Off the Run

It’s Getting Hot In Here

• Fervo just completed the largest clean energy IPO ever. $10 billion valuation.
• Next generation geothermal is not Old Faithful. Shale technology has unlocked a new resource. Firm, 24/7, carbon free power.
• The drilling technology is ready. The reservoir underwriting still needs time.

I’ve had more non energy people call me in the last two weeks, asking if I knew anything about this geothermal company that just went public. Fervo I ask? Yeah, that’s the one. And I proceed to point them to the interview I did with Tim Latimer in 2023. I guess we were both ahead of the curve. Difference is, Tim’s company went public at a $10B valuation. For those of you that think this was an AI driven overnight success, think again. This appearance on the grand stage has been almost two decades in the making.

On May 12th, Fervo priced at $27 a share, raising $1.89 billion, the largest clean energy IPO ever. It quickly traded up and closed 35 percent above pricing. And believe me, it was not on $138,000 of revenue in 2025. It is because the market has finally priced what the hyperscalers already knew: firm, dispatchable, 24/7 carbon free baseload power is the scarcest commodity in the AI buildout. Nuclear works, but it currently takes a decade and costs $15,000 per kilowatt. Wind and solar are cheap but not firm. Gas is firm but you write a fuel check forever. The market has been looking for something that is clean, firm, fast to deploy, and free of fuel cost exposure. That is a very specific description of one technology.

Today’s geothermal is not Old Faithful, where developers had to hunt for a very specific coincidence of heat, water, and naturally fractured rock in the same place. Enhanced geothermal systems (EGS) change the equation because you are not hunting for a natural resource. You are engineering one. Drill down roughly two and a half kilometers, turn horizontal, frack the rock to create flow pathways, pump cold water in and pull hot water out. Thanks to the shale revolution, American operators have drilled over 200,000 horizontal wells and every one of them produced temperature logs and rock mechanics data that geothermal developers can now use. The exploration risk is gone.

But like all ‘new’ technologies, it’s not as competitive on cost.  Not yet. What gives it a leg up on technologies like solar, is it’s not starting from scratch. Solar had to invent its manufacturing process. It took two decades and Chinese scale to drive costs down 90 percent. EGS started with 20 years of shale learning already in the toolkit. That is why Fervo’s drilling costs have fallen 70 percent in two years across just 14 wells, moving faster than early solar did at the same stage. Above ground, you have Mitsubishi and Baker Hughes equipment and construction partners. Veterans of the industry. Today Cape Station costs roughly $7,000 per kilowatt. The target, at scale, is $3,000 per kilowatt.

Aside from the current cost structure, because with power demand where it is we know some will look past that, the reason everyone is not building an EGS plant is lack of data on reservoir longevity.  The metric all my geologist friends are telling me to watch is thermal drawdown or rather, if the rock keeps its heat as the cold water runs through it. Right now we have 20 months of continuous data from Project Red with no measurable temperature drawdown and thermal recovery already exceeding DOE benchmarks. That is encouraging, but it’s not ten years of data, so the jury remains out. Cape Station will be the first commercial scale proof point with the first 100 megawatts expected late 2026. The construction cost risk is contained and for now the supply chain is secured.  But those next 5-7 years of data can’t come fast enough.

There are others in the geothermal space also making headway. Sage Geosystems, Quaise Energy, CTR, and Mazama are all coming. Fervo is just the furthest along. Hopefully they catch up soon as our grid could use twenty Cape Stations. What will be good about geothermal is that you will be able to bring it on in stages rather than having to wait for large projects to be finished (like nuclear).  Think Venture Global modular system rather than Golden Pass. Fifty megawatts at a time, modular, each GeoCluster independently financeable on its own PPA and its own project finance stack. Should the thermal capacity hold, the next leg of the power story could be another drilling development story.  Add a 15-year PPA withan investment grade offtaker and you have a new infrastructure story. The question now for anyone paying attention is not whether geothermal works. It is whether you want to be in the room before that answer arrives or after.