Energy Tech Startups

0:00 Welcome back to the show today. I have with me Cindy Taff, who is the co-founder and CEO of Sage Geo Systems. Welcome to the show. Thank you, Brett. Glad to be here and I'm excited to be talking

0:13 about geothermal and energy storage. Yeah. And we're really excited to learn more about Sage Geo Systems and what is it that you guys do. So maybe we could get started with with that. You know,

0:24 what is this company about and what does it do? So yeah, we we started Sage about three years ago when we got our initial seed funding and when we went into it, we were really focused on geothermal.

0:37 But because of our oil and gas background, we knew we needed to get to the field pretty quickly to test our technologies, which we did. And during the field trials or demonstrations, we actually

0:49 discovered we had the perfect energy storage solution. So now we're advancing energy storage deep in the earth So if you think about pump-tydro storage. Up a mountain, we're doing that, but we're

0:60 doing it deep in the earth, so we call it subsurface, pumped hydro, or upside down, pumped hydro storage, and then geothermal. And the exciting thing is that the technology is actually build on

1:10 one another. So it's not completely separate. You use the same technologies for geothermal. As you do for energy storage, you're just deeper, and then in hot rock and harvesting the heat in

1:22 addition to the pressure energy of the water. Okay, so it's geothermal, and then you call it pumped hydro. Subsurface pump, hydro storage. Subsurface pump, hydro storage. Yeah, energy storage

1:32 for short. Yeah. Yeah. I have so many questions, 'cause I feel like there's so much nuance in geothermal. I think I saw in the press release, there's a distinction between dry rock and wet rock,

1:42 and not coming from the industry, I'm like, are rocks ever wet? But that's a different question. And then you talk about geopressure, geothermal systems versus, I guess, what are the different

1:51 flavors of geothermal that people usually talk about? Maybe that'll help us in our audience to understand where you guys live. Yeah, absolutely, it's a great place to start. So the geothermal

2:02 energy around the world is 16 gigawatts and it is all 100 from what is called traditional geothermal, which is geothermal. If you think about the geysers of California or Iceland, so it's basically

2:15 geothermal that's coming from rock that is hot, but it's got water in train, large, large volumes of water in trains in it. And typically close to the surface because it's near volcanoes or the

2:28 ring of fire. The challenge with that geothermal, even though it is the only commercial geothermal available right now, the challenge is the geology is very limited. It only represents like 2 of

2:42 the geothermal geology around the world. So then what you want to do as an industry, what we want to do is tap into rock that is hot, but it doesn't have that water, those large volumes of water

2:55 and trained in it. The idea is you've got the heat, but you have to have a way to bring that heat to surface. So that's what's so ideal about traditional geothermal. It has the water to bring the

3:06 heat to surface, but for the next generation geothermal, which is hot, dry, rock, you have the heat. So then you have to figure out how to get that heat to the surface. And usually what you're

3:17 doing is creating an artificial reservoir, either a closed loop system or an engineered system like a fracturing system, which then you pump water from the surface into that system. You harvest the

3:29 heat and then that water, you use the water to bring the heat to the surface. So that's what I think the all the excitement about geothermal is right now is this next generation geothermal, which

3:39 is the hot rock, but not with the water and rain. Now, in my opinion, there are advantages to going to the next generation geothermal, that.

4:01 The expiration risk is lower. So even with traditional geothermal wells, about 40 of them are underproducing. They're either not making enough water or the water doesn't produce for a long enough

4:05 period of time or it just, the heat isn't as high. Whereas the expiration risk for hot dry rock is gonna be less because what you need to find really is the heat and not the water entrained in it.

4:18 So 'cause you're bringing the water from the surface and you're creating your own reservoir. Got it. So historically it was a little bit of wild caddling in some ways where you just had to get lucky

4:28 with the right reservoir and the right water. And now we can really kind of create an engineered result 'cause now we're controlling a lot more of the system. Jason, that's a great way to look at

4:37 it. And the other advantage too is if you can imagine this hot water from traditional geothermal's been down in the earth for millions and millions of years, when it comes up it brings a huge amount

4:47 of minerals with it In some cases, if you have lithium and cobalt and all the precious minerals, it's a benefit. But what happens is when it cools, the minerals will start to fall out. So it'll

5:00 make scale on your equipment. So you have to mitigate the scale or fouling of the equipment. So that's the other thing I think next generation to your thermal will have less issues with is this

5:12 fouling. 'Cause the water just doesn't sit long enough to really pick up. Correct, correct I'm curious like in terms of order of magnitude for the traditional wet rock, is it much more water that

5:23 is kind of used and consumed versus like a closed loop dry rock system? I think it'll depend on the next generation design type. So closed loop systems are gonna use very little water 'cause you're

5:40 losing water from evaporation mainly because you're within pipe the way we operate our systems

5:48 What we're doing is we're using our fracture more as a balloon rather than pumping through the fracture as a system like a network. And because of that, we're targeting very low permeability

6:00 formation. So our water losses are like 2 or less. And then if you look at the DOE two, well, EGS systems, from what I understand, they're, they've got water losses between 20 and 30. So it

6:13 really depends on what system you use on how much water you're using, but you are reusing water, whereas with traditional geothermal, they will re-inject water to keep the pressure of the system

6:27 higher. But then sometimes they just dispose of the water as well. Yeah. And so just to kind of go back on the, I guess, the oiling gas side of things, rocks are permeable and that's where the

6:37 water goes, right? It kind of goes into the, the, the subsurface, like a sponge. And that's why you lose a little bit. Exactly, that's, in the case of the water losses, you're gonna have

6:48 losses due to evaporation, and then the leak off is exactly what you're talking about, Jason, is you've got poor space, and as that poor space is connected, that's called permeability. And so

6:59 the water will tend to move away from the fracture into the poor space of the rock, exactly. But again, if it depends on the permeability of the rock that you're targeting, and then the design of

7:12 the geothermal system that you're also using.

7:15 Can you explain a bit more when you say you're using that crack as a balloon? Is that, 'cause it expands when you put the water in it. Yeah, what do you actually mean by that? So this is a great

7:26 segue into our geo-pressure geothermal system. So our technology, we term GGS, not EGS or AGS, but GGS. So what we're doing is we're drilling a well For the formation, we're targeting, again,

7:42 low permeability, low porosity. We don't want natural fractures, which actually will add a secondary permeability. And what that does, it allows that fracture to act like a tank or a

7:55 watertight system. And so when you fracture treat, you're creating a fracture. Let me just give you typical dimension. So 3, 000 feet vertical, 500 feet in length and the opening is very, very

8:10 small. So 12 inch to one and 12 inches, that's the aperture. So if you can imagine two extremely hot plates with a very small opening where you pump water into it, but to your point the rock

8:25 actually has elasticity. So when you're pumping the water into this fracture, under pressure, it's wanting to open that fracture. And by doing so, you're now, you've got a pressure component of

8:40 that water, right? And so when we produce our water back for geothermal, not only are we using the heat component, which is of course an energy, but we're using the pressure component. So most

8:52 geothermal systems actually vent the pressure before it goes through the heat exchanger, because it's just hard to find a heat exchanger that's rated to these higher pressures. So we want to

9:03 preserve that pressure energy so that we, our net output is going to be higher. Our modeling says our net output will be 25 to 50 higher because we're preserving that pressure energy. So that goes

9:15 back to geopressure, geothermal system. But the rock does have elasticity and it's whether it's sedimentary rock, the forage project actually proved that even the hard rock igneous granite rock has

9:29 elasticity as well.

9:33 been done in the industry elsewhere that gives you validation that this is going to work and the crack's not going to spread further, for example. Yeah. Well, I'll first refer you to our field

9:45 testing that we did in

9:48 2022 where we proved the technology. So what we did is we, I mentioned we went to the field quickly and we went to the field to prove our downward oriented fracking technology, which is also called

9:59 gravity fracking So we fracked with the heavy fluid, we don't need a huge frack fleet and it will preferentially grow outward and downward toward the heat, which is advantageous, but also the way

10:14 the fracture closes it will open from the top down like a zipper and it'll close from the bottom up like a zipper. And so if you've got this orientation against the well bore, the fact that it's

10:28 below the perforations or if you have a horizontal well board below the horizontal lateral, when that water is basically pushed out of the fracture, you're not losing any in an attic above the

10:41 perforations or above the well bore. So we had created a fracture and then we had spent about five months back to your question,

10:50 testing the best way to get the heat out of that fracture without expending a lot of energy. And so what we did, one of the first things that we did was circulate through the fracture similar to EGS

11:03 and we found that we had some of the same challenges, high friction pressures, and we would not get all the fluid back 'cause it kind of get trapped in the fracture. So then we started this cyclic

11:15 pumping and it's actually, so we proved it in our field demonstration in 2022 and then we went back to the well and did five weeks of energy storage testing where we did about 50 or 60 cycles But the

11:29 oil and gas industry also uses it. in heavy

11:34 oil applications, they call it huff and puff. And so it's been used for many years in huff and puff. And the other indicate, I'm not a geologist, but when we talk to geologists and geosciences,

11:46 they say the other indication is geyser wells have some of the same behaviors that we're emulating in our fracture So yeah, we've

12:00 done some due diligence with a pretty well-known engineering company, the oil and gas industry, and they

12:08 confirm that you can cycle these wells for hundreds of years. I mean, we're not gonna claim hundreds of years 'cause we only need a facility to last 30 years, but we're pretty confident that the

12:18 frack is gonna behave very well for the top theory that we need. I have so many questions that could go down and rabbit holes on the technology and I'm thinking, I didn't even know you can

12:27 directionally direct fractures.

12:32 And I'm very curious how that works. Yeah, no, that's a great question. Because in the oil and gas industry, when you're drilling the well, you're drilling with a heavy mud. And there's times

12:44 where a driller will say, I just blew out the shoe, meaning that they lost their mud and they lost it in a downward direction. That's gravity fracking. So basically, gravity fracking is using a

12:56 fluid that is so heavy that the weight of the fluid is creating the fracture. Okay. And so when you fracture, you're gonna be pumping at a certain pressure and a rate. So because of our fluid

13:11 being so heavy, we're pumping at a lower pressure and a lower rate because we want the fluid to do the majority of the work. And so when you do that, the fracture's wanting to go out, but downward.

13:23 And this technique was actually used And I think it's continued to be used by the nuclear industry to dispose of nuclear waste, which is very heavy. In the oil and gas industry, you're fracking

13:37 mainly with water, which is pretty light, at high pressure, so at high rates. So we're fracking at two to three barrels a minute, 500 to 1, 500 psi The oil and gas industry is pumping at 20 to

13:54 40 to 60 barrels a minute and at much higher pressures, 10, 000 to 15, 000 psi. So those fracks are wanting to go out and upward because of the lighter fluid and because of the pressures and the

14:10 rates that you're pumping at, because you're forcing it in

14:13 and the shallower you are in a formation, the lower fracks stresses at the top versus the bottom and that's why You need a heavy fluid to - force it downward rather than a light fluid with high

14:28 pressure and high rate, which would force it more upward. Interesting. Yeah. It's amazing how much you know about what goes on down there and I realize how little I understand about kind of the

14:39 fracking process. Interesting. Yeah. And

14:44 you know, you started this company three years ago and your background is, is with Shell And you're saying, how did you decide that it was time for you to go solo and start this own company? Yeah.

14:57 No, great question. So, you know, I always wanted to get into renewables, but, you know, when I looked at solar and wind, I was like, wow, none of that uses the, the skills that I've

15:07 learned in Shell over the last 35 years. And geothermal, my, my team actually at Shell was the team that would do the cost estimates for geothermal. And, um, but we never really pulled the

15:20 trigger and drilled any geothermal wells and not, you know, I was so busy running our unconventional assets. I didn't really deep dive into why was that, but I figured the economics just weren't

15:31 that good, or they were one off well. So then my current partners, of course, we work together at Shell, and we've known each other for 30 years, and they were getting into geothermal, and they

15:47 have a history of developing, this is Lance Cook and levering. So they have a history of developing technologies for the oil and gas industry, pretty complex technologies, but also commercializing

15:58 them. So I figured if anybody's gonna crack the nut on geothermal, it's gonna be these two, and so, and when we work together at Shell, they used to use me and my team to test their technologies

16:12 'cause we were onshore, so we could test them quickly and cheaply compared to offshore. So when they were calling, I was like, this is a perfect opportunity to get into renewables, and to me,

16:22 what's exciting about it, if you look back at. wind and solar where they were on the learning curve. There's an inflection point on the learning curve where you start to finally drive down cost and

16:34 improve efficiencies and you really can

16:38 build these things at scale. So we are where wind and solar were 15 years ago on the learning curve. So that's exciting for me that we're still developing the technology. We're trying to figure it

16:48 out as an industry. We've got different horses in the race, whether it's sage or ever or green fire, Fervo, right? And I just am excited about what's going to happen over the next three to five

17:01 years when the industry breaks through and makes geothermal cost competitive and commercially viable. And I think what's interesting that we're circling back to is there's an aspect of geothermal

17:15 where it is base load, where wind and solar aren't, and so there's some some dispatability, but there's also some dispatability on the storage, which is. intrinsic now with what you're doing.

17:27 There's some questions I have on the storage side of things like I think that there's commonly quoted like the return round trip efficiency on the storage. Does the math kind of pencil out the same

17:36 way when you think about the fact that you're producing and storing? The math for the energy storage actually pencils out almost better than geothermal. And because to your point, wind and solar

17:47 have done such a great job greening the grid, but they're intermittent. So we need to help wind and solar I mean, you look at Texas and California and the duck curve is such that solar is actually

17:59 over producing now in both states in the middle of the day, which is pretty impressive, right? Pretty exciting. So now we need to help wind and solar move. We need solar, well, both of them,

18:12 to move to what they call the shoulder time. So in the morning, in the evening. And so to your point, Jason, the energy storage, that we're doing deep in the air, so upside down pumped hydro.

18:27 We're not trying to compete with lithium-ion batteries for two or three hours because lithium-ion batteries will beat us on cost because everything is really cost. We have to be, we as an industry

18:37 have to be cost competitive. But when you need four hours or more duration, that's when we come into play because then you have to start stacking these lithium-ion batteries and then the cost just

18:51 obviously multiplies. And so

18:55 we're working with an oil and gas company in the Middle East and they had asked us, can you model what they call blended LCOE? So if you take solar and you take our energy storage, what is that

19:08 levelized cost of energy? So what we did is we took the solar, we assumed two cents a kilowatt hour for solar, which is about average. And then we said, okay, solar is gonna produce for seven,

19:20 eight or nine hours a day. We're looking at a hundred megawatt scale and we put our energy storage cost into the system and into the model. And the blended LCOE was five cents a kilowatt hour. So

19:32 why is that exciting to me is because the wholesale cost in Texas is five and a half cents. So that means we can be cost competitive in Texas

19:45 with solar plus energy storage, which makes solar 247 electricity, right? Yeah. Yeah. Interesting. And then I think you described a little bit of kind of what goes on down a hole with the size

19:56 of the, I guess the well itself, but what are the surface facilities that you need? Yeah, actually the footprint, we'll talk about the

20:07 power plant and the wells first. So the footprint is relatively small, So for a 30 to 50 megawatt facility, we would drill. So for energy storage, we get about three megawatt per well. For

20:20 geothermal, of course, it depends on the formation temperature and the ambient temperature, but you're getting between three and six megawatt net per two well system. But again, you get much more

20:34 in a colder climate than you do in a hot climate. So for say a 30 to 50 megawatt system, you're looking at about a five acre footprint for the wells and the injection pumps and the turbines. But

20:51 for energy storage, then you have to also have a surface reservoir, so water storage facility. So for energy storage, that five acres then becomes 10 to 15 acres with the water. 'Cause you need

21:03 basically a holding pond. Correct, correct. So relatively small, if you think about the footprint of solar and wind.

21:12 Right. And perfect actually for distributed, you know, behind the meter power that, you know, we're working with a mining company that, you know, can't get electricity in Arizona. So they're

21:27 looking at solar combined with storage or data centers, as you guys know, that's going to be a tremendous need of electricity in the near future. So that's, that's pretty exciting if you can

21:38 provide behind the meter energy to data centers as well. And they like to run in cold places too. So that's like a double bonus for you. Yeah, they, I didn't realize that because the, the, it's

21:49 a, it's a good point. But the, the big tech companies that we're talking to, they're looking at Texas.

21:58 And well, they're also looking in the East as well. So which is where it's colder. Yeah. I think for, for data centers, it's a, it's a compromise of how close are you to the use case and then

22:08 also like. You have to run HVAC ends up being a large cost behind CAPEX. Yeah, yeah, that would make sense. Yeah. This is the cooling. Yeah. So how does it work like practically when you are

22:21 getting a lot of solar and when energy, how does it connect to your system and then what do you do with the - how do you actually store that energy? Yeah, no, that's a great question. So let's

22:30 just use solar as an example, the blended LCOE example So what you would do is you would build your solar facility to the size that you're promising the electricity and you would sell that

22:44 electricity during daylight, you know, sunny hours, daylight hours. But then you would overbuild that solar facility so that while the sun is up, you're not only selling electricity that you've

22:58 promised to the grid, but you're also moving - using that electricity to power an electric pump, which then pumps the water deep into the earth, pressurizing that fracture, and then you'll close

23:11 the wellhead and you'll have that pressurized water ready to basically produce through a peltin turbine and generate electricity. So once the sun goes down, you open the wellhead, you let that

23:24 fracture start to close. You actually can control the rate at which that fracture closes and therefore produce that water over a 17-hour period of time when the sun is down and then you're producing

23:37 the electricity when the solar can't and then when the sun comes back up, you close the well in, you start the process all over, where the solar is producing electricity and then we're pumping,

23:48 you're raising the electricity to power an electric pump and pump the water into the fracture. And you can do that for five hours, you think,

23:59 because you said it can go longer than lithium-ion batteries. So how much longer do you think? Well, in our energy storage demonstration last year, we were able to produce electricity or power for

24:13 17, 18 hours. So again, what you're doing is you're running the water through a choke, what they call a choke, and you're controlling the flow of that water, and then you can produce it over

24:23 longer periods of time. But we can also, if there's like, you guys know in Texas, in the summer heat, in the evenings between four and seven pm, you have the peak energy needs. We can also

24:36 release that water more quickly if we want. So we don't have to produce it over 18 hours, we can produce it over one hour, or we can produce it over three hours, as long as the well bore size is

24:48 large enough. So that's what's kind of exciting about the energy storage technology that we have. It's flexible where you can be short duration, you can be long duration The other thing is, is we

25:00 - We want that fracture to always be open. So we have a volume of water that we keep in the fracture. You call it a pad. And what we're cycling is only 10 of that volume. But if there's an energy

25:14 emergency, so thanks Storm Yuri, and you need to produce more of that water, we can produce it down to 20, 30, 40, before that fracture starts to close. And the only, so you can produce

25:28 electricity, the only downside is your round-trip efficiency, won't be as high as what it would be if you're only cycling 10. So it's really an emergency reserve? Exactly. This is what it's

25:38 available for. Exactly. Interesting. But to your point on round-trip efficiency, we did test that last year as well, so our round-trip efficiency is between 70 to 75 for this energy storage.

25:51 Yeah, that's pretty good. No, you know, we're really at the cutting edge of this technology, like you said, there's only a handful of players out there, and you recently. just raised17 million

26:02 for Series

26:04 A round. That's correct. And that's really exciting. And you've got, it was led by Chesapeake Energy Corporation. Can you explain to us why would Chesapeake be so interested in this kind of

26:18 technology right now? Yeah, I mean, Chesapeake has been great to work with. They did a lot of due diligence last year. Of course, they really understand the subsurface because they're an oil and

26:29 gas company. So I don't wanna speak on behalf of Chesapeake, but Chesapeake, in our discussions with them, have very serious ESG goals. And they liked our technology. They think our technology

26:46 makes a lot of sense in the subsurface area, and they really think there's a huge future for our technology. I think they're still figuring out how it's gonna fit into their ESG goals, but they

26:56 wanna be involved in the journey because they believe in the technology. So I think it's really more of that than anything else. And they think it's gonna help their ESG goals eventually, right,

27:11 once we get start to scale. And I think Chesapeake is famous for having fantastic land operations in terms of sourcing and identifying leases. Like is there a collaboration point that you can

27:21 foresee where like you would be on their assets or would use that as a strategic partnership? I think there could be You know, I think one of the goals that they have is to of course offset their

27:34 carbon offsets in their operations. And so I think a future collaboration would be that we are helping them with those carbon offsets or providing green energy for them at their location. So. I

27:48 guess my question is like, do you have to go out and get leases in the same way? We do. Like all over and is there the same, I guess the question I'm getting to, This is gonna be a land rush in

27:58 the future of. getting the best geothermal kind of assets locked up, the same way we saw it with shale, if we really get through this kind of pivot point that you were describing. I think there

28:08 will be. I think it will vary depending on technology again, because our technology wants low permeability, other geothermal technology wants high permeability and fractures. I do think one of the

28:24 challenges to all electricity interconnection to the utility grid is proximity to substations. So I think that is a consideration because if you're one mile away from a substation versus 10 miles

28:38 away, you're gonna have an advantage because it's gonna be less cost

28:48 to interconnect. So I do think there could be a land rush, but I think it's gonna be dependent on the technology because again, you know, If the technology wants low permeability formations, then

28:58 you're gonna land rush in one area. If it wants high permeability formations, you're gonna land rush in another area. But I mean, with that being said, geothermal as a whole is like when we look

29:09 at, say, the continental US. and where our energy storage is applicable, we can pretty much put it 90. We just wanna avoid major faults. But once you get below 5, 000 feet, finding low

29:22 permeability formations is pretty prevalent. Then when you look at the geothermal overlay where we need heat in addition to the low permeability, then you are only looking at probably 35 of the US.

29:36 Because what you wanna do is be able to drill to your targeted heat, which for us is 150 degrees C, or 300 F, but you wanna be able to drill to those depths, I'm sorry, drill to that heat at

29:50 depths, that oil and gas equipment can drill. right now, which is 20, 000 feet. So like our test oil in Star County was drilled in 2008, it was drilled to a depth of 19, 000 feet and 235

30:04 degrees C. So the oil and gas industry has all of the technology that we need to drill these wells, to complete these wells. And so to us, in our view, the biggest challenge is really the

30:19 thermodynamics of getting the heat out of the earth, and then converting the heat to electricity efficiently and cost-effectively, and the geomechanics of how does the earth act when you're

30:34 interacting with it to harvest this heat. And again, around the efficiency of the system and the cost-effectiveness of the system. What are some of the risks that this technology has that maybe

30:49 still worries you or worries investors to refrain from going into geothermal? I would say, well, let's talk about the business risk first and then we can talk about the technology risk. So the

31:03 business risk is being commercially viable. So we talked about the 16 gigawatts around the world is all traditional geothermal, where you've got the huge volumes of water very close to the surface

31:16 of the earth. There are no commercial next generation geothermal power plants. And that is what we as an industry, that's the nut we need to crack, right? And so that goes back to the

31:33 thermodynamic and the geomechanic challenges of getting the heat out of the earth and then also converting it to electricity so that it's commercially viable. I would say the technology risk,

31:42 especially when referencing our technologies or any technologies that use fracturing that worry investors is the use of fracturing.

31:53 Um, you know, induce seismicity, earthquake, some tremors is a worry. Um, when we do our operations, we have induced seismicity monitoring that we work with the University of Texas Bureau of

32:09 Economic Geology. So they're independent and they're monitoring for earthquakes and tremors, which we didn't expect any, but we want to monitor so that we can show everybody that we're not seeing

32:19 any. So I think that's one of the worries Because our technology is not the way trimmers and earthquakes typically happen. Again, I'm not a geoscientist, but this is what I understand is when you

32:32 pump or produce large volumes of fluid across a fracture that's already existing, it'll lubricate the fracture and make that fracture shift and that'll cause the tremors or the earthquake because

32:47 we're not wanting to Target natural fractures because that would actually be detrimental to our efficiency of our system. And also because we put a certain volume of water in that fracture and then

33:00 work within that same volume. We think the induced seismicity risk for us is very low. We still take it very seriously. We look at the geology. We make sure that we're not near major fall to

33:11 fractures. And we're measuring for induced seismicity, but we think the risk is very low. So to single this back to the investment, I noticed a lot of the folks investing you do appear to be

33:24 strategic or people involved in the industry, but not in as many like pure play finance investors. Is that true? That's a very fair statement. And so I think to go back to it, like is the risk

33:33 really business risk or is it that financial investors don't understand like what goes on down whole? And so they kind of stay at arm's length. What was your experience on the fundraising trail? I

33:43 think that's a very good statement. So our experiences has been that we've been able to attract angel investors. You know, one of our investors is Chris Anderson, who also owns Ted Talks. And

33:57 then Arch Meredith, who's also a technical investor. And then of course, strategic, as you mentioned. So neighbors and geologue, who's a subsurface characterization company and then just

34:10 recently Chesapeake. We have had more trouble attracting pure financial investors, like you said. Now, helium three ventures just invested in us and what I'm impressed with on helium three, to

34:24 your point, is they did a large amount of due diligence, including getting on LinkedIn and calling some of our, the executive team's colleagues without us knowing, which was great, 'cause we

34:37 think that the deeper you dig, the better we look, so we like it. But they called our colleagues just to check our characters. But they also did technical due diligence So to your point, I do

34:48 think what we struggled with is probably the financial investors really understanding the subsurface part. And because you can't see it, when you talk about pumped hydro up a mountain, it's easy to

35:04 visualize, but when you talk about pumped hydro or geothermal deep in the earth, and it's harder to visualize. And I think there's just a smaller subset of people that have the skills to really

35:15 understand what's going on in the subsurface. So I think that's one of the challenges And then we're technical people. And so for us to very eloquently explain what we're doing in our technology

35:29 without overwhelming people are, I think that's our challenge as well is being able to talk their language, but still explain what we're doing in a technical manner, I guess. Yeah, some of it

35:43 also is, I think a lot of the financial investors do tend to live on the coast And I don't think a lot of them actually appreciate it, I understand what that. tracking technology actually is, is

35:53 it's more of a way to manage and manipulate rocks and less about actually getting oil. Yeah, application is getting oil out. I imagine you run into a lot of folks who hear what you're you're doing

36:03 and can't separate in their head. This is actually about geothermal, not producing hydrocarbons. Yeah, I we had some investors like that. One of the things that we hear quite often is, we're

36:15 either too early for an investor, meaning that, hey, come back when you've got three or four plants operating, because we don't want to take a technology risk, we're happy to take a scale risk.

36:27 Or we're too late, meaning that they really wanted to get in at the very ground floor and own a large piece of sage geosystems for a smaller dollar amount. One of the challenges with any kind of

36:40 infrastructure investing, I would imagine, including geothermal or energy storage, is it takes a lot of money. I mean, a a geothermal system is gonna be, you know, we're saying pre-scale nine

36:53 million per megawatt. So if you're gonna drill say two wells for a three to four megawatt net output, you're looking at, you know, 40 million. And so that's a lot of money. And even energy, I

37:07 mean, energy storage, we're looking at, you know, two and a half million per megawatt. So, you know, a single well with a single pump and injection, I'm sorry, single pump and single pelt and

37:16 turbine is about, you know, seven and a half million So it's just a lot of money compared to a lot of venture capitalists really like to invest in software, where, you know, you can invest a

37:29 million dollars, you get a turnaround in six months, knowing whether it's gonna be successful or not, or maybe it's more than six months, maybe it's a year, but ours are higher capital outlay and

37:40 then, of course, longer time to prove. So on the technical risk, this is something you wanna dig in But it's evident to me, especially with your career folks working kind of within the subsurface.

37:54 Yes, there's a lot of maybe risks down hole, but we also have a lot of control over these systems where I'm wondering how much of it is really like science risk versus engineering risk. And I

38:05 sometimes think sometimes investors can't tell the difference when something is like a fundamental, we've discovered an entirely new way to frack versus what you've been describing to me is you've

38:14 been piecing together some things that people have been aware of, but maybe we didn't spend the time to engineer for a certain result Did you run into that when you were talking to people? Yeah,

38:22 Jason, I wish you would go work for a VC company 'cause you're spot on. So we try to explain, you know, again, this is probably the language that we speak that probably doesn't resonate with

38:33 investors. We try to explain that we're at a technology readiness level. You know, there's one through nine and we're at seven, meaning that we've proven all the technologies independently. Now

38:45 we need to bring them together in a system. and produce electricity, which is what we're gonna be doing with our energy storage facility at the end of the year.

38:55 And so as you're pointing out, I don't think investors understand the difference between science risk and now we've done the science, we need to put it all together and then start engineering the

39:07 cost out, right? Engineering the efficiencies upward and the engineering the cost out, which is exactly what we did as a hobby

39:18 in oil and gas, right? I mean, that's how you make money in oil and gas is you discover the resource and then you start drilling and then you drive cost down, you drive your output or your

39:30 efficiency of recovering the hydrocarbons up and that's where we feel like we are right now. But again, to go to that next step, that's when you need the millions of dollars to start doing the

39:44 entire system, right? So I think that is a. of misunderstanding.

39:51 Yeah, and I think that's a challenge for a lot of startups within climate tech who are capital intensive are working on heart technologies and not software, like you said, right? So what kind of

40:01 advice would you give them in terms of how can they fundraise, knowing, especially based out of Texas, for example, because a lot of VCs are in the coast, as we've said, and a lot of them have

40:19 come to our podcast and complain about, you know, we don't have that same investor culture here in Texas. My first advice would be to hire somebody with a financial background that speaks the same

40:33 language as the investors. And so right now, we're trying to keep our organization pretty small, 'cause we wanna spend as much money the field as we can versus on GNA. And so we're all in

40:47 engineers, and we also have a business manager. We, you know, looking back, we probably, if we had done it differently, we would have hired somebody with a financial background that speaks the

40:59 same language as the investors, because we don't speak that language. That would be my number one piece of advice.

41:10 One of the things that I'm coming to appreciate talking to a lot of kind of energy transition entrepreneurs, especially those with kind of more of an engineering background, is they tend to be very

41:20 conservative with their financial protections, because I think the industry likes to do these like P90 estimates, where you take a new account, you know, what happens if we need to do a cost

41:31 overrun, or if the project takes an extra year, and that ends up making the venture economics just not look as good. And a lot of times, I think, when venture capitalist are reviewing business

41:44 plans. they're kind of expecting the opposite, where maybe something's more of a P50 or even a P25, but we don't speak that same language because everyone industry knows exactly what a P90 is.

41:55 Right. And I don't think they've ever heard that word on the East Coast, in my opinion. Okay, that's interesting. Yeah. And I think to your point, Jason, it's a balance between wanting to be

42:06 authentic with the investors and have credibility and not over blow your story And at the same time, like you said, I think we've done that to ourselves. We've been over conservative in our

42:21 projections, but we also want to be able to look the investors in the eye and back up what we're telling them and not be unrealistic. So I think it is a balance between being realistic and authentic

42:37 and then not cutting yourself short. And I'm not saying it's a bad thing The fiscal discipline is how we get companies that last 100 years. and to time it right. So when the price of oil is right

42:47 or the understanding that the acreage is right, they can deploy capital massively. So I'm not

42:53 saying it's a challenge. It's just the nature of our industry is so sophisticated in certain ways we do kind of capital planning that it doesn't match with the expectations of how venture capital

43:03 operates. And there's a little bit of this translation gap that we have. So it makes me even wonder if a person in finance and traditional oil would still have a translation problem of the kind of

43:14 venture capital finance. It's a good point. I didn't realize, you know, like I said, P90, P50 estimates are something that we've done for years and it's just kind of second nature. And, but

43:25 now that you mentioned it, I've never really heard that come out of a VC

43:30 representative's dialogue. So that may not be part of their

43:36 vocabulary. Yeah, and no one wants to admit they don't know what it means. Yeah, yeah, yeah, no,

43:42 I understand Yeah. So

43:44 Can we talk about Houston a little bit? Yeah, we can talk about Houston. So you're, you're a Estonian, is that correct? Well, King William. King William. King William. Yeah, King William.

43:54 I mean, Houston's basically a sprawling city, right? Absolutely, absolutely. No, yeah, all of us actually at Sage work our offices in neighbors building in Greens Point. So we all live in

44:08 Houston and, you know, I think this is for geothermal and energy storage in the ground This is the perfect place to be 'cause you have the oil and gas infrastructure, you've got the networks. And

44:21 if you just kind of, we can talk about Houston, but if you kind of pan out to Texas, Texas has always been an energy leader. And I'm convinced if you guys have probably seen these articles on

44:33 LinkedIn, but you've got all of these regulations in California that's driving up wind and solar installations. But in Texas, it's all about, the market, right? But our win, so we're number one

44:47 in solar and I'm sorry, number one in wind, and we're actually gaining on California in solar. So it's kind of exciting to see what Texas is doing. And I'm also part of the association called

45:01 Texas Geothermal Energy Alliance. And these guys did a fantastic job in the 2023 Texas legislator session in that there was four geothermal bills that they wanted to pass and they got all four of

45:16 them passed. So yeah, so I think Texas is really embracing geothermal and energy storage. We've had meetings with the Texas Railroad Commission because the Railroad Commission really wants to

45:27 understand, you know, what is coming in Texas as far as regulations. And so I think Texas is doing a great job embracing what is next as far as energy storage and geothermal. Yeah, I mean. We

45:40 know energy, right? And like you said, all the talent is here, all the industry is here. So you are at the right place for this cutting edge technology. The investors might not be here yet, but

45:51 it's coming. Yeah, they're coming. It sounds a little bit. So when you put your seat around together, was that mostly Texans who came in to support you guys at that very early stage? Or did you

45:60 find it in Houston? It was half of

46:05 it was, most of it was Veria, Chris Anderson So Ted talks, he's not Texas. And then it was neighbors. Neighbors is obviously Texas. So yeah, so I think neighbors played a huge role in our seat

46:17 round. Yeah. And when you, I guess, got started, I think you indicated earlier those hesitance to work at companies outside of the industry. But when you decide to make that leave, did you find

46:30 like Houston had the support structures you needed to really start the business? Oh absolutely yeah yeah tell us a little bit about what what you discovered and and where that support came from.

46:41 Well, and as a startup, again, we are, you know, in the stage that we're at right now, we are working to figure out how to crack the nut on the geothermal technology, right, which we think

46:59 we've done. So our focus is really on the technical side, the geomechanics, I mentioned the geomechanics and thermodynamics, doing the modeling We've got a modeling director that used to work at

47:11 Weatherford. That's just fantastic. And he can model these systems before we even go to the field. So our group is very technical. Now, back office-wise, we have a business manager. She does a

47:23 fantastic job. And where we need support, neighbors has been there. Like, if there's something that we need support in the back office, they've been there to offer support as needed.

47:34 So, you know, I think we're, self-sufficient. The other thing is we recognize that we can use consultants in the area, whether they're technical consultants or legal consultants. Our legal

47:48 consultancy is out of Austin. So all of the networks that we use and consultancies are

47:56 mostly out of Texas. And so I think it's just a fantastic area to be because of what you'd mentioned, the skill set and just

48:08 being able to reach the people easily and close to home. Were those all from like social networks and relationships you had developed like in your career or are these a lot of new relationships that

48:19 you had formed? I would say they're a lot of new relationships, but as extensions from networks that we already had. So you're trying to figure out, okay, Who should we use for this, you network,

48:32 and then they say, well, this is what we would recommend who you would use, and then we would go from there. So I think a lot of them are new, but again, you know, introductions from people

48:45 that we already knew, or networks that we already had. It's very different, I will say, after working for Shell for 35 years, where I was allowed to focus, you know, not on raising money, but

48:58 on delivering the business, you know, drilling the wells, driving the costs down. So, but as a startup, you know, I would say at least 60 or 70 of my time is now spent on raising money, right?

49:12 And developing partnerships with, you know, future partners that will help us, you know, build projects, identify projects, raise money And so it's definitely, my old network is still valuable

49:28 to me, but it's not the same network. And how did you feel like you had, did you have to change as like a leader to kind of make that transition? Absolutely. Tell us about that. Oh yeah, I mean,

49:39 Shell, you know, I had 300 people working for me. They were the best of the best. You know, we would set goals and, you know, some people thought they were unrealistic and we would always

49:51 deliver the goals. And if you didn't have the expertise in your team, you know, Shell's 85, 000 employees, there's an expert somewhere within Shell, right? Then you, you know, start working

50:03 for a startup and there's, you know, 10 people. So you don't have that 350 people. So, you know, some days I'm CEO, some days I'm drilling engineer, you know, some days I'm out, you know,

50:14 cleaning the conference room because we have an investor coming and we want to make sure the conference room looks good. So, yeah, it's all fun, you know, getting it done and just the excitement

50:24 of working. as I said in this early stage of a renewable that I think is going to be hugely impactful is just exciting.

50:35 When you think about like the ecosystem and you think about where you have to go next, are there any gaps like within the maybe startup support ecosystem that you've identified and obviously you've

50:42 been able to overcome, but.

50:49 I do think it goes back to your comment on the venture capitalist they are, as you said, located on the coast. And so maybe that's what Texas is or Houston is missing.

51:04 But it's not to say that we don't have the connections, you know, through our investment bank or other means, but yeah, I think that would be the biggest gap in Houston is having that

51:17 VC mentality close by or locally And

51:23 I think that's also an opportunity for us because. Again, these are different kind of investments, so as we're developing our venture capital ecosystem and we're seeing new venture firms come up in

51:34 the past three years, is how we can educate these investors and maybe develop a new philosophy of investing that is conducive to heart tech, to these kind of investments which require a lot of

51:48 capital upfront. I love that idea. I mean, that is so needed and that would be very useful, right? Yeah. I love that idea. Yeah. And like you said, it's an opportunity to create a different

51:55 approach andor mindset when it comes to, you know,

52:06 how are we going to green the grid? How are we going to, you know, do the energy transitionenergy expansion, right? Because it's not just a transition. It's an expansion. So I agree with you

52:18 completely. Yeah. Exciting. Yeah

52:22 we like to ask our guests if they have a personal climate impact story, something that happened in your life, either growing up or later that left a mark, and you were like, You know what, I want

52:33 to do something for the planet. Yeah, this dates back to a long time ago. My dad was a geophysicist, and he worked for mobile oil, and I remember at one point we were in California, but then we

52:48 got transferred to Louisiana So I was pretty young, probably eight and nine years old. And so his colleagues gave him a going away party, and you know, we didn't attend, but he came home with all

53:00 of his gifts. And one of his gifts was a guy took a jar and took a match and just, you know, created what looked like smog in a jar and gave it to him. Because even back then, which would have

53:15 been in the 70s or yes, there was a lot of smog in LA. And we were living in a suburb of LA. And so I just You know, I thought, okay, well, this is funny, but it's not funny. So anyway, so

53:31 it was just something that always kept in my mind when I, you know, started learning more about,

53:38 you know, greenhouse gas emissions and, and, and this was back in the 70s, right? Right. So there was even a smog problem back then in California. Yeah, absolutely. And the difference is you

53:49 could see the smog then and today people can't associate a carbon. Yes. So that that's what makes it almost more challenging That's exactly right. Yeah. Because when you can see it, it's one

53:59 thing, but when it's there and you can't detect it except for

54:05 new technology, it's going to be more difficult for people to envision. Yeah. I'm totally a tangent. So I'm going to, apparently I'm going to India in July because there's a family wedding. But

54:15 there's sometimes when you go to Asia where you land and you get out and you're like, Oh, I can taste the air. Yes. The taste of the pollution. It's the taste of the smog And I forgot where I was

54:24 recently. it was in Oaxaca down in Mexico. And the first thing when we landed my wife and I looked at each other, it goes, Tastes like India. And it's this kind of, I don't know if it's ozone or

54:34 what, but it's this kind of industrial flavor that can exist in places. And in many ways, we're really blessed here that we did clean up the smog problem and we do have that clean air, but it

54:46 still exists in other places. Yeah, and it impacts people's health. When I go to Pakistan, for example, and I can't be outside very long, especially if we're on the road, because there are all

54:57 these trucks and there are all these fumes coming out that are just, yeah, it gives me a headache. Yeah, I had colleagues that went on work for Shell that we had operations in China. And if they

55:11 were offered a role in China and they had young children, it was something that they really needed to consider because their young children were developing long capacity and they were worried about

55:22 impacting

55:24 that at an early age, so it's definitely. something that we need to be very serious about.

55:30 What is one thing our audience can support you with?

55:35 Curiosity, if they're watching this or listening to this, the fact that they're curious enough is fantastic. So just having the curiosity to understand what geothermal is, what energy storage is,

55:51 where we can do it, how it's clean, and how it can be a future energy source, I think is exactly what we need people to do, ask questions and just be curious. Yeah, just learn more about these

56:05 new technologies, right? Yeah.

56:08 Yeah, and what should people find you on LinkedIn? What's the website? Yep, LinkedIn or sagegeosystemscom or, yeah, email. There's an email link on our website, which I, you know, we'll get

56:20 a lot of the emails, not directly, we filter through them, We don't not answer any emails, so yeah, happy to email me directly at cindytaffsageduassystemscom. Yeah. Well, thanks for being here,

56:31 Cindy. Yeah, no, thank you. Yeah, we're excited to follow you

56:39 and find out more about this commercial facility and where it's gonna end up being. Yeah, yeah, I hope we can announce that soon, so. Yeah, exciting, hmm, thank you.