Geothermal Insiders Unpack the Fervo Short

Few startups have as much riding on their success as Fervo Energy. To many concerned about climate change, the company, which taps underground heat to generate electricity, represents a source of hope for a clean energy future because it promises to produce carbon-free power around the clock, unlike wind and solar.

Now that Fervo has gone public, however, it’s opened itself up to new scrutiny about whether it can deliver on its promise. In early October, a short seller called Morpheus Research published what it presented as blockbuster findings that Fervo was “unraveling” and that its first commercial project was “destined for failure.”

The report alleged that Fervo struggled with declining temperatures at its pilot project and is facing water loss issues and trouble accessing transmission at its first commercial plant.

Fervo’s stock, which debuted at $27 per share, was already down to $14.33 prior to the report’s publication after rising interest rates drove a broader market pullback from clean energy stocks. The market also appeared to react after the company told investors in August that its transmission partners “are managing unique circumstances in 2027 that may result in Fervo being curtailed for a period of time.”

Since the Morpheus report came out, the stock has sunk another 30%. This may have enriched the short seller — it makes money by betting that a stock is overvalued — so its claims deserve deeper scrutiny. I spent the past week talking with geothermal power experts about whether the report’s findings had any merit.

The community of people with knowledge of the subject is small, however, and almost everyone, it seems, is invested in Fervo’s success — if not financially, then emotionally. It’s hard to overstate how much people want this company to succeed. The report had clearly sent a wave of anxiety through the sector, with a founder of a different company expressing worry that it could spook investors away from geothermal altogether.

Fervo told me it was “carefully reviewing the claims” in the report and believes they “reflect a short seller’s selective and outcome-driven characterizations of early-stage pilot data. Our disclosures to investors and regulators, and our reporting to state agencies, remain the appropriate record of how our projects are performing.” Morpheus did not respond to a request for comment.

The consensus among the people I talked to was that the short seller took many of the known unknowns about Fervo’s technology and played them up as though the company was engaged in a cover-up. They largely discounted the issues Morpheus raised about Fervo’s pilot site, but acknowledged that there were real, if unsurprising, questions about the commercial plant.

“This report does not tell me anything that I did not know beforehand around the challenges enhanced geothermal systems need to address,” Mike O’Connor, the director of the Mountain West Geothermal Consortium, of which Fervo is an advisor, told me. O’Connor worked at the Department of Energy under the Biden administration and was a lead author of the agency’s “Pathways to Commercial Liftoff” report on next-generation geothermal power.

To understand how Fervo’s technology is supposed to work, imagine sticking two straws into a hot sponge and then shooting cold water down one of them. The water flows into the pores of the sponge, soaks up its heat, and then travels out of the other straw. Fervo is doing the geological equivalent, drilling deep underground to where the rock is very hot, and then drilling horizontally to break it up and create “pores” for water to pass through. The company pumps water down into those pores through an injection well, the water absorbs heat from the rock, and then travels back to the surface via separate “production” wells. The hot water enters Fervo’s power plant where it’s used to create steam and spin a turbine.

When O’Connor referenced the known challenges with enhanced geothermal systems, he was talking about water loss and “thermal decline,” or when the rock begins to lose heat. Fervo’s system is designed to prevent water loss to the atmosphere and recycle the same water through the plant continuously. Water can still be lost underground, however, if not all of what is pumped down is recaptured by the system. There is also uncertainty about how much water you can pump through a given system before it starts to permanently lose heat.

The Morpheus report claims Fervo is struggling with both of these issues more than the company is letting on. It relies on Fervo’s own disclosures, additional data the company submitted to Nevada regulators, and interviews with an unspecified number of anonymous former employees to make the case.

For example, it zeroes in on an incident from March 2024 when public data appear to show that Fervo increased the amount of water it pumped through its small 3-megawatt pilot project in Nevada, known as Project Red, and saw a stark drop in temperatures. The report juxtaposes this with a September 2024 social media post from Fervo’s CEO Tim Latimer, who said the company has “observed zero thermal decline to date” at the pilot project, accompanied by a temperature chart with a straight line hovering around 345 degrees Fahrenheit.

Morpheus alleged that Fervo tried to hide this event, but everyone I spoke to felt the short seller read the data wrong. Greg Leveille, the former chief technology officer of ConocoPhillips, and now works as a geothermal energy consultant, provided a simple explanation for the March 2024 event on his website. Morpheus’ analysis was based on monthly data reported to Nevada regulators. When Leveille looked at daily temperature data Fervo published recently, however, he deduced that the company had temporarily stopped flowing water through the system in March 2024, causing the fluid temperature to drop to the temperature of the cold outside air. Such operational decisions aren’t captured in the monthly averages reported by the regulators.

Fervo confirmed to me that Leveille’s interpretation was accurate.

Morpheus goes on to warn that “thermal decline at Project Red has now accelerated to an even faster rate of 24°F per year,” despite Fervo’s claim in its May 2026 IPO statement that its pilot plant “has not experienced the kind of premature thermal decline that has long plagued traditional geothermal projects.” The report includes a chart with data from Nevada regulators showing that production temperatures fell about 2 degrees per month between November 2025 and May 2026.

When I asked Fervo about this, a company spokesperson told me, “Our published data clearly demonstrates that there have not been rapid early declines in temperature at Project Red,” referring me to a blog post the company published in April. The post does acknowledge a “slight temperature decrease” at the end of the pilot project’s life, but says it is “consistent with the gradual, expected onset of the decline phase that reservoir models predict well in advance.”

O’Connor, of the geothermal consortium, argued that Project Red was essentially a science project — a site for research and development. “It’s not designed the way it should be if you actually care about long-term production,” he said.

The more concerning part of the Morpheus report, according to O’Connor and other sources I spoke to, was its statements from former employees about water loss at the company’s first commercial project, Cape Station, in Utah.

Project Red lost water at a pretty steady rate of 20% to 30% per month throughout its operation. Fervo disclosed this and said it was expected due to the pilot plant’s simpler two-well design. Latimer has asserted that the company targets 99% water retention at its commercial plants “where there is a network of production wells surrounding injection wells.” Fervo also argued that the water wasn’t lost, per se, but remained “within the same hydrogeologic formation, supporting pressure maintenance and long-term productivity.”

Fervo has been more tight-lipped about water loss at Cape Station, however. Morpheus points to a 2024 paper in which the company published 24 hours of production data from a test at the commercial site and left out water loss data. The report quotes two former employees who said the results “weren’t good” and that the water wasn’t behaving the way the company expected. When I asked Fervo about this, it pointed me to an investor presentation published in September that reported it had measured a 90% water retention rate at a “triplet” well test at Cape Station and continues to model 99% retention for the complete, “full field” design.

The report also highlights a debate in the expert community over whether water that leaves Fervo’s system will return to the aquifer Fervo is drawing from, as the company argues — or vanish off in another direction. Fervo’s water rights in Utah are premised on “non-consumptive” use, so if it starts drawing more water than expected, it could run into trouble.

“That’s the big controversy, and that’s where the snake oil can go both ways,” Peter Malin, a seismologist and chief scientist at the energy consulting firm Enegis, said when I asked him about the report’s water-loss sections. “Until the actual data are let out, I couldn’t say one way or another.”

“I think this report is showing, to some degree, the ramifications of being a public company,” O’Connor said. He believes Fervo’s explanation for water loss at Project Red, he told me, but added that it’s notable that the company hasn’t yet disclosed water loss data from Cape Station. “Disclosing more operational data is going to be an important milestone for the company.”

Fervo did not respond to questions about whether it plans to disclose more water loss data from Cape Station or what it means if water loss is higher than expected.

The Morpheus report raises a few other concerns related to project costs and seismicity, but the only one the outside experts I spoke with shared concern about was Fervo’s difficulty getting interconnection and transmission rights for future phases of the Cape Station pilot. The company has offtake agreements with utilities in California that depend on transmission access it doesn’t currently have locked in. This is, of course, an issue that the entire power market is dealing with, and one that Congress is trying to solve with a new transmission and permitting reform bill.

Christopher Dendrinos, an analyst at RBC Capital Markets, issued a bullish research note projecting long-term confidence in Fervo after the Morpheus report came out, but conceded that “potential transmission availability and timing is one of the bigger threats to rapidly scaling operations.” (RBC Capital Markets has provided investment banking and other services to Fervo and co-managed the company’s initial public offering.)

I asked Dendrinos about the lack of data from Cape Station, and he shrugged it off. The project only just started commercial operations in late September, he said, so the company doesn’t have real production data yet.

“Everyone’s entitled to have their own opinion on what they see as being de-risked or not de-risked,” he said. “It really just comes down to, do you trust the management team’s expectations, or do you not?”