Palo Alto-based XGS Energy is developing a new geothermal power system that could produce more power in more places
In the not-so-distant future, San Franciscans might get a portion of their electricity from a Palo Alto startup’s new spin on an old method of generating energy.
XGS Energy is working on a next-generation geothermal power plant that’s designed to generate energy in places considered unsuitable for such systems in the past. Traditional geothermal energy has involved tapping into features such as hot springs — in which water is heated by underlying geological conditions that are near the surface — and using that water to power steam turbines.
Although California has an abundance of such areas, it has plenty more places where there are hot underground rocks but no subsurface water, or areas where the rocks aren’t hot enough for traditional geothermal power, experts say. XGS’s system essentially brings the liquid to the site and keeps it in a closed loop, where it can be used over and over to transfer heat to a power plant on the surface, said Lucy Darago, XGS’s chief commercial officer.
“That opens up the ability to bring geothermal energy development and all the really nice things that come with geothermal ... to many more places,” Darago said. While the 30-person company is still early in its development cycle, it recently received a vote of confidence.
Last week, California Community Power — a public authority established by CleanPowerSF and eight other local public energy providers — signed a deal with XGS related to the latter’s development of 115 megawatts of geothermal power generation in the state. Under the deal, CleanPowerSF and the other CC Power members essentially have first dibs on the electricity produced by XGS’s geothermal project.
XGS was one of three next-generation geothermal power companies CC Power signed deals with last week, said Alex Morris, the authority’s general manager. Each one is working on its own way of boosting geothermal’s potential, he said.
“It’s pretty exciting, because they are bringing a lot of new, advanced technologies” to the industry, Morris said. Electricity consumption in California has seen almost no growth in the last 20 years, thanks in large part to the state’s energy-conservation efforts. But the California Energy Commission is forecasting consumption will soar by nearly 50% by 2040 due to growing demand from data centers and increased electrification of appliances, vehicles and other equipment.
At the same time, the state has set a goal of having its electrical grid be entirely powered by carbon-free energy by 2045. Much of the new power production in the state and around the country has been coming from solar arrays. In 2024 — the most recent year for which data is available — 22.5% of all the power generated in California came from solar cells, up from less than 1% 12 years earlier, according to the CEC.
But solar power is intermittent and variable — it doesn’t generate electricity when the sun is down, and power generation falls off on cloudy days — so the state still relies on other sources to fill in the gaps and provide what’s called baseload power. Carbon-emitting natural-gas plants still provide 40% of the electricity generated in California.
As a result, there is a wide expectation that the state needs to develop new and alternative sources of electricity production.
“There’s a growing need for energy, and so everybody’s looking how to solve that problem as affordably as they can on behalf of their customers,” Morris said. That’s where next-generation geothermal could come in. Similar to solar, newer geothermal systems such as XGS’s don’t generate any greenhouse gases when producing electricity — but they can produce power around the clock, just as nuclear or gas-fired plants do.
And next-generation geothermal plants have other advantages, said Marc Jacobson, a professor of civil and environmental engineering at Stanford University who focuses on energy policies.
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They also don’t require the mining of toxic minerals such as uranium, and they can be built at far less expense, he said. Compared with solar arrays, new kinds of geothermal plants require less land and can be located just about anywhere, Jacobson said. Although geothermal isn’t as inexpensive as solar or wind energy, it’s likely far less expensive than nuclear and the price will likely come down as it scales up, he said.
Geothermal “really is ... a good source of energy,” he said. California has had geothermal power plants for decades, most notably the massive Geysers complex in Sonoma County. But those types of power plants rely either on existing subsurface water or pumping water into the ground. Less than 5% of California’s electricity generation came from geothermal plants in 2024, according to the CEC — down from about 7% in 2002.
Actual power production from such plants has dropped from about 13.4 gigawatt hours to 10.5 gigawatt hours over that time period, thanks in part to declining production at The Geyers and increasing reliance on solar and wind power, CEC spokesman Michael Ward said. Unlike the geothermal plants at The Geysers, XGS’s system doesn’t rely on existing water in the ground.
Instead, the company plans to drill holes deep in the ground, using essentially the same type of equipment used for drilling oil wells. It would fill those holes with a kind of capped tube or pipe that has a second tube inside it. Cool liquid would go down to the bottom of the tube, get heated there by hot rocks, and forced by pressure back up to the surface through the inner chamber.
At the surface, the heat would be transferred through an exchange to a liquid in a second closed-loop system. That heated liquid would power a turbine and generate electricity. Because the system would be built around closed loops, it wouldn’t need water to be already present in the rocks — and it wouldn’t release any steam into the atmosphere. That steam from traditional geothermal plants can contain and release carbon dioxide, Jacobson said.
XGS, which was founded in 2008 and has raised about $60 million in venture funding, expects it would take about two years to build a 50-megawatt plant, Darago said. That’s about the same time it would take to build a natural-gas plant. The difference is that there’s a huge backlog for gas turbines right now, she said — but the turbines and other equipment needed to build XGS’ geothermal systems are readily available.
The key hang-up for the startup is navigating the permitting process and convincing the California Independent System Operator — the nonprofit that oversees much of the state’s electrical system — to sign off on XGS connecting its power plants to the grid, she said.
“The construction period is typically pretty straightforward ... It’s really about when you get to start construction,” Darago said. Darago declined to say where the company plans to build its first plant, but Morris said XGS was looking at sites in Lake County, north of Sonoma. The first plant will likely come online around 2028 or 2029 and could be providing to CC Power’s partners by the early 2030s, she said.
XGS’s agreement with CC Power sets out a series of benchmarks for the startup to hit before CC Power’s members would enter into negotiations with the startup for power-provision agreements that typically last around 20 years, according to Morris. All nine of CC Power’s members signed the initial agreement with XGS, although they would each have to decide later if they want to buy power from it, he said. XGS is one of several companies working on next-generation geothermal technologies.
Fervo Energy, which has developed a two-stage system similar to that of XGS, has teamed up with Google to develop a plant in Nevada. CC Power also signed deals with Zanskar, which uses artificial intelligence to find promising new geothermal sites, and Atlantica, which is working to augment the power production of an existing geothermal site in Inyo County.
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