In 2006, a widely cited MIT study announced that America was sitting on a renewable-energy goldmine: geothermal reserves equivalent to thousands of times America’s annual energy consumption, a substantial portion of which could be readily unlocked using emerging technologies known as “enhanced geothermal systems”, or EGS.

Almost a decade later, however, geothermal remains the ugly stepchild of the renewable energy sector, accounting for just 3 percent of America’s total renewable-energy output — three quarters of a percentage point less than the year the MIT study was published. That’s a sign of the uphill struggle geothermal energy companies have faced in attempting to prove and popularize EGS technologies.

That said, the resource is there and perhaps all that is missing is the deployment of innovative technology.  For investors who have the stomach for risky but potentially lucrative long-term bets, this is an area to watch.

Conventional geothermal energy systems, which rely on underground water resources to carry heat to the surface, only work when water, heat, and porous rocks are co-present. EGS, by contrast, uses a combination of deep-well technologies, fracking-style methods, and pumped water to actively break up and extract heat from rock formations. That means it can be far more widely deployed, even in areas that aren’t typically thought of as being rich in geothermal resources. In total, current EGS technology has the potential to unlock around 90 percent of America’s attainable geothermal resources, providing well over 100 gigawatts of cheap, clean energy, according to recent government research.

In practice, however, tapping the abundant heat energy that lies below our feet is proving difficult. Only between 10 and 40 percent of exploratory geothermal drilling yields productive wells, making new projects expensive and difficult to finance. That makes government incentives a vital piece of the puzzle: in Germany, for instance, officials are using grants, low-rate loans, and feed-in tariffs to take the sting out of early-stage geothermal development. In the US, the Clean Power Plan could have a similar effect, experts say. “If this rule is successfully implemented, states which contain geothermal resources but have not developed them yet may consider developing their geothermal resources to meet carbon reduction requirements,” notes the Geothermal Energy Association in its most recent annual report.

The biggest name in enhanced geothermal is AltaRock Energy, a startup that launched with backing from big names including Khosla Ventures, Google (NASDAQ:GOOG), and Kleiner Perkins. Its version of EGS is notable for allowing rock formations to be subdivided and selectively sealed off through the injection of recycled plastics, allowing the EGS process to be used multiple times in different sections of a single formation. The company this year took over a struggling Nevada geothermal power plant, and is in the process of refurbishing it as a utility-scale testing-ground for EGS technology; it has also completed promising testing in Bend, Oregon, obtaining results that suggest its version of EGS is safe, effective, and scalable. 

While AltaRock’s technology can open up new geothermal wells in areas that were previously unviable, EGS can also be used to stimulate existing geothermal wells. That allows companies to get more juice from proven but flagging sites, while sidestepping the expensive process of locating new geothermal resources. In 2013, Ormat Technologies (NYSE:ORA) became the first firm to connect an EGS geothermal well to the electrical grid, using the technology to boost the capacity of its existing Desert Peak project in Nevada by 1.7 megawatts, or about 38 percent. Calpine Corp (NYSE:CPN), which owns the massive Geysers power plants north of San Francisco, is similarly planning to rejuvenate its wells by injecting them with wastewater from the city of Santa Rosa, in a bid to increase energy output by 85 megawatts. “If we can go to all the hundreds or thousands of wells that are unproductive and tinker with them to make them productive, this is a game changer,” says Ormat policy chief Paul Thompson.

Risks remain for the sector, not least because while EGS has been shown to work in principle, putting the ideas into practice is technologically challenging. EGS requires very deep wells, often bored through harder rocks than is economically possible with conventional rotary drill bits. That’s forcing companies to experiment with unproven technologies — AltaRock uses a hammer-like drill to pound its way down to geothermal formations — in order to achieve the depths they need. That’s too great a risk for some investors. “Enhanced geothermal systems are still a science project, in my view,” says John McIlveen, senior vice president of Jacob Securities.

The bigger problem, however, is that EGS has much in common with fracking, and while the technology is unlikely to taint groundwater supplies, there remains the potential for increased seismic activity near EGS wells. One Swiss project, built on a known fault-line near the city of Basel, had to be suspended after it triggered earthquakes that caused millions of euros in damage. “The Basel story is dredged up over and over again — but we have learned from it, and it is pretty easy to put safeguards in place that will severely minimize risk,” says AltaRock communications chief David Stowe.

Concerns over safety and feasibility may have slowed the rollout of EGS, but the heat energy detailed in MIT’s 2006 report isn’t going anywhere. Industry boosters say they expect to see a snowball effect as EGS pilot projects — such as the initiatives recently funded by the Department of Energy — start to deliver results. A 2013 study by the JASON advisory group suggests that EGS is on course to boost the nation’s active geothermal capacity by 5-10 GW over the next 5-10 years. After that, supporters say, the sky’s the limit.

 

Companies to watch

Foro Energy of Colorado is developing ARPA-E-backed laser drilling technologies that could zap their way through the tough, bit-resistant granites and basalts that surround many geothermal energy sources.

*  Spokane startup HyperSciences recently won a $1 million grant from Shell to fund research into “ram” drilling technologies — effectively cannons that fire bullet-like projectiles into the ground, pulverizing rocks and allowing the boring of deep geothermal wells. 

Alterra Power Corp. (TSX:AXY) and its Icelandic subsidiary HS Orkawere part of an Icelandic deep-drilling consortium that broke new ground last year by drilling directly into a 1,900 degree Fahrenheit magma reservoir, and using EGS technologies to generate superheated steam.

Ben Whitford is the U.S. correspondent for The Ecologist. He has written for the Guardian, Newsweek, Mother Jones, Slate, and many other publications.