Geothermal power, recognized as one of the best sources of emission-free renewable energy, has long been considered a victim of circumstance.

There is an abundance of heat in the Earth's crust that can be tapped to generate electricity, but only so many locations in the world with the right temperatures, rock conditions, shallow depths and underground water reservoirs required to make a geothermal power plant economical.

It's the main reason venture capitalists, perceiving geothermal as a mature market with limited opportunity, have shied away from the space. But new technologies and processes, falling under the banner of "enhanced" or "engineered" geothermal systems, or EGS, are changing the game and attracting some of the best names in the venture-capital community.

Ormat Technologies, for example, has attracted the attention of Google.org, including visits from senior executives such as Larry Page and discussions about potential clean-energy collaborations, according to Israeli newspapers Haaretz and The Marker earlier this week (via VentureBeat). And Western GeoPower Corp. said Wednesday it had signed a $520 million, 20-year agreement to deliver geothermal power to the Northern California Power Agency.

Seattle startup AltaRock Energy envisions a time when location is no longer a barrier to geothermal development. "Our goal is to get to where we can develop geothermal anywhere," co-founder and President Susan Petty said.

Kleiner Perkins Caufield & Byers and Khosla Ventures invested a reported $4 million in AltaRock last summer as part of a Series A round that included seed backer Aaron Mandell, a co-founder and senior vice president of GreatPoint Energy.

AltaRock is setting the industry bar high: It wants to develop technologies and processes that lower the cost of constructing EGS power plants. This means better and cheaper drilling techniques, making it economical to explore depths of three miles or more.

More important, the company is perfecting methods for creating fractures in hot, dry rock that conventional geothermal systems can't use. By creating fractures, water can be pumped into the rock to retrieve heat.

The young company, which prefers to keep a low profile, has already negotiated land positions in the northwestern United States that will host its first EGS projects. A second round of funding is also in the works, Petty said.

"We're a lot closer to making EGS economic where we can displace coal than we are to making carbon capture and sequestration economic," she said. "We've just got to get out there and start drilling holes in the ground."

AltaRock claims to be the only company looking to commercialize power generation from EGS technology in the United States, although several ventures and projects exist throughout Europe and Australia. Conventional geothermal is only economical in certain U.S. locations, such as California or Hawaii, where wells are relatively shallow and hot water sits in naturally fractured rock.

But prime sites often are in areas with low populations or a lack of access to transmission lines. This geological limitation caps potential U.S. development at 50 gigawatts, according to Khosla Ventures, which cited a 2007 study from the Massachusetts Institute of Technology.

The same study found that EGS technology removes such restrictions and could make it possible to develop 1,250 gigawatts of geothermal power for less than 10 cents per kilowatt-hour.

In a recent green-energy investing paper, Khosla Ventures founder Vinod Khosla argued that EGS can be competitive in the next seven to 10 years with nuclear-, wind- and solar-thermal-power production, as well as with various "clean-coal" approaches when a realistic price on carbon is taken into account.

Trae Vassallo, a partner with Kleiner Perkins, called geothermal a "huge sleeper." With EGS, she said, it's possible to take previously drilled dry wells, deemed unworkable using conventional methods, and turn them into valuable operating assets.

"There's a lot of data out there for those lemons," said the venture capitalist. "A dry hole in traditional geothermal becomes the perfect well bore for what [AltaRock] is doing."

Vassallo was instrumental in the creation of AltaRock. After joining Kleiner Perkins in 2002, she began asking experts in the geothermal field about the potential of the renewable resource. The responses were consistent: Underfunding and modest innovation had restricted deployment of geothermal-power projects.

This inspired her to drill deeper.

"I took this on as my project and started going to these nitty-gritty technical conferences," she recalled in an interview. The conferences took her to Texas, Nevada and more exotic locations like Iceland.

What Vassallo soon discovered was that most investments in the space went to developers that had land with valuable geothermal resources, similar to investments in small oil prospectors. Little, if any, of these investments had to do with new innovations or creative business models that typically attract venture capitalists.

"We want a technology advantage, or something that really defines the industry," she said. "We want a business model or technology with a difference."

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