Fervo, a geothermal company, reported $11.9 billion in contracted revenue in its third-quarter earnings, up from $7.2 billion the previous quarter, as hyperscalers search for electricity to power their AI data centres. The company said Monday it is on track to complete a 396 megawatt power plant for Google by the end of 2028.
Fervo connected its first 100 megawatt geothermal plant to the grid earlier this year, and both that project and the larger Google plant are at Cape Station in Utah, a resource that could generate 8.4 gigawatts. Experts had previously told Fervo the site could only produce about 4 gigawatts.
The Google project, called Cape Google 400, will be grid-connected. Fervo co-founder and CEO Tim Latimer said on an earnings call Monday that the arrangement allows Google to draw power from the deal and sell it to other customers if it is not ready to use it. “We built Cape Station on our schedule. Google can develop a potential data center on their schedule, and neither party is waiting on the other,” he said.
Latimer’s comment highlights an advantage geothermal has over competing generating sources like large nuclear or natural gas plants: its phased construction. Fervo’s newer wells are deeper and hotter, each capable of generating 15 megawatts of gross power. Several are linked into a unit the company calls a GeoBlock. The first completed GeoBlock generated 33 megawatts, while recent ones reached 50 megawatts, sized to match the demand of a typical data centre hall, so hyperscalers can bring them online incrementally.
Fervo is still in the early stages as a business. It ended the quarter with an operating loss of $43.7 million, though it holds $1.9 billion in cash and cash equivalents and long-term debt of $301.6 million, which should give it plenty of runway.
Much will depend on Fervo bringing down the cost of its power plants. The first phase of Cape Station cost $7,000 per kilowatt of capacity, the company said, while the Google project costs $5,500 per kilowatt, a significant drop. With subsidies, that is about equivalent to a new natural gas power plant running on fuel costing $6 per million BTUs, still about twice what natural gas costs today. The company’s long-term target is $3,000 per kilowatt, which, if Fervo can hit it, could significantly undercut natural gas power even at today’s prices.
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Cost per kilowatt for Fervo's geothermal projects
US dollars per kilowatt
Target is company's stated goal; current costs include subsidies. Source: TechCrunch via Fervo's quarterly earnings report
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Analysis
Why This Matters
AI data centres are driving a scramble for new electricity sources, and geothermal offers a firm, low-carbon alternative to natural gas and nuclear that hyperscalers are seeking.
Fervo’s rapid contract growth indicates that developers are betting on geothermal as a scalable solution, potentially reshaping the energy mix for the tech sector.
The company’s ability to cut costs will determine whether geothermal can compete with cheap natural gas, a key question for the broader decarbonisation of the grid.
Background
Fervo Energy is a US geothermal company that uses advanced drilling techniques to access deep hot rock, enabling electricity generation in locations where conventional geothermal is not possible. Its Cape Station project in Utah is one of the largest geothermal developments in the world. The company has been publicly traded and was founded by Tim Latimer, a former drilling engineer for a major oil and gas company.
Key Perspectives
Tim Latimer, CEO of Fervo: Stressed that the phased construction of geothermal plants lets hyperscalers add capacity at their own pace without waiting for the generator or vice versa.
Fervo’s earnings report: Shows a $4.7 billion jump in contracted revenue, attributed to hyperscaler demand and the company’s track record of meeting deadlines.
Fervo’s cost projections: The company aims to lower plant costs from $5,500 per kilowatt today to $3,000 per kilowatt, which would undercut natural gas even at current fuel prices, but achieving that target remains a significant challenge.
What to Watch
Whether Fervo meets its cost-reduction milestones, especially the $3,000 per kilowatt target that would make geothermal cheaper than natural gas.
The completion timeline for the Cape Google 400 plant and whether Google exercises options to expand the offtake.
How other hyperscalers respond: if Fervo’s approach is successfully scaled, other tech companies may place large orders, accelerating geothermal deployment.
