IRA incentives for thermal storage in idle oil wells IMAGE©Geo2Watts
Climate policy in the US Inflation Reduction Act (IRA) provides powerful incentives to generate renewable energy and phase out fossil fuel production. Oil and gas companies are already required to cap boreholes when an oil well is depleted, to meet Asset Retirement Obligations (ARO). But if the borehole is instead repurposed to generate zero emission electricity, Investment Tax Credits (ITC) in the IRA would repay up to 50% of the capital recovery.
The entrepreneurial founders of Geo2Watts leverage new long-term Investment Tax Credits within the IRA to reduce the investment cost of a clean energy technology that puts idle oil wells to a new use, clean energy generation.
The firm’s patented Borehole Battery would repurpose idle oil well bores as thermal storage heated by solar thermal energy, and delivered through a Organic Rankine Cycle (ORC) geothermal energy generator.
Unlike the similar but large-scale solar thermal energy storage being built within an entire depleted oil reservoir in California, the Geo2Watts conversion would repurpose only the metal bores left in the ground when idle oil wells are depleted, simplifying permitting.
Once a well is converted to thermal energy storage and is generating electricity, it would qualify for the 30% base ITC for generating zero-emission electricity, and an additional 10% for meeting domestic content. And because it would be sited in an oil-producing region, it would get another 10% for being in an “energy community”.
Geo2Watts Co-founder Bill Bartling brings oil industry experience on the policy side with decades in the energy industry, most recently as the former Chief Deputy at CalGEM, California’s oil, gas, and geothermal energy regulator. This has given him an inside view of the opportunity in the legislation.
“It’s as much work to plug a well with all that cement from bottom to top as it is to put sand in it from bottom to top,” he pointed out.
“The ARO requires that you seal off the bottom of your well, set a plug a certain depth above the highest oil level, and perform a casing integrity test to pressurize it to ensure no leaks. Then you pour in heavy drilling mud that dries like Adobe up to about 110 feet below the earth’s surface. Then, set a second cement plug at least 100 feet deep and cut the casing off 10 feet below the surface. You weld a plate on top of that and then bury it in dirt.”
Converting a well to thermal energy storage could enable companies without enough ARO reserves to abandon their wells to fully meet mandatory ARO requirements at up to half the cost.
Co-founder Phil Cruver is a serial entrepreneur in renewable energy projects who served as Principal Investigator for over $1.2 million of federally funded R&D projects. His former projects include a 500-turbine wind farm in Palm Springs contracted with SCE. He summarized the financial opportunity in the IRA.
“To plug and abandon a well costs $100,000 to $150,000, depending on the well. You’re just pouring boxes of money into a hole,” he said.
“But the owner can recover half of that money with the IRA. In California, there are 49,000 idle wells on record, and abandoning all of those will be in the $3 billion range. So, this now allows operators to do the right thing, responsibly close the wells, shut off the actual or potential methane leaks, and convert it into energy storage for producing clean electricity.”
In the US, the ITC has been the primary driver of renewable energy growth. However, this tax credit has often been halted prematurely, risking investments each time Congress changed hands. As a result, clean energy investment has until now not had the tax benefit certainty of fossil energy investment, discouraging potential investors and bankrupting developers.
But that era of uncertainty for renewable investment could be at an end, as Cruver explains. The IRA has for the first time put in law a decade-long sunset date of 2035 for the ITC, giving it for the first time something more like the permanence and certainty that fossil energy tax benefits have enjoyed since the 1920s. With a decade of opportunities, that’s now likely to develop the bipartisan support needed for the energy transition.
“With the IRA, the Biden administration is now pumping clean energy money into red states like Texas as fast they can,” Cruver said.
“Goldman Sachs says the IRA will generate over $3 trillion of US clean energy investment. And as of two weeks ago in Texas alone, 1,500 clean energy projects were in the pipeline representing nearly half a trillion dollars.”
And now there is an added inducement, making these tax credits transferable, Cruver noted.
“The big change with the IRA is now you can sell these tax credits on the open market,” he explained.
“Previously, you had to go through a complicated formula of building partnerships with various companies that could use the credits. Not anymore. Now, once you earn the tax credit, you can sell it on websites like Cruxclimate, and for big deals, $100 million or so, you can sell the tax credits for 100% on the dollar.”
The Geo2Watts system combines solar collectors, a closed-loop heat exchanger, sand mixed with PCMs (Phase Change Materials), and the Organic Rankine Cycle (ORC) power generator.
The borehole left behind in an idle well is a metal tube around 7” in external diameter that typically extends a mile or more into the earth. A small pipe would be inserted within this borehole to carry a working fluid from the solar collector to heat the surrounding sand inside the borehole and store it at about 200°C. Existing multiple thick layers of concrete and steel casing surround the original borehole tube that act as potent heat insulators.
The heated working fluid is then run back up and through a heat exchanger to run the ORC power generator at the surface to generate this artificial “geothermal” energy as power. The system would be a closed loop configuration with no toxic materials.
The firm plans to build its prototype system next year and is investigating several possible locations in California, Texas, and Louisiana for the pilot project.
The Permian Basin is a particularly promising market, Bartling explains, with 100,000 idle wells between Texas and New Mexico, and many of them new.
“In Texas, they’ll carve out maybe 10 acres and drill 20 or 30 wells next to each other,” said Bartling.
“They’ll typically go down 10,000 feet, make a sharp turn, and go out another 20,000 feet; then hydraulically fracture the well, so they have very rapid decline rates, short lives. These 20 or 30 young wells in close proximity haven’t had much time to degrade. So that’s an ideal situation to daisy-chain them into a bigger power plant. So, Texas and New Mexico are also exciting markets for us.”
