The Energy Question Episode 48 Cindy Taff, CEO of Sage Geosystems

 

David Blackmon [00:00:04] Hey, welcome to the energy question with David Blackmon I’m your host, David Blackmon and my very special guest today is Cindy Taff, the CEO, Chief Executive officer of Sage GeoSystems, a Texas-based company that’s working in the area of geothermal energy. And this is a really exciting one for me to do because it’s something I’ve always been very interested in personally. So Welcome to the show Cindy.

Cindy Taff [00:00:31] Cindy Yeah. David Thank you for having me on I really think what we’re going to be talking about is going to resonate with your listeners because as you know, geothermal energy is a natural segway into renewables from oil and gas. So happy, happy to be on.

David Blackmon [00:00:47] Yeah, Yeah, it really is and it just makes so much sense from an energy and policy perspective. And I know you’re going to be able to give us all the details. Why it makes sense from a business perspective, too. Before we go into the Q&A, though, I want to give you a few minutes to talk about your background and the mission, you know, the business objectives for, Sage, Geo System.

Cindy Taff [00:01:12] Yeah. No, absolutely. So my background, David, I’ve got over 35 years of experience in the oil and gas industry. My last role was Vice President Welles over Shell’s global unconventional assets, which included assets in Canada, South America, China, and even Ukraine before we got out of Ukraine.

Cindy Taff [00:01:33] So what I’m proud of is I love my team to systematically reduce cost over about 50% over about a five-year period. And this is during a time when the scope of both lateral length and the number of francs were increasing. So I’m currently, as you mentioned, CEO of Sage, and really we’re excited to be using our oil and gas background to actually bolster the geothermal industry. So happy, happy to be in geothermal. And I want to mention we’re also doing energy storage. So that’s something that hopefully we’ll have time to talk about as well.

David Blackmon [00:02:13] Why don’t we start with that? Energy storage. What are the mechanics of that related to a geothermal project?

Cindy Taff [00:02:21] Yeah. So, you know, David, right now we can actually deliver long-duration energy storage solutions at a cost that beats pumped hydro storage and lithium-ion batteries so that, believe it or not, pumped hydro storage so where you pump water from the bottom of a mountain to the top of a mountain, that actually accounts for about 90 to 95% of the storage around the world.

Cindy Taff [00:02:48] So we can actually beat those costs now and if you think about lithium-ion batteries, where you have to depend on lithium, there’s a huge dependency on China so we can do that we can do that now.

Cindy Taff [00:03:00] So if we are able to put our energy storage together with solar, we can actually generate baseload power. So solar plus our energy storage gives you 24 seven baseloads and we’ve got a line of sight to actually beat combined cycle peaker plants at $2 an MCL. Yeah. So we’re excited. We’ve done some tests in Star County, Texas. Yeah. So I am really excited about what we’re doing and we’re looking to do our first demonstration pilot plant in the first half, half of next year.

David Blackmon [00:03:42] Well, you know, one of the things that that’s always I won’t say confused necessarily, but struck me as if the, you know, the potential for geothermal has always been pretty enormous. But it never has really scaled up in a big way as is your you’re on your website. You know, current geothermal activity has been located near dormant volcanoes basically in those areas and in very isolated parts of the country. Talk about the factors that have conspired, really that have prevented geothermal from scaling up in a significant way over the past decade.

Cindy Taff [00:04:26] So the areas that you mentioned, David, that is called conventional or hydrothermal, geothermal. So of course that’s been around for over 100 years. The challenge is that you need to be to get the geologic characteristics. You need to be either near a volcano or near the ring of fire. And so it represents only about 2% of the geothermal resources around the world.

Cindy Taff [00:04:55] And so what represents a bigger resource base and really the ability to put geothermal in more places than just these geographically limited areas, like, you know, Iceland or geysers of California would be a formation that is hot, but it doesn’t have the water that will naturally bring that heat to the surface, so it’s called hot, dry rock.

Cindy Taff [00:05:19] So it’s contained in formations that the oil and gas industry has drilled to these depths for many, many years. So, for example, the Star County test well that we have was drilled in 2008 to a depth of 19,000 feet and almost 500 degrees F. So that’s plenty of heat right there to have a commercial installation.

David Blackmon [00:05:42] Yeah. And, you know, that’s all very technically feasible. I mean, with current technology, right? We’ve already drilled wells. I know we’ve been drilling wells in the Madden field in Wyoming, 25, 27,000 feet in the United States. So so none of this is beyond technical feasibility it’s just current technology, Right?

Cindy Taff [00:06:04] That’s correct for drilling the well. Now, what we’re focused on is how do you cost-effectively then harvest that heat out of the earth and then bring the heat to the surface and then cost-effectively convert that heat to electricity so that’s the challenge and it’s actually the challenge that the EGS industry has faced for about 40 years.

Cindy Taff [00:06:28] And so most of the industry uses what they call a two well eggs system where you drill one well, you inject, you drill one well, and which is going to be your injector, you drill another, which is going to be your producer then you create a frac in between those wells.

Cindy Taff [00:06:46] And so then you pump water into the injector and then move it through that frac and then produce it out of the producer. And some of the challenges with this two-well eggs system, are one cost because you need two wells. The other is really the ability to connect that fracture between the two wells. And then once the fracture network is actually created, it takes a significant amount of pump pressure or energy, parasitic energy to pump water from one well to the other.

Cindy Taff [00:07:17] And then there’s actually a tendency, as you know, in the oil and gas industry, there’s a tendency for that water to follow the path of least resistance. So it tends to short circuit and not use that entire frac as heat, basically a surface area for the heat exchanger. And so those are some of the challenges with the two well, eagle systems.

Cindy Taff [00:07:39] So what SAGE is doing differently is we’re using a single well, so your cost is going to go down and then we use what we call a a cycle of injection of production. So very much like huff and puff in the oil and gas industry. So we’ve been able to overcome some of those challenges that the two-well Eagle system has had for many years.

David Blackmon [00:08:02] Is it a strictly vertical well or is there a horizontal lateral involved too?

Cindy Taff [00:08:08] our test well in Star County happens to be a vertical well with a single fracture. But what we will be testing is the ability to drill a horizontal well, and install multiple fractures, just like in unconventionals.

Cindy Taff [00:08:22] And for those fractures than to be additive not only in the surface area where that heat exchange takes place but also in the pressure energy that you get out of those fractures as they the fractures will close on that water When you’re pumping that water to harvest the heat. And not only do you have the heat energy from that water, but as you can imagine, you have the pressure energy from that water that you get to harvest and turn to electricity brine.

David Blackmon [00:08:50] These are strictly conventional formations you’re tapping into.

Cindy Taff [00:08:54] Yeah, that’s what’s interesting. So you also have to take your oil and gas and put it on upside down. So we’re talking about formations that are low to no permeability, low to no porosity. We’re not wanting secondary permeability from fractures or faults.

Cindy Taff [00:09:14] We’re actually wanting something that’s very tight so that when we pump the water into the fracture, the water stays there. And then so what we do is we pump the water into the fracture, we close the wellhead valve, and the water gets stored in that fracture under pressure.

Cindy Taff [00:09:31] If it’s hot enough, it also gets heated, and then when the energy demand peaks, you open up the wellhead valve and that fracture is wanted to close naturally on that water and it jettisons the water back to the surface under a tremendous amount of pressure and force.

David Blackmon [00:09:49] So. So talk about, you know, every industry like this has pretty significant infrastructure challenges right ahead of it. A new industry that is a cutting edge technology like this. Talk about the kinds of infrastructure requirements and challenges you’ll be facing in bringing this all, you know, being able to scale this kind of an operation up.

Cindy Taff [00:10:17] Yeah, so that’s a great question. So I would say that one of the main infrastructure challenges is actually if we’re wanting to connect to the utility grid, which our technologies do not have to connect to the utility grid, we can have microgrids or what they’re called island grids, which are right behind the meter and servicing an industry or a facility that needs energy and they don’t want to be on the grid.

Cindy Taff [00:10:45] So, for example, the military wants this security of supply. But if we’re wanting to connect to the utility grid, one of the biggest challenges is the current wait time for getting that connection and also some of the equipment. So, for example, Transformers and switch gears just there, the lead time to get those are 12 to 18 months so I think that’s one of the biggest challenges, challenges that we have.

Cindy Taff [00:11:15] Other than that, you know, we’re drilling a well using existing off-the-shelf oil and gas equipment and people. So that’s pretty straightforward. And then our power plant equipment is I mean, we do have some proprietary technology that we’re using, which includes a supercritical CO2 turbine, which we’re actually going to be testing the prototype in a matter of a couple of months. But other than that, you know, it’s pretty straightforward. So I would say the biggest infrastructure challenge that is getting connected to the grid.

David Blackmon [00:11:49] Yeah, you mentioned Transformers. Just as an aside, I’ve talked to the president of several of the power industry’s trade associations in recent weeks about that that is a big issue facing our country the supply chain markup where transformers are concerned.

David Blackmon [00:12:14] I wonder also you know for an application like yours, we have this issue in the Permian Basin talking about the grid where there’s a shortage of transmission and really electricity available in the Permian Basin of all places.

David Blackmon [00:12:32] I mean, I wonder, is there a potential for geothermal to kind of be able to establish a microgrid to power the oil patch out there in the Permian? And help these operating companies acquire electricity from that kind of resource rather than having to wait for the grid to come out there.

Cindy Taff [00:12:53] Yeah. David Absolutely. So for example, we’re working with Oil and Gas Company in California that’s actually starting to focus on carbon capture and they’re wanting electricity behind the meter and they also need heat.

Cindy Taff [00:13:09] So as you can imagine, we can provide both electricity and heat and there are a lot of industrial applications that need heat. So direct air capture needs heat. But yes, we can create that island grid or microgrid behind the meter and provide electricity and heat for four different operations. So that’s definitely.

Cindy Taff [00:13:30] I mean, so there is a question, if you think about it, about, you know, the utility grids need updating, they need upgrading. So there’s a lot of money that needs to be spent doing that. But then you can also start looking at distributed power.

Cindy Taff [00:13:45] So we can definitely provide the power where you can direct it to a certain area without having to rely on that utility grid. So we can actually play in both spaces as needed. But as you’re pointing out, the utility grid is, you know, it’s under a lot of stress. And as the electrification of our world increases, that need for electricity is just going to continue to increase.

David Blackmon [00:14:11] Yeah, it is. It’s going to grow pretty exponentially, particularly if we have this effort to scale up electric vehicles becomes a reality because there, you know, the load EVs alone are going to put on the grid is really going to be massive and I, I just don’t think our policymakers have really thought through all these kinds of things, all these kinds of considerations that,.

David Blackmon [00:14:36] You know, it’s of course, it’s an overwhelming set of challenges for anyone to be able to think through and plan for. But I just am kind of concerned that we’re going to going to hit a bit of a crisis here in the coming years with everything that’s happening in that space.

David Blackmon [00:14:57] What about incentives from the government speaking to the federal government? You know, we have the IRA, we have the infrastructure bill. There’s this set of billions and billions of dollars in tax incentives and outright subsidies for these kinds of wind and solar. Know a lot of different things. I wonder, though, does geothermal qualify for the investment tax credit, for example, or any of the other incentives in those bills?

Cindy Taff [00:15:28] Yeah, David, For four years, wind and solar had a lot of tax incentives that geothermal didn’t see. But in the Inflation Reduction Act, there are tax incentives not only for wind and solar but also for geothermal and then also for storage.

Cindy Taff [00:15:45] So for the first time storage tax incentives, you don’t have to have storage actually connected to either wind or solar. It can be independently implemented. So, yes, there are investment tax credits. And then for storage, there are actually production tax credits in the IRA. So they are array know, of course, you know, everybody is waiting on guidance from the IRA, so it looks great on paper.

Cindy Taff [00:16:15] But yeah I mean the incentives are 40, 50, 60% investment tax credits in some areas with, you know, there’s an additional ten. It starts kind of at a base of 30%. So there are additional tax credits. For example, if you’re in an energy community, which, you know, a lot of the areas that we’re looking at, our energy communities, because they’re communities where there are either oil and gas wells or we’re looking at repurposing coal plants, that’s considered an energy community. So those additional tax credits would apply.

David Blackmon [00:16:50] So how would repurposing a coal plant with geothermal? I mean, what would the mechanics be involved in doing something like that? I know, I know. We have a couple of dozen, probably retired coal plants here in Texas. So what what would the mechanics involved be in doing that?

Cindy Taff [00:17:10] Well, so first you would want to evaluate whether you can drill to the temperatures that you need for geothermal. So, for example, we’re targeting 300 degrees or greater, if you can again you can economically drill to those depths. If you can’t, then what we would want to do and we’re actually working with a coal plant here in Texas is use our energy storage combined with solar. And so what is attractive about coal plants is that they’ve already got a lot of infrastructure that we can reuse.

Cindy Taff [00:17:43] So, you know, the simple ones are roads, buildings, but the more complex ones are against, the ones that are really fit for what we’re doing is, you know, water, surface water facilities for cooling. There’s already a substation right there at the power plant, so you don’t have to worry about those interconnections and the cost of interconnecting because the infrastructure to the grid is already there.

David Blackmon [00:18:10] Yeah. So I guess my understanding of this is that when you bring the heat up out of the ground from a geothermal well, is there any potential for that heat to be transported to another site for power generation? or would the generating capacity need to be right there on-site? I wonder about, you know, the need for any kind of pipeline infrastructure related to a geothermal operation.

Cindy Taff [00:18:40] So ideally, you would want the power generation right there so that you don’t have to build the piping. You don’t have to if you can imagine, you’re going to have to insulate that piping so you don’t lose heat in the transport of the hot water from the well to wherever the power generation is.

Cindy Taff [00:19:02] And so ideally, you’re going to want that power generation right there on the well pad. And because electricity, you know, of course, is going to be easier to then transfer to other places and to utilize, there are direct heat applications, of course, and still even in the direct heat applications, the closer you are to the endpoint or the use point, the more ideal it would be.

David Blackmon [00:19:30] So I just wrote a story about ESG and emissions and of course, ESG is a. You know, a very significant concern for every company in every industry these days. And I wonder about where geothermal is concerned.

David Blackmon [00:19:45] What are the big challenges your company faces just in terms of particularly the Emission piece of it? I mean, every company is, of course, going to want to focus on diversity and proper governance, on the emissions piece of it. Is there a significant carbon footprint with a geothermal operation, for example?

Cindy Taff [00:20:08] Yeah, we caution about saying zero, but it’s very you know, once you get past the drilling of the well and the construction of the power plant and of course, constructing the pad before you even bring the drill rig drilling rig out there, that’s going to be our biggest carbon footprint is in the construction.

Cindy Taff [00:20:29] And of course, you know, in the oil and gas industry, we can also use rigs that run off of either well, typically High Line and there are even some companies that are working on battery storage to run their rigs.

Cindy Taff [00:20:43] So once you get past the construction phase, the carbon footprint goes down considerably because we’re not using any kind of fuel for our operations. It’s any kind of energy that we need. We’ll take it out of our operations, you know, for pumping, for example, or for cooling, that will be basically a parasitic load out of the energy that we create. But it’s close to zero. David But we don’t like to say zero because that’s that’s something that’s hard to promise.

David Blackmon [00:21:16] Yeah. Are you to the point as a company of producing an annual sustainability report? we have not gotten to that step yet.

Cindy Taff [00:21:25] We have not gotten to that but let me say, you know, one of our investors actually is neighbors, and I’m sure you’re familiar with them. They’re the largest drilling contractor onshore in the world.

Cindy Taff [00:21:39] And so, you know, as we progress as a company, we they’ve been great to work with. They’ve been very supportive of their back office. And for example, we have an investor that’s asking us exactly what you just asked. What is your scope one and scope two emissions?

Cindy Taff [00:21:54] And so we have our team working on what the scope one emissions look like. So we’re we’re going to be talking to neighbors this week about what the scope one, emissions from their drilling rigs look like.

Cindy Taff [00:22:05] But again, they’ve been great partners to work with and they’ve been helping us with those types of reports. And we just haven’t gotten there as a company in having to submit those kinds of reports as of yet.

David Blackmon [00:22:18] Yeah, I you know, we talk about footprints of carbon footprint, but there’s also, you know, one of the other concerns that inevitably arises with any operation like this is land footprint. And my assumption, of course, is given the similarities to an oil and gas drilling operation, my assumption is that the good pad and the overall land footprint of a geothermal operation are probably pretty similar to that of a typical drill site in the shale patch, correct?

Cindy Taff [00:22:51] Yeah. David, you’re spot on so on average, it’ll depend on the ambient temperature where we’re drilling the well, but on average we’re going to get about three-megawatt net per well. And so if you want to build, say, a 50-megawatt power plant, then.

Cindy Taff [00:23:09] What we’re going to want to do is drill between 18 and 20 wells, but we’re going to use unconventional multi-well pad operations where you spaced the wells about ten feet apart on the surface. But you directionally drill so that you’ve got the space and no thermal interference in the subsurface. So for a 50-megawatt power plant with a good footprint and the power plant footprint, you’re looking at about five acres or less.

David Blackmon [00:23:39] That’s amazing. That’s. That’s less just for folks to understand that’s roughly, roughly about the same in a big wind farm as a single turbine. It’s going to occupy basically one of the tall towers. So that’s a pretty minimal land footprint.

David Blackmon [00:23:59] You know, all of this to me, just makes so much sense. I really hope this is an industry, a piece of the industry that’s able to really scale up in the years to come. I wonder I always like to ask this question, what would you do? Like for our viewers to know that I haven’t already asked you about, because I never think of all the good questions that you’re or something I haven’t asked that you ought to talk about.

Cindy Taff [00:24:32] Well, and I think I mentioned in the beginning, you know, geothermal and energy storage I want to emphasize the energy storage because that is what is needed right now to really complement wind and solar.

Cindy Taff [00:24:46] It’s a natural segway from oil and gas so we use the same equipment, we use the same professional skill set. So that’s what I would want to leave your listeners with is this is a great way for the oil and gas industry to expand its application, to learn more about renewables and really to get into the renewable space.

Cindy Taff [00:25:10] And it’s pretty obvious we do actually two of our investors are from the oil and gas industry. One is Nabors and one is Glogg. And so they recognize that it’s a natural segue way for not only their people but their equipment.

David Blackmon [00:25:24] And the ability to produce a continuous energy storage like you’re talking about. I just to give you an example of how little understanding there is of this in the media, late last week, I fielded a media call from a publication I won’t mention, but the reporter was calling about the potential for energy storage in Texas.

David Blackmon [00:25:50] And, you know, she was looking for somebody to give her obviously very favorable comments about lithium-ion stationary storage and I don’t have a positive view of that so my comments didn’t end up in her story.

David Blackmon [00:26:05] But I did mention the potential for geothermal storage in that interview, and she had literally no idea what it was I was talking about. So that’s, of course, a challenge that your industry is going to have to be able to meet is a big part of. It’s going to be educating the public about all this, right?

Cindy Taff [00:26:28] Yeah, Actually, just last week I was in Washington, DC. The Geothermal Rising Association had scheduled a capital fly in and the intent was exactly what you’re talking about, David is, is education a lot of people don’t understand. I mean, and you know, to their defense, when you drill a well, you can’t see below the surface. So they don’t really understand what’s going on down there.

Cindy Taff [00:26:53] And I think it is important for us to educate not only on what is geothermal and how it can be really put just about anywhere in the world but also energy storage and how when you combine that with solar and wind that you can take those assets and really expand the time during the day that they can produce electricity.

David Blackmon [00:27:16] Yeah, You know, I got horrified a couple of years ago. I was doing an interview with a lithium-ion stationary battery maker and they kept talking about renewable baseload capacity that their batteries, they contended, would give wind and solar the capacity to be the baseload generation.

David Blackmon [00:27:38] And, you know, I mean, they were talking about a stationary battery installation that would provide maybe 4 hours of backup power for wind and solar. But what you’re talking about and what people need to understand is if you can scale this up, this geothermal storage concept, that you literally can.

David Blackmon [00:27:58] Turn wind and solar into potential baseload capacity because of the ability for geothermal to provide this continuous storage capacity that doesn’t discharge like a lithium-ion battery does and that to me is the biggest potential of all of this.

Cindy Taff [00:28:18] And David, we can do that now, we can do that now with the existing oil and gas technology. And for like you mentioned, for durations over 4 hours, which is considered long duration and that’s what solar and wind needs. We are beating lithium-ion battery costs now and we can only just go, as we do in the oil and gas industry. As we scale up, we can drive those costs down further.

David Blackmon [00:28:46] Yeah, I mean, that’s the key to the whole thing is getting those economies of scale as you scale up. And I mean, just like Exxon and share for my oil and gas viewers who are probably the majority of my viewers is just like what Shell

David Blackmon [00:28:58] I mean, what Chevron and Exxon Mobil and Oxy you’re doing in the Permian Basin, they’re the most cost-effective producers out there because they have the economies of scale that the smaller producers really can’t have and it’s the same concept here.

David Blackmon [00:29:14] So as this scales up, I mean, the cost of cost per unit is inevitably going to go down even further and become even more competitive. So I just think this is the way we ought to be really focusing on with this energy transition where storage is going to turn.

Cindy Taff [00:29:32] And David, the oil and gas industry in the U.S. drills about 20,000 wells a year. So the oil and gas industry can scale this right now. They have the capabilities to scale it right now.

David Blackmon [00:29:47] One last question that I forgot to ask I meant to ask is, Can you and your operations go into an old oil and gas existing wellbore and tap into that for your purposes to reuse that existing wormhole?

Cindy Taff [00:30:04] We did so we reentered an exploration gas well that was drilled in 2008. And in Starr County, it was actually logging abandoned. So we excavated, found the casing, and drilled all the cement plugs out. And the biggest line of sorry, the biggest casing size that they had run was a nine and 5/8 inch liner. So we tied the nine and 5/8 liner back to the surface. And that’s what we’ve been doing our testing for the last two, two and a half years.

Cindy Taff [00:30:33] Now for energy storage, oil and gas reuse of oil and gas wells is perfect. Especially when you’ve got the well density in other words, multiple wells on a single pad like we do unconventionals.

Cindy Taff [00:30:47] Now, when you have a single well on a single pad, you’re still going to likely want to drill additional wells on that pad because you’re going to want to have that scale. But yeah, we can use it for energy storage. We can use oil and gas wells right now. In fact, we’re talking to a couple of oil and gas operators that want to repurpose their oil and gas wells for energy storage.

David Blackmon [00:31:13] Fantastic. Well, this is this is just an amazing concept all around and I know it’s been out there in theory anyway for it, a very limited basis for decades. But the potential for it to play a big role in this transition is really there. And, I sure do appreciate you taking the time to do this interview with me today.

Cindy Taff [00:31:37] Yeah. Thank you so much I’ve enjoyed the conversation. Thank you.

David Blackmon [00:31:42] And we are up against time, folks so we’re going to have to leave it there but let’s let’s plan to talk again as things develop in the future.

Cindy Taff [00:31:52] That would be fantastic.

David Blackmon [00:31:54] Good deal and for all my viewers, I appreciate you tuning in thank you. Eric Parel, our extraordinary producer, and Sandstone Group for hosting our show. I am David Blackmon, and that is all for now.

 

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