Geothermal Tech post-Fervo IPO

An investor at the geothermal Ripple holds an exploration licence that cost very little, and an AI data-centre developer now plans to build in the middle of it. Cheap land near demand, the investor said, can lose you everything or return many times the money. Torsten Kolind of Underground Ventures agreed that land is how US geothermal companies are valued, and Fervo's IPO filing makes much of the land it has secured. But geothermal extracts no resource, and Underground Ventures is betting on a future where plants can go next to any city, data centre or industrial site. In that future, Torsten said, "our hope is that each of the acres will be worthless."

Getting there is the hard part. Sarah Black of Alfa8, the other host, said geothermal is entering its third phase. For a century it depended on finding hot water underground, which exists under only about 3% of the earth, and by the early 2010s it supplied about 0.3% of the world's electricity. Horizontal drilling and fracturing from the shale boom made it possible to engineer reservoirs where there is only heat. Next-generation geothermal raised about 2 billion last year and has already passed 3 billion this year. Fervo raised 2 billion in its IPO and reached a market value of 10 billion on its first day. Pilots have worked, but there are still no large producing next-generation commercial projects.

Scaling without oil money

Going from pilots costing tens of millions to projects costing hundreds of millions needs a different capital stack, Sarah said. Fervo raised over a billion in equity before it listed, a route few others are likely to repeat. Oil and gas handles this kind of upfront risk on big balance sheets, spread across portfolios of projects. The majors have not come in and are unlikely to until next-generation projects prove profitable. "The industry has to learn how to scale without the support of oil and gas money."

That means debt and infrastructure investors, and the talks with banks are still at an early stage. It also means sharing risk through joint ventures, such as Ormat's with SLB, and insurance products designed for geothermal. Torsten noted that people now talk about first-of-a-kind funds dedicated to geothermal, which would have been unheard of a few years ago.

The neglected casing

The technology stack is not finished either. For enhanced systems of the kind Fervo builds, Torsten said, the most serious problems are water losses and parasitic load, the energy spent pumping water through tight fractures. Induced seismicity is largely under control. Geothermal fracturing uses no chemicals, because nothing is extracted, and it runs deep enough that tremors can be measured but not felt if the work is done properly. Less is known about how engineered reservoirs behave over many years.

Superhot rock breaks the pitch that geothermal simply reuses oil and gas kit. At 400°C drilling tools and sensors fail, steel casing stretches, cement cracks and brine may be more corrosive. The prize is up to ten times the power from the same well, because the fluid carries more energy and converts to electricity two to three times as efficiently. Money has gone to new ways of drilling, such as millimetre-wave and pulse drilling, Sarah said. Torsten wanted to see someone fix well casing, a large share of the capex, which start-ups barely touch. You have to go into research labs to find novel ideas for it.

The industry has to learn how to scale without the support of oil and gas money.

Where the venture returns are

An investor asked how others underwrite the sector. Project developers look like 15 to 20% returns at best, they said, so where do venture-scale outcomes come from in an industry this small? Sarah said geography decides. In the US, enabling-technology companies can sell to developers such as Fervo and Mazama. In Europe, projects are bespoke, often built around heat and local utilities, so technology firms end up in joint ventures with more skin in the game. One drilling founder said pure project development, still a little dearer than solar and wind with batteries, is not endlessly scalable, and technology that cannot scale loses anyway. So the company does both.

The next question was whether a geothermal SLB will emerge. Subsurface work runs on trust, Torsten said, which favours firms with a record. But with perhaps a hundred thousand wells to drill in the next 25 years, the tools must be open to every developer, so Torsten prefers product companies that sell to everyone, even if services earn more at first. Sarah said that the oil majors are absent but the service companies are not. SLB and Baker Hughes are building expertise, and SLB buys start-ups every year. Another drilling founder already had large service companies following their work and expected to be bought by one of them.

For investors new to the field, Sarah's signal was developer pull. Fervo's fast followers are drilling their leases and need tools now, which gives enabling-technology start-ups early revenue. Torsten urged patience. After Fervo listed in May, three other companies rushed their IPO plans, and then Fervo's shares slumped, perhaps only for now. Torsten admitted it sounds ironic from a venture investor, but the aim is for geothermal to become a commodity, with investors backing the things every developer will need. It is the same bet as the worthless acre.

This Ripple was hosted by Torsten Kolind (Underground Ventures) and Sarah Black (Alfa8) at The Drop 2026 on 16 September.