February continues to be fruitful for Houston’s geothermal companies, as Fervo Energy announced another major round of funding on Feb. 29.
Fervo closed a $244 million funding round with new investment led by Oklahoma City-based Fortune 500 company Devon Energy Corp. (NYSE: DVN). Other new investors include Houston billionaire John Arnold, Galvanize Climate Solutions, Liberty Mutual Investments, Marunouchi Innovation Partners, Mercuria, and Mitsubishi Heavy Industries. Goldman Sachs & Co. LLC acted as exclusive placement agent to Fervo Energy, and Vinson & Elkins LLP acted as legal adviser to the company.
Returning investors include Capricorn’s Technology Impact Fund, Congruent Ventures, DCVC, Elemental Excelerator, Helmerich & Payne, and Impact Science Ventures. According to Crunchbase, the round takes Fervo to $325.5 million raised in funding to date.
"With this round of funding, led by Devon Energy, we’re adding a group with deep expertise in drilling and subsurface technology, power markets, project development and finance, and climate solutions," Sarah Jewett, vice president of strategy at Fervo Energy, said in response to Houston Business Journal questions. "The strength of the partners and the funds raised in this round underscore the value of our fully de-risked enhanced geothermal systems technology and opportunity for EGS to satisfy intensifying demand for 24/7, carbon-free power."
The funding will support operations at Cape Station, the company’s first utility-scale geothermal project in Utah, Fervo said in its announcement. Cape Station broke ground in September 2023 and is expected to begin delivering electricity to the local grid in Utah in 2026.
Fervo published initial drilling results from Cape Station earlier this month, drilling seven wells for the project since June 2023. Drilling cost per well decreased throughout the process, dropping from $9.4 million to $4.8 million per well, the company said.
“Since its inception, Fervo has looked to bring a manufacturing mentality to enhanced geothermal development, building a highly repeatable drilling process that allows for continuous improvement and, as a result, lower costs,” Tim Latimer, Fervo Energy CEO and co-founder, said in a news release announcing the drilling results. “In just six months, we have proven that our technology solutions have led to a dramatic acceleration in forecasted drilling performance.”
In addition to its Cape Station plant, Fervo also landed approximately $25 million from a Department of Energy grant this month. That money will be used for a geothermal pilot project also located in Utah.
Devon investment continues oil and gas investor interest in geothermal
Fervo isn’t the only Houston-based geothermal company drawing attention from oil and gas investors. Also in February, Sage Geosystems closed a $17 million Series A funding round led by another Oklahoma City-based energy giant, Chesapeake Energy Corp. (Nasdaq: CHK).
Sage said the funding will enable it to build its first geothermal energy and storage facility in Texas this year. The plant is also expected to go online on the Electric Reliability Council of Texas’ grid this year, becoming one of the Lone Star State’s first geothermal plants.
“If you talk to any of our [energy-focused] investors, they definitely see geothermal as a segue from their skillsets into the renewable energy space,” Sage CEO Cindy Taff told the HBJ in an interview.
A January 2023 report from the Congressional Research Service highlighted the potential of idle and underutilized oil and gas assets — such as abandoned wells, drilling equipment and power plants — to be converted for geothermal use. However, the report also noted that geothermal projects do not have the same kinds of regulatory risk mitigation that oil and gas drilling does, such as tax deductions for explorations.
Working on geothermal projects also requires transferable skills from the oil and gas industry, as Latimer can attest. He founded Fervo in 2017 after a career in hydrocarbon engineering and previously told the HBJ that when he began hiring geothermal workers, he found plenty in Houston with strong oil and gas backgrounds.
“You have to build stuff that works on a massive scale,” Latimer said. “If you actually want to make a difference, you have to have the right people on the team who know how to execute large, complicated projects at scale — that’s one of the things the oil and gas industry does so well.”
Fervo previously told the HBJ that it anticipates developing future projects in Texas after the cost to produce geothermal energy goes down. The company's Houston headquarters are part of the Main&Co development at 114 Main St.
