Geothermal system design has recently gone through a transition so that many “closed loop” systems can be installed anywhere. This will lead to a rapid abandoning of traditional geothermal by global oil services companies and rising installations reaching a peak of 17 GW thermal of additional capacity per annum, and a cumulative installed base of just below 245 GW thermal by 2050.
Traditional geothermal drilling will start to slow almost overnight, as all the major oil services companies – known for their drill ownership and geological expertise – embrace closed loop systems and push to over 1 GWth per annum in the next three years from a base of just a few hundred MW right now.
This is primarily because a handful of start ups are just coming out of their pilot phases and building their first, albeit small and relatively unambitious, commercial systems. Many of these are attracted to Europe in general and Germany in particular due to a massive need to replace the fuel sources for district heating systems in 450 European cities – a simple way to achieve energy security from Russian natural gas.
This commercial activity has already seen prices of geothermal systems become affordable, especially for purely heat based systems. However most systems will be hybrids, with mostly heat, and some electricity generation, as closed loop AGS (Advanced Geothermal Systems) and Enhanced Geothermal Systems (EGS) begin to challenge the LCOE of many sources of fuels for electricity.
We expect geothermal to go from producing 0.4% of global energy to something closer to 2.15% of an energy base that is 3 times the size of today’s – a growth of some 20 times, during that rush to 2050, and for geothermal to build beyond 2050 to augment renewables.
Countries like Japan, and South Korea, which have scant land resources for renewables and other islands generally, will subsequently be drawn to closed loop geothermal, because it gets them off the merry-go-round of imported fuels which yo-yo in price around geopolitical events. The combination of district heating replacement in the Northern hemisphere, and energy security everywhere else, will promote geothermal ahead of some uses of hydrogen and battery energy storage. The advantage of being backed by today’s oil services giants, who are on the leading edge of drilling technology, with customers often being “financially bombproof” local governments and municipalities, will lead to geothermal becoming attractive to investors over the next few years.
The evolution of geothermal will create a $31 billion marketplace for annual drilling by 2050, lapped up mostly by the existing oil services majors like Schlumberger, Haliburton, Baker Hughes, Petrofac and KCA Deutag. The oil drilling business will by then be in tatters, and natural gas drilling will have become a much smaller business, and this will represent a well-trodden survival route for the oil services majors.
Background and introduction
Most commentators routinely write off geothermal energy as not ready for prime time, unlikely to be taken up at scale in a manner that will affect the decarbonization of global electricity.
But the Russian-Ukraine war has cast its shadow positively over geothermal, just as it is technologically speaking, ready to deliver at scale – quite simply because it is yet another string in the bow of energy security.
In all geothermal systems hot water is brought to the surface and connected to a heat exchanger. For district heating networks the other side of the heat exchanger is the district heating network and a second heat exchanger is then also used.
In this report we discuss the different strategies for closed loop systems, including hybrid pipe in pipe systems, and EGS fracking based systems – which will trigger a take-off in spend.
AGS/EGS geothermal creates an underground aquifer, and the nearby rocks replenish the heat in the rocks which are in contact with the water through conduction, and this makes the process one of constant heat provision.