, I do. Of course I know how to do it. It's 10 gigawatts. I'm gonna get this done. And then you go out and get a European pension fund or an Australian pension fund to put a specialty facility in place for you. And then you say to Brookfield.

C (19:02)

Ha ha ha.

D (19:02)

You guys missed the boat. Right? And then Berkshire Hathaway wants to get involved because they own all of the geothermal plants in the Salton Sea as well as, like, the Chevron ones. You're like. You're an idiot. You have all this geothermal exposure. Why aren't you going all in? Right? And, like, it works every time. These guys are not as smart as they say they are. Like, you create, like, this FOMO loop, and then people are like, oh, I got the Saudis to come in. Oh, sorry, you missed the boat. And whatever it is. But, like, if you're Fervo or you're Zanskar or whatever it is, you want that FOMO loop, you want people to believe you're going to get to 10 gigawatts of deployment. That's how your stock price gets to 20 billion, right? Like, it's not going to, like, go up there because you guys showed engineering discipline every single week, and then you just kept going up the latter. Right? That's not how this works. And so, I mean, you build whatever company you want to build. But I'm just saying we are in a moment right now where everybody wants you to win and everybody wants to lean in. Give them a reason to do it.

C (20:06)

Unless you're a nuclear company. And then Jigger has a very different explanation for that hypothetical.

D (20:11)

No, no, I'm saying that they are doing that. Right, and I'm explaining how they're doing that. Right. Like, I'm not. Look, I mean, the. The story on the nuclear side is they absolutely are.

C (20:21)

They're running the high street. Yeah.

D (20:23)

That the. That the. The military bases are all going to buy a nuclear plant. You get a military base, and you get a military base contract. Right. Do I know that that's going to happen? I don't know. But, like, you know, last week, they just canceled the. The need for a NEPA evaluation for advanced reactors, which I fully support, by the way. It was always unnecessary. But, like. But, you know, the stock market views that as a positive tailwind, and then all their stock prices go up. I mean, I'm just saying, like, you.

B (20:55)

Know, like, play the game, Caroline. Talk About Google's initial investment in Fervo, like what was it? How did the partnership work?

C (21:04)

Yeah, I mean it's been an, it's evolved over the years and I think that the ferval relationship with Google is a really a good example of how Google can create a hype cycle about something that while an excellent technology, and I think we all agree we want Fervo to succeed and Fervo needs to succeed, was done so in a way or with internal market signals that don't, can't be replicated externally. And I'll explain that. So we initially invested in Fervo based on in the same way we initially invested in Kairos, which was that we had done our 247 carbon accounting across our grids everywhere. And in each location we determined what technologies were needed to meet full decarbonization of our load and what technologies which at scale we believed would be the least cost path to meeting that. So it wasn't like we said, we need nuclear everywhere, we need geothermal everywhere, we need long duration storage everywhere. It was very relative to whatever the dynamics of that grid were going to be. So we recognized where we were going to need nuclear in the Southeast, we recognized we were going to need geothermal in the West West. And that was our internal signal. And we had, just like any of the hyperscalers, we had a budget where we could pay a premium amount against what would be a market rate and then we had an additional premium amount if we thought we could scale it. And those were the internal signals that we had. Now the great thing about that was that Google did amazing due diligence and Michael and Maud and Lucia on the technology teams did an amazing job at determining the technologies that were going to be the most likely to succeed. Where that breaks down is that the market signals that exist externally, if you're held to a P and L, if you take equity in a company and you expect a 20% return if there's some existing market signal around capacity ancillary and energy that they're going to be able to play in. Those didn't exist really for our investment. And to some degree we made the case and we tried to make it work. But largely we were being driven by what is the cost to decarbonize and what's the right technology in that location. So Fervo kind of came to the top because we needed a partner in the west, we needed a credible partner in the west. We needed a partner who we believed we could work with, Berkshire with and we needed a technology that we believed was critical in scaling in that part of our portfolio. That doesn't mean we were looking at Fervo for Europe or Fervo for Asia. It meant that we were looking at Fervo in that location. And, you know, coincidentally, that's where Tim wanted to grow as well. So it worked out. And that was sort of the initial investment.

B (24:31)

And what's. What was wrong with that approach?

C (24:34)

I don't think that anything's wrong with that approach. I think what's important is for the market to recognize that Google's initial investments in 247 technologies are not held to the same scrutiny as private equity investments or as going public is going to be raising debt or is even what you would say replicable from other customers as offtake. So we are that early tech seed investment in the same way that Engine Ventures is investing in those early startups. And so to look at that as a signal that it's good for everybody else, I think is disingenuous, because Google didn't take the investments in Fervo or investments in Kairos in the same way that they took investments like Waymo. Right.

D (25:31)

You weren't sending that signal like people.

C (25:33)

I don't think we were. I don't think we were. But I do think it feeds the hype. The hype. I think it does feed the hype cycle that you're talking about.

B (25:40)

Jigger Tigger's all about the hype cycle.

D (25:42)

Hyper's gonna hype.

C (25:43)

Yeah. And that's. And that's the thing that I think people need to understand that, like, Google did all this, Microsoft does all this because they truly believed, at least in the beginning, that this was the right way to spend their capital, that this is what the future needed, that this is what the grid needed. And so I don't.

D (26:01)

I don't see the distinction, Caroline. Like, I just think, like, when Google or Stripe or Microsoft chooses a CDR company to buy, like, you know, carbon credits from, or they decide that they're going to invest early in a nuclear company like Kairos. I mean, Kairos is by far the most disciplined nuclear company on the planet. Right. So I think that is a data point. I agree that it doesn't meet the tpg, Apollo data points. It doesn't meet the Brookfield Berkshire data points. It meets whatever data points you were providing, but it is like. Like it is a source of momentum.

C (26:39)

Oh, and it should be. Yeah, yeah.

D (26:41)

It absolutely should be clean tech sector. You know, like, I mean, the big mo kind of matters. Right. Like, I Don't think the best technology wins in clean tech. It's the one that can raise the capital, attract the talent, execute on their milestones. And a lot of times like the number three company and from a technology perspective wins instead of the number one technology. And I think that's fine.

C (27:03)

I think what it's important to understand with Google is that we were looking for those disciplined companies. We were looking for the ones that we thought they needed steady capital, they needed a partner. It wasn't about being a flash in the pan. And that is a little different from where the cycles are right now. Now what I think is important to understand is when we first invested in Fervo, it actually wasn't a capacity play at the time. Right. It's similar to Kairos. It was really like, how do we decarbonize our footprint play? It wasn't until we created the CTT with Berkshire did we start looking at it as a capacity play.

D (27:47)

That was the clean transition tariff.

C (27:49)

That was the clean transition tariff, Right? Yeah. And so that was when we started saying, okay, how do we take the portfolio of our 247 investments which were done, you know, because of a desire to decarbonize and were done through the lens of what is the best technology, what's the best, most disciplined company. And I've said this before, culture really mattered for Google. It really mattered.

D (28:15)

Oh, I totally agree. One other thing I would just say though, when you say Berkshire, I think Berkshire is big. I think what you mean to say there is that that Berkshire owns Nevada Power and several of the other utility companies.

C (28:26)

So this was, it was an Nvidia.

D (28:28)

Utility companies, not their unregulated.

C (28:32)

No, we were, I mean, but at the, but we were partnering at the top with Berkshire to do this. And you know, and Scott Thawne was supportive of it and he saw it as, you know, a way to meet multiple needs in the state. And you know, Doug at NVE was also supportive of it and we had a really supportive commission. And so it was first time you were able to sleeve capacity and sort of a contract for differences on your existing tariff. And that's going to be replicated across the country and I think we'll see a few more of those this year. But that was actually when we took the 247 portfolio and said, how do we make this capacity? And that lens comes with a different set of variables to scrutinize. Right. And that lens makes it harder when it comes to. Comes to scale. And so you have to. And Google's in this space right now. And I think everyone's in this space right now. We talked about it when we were talking about the investments in Oklo and TerraPower is like there's different pressures now. And so internally, what was driving investment for the good of decarbonization, that's going to pivot. And I suspect that investments will look different going forward.

B (29:51)

Do you think that they're going to pull it off, that the story that they will start telling investors is the real story?

C (29:57)

Well, I think Favo is going to pull it off and I mean, I think that they have right sized their ambition and I think that they will meet everything that they've publicly acknowledged that they will meet. And I think that goes back to this clear theme that we think Tim's very disciplined. And whether or not Jigger thinks he should be less in his PR story is another question. But you know, we can't get his PR story.

D (30:24)

I mean, I think he should invest heavily into early stage deals. But anyway.

C (30:28)

Well, but that's a different, I mean, and that's the difference in the business models. Right. And so I think what, what Fervo has done or the theory of change that they are trying to prove is that you can follow the stepping stones that created the oil and gas industry's dominance and pivot it for geothermal. That's not the same business model that all the other geothermal companies are using. Some of them are just piggybacking on existing infrastructure and some of them are going completely around it.

D (31:02)

No, no, I agree with that. I think Fervo is amazing. I like, want nothing but the best for them. I think men with rugged good looks and facial hair should be able to be successful.

B (31:13)

I think that's a prerequisite for geothermal.

C (31:16)

And all women with rugged good looks, facial hair, I guess too.

B (31:21)

But you have to have some rugged looks to be in geothermal.

D (31:24)

Yeah, exactly. But, but I, you know, my North Star is relevance. And I think what the DOE said in the geothermal liftoff report is to get to that sort of cost reduction curve and to get to, you know, double digit prices per megawatt hour and not triple digit prices per megawatt hour that you needed to get to 5 gigawatts by 2030 and not one company. It could be the entire sector. But I think that the entire sector needs to get that big to get Halliburton and SLB involved, to get all of the supply chain folks ramped up to do all of the things they want to do. And so I am always going to be on the side of how do we get them to 5 gigawatts and $30 billion by 2030 as opposed to how do we get one 400 megawatt project completed?

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B (33:37)

Let's talk about Sage Geosystems now. So a few weeks ago Sage closed a $97 million Series B. They're partnering with Ormat. They're focused on brownfield development, whereas Fervo is focused on greenfield development. How does a company like Sage Jigger compare to Fervo? You think that they're more of like a technology provider now than a developer, is that right?

D (34:02)

Yeah, I think Sage is an amazing company, to be clear, and I had the great fortune of spending a lot of time with them when I was at doe, but their business model was less about geothermal power and was more about long duration energy storage. Right. So a lot of what they were doing was saying when the Texas market has negatively priced power, we can put pressure down into the ground and then we can bring that pressure back out as power right when electricity prices are high. And of course like instead of that being a negative loop, right, like a battery where you lose 20% in the round trip efficiencies, you're actually getting more energy added to the system by having hot, you know, like sort of rocks Underneath, right? And so you're actually getting geothermal power and you're actually. But also supplementing that by putting energy into the ground when electricity prices are negative. And there are a lot of people who are interested in that. So you can imagine like battery storage took off like a rocket ship the last three years in Texas. And so I think Sage's model is fantastic. I think the deal with Ormat though is an interesting one. Like, I mean I know the Ormat people and love them, but they are not flexible people. So in general, like this is a deal where Sage said we're a technology company, we need somebody to actually execute on our behalf. They're really giving their technology, in my opinion in this deal to Ormat and saying you need to use this technology to become more commercial faster. Which I think is fabulous. To be clear, I don't think that the Sage guys did anything wrong here. I think they did exactly everything right here. And it's something that I think a lot more clean tech companies should do, which is once you, you've proven your milestones and your technology really works, you find an extraordinary operator like Ormat and say you take it to the next level and you have access to very low cost capital that we don't have access to. And so you help us make one plus one equal three, which I think is wonderful.

C (36:13)

So I think I agree with Jigger on the smart pivot from Sage because I think this was what happens with a lot of, you know, proven, early proven technology companies is there's a big difference between, you know, being engineers, improving a technology can work and then scaling a business model that's going to integrate with the rest of the system. But if you're looking at a portfolio, when I think of Fervo, I look at Fervo and say this isn't if you build it, they will come potential, this is a colocation potential. This is they can go anywhere and build 24, 7 base load power and then you can build systems around it. If I look at Sage, this is a play that says I can arbitrage, I can create capacity on the system, I can integrate into a grid that's already stressed and those two together make a really powerful play. But I would look at them and utilize them differently if I'm building power, say for load in an investment portfolio. And I think what it sort of says about the investments in Sage and sort of meta is that they're looking at this less as a, hey, we're going to co locate and micro grid off the system. But this is a technology that can find us capacity in a system where we need to grow, where we can't build it potentially. And so that's how you look at these differently. And I think one of the interesting things about, about Fervo is that the west is going to be a huge growth market for data centers moving forward. It has to be because PJM is collapsing. But also just in terms of how much power is going to be needed and how much new power is going to be needed. And so how you are investing probably is indicative of where you think you're going to build.

B (38:13)

And so Meta signed a 150 megawatt power purchase agreement with Sage. How does that differ from the approach that Google took in partnering at a deeper level with Fervo?

C (38:24)

Well, our partnership with Fervo was sort of stairstepped in multiple different ways. I think the Meta deal, I go back to what I said. I think Meta is looking at this as we need to invest in options that can create capacity on stress grid. As Jigar was pointing to, this is a space where it's like, hey, we actually one plus one equals three in terms of dispatch if we store at the right hours. Right. Whereas Fervo was really about brand new baseload that could be independent from the grid if needed be. And so I think that that's probably, I can't say for sure that that's Meta's theory of change, but given what what Sage is offering, it's more flexible, you know, and it's definitely more dynamic when you think about integrating with an existing system and being able to potentially be layered or partnered with other technologies.

B (39:21)

I guess I'd like to hear your thoughts on why we are having this conversation now. And by that I. We're sort of recapping a lot of commercial progress. We all know that these technologies are getting much more serious consideration in an era of load growth. But like, what is different in your mind for the geothermal industry? That wasn't true a decade and a half ago, two decades ago, when we saw this long fade of interest in the industry.

D (39:50)

I could give you an answer, but like it's not.

B (39:53)

You're always not true.

D (39:56)

No, look, I mean we manufactured out of whole cloth this entire hype cycle around geothermal at the Department of Energy. Like if had we not written the liftoff report and instead I wrote a liftoff report about next generation hydro technologies, we'd all be talking about hydro instead of geothermal. Like, I mean when you think about geothermal's history It's a dumpster fire. Like when you think about how many loans we provided out of the loan program's office to us Geothermal and all those other companies, like, you know, none of them really succeeded very well. Now a huge amount of progress has been made, right, on hydraulic fracturing around the forge technologies, around a LED discovery with Zanskar. So like, I mean, but I could also rattle off the exact same list for hydro. And when you think about like what GIA has done at Natal in terms of fish friendly turbines, when you think about like what's happening on the automation of hydro, all the hydro projects are like, if you go into a hydro project, it looks like a nuclear plant where everything is like analog and all of the controls are basically done by like vacuum tube and just upgrading all those controls to digital and then trading in the market. Most of the hydro companies are now just finally hiring power traders that they haven't had work on their system. I could do the same thing for you. This is part of what I'm trying to explain to people is that everybody wants this stuff to be technology led. Oh, these technologies are amazing. Da, da, da, whatever. No, totally manufactured. And when you think about the venture capitalists, this no way that they actually made any of these decisions on their own. The reason they invested in nuclear and geothermal is because we told them to and we hyped it. Right. And they didn't make the same investments in hydro, to be clear. Right, but we could have done that too. The hydro industry just couldn't get their act together to work with us to like put the liftoff report together. Right. Like do I think that geothermal actually has this potential? Yes, all of it was truthful. I'm not suggesting that anything was lied about, but I also think we could double the entire amount of hydro production in this country just by using more efficient turbines and more efficient technology that no one is hyping at all. That I can tell. And I don't think any of the FERC processes to relicense hydro is happening because nobody has hyped it. So nobody in the Trump administration wants to fix it. And the vast majority of the hydro developers that I talk to have a hell of a time raising capital as a result.

B (42:26)

Caroline, how much of this new enthusiasm about geothermal is about technology fundamentals and different approaches to project development versus the story?

C (42:35)

I mean, I reluctantly have to agree that the story is a big part of this, obviously. And similar to jigger even. I can't say that it was just Google, but I'd like to think that Google's initial investment in Fervo did something to feed that hype story. I think it's just an important point to recognize that we did it it from the perspective of diligence and discipline and what's going to be the best tech in the market. We weren't chasing a hype cycle when we decided what technologies to invest in. I think every hyperscaler is chasing a hype cycle now. And so it's just a very different world than when we first invested in it. But I also think that why are we doing this now? I think because who, who is investing? The companies that are investing are the companies that can put men on the moon and create driverless cars and can create AI. You have the massive tech companies that have the mentality of we go in, we break things and we try to fix them and we say we're sorry maybe and we're gonna disregard whatever rules were put in place beforehand. So I think putting my foot down.

D (43:53)

And at space based data centers, my foot is down.

C (43:58)

I don't know how many times that was pitched internally. It'll happen. Mark my words, it'll happen. But that's also a big part of this is like there is a sentiment that comes along when a company like Google says we think this technology is good, good, that means something. Right? And I think that is one of the most beautiful things Google has done in the energy space right now. And I can't disregard the fact that when I would sit there with commissioners or governors or utility CEOs, they were all sort of like, yeah, well if Google thinks that this can happen, then we should give it it, you know, a real, a real look. See, right was the exact words that were used.

D (44:52)

But I'll contrast that with Nest. Right? Google made a big play with Nest and it wasn't until we wrote the VPP liftoff report out of DOE that people were like, let's do this. And then Google spun out the Nest group and merged it with Ohm Connect. Right.

B (45:07)

Well that had been in the works for a while. I mean like that was part of a long.

D (45:10)

But they were not getting anywhere and they're still not getting anywhere.

C (45:13)

To be clear, the difference with Nest is you are going up against a customer acquisition regulatory model that was underappreciated at first. This our investments were really about forget the box, go outside the box, find a few partners who are willing to do it with us. And TVA was willing to do it with Kairos because the leadership at TVA for years has been passionate about nuclear development.

D (45:41)

I mean, Jeff Liosh, we'll see if the news. The new group that's there now that Jeff is gone is going to continue the enthusiasm.

C (45:49)

Don is just as enthusiastic. He's just got a different administration to work with. And the same with Fervo. We had a willing utility partner. We would not have gotten that deal done in many utilities across this country.

D (46:08)

You know, I'm not disagreeing with you and I'm not trying to take credit where credit's not due. And obviously I'm a, a little bit hyperbolic, but like, but I would just.

C (46:18)

Can we record that?

D (46:20)

I mean, you could like play it on repeat. I'm hyperbolic, but the reason I do it is not because I don't know what I'm doing. I do it because people need permission to do big things. And like, if you don't give them permission to do big things, then they don't get it. And the thing is that like, you and I both know that like the person who wants to do big things at the level of Google or the level of, of Berkshire Hathaway or whatever else isn't the ultimate decision maker. That person's like three levels up. And if there isn't a hype cycle around geothermal or green hydrogen or whatever it is that we're talking about at the time, then when that proposal gets to that top level, they say no. I mean, their default is to say no on almost everything. Right. And so unless it's being talked about on stage at Sarah Week or unless it's being talked about on stage at Davos or whatever else, and that hype cycle is essential to getting it. There's there, you don't get the yeses.

B (47:13)

I just want to touch on the administration here for a second. Does the support within the administration do anything meaningful to reduce risk in geothermal right now?

C (47:23)

You know what was interesting, I remember talking to Tim. He's like, you know, under the Biden administration, I was oil and gas, and then under, you know, the Trump administration, I was clean energy. But now I, I think they figured out who, who I am actually. And I think they have had to, to ping pong throughout that. But absolutely, absolutely. Now the, the, the fact that you don't have to deal with the political retribution, that is a huge variable, as we talked about with the OKLO deal, that is a huge variable in why people invest right now. Why companies or why especially hyperscalers invest.

D (48:00)

Yeah, I mean, I think it's telling that Tim has not used the, you know, energy dominance financing mechanism, which he could have done. I don't think he wants to give up 10% of his company and warrants to the Trump administration. And so, I mean, we'll see where all this stuff goes, but I think to true form, right? The Trump administration says things and puts out press releases, et cetera, but it chills investment capital. Like, I mean, everyone around them is like, like, boosting geothermal. But then when you look at, like, do I really want to interact with this administration? Do I really want to work with them on this, that or the other? It's unclear, right? And the people that you talk to in the administration are like, well, I can't answer that. That's like three levels above my pay grade. Because there's absolutely no logic to how they make any decisions. So unless you get a verified answer from the White House, you don't know what side of the bed they woke up on that day and whether they're generally going to be supportive or not supportive of your approach.

B (49:02)

So there are a lot of reasons why geothermal fizzled. They have not historically had any meaningful presence in Washington. You know, the industry has not been able to get together and have a clear voice asking for sound policy. When the fracking boom took off, a lot of capital and talent got sucked into oil and gas, and then a lot of capital went into wind and solar. I guess I want to know, like, if this moment fizzles today, what would be the reason?

D (49:36)

I don't think it's going to fizzle. I'm a big fan of what Zanskar is doing. Like, what Zanskar is doing is basically using advanced AI. And they've been doing this for 10 years, to be clear. Like, I mean, they were funded, that research was funded initially by the National Science foundation and then the Department of Energy. And so, like, so the Department of Energy has been on this whole machine learning now, AI kick for geothermal for a long time. They've already found 10,000 megawatts of extraordinary deposits of hydrology where someone like Ormad or somebody else could drill it and make it successful. I think when you look at Calpine and the purchase that Constellation made of Calpine, and they immediately announced that there's over 600 megawatts of enhancements that they could make to their existing geothermal facilities with, with this new geothermal industry using their advanced technologies to improve existing geothermal facilities, I don't think that there's any chance that this particular iteration of group of companies fail from the perspective of Bringing more geothermal capacity online, they might fail financially, structurally. They might have to go into bankruptcy, get restructured. Their technology will be bought by somebody else and that person will take it to the finish line. Some people make billions and some people lose billions. Right. But I think that the technology set that has come out from the geothermal industry today is a far more compelling technology set than we had in 2009 when US Geothermal was trying to do their thing.

B (51:08)

Aha. So there is a technology story.

D (51:11)

There always is a technology story. I don't think I've shied away from it.

C (51:17)

I agree. The technology is more compelling. I don't think it's a matter of, of failure. I think it's a matter of speed to market and competition with existing oil and gas expansion. Right. And, but that is, that's the issue for any clean technology right now. It's that how, how quickly can you grow and gain market share to a point where you are a no brainer option in terms of building gigawatts of power for new load and being able to do it in a way that is either divorced or integrated with our crazy markets right now? So I think it's not a matter of will these companies fail. I don't think they will fail. I think they may be limited because you've got five years to build a significant amount of capacity. And once you build the pipelines for some of this capacity, that sort of locks you into some solution sets. Right. So that's always been sort of the trade off and that's not unique to geothermal. But it is one that might be advantageous to geothermal if there is an ability to integrate with that system, which a lot of these companies are looking at right now.

D (52:43)

Now.

B (52:43)

So let's turn now to some new research. We've just spent the episode talking about the viability of building new infrastructure, drilling wells, laying down underground systems. But there's another side to that equation that we don't talk about very much, which is the financial viability of fossil fuel infrastructure we already have as demand starts to decline. There's a new article published in the journal Science by Emily Gruber and Joshua Lapin at the University of Notre Dame that asks this question, what happens when energy systems that were designed to grow indefinitely are forced to shrink? And their argument is basically that fossil fuel systems don't wind down smoothly. They hit different economic, physical, organizational thresholds where things can break. So refineries, for example, can't operate below certain utilization levels. Gas pipelines have fixed costs even as Customers potentially leave coal plants and mines fall in tandem. So why does this matter? This was a study that you sent to us, Jigger. I thought it was really interesting and a nice complement to this discussion. And it's a topic that doesn't really get discussed very often. So Jigar, what do the authors mean when they say fossil fuel systems are more fragile than we assume?

D (54:03)

Well, I mean, I think that when you think about what we all experienced during COVID right. This is a great sort of example of exactly how this works with fossil fuels, right? You have this extraordinarily complex system of just in time deliveries and everyone operates their ports a certain way and then the semi trailers to that. Our friends at the Odd Lots podcast went through this super deeply on all the different pieces. And then when you have a shock to the system like Covid, it all sort of breaks down. And then when like, you know, we got out of COVID it like led to all this inflation, right? Because people were not ready to turn the system back on. And when you turn the system back on, it's like some parts get turned on faster than the other parts and then some parts went out of business in the meantime and so they're not there to like, you know, spin back up. Right. And so the fossil fuel industry is similar, right? And this is something that I have have lectured my friends in the environmental movement on for years without any success, which is that you don't want things to be more expensive if you want to shut the fossil fuel industry down. The way to shut them down in a managed decline fashion is to reduce the cost of oil, not increase the cost of oil. If oil went to $40 a barrel, they would naturally make less investments because they just don't pencil. And they wouldn't go after the Arctic and they wouldn't go like, you know, heavy oils in like the tar sands of like, you know, Alberta. Right? Because it doesn't pencil. They wouldn't go into like deep sea drilling and then they would naturally like, you know, reshuffle their own assets and shut this refinery down, but not this one. And they would shut this pipeline down and not this one. Right? So the way to do this is to destroy demand and instead environmental groups always try to destroy supply. They're always trying to say, how do we prevent this pipeline from getting built? How do we prevent people from drilling in this place? And that leads to higher costs and more profit potential for the existing oil and gas industry and then pissed off consumers. Right? And this is a completely different angle, frankly, to the argument that I was making. And their angle here is that basically if you regulate these folks, like natural gas utilities, for instance, to the point where they, they are destroying demand at such a level that they still are required to provide these essential services to some part of their territory, but not the rest of their territory, they may not be able to do that either. And then the whole thing breaks down, which then leads to social unrest. People who can't be warm in the winter, like industrial processes, that can't be supported, that you're playing with fire here through the way in which you're trying to regulate these types of assets.

B (57:05)

Two words that I don't think I'll ever hear a politician use when talking about fossil fuel infrastructure. Managed decline. That feels like a politically untouchable concept now. But I agree that it's really important to start thinking about it. Caroline, what's your interpretation? Why don't we just let these companies go out of business, let the market take care of itself if we start to see a true decline in demand for fossil fuels, There's a difference between.

C (57:33)

Gas and natural gas, which is a regional commodity, and oil fuel, petrol, which is a global commodity. On the latter, I think if we let fuel go to $40, we're going to open up a bunch of reserves in the US and that's going to put a lot of international geopolitical allies that we need in a tough spot and that's why the price stays high. There's an aspect to this that is not just what is the market dynamic, it's what do we need to keep some level of civility and, and diplomacy with key allies in the Middle East. Now when it comes to gas, I think the interesting part about the gas industry is that six, seven years ago when there was no load growth, everyone sort of pivoted and said, we're going to export LNG to Europe, which they're doing, and that's how they're making any money moving forward. And so the question you have have is, you know, locally in the US if we were to to restrict this, would the pivot be to export to Europe? I think generally that will still be the case. Or would you pivot and export in Africa or Asia where there is still a ton of gas potential? So it's a question of whether you cripple a local industry and whether it moves on someplace else. I think it's really naive to say that if we reduce gas or if we regulate gas to a minimum contract, that it won't pivot and expand in other areas of the world, because I think it will. I think this has just been an easy and lucrative and politically viable place. The question you have then is what do you do with that infrastructure and what's the point of that infrastructure? And maybe as we said before, okay, that's an opportunity for geothermal. I think it is false to say that the gas industry doesn't have other options. I think where it grows is going to be internationally. How it declines in the US Is the point we've been making for a long time is if the margins just aren't there and it's not worth all the upfront capex to extract whatever they're going to be able to extract on the back end end. But that doesn't mean it goes away, it just means we offshore it, so to speak.

D (60:11)

I agree with you on the macro level, the people in the Marcellus will produce gas and they'll figure out a way to pipe it to some LNG export terminal and they'll export it, right? But in the middle, we're trying to re industrialize our country and manufacture stuff here. In order to manufacture stuff here, you need low input costs. You do. And the same thing's true with while we all want to figure out how to live on heat pumps, there are places that routinely get below freezing. And even though the heat pump can produce heat, it produces heat at a much higher cost than it otherwise would when temperatures go below 30 degrees. And now those temperatures are going below 30 degrees all the way down in Atlanta. And so you're like, okay. And so, you know, I just think, I think that like one of the things that I struggle with in this moment is that most Americans just don't care about like all of this stuff. They don't care about climate change, they don't care about any of this stuff. They just care about being able to have affordable bills and living their lives the way they want to live it. Right? And so if this regulation on this side, like disrupts their life to the point where they can't get affordable energy, that's a political problem. And that generation of politicians, once seared by that problem, end up acting a certain way for the next 40 years and you're not going to get them back through whatever arguments you make on climate change or polar bear photos or whatever it is that you do. If their constituents get super pissed off about the energy transition, then they're going to just reject the energy transition. And I think that, that, that is where this paper is really, I think coming from, which is that there's the right way to do this, which is through the capital markets and figuring out how to create low costs and how to make the oil and gas industry make more disciplined decisions. And then there's the wrong way to do this, which is just to ban natural gas.

C (62:16)

To just say no policies. Yeah, yeah, yeah. And I think that many states in the country are reeling with that right now. You know, Illinois, Virginia, places where there's also a ton of load growth. They're scrambling to figure out how you're going to meet this amongst a policy framework that has just said no. Meanwhile, and we didn't talk about this and we probably should have talked about this with geothermal is like there's another workforce question here. I think we've seen this where workforce disruption is going to matter. And so where do you place your workforce right now to ensure to jigger's point that people can turn their lights on where at the same time growth opportunity in that sector is looking dizziness, dismal. Right. So it's, and there isn't enough of it in the first place. So it's a, it's complicated. I don't, I don't disagree Jigger with the, the concept of that. Like the just say no policies are. Well listen, they did it in Europe and look what happened in the invasion of Ukraine. All of a sudden, you know, Germany shut down all of their nuclear plants, was running on coal, imported coal, couldn't get anything together. But then Russia invades Ukraine and they can build an LNG portal in less than nine months because people weren't going to be able to deal with the costs or the freezing temperatures. Right. So where there is a will, there is a way on this. But they went with a just say no policy and then they reversed that policy when it got too expensive.

D (64:04)

So I think, but I don't think conventional wisdom broadly has moved yet. And that's why I think this paper is so important. Right, because it starts a conversation around what the implications are of the just say no policy and how these systems really work. Because I think for a long time governors just didn't pay attention. The whole thing was just a vibes based thing because energy was a number 22 issue on the political spectrum today. It's top too. So a bunch of folks are hiring smart people to go work for their administration and to advise their governors. And I think a lot of those folks are being told, hey, you know, like if you really want your state to be economically competitive and you still want all of these other metrics to be successful, then you're going to have to have a more nuanced understanding of.

C (64:54)

How these systems work, not just the hype cycle.

B (64:57)

Yeah. And Emily Gruber does a lot, I know Emily Gruber does a lot of work on the long term transition, thinking about the just transition for workers. And so this is very much a long term framework for policymakers. I think that this quote from the article sums up what her argument and Joshua Lapin's argument. If replacement zero carbon systems are not deployed fast enough, aging systems with declining revenues could require considerable new investments for short term use that will likely have to be made on the basis of public needs rather than profitability. Are there any potential, if we are thinking about this as a policy intervention of some kind, are there any ideas that you can think of where we would actually talk about this as a, as a country and inject policy?

D (65:51)

I mean, there are a set of technologies that we know about and that we have studied and that we've written reports about that are ready to come go and they destroy demand on the margins for natural gas consumption and oil consumption on a regular basis, right? Whether it's electric vehicles, whether it's heat pumps, whether it's like, you know, electrification of things, whatever it is, there are a set of technologies. Remember we all did this whole McKinsey cost curve thing back in 2009. Whatever else, all of those technologies on the left side of the cost curves are still sitting there with like 5, 7, 8% penetration into the marketplace, right? Like putting together a set of policies that get that up to 90% penetration into households, right? Like we're buying millions of new appliances every single day in this country, right? Those appliances could be good appliances or they could be like business as usual appliances, right? Policy can play a role in all of those conversations, right? We have millions of households who still haven't weatherized their homes. Like policy can play a big role in doing that. The thing is, is that I just think we are so obsessed as a country country with like next generation technologies that we don't, we have a similar obsession with the boring stuff that has paid for itself for God knows how long and could probably destroy, I don't know, 10% of US natural gas consumption just through things that save people money, right? But it's like nobody wants to have a podcast about that.

C (67:25)

Everybody wants to talk about ribbon cutting for that.

D (67:28)

Everyone wants about to talk. And so like, I think in general the policy apparatus needs to talk less about, first of a kind deployment and commercialization of technology and all that stuff, which I still support, don't get me wrong, I'm not saying abandon it, but focus a lot more on the stuff that just saves people money every day. Insulation, weatherization, like all these things that, like, we know about, we've mapped it, we have a report for that. Right. But like, what does it take to get the workforce in place? What does it take to get the economics in place? Maybe we need to finance things on the meters and not on people's credit. Right. So that, like, if you sell the house, the next owner of the house pays for that loan because it's the house that got the improvements, not the owners. Right. Like, there's all sorts of ways of adapting and pioneering and innovating in the space too, but we have to be focused on getting the deployment of the boring stuff up.

B (68:21)

Amen.

A (68:22)

Yeah.

C (68:23)

I think what Jigger is saying, though, is if you think about it simply, which is that to avoid having to reinvest in a supply side system that we know has diminishing returns and potentially can have some really catastrophic implications from a policy perspective, you have to invest in sort of the demand side system. And that framework, investing in the demand side system as opposed to investing in the supply side system is one that very few, if any, have adopted. Right, but that's. I mean, you'll correct me if I'm wrong, Jigger, but I think that's sort of what you're saying.

D (69:06)

And it's a political home run.

C (69:08)

Yeah, right.

D (69:09)

Like the reason why the IRA wasn't as big of a home run is everyone was like, that's that project over there, that's $500 million. People think it's going to make a.

C (69:17)

Bunch of companies money.

D (69:19)

Right.

C (69:19)

I don't know if it's going to lower my bills.

D (69:21)

Like we, we need to have vans going down the street saying, like, you know, like we weatherize you. Like, you know, just like, you know, flag us down and we'll weatherize you for 500 bucks.

B (69:31)

That is a tension that we've all been grappling with since the 1970s, and it is more salient than ever. I think that's a great place to end it. Caroline, go get some rest. Go eat some ashwagandha or whatever herbs you take.

C (69:50)

I take ashwagandha as well as many other. Many other herbs. Yeah.

B (69:53)

Thank you, Jigger. Good to see you. Thanks for hyping up geothermal for us.

D (70:00)

I mean, deploy, deploy, deploy.

B (70:09)

Thanks everyone for being here. Open Circuit is produced by Latitude Media, Jigger Shaw and Caroline Golan. Are my co host. I am Steven Lacy, your co host and executive editor. The show is edited by me, Sean Marquand and Anne Bailey. If you are not already subscribed on YouTube, go ahead and do that. And to our Spotify listeners, you're getting video now, so please enjoy. And you can find all of our episodes over on YouTube or the back catalog anywhere you get your podcasts. Go to Latitude Media for any stories and background information on the topics that we cover here here. And thank you so much for being here. We will catch you next week.