Fervo jumps on deal to provide geothermal power for prospective Google data center

Alphabet has tapped recently listed mid-cap geothermal power developer Fervo Energy to supply a planned data center in Utah. Starting in 2028, Fervo will deliver up to 396 megawatts of capacity to the facility. Fervo shares soared 25% on Tuesday following the announcement.

Under the agreement announced Tuesday, Alphabet will also have the option to tap another 600 megawatts of capacity from Cape Station, the Fervo geothermal project, by 2030. That would bring the total amount of power supplied to Alphabet to almost 1 gigawatt, roughly the output of a traditional nuclear reactor, Bloomberg notes. The agreement has a 15-year term. Cape Station still requires approval from Utah regulators for a power delivery arrangement using a separate private generation system, the company reported last week.

Geothermal energy is attractive to tech companies because it provides clean, around-the-clock electricity. That allows them to power data centers while moving closer to longstanding climate goals, Bloomberg writes.

Fervo Energy went public in May, having raised $1.89 billion in a Nasdaq IPO. The company still generates almost no revenue, but it has attracted the attention of billionaire and former Microsoft CEO Bill Gates. He visited its site in Utah, where the company planned to build the geothermal power plant. “Geothermal is one of the most promising ways to deliver clean energy that’s reliable and affordable,” Gates wrote on his Gates Notes blog in September last year. “Intermittent power sources like wind and solar will play a key role, but we also need sources of energy that work around the clock without contributing to climate change, like geothermal and nuclear power.” Gates-founded Breakthrough Energy Ventures was one of Fervo’s earliest investors, leading its $11 million funding round in 2019. Breakthrough Energy entities subsequently continued investing in the company and its projects.

Fervo Energy also has preliminary power purchase agreements with several companies, including utility Southern California Edison and Shell, as well as a partnership with NV Energy.

Fervo shares soared 25% on Tuesday to $19.30 apiece. The IPO was priced at $27 per share, 43% above the stock’s closing price on Monday.

In early August, BofA Securities initiated coverage of Fervo Energy with a “neutral” rating at a target price of $40 per share, Investing.com reported. It described Fervo Energy as “a high-quality story already carrying a full valuation,” with the stock then trading at around $37 per share.

On August 12, Fervo plunged following the company’s first quarterly earnings report since its IPO, for the second quarter. Investors were concerned less about its current results – as Cape Station is still being readied for commercial operation – than about its 2027 outlook. Fervo said full-year revenue would be around $60-80 million due to potential transmission curtailments between the station and its customers. For comparison, William Blair had previously forecast a 2027 top line of $80 million.