Sage Geosystems CEO on the Promise of Geothermal Energy

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2:18So in October, Bloomberg reported on how for the first time in years, the U.S. federal government has leased every parcel of public land it's open for geothermal development and at record prices. On that, just last month, Bloomberg's Michelle Ma reporting that Ormot Technologies, one of the world's biggest geothermal energy developers, co-led a$97 million series be funding around for a company that's tapping hot rocks to generate electricity. Yeah, that startup, Sage Geosystems, it is one of the companies leading the push to utilize innovative technology to really harness energy from the ground and meet surging power demand from artificial intelligence.

2:50You know from everything that we've talked about that this demand to build out AI data centers means a lot of power is needed. And whether it's going to be solar or nuclear or carbon-based, we need it all, geothermal as well. So let's get more on the company for that. We do head to Houston, Texas, and to Cindy Taft. She's CEO of Sage Geosystems. She spent more than three decades in the oil and gas industry, including most recently as VP of Unconventional Wells and Logistics over at Shell. She's had teams around the globe. We are so delighted to have you here. We've been looking forward to having you on.

3:23Tell us a little bit about your company.

3:25Cindy Taff:Yeah, thanks for having me on. I love talking about Next Generation Geothermal. So yeah, we founded Sage about five years ago. So as you've described, my background is oil and gas. My co-founders, Levering and Lance Cook, their background is oil and gas. However, they spent their careers doing something a little bit different than I did. They are the scientists, the innovators. So they created a lot of very challenging technologies for the oil and gas industry. And so we're using that knowledge of the subsurface and of our oil and gas background to advance what we're calling next generation geothermal, what the industry calls next generation geothermal.

4:05OK, so people think of geothermal. They think of the OK, I'm sorry to to Bruce, my freshman year geology teacher, because I'm going to butcher this a little bit. But they think of the don't do it. Don't do it. The warm temperatures as you go further down when you drill and using that heat water to generate steam, correct?

4:26Cindy Taff:Yeah, Tim. So maybe just a brief overview. She's like, yeah, I'll give you like a C minus, but I'll just take it from here. Yes, but no. When most people think about geothermal, even myself when I'm still at Shell, you think about Iceland or the guys who are in California. So that's conventional geothermal. That's where you're drilling into a hot pocket or pool of water that's just below the surface. It's very convenient if you have a volcano or the ring of fire in your backyard, because that is the circumstances that you need for that very unicorn geology to find the conventional geothermal. So the challenge is it represents only about 2 % of the geothermal around the world.

5:15Cindy Taff:What Sage is doing, and there's other companies, of course, in the industry, is we're tapping into hot, dry rock. This is what that next generation geothermal is. So it's rock that has the heat, but it doesn't have that large body of water. And what that allows you to do is increase the geology that you can find that heat. So instead of the 2%, you're talking about 50 % or 60 % of the geothermal around the world. And the only reason why it's not 100 % is because in some areas like eastern U.S., the heat is there, but it's very deep and just not economic to drill for. Hey, my understanding is we've seen Alphabet's Google, Meta platforms among the data center operators who have actually inked deals with geothermal companies to provide the power.

6:04Meta is a partner with you guys. Tell us about that partnership. And what does inking a deal mean? Like, are they ponying up money? Are they helping you in development? And I'm also curious, how much power can geothermal ultimately provide? And how long does it take to kind of ramp up?

6:21Cindy Taff:Yeah, so no, great question. So yes, we have a term sheet with Meta. So we are going to be, that will become a virtual PPA. So we'll be building geothermal in the vicinity of one of their data centers, but we'll be putting it on the same grid that they're taking power off of. So that gives us flexibility on location, but it's still a virtual PPA. Yeah, power purchase agreement. Yeah, sorry. Yeah, virtual power purchase agreement. That's exactly right. So we like the flexibility of not having to necessarily put the power in the backyard of the data centers, Although into the future, that seems to be probably the solution that we're all headed for so that you don't congest the grid.

7:05Cindy Taff:And so that's what our agreement with Meta is. Now, to your other question, what is the resource? What's the size of the resource? So when we talk about conventional geothermal, again, those large pools of hot water just below the surface, you're talking about 40 gigawatts. But if you can expand it to this hot, dry rock, you're talking about between five and seven terawatts. And this is in the lower 48 U.S. only. So if you do that around the world, the resource potential is huge. So I'm curious about sort of these PPAs that you have and why we're not necessarily hearing as much from the government about this type of energy development versus natural gas and, of course, nuclear.

7:58Geothermal doesn't seem to get a lot of love.

8:02Cindy Taff:A lot more love as of late. So one thing I will say is geothermal has always been supported by both sides of the aisle. The current administration, especially with Chris Wright as the energy secretary, he is very familiar not only with conventional geothermal, but with next generation geothermal and the resource growth that you can have in that area. And so you've seen geothermal in a couple of the executive orders. it's actually very well supported in the one big, beautiful bill. So, you know, I think geothermal is coming into a huge momentum, supported, you know, supported by not only the last administration, but also very much by this administration.

8:49We're talking to Cindy Taft. She's chief executive officer of Sage Geosystems, joining us from Houston, Texas. Our Bloomberg NEF folks who track all things energy, have noted that the primary downsides of geothermal energy include high upfront capital costs, long project development timelines, and potential seismic risks, so earthquakes from drilling. Can you address those?

9:11Cindy Taff:Yeah, so it is an infrastructure, you know, project. So yes, upfront capital costs are large, just like a lot of infrastructure projects. Timelines can be longer. I mean, you know, if you want to invest, say, in a software, you know you're going to know in six months whether that software is going to be successful in an infrastructure project it's going to be two or three years until you know that that is successful as far as earthquakes yeah i'd actually like to talk about that and so um it it really depends on how you're operating in the subsurface so the the earthquake and tremors that you have seen um from say the oil and gas industry or other industries is when they're pumping water continuously or any type of fluid into the subsurface, and it will find its way to natural faults and fractures that are connected to what they call the basement rock.

10:07Cindy Taff:It'll lubricate those fractures and make those fractures slide or slip, and that's what results in the earthquake. What we're doing, we are using fractures to harvest the heat because in a matter of a week, You can create very large surface contact areas with those fractures. But the way we're operating our fractures is we're putting water into that fracture, but then we're taking it out. We're putting it in and we're taking it out. And so we're not pumping volume upon volume into that subsurface, meaning that we're not going to – we have a less likelihood of connecting to these natural faults, which would result in the earthquake.

10:48Cindy Taff:So I think the risk, at least for the way we operate our fractures at Sage, is a lot lower than what you're seeing in the oil and gas industry, in particular in the disposal of water, which is a waste product for the oil and gas. Okay, so that's what I want to talk about. As Carol always says, there's no such thing as a free lunch. And, you know, coming from the American West and growing up in drought-stricken California, I'm curious about where you can do this, where there is an abundance of water, so you're not actually using that natural resource. Yeah, Tim, it's a great question. We do need water.

11:23Cindy Taff:I will say that the water needed for our operations is less than a coal plant. It's less than a combined cycle natural gas. And that's because we are reusing the water. We're putting it into the subsurface to harvest the heat or absorb the heat. And then we're using it as a carrier to bring that heat to surface. and then we turn around and we pump it back into the subsurface. And so in our geothermal applications, that water stays in a pressurized system. So the losses are what we've measured is less than 2%. So you don't have to use a lot of makeup water because you're not losing a lot of water to the production of the energy.

12:03Cindy Taff:So we do need upfront water volumes. But again, those losses being less than 2%, the makeup water is very immaterial. Hey, Cindy, just got about 30 seconds. I mean, ultimately, it comes down to, we saw this with solar and wind, cost comparisons between that alternative energy and existing forms of energy and also the financial viability. So where does geothermal fit in? Does it have a ways to go before it can be like, oh, well, this makes sense financially? And I'm so sorry, just about 20 seconds, 25 seconds. Yeah, Carol, I think we are where wind and solar were 15 years ago. Right now, 10 to 12 cents a kilowatt hour.

12:41Cindy Taff:If you're above scale, that can be driven down to 6 to 7 cents a kilowatt hour at scale.

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