From Hydrocarbon Liability to Geothermal Asset: Transitional Energy Digs Into Oil & Gas Well Reuse
HeatBeat is one year old! What better way to celebrate than to highlight a new geothermal startup that has successfully raised money! I met Transitional Energy at an Rocky Mountain Association of Geologists Seminar I gave back in the spring on geothermal. They went on to participate in the Closed Loop Geothermal Systems panel of Pivot2020 in July. Now they have just announced the award of a $500,000 grant from the State of Colorado to pursue their oil and gas well conversion geothermal concept.
My conversation with Transitional Energy's Johanna Ostrum has been edited for length and clarity.
JB: Give me the elevator pitch for Transitional Energy – what are you after in geothermal?
JO: Our vision is to bridge the energy gap and transition the energy grid from fossil fuels to renewable energy by transitioning existing oil and gas wellbores and infrastructure in sedimentary basins into geothermal energy producing assets. Transitional Energy will become a baseload power producer at cost-competitive rates to wind and solar, without the need for energy storage that intermittent clean energy sources require. Due to recent improvements in Organic Rankine Cycle engines, the timing is right for widespread deployment.
JB: It sounds like your team has made some progress since the summer when we saw you at Pivot2020. Tell me about your new $500,000 grant. What are you aiming to accomplish with the funds?
JO: The State of Colorado Advanced Industries grant supports early stage companies that will bring technological advancement to market, particularly the Colorado market, be headquartered in the state, and benefit the people of Colorado in some way. Our company checks all of those boxes and will help the state reach its 100% renewable energy by 2040 goal. The funds will allow us to execute our Phase 1 power generation goals, in which we will not only demonstrate that we are the team to execute on bringing low-temperature geothermal to the State of Colorado, but help us understand our operating conditions in the legacy oil and gas fields we've selected before scaling up to megawatt-scale power production.
JB: Tell me more about your Phase I.
JO: Phase I will validate our model assumptions as quickly and cheaply as possible. Much like when you drill a step-out horizontal well in a known reservoir, you are confirming the reservoir model assumptions. In the clean energy context, when a wind farm is being installed, they will need to confirm actual production vs. modeled or predicted wind resource estimates. We need to work through that process as well for our well reuse concept.
JB: Any oil and gas industry engagement so far?
JO: Yes. We've had very positive interest, feedback, and engagement from oil and gas entities and other private companies. Forward-looking oil and gas companies see on the horizon a turning point in the industry where they can’t just give lip service to ESG initiatives. Regulatory changes along with public pressure are pushing them to lower emissions and ‘green’ their production streams. Geothermal is a natural step for the oil and gas industry as they consider their role in a decarbonized energy future. There is essentially no research and development needed to make this happen, just deployment of proven process flow and power generation technologies.
JB: Folks in oil and gas companies are eager to see performance metrics for emerging geothermal concepts. What can you say on output, well cost, and project economics?
JO: The key performance indicators for the Transitional Energy approach look a lot like those in oil and gas: we are managing fluid flow rates with electric submersible pumps; we are monitoring flowing temperatures through the system; and we are assessing how reservoir fluid chemistry interacts with the system and whether scaling in pipes and pumps is an issue.
Electrical output is very field dependent, just as estimated ultimate recoveries are in oil and gas. Each Organic Rankine Cycle electrical power generation unit can output from 75-150kW depending on manufacturer, temperature, and flow rate. Where we can run several units in series and several series in parallel, we can generate a megawatt or more per producing wellbore. Where wellbore reuse is an option, wellbore capital cost is close to zero: artificial lift changeout and wellbore workovers, if needed, are the only capital costs involved with the well repurposing.
With no exploration or new drilling costs, the timeframe and economics of low-temperature geothermal are compelling. In a world where one is selling power for 5-20 cents per kilowatt-hour, cost control and operational scale, as well as selling additional products from the fluid stream, are important for positive economics. It's important to note that subsurface expertise is only part of the solution to making low-temperature geothermal work. It's the coupling of that with power marketing and utility expertise that gets the electrons flowing.
JB: You mention above capital cost being close to zero where wellbore reuse is an option. Tell me more about that – what under what conditions is wellbore reuse viable? And how many reusable wells exist in the US, by your estimation?
JO: A wellbore is reusable for geothermal in a similar manner to how it is reusable in the oil and gas industry. Competent cement for zonal isolation and casing integrity are paramount. Since geothermal needs higher flow rates than oil and gas, wider interior diameter casing is better. We estimate approximately 250,000 reusable wellbores exist in the US.
JB: What is the size of the low temperature geothermal opportunity, and how quickly can it scale?
JO: The total size of the opportunity is immense. Just in North America, any sedimentary basin or shale basin map illustrates the size of this opportunity. Most of these basins have conditions in one or several subsurface zones where temperature and flow are right for generating power. Transitional plans to drill new wellbores in regions where there are no more competent hydrocarbon wellbores for the target zone available for acquisition and the subsurface and power markets conditions are attractive.
Where we can sell behind-the-meter to load centers, we can scale very quickly, in a matter of months, to megawatt-scale production. Where we have to connect to the grid, the interconnection process can take 18 months following the framework set forth by the utility and the state public utility commission. Once that process is complete, however, power purchase agreements can protect revenue over durations as long as 15-40 years.
JB: What is the biggest challenge your team faces currently?
JO: We face the same challenges common to many startups: securing enough funding to launch while also securing execution opportunities. Basically getting the chicken and the egg lined up at the same time. Working through the pandemic has presented unique challenges as a new venture. Meeting investors for the first time in a virtual setting is very different than shaking someone’s hand across a table. Finding the right investor class has also been a challenge. We've had plenty of interest from greentech investors who are excited about the idea of reuse of existing infrastructure and see the market potential. However, the steady returns and low risk of power production don’t naturally fit within their investment model.
JB: How did you get started on your entrepreneurial journey?
JO: In mid-2019, one of our co-founders attended a geothermal session at the American Association of Petroleum Geologists Annual Convention and quickly grew excited with the potential of geothermal in the oil and gas industry. That idea was to marry subsurface technical experience with power markets experience to be an initial mover in the low-temperature geothermal space. Using programming languages like Python and R to quickly and efficiently wrangle vast amounts of public subsurface data, and using our own network from working in the industry, we quickly zeroed in on our initial opportunities. Since our team has decades of combined experience in energy startups, oil and gas operations, reservoir analysis, finance, and power marketing, we’ve been able to think broadly about the market potential and make the right connections.
JB: What would you say to other female entrepreneurs who may be hesitating to enter such a male dominated field?
JO: Three of the four members of the Transitional Energy team are women who have worked in male dominated industries their entire careers. Our advice is to trust in yourself and your expertise. Believe in the data and the compelling narrative of geothermal energy. Work with men who treat you as a professional and an equal. Don't let “manels” (or all male panels) at your favorite conference deter you. Offer a hand up to folks following in your footsteps as you build your own teams. Diversity of people and most importantly, ideas, will only make the implementation and spread of geothermal more successful.