The Nuclear Industry Loves This Geothermal Startup

Mano Nazar spent nearly 40 years working in the atomic energy industry — first at Duke Energy, then at American Electric Power before his capstone years as the chief nuclear officer at NextEra.

Now a semi-retired investor, he’s turning his attention to a resource he thinks can help meet the surging electricity demand the slow-growing reactor business is struggling to supply: geothermal.

On Wednesday, he is slated to announce that he’s joining the board of directors at XGS Energy, which has emerged as the nuclear power industry’s geothermal darling, as part of the company’s latest funding round.

The new $13 million round of financing — reported exclusively by Heatmap — will help the Houston-based next-generation geothermal company to complete work on its first pilot project on land owned by the U.S. military in California.

So-called enhanced or advanced geothermal is among the hottest things in clean energy right now. The nascent industry is seeking to rapidly expand the areas where drillers can deploy America’s oil and gas know-how to tap into heat from the Earth’s molten core to generate 24/7 clean electricity.

Until now, conventional geothermal technology has limited the resource’s potential to the few places where magma close to the surface heats naturally formed underground reservoirs of water — think Yellowstone’s geysers in the American West or volcanic Iceland.

In 2023, however, fellow Houston-based startup Fervo Energy proved that modern oil and gas techniques such as the horizontal drilling methods used in hydraulic fracturing, or fracking, could be applied to geothermal power. The milestone sparked a rush into the industry, with rivals such as Sage Geosystems — whose top executive once ran the fracking division at Royal Dutch Shell — competing for power deals with major tech companies.

“Geothermal has never been able to expand to new geographies, so it’s really exciting that next-generation geothermal has the ability to go outside of the existing hotspots,” said Peter Davidson, who ran the Obama-era Energy Department’s Loan Programs Office before joining Aligned Climate Capital, one of the new venture firms backing XGS in this financing round. “That’s the real benefit of all the enhanced geothermal — it’s using the deep-drilling technology that’s been developed by the oil and gas industry.”

XGS took a unique approach. Unlike Fervo or Sage, which frack for heat and create artificial reservoirs underground, XGS bores deep, vertical wells then sticks a steel pipe filled with water into the hole. The company then fills the area around the pipe with a liquid slurry containing a proprietary blend of conductive minerals that transfer heat from the well through the pipe and to the water inside the tube. XGS declined to name what minerals it uses, but said they’re naturally occurring and widely sold as commodities.

This approach caught the attention of the nuclear industry. Among the company’s top investors so far is the venture arm of Constellation, the nation’s largest operator of atomic power stations, which led a key funding round last year.

Like nuclear or fossil fuel plants, geothermal power produces large amounts of heat. “The nuclear industry is really, really good at knowing what to do with that heat,” XGS CEO Josh Prueher said.

Prueher credits his past experience working for battery storage and microgrid developers with helping him forge closer ties with incumbents in the electrical industry. With electricity demand growing from data centers, he said, he knew enough about constructing projects to recognize that the timescales small modular reactor developers were proposing would likely take too long to satisfy the appetites of the artificial intelligence boom.

“I’m not a technology guy, I’m a guy who likes to build projects, and we want to build, own and operate,” Prueher told me. “We felt SMRs are pretty late to what we’re seeing … so then we started to look at geothermal.”

This latest financing includes venture firms such as Aligned Climate Capital and Clearsky, where Nazar is an investor.

“If you think of nuclear, each installation is a huge installation. That’s one of the challenges of the industry — finding the funding, insuring against cost overruns, and executing megaprojects,” said Charles Gertler, a former Energy Department researcher who authored the Loan Programs Office’s liftoff report on geothermal technology and just founded his own startup in the sector. “What’s so cool about XGS is that they’re building megaprojects that can be deployed piece by piece. The design of their system is a little more elegant and foolproof than some other approaches we’ve seen in the industry.”

Despite the breakthroughs enhanced geothermal companies have yielded, Nazar sees the technology serving different needs than nuclear power. Unlike reactors, which struggle to ramp up and down, geothermal plants can decrease or increase output when the electrons coming from weather-dependent renewables such as wind and solar are waxing or waning. But nuclear power could still generate electricity in plenty of places where hot rocks are just too deep to drill economically, he said.

“Geothermal you can stop and start the next hour, as opposed to nuclear … but you don’t have geothermal resources everywhere, whereas with nuclear you can build it as long as you have access to a coolant,” Nazar told me. “It’s complementary, not competitive.”