Geothermal is Essential to a Sustainable Energy Future

We are very excited about electrification and have led two pre-seed investments in this space in 2023, including one in geothermal. Please reach out if you are actively investing in this space and want to connect!

There’s breaking news in the geothermal energy space.

Las week, Oak Ridge National Lab, in partnership with US DOE Office of Energy Efficiency and Renewable Energy and Geothermal Technologies Office released a report titled “Grid cost and total emissions reductions through mass deployment of geothermal heat pumps for building heating and cooling electrification in the United States." The report makes a clear case for widespread adoption of geothermal heat pumps (GHPs), demonstrating the viability of this approach from economic, sustainability and operational standpoints. 

The key takeaway of the report is that GHPs, which use ground source energy, are critical to decarbonizing the building sector, particularly single family homes. In the coming electrification revolution, converting homes to GHPs will be a high-priority item in order to support grid resiliency.

At Baukunst, we’ve been interested in the geothermal energy space for some time and have been investing here. The data in this report provides independent validation for our conviction that geothermal will become an important part of the energy mix moving forward. It will also open up non-dilutive funding opportunities, which is excellent!

The report analyzed the widespread use of GHPs in three scenarios:

• Base Scenario: continuing to operate the grid as it is today
• Grid Decarbonization Scenario: 95% grid emissions reductions by 2035 and 100% clean electricity by 2050
• Electrification Futures Study: grid decarbonization scenario with expansion to include wider electrification, including building heating

In each scenario, deployment of 5 million GHPs per year demonstrated 1) grid cost savings, 2) consumer fuel cost savings by eliminating fuel combustion for space heating, and 3) CO2 emissions reductions.

Wide scale deployment of GHPs in the US would lead to a:

1. Net reduction of annual electricity consumption and GHG emissions across the US: The southeastern US has the potential to see the greatest electricity savings (primarily due to high cooling loads). The northern US would see the highest reduction in GHG emissions due to reduction of on-site carbon emissions created by heating sources (gas, propane, fuel oil). 
2. Reduction in annual power generation: The base scenario would reduce annual electricity generation by 585 TWh, 593 TWh for the Grid Decarbonization, and 937 TWh for the Electricity futures study. For reference, the US generated 4,243 TWh of electricity in 2022. 
3. Reduced need for power generation and storage capacity: The base scenario would reduce US need for power generation and storage capacity by 173 GW, 345 GW in the grid decarbonization scenario, and by 410 GW in the electricity futures scenario. 
4. Alleviate transmission build out requirements: The base scenario would avoid 3.3 terawatt miles of transmission additions, 36.7 terawatt miles in the Grid Decarbonization scenario, and 65.3 terawatt miles in the Electricity Futures study. 65.3 terawatt miles is equivalent to 43.5K miles of transmission lines that do not need to be built – this is enough to cross the US, coast to coast, 16 times.  
5. Reduced summer and winter resource adequacy requirements:

• Fossil-fueled power plants require grid resources to operate, so increasing the number of GHPs deployed makes a significant impact on the amount of grid capacity that can contribute to resource adequacy.
• In the base scenario the grid no longer needs 102 GW (summer) and 95 GW (winter). In the grid decarbonization scenario, the grid no longer needs 103 GW (summer) and 101 (winter). In the Electricity Futures scenario, substituting air source heat pumps with GHPs would lower resource adequacy requirements by 127 GW (summer) and 185 GW (winter). 

1. Reduced CO2 emissions in the electric power system and building sector: In the base scenario, GHP deployment would eliminate 217 million tons of CO2 every year until 2050 because of a reduction in peak electrical demand. In the other two systems, GHP deployment does not affect carbon emissions because carbon emission reductions are built into the scenario. 
2. Reduced marginal system cost of electricity for customers: 

• The marginal system cost is the wholesale price that wholesale buyers pay to generators and grid operators. 
• In the base scenario, the reduction in marginal cost is $316B. In the grid decarbonization scenario, there is a $557B reduction in marginal cost. In the electricity futures scenario the marginal cost reduction is $606B.

1. Reduced cumulative system cost of electricity: 

• The cumulative system cost is the capital costs of generators and transmission systems, in addition to the cost of operating generators and the grid. 
• In the base scenario, the cumulative system cost is reduced by $147B or 5%, $246B or 7.1% reduction in the grid decarbonization scenario, and $306B or 7.4% reduction for the electricity futures scenario. 

1. Reduced regional peak load of electricity:Mass GHP deployment can reduce peak summer load by 3-28%, depending on region. Southern areas of the US have the highest peak load reductions due to their higher cooling demands in the summer. In the winter, GHP deployment can reduce peak load for most areas. However, peak load is less affected in areas where on site fuel combustion sources are used. 
2. Improved reliability of regional electric power supply: GHP deployment can improve the reliability of power grids in extreme weather events and reduce rolling blackouts. 

This report and additional research on geothermal can be found on the Geothermal Technologies Office website.