vox--2020-10-21--Geothermal energy is poised for a big breakout

Geothermal power is the perpetual also-ran of renewable energy , chugging along in the background for decades , never quite breaking out of its little niche , forever causing energy experts to say , “ Oh , yeah , geothermal ... what ’ s up with that ?
” Well , after approximately 15 years of reporting on energy , I finally took the time to do a deep dive into geothermal and I am here to report : This is a great time to start paying attention !
After many years of failure to launch , new companies and @ @ @ @ @ @ @ doldrums , to the point that it may finally be ready to scale up and become a major player in clean energy .
In fact , if its more enthusiastic backers are correct , geothermal may hold the key to making 100 percent clean electricity available to everyone in the world .
And as a bonus , it ’ s an opportunity for the struggling oil and gas industry to put its capital and skills to work on something that won ’ t degrade the planet .
Vik Rao , former chief technology @ @ @ @ @ @ @ service giant , recently told the geothermal blog Heat Beat , “ geothermal is no longer a niche play .
It ’ s scalable , potentially in a highly material way .
Scalability gets the attention of the [ oil services ] industry.
” In this post , I ’ m going to cover technologies meant to mine heat deep from the Earth , which can then be used as direct heat for communities , to generate electricity , or to do both through “ cogeneration ” of heat and electricity .
( @ @ @ @ @ @ @ take advantage of steady shallow-earth temperatures to heat buildings or groups of buildings , are sometimes included among geothermal technologies , but I ’ m going to leave them aside for a separate post . )
Before we get to the technologies , though , let ’ s take a quick look at geothermal energy itself .
Fun fact : The molten core of the Earth , about 4,000 miles down , is roughly as hot as the surface of the sun , over 6,000°C , or 10,800°F .
That ’ s why @ @ @ @ @ @ @ calling it “ the sun beneath our feet.
” The heat is continuously replenished by the decay of naturally occurring radioactive elements , at a flow rate of roughly 30 terawatts a year , almost double all human energy consumption .
That process is expected to continue for billions of years .
The ARPA-E project AltaRock Energy estimates that “ just 0.1 % of the heat content of Earth could supply humanity ’ s total energy needs for 2 million years.
” There ’ s enough energy in the Earth ’ s crust @ @ @ @ @ @ @ to power all of human civilization for generations to come .
All we have to do is tap into it .
Tapping into it , though , turns out to be pretty tricky .
The easiest way to do so is to make direct use of the heat where it breaks the surface , in hot springs , geysers , and fumaroles ( steam vents near volcanic activity ) .
The warm water can be used for bathing or washing , and the heat for cooking .
Using geothermal energy this way has @ @ @ @ @ @ @ going back at least to the Middle Paleolithic .
Slightly more sophisticated is tapping into naturally occurring reservoirs of geothermal heat close to the surface to heat buildings .
In the 1890s , the city of Boise , Idaho , tapped one to create the US ’ s first district heating system , whereby one central source of heat feeds into multiple commercial and residential buildings .
( Boise ’ s downtown still uses it . )
After that came digging deeper and using the heat to generate electricity .
The first commercial @ @ @ @ @ @ @ opened in 1960 in the Geysers , California ; there are more than 60 operating in the US today .
The technology for accessing deep geothermal is developing at a dizzying pace these days .
Let ’ s take a look at its basic forms , from established to experimental .
Once it reaches the surface , geothermal energy is used for a wide variety of purposes , mainly because there are many different ways to use heat .
Depending on how hot the resource is , it can be exploited by numerous @ @ @ @ @ @ @ can be used directly , to run fisheries or greenhouses , to dry cement , or ( the really hot stuff ) to make hydrogen .
To make electricity , higher minimum heats are required .
The older generation of geothermal power plants used steam directly from the ground , or “ flashed ” fluids from the ground into steam , to run a turbine .
( The water and air pollution that has been associated with first-generation geothermal projects was all from flash plants , which boil water from underground and end @ @ @ @ @ @ @ some nasty pollutants . )
Flash plants require heat of at least 200°C .
The newer , “ binary ” plants run fluids from the ground past a heat exchanger and then use the heat to flash steam ( meaning the underground water isn ’ t boiled directly and there ’ s no air or water pollution ) .
Binary plants can generate electricity from around 100°C up .
Getting the heat to the surface is the trick .
For that purpose , it ’ s useful to think of geothermal energy technology @ @ @ @ @ @ @ In a few select areas ( think parts of Iceland , or California ) , water or steam heated by Earth ’ s core rises through relatively permeable rock , full of fissures and fractures , only to become trapped under an impermeable caprock .
These giant reservoirs of pressurized hot water often reveal themselves on the surface through fumaroles or hot springs .
Once a reservoir is located , exploratory wells are drilled until a suitable location can be located for a production well .
The hot water that rises through that @ @ @ @ @ @ @ temperature to 370°C , depending on the field ( to get into temperatures hotter than that requires going deeper ; more on that later ) .
Once heat is extracted from them , the fluids are cooled and returned to the field via an injection well , to maintain pressure .
Almost all conventional geothermal projects , most of what ’ s now running , make use of high-quality hydrothermal resources .
One problem with hydrothermal reservoirs is that their visible manifestations — hot springs and fumaroles — remain the only reliable way @ @ @ @ @ @ @ of new fields is expensive and uncertain .
( This is one area of furious technological development . )
Another problem is that they are extremely geographically concentrated .
In the US , geothermal electricity is mostly located in California , Nevada , Hawaii , and Alaska , where tectonic plates are grinding beneath the surface .
Where hydrothermal resources are readily available , the advantages of geothermal energy are well-understood .
The global geothermal electricity fleet has an average capacity factor — time spent running relative to maximum capacity — of 74.5 @ @ @ @ @ @ @ 90 percent .
Geothermal can provide always-on , baseload power ; it is the only renewable resource to do so .
As of the end of 2019 , global installed geothermal electric capacity , dispersed across 29 countries , reached 15.4 GW , with the US in the lead .
The final problem is that most of the big , well-explored , well-characterized fields have been tapped out , at least with conventional technology .
Geothermal that relies on high-quality hydrothermal resources remains a niche solution , difficult to standardize and scale .
@ @ @ @ @ @ @ behind other renewable resources for so long .
Which brings us to ...
Conventional geothermal systems are limited to specialized areas where heat , water , and porosity come together just so .
But those areas are limited .
There ’ s plenty of heat stored down in all that normal , solid , nonporous rock , though .
What if geothermal developers could make their own reservoirs ?
What if they could drill down into solid rock , inject water at high pressure through one well , fracture the rock to let @ @ @ @ @ @ @ collect the heated water through another well ?
That , in a nutshell , is EGS : geothermal that makes its own reservoir .
To be clear , the line between a conventional hydrothermal resource and a resource that requires EGS is not sharp .
There are many gradations and variations between wet/porous and dry/solid .
“ What you really have is a supply curve , where the variables are temperature , depth , well permeability , and reservoir permeability , ” says Tim Latimer , founder and CEO of the EGS company @ @ @ @ @ @ @ two extremes exists.
” To put it simply , as the resource gets deeper and the rock becomes hotter and less porous , the engineering difficulty of accessing it rises .
The basic idea has always been that EGS would start off within existing hydrothermal reservoirs , where fields are relatively well-characterized .
Then , as it learned , honed its technology , and brought down costs , it would branch out from “ in field ” into “ near field ” resources — solid rock adjacent to reservoirs , at similar depth @ @ @ @ @ @ @ venture farther out into new fields and deeper into hotter rock .
In theory , EGS could eventually be located almost anywhere in the world .
That ’ s been the game plan for a decade now , and it ’ s still the game plan , as laid out in the magisterial 2019 GeoVision study on geothermal from the Department of Energy .
The EGS industry has had trouble , though , getting all the ducks in a row .
There was a burst of activity around 2010 , based on Obama @ @ @ @ @ @ @ But by the time the drilling technology from the shale gas revolution had begun making its way over to geothermal , around 2015 , capital had dried up and attention had turned away .
It ’ s only been in 2020 , Latimer says , that everything has finally lined up : strong public and investor interest , real market demand ( thanks to ambitious state renewable energy goals ) , and a flood of new technologies borrowed from the oil and gas industry .
EGS startups like Fervo are growing quickly and @ @ @ @ @ @ @ EGS projects today .
The engineering challenges remain daunting , especially as the targets get deeper and drier .
There are PR challenges as well .
Injecting fluids into the ground in order to fracture rock is known as “ fracking ” in the oil and gas business , and ... it ’ s got a bit of a reputation .
In fact , there are whole US states and countries where it is banned .
The industry is keen to distance itself from gas fracking .
The fluids used are benign , @ @ @ @ @ @ @ water pollution .
Worries about induced seismic activity are somewhat overblown ; in oil and gas drilling , it is high-volume water disposal wells associated with seismicity , and EGS doesn ’ t have those .
The fractures are smaller , more controlled , and under far less pressure than in oil and gas fracking .
As long as drillers avoid fault lines , which they ’ re getting better at doing , the risk is modest , especially relative to the benefits .
( Ironically , geothermal projects have to meet more @ @ @ @ @ @ @ dangerous oil and gas projects . )
And , of course , unlike with gas fracking , there ’ s no combustion of fossil fuels at the end of the line .
EGS is benefiting from technology advances in fracking , but it is not doing the thing environmentalists hate .
Explaining that to the public and policymakers remains a thorny challenge , though , to say the least .
Still , if the engineering and marketing challenges can be overcome , the prize is almost unthinkably large .
Assuming an average well @ @ @ @ @ @ @ rock temperature of 150°C , the GeoVision study estimates a total US geothermal resource of at least 5,157 gigawatts of electric capacity — around five times the nation ’ s current installed capacity .
Alternatively , using EGS for direct heat could provide the US with 15 million terawatt-hours-thermal ( TWhth ) .
“ Compared to a total US annual energy consumption of 1,754 TWhth for residential and commercial space heating , ” DOE writes , “ this EGS-based resource is theoretically sufficient to heat every US home and commercial building for at @ @ @ @ @ @ @ enough heat down there to sustain civilization for generations .
And there ’ s even more heat deeper down , 6 miles and further .
At the far horizon of EGS is “ super hot rock ” geothermal , which seeks to tap into extremely deep , extremely hot rock .
At extremely high heat , the performance of geothermal doesn ’ t just rise , it takes a leap .
When water exceeds 373°C and 220 bars of pressure , it becomes “ supercritical , ” a new phase that is neither @ @ @ @ @ @ @ supercritical water is funky ( it ’ s like ... low-density water ? )
and I ’ m not going to attempt to explain it , but it is regularly used by industry , including in some advanced coal plants , so its properties are fairly well understood .
For our purposes , there are two important things about supercritical water .
First , its enthalpy is much higher than water or steam , meaning it holds anywhere from 4 to 10 times more energy per unit mass .
And second , it @ @ @ @ @ @ @ the Carnot efficiency of its conversion to electricity .
“ Not only do you get more energy out of your well , ” says Eric Ingersoll , a clean energy analyst at the consultancy LucidCatalyst , “ you get more electricity out of that energy.
” That means an individual geothermal project at 400°C would have about 50MW capacity , compared to the roughly 5MW capacity of an EGS project at 200°C — twice the temperature , 10 times the power .
You could get more power out of three wells on a @ @ @ @ @ @ @ 42 EGS wells at 200°C , using less fluid and a fraction of the physical footprint .
Experience to date shows that the hotter geothermal gets , the more competitive its power price , to the point that super-hot EGS could be the cheapest baseload energy available .
The engineering challenges are hairy .
( Oil and gas engineers , the current masters of drilling , did not design for high heat ; they didn ’ t need to . )
New casings and cements need to be developed ; water chemistry at @ @ @ @ @ @ @ ; materials that resist corrosion and high heat need to be perfected ; drilling techniques need to continue improving .
There are even new , “ non-contact drilling ” methods being developed , including AltaRock ’ s , which uses frickin ’ lasers ( “ millimeter waves , ” technically ) .
No well is currently producing electricity from supercritical water , but several past wells ( in Hawaii and California ’ s Salton Sea , e.g . )
have encountered supercritical water and there are exploratory projects in Japan , Italy , @ @ @ @ @ @ @ learn more .
( Here ’ s a recent review of super-hot-rock history and research . )
It wouldn ’ t take much help to get this technology developing more quickly .
“ There ’ s an opportunity to spend a relatively small amount of money to galvanize the industry , ” says Ingersoll .
The US currently lacks a robust clean energy innovation system , but there ’ s a super-hot-rock research program at ARPA-E ( AltaRock ) , a spinoff group called the Hotrock Energy Research Organization ( HERO ) , @ @ @ @ @ @ @ .
More is needed .
The reward — cheap baseload power , available almost anywhere — is too big to pass up .
A fourth category of technologies has emerged recently , which holds out similar promise that geothermal power could someday be accessible anywhere .
AGS refers to a new generation of “ closed loop ” systems , in which no fluids are introduced to or extracted from the Earth ; there ’ s no fracking .
Instead , fluids circulate underground in sealed pipes and boreholes , picking up heat by @ @ @ @ @ @ @ , where it can be used for a tunable mix of heat and electricity .
Closed-loop geothermal systems have been around for decades , but a few startups have recently amped them up with technologies from the oil and gas industry .
One such company , started by investors with experience in oil and gas , is the Alberta-based Eavor .
In Eavor ’ s planned system , called an “ Eavor-Loop , ” two vertical wells around 1.5 miles apart will be connected by a horizontally arrayed series of lateral wells , @ @ @ @ @ @ @ to maximize surface area and soak up as much heat as possible .
( Precise lateral drilling is borrowed from the shale revolution , and from the oil sands . )
Because the loop is closed , cool water on one side sinks while hot water on the other side rises , creating a “ thermosiphon ” effect that circulates the water naturally , with no need for a pump .
Without the parasitic load of a pump , Eavor can make profitable use of relatively low heat , around 150°C , available @ @ @ @ @ @ @ half down .
So far there ’ s an “ Eavor-Lite ” demonstration project built in Alberta , meant to prove out the basic concepts and technologies .
It has shown that the lateral wells can be precisely targeted , the thermosiphon effect works , and the plant ’ s costs and output can be reliably predicted in advance .
The company has three or four commercial plants in various stages of planning ; likely up next is a plant scheduled to break ground in 2021 in Geretsried , Germany .
( It @ @ @ @ @ @ @ feed-in tariffs . )
In France and the Netherlands Eavor will provide heat ; in Japan , electricity ; in Germany , a mix .
When I spoke with Eavor president John Redfern and head of business development Paul Cairns , they told me about a recent change in their design that will reduce the physical footprint and enable even more precise drilling .
Instead of the two vertical wells being located at a distance , they will be right next to each other .
Lateral wells branch out from them , staying @ @ @ @ @ @ @ .
Like so : With the wells so close to one another , they can use “ magnetic ranging ” ( with a transmitter in one well and a receiver in another ) to remain at a fixed distance from one another .
Meeting at the end is easier than meeting in the middle .
As for land use , after the initial drilling , the only part that technically needs to be aboveground is the air cooler that cools the water before it descends .
Power lines , even the electric generator @ @ @ @ @ @ @ if there ’ s a water cooler rather than an air cooler , that too could be underground .
“ Theoretically , ” Cairns says , “ you could have zero surface footprint.
” Since all Eavor needs to work is hot rock , which is pretty reliably located beneath almost any site in the world , it avoids the need for expensive exploration and modeling .
“ We ’ re not smarter , ” Redfern says , “ we just have much simpler theoretical problems.
” An Eavor-Loop can act as baseload @ @ @ @ @ @ @ can also act as flexible , dispatchable power — it can ramp up and down almost instantaneously to complement variable wind and solar energy .
It does this by restricting or cutting off the flow of fluid .
As the fluid remains trapped underground longer , it absorbs more and more heat .
So , unlike with solar , ramping the plant down does not waste ( curtail ) the energy .
The fluid simply charges up , like a battery , so that when it ’ s turned back on it produces @ @ @ @ @ @ @ the plant to “ shape ” its output to match almost any demand curve .
Jamie Beard , who runs the Geothermal Entrepreneurship Organization at the University of Texas Austin , is bullish on AGS ( she worries about the PR problems facing EGS ) , but she warns that Eavor — like other promising geothermal startups Fervo Energy , GreenFire Energy , and Sage Geosystems — does not yet have everything figured out , despite its confident claims .
“ I want them to have it in the bag , ” she @ @ @ @ @ @ @ t yet have it in the bag.
” Directional drilling in high temperatures , above 150°C or so , remains difficult , with equipment prone to melting ( again , oil and gas engineers did not design their technologies with high heat in mind ) .
As rock becomes harder , equipment must also be hardened to additional vibrations .
And electronics need to be better insulated .
The Eavor-lite project is only mining heat of about 70°C .
( It was not intended to be commercially viable . )
To make geothermal @ @ @ @ @ @ @ need to master going deeper and hotter .
“ You can ’ t economically produce geothermal energy at 90°C , ” Beard says .
“ 150 , yeah , you ’ re getting there .
250 , oh , yeah .
300 , you ’ re solid.
” She stresses that there are no insuperable barriers if enough technical know-how and capital are brought to bear .
The problem of extracting geothermal from deep , dry , hot rock , she says , “ is largely an incremental engineering problem that , when @ @ @ @ @ @ @ energy ” might sound like big talk , but in this case , it is not idle .
The main problem facing renewable energy is that the biggest sources , wind and solar , are variable .
Whereas fossil fuel power plants that run on coal and gas are “ dispatchable ” — they can be turned on and off on demand — wind and solar come and go with , well , the wind and sun .
Building an electricity system around wind and solar thus means filling in the gaps , @ @ @ @ @ @ @ that can jump in when wind and solar fall short ( say , at night ) .
And the electricity system needs to be extremely secure and robust , because decarbonizing means electrifying everything , moving transportation and heat over to electricity , which will substantially raise total electricity demand .
The big disputes in the clean energy world thus tend to be about how far wind , solar , and batteries can get on their own — 50 percent of total power demand ?
80 percent ?
100 ? )
and what @ @ @ @ @ @ @ .
( See this much-cited 2018 paper in the journal Joule on the need for “ firm , low-carbon resources.
” ) The answer currently favored by renewable energy advocates is more energy storage , but at least for now , storage remains far too expensive and limited to do the full job .
The other top possibilities for “ firming ” electricity supply — nuclear power or fossil power with carbon capture and sequestration — have their own issues and passionate constituencies for and against .
Geothermal power , if it can @ @ @ @ @ @ @ in hotter , drier , and deeper rock , is a perfect complement to wind and solar .
It is renewable and inexhaustible .
It can run as baseload power around the clock , including at night , or “ load follow ” to complement renewables ’ fluctuations .
It is available almost everywhere in the world , a reliable source of domestic energy and jobs that , because it is largely underground , is resilient to most weather ( and human ) disasters .
It can operate without pollution or greenhouse gases @ @ @ @ @ @ @ electricity can also be used to fuel district heating systems that decarbonize the building sector .
It checks all the boxes .
“ Our challenge is not that we have any enemies , ” says Latimer .
“ If you want to talk to Democrats , we produce carbon-free electricity 24/7 — the last piece of the puzzle for a fully decarbonized electricity sector .
If you talk to Republicans , it ’ s American ingenuity putting our drilling fleet to work on a resource that ’ s fuel-secure , doesn ’ t @ @ @ @ @ @ @ oil and gas people back to work .
It ’ s a beautiful bipartisan story .
The problem is we just don ’ t get talked about.
” Oil and gas to the rescue ?
One thing that might get more people talking about geothermal is the somewhat serendipitous opportunity it offers to the oil and gas industry , which is reeling from oversupply , persistently low prices , and cratering demand caused by the pandemic .
Consequently , it is hemorrhaging jobs .
Geothermal is buzzing with startups that specifically need innovation @ @ @ @ @ @ @ very skills many oil and gas workers already have .
They could put those skills to work making the planet safer for future generations .
That skills match is what animates Beard ’ s geothermal entrepreneurship organization and the $ 4.65 million contest that DOE launched this year to pair geothermal innovations with partners in the manufacturing industry .
There ’ s never been a better time to start or join a geothermal startup — most of them will fail , but there ’ s a future billionaire in there somewhere .
Industry @ @ @ @ @ @ @ waves when , a few months ago , the “ Frack King ” — Mukul Sharma , an O & G engineer at UT Austin who has been key in the development of hydraulic fracturing — launched a new EGS venture called Geothermix .
“ When we started in the unconventional [ oil and gas ] space , there were a lot of issues that needed to be resolved , but over time we have increased well productivity by a factor of 4 to 10 in many shale basins , ” he told @ @ @ @ @ @ @ early on the learning curve in the EGS context , but I have no doubt that we will be able to translate oil and gas learnings from the past decade and successfully deploy these methods in EGS.
” Latimer was an O & G engineer before he shifted to geothermal .
Sage Geosystems was founded by Lev Ring and Lance Cook , two longtime O & G veterans .
Eavor employs several O & G veterans .
The industry is taking notice as well .
“ We got a nice little head start @ @ @ @ @ @ @ hell to stay ahead of it , ” says Redfern , “ but yeah , [ oil and gas majors ] are definitely turning their attention to this.
” What ’ s likely is that oil and gas majors will eventually start buying up geothermal startups .
Investments in geothermal would give them a way to shelter part of their portfolio from the brutal oil market .
And geothermal is a more natural match than wind and solar for many of these companies .
“ The fact that it leverages industry core competencies @ @ @ @ @ @ @ , ” Rao said , “ will give it staying power in the industry , regardless of energy market conditions.
” Geothermal remains a relatively small industry , with a market cap in the single-digit billions , while oil and gas is a trillion-dollar industry .
There ’ s no realistic way geothermal can promise to absorb all the jobs currently being lost in oil and gas .
Nonetheless , geothermal offers O & G something it badly needs : a port in a storm .
It ’ s a growing clean energy @ @ @ @ @ @ @ in exploration and drilling .
Oil and gas has one of those .
Recent oil and gas technology innovations are going to turbocharge geothermal , especially if policymakers can get their act together and offer some support .
There ’ s a steep learning curve ahead and they ’ re just now accelerating into it , but the next decade is likely to be more active for geothermal than the past four .
With an inexhaustible , dispatchable , flexible renewable energy source so close to breaking through , the vision of a @ @ @ @ @ @ @ less utopian , more and more tantalizingly within reach .
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Geothermal power is the perpetual also-ran of renewable energy, chugging along in the background for decades, never quite breaking out of its little niche, forever causing energy experts to say, “Oh, yeah, geothermal ... what’s up with that?”
Well, after approximately 15 years of reporting on energy, I finally took the time to do a deep dive into geothermal and I am here to report: This is a great time to start paying attention!
After many years of failure to launch, new companies and technologies have brought geothermal out of its doldrums, to the point that it may finally be ready to scale up and become a major player in clean energy. In fact, if its more enthusiastic backers are correct, geothermal may hold the key to making 100 percent clean electricity available to everyone in the world. And as a bonus, it’s an opportunity for the struggling oil and gas industry to put its capital and skills to work on something that won’t degrade the planet.
Vik Rao, former chief technology officer at Halliburton, the oil field service giant, recently told the geothermal blog Heat Beat, “geothermal is no longer a niche play. It’s scalable, potentially in a highly material way. Scalability gets the attention of the [oil services] industry.”
In this post, I’m going to cover technologies meant to mine heat deep from the Earth, which can then be used as direct heat for communities, to generate electricity, or to do both through “cogeneration” of heat and electricity. (Note that ground-source heat pumps, which take advantage of steady shallow-earth temperatures to heat buildings or groups of buildings, are sometimes included among geothermal technologies, but I’m going to leave them aside for a separate post.)
Before we get to the technologies, though, let’s take a quick look at geothermal energy itself.
What is geothermal energy?
Fun fact: The molten core of the Earth, about 4,000 miles down, is roughly as hot as the surface of the sun, over 6,000°C, or 10,800°F. That’s why the geothermal energy industry is fond of calling it “the sun beneath our feet.” The heat is continuously replenished by the decay of naturally occurring radioactive elements, at a flow rate of roughly 30 terawatts, almost double all human energy consumption. That process is expected to continue for billions of years.
The ARPA-E project AltaRock Energy estimates that “just 0.1% of the heat content of Earth could supply humanity’s total energy needs for 2 million years.” There’s enough energy in the Earth’s crust, just a few miles down, to power all of human civilization for generations to come. All we have to do is tap into it.
Tapping into it, though, turns out to be pretty tricky.
The easiest way to do so is to make direct use of the heat where it breaks the surface, in hot springs, geysers, and fumaroles (steam vents near volcanic activity). The warm water can be used for bathing or washing, and the heat for cooking. Using geothermal energy this way has been around since the earliest humans, going back at least to the Middle Paleolithic.
Slightly more sophisticated is tapping into naturally occurring reservoirs of geothermal heat close to the surface to heat buildings. In the 1890s, the city of Boise, Idaho, tapped one to create the US’s first district heating system, whereby one central source of heat feeds into multiple commercial and residential buildings. (Boise’s downtown still uses it.)
After that came digging deeper and using the heat to generate electricity. The first commercial geothermal power plant in the US was opened in 1960 in the Geysers, California; there are more than 60 operating in the US today.
The technology for accessing deep geothermal is developing at a dizzying pace these days. Let’s take a look at its basic forms, from established to experimental.
Four basic types of geothermal energy technology
Once it reaches the surface, geothermal energy is used for a wide variety of purposes, mainly because there are many different ways to use heat. Depending on how hot the resource is, it can be exploited by numerous industries. Virtually any level of heat can be used directly, to run fisheries or greenhouses, to dry cement, or (the really hot stuff) to make hydrogen.
To make electricity, higher minimum heats are required. The older generation of geothermal power plants used steam directly from the ground, or “flashed” fluids from the ground into steam, to run a turbine. (The water and air pollution that has been associated with first-generation geothermal projects was all from flash plants, which boil water from underground and end up off-gassing everything in it, including some nasty pollutants.)
Flash plants require heat of at least 200°C. The newer, “binary” plants run fluids from the ground past a heat exchanger and then use the heat to flash steam (meaning the underground water isn’t boiled directly and there’s no air or water pollution). Binary plants can generate electricity from around 100°C up.
Getting the heat to the surface is the trick. For that purpose, it’s useful to think of geothermal energy technology as falling into four broad categories.
1) Conventional hydrothermal resources
In a few select areas (think parts of Iceland, or California), water or steam heated by Earth’s core rises through relatively permeable rock, full of fissures and fractures, only to become trapped under an impermeable caprock. These giant reservoirs of pressurized hot water often reveal themselves on the surface through fumaroles or hot springs.
Once a reservoir is located, exploratory wells are drilled until a suitable location can be located for a production well. The hot water that rises through that well can range from just over ambient temperature to 370°C, depending on the field (to get into temperatures hotter than that requires going deeper; more on that later). Once heat is extracted from them, the fluids are cooled and returned to the field via an injection well, to maintain pressure.
Almost all conventional geothermal projects, most of what’s now running, make use of high-quality hydrothermal resources.
One problem with hydrothermal reservoirs is that their visible manifestations — hot springs and fumaroles — remain the only reliable way to identify them; exploration and characterization of new fields is expensive and uncertain. (This is one area of furious technological development.)
Another problem is that they are extremely geographically concentrated. In the US, geothermal electricity is mostly located in California, Nevada, Hawaii, and Alaska, where tectonic plates are grinding beneath the surface.
Where hydrothermal resources are readily available, the advantages of geothermal energy are well-understood. The global geothermal electricity fleet has an average capacity factor — time spent running relative to maximum capacity — of 74.5 percent, and newer plants often exceed 90 percent. Geothermal can provide always-on, baseload power; it is the only renewable resource to do so.
As of the end of 2019, global installed geothermal electric capacity, dispersed across 29 countries, reached 15.4 GW, with the US in the lead.
The final problem is that most of the big, well-explored, well-characterized fields have been tapped out, at least with conventional technology. Geothermal that relies on high-quality hydrothermal resources remains a niche solution, difficult to standardize and scale. That’s why it has lagged behind other renewable resources for so long.
Which brings us to ...
2) Enhanced geothermal systems (EGS)
Conventional geothermal systems are limited to specialized areas where heat, water, and porosity come together just so. But those areas are limited.
There’s plenty of heat stored down in all that normal, solid, nonporous rock, though. What if geothermal developers could make their own reservoirs? What if they could drill down into solid rock, inject water at high pressure through one well, fracture the rock to let the water pass through, and then collect the heated water through another well?
That, in a nutshell, is EGS: geothermal that makes its own reservoir.
To be clear, the line between a conventional hydrothermal resource and a resource that requires EGS is not sharp. There are many gradations and variations between wet/porous and dry/solid.
“What you really have is a supply curve, where the variables are temperature, depth, well permeability, and reservoir permeability,” says Tim Latimer, founder and CEO of the EGS company Fervo Energy. “Everything between the two extremes exists.”
To put it simply, as the resource gets deeper and the rock becomes hotter and less porous, the engineering difficulty of accessing it rises.
The basic idea has always been that EGS would start off within existing hydrothermal reservoirs, where fields are relatively well-characterized. Then, as it learned, honed its technology, and brought down costs, it would branch out from “in field” into “near field” resources — solid rock adjacent to reservoirs, at similar depth. Eventually it would be able to venture farther out into new fields and deeper into hotter rock. In theory, EGS could eventually be located almost anywhere in the world.
That’s been the game plan for a decade now, and it’s still the game plan, as laid out in the magisterial 2019 GeoVision study on geothermal from the Department of Energy. The EGS industry has had trouble, though, getting all the ducks in a row. There was a burst of activity around 2010, based on Obama stimulus money and binary power plants. But by the time the drilling technology from the shale gas revolution had begun making its way over to geothermal, around 2015, capital had dried up and attention had turned away.
It’s only been in 2020, Latimer says, that everything has finally lined up: strong public and investor interest, real market demand (thanks to ambitious state renewable energy goals), and a flood of new technologies borrowed from the oil and gas industry. EGS startups like Fervo are growing quickly and bigger, established companies are running profitable EGS projects today.
The engineering challenges remain daunting, especially as the targets get deeper and drier. There are PR challenges as well. Injecting fluids into the ground in order to fracture rock is known as “fracking” in the oil and gas business, and ... it’s got a bit of a reputation. In fact, there are whole US states and countries where it is banned.
The industry is keen to distance itself from gas fracking. The fluids used are benign, so there’s little danger of water pollution. Worries about induced seismic activity are somewhat overblown; in oil and gas drilling, it is high-volume water disposal wells associated with seismicity, and EGS doesn’t have those. The fractures are smaller, more controlled, and under far less pressure than in oil and gas fracking. As long as drillers avoid fault lines, which they’re getting better at doing, the risk is modest, especially relative to the benefits. (Ironically, geothermal projects have to meet more seismic safety conditions than comparatively far more dangerous oil and gas projects.)
And, of course, unlike with gas fracking, there’s no combustion of fossil fuels at the end of the line. EGS is benefiting from technology advances in fracking, but it is not doing the thing environmentalists hate. Explaining that to the public and policymakers remains a thorny challenge, though, to say the least.
Still, if the engineering and marketing challenges can be overcome, the prize is almost unthinkably large. Assuming an average well depth of 4.3 miles and a minimum rock temperature of 150°C, the GeoVision study estimates a total US geothermal resource of at least 5,157 gigawatts of electric capacity — around five times the nation’s current installed capacity.
Alternatively, using EGS for direct heat could provide the US with 15 million terawatt-hours-thermal (TWhth). “Compared to a total US annual energy consumption of 1,754 TWhth for residential and commercial space heating,” DOE writes, “this EGS-based resource is theoretically sufficient to heat every US home and commercial building for at least 8,500 years.”
There’s enough heat down there to sustain civilization for generations.
And there’s even more heat deeper down, 6 miles and further.
3) Super-hot-rock geothermal
At the far horizon of EGS is “super hot rock” geothermal, which seeks to tap into extremely deep, extremely hot rock.
At extremely high heat, the performance of geothermal doesn’t just rise, it takes a leap. When water exceeds 373°C and 220 bars of pressure, it becomes “supercritical,” a new phase that is neither liquid nor gas. The science of supercritical water is funky (it’s like ... low-density water?) and I’m not going to attempt to explain it, but it is regularly used by industry, including in some advanced coal plants, so its properties are fairly well understood.
For our purposes, there are two important things about supercritical water. First, its enthalpy is much higher than water or steam, meaning it holds anywhere from 4 to 10 times more energy per unit mass. And second, it is so hot that it almost doubles the Carnot efficiency of its conversion to electricity.
“Not only do you get more energy out of your well,” says Eric Ingersoll, a clean energy analyst at the consultancy LucidCatalyst, “you get more electricity out of that energy.”
That means an individual geothermal project at 400°C would have about 50MW capacity, compared to the roughly 5MW capacity of an EGS project at 200°C — 42 percent hotter, 10 times the power.
You could get more power out of three wells on a 400°C project than you can out of 42 EGS wells at 200°C, using less fluid and a fraction of the physical footprint.
Experience to date shows that the hotter geothermal gets, the more competitive its power price, to the point that super-hot EGS could be the cheapest baseload energy available.
The engineering challenges are hairy. (Oil and gas engineers, the current masters of drilling, did not design for high heat; they didn’t need to.) New casings and cements need to be developed; water chemistry at high heat needs to be better understood; materials that resist corrosion and high heat need to be perfected; drilling techniques need to continue improving. There are even new, “non-contact drilling” methods being developed, including AltaRock’s, which uses frickin’ lasers (“millimeter waves,” technically).
No well is currently producing electricity from supercritical water, but several past wells (in Hawaii and California’s Salton Sea, e.g.) have encountered supercritical water and there are exploratory projects in Japan, Italy, Mexico, and several other counties to learn more. (Here’s a recent review of super-hot-rock history and research.)
It wouldn’t take much help to get this technology developing more quickly. “There’s an opportunity to spend a relatively small amount of money to galvanize the industry,” says Ingersoll. The US currently lacks a robust clean energy innovation system, but there’s a super-hot-rock research program at ARPA-E (AltaRock), a spinoff group called the Hotrock Energy Research Organization (HERO), and several demonstration projects pushing things along. More is needed. The reward — cheap baseload power, available almost anywhere — is too big to pass up.
A fourth category of technologies has emerged recently, which holds out similar promise that geothermal power could someday be accessible anywhere.
4) Advanced geothermal systems (AGS)
AGS refers to a new generation of “closed loop” systems, in which no fluids are introduced to or extracted from the Earth; there’s no fracking. Instead, fluids circulate underground in sealed pipes and boreholes, picking up heat by conduction and carrying it to the surface, where it can be used for a tunable mix of heat and electricity.
Closed-loop geothermal systems have been around for decades, but a few startups have recently amped them up with technologies from the oil and gas industry. One such company, started by investors with experience in oil and gas, is the Alberta-based Eavor.
In Eavor’s planned system, called an “Eavor-Loop,” two vertical wells around 1.5 miles apart will be connected by a horizontally arrayed series of lateral wells, in a kind of radiator design, to maximize surface area and soak up as much heat as possible. (Precise lateral drilling is borrowed from the shale revolution, and from the oil sands.)
Because the loop is closed, cool water on one side sinks while hot water on the other side rises, creating a “thermosiphon” effect that circulates the water naturally, with no need for a pump. Without the parasitic load of a pump, Eavor can make profitable use of relatively low heat, around 150°C, available almost anywhere about a mile and a half down.
So far there’s an “Eavor-Lite” demonstration project built in Alberta, meant to prove out the basic concepts and technologies. It has shown that the lateral wells can be precisely targeted, the thermosiphon effect works, and the plant’s costs and output can be reliably predicted in advance. The company has three or four commercial plants in various stages of planning; likely up next is a plant scheduled to break ground in 2021 in Geretsried, Germany. (It will take advantage of Germany’s feed-in tariffs.) In France and the Netherlands Eavor will provide heat; in Japan, electricity; in Germany, a mix.
When I spoke with Eavor president John Redfern and head of business development Paul Cairns, they told me about a recent change in their design that will reduce the physical footprint and enable even more precise drilling. Instead of the two vertical wells being located at a distance, they will be right next to each other. Lateral wells branch out from them, staying parallel until they meet at the end. Like so:
With the wells so close to one another, they can use “magnetic ranging” (with a transmitter in one well and a receiver in another) to remain at a fixed distance from one another. Meeting at the end is easier than meeting in the middle.
As for land use, after the initial drilling, the only part that technically needs to be aboveground is the air cooler that cools the water before it descends. Power lines, even the electric generator itself, could be underground. And if there’s a water cooler rather than an air cooler, that too could be underground. “Theoretically,” Cairns says, “you could have zero surface footprint.”
Since all Eavor needs to work is hot rock, which is pretty reliably located beneath almost any site in the world, it avoids the need for expensive exploration and modeling. “We’re not smarter,” Redfern says, “we just have much simpler theoretical problems.”
An Eavor-Loop can act as baseload (always-on) power, but it can also act as flexible, dispatchable power — it can ramp up and down almost instantaneously to complement variable wind and solar energy. It does this by restricting or cutting off the flow of fluid. As the fluid remains trapped underground longer, it absorbs more and more heat.
So, unlike with solar, ramping the plant down does not waste (curtail) the energy. The fluid simply charges up, like a battery, so that when it’s turned back on it produces at above nameplate capacity. This allows the plant to “shape” its output to match almost any demand curve.
Jamie Beard, who runs the Geothermal Entrepreneurship Organization at the University of Texas Austin, is bullish on AGS (she worries about the PR problems facing EGS), but she warns that Eavor — like other promising geothermal startups Fervo Energy, GreenFire Energy, and Sage Geosystems — does not yet have everything figured out, despite its confident claims. “I want them to have it in the bag,” she says, “but they don’t yet have it in the bag.”
Directional drilling in high temperatures, above 150°C or so, remains difficult, with equipment prone to melting (again, oil and gas engineers did not design their technologies with high heat in mind). As rock becomes harder, equipment must also be hardened to additional vibrations. And electronics need to be better insulated.
The Eavor-lite project is only mining heat of about 70°C. (It was not intended to be commercially viable.) To make geothermal work, Eavor and other companies will need to master going deeper and hotter. “You can’t economically produce geothermal energy at 90°C,” Beard says. “150, yeah, you’re getting there. 250, oh, yeah. 300, you’re solid.”
She stresses that there are no insuperable barriers if enough technical know-how and capital are brought to bear. The problem of extracting geothermal from deep, dry, hot rock, she says, “is largely an incremental engineering problem that, when solved, solves energy.”
“Solves energy” might sound like big talk, but in this case, it is not idle.
The extraordinary promise of geothermal
The main problem facing renewable energy is that the biggest sources, wind and solar, are variable. Whereas fossil fuel power plants that run on coal and gas are “dispatchable” — they can be turned on and off on demand — wind and solar come and go with, well, the wind and sun.
Building an electricity system around wind and solar thus means filling in the gaps, finding sources, technologies, and practices that can jump in when wind and solar fall short (say, at night). And the electricity system needs to be extremely secure and robust, because decarbonizing means electrifying everything, moving transportation and heat over to electricity, which will substantially raise total electricity demand.
The big disputes in the clean energy world thus tend to be about how far wind, solar, and batteries can get on their own — 50 percent of total power demand? 80 percent? 100?) and what sources should be used to supplement them. (See this much-cited 2018 paper in the journal Joule on the need for “firm, low-carbon resources.”)
The answer currently favored by renewable energy advocates is more energy storage, but at least for now, storage remains far too expensive and limited to do the full job. The other top possibilities for “firming” electricity supply — nuclear power or fossil power with carbon capture and sequestration — have their own issues and passionate constituencies for and against.
Geothermal power, if it can be made to reliably and economically work in hotter, drier, and deeper rock, is a perfect complement to wind and solar. It is renewable and inexhaustible. It can run as baseload power around the clock, including at night, or “load follow” to complement renewables’ fluctuations. It is available almost everywhere in the world, a reliable source of domestic energy and jobs that, because it is largely underground, is resilient to most weather (and human) disasters. It can operate without pollution or greenhouse gases. The same source that makes the electricity can also be used to fuel district heating systems that decarbonize the building sector.
It checks all the boxes.
“Our challenge is not that we have any enemies,” says Latimer. “If you want to talk to Democrats, we produce carbon-free electricity 24/7 — the last piece of the puzzle for a fully decarbonized electricity sector. If you talk to Republicans, it’s American ingenuity putting our drilling fleet to work on a resource that’s fuel-secure, doesn’t rely on imports, and puts the oil and gas people back to work. It’s a beautiful bipartisan story. The problem is we just don’t get talked about.”
Oil and gas to the rescue?
One thing that might get more people talking about geothermal is the somewhat serendipitous opportunity it offers to the oil and gas industry, which is reeling from oversupply, persistently low prices, and cratering demand caused by the pandemic. Consequently, it is hemorrhaging jobs.
Geothermal is buzzing with startups that specifically need innovation and expertise in drilling technology, the very skills many oil and gas workers already have. They could put those skills to work making the planet safer for future generations. That skills match is what animates Beard’s geothermal entrepreneurship organization and the $4.65 million contest that DOE launched this year to pair geothermal innovations with partners in the manufacturing industry.
There’s never been a better time to start or join a geothermal startup — most of them will fail, but there’s a future billionaire in there somewhere.
Industry veterans have taken notice. It made waves when, a few months ago, the “Frack King” — Mukul Sharma, an O&G engineer at UT Austin who has been key in the development of hydraulic fracturing — launched a new EGS venture called Geothermix.
“When we started in the unconventional [oil and gas] space, there were a lot of issues that needed to be resolved, but over time we have increased well productivity by a factor of 4 to 10 in many shale basins,” he told Heat Beat. “We are very early on the learning curve in the EGS context, but I have no doubt that we will be able to translate oil and gas learnings from the past decade and successfully deploy these methods in EGS.”
Latimer was an O&G engineer before he shifted to geothermal. Sage Geosystems was founded by Lev Ring and Lance Cook, two longtime O&G veterans. Eavor employs several O&G veterans.
The industry is taking notice as well. “We got a nice little head start, and we’re running like hell to stay ahead of it,” says Redfern, “but yeah, [oil and gas majors] are definitely turning their attention to this.”
What’s likely is that oil and gas majors will eventually start buying up geothermal startups. Investments in geothermal would give them a way to shelter part of their portfolio from the brutal oil market.
And geothermal is a more natural match than wind and solar for many of these companies. “The fact that it leverages industry core competencies for the purpose of producing clean energy,” Rao said, “will give it staying power in the industry, regardless of energy market conditions.”
Geothermal remains a relatively small industry, with a market cap in the single-digit billions, while oil and gas is a trillion-dollar industry. There’s no realistic way geothermal can promise to absorb all the jobs currently being lost in oil and gas.
Nonetheless, geothermal offers O&G something it badly needs: a port in a storm. It’s a growing clean energy industry that needs a smart workforce trained in exploration and drilling. Oil and gas has one of those.
Recent oil and gas technology innovations are going to turbocharge geothermal, especially if policymakers can get their act together and offer some support. There’s a steep learning curve ahead and they’re just now accelerating into it, but the next decade is likely to be more active for geothermal than the past four.
With an inexhaustible, dispatchable, flexible renewable energy source so close to breaking through, the vision of a fully renewably powered world seems less and less utopian, more and more tantalizingly within reach.


vox--2020-10-21--A new paper finds stimulus checks, small business aid, and “reopening” can’t rescue the economy

This story was originally published on June 17 , 2020 , and some details may be out of date .
For Vox ’ s latest coverage on the pandemic , visit our coronavirus hub .
The coronavirus pandemic ripped through the American economy at an incredibly rapid pace — so rapidly that it ’ s been difficult for economists and others to understand what exactly is going on .
Our best data sources about the economy are wildly out of date : Unemployment data comes out just once a month , and GDP data only four times a year .
@ @ @ @ @ @ @ together by a research group at Harvard , drawing on a variety of corporations ’ private data , now allows economists to track what has happened to the economy in real time .
The data they collated shows that the economic crash has been driven disproportionately by the actions of high-income Americans , whose consumer spending has crashed more than that of poorer Americans , devastating low-income workers and small businesses in rich areas .
The data also suggests that economic relief measures have done little for small businesses : Stimulus spending tended @ @ @ @ @ @ @ not small local stores , and small businesses eligible for Paycheck Protection Program ( PPP ) loans are generally not any better off than ones that were not eligible .
And researchers who developed the data found official orders “ reopening ” states do not increase economic activity , and so appear to endanger public health without any economic benefit .
The picture that emerges in a new working paper based on the economists ’ findings is of an economy frozen in place .
Simply declaring the economy “ reopened ” does not @ @ @ @ @ @ @ people to spend more , and it ’ s not clear that anything can until the real threat passes .
The tool , the Opportunity Insights Economic Tracker , was launched by the Harvard-based Opportunity Insights group .
The research was led by Raj Chetty , Nathaniel Hendren , John N. Friedman , and Michael Stepner , and the tool was assembled by a team of 39 collaborators .
It aims to provide a service that has never existed before , but is badly needed during the pandemic : a real-time , day-by-day @ @ @ @ @ @ @ economy is performing .
The tool works by collating administrative data from a variety of corporations , including Affinity Solutions ( a company tracking consumer spending ) , Burning Glass ( a job market analytics company ) , Earnin ( an app that offers advance loans on paychecks ) , and HomeBase ( which sells punch-card and work check-in software ) , among several others .
The data Opportunity Insights gathers from these companies is anonymized ; the Economic Tracker can ’ t track individual people for privacy reasons .
But the data @ @ @ @ @ @ @ to a remarkable degree .
Affinity captures about 10 percent of credit and debit card transactions in the US , and its records are biased toward goods that tend to be purchased with cards rather than cash .
Nonetheless , Chetty and his co-authors found that Affinity ’ s data aligned almost perfectly with the Monthly Retail Trade Survey conducted by the Census Bureau , which serves as the basis for the Bureau of Economic Analysis ’ s official GDP numbers .
The blue lines below are consumer spending as measured by Affinity @ @ @ @ @ @ @ the left ) and just food services ( on the right ) .
The green lines are the MRTS .
If you have a hard time telling the lines apart , that ’ s the point : Similarly , using data from ADP , a large payroll processor , alongside Earnin and HomeBase data provides a decent approximation of the Current Employment Statistics survey used by the Bureau of Labor Statistics .
It ’ s by no means perfect , and the authors are clear that its imprecisions may be more important in @ @ @ @ @ @ @ and 6 percent unemployment is a huge deal ) than now ( when the difference between 14 and 16 percent unemployment feels rather less meaningful ) .
But the data nonetheless allows for striking analyses that you would typically only see conducted many years after a crisis like this .
You can , for instance , compare how small business revenue has fallen between neighborhoods .
Here ’ s what DC looks like , for instance .
Businesses in the wealthy central business area have seen huge declines , while poorer ZIP codes @ @ @ @ @ @ @ but poor Anacostia neighborhood ) and 20011 ( which contains both poor and gentrifying neighborhoods in the northern part of the city ) have seen business revenue actually increase : You can look up small business revenue in your own area using the interactive below , best viewed on a larger screen : And you can do the same for employment data here : The development of the OI Economic Tracker in some ways parallels the creation of “ national accounts ” data like GDP statistics .
That effort began in earnest in @ @ @ @ @ @ @ at the National Bureau of Economic Research in Cambridge , Massachusetts , under the supervision of Penn professor and future Nobel laureate Simon Kuznets .
Eventually , Kuznets ’ s methods were adopted by the federal government and they form the basis of our official economic statistics today .
“ In the Great Depression , they wanted to measure things with more regularity and Kuznets decided to take this on , ” Chetty told me .
“ That ’ s the basis of what you see in the Bureau of Economic Analysis data @ @ @ @ @ @ @ basis of how you could do this without surveys.
” Chetty tells me OI is in talks with Intuit , whose TurboTax and Mint programs are home to vast reams of individual financial data , and Mastercard to provide even more sources on consumer spending and incomes .
He hopes eventually that a tool like this , with bigger and more representative data sources , could become a province of the government , just as Kuznets ’ s idea of regularly measuring the total national income of the United States went from a @ @ @ @ @ @ @ of the federal government .
In the meantime , the OI Economic tracker can give us important insights into which policies are and are not working during the Covid-19 recovery .
The paper by Chetty , Friedman , Hendren , and Stepner suggests that small business loans and stimulus checks haven ’ t been enough to keep small businesses afloat , especially in affluent areas .
Indeed , it suggests that any kind of recovery is likely impossible until the pandemic is over .
What ’ s needed is income support in the @ @ @ @ @ @ @ program for people put out of work who are struggling to afford food and rent .
Only once the pandemic is well and truly behind us is a regular recovery possible .
Any one of the paper ’ s five key findings could justify an individual research paper ; this relatively short paper covers all five , and more .
Spending has collapsed dramatically since the Covid-19 crisis began .
But it didn ’ t fall evenly .
The data in the OI Economic Tracker indicates that by May 31 , 66 percent @ @ @ @ @ @ @ since January was concentrated in the top 25 percent of households by income .
The bottom quartile , by contrast , was basically back to precrisis spending patterns by the end of May : High-income people spend more overall than low-income people , as you ’ d expect , including more on in-person services .
Those factors combined with a higher percentage-wise drop in overall spending meant that the large majority of the drop in spending is attributable to the wealthiest segment of the population .
These spending changes seem to be correlated @ @ @ @ @ @ @ codes , as well .
“ Spending fell sharply on March 15 , when the National Emergency was declared and the threat of COVID became widely discussed in the United States , ” the authors find .
Where people changed their spending was heavily influenced by restrictions on in-person interaction .
“ Nearly three-fourths of the reduction in spending is accounted for by reduced spending on goods or services that require in-person physical interaction ( and thereby carry a risk of COVID infection ) , such as hotels , transportation , and food @ @ @ @ @ @ @ despite the fact that these categories only made up one-third of consumer spending before the crash .
“ pending on luxury goods such as installation of home pools and landscaping services — which do not require physical contact — increased slightly after the COVID shock.
” Similarly , ZIP codes with higher rates of Covid-19 infection saw sharper reductions in spending .
The mechanism here is simple : People in areas with higher Covid-19 caseloads spent less time outside ( as verified by Google cellphone data ) , and this translated into less @ @ @ @ @ @ @ s more , the authors find that regardless of the level of Covid-19 infection in an area , high-income people spent less time outside than lower-income people .
There are a number of reasons why this might be ; high-income people are likelier to have jobs where they can work from home and have larger living spaces that they can enjoy .
But this all combines to help explain why spending fell so much among higher-income households , in particular .
2 ) Those who serve the rich are suffering most Housing in @ @ @ @ @ @ @ income : There are rich neighborhoods and poor neighborhoods of cities , rich suburbs and poor suburbs , more and less affluent rural communities .
So it stands to reason that people providing in-person services in richer areas , like baristas or waitstaff or hotel cleaners , might have suffered more than their counterparts in poorer areas , given the sharper reduction in spending by the rich .
So the authors look at data from Womply , a business software company that offers credit card transaction tracking for small businesses .
Sure enough @ @ @ @ @ @ @ the richest neighborhoods of major cities : Overall , 55 percent of small businesses in ZIP codes with the highest apartment rents closed , compared to 40 percent of small businesses in the lowest-rent ZIP codes .
The shock to these businesses was tremendous : Not only did they face higher fixed costs to begin with due to high rents , but the greater collapse in spending by the rich pummeled their revenue more .
This flows through to service workers employed in these high-rent , high-income areas ( but who likely live @ @ @ @ @ @ @ can afford ) .
Hours worked fell by more than 80 percent in the richest ZIP codes of New York , San Francisco , and Chicago , and only 30 percent in the poorest ZIP codes of those cities .
A similar pattern emerges for outright job losses : In the data from Earnin , the paycheck advance company , 36 percent of job losses are in ZIP codes in the top quartile by rent , and 11 percent in ZIP codes that fall in the bottom quartile by rent .
Same goes @ @ @ @ @ @ @ high versus low-rent areas .
Tellingly , no such pattern in job postings emerges for workers with college degrees , suggesting that the pain here is concentrated among lower-income people who work in rich neighborhoods .
This then flows through to consumer spending .
The charts below look exclusively at low-income ZIP codes , and compare ZIP codes where more workers work in high-rent , affluent areas to ones where fewer workers work in rich areas .
The more people in the ZIP code worked in rich areas , the worse off they @ @ @ @ @ @ @ worked and consumer spending : For more on this phenomenon , see Emily Badger and Alicia Parlapiano ’ s excellent piece in the New York Times based on the OI Economic Tracker data .
They talked to service workers in NYC and DC who worked in higher-income neighborhoods and have seen hours and tips dry up .
3 ) Stimulus checks kept people afloat , but not small businesses One interesting aspect of this downturn is that while unemployment has skyrocketed , individual incomes have too .
In April , personal income ( @ @ @ @ @ @ @ wages , government benefits , investments , and so on ) grew by 10.5 percent , by far the highest monthly growth rate in the metric ’ s 60-year history , even as unemployment shot up from 4.4 percent to 14.7 percent that same month .
This is largely due to the CARES Act , Congress ’ s relief measure that included both a $ 1,200 per person stimulus check to most Americans and a super-sized unemployment benefit package that boosted UI benefits by $ 600 a week .
Chetty , Friedman , @ @ @ @ @ @ @ see what effect the stimulus checks specifically had because the Earnin data indicates that the large majority of people ( over 70 percent ) got their $ 1,200 from the IRS on April 15 , exactly ; a small minority arrived on April 14 as well .
That allows the authors to test how the stimulus affected households by comparing spending on April 13 to April 15 .
This is a variant on what ’ s called a “ regression discontinuity ” approach in social sciences , and it ’ s one of @ @ @ @ @ @ @ what effects a policy actually caused , as opposed to what happened around the same time .
Sure enough , spending jumped modestly for high-income households ( by 9 percentage points ) and enormously for low-income households ( by 26 percentage points ) over the two days that the stimulus package was implemented .
The blue line above is the poorest 25 percent of Americans by income , the green line the richest .
Both saw spending fall sharply upon the onset of the crisis , but almost instantaneously the stimulus caused spending @ @ @ @ @ @ @ back much , much more for the poorest Americans , nearly back to precrisis levels .
But looking at how people spent their stimulus checks reveals some limitations of the policy ’ s ability to boost the economy .
Spending on in-person services only rose 7 percentage points , whereas spending on durable goods ( furniture , cars , TVs , computers , etc . )
grew a startling 21 percentage points , accounting for nearly half the recovery in spending .
What ’ s more , the authors find little effect of @ @ @ @ @ @ @ and absolutely no effect on small business employment .
Small businesses tend disproportionately to sell goods and services in-person , and a disproportionate share of their revenue comes from wealthy people .
So the stimulus , which was both less meaningful for wealthy people and came at a time when people were understandably afraid to leave their homes , did little to help them .
It ’ s not necessarily an indictment of the stimulus package that it didn ’ t help small businesses .
It wasn ’ t meant to — it @ @ @ @ @ @ @ especially , get by and survive amid this calamity .
And at that job , it excelled .
The program meant to help small businesses was the Paycheck Protection Program ( PPP ) , which offers forgivable loans to small businesses that keep the majority of their staff on payroll .
But Chetty , Friedman , Hendren , and Stepner find little evidence that this program was effective .
PPP is administered to Small Business Administration ( SBA ) -eligible businesses , which with a few minor exceptions means businesses with 500 or @ @ @ @ @ @ @ able to compare businesses with total employee counts just below and just above these thresholds , who likely closely resembled each other with the exception of one group being eligible for PPP loans , and the other not .
Here is how hours worked at small businesses evolved , at different levels of small business size : In the immortal words of Pam Beesly : They ’ re the same picture .
Employers with around 1,500 employees reduced hours ever so slightly more by the end of May than businesses with fewer employees @ @ @ @ @ @ @ and goes away entirely if you limit the analysis to food and hospitality businesses that PPP was particularly designed to help .
“ We conclude that the PPP had no meaningful effect on unemployment at small businesses , at least as measured through the middle of May , ” the authors write .
So if stimulus checks and PPP loans aren ’ t enough to keep employment at small businesses afloat , maybe declaring the crisis over could ?
That ’ s the intuition behind politicians nationwide , led by President Donald Trump @ @ @ @ @ @ @ , ” and have succeeded in rolling back stay-at-home orders in a number of states .
But this only works if the order to reopen actually spurs consumers , and in particular the wealthy consumers who ’ ve cut back spending the most , to go out and buy the in-person goods and services they ’ ve been shunning .
The OI Economic Tracker data let the authors test precisely if that ’ s happening .
First the authors compared Minnesota ( which did an early partial reopening on April 27 ) to @ @ @ @ @ @ @ 13 in response to a court order ) .
As you can see , despite very different reopening timing , the trajectories of the two states was nearly identical when it comes to consumer spending , and the orders themselves didn ’ t seem to do much .
Then the authors expanded this analysis to a total of 20 states that issued reopening orders prior to May 4 ; for each reopening date , they paired these states with control states that didn ’ t reopen , and that prior to reopening had @ @ @ @ @ @ @ spending .
The authors find that consumer spending was growing before formal reopening and kept growing after ; it ’ s possible the reopening caused some of the boost .
But in any case , employment did not rise at all in the reopened states .
“ The implication of this finding is that restoring confidence in public health may be a prerequisite to a full recovery , ” the authors conclude .
That was true in 1919 during the Spanish flu , and it seems to be true again today .
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This story was originally published on June 17, 2020, and some details may be out of date. For Vox’s latest coverage on the pandemic, visit our coronavirus hub.
The coronavirus pandemic ripped through the American economy at an incredibly rapid pace — so rapidly that it’s been difficult for economists and others to understand what exactly is going on.
Our best data sources about the economy are wildly out of date: Unemployment data comes out just once a month, and GDP data only four times a year. However, a new data source put together by a research group at Harvard, drawing on a variety of corporations’ private data, now allows economists to track what has happened to the economy in real time.
The data they collated shows that the economic crash has been driven disproportionately by the actions of high-income Americans, whose consumer spending has crashed more than that of poorer Americans, devastating low-income workers and small businesses in rich areas.
The data also suggests that economic relief measures have done little for small businesses: Stimulus spending tended to go to Amazon or Walmart, not small local stores, and small businesses eligible for Paycheck Protection Program (PPP) loans are generally not any better off than ones that were not eligible.
And researchers who developed the data found official orders “reopening” states do not increase economic activity, and so appear to endanger public health without any economic benefit.
The picture that emerges in a new working paper based on the economists’ findings is of an economy frozen in place. Simply declaring the economy “reopened” does not seem to do anything to spur high-income people to spend more, and it’s not clear that anything can until the real threat passes.
The tool, the Opportunity Insights Economic Tracker, was launched by the Harvard-based Opportunity Insights group. The research was led by Raj Chetty, Nathaniel Hendren, John N. Friedman, and Michael Stepner, and the tool was assembled by a team of 39 collaborators. It aims to provide a service that has never existed before, but is badly needed during the pandemic: a real-time, day-by-day, ZIP-code-by-ZIP-code snapshot of how the American economy is performing.
The tool works by collating administrative data from a variety of corporations, including Affinity Solutions (a company tracking consumer spending), Burning Glass (a job market analytics company), Earnin (an app that offers advance loans on paychecks), and HomeBase (which sells punch-card and work check-in software), among several others.
The data Opportunity Insights gathers from these companies is anonymized; the Economic Tracker can’t track individual people for privacy reasons. But the data from these companies matches gold-standard government surveys to a remarkable degree. Affinity captures about 10 percent of credit and debit card transactions in the US, and its records are biased toward goods that tend to be purchased with cards rather than cash.
Nonetheless, Chetty and his co-authors found that Affinity’s data aligned almost perfectly with the Monthly Retail Trade Survey conducted by the Census Bureau, which serves as the basis for the Bureau of Economic Analysis’s official GDP numbers.
The blue lines below are consumer spending as measured by Affinity, for all consumer spending (on the left) and just food services (on the right). The green lines are the MRTS. If you have a hard time telling the lines apart, that’s the point:
Similarly, using data from ADP, a large payroll processor, alongside Earnin and HomeBase data provides a decent approximation of the Current Employment Statistics survey used by the Bureau of Labor Statistics. It’s by no means perfect, and the authors are clear that its imprecisions may be more important in normal times (when jumping between 4 and 6 percent unemployment is a huge deal) than now (when the difference between 14 and 16 percent unemployment feels rather less meaningful).
But the data nonetheless allows for striking analyses that you would typically only see conducted many years after a crisis like this.
You can, for instance, compare how small business revenue has fallen between neighborhoods. Here’s what DC looks like, for instance. Businesses in the wealthy central business area have seen huge declines, while poorer ZIP codes like 20020 (which contains the historic but poor Anacostia neighborhood) and 20011 (which contains both poor and gentrifying neighborhoods in the northern part of the city) have seen business revenue actually increase:
The development of the OI Economic Tracker in some ways parallels the creation of “national accounts” data like GDP statistics. That effort began in earnest in the United States in the early 1930s at the National Bureau of Economic Research in Cambridge, Massachusetts, under the supervision of Penn professor and future Nobel laureate Simon Kuznets. Eventually, Kuznets’s methods were adopted by the federal government and they form the basis of our official economic statistics today.
“In the Great Depression, they wanted to measure things with more regularity and Kuznets decided to take this on,” Chetty told me. “That’s the basis of what you see in the Bureau of Economic Analysis data. Going forward, this is the basis of how you could do this without surveys.”
Chetty tells me OI is in talks with Intuit, whose TurboTax and Mint programs are home to vast reams of individual financial data, and Mastercard to provide even more sources on consumer spending and incomes. He hopes eventually that a tool like this, with bigger and more representative data sources, could become a province of the government, just as Kuznets’s idea of regularly measuring the total national income of the United States went from a private academic endeavor to the official business of the federal government.
In the meantime, the OI Economic tracker can give us important insights into which policies are and are not working during the Covid-19 recovery. The paper by Chetty, Friedman, Hendren, and Stepner suggests that small business loans and stimulus checks haven’t been enough to keep small businesses afloat, especially in affluent areas. Indeed, it suggests that any kind of recovery is likely impossible until the pandemic is over. What’s needed is income support in the form of unemployment insurance or some other program for people put out of work who are struggling to afford food and rent. Only once the pandemic is well and truly behind us is a regular recovery possible.
Any one of the paper’s five key findings could justify an individual research paper; this relatively short paper covers all five, and more.
1) The high-income recession
Spending has collapsed dramatically since the Covid-19 crisis began. But it didn’t fall evenly. The data in the OI Economic Tracker indicates that by May 31, 66 percent of the fall in credit card expenditures since January was concentrated in the top 25 percent of households by income. The bottom quartile, by contrast, was basically back to precrisis spending patterns by the end of May:
High-income people spend more overall than low-income people, as you’d expect, including more on in-person services. Those factors combined with a higher percentage-wise drop in overall spending meant that the large majority of the drop in spending is attributable to the wealthiest segment of the population.
These spending changes seem to be correlated varying levels of Covid-19 infection between ZIP codes, as well. “Spending fell sharply on March 15, when the National Emergency was declared and the threat of COVID became widely discussed in the United States,” the authors find.
Where people changed their spending was heavily influenced by restrictions on in-person interaction.
“Nearly three-fourths of the reduction in spending is accounted for by reduced spending on goods or services that require in-person physical interaction (and thereby carry a risk of COVID infection), such as hotels, transportation, and food services,” the authors find, despite the fact that these categories only made up one-third of consumer spending before the crash. “pending on luxury goods such as installation of home pools and landscaping services — which do not require physical contact — increased slightly after the COVID shock.”
Similarly, ZIP codes with higher rates of Covid-19 infection saw sharper reductions in spending. The mechanism here is simple: People in areas with higher Covid-19 caseloads spent less time outside (as verified by Google cellphone data), and this translated into less spending on in-person services. What’s more, the authors find that regardless of the level of Covid-19 infection in an area, high-income people spent less time outside than lower-income people.
There are a number of reasons why this might be; high-income people are likelier to have jobs where they can work from home and have larger living spaces that they can enjoy. But this all combines to help explain why spending fell so much among higher-income households, in particular.
2) Those who serve the rich are suffering most
Housing in the United States is heavily segregated by income: There are rich neighborhoods and poor neighborhoods of cities, rich suburbs and poor suburbs, more and less affluent rural communities. So it stands to reason that people providing in-person services in richer areas, like baristas or waitstaff or hotel cleaners, might have suffered more than their counterparts in poorer areas, given the sharper reduction in spending by the rich.
So the authors look at data from Womply, a business software company that offers credit card transaction tracking for small businesses. Sure enough, the biggest losses are recorded in the richest neighborhoods of major cities:
Small businesses lost 73% of their revenue in the Upper East Side in New York, compared with 14% in the East Bronx; 67% in Lincoln Park vs. 38% in Bronzeville on the South Side of Chicago; and 88% in Nob Hill vs. 37% in Bayview in San Francisco. Revenue losses are also large in the central business districts in each city (lower Manhattan, the Loop in Chicago, the Financial District in San Francisco), likely a direct consequence of the fact that many workers who used to work in these areas are now working remotely. But even within predominantly residential areas, businesses located in more affluent neighborhoods suffered much larger revenue losses.
Overall, 55 percent of small businesses in ZIP codes with the highest apartment rents closed, compared to 40 percent of small businesses in the lowest-rent ZIP codes. The shock to these businesses was tremendous: Not only did they face higher fixed costs to begin with due to high rents, but the greater collapse in spending by the rich pummeled their revenue more.
This flows through to service workers employed in these high-rent, high-income areas (but who likely live in poorer, lower-rent neighborhoods that they can afford). Hours worked fell by more than 80 percent in the richest ZIP codes of New York, San Francisco, and Chicago, and only 30 percent in the poorest ZIP codes of those cities.
A similar pattern emerges for outright job losses: In the data from Earnin, the paycheck advance company, 36 percent of job losses are in ZIP codes in the top quartile by rent, and 11 percent in ZIP codes that fall in the bottom quartile by rent. Same goes for job postings for lower-skilled workers in high versus low-rent areas. Tellingly, no such pattern in job postings emerges for workers with college degrees, suggesting that the pain here is concentrated among lower-income people who work in rich neighborhoods.
This then flows through to consumer spending. The charts below look exclusively at low-income ZIP codes, and compare ZIP codes where more workers work in high-rent, affluent areas to ones where fewer workers work in rich areas. The more people in the ZIP code worked in rich areas, the worse off they were, both in terms of hours worked and consumer spending:
For more on this phenomenon, see Emily Badger and Alicia Parlapiano’s excellent piece in the New York Times based on the OI Economic Tracker data. They talked to service workers in NYC and DC who worked in higher-income neighborhoods and have seen hours and tips dry up.
3) Stimulus checks kept people afloat, but not small businesses
One interesting aspect of this downturn is that while unemployment has skyrocketed, individual incomes have too. In April, personal income (defined as the money Americans receive from wages, government benefits, investments, and so on) grew by 10.5 percent, by far the highest monthly growth rate in the metric’s 60-year history, even as unemployment shot up from 4.4 percent to 14.7 percent that same month.
This is largely due to the CARES Act, Congress’s relief measure that included both a $1,200 per person stimulus check to most Americans and a super-sized unemployment benefit package that boosted UI benefits by $600 a week.
Chetty, Friedman, Hendren, and Stepner are able to see what effect the stimulus checks specifically had because the Earnin data indicates that the large majority of people (over 70 percent) got their $1,200 from the IRS on April 15, exactly; a small minority arrived on April 14 as well. That allows the authors to test how the stimulus affected households by comparing spending on April 13 to April 15. This is a variant on what’s called a “regression discontinuity” approach in social sciences, and it’s one of the higher-quality tools we have for testing what effects a policy actually caused, as opposed to what happened around the same time.
Sure enough, spending jumped modestly for high-income households (by 9 percentage points) and enormously for low-income households (by 26 percentage points) over the two days that the stimulus package was implemented.
The blue line above is the poorest 25 percent of Americans by income, the green line the richest. Both saw spending fall sharply upon the onset of the crisis, but almost instantaneously the stimulus caused spending to bounce back. It just bounced back much, much more for the poorest Americans, nearly back to precrisis levels.
But looking at how people spent their stimulus checks reveals some limitations of the policy’s ability to boost the economy. Spending on in-person services only rose 7 percentage points, whereas spending on durable goods (furniture, cars, TVs, computers, etc.) grew a startling 21 percentage points, accounting for nearly half the recovery in spending.
What’s more, the authors find little effect of the stimulus on small business revenues, and absolutely no effect on small business employment. Small businesses tend disproportionately to sell goods and services in-person, and a disproportionate share of their revenue comes from wealthy people. So the stimulus, which was both less meaningful for wealthy people and came at a time when people were understandably afraid to leave their homes, did little to help them.
4) Paycheck Protection didn’t do much
It’s not necessarily an indictment of the stimulus package that it didn’t help small businesses. It wasn’t meant to — it was meant to help poor Americans, especially, get by and survive amid this calamity. And at that job, it excelled.
The program meant to help small businesses was the Paycheck Protection Program (PPP), which offers forgivable loans to small businesses that keep the majority of their staff on payroll. But Chetty, Friedman, Hendren, and Stepner find little evidence that this program was effective.
PPP is administered to Small Business Administration (SBA)-eligible businesses, which with a few minor exceptions means businesses with 500 or fewer employees. So the authors are able to compare businesses with total employee counts just below and just above these thresholds, who likely closely resembled each other with the exception of one group being eligible for PPP loans, and the other not.
Here is how hours worked at small businesses evolved, at different levels of small business size:
In the immortal words of Pam Beesly: They’re the same picture.
Employers with around 1,500 employees reduced hours ever so slightly more by the end of May than businesses with fewer employees, but the difference is minuscule, and goes away entirely if you limit the analysis to food and hospitality businesses that PPP was particularly designed to help. “We conclude that the PPP had no meaningful effect on unemployment at small businesses, at least as measured through the middle of May,” the authors write.
5) Reopening orders don’t actually reopen the economy
So if stimulus checks and PPP loans aren’t enough to keep employment at small businesses afloat, maybe declaring the crisis over could? That’s the intuition behind politicians nationwide, led by President Donald Trump who are pushing for a “reopening,” and have succeeded in rolling back stay-at-home orders in a number of states.
But this only works if the order to reopen actually spurs consumers, and in particular the wealthy consumers who’ve cut back spending the most, to go out and buy the in-person goods and services they’ve been shunning. The OI Economic Tracker data let the authors test precisely if that’s happening.
First the authors compared Minnesota (which did an early partial reopening on April 27) to Wisconsin (which did so on May 13 in response to a court order). As you can see, despite very different reopening timing, the trajectories of the two states was nearly identical when it comes to consumer spending, and the orders themselves didn’t seem to do much.
Then the authors expanded this analysis to a total of 20 states that issued reopening orders prior to May 4; for each reopening date, they paired these states with control states that didn’t reopen, and that prior to reopening had a similar trajectory in employment or consumer spending. The authors find that consumer spending was growing before formal reopening and kept growing after; it’s possible the reopening caused some of the boost. But in any case, employment did not rise at all in the reopened states.
“The implication of this finding is that restoring confidence in public health may be a prerequisite to a full recovery,” the authors conclude. That was true in 1919 during the Spanish flu, and it seems to be true again today.