Geothermal Supply Chain
The Opportunity
Advancements from the oil and gas sector, especially in directional drilling and well design, are driving innovation in geothermal development.1 Next-generation geothermal can drive American energy abundance, support energy security, and provide 24/7 clean firm baseload power to the grid with adequate support across the value chain.2
Today’s conventional geothermal systems have a global capacity of only 16 gigawatts (GW) of power and are geographically limited to regions where concentrated heat is located near the Earth’s surface. Next-generation geothermal technologies like enhanced geothermal systems (EGS) and closed-loop geothermal systems (CLGS or AGS) aim to make geothermal possible nearly anywhere.3,4
Foreign Entity of Concern (FEOC) provisions for the clean electricity investment and production tax credits (48E and 45Y, respectively) must be made workable to accommodate the next-generation geothermal technology supply chain where limited domestic capabilities exist or risk hindering U.S. innovation and competitiveness. CATF’s full list of FEOC considerations can be found here.
U.S. and Foreign Supply Chain Capability
Treasury and IRS should integrate next-generation geothermal global supply chain considerations when designing guidance and implementing FEOC provisions to enable the U.S. geothermal industry to comply and report in the development and deployment of projects. The U.S. geothermal industry and market for geothermal-specific components are growing but still relatively nascent, therefore rely on a globally integrated supply chain.
Geothermal project components include technology and material for siting and characterization. drilling, well design and construction, heat extraction, and power production. Below are technology and material components needed for next-generation geothermal technologies like superhot rock (SHR) organized by project stage.
| Project Stage | Domestic and Foreign Capability |
|---|---|
| Drilling | – Large diameter drill strings: U.S. and Europe have primary global market capacity – Downhole tools: China has primary global market capacity for some – Magnets and raw materials for millimeter wave drilling: China has primary global market capacity |
| Well Design and Construction | – Wellheads and components: U.S. and China have primary global market capacity – Cements: U.S. has domestic market capacity – Monitoring equipment: U.S. has domestic market capacity for FAS fiber optics and monitoring instruments/boxes made domestically; China has primary market capacity for lowest cost relatively high-quality seismometers |
| Heat Extraction | – Proppants: U.S. has primary market capacity |
| Power Production | – Turbines, production pumps, and plant infrastructure: U.S. and non-FEOC countries (e.g. Italy, Israel, Japan) have primary market capacity; China has primary market capacity for components – Heat exchangers: global market capacity is primarily from U.S. and non-FEOC countries (e.g. Italy, Israel); China has primary market capacity for components – Control room equipment (e.g. computers): U.S. and non-FEOC countries have primary market capacity |
The United States is a leader in geothermal energy and innovation and has immense potential to lead in the next-generation geothermal market. Treasury must take the above considerations into account when developing FEOC guidance to ensure the U.S. can continue to innovate and compete on the global stage.
1 An introduction to the next clean energy frontier: Superhot rock and the future of geothermal
3 Gaps, Challenges, and Pathways Forward for Superhot Rock Geothermal Synthesis Report
4 See CATF’s SHR Glossary for more detailed definitions.
