The Marriage of Climate Activism & Drilling: Sage Deal Models a Hopeful United Future for Geothermal
Sage Geosystems (Sage), a startup focused on ‘hot dry rock’ geothermal energy development (and GEO graduate!), has announced it closed a Series A round of financing. Virya, LLC, a climate fund founded by TED curator Chris Anderson led the round with a $3M investment. As part of the round, Sage has entered into a non-binding letter of intent for an additional $2M investment by drilling contractor H&P. The investment unites an unprecedented and extremely exciting group of investors to pursue an accelerating bright spot for the oil and gas industry and climate change advocates alike – the prospect of globally scalable geothermal energy development. This deal is a hopeful model of what's to come in geothermal investment over the coming months.
In an update to our June feature of the Sage team, we caught up with Sage's CEO Lev Ring and CTO Lance Cook to get the scoop on their funding round and Texas pilot plans.
JB: First off – Awesome news and an incredible set of partners!
LR: We are humbled, honored, and can’t wait to get into the field. We couldn't have hoped for a better group of folks to help us make things happen.
JB: What has Sage accomplished since you were last featured on HeatBeat back when you launched in the summer?
LC: We have been doing a lot of modeling of various scenarios for field trials and plant design. We won the first round of the DOE Geothermal Prize, which was exciting for us. That project is related to our downhole heat exchanger and is ongoing. We have also fielded a lot of technical inquiries about our approach, and have had some in depth exchanges with a number of operators. We have been very pleased to see the amount of operator interest in geothermal on both sides of the Atlantic, and we’ve been listening carefully to their concerns. Engagement goes all the way up to the CEO in a few instances, and that’s new and very hopeful. And lately we've been building our team - all career long oil and gas veterans who are very excited about the future of geothermal.
JB: So looking forward to your field test, what are you seeking to demonstrate?
LR: We will measure the heat we can harvest in an existing well with a downhole heat exchanger to get background data on the well. We will then pull the heat exchanger, grow our HeatRoot network outside the wellbore, and rerun the tests to see how much more heat we can harvest at various flow rates with the HeatRoot network in place.
JB: What are HeatRoots?
LR: They are part of Sage's well design to help us get as much heat to the surface, as cheaply as possible. Lev and I spent time in industry perfecting a method of growing fractures downward, in order to avoid shallow aquifers in the oil and gas context. We are leveraging those learnings in our geothermal designs to grow networks of 'roots' downward from our wellbore, into deeper hotter rock. The roots will shuttle heat upward to the heat exchanger. Think of it like a solar concentrating plant, but underground and we are focusing the heat on our wellbore.
JB: How is this different from use of fractures in the traditional EGS context?
LC: In several significant ways. Our HeatRoots feed a closed loop heat exchanger, so once the roots are grown and filled with fluid, we do not circulate fluid continuously through them like EGS systems require. We believe this will make the connectivity and seismicity issues associated with EGS projects a non-issue for Sage.
JB: Where are you going to do your field test, and how did you choose the location?
LC: We intend to enter into a partnership with an existing well owner in Texas to perform our tests. Why Texas? We understand the Texas rules and regulations, and there is certainty on that front. Plus, Texas is the center of the drilling universe. We feel that doing our first pilot and projects here will be a huge win for the state, and make scaling up easy.
JB: What does success look like for your pilot? What data will you get, and how long will the demo take?
LR: If we get fluid to surface at high flow rates that is 80% of static bottomhole temperature (or higher), we’ll be excited. We will get all sorts of proprietary data and information on our system, but the thing everyone will want to know is how much more heat can we deliver with our well design than has been possible in the past. Once we start the baseline data collection, it will take about a year in the field to complete the pilot.
JB: What happens if you get mixed results?
LC: We will be calibrating our models in the field from the beginning of the tests. If we see early on during the testing we are underperforming expectations, we will make adjustments. There is always the risk that we end up with results early on like George Mitchell experienced when trying to prove he could get commercial gas from the Barnett shale. He kept getting encouraging results, but not quite what he needed...until he broke the code and changed the energy landscape for the US and world. We are comfortable with our partnerships and industry interest that if our results are encouraging, the support will be there to keep pushing.
JB: What’s the plan if you are successful?
LC: Next step will be commercial power generating project in Texas. We are planning this project in parallel with our demonstration so once we have a pilot success we are ready to roll. We will drill a new hot dry rock well and build a 10MW power plant. We are in discussions with an operator currently who is interested in supporting a ‘go big’ approach to scale-up if the pilot gives us a win. In that scenario, we would pad drill ten wells, aiming for 100MW. And from there, we are off to the races.
JB: The lack of data and transparency from startups has been frustrating for oil and gas entities interested in vetting new geothermal concepts. Are y’all going to share?
LR: Our upbringing and experience in industry encourages us to be transparent such that those with deep expertise understand the basics of our approach. There is science behind all of this after all. So yes, we will share our results. But we will draw the line of course in teaching the world how to replicate our approach. We do hope that we catalyze new innovations in geothermal in the industry though, and movement by other entities. It’s up to us to stay nimble, constantly advance, and outrun competitors.
JB: Are you going to tell the crew who works on your pilot that they may be building the future of energy?
LC: A key part of work in the field is explaining the objectives of the project and making sure everyone understands the ultimate vision (you can end up with a mess if your crews think they are building a barn instead of a hospital). I do think that rig crews will view geothermal development as a very interesting growth opportunity in their field, so I expect there to be a lot of interest and questions in on site. Making history? I’d tell them that is our dream, and ask them to help us get there.
JB: There are a whole lot of people in the oil patch who are watching you all closely and cheering you on. We will see you on the other side of your demo…
LC: You’ll be the first to know.