Change Makers: John Plack, Ameresco SVP

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Hill Vaden:

All right, welcome back to EnergyCents and S&P Global Commodity Insights podcast, covering all topics on the intersection of energy and finance. This is your host, Hill Vaden, with your other host, Sam Humphreys. Sam, how's it going?

Sam Humphreys:

I'm good, thank you, Hill. How are you?

Hill Vaden:

I am doing well. So, we have just spoken as part of our Change Maker series with John Plack, the VP of engineering at Ameresco. And Ameresco is ... I liked his abbreviation, so I'm going to use it to introduce him, D-Boom. They are D-Boom Company, which designs, builds, owns, operates, and maintains infrastructure. And we talk that they're based in Massachusetts, and we talk a lot about geothermal. Can you give people some things to listen out for over the next 30 minutes or so?

Sam Humphreys:

Absolutely. So, this was brilliant conversation. So, the company as a whole are focused on clean tech, and we just spent the day, this session, talking about geothermal and the applications that they are using it for currently, which is definitely focused on the thermal part of geothermal, and then how that can lead to, as they develop, power generation, and where that power generation sits and the customers it wants to help facilitate. Excuse me. And we go into a little bit more depth about the industry as a whole, the implications of how the company are able to scale this business in line with policies and regulations, and then some of the practical sides of cost of steel and aluminum. And then, we also touch on the future of geoscience and geoscientists, just because I was interested in that bit, but it was fascinating. But what about you? What did you think?

Hill Vaden:

Yeah, I really enjoyed the conversation. And we hear a lot about advanced geothermal and some of the newer things that a lot of these companies are doing, like Fervo, and Sage, and others. And this was really a look at some of the more traditional geothermal, and all of it is coming about on this need for resilience within power markets to help balance and support the growth of intermittent production on the side. So, a good conversation, and we'll hand it off to John now.

All right, John, well, thanks so much for joining Sam and me today. And so we're going to talk, I think, a lot about geothermal today, but before we do, can you talk a little bit about your role at Ameresco and about Ameresco specifically?

John Plack:

Sure, sure. So, I've been with Ameresco over 20 years. Ameresco is a clean tech integrator. Essentially, we design, and build, and often finance energy projects focused on our customers' sustainability goals, their generation goals, and overall energy efficiency, so providing energy efficiency improvements for our customers. So, we'll bring the design. We'll bring the construction. And oftentimes, we'll finance the programs too for them. My role within the company is I operate within what we'll call our design development side, and I bridge the gap into our implementation team. My skill set or my training is in mechanical engineering, but I often bridge that technical and financial side, being able to bring our financial packages that are outlining the efficiency benefits and those things for our customers. Essentially, just really responsible for delivering cost-effective solutions and meeting our customers' sustainability and resiliency goals with our program, so in charge of our team to get that done, so to speak.

Sam Humphreys:

I believe I'm also going to start it off with, as you said, it's clean tech, but it was solar originally back in 2000, or something like that. When was the decision made, and why was it made to include geothermal as a solution?

John Plack:

Good question. Geothermal has been a bit of a natural evolution. It's been one of those technologies that we couldn't cost-justify previously. So really, it was the cost that was really keeping it from being one of those arrows in our quiver to be able to provide in the solution set to our customers. So, we're seeing a couple of things go on right now, and one of them has to do with the cost side. The other is with regard to the fact that it brings a really sustainable and resilient solution. It's a base load. It's 24/7. It really provides in things that some of our other solutions can't provide from that standpoint. So, Ameresco has taken the dive into geothermal from really the thermal component first because that's the shallower aspect of geothermal right now, so it became the most cost-effective right out of the gate.

We were able to do thermal projects immediately, and we've been able to implement geothermal on that side for universities, hospitals. Right now, we do large-scale military housing complexes, so 5,000 homes, let's say, at a clip. And really, the geothermal power generation side, which is really where we're keen to move into next, hadn't achieved, and it's right on the cusp of achieving, some of that commercial viability that we need for it to be something that we can promote and bring into our programs. So, where geothermal became applicable for us, we use it, and use it a lot right now. Obviously, the income tax credits provided through the IRA right now on the geothermal side have accelerated a lot of that activity, so we're seeing a lot more on that front and really expanding our capabilities to deliver more projects on the geothermal side because of it. So, that's been exciting, and we're looking for that to continue to drive costs and drive technology to the point where we can start adopting bigger geothermal programs.

Hill Vaden:

And when you're talking about geothermal, are you talking about more of the traditional geothermal or more of the advanced geothermal? I sit in Houston, and so a lot of the shale technology and shale interest is repositioning itself or targeting geothermal as really that deep opportunity that one can go anywhere. And I know Ameresco is, what, you're a Massachusetts headquartered company?

John Plack:

Mm-hmm.

Hill Vaden:

So, a little bit outside the shale patch.

John Plack:

Yeah, yeah. Yeah, and actually, we do programs all over the country and actually, internationally, some of them, so we're interested in applying technology where it best fits. But yeah, I think where we looked at geothermal initially, it was really the shallow, our easy to find, geothermal, easy to apply, but what we're seeing with the enhanced geothermal systems is we're able to get deeper. We're able to create zones of geothermal where there weren't zones, or we didn't think about them being available before. We just need the heat now. And so, the application range is spreading, and really now, when geothermal was really just focused on these shallower thermal pockets, because that was the only technology that was available to us, and the costs were capable of being handled by what we were able to deliver, that's where we focused. Now, we can go in many different areas to deploy geothermal, and that's really the technology growth. It parallels the oil and gas search and what the fracturing provided gas search, that these pockets then opened up for us to be able to pull gas out through those drilling technologies. Those same things are being implemented with geothermal applications and geothermal power derivatives. So, we're seeing that growth, the same type of growth. It's a very parallel story on this side as well.

Sam Humphreys:

So, particularly for folks that maybe are outside of the US, where have your operations initially been centered around? Because if you talk about the thermal, then you can expand using new technology. What does that look like from your perspective? Is it focused around certain East Coast, West Coast? Yeah, just a little bit of background there.

John Plack:

Yes, for us, and I'll bring it back to how we've gotten into this. We've applied geothermal from the thermal perspective, so shallow closed loop systems, and we've done that in the mid-band of the US. We don't get extremely north, and we don't get extremely south with that offering, not to say that we couldn't, because there's technological advances that are occurring on that side. We deploy heat pumps with a lot of our geothermal programs.

But with regard to the next evolution of where we're looking to bring power generation into our programs, we have really focused from a geography because we're interested in what we're going to be able to deliver and save our customers, so where they're paying the highest rates and where those geothermal assets occur is a good balance for us. That's a strike point. I think the next evolution for us may be looking at where we get into geothermal, where it becomes deeper, harder to create those aspects. That's going to be the second level for us, where we really need to get costs handled and be able to identify and promote, "Hey, I can do this project for this cost. I can design it for this setup. I know exactly what this is going to be before we take it into that next realm of going deeper, creating those pockets deeper, and these underground horizontal runs and all of those things that come." But we're going to look for the easier strike first from our perspective.

Hill Vaden:

Can you maybe give us either a generic example or real-life example of what you would bring to one of these customers and how you would identify geothermal as a good fit for an Ameresco customer?

John Plack:

Yeah, so it's funny because a lot of our customers, and this ends up especially on the utility or our federal customers, which is really where I play within our Ameresco portfolio. So, they're looking for resiliency. They're looking for maybe a sustainable solution. And I think that's where we're going to look to deploy the geothermal assets first. We also want to be able to offset what is a driver for them, which may be a high utility cost or a high utility demand response cost, so that's the balance. That's the balance point or the tipping point for us and will lead us into the geography we want to be in.

And then, like I said, then we get into the underground aspect of it. So, where can we do geothermal most cost-effectively right now? And that's going to be ... some of the things that, some specific examples we looked at right now are some areas where maybe we could start with pulling the thermal, so using the heat directly first and then building the plant around that. Already having the asset in the ground and then starting to build out that asset to then start taking it to a power generation and waste heat scenario, where we can have that phased approach into a program, so it's really matching up with the asset. And those are some of the things that we have on the table right now. I will admit most of those are occurring in the western part of the US, and also, maybe even up into Alaska, we're looking at some opportunities as well.

Sam Humphreys:

Now, you did mention that you've got some international business opportunities as well. Firstly, I think I read that it was in the UK. Can you expand on are the customers' needs there similar to those in the US? Are you looking at the same thing, looking at this shallow source of geothermal, or is that a future briefing for power generation?

John Plack:

Yeah, great question. And we do have a UK operation, a very large one, so we're happy about that. But we haven't gotten the traction on geothermal outside of the US yet. It's really related to the opportunity with the customers that we have in those areas. I think once we develop the technology, whether it be in the US or outside, we would look to scale it everywhere. It becomes a tool in the tool bag. Right now, for geothermal, we're looking for commercial viability. I think you could probably research, and there's been a lot of movement, even within the last couple of months, on the geothermal front, and especially the viability of commercial power generation from geothermal assets. And so, we're seeing it in the US. And specifically, I'm seeing it with my customers, where there's a lot of talk around it. And once there's some buzz, that means that we're headed in the right direction.

Seeing the DOE support it, where geothermal shot, I'm going to mess it up, but they're trying to incentivize, essentially, creating cost-effective solutions to be able to bring this technology to bear more readily. So, that's why I think you're seeing the focus, or at least where my focus is right now, because there's a lot of industry around it. Given that the Europeans and the folks abroad tend to maybe be a bit more advanced on their sustainability goals and their push towards that, you may see adoption occur a lot. In other words, the technology may rise from a cost-conscious standpoint here in the US, where we have the technology, and we know how to do it for the set costs, and then you may see it adopted over there a lot faster. So, we may see that occur. But right now, we're seeing a big push in the US to get geothermal assets up and operational and start deploying them, both from a governmental and utility standpoint.

Hill Vaden:

And where do you see geothermal ... the word, I think, everywhere, or a scale has come up a couple of times in this conversation. You can only make oil and gas where there is oil and gas, right? And geothermal, are there some natural resource ... aside from above-ground constraints, are there some natural resource constraints that are going to limit the application of this?

John Plack:

Yeah, I mean, I think the geology itself becomes the most limiting factor in, a lot of times, how deep we have to go to get there. But I say that, and then I think back to that analogy that I drew you to earlier on the fracking side, where we didn't think some of these gas reservoirs were ever going to be able to be captured, and we did it. So, it's just a matter of that natural growth and technology to get there.

Geothermal's a bit in its infancy from that standpoint, where there's operational geothermal assets, but they were taking the easier applications where heat surface in these fractured areas already, with the hydro part of it being added. But now, you're seeing now, with enhanced geothermal systems, where we're able to create deep wells ourselves, and just by utilizing the heat, that we're going to be able to spread that. And how fast? My honest opinion is, I think it's going to go fairly quickly once we [inaudible 00:16:09] in the easier applications to be able to take it and go deeper and further and bigger with the generation. So, I think even recently in news, they were talking about a 400 megawatt application in Utah, which is just ... That's where we need to be. That's the commercial viability to be able to bring this thing to scale, answer a 24/7 base load, and provide it with a force. So, that's all good movement, really good movement for our industry.

Sam Humphreys:

We've had a lot of conversations with power generation and energy within the US recently, and there is something that we obviously have to maybe ask that we probably heard, and that is some of the constraints that could maybe face scaling up and cost with the impact of some of the tariffs that are being mentioned, and the supply of steel and aluminum, in particular. Can you talk about it? Do you think, firstly, that will have a material impact on scaling? And then what are your general thoughts about the long-term implications that it could have on this particular sector?

John Plack:

Yeah, I mean, obviously, tariffs on steel and aluminum are going to be impactful, I think, especially at the start, where we really don't have domestic production capable of meeting all of the requirements that we have within our own country. So, you're going to see that impact. Right now, there is an offset in that we see that the geothermal aspects of the IRA and the ability to put cost savings measures on that side may offset some of that, but it's absolutely impactful from a first-class standpoint. And there's such a push on the energy side of this equation. In other words, we're seeing the rise of AI, data centers, electric vehicle, and there's still a push on the electrification side as well. All of those are compounding the requirement to find local generation, or increase our generating assets, or figure out other ways to provide generation that ... I think the impetus to bring these technologies is still going to be there and may solve or push some of that cost barrier that's being provided or being impacted through the tariffs.

Hill Vaden:

Are there some above-ground constraints that you see needing to get worked out in terms ... I'm going to come back to shale again, right? It's easy to put a rig in your backyard if you're getting a 25% royalty. It's harder perhaps if you're not. Are there revenue incentives for people to work with geothermal on the above-ground side of things when you're not perhaps consuming the power directly?

John Plack:

Well, that's a good question. Yeah, I mean, I think that if I'm understanding your question correctly, the above-ground aspect of it is always at play. I think from our perspective, we're always looking for that land. I'll draw the parallel to maybe solar, where there's a direct impact to those folks that lease their land for solar. They weren't using it else wise, so why not go ahead and put the solar fields on there? So yeah, if you have the land and you have the energy requirement, it makes sense. If you have the land and you don't have the energy requirement, there still can be an impetus behind it if there is an offset through payment to those owners of the land, just like there was from a solar perspective. So, if we find the resource and the above-ground owner or the above-ground restriction is ownership, then it's just a matter of the economics and incentivizing them to adopt, and why we would want to do that.

I think the other above-ground restrictions are the things that occur across the board. Regulatory environment becomes an issue, the local utilities, how we get power onto the grid, and distribute from their emissions. There's all those kinds of things that are at play still with this kind of a solution. Permitting, across the board, it's a state-by-state requirement, so that can have a long-term impact because now you're talking not only costs, but time to get those things done. So, I think those are some of the above-ground concerns when we look at the application.

Sam Humphreys:

So, a conversation that I know I've been having, and I think Hill as well, in this industry recently is the new wave of geologists or geoscientists coming into the profession. It's something we talk about within Upstream a lot, I know. Do you think that there is a real risk here at the moment, as it is today, that we're seeing less of those folks studying geoscience at a university level and then coming into the industry? Or is it not so for geothermal? I know a lot of courses, for example, have been rebranded to not necessarily include oil and gas, but they are still looking at other solutions. So, I just wanted to pick your brain on that one.

John Plack:

There are variables to bringing this technology and scaling it to where it becomes just part of the discussion. And we're seeing it deployed across the US or the world. It's going to rely on that base of folks that can do exactly what we need them to do from a ... The underground part of this equation is the part that's unique and new. A lot of the stuff, once we get the steam and the things above ground, we have those guys. That's how we integrate all of our other projects, depending on the different types of power production we do, but the underground part is the magic and the science, and where the data-driven analytics allow us to maintain the cost to produce the [inaudible 00:22:49].

So yeah, it's absolutely important that, as we retire out a generation of geologists, that we bring in a new group. And that's where I'm hopeful that some of the incentives being provided by the government, the push, the moonshot-like push on geothermal to the extent that we continue to broadcast that and get that message out to young up-and-coming scientists, whether they choose a profession like mine in mechanical engineering, but then they see an ... I know when I was in school, geology, I mean, it was like rocks. Nobody really-

Sam Humphreys:

You're talking to a geologist here, just saying.

John Plack:

It's like one of those things where if you promote it in a way that you provide this as your outlook, it's not just oil and gas, I guess is what I should ... You know what I mean? It very much has a much broader field and take. Then, I think we'll get the buildup of that group, the core individual that we need to do the study and to do the analysis, because that's where it all starts. That's exactly those folks that are able to look, identify, and then go out and test and tell us exactly what we're going to be getting from the site.

Hill Vaden:

Where do you think we are today in geothermal, and where is Ameresco in that sense? Is geothermal in the early innings, middle innings, late innings? And is this a small and growing part or a large and growing part of Ameresco's portfolio?

John Plack:

I think we're in the early stages. The geothermal that we do is the geothermal that has been around for a long time, this shallow field geothermal. We connect [inaudible 00:24:47]. Costs are stable, all of that. The geothermal we want and where we're going, because it ties into all of the other things that we're seeing on the energy spectrum, the ability to deploy microgrid to control where your power is going and how your power is used, deployment of your own generating assets depending on what customer we're dealing with so that they have energy security and stability. They're able to weather natural disasters or grid issues from the utility, or whatever it is, to continue to do what they need to do from a business function perspective; those things will allow that geothermal adoption. And from that perspective, my belief is we're in a very early stage of bringing that power to those people.

I tied it in a little bit to what we're seeing into the energy spectrum of the big users that are coming up down the line. And this is a part, I believe, of that puzzle to answer that equation. We have a limited supply of electrical generation today. We have a gas infrastructure, gas line debt. So, once we start tapping all of those resources for all they have or are maxing them out, what are the next answers? What are the things that allow this individualized type of generation or this generation for an asset that may have a large power draw that can't get it from the local utility? How do we bring manufacturing into areas that maybe can't get? This is an answer. And if we can come in and say, "Yeah, we can generate here locally," this is part of that solution set.

Sam Humphreys:

We always like to round these conversations off with things to watch in the next six months. So, what do you think you would like folks who are listening to watch out for, particularly with Ameresco, over the next six, maybe 12 months or so?

John Plack:

Yeah, so some of the things that I'm going to be looking out for are the continued exploration on a couple of these geothermal projects that are in the news, so seeing right now a lot of activity on a couple of different programs, not only in the US. There's one coming up in Germany that I'll be interested in watching. So, there's the use cases where we're seeing adoption on the bigger scale of Meta and Google, signing PPAs for the thermal projects. Is that going to continue, or are we going to continue to see that push on that side? Is the DOI, the Department of the Interior, going to continue to grant quick access permits to allow us to do some of the things that we want to do, especially on a geothermal basis? Are we going to see that applied? And then the technology improvements that come out of not only the programs I talked about in the first section, but also, is the DOE programs and some of those, I think there's FORGE and some of these other programs that are looking to increase the technical viability of geothermal, are we seeing some benefits from that? Are we really seeing that now we're able to commercially adopt through scale and cost the geothermal that we want to adopt?

I know that from an Ameresco perspective, we will have the customers that we can deploy this technology in. We're talking to them right now. And that's one of the things that has kept me here doing what I do, and why I've been at Ameresco so long is because we are able to take these technologies and deploy them as soon as they make sense. And that's why you'll see my focus here and why we're continually looking at these types of technologies to have to be able to serve customers. I think we're early. I mean, to get back to the initial part of the question before, I think we're early in that, but I think it's right. It's right ready to scale in the next six to 12 months. Seeing movement in all of those boxes is a continued good sign that this is ready to pop.

Hill Vaden:

Ready to pop, that's a great place to leave it. Thanks, John, for joining us and indulging us with a conversation on geothermal. There's a lot to watch here, and I look forward to seeing Ameresco move forward on it.