The Exchanges

Q they are geographically limited. You do need that heat To be pretty close to the surface, and you need some additional characteristics like permeability as well, and that's what has kept geothermal limited geographically to specific areas kind of all over the world. Let's contrast that then. So when you think about the type of thing you're interested in, what type of depth and temperature should I be thinking about?

A So, so the right way to think about this is to think about temperature. Temperature is the target. We pick roughly a hundred degrees Fahrenheit for a very clear reason. It's physics. If you are going to use water to extract heat from the subsurface, that is the ideal temperature. A hundred degrees Fahrenheit. Anything above that Diminishing returns. Anything below that, you're leaving too much opportunity on the table. So we're going after that temperature. That is the target. And the question then is, how deep is that? Well, it depends where you are. In some places, not very deep at all. You can go maybe three miles, which is consistent with oil and gas drilling depths, and you're there. Um, but in other places, you have to go Three, maybe four times as deep as that to get to those temperatures. So that's the range. Always looking for 800 Fahrenheit, and you'll find it anywhere between three miles to 12 miles deep, depending on where you are in the world.

AI assessment note: “Always looking for 800 Fahrenheit, and you'll find it anywhere between three miles to 12”

Q that 800 degrees or something in that range, kind of everywhere. But, um, but it'd be better to start where it's not quite that deep. So where geographically do you tend to get it? I mean, I'm sure this is different all over the world, but talk to me about, like, what are the geologies, and maybe within the U.S., where can you find 800 degrees at, like, three miles?

A Yeah, it's usually the ring of fire. So anywhere in the Pacific, um, side of the country, um, and all of the Pacific of, of South America as well. So the ring of fire wrapping from America to North America, to Alaska, to Japan, to Indonesia, to Philippines, all the way down to New Zealand, um, That's a typical place where you'll find those, and that's billions of people, and so it's not a small market by any means. Um, you can also find it in the, in the Atlantic Ridge. So Iceland, for example, you don't need to go anywhere close to those steps to get to those temperatures. Kenya, um, in short, in short, everywhere where you have geothermal today is very likely one of those places where you'll find the 800 degrees Fahrenheit Uh, at three miles, closer to three miles than closer to 12 miles.

AI assessment note: “Yeah, it's usually the ring of fire. So anywhere in the Pacific”

Q traditional hydrothermal anyway, just because you don't have enough heat near the surface. So that's kind of the interesting trade here. I guess the other thing we should talk about, though, is permeability, right? Like, if you're doing traditional geothermal, uh, Exploration. You're trying to find a place that does have heat near the surface and also has sufficient permeability. Is that, how does that look at these greater depths?

A Yeah. So in general, permeability decreases as you go deeper. You have more lithostatic pressures and, um, a, that, that's going to work against you. However, the, the crust of the earth is critically fractured. This has been shown. So what that means is that there's already An inherent fracture crust at large, and when you start putting cold fluids in an injector well, the density of those colder fluids versus the lower density of the pore pressure fluids will actually open that up. Um, I did a, very early in my days in Quays, and coming from oil and gas, I did a little bit of a literature search on something called lost circulation events in oil and gas. It basically means you're losing your drilling muds, um, And you see it in the literature. When you exceed a certain depth temperature threshold, when you're going into the, a little bit too deep, a little bit too hot wellboards in oil and gas, you have no circulation events. In other words, you fracture, you activate the permeability in the rock that's already there. So we believe that, uh, in the geothermal, we're going for this hotter, deeper kind, uh, activating that permeability, it's going to be Uh, favored by physics, by differential density of fluids. Uh, but this is an EGS system. We're not talking about having permeability in there. It's, if it's there, it's there, it's closed. We're talking about activating that pe…

AI assessment note: “in general, permeability decreases as you go deeper. You have more lithostatic pressures”

Q that, maybe that's the end state part one, because somebody will do that in what you call shallow systems, and then it's going to take a while for somebody else to do it at 10 mile depth or something like that. But, you know, in the lead up to, like, there being the world's first super hot rock Geothermal power plant. What are the milestones we should watch out for?

A Yeah, the flow test. The flow test is the moment of truth. He's the equivalent of, uh, heating oil and the oil gushing out. So the flow test is the ability to drill down, uh, two wells usually, connect them through a fracture network, and produce steam at a given temperature and pressure and flow rate. That, if you can see that, if you can point to that and you can say, look, it's durable, it's, it hasn't lost temperature, it hasn't lost flow rate, the rest is relatively straightforward. You build a power plant on the surface to convert that steam to, to electricity. So the flow test is the thing we all should be watching for. I want to, and I, and I want to see flow tests that are super hot, And they can be subcritical or supercritical, it doesn't really matter, but hovering in the 400 degrees Celsius, um, or 800 Fahrenheit, uh, and I want to see them, uh, in a variety of depths in the three-milers, in the four-milers, in the five-milers, and that's the roadmap. For us in particular, the project in Oregon gets that flow test by the end of this year. By the end of twenty-twenty-six, Quaze has a commercial-grade Injector producer per EGS system producing 25 to 30 megawatt equivalent electric output from a flow test.

AI assessment note: “The flow test. The flow test is the moment of truth.”

Q can go to the kind of lower end of those depths. So talk to me about, like, how deep do we drill for oil and gas right now? And, um, if you think about that as compared to the shallower version, the places where you get 800 degrees Fahrenheit at three mile depth or something like that, um, How does that compare to what we do in oil and gas?

A Yeah, so oil and gas systems are not depth limited. They are temperature limited. You will find people drilling with mechanical drilling systems all the way down to eight miles, nine miles, pushing really out there, but not hot, right? So the, the gap is not depth. The gap is heat, is how hot you can drill, and that's where you will start seeing fundamental differences. If I try to answer this irrespective of temperature, I would tell you that oil and gas systems can already drill to the vast majority of depths that this, um, that we're talking about here, miles and miles, three, four, five, six, seven, eight miles under the earth. But when you add the temperature, which is really the target we're going for, then you see a massive gap. To put it bluntly, oil and gas mostly happens at two to three miles deep. It's rare to find it below that because it starts to get too hot. Uh, and here we're talking about that being the beginning of the geothermal frontier we're unlocking. So, so the end of one is the beginning of the other one.

AI assessment note: “oil and gas mostly happens at two to three miles deep”

Q I guess we should maybe be explicit about why getting to 800 degrees Fahrenheit is beneficial. Can you just do a quick comparison to, like, how much power you could extract from a well at, if it is an 800 degree well versus a 200 degree well?

A Yeah, we're talking about 10 times the power. So the Icelandics were the first ones to talk about these at length. Um, it has to do with physics. It has to do with the thermophysical properties of water, basically higher densities, lower viscosities. It has to do with the thermodynamic conversion efficiencies between the heat and electricity. So at the end of the day, the same wellbore, let's call it eight inch in diameter, very typical size, uh, it will transfer maybe one to 10 megawatts electric equivalent. If it's flowing at 200 degrees Fahrenheit, I will transfer 10 times that, um, if it's flowing at 800 degrees Fahrenheit. So, um, in Fahrenheit terms, two times the temperature, three, four times the temperature, but 10 times the power. So that's the calculus we're trying to unlock. Um, and if you go harder than that, it actually doesn't help you. So if you go to a thousand Fahrenheit, 2000 Fahrenheit, it actually works against yourself. Um, a hundred really is the Goldilocks zone for that supercritical property of water, but you're talking about a 10 X.

AI assessment note: “Yeah, we're talking about 10 times the power.”

Q to those depths, really, in oil and gas, but you believe that because of the fundamental physics, it will actually be easier to frack, essentially, because you're going to, you're basically going to inject drilling buds, and those are going to Open up a fracture network just because of how the rock works. Do we have, like, do we, do we have, has anyone done that at that depth ever?

A So we don't access these depths at these temperatures, right? Any, any hole that's deep in the world is not hot. So this effect doesn't quite manifest. Like cola in Russia, uh, the KTB in Germany, they're, they're cold. They're, they're barely, they're half the temperature that we needed to So the answer is no, nobody's ever done it. The closest we've done to that is in the lab. EPFL has been publishing a very interesting work, the Japanese as well, showing these effects, but, but that's correct. The physics tells you, and the lab experiments tell you that the, the density of the colder fluids play a disproportionate role in fracture initiation and propagation at these temperature depth combinations. Now the first project, the one we're doing in Oregon, will be the beginning of showing those effects. Uh, I think we're gonna be the first people in the world that actually show and start pointing their way to, ah, that following from lab results. Yeah.

AI assessment note: “So the answer is no, nobody's ever done it.”

Q really, including geothermal. And you're going deeper, so I would presume that your, to you, drilling speed actually ends up being among the, or the most important metric, probably. What do we know? You're, you're introducing a novel sort of drilling process, millimeter wave Drilling, which you can explain what that is. Um, what do we know about speed, and how do you compare that to what we typically see?

A Yeah. So, so the, the important thing with speed is the total average speed. So it's like the tortoise and the hare. A lot of people overemphasize instantaneous speed, like, oh, we can drill a hundred meters per hour instantaneously, but that matters less than your consistency. So non-productive time in drilling is what starts to take over your drilling economics. Um, You start spending a lot of time not drilling, but replacing the drill bit and running the pipe in and out the hole. So for us, we're not really trying to have, um, ungodly drilling speeds instantaneously. We're trying to have a very low, nonproductive time, independent of temperature and depth. What do we talk about? We talk about three to five meters per hour, all things considered. What does that translate to? It means you can get to 10 kilometers, that's six miles. Um, Within a hundred days. You're in the money there. To give you a sense, the Chinese recently did, uh, an eleven-kilometer haul, and I'm switching units because they, it's been reporting those units. So, about eight miles deep. The first 10 kilometers took a year to drill, and the last one kilometer took another year to drill. So, there is a massive exponential in there, and that's what we're going after. We don't care about the instantaneous speed. We care about the non-productive time and the consistent speed. Uh, we want to get down there regar…

AI assessment note: “We talk about three to five meters per hour, all things considered.”

Q I don't want to overstate it, but like invent a new form of fracking, essentially, that you can do at these great depths and these great temperatures, and then ensure that that delivers sufficient permeability and that your decline curve is Acceptable, and so on. Um, do I have those two technical risks right at the high level, and then are the other major challenges that I'm not thinking of?

A Yeah, I think those two encapsulate the core of what are the gates that you need to go through to prove that this can be done at scale. The drilling by far outweighs the fracturing. The fracturing does happen in nature. We see this in nature every time a hydrothermal vent or a mine forms. This is the process by which it does so. So there's evidence in the geological record that The fracture in part has precedent. There's no evidence whatsoever in the geological record, of course, that you can actually drill these things mechanically from the surface. That's a unique thing. So I would, I would say that if you can access these temperatures, regardless of depth, you've initiated a journey for human creativity and industry to actually conquer that, um, that frontier, that geological frontier. And as you Correctly pointed out, I think the price that we gain by doing so is enormous. It's unlike any other energy source out there. It dwarfs everything else combined. So that's right. Um, there's a lot of engineering between here and there, but engineering is not physics or fundamental science, are things that can, can get unlocked one step at a time, starting with those shallower systems and progressing sequentially to the deeper systems. We're not going to develop a deep system on day one. Because that's unnecessarily hard, but we're going to develop the shallow systems on day one and …

AI assessment note: “Yeah, I think those two encapsulate the core of what are the gates”

Q presume your solution to that is a combination of we're just going to need a lot of money, but also Do as much learning as you can before you have to drill all the way down to a three or four mile depth. How much can you learn and prove without going to that depth versus how much you're just going to have to drill that deep to get there?

A The, these things are already drilled, right? So the place we picked for our first project already has holes drilled to the right temperature depth combinations. So that is the key. The key is your first project, your first attempt Cannot represent technical gaps, because you're gonna run out of money, and you're not gonna be able to raise the tens of millions of dollars that you need. So we've already done that. We've picked a location with enough precedent, and we've picked a team with enough, ah, understanding of that location to convince enough taker of power that we can build under those conditions. So we're already getting into market. Uh, in that location with a real take or pay PPA, uh, because we know that we can point to all of the solutions with precedent.

AI assessment note: “place we picked for our first project already has holes drilled”

Q How has it, I mean, who drilled the previous well to that temperature depth combination and why?

A In that particular location, neighbors. Neighbors is our drilling partner, right? So another reason why we're working with them, uh, this, this temperature, uh, Depths. So these shallow super hot rock wells are, have precedent. Um, going all the way back to the seventies, humans have actually pushed tools to these extremes successfully. What nobody has ever done is to actually build a full commercial grade enhanced geothermal system out of them. So we're basically picking precedent from everywhere to build their first commercial EGS system that's super hot rock. Now, That wouldn't work in a deeper system, but that works in a shallow system. To make it work in a deeper system, you need to close those gaps, and that's where our drilling technology and many of the other things we're doing in the background come into play. But you start, you get into your first commercial success with as much precedent as possible so that you can actually navigate those ten million to a hundred million dollar gaps that is going to take you To do so.

AI assessment note: “In that particular location, neighbors. Neighbors is our drilling partner, right?”