Mike Umbro, an investment banker and oil-tycoon-turned-geothermal-entrepreneur, chats with Mark Hinaman about his project with Premier Resource Partners to build a long-term energy storage solution in existing oilfields in California.
[00:00:00] Mike Umbro: Sharing with Sacramento, “Hey, you know, there’s this phenomenal transition opportunity that exists for the oil fields. Number one, it’ll give you clean power. Number two, it’ll give you dispatchable power. Number three, it’ll give you seasonal energy storage, number four… and there’s all these exciting attributes that that are kind of open with this policy window for clean energy.”
[00:00:21] Intro: Just because the facts are A, if the narrative is B and everyone believes the narrative, then B is what matters. But it’s our job in our industry to speak up proudly Soberly. And to engage people in this dialogue, those two and a half billion people that are on energy poverty, they need us. America cannot meet this threat alone.
If there is a single country, of course, the world cannot meet it without America that is willing to, we’re gonna need you the next generation to finish the nuclear regulation. We need scientists to design new fuels, focus on net public benefits. We need engineers to invent new technologies. We need over absurd levels of radiation property entrepreneurs to sell those technologies.
Then we will march towards this. We need workers to operate a. Assembly lines that hum with high tech. Zero components on prosperity need. Diplomats and businessmen and women and Peace Corps volunteers to help developing nations skip past the dirty phase of development and transition to sustainable sources of energy.
In other words, we need you.
[00:01:25] Mark Hinaman: Okay. Welcome to another episode of the Fire Deion podcast, where we talk about energy dense fuels, and how they can better human lives. We’re joined today by Mike Umbro, who’s with Premier Resource Management and a good friend of mine, Mike, how you doing today?
[00:01:39] Mike Umbro: I’m doing well, I’m doing well. Just living the dream out here in California.
How are you today,
[00:01:45] Mark Hinaman: man? You’ve been fighting hard out there for a while now. So Mike, we’ve been friends for Yeah, a while. I mean, virtual friends, right. But we, yeah, I don’t know that , we haven’t met in person yet. Right. So, which is a shame. I mean, WeChatting, before we start recording, like, we need to get together.
So, hopefully you come to town or next time in California. Absolutely. So, well, Mike, for the audience’s benefit for sure, why don’t, why you kinda, for sure. Quick background on yourself and we can dive into kind of your history and then the project that you’re working on now.
[00:02:15] Mike Umbro: Yeah, absolutely. So I’m a investment banker by training and background. I’ve been in the energy space since about 2007, and born and raised in San Diego, California working predominantly in Kern County, California these days. We have, a development on the west side of the valley of the San Joaquin Valley there in Kern County, central California, about an hour drive, south.
East of Paso Robles for the wine drinkers out there. And so we’re developing, a solar to geothermal project out there. And, I’m excited, to share our announcements and what we’re doing. We’ve done a lot of work, and yeah. I’m excited to join you talk about it today.
[00:02:55] Mark Hinaman: Awesome. Solar to geothermal, have you always been on that side or, you’ve done oil and gas projects too, right?
[00:03:01] Mike Umbro: Right. Yeah. No not at all. So, most of my career has been in the oil and gas space, along with my partners who are technical and engineers in, the brains of the operation. But we’ve been working on this site, in terms of permitting underground injection control for water injection. You know, bugs, bunnies, bio surveys, all that good stuff since about 2018, and as I’m sure most of your energy followers lay people out there even understand that permitting in California, can be a big challenge and a long process and.
This project has evolved from an oil and gas project, to a geothermal play. And so we’re excited to have alignment with Sacramento and alignment with where the state’s going from an energy mix perspective and excited to bring solutions to the table, that are from, I guess you’d say a non-traditional, perspective, in terms of geothermal assets.
[00:04:05] Mark Hinaman: I’m sure we’ll dive into how this came to be, but I have to ask upfront why’d you guys pivot from oil and gas to this geothermal project?
[00:04:13] Mike Umbro: Yeah, well the, so, those that might not know the nuances of California’s oil and gas fields, about 70% of the oil produced in California is produced by way of steam generators.
So you take natural gas feed stock, To power a steam generator and you put steam down hole because we have a heavy oil resource to get that oil to flow and to maximize or enhance your oil recovery. Well, by virtue of that kind of set of circumstances. We know a lot about the thermodynamics of the reservoir and how heat can be used that case to enhance oil recovery.
But in our case, what we’re doing is using the sun’s energy to heat the reservoir fluids, and then. Keep those reservoir fluids at a 490 degree F temperature, which provides us the ability to produce dispatchable power generation, and. Not to get too far, I don’t want to jump in terms of questions, but one of the big issues in California is we’ve got a tremendous amount of traditional photovoltaic power generation during the day, but at night we, almost entirely dependent on natural gas imports, coal imports.
A little bit of wind. But you know, our grid is still, a, about a 50% natural gas fired grid in California, and we’re quickly moving to, or attempting to move to clean power. And so that’s kind of the why behind why we have Refocus the project. Yeah.
[00:05:57] Mark Hinaman: Yeah. That’s great.
Is the field in Huntington Beach also steam
[00:06:02] Mike Umbro: recovery?
Uh, I don’t, I don’t know. I think it’s a lighter oil. Which field though? There’s several. Are you talking about like some that’s,
[00:06:11] Mark Hinaman: Just on the beach was Long Beach in there? Waston, crc, like. In Huntington.
[00:06:16] Mike Umbro: Yeah. Like there’s little punch
[00:06:18] Mark Hinaman: jacks all over the place. I
[00:06:19] Mike Umbro: don’t think that is, people have no idea.
I don’t think that field is. But that’s a big push right now from a policy perspective is to shut that out. Yeah. Is to shut down the LA basin.
[00:06:28] Mark Hinaman: It’s kind of sad. But so you said since 2018 Yeah. You’ve had this site or been working this project, I mean That’s right.
That’s been some time. Has it always been this geothermal paired with solar play, or did you guys start out thinking that there was more oil resource there?
[00:06:43] Mike Umbro: Yeah, we started thinking we would be a traditional, you know, steam flood type operation, but 2018 and 2019 were two very different years in terms of, we had some re regime change in Sacramento and you know, really on top of that we’ve had permits for oil and gas drilling really. Shut down.
And so, you look at that and you say, well, despite your best efforts right, do we want to continue to, you’ve
[00:07:12] Mark Hinaman: done so much for the industry to try and Yeah. You know, transform
[00:07:15] Mike Umbro: it.
Yeah. And that’s, it’s a big problem. I think the industry for too long was too silent and too reliant on major operators to I don’t know what you’d say guide policy makers in terms of what California’s homegrown home sourced resources like versus what foreign crude is like. And that, as you’re alluding to, has been a big focus of mine to educate.
Not only the folks in Sacramento, people online, unfortunately it’s, it tends to be difficult to break out of our echo chamber in LinkedIn or wherever, whatever platform we’re using outside of just even energy professionals. So, I’m still trying to do that. I’m still advocating for locally sourced energy, but in terms of our project, specifically, the attributes of geothermal were just too great to ignore.
And the more and more we looked at it, the more and more from a technical standpoint, our team simulated the reservoir, simulated the power generation simulated the weather, the solar radiance, and the weather characteristics around our region. You know, the lack of rain, the terrain, it’s flat, you know, all of these positive characteristics started aligning.
We said, okay, well now what about the economics? It doesn’t work. Key point and the economics. Yeah. And as you know, and it’s a fair, you know, challenge. Some folks have said, well, that’s gotta be expensive. And what I say is, well, yeah, clean power generation is not cheap. And that’s further bolstered by what we saw.
In December in California, which really we had been going down this path for. 18, almost two years now. But this winter really solidified my belief that this is absolutely the route for us because we saw as people across the country notice rain for days and then rain for weeks. And then it was like, when is the rain gonna stop?
We’ve had clouds in California here since. Since November it’s just been a very interesting climate year. But when we started looking at the cost of power in the month of December, Our kind of a system, we would’ve been running 24 7 the whole month given the rates people were paying.
You had gas being brought into California for at the city gates for $50 in M C F, just astronomical prices. You had wholesale power prices at, you know, looking at the substation near our lease that were, you know, you’re talking 40, 50 cents a kilowatt hour just for generation that’s not distribution and in into people’s homes.
And so the market was there. For a seasonal event, which is what we call it, it was a seasonal event. And our technology that we’re looking to bring online really does a great job of addressing peak power. Which peak power rates in California are up near, you know, 49 cents a kilowatt hour some of the highest in the country and seasonal events where, you know your solar is not necessarily affordable or your batteries that are four hour duration are not necessarily available.
And so, the market is really such where there’s a tremendous opportunity in our region. And it looks like elsewhere. I mean, we’re seeing Texas right now with a tremendous heat wave and what an awesome thing if they had, , thermal energy storage in the reservoir. There’s a lot of reservoirs in Texas, so this isn’t something that’s just a available to us in California as we see, you know, policies and energy mixes demand clean power.
[00:11:05] Mark Hinaman: So let’s step through the technology a little bit. To help folks understand what the project is. I mean, we said solar, geothermal, but can you talk a little bit more about it and kinda describe the system?
[00:11:16] Mike Umbro: Sure. Yeah. And just to reiterate, I am not an engineer, but I am good at kind of relaying how the system works. So I think that’s sometimes helpful. If you think of it, it is, yeah. Hopefully people, yeah. Hopefully you’d get a lot of non-engineers listening.
So our demonstration will be a 10 megawatt demonstration and we’ll scale up to 400 megawatt power generation at this site. But the first. The first loop involves a 40 acre solar array. We’re using parabolic trough mirrors, and this is proven known technology in the concentrated, you know, solar thermal world.
It’s not a a tower system that concentrates up to a tower and fries birds along the way. It’s concentrated to a pipe that runs right in front of these, yeah, they’re about eight feet tall kind of trough looking systems. And so we take the I radiant energy from the sun. Into those solar collectors those collectors concentrate onto a pipe, which has a working fluid, a polysilicon oil working fluid that is heated to up to 700 degrees f that working fluid goes to a heat exchange and.
We through a series of extraction and injection wells, we bring our produced brackish water from the reservoir at a depth of about 1200 feet. We bring that to surface where that. Brackish water which starts at about a hundred degrees F naturally in our reservoir, meets the heat exchanger and is heated to 490 degrees f.
We then re-inject into the injection wells. That 490 degree F water, it takes about 15 to 18 months to heat the reservoir and going back to the thermodynamics of steam drives. Those temperatures are achieved in the Central Valley, that’s not unknown to the Central Valley of California. But we heat the entire reservoir to 490 degrees.
F. And what that does it does two things. When you’ve got a hot reservoir you can bring that heated fluid back to a second loop, which is our power generation loop. And that loop has a steam turbine and power generation set, which is known technology to create power. And so we bring that 490 degree f fluid to a heat exchanger in front of that loop which powers the turbine generator set.
And so what we can do is we’re cycling the fluid through the reservoir 24 7, but we can send it to or turn on the power generation loop when we want. And so, we’re not looking at running this necessarily as a base load geothermal asset but more, as, think of it as competition to a natural gas peaking plant, which we have throughout California.
We have these natural gas peaking plants to meet peak power demands, to meet the demands on sunny days, to meet the demands. You know, in, in high temperature situations where you got a lot of power draw on the grid or. In, you know, rainy events where you’ve got your traditional solar and wind that might not be available.
So we’re meeting the moments with peak power, nighttime power, early morning power when traditional renewable sources might be unavailable. So that’s kind of a quicken. Yeah, that’s kind of a quick explanation of it.
[00:14:51] Mark Hinaman: I mean, it’s ingenious. To me it sounds like your other competition would be batteries or the dispatchable space.
Right? I mean, this to me just sounds like a different form of dispatchable power and serves kind of the same function as what a lot of people envision industrial scale batteries to be serving. Right.
[00:15:11] Mike Umbro: Right, right. I think a lot of people that are energy experts have some concerns with traditional batteries.
They’re four hours in duration, so it’s a little bit of a misnomer to call them long duration energy storage systems. But what they typically do is stack those lithium ion batteries. So you have four hours, whatever, from eight to midnight. Then you got another set from midnight to four.
You’ve got a whole massive swath of land that you’re using to build these industrial battery parks, and then you’ve got degradation of those batteries. In as soon as five years from installation, from what I’m hearing from folks that are on that industrial battery installation side of the house.
So that’s a big concern when you’re talking about powering, California’s transportation fleet, the entire grid on solar and battery combination. It’s just not possible. We have threes, we got a bunch more mines, right? Lithium ion batteries. Oh yeah. Mean they’re not gonna let us find this much in America.
I mean, the amount, the volume. Yeah. I mean, we’ve got three gigawatts of them installed today, and by 2045, the estimates are, we’re gonna need 60 gigawatts. I mean, it’s just an astronomical build out if you want long duration energy storage. And then, oh, by the way, if you look at what happened in December, the whole month of December, where these batteries in California, they weren’t being charged by the solar energy you’ve got.
You’ve got daylight working against you in December, right? Because you’ve only got really five hours of effective daylight in that month. But then when you’ve got rain all month, those batteries were being recharged by natural gas. They weren’t being recharged by traditional pv. So the other phenomenal characteristic of subsurface.
Heat storage is the earth is an amazing container. And insulator, I mean, you think of the core is magma and then you think of, you know, all the different. Traditional geothermal, hot, dry rock. There’s a tremendous amount of heat beneath our feet. And what the reservoir does for us is it stores power or stores heat, excuse me, for up to a thousand hours.
So that’s 42 days. Once we get this reservoir hot. We could have a grid outage for 42 days and power every home in the county of Kern for 42 days. All 300 or 400,000 homes from our one 400 megawatt facility. So it’s an amazing source for seasonal demand for events as we are experiencing climate change for seasonal events that.
Are really unknown to us. We need resiliency. And so it’s a, it’s an amazing tool for that, that is one of the most exciting attributes for us.
[00:18:06] Mark Hinaman: Nice. Now, on this podcast we talk energy dense fuels and 40 acres for 10 megawatts doesn’t sound super dense. But it’s, I mean, it’s still really impressive.
The I assume for the 400 megawatt plant you would scale up or need, would it scale linearly for the amount of land required?
[00:18:22] Mike Umbro: Yeah, you’re gonna need a lot of land. You’re gonna need a you know, a section and a half of land for your solar collectors.
[00:18:28] Mark Hinaman: So like 1600 acres or it’s a lot of land. People are familiar with the acre conversion. Then that’s like one and a quarter square miles.
[00:18:34] Mike Umbro: Right, right. And these industrial parks for traditional PV exist and these concentrated solar systems exist. There’s two, three connected to California’s grid. But really when you look at The capability of, you know, building a 400 megawatt power plant, you know, there’s tradeoffs and so, land use is definitely a trade off in that.
But you would have a lot of land use with a flat panel PV and lithium ion battery park as well. So it’s, yeah, there’s no, how energy wells is free from impact. Absolutely.
[00:19:11] Mark Hinaman: How many wells? Like, does the system use do you have one multiple injection wells and then production wells?
[00:19:18] Mike Umbro: Yeah, our demonstration will have 37 wells. So our full field development, you’re talking about 600 extraction wells, 300 injection wells, something on the order of that. So you’re talking about. What we like about it is it’s like for like skillset for the oil and gas industry. It’s not, hey, We’re gonna repurpose you go learn something else to do.
No, these are gonna require drilling rigs and the same like for like, skill sets of the oil and gas industry. So it’s a phenomenal transition opportunity for people.
[00:19:52] Mark Hinaman: Are they all vertical wells or would you drill any horizontal? Would there be a benefit to drilling horizontal?
[00:19:56] Mike Umbro: No, they’re all vertical wells. You know, you can look at like a five spot pattern, which is five, you know, four wells around one injector. Or you can look at like a seven spot pattern, which is six wells around one injector, six extraction around one injection. Well, they’re all vertical wells. We’re talking depths of 1200 feet.
So very reasonable drilling costs, you know. Three to $400,000 a well, instead of, you know, many millions for horizontal or for deep dry yeah. Type of opportunity. Yeah. Yeah. And then the other thing that, you know, yes it is you know, land and intensive in some respects and And capital intensive to build.
But the longevity of the project, you know, the reservoir doesn’t degrade. We’re not doing anything over frac gradient. We’re we’re able to maintain that heat at a constant pressure, and we’re looking at operating this type of a facility for. 30 to 50 years and really longer, you know, it’s all about, as you know, you know, maintaining the wells and maintaining the infrastructure.
But this is, we’re looking at this as a long-term power generation project. And so, it can be a really valuable tool when you look at. Not just doing this in our field, but across, you know, the west side of the San Joaquin Valley. You’ve got a lot of pore space and a lot of reservoirs defined. And we really look at the reservoir as it’s our container for storage.
It’s our battery that we don’t have to build, we just have to manage it the right way.
[00:21:28] Mark Hinaman: Got it. Yeah. When I think about the technical challenges with it I anticipate like maintaining this, the integrity of the casing of those wells will be critical. And so, I mean, I imagine you guys are gonna have to have water scrubbing and keep your water very clean. Yeah. Cause it’s not gonna be perfect when you’re extract it. Right. You’re gonna have salts and material in it when it comes out. And so yeah. Scrubbing it, keeping it clean.
[00:21:50] Mike Umbro: Absolutely. Yeah. Yeah. And there’s some things we’re doing on the engineering side to keep everything in the liquid phase and solution and Kind of have scaling happen where you want it to happen at the surface, not in your wells and down hole.
And like I said, you know, our team’s very familiar with, you know, you’ll have scaling and steam generators in, in, in oil plays out here, and you. You’re doing a, you know, a one day turnaround drilling out that scaling outta your steam generators and getting them back online. And so, there will definitely be routine maintenance issues that we’ll look at.
But but the process is nice because you can use brackish water. We’re not using any fresh water for this. We’re not We’re not drawing on any resource that is used for agriculture, for for any communities. We’re not really even, we’re in an area of California that looks like Mars. I mean, we’re well away from homes and communities.
So yeah, there’s a lot of, there’s a lot of planning that’s been going on in the, you know, within our team to, to mitigate some of those issues that of course will be challenges to me.
[00:22:56] Mark Hinaman: Absolutely. Now, When most people hear solar, they think PV and I mean this is distinctly different, right?
It’s the parabolic mirrors that just like you said, has a pipe down the center of it and you’re using the heat to directly heat that power fluid or working fluid. But I. Expect a project like this could leverage excess pv, but there would just be an efficiency cut. Right? Meaning if you had excess electricity, you could heat a power fluid.
Yeah. Big time. But take a lot of energy and a lot of extra electricity to get up to 700 degrees Fahrenheit. But like, I mean, have you guys done run the numbers on you know, maybe trying to install a system like this somewhere that has a bunch of excess PV or other renewables?
[00:23:35] Mike Umbro: Yeah, you could use like a PV for a black start capability, like a PV with a traditional lithium ion battery to kind of get your power generation kicked on when you’re starting from an off position. But these parabolic troughs are on the order of like 80% efficient and flat.
Panel PV is like in the 20% range, I think. So you would need. At best, a tremendous amount of flat panel pv. Yeah, and that’s really, you know, one of the, one of the dynamics about this, you know, they were building these trough systems and there are multiple connected to CAISO’s grid out here in California, but they were done in the early two thousands before flat panel PV had made significant advancements in efficiency.
So one of the things that happened was like, well, we’ll just, you know, solar developer said, well, we’ll just roll out way more of the cheap flat panel pv is that technology developed and improved? It’s a lot cheaper than building these trough systems for concentrated solar. Which makes a lot of sense, you know?
And so the flat panel PV started to really ramp up. Now we’ve got. Arguably way too much of it in California where we’re shedding load off to Arizona and neighboring states and and the rate payers are paying, you know, quote unquote administrative fees to shed load. And there’s ways that those fees are buried in all of our utility bills.
But this trough system. Combined with reservoir thermodynamics, combined with known power generation, you know, traditional steam turbine to power generation sets. It’s really that’s the novel part about what we’re doing is not in any one of these components because they all exist independently and have been proven independently.
What’s novel is about how we’re combining them and marrying them with the reservoir. So that’s one of the exciting things that. You know, that we’re looking at is, yeah, there’s other ways to do things. They’re not as efficient with this particular process, but but it’s exciting in that, you know, we’re not creating something crazy new or you know, unproven.
So it’s exciting from that perspective.
[00:25:44] Mark Hinaman: Yeah. That’s awesome. You mentioned the team. Let’s talk a little bit about them. How did, how’d you guys get connected? Had you been working together before? Who is the team?
[00:25:52] Mike Umbro: Yeah. That’s a funny story. So my, I have a good buddy that owns a directional company.
I call him the mayor of Bakersfield, but he owns a directional company called Geo Guidance Drilling Services. They do a lot of geothermal drilling they do a lot of oil and gas drilling. And my buddy Joe had me over to his office one day and said, Hey, come meet these guys. I want you to meet ’em, Jim and Lonnie.
And I said, okay, I’ll meet these guys. They’re trying to, You know, start a project. And so, Jim is 27 years Chevron Thermo enhanced oil recovery, you know, technology division leader, and worked his way to, you know, reserves advisory committee and really to some of the highest levels within Chevron.
So he’s got a huge amount of local. Local San Joaquin Valley knowledge and experience as well as international. Lonnie, our other partner is our petroleum engineer and kind of surface anything above ground. He handles again, a California native has been here his whole life and a lot of experience in these fields.
And then we have technology partners from a company called Ramsgate Engineering, and they have installed some of the first Thermal systems in the Middle East in places like, you know, Oman and and Bahrain and Madagascar and places everywhere in between. But again, with a Kern County and San Joaquin Valley focus predominantly so.
We have a technical team that is second to none in terms of what they know about thermodynamics, about reservoir mechanics, about reservoir response, and all the important technical components of what we’re trying to do. So, so we’re not just some guys kinda with the crazy idea without, you know.
Specific fit for purpose experience, which is really exciting. And my job is really to to marry their expertise with with who we’re now doing a geothermal partnership and have been for a number of months with National Renewable Energy Lab, Lawrence Berkeley National Lab, Idaho National Lab, and the Department of Energy.
So my job is to kind of get these quirky engineers to talk to this set of, you know, scientists at the laboratories and, Pursue those commercial agreements and, you know, non-disclosure agreements, getting those projects kicked off which we’ve done working government affairs and sharing with Sacramento.
Hey, you know, there’s this phenomenal transition opportunity that exists. For the oil fields, number one, it’ll give you clean power. Number two, it’ll give you dispatchable power. Number three, it’ll give you seasonal energy storage, number four. And there’s all these exciting attributes that that are kind of open with this policy window for clean energy.
So that’s kind of how we all come together as a team and it’s a really good fun time. Yeah.
[00:28:49] Mark Hinaman: Their job sounds easy. Your job sounds hard.
[00:28:53] Mike Umbro: I don’t know. I don’t know which one I’d want. So yeah, we all do a really good job of kind of, yeah. Yeah. I find the money and the opportunities to, to permit and the opportunities to partner with labs and it’s been a phenomenal learning experience.
I love you. I think that’s one of the, the blessings in disguise of having the challenges of the oil field and then moving over to geothermal is it’s been a really awesome. Opening conversation with politicians, with state agencies, with the labs where we’re not butting heads.
It’s like, I’m not trying to ram an oil project down your throat. I’m trying to solve these big problems that you’re trying to solve. And so it’s been a, it’s been a lot of fun.
[00:29:37] Mark Hinaman: If you can’t beat ’em, join them. I love it. That’s good.
How many of these projects could exist in California?
Like I, I love the way that you guys approached this problem. You identified a need. You know the technology, you know, a system and you did the math and said, this makes sense. We can actually like go build stuff to fill this niche. Mm-hmm. But I mean, how many does California need? Is it just one, is it gonna be your guys’ 400 megawatt plant?
Or is there opportunity to build a bunch more of these?
[00:30:04] Mike Umbro: There’s a phenomenal opportunity to build a bunch more. I think it’s a little unknown in terms of how many we need. We know we need 65 gigawatts of long duration energy storage or more based on what the California Energy Commission is receiving from, that’s from consultants and it’s huge.
It’s a massive build out that is so much power. So we know we need a lot. It’s a tremendous amount of power. Yeah. And I don’t think people really appreciate that outside of, you know, energy geeks, but it’s a lot of power. I mean, I guess to put that in perspective, when we had the threat of a blackout last September, I think we were.
At our peak, you know, in terms of peak demand we’ve ever had in California. And we were at like 52 gigawatts of demand, I think, when we were under that threat. So yeah, you’re talking about we need more than that for energy storage. It’s a phenomenal need which we’re excited about. What we wanna do is be the first to the market with it.
We want to, you know, it’s pioneering work and that’s what’s exciting and that’s what the opportunity is for us. But, As I mentioned earlier the PO space available and the defined reservoirs available on the, on just the west side of the San Joaquin Valley, and for those, it’s hard to visualize, but the west side of the San Joaquin Valley is very remote.
It takes you about an hour’s drive from Bakersfield proper. Due West to just get over to the 33, which is called the Petroleum Highway, which basically connects several major oil fields that have been producing since, you know, the 1902 timeframe. You’ve got Be Ridge McKitrick midway, sunset, lost Hills, a whole host of, you know, Fields in between that are very well defined.
And so, and a lot of them are located on land that is flat on areas that are not near homes, on areas where there’s no potable water that you’re gonna use. So they’re really situated in the area that you would want to have, you know, industrial power generation. It’s the right area to be in, but we think that the reservoirs on the west side of the San Joaquin Valley could bring over half of the energy storage needs to the state.
So we could meet up to 45 gigawatts within these fields if we were to convert you know, several of the West side oil fields to this process. My goal, Is to build one gigawatt in our area. So starting with our project, build that to 400 megawatt but build up to about a gigawatt in our pocket of that West Side Valley.
But the reason I say we don’t necessarily know how much we’ll need is because, you know, if we’re starting to show that we can. Save the grid, so to speak, during peak times. Eventually, hopefully we build enough of these and it starts to stabilize those peak times and stabilize the market. And so maybe that brings down the cost on a kilowatt hour per basis where it’s not as economic to do.
And you know, like I said, that’s why we want to be first to market. The market exists today, but. Hopefully we can build enough of these to where we bring down the cost of power for the people of California. But. I think a disclaimer on that, it’s gonna be a long time before, before that happens, before that tipping point happens and we start to stabilize things.
Cuz we need a massive ramp up in terms of
[00:33:37] Mark Hinaman: generation, I mean, I just did the, some quick math while you’re chatting. 65 gigawatts your guys’ plants, 400 megawatts take 1600 acres. Like, and if you just built half of the dispatchable need, then that’d be 200 square miles. I don’t know, I might have done that wrong, but that’s a lot.
That’s a lot of landmass to like build that much dispatchable power with these systems. But like you say,
[00:33:59] Mike Umbro: it’s, if you are, if you’re first, then
[00:34:03] Mark Hinaman: like you, you fill that need and you’ve got, you know, PPAs and you can be the peaker plant. Right. And it’s carbon free, so Yeah. Makes sense.
[00:34:11] Mike Umbro: Yeah. And on the west side of the San Joaquin Valley, there’s plans to build a carbon management park. They’re calling it through Kern County and a partnership with the county and the Department of Energy. But it calls for 30,000 acres of solar. Out there on, and that’s not anything to do with our project.
But yeah, there’s plans for, we already generate the most photovoltaic power in the state in terms of Kern County. You see a lot of that on the east side of the Valley and the Mojave. But you’ve got issues with Joshua trees and desert tortoises and land use out there. But yeah, there’s a call for 30.
[00:34:46] Mark Hinaman: Is the ecosystem different then on the west side? I mean, I’m unfamiliar with the area, but looking up pictures of it and some of the pictures, I, it’s pretty, you’re right, it looks like the moon, but there’s, it does, there’s life everywhere,
[00:34:59] Mike Umbro: yeah. And there are, you know, species that we need to be mindful of and avoid that we can avoid through, you know, mitigation, planning and avoiding sensitive habitat.
But you know, the area that we’re at gets less than four inches of rain per year. A tremendous amount of solar irradiance. When you look at. sam.gov weather data. So it’s really fit for the right purpose to be generating, you know, solar energy out there. On the west side it’s flat. I don’t foresee any future housing developments going on out there.
It’s so remote. You do have towns like Taft and McKitrick that are oil towns that were built in that remote area to service the fields. But these systems wouldn’t be, you know, it’s more hilly in Taft in those areas. So these systems wouldn’t necessarily be. Right next to these communities.
But there’s a tremendous amount of available land out there. But yeah, of course, you know, every, everything to do with the California Environmental Quality Act, CE Equa in terms of biodiversity and maintaining the ecosystem out there, that’s priority number one. And and that’s also where this fits in from a clean power generation standpoint.
The Sacramento has said, we don’t want. Oil and gas extraction because we want to protect the environment. So, again, everything has tradeoffs. If you don’t want oil and gas, then people have to be comfortable with the tradeoffs of using the surface for clean power generation. There’s just no way, there’s no magic wand that we can wave in the air that, that makes the lights go on.
And so, I think it’s also where we’re seeing Governor Newsom. Recently, obviously I study it closely, but for those that are not from California he’s proposing about a dozen trailer bills attached to his budget that will be approved in the next really week and a half. July one, I think is when the budget gets approved.
But he’s realized
[00:37:02] Mark Hinaman: that I don’t know what these are. Sorry. Yeah,
[00:37:05] Mike Umbro: they’re his bills. He gets to write bills that are kind of trailered in to the budget here in, in the closings, the closing days of when the budget is passed. But these bills that he’s proposing are talking about streamlining the environmental processes.
And permit approvals for clean power generation, for water infrastructure, for other infrastructure projects. Because he is realized, you know, look, the federal money through the ira, through the jobs act is available and. If we don’t have a way to permit these projects, we’re not going to access any of that money.
And so we’re seeing a very interesting window open up here from a policy perspective where where Sacramento’s saying, no, we need to build these clean power projects and we cannot have these hung up. In years long debates. Because we simply don’t have that time. And that’s another element that I think the general public needs to be.
That’s really interesting of,
[00:38:05] Mark Hinaman: that was another question I had
[00:38:06] Mike Umbro: was it’s gonna take time.
[00:38:08] Mark Hinaman: What effect has the IRA or Inflation Reduction Act had on your guys’ scoping of this project? Do you expect to realize benefit from that? Are there investment tax credits to be realized and how, I mean, sounds like it’s affecting how California legislators and the governor’s office is thinking about deploying clean projects. But how have you guys specifically approached that? What’s your strategy?
[00:38:33] Mike Umbro: Yeah, absolutely. So, the IRA through that we think will qualify for about 60% investment tax credit. So that’s pretty big number. There’s a series of obviously there’s grants for long duration energy storage that we have yet to apply for. Those are, I think, probably forthcoming as they look at different grant opportunities they’ve been rolling out for other technologies.
And we’ll probably see some, you know, more fit for what we’re doing. So there’ll be grant opportunities. We don’t factor in any of the investment tax credits or grant opportunities or any outside sources of funding into our economic model. So we’re cost competitive without that, given where the.
Price of power is, which is pretty phenomenal because this is not cheap infrastructure to build, but as you say, yeah it’s definitely forcing a very important policy conversation to take place in Sacramento where we’re saying, Hey, we are the state. California that is quote unquote leading the energy transition not only in the United States but across the globe.
And if we’re gonna talk the talk, the only way to walk the walk is to build it and to do it. And I think we’re at this critical juncture where unless we have permit reform, unless we have the environmental activist community, Align or fall in line with what Sacramento wants to do. We’re not gonna do any of it, and we’re gonna have blackouts and we’re gonna have energy scarcity, and we’re gonna have skyrocketing energy prices.
And I think to the governor’s credit, I think he’s realized that. And I think he said, you know, Hey, this is where, as the governor, I’m gonna, I’m gonna exert my power and we’re gonna, we’re gonna make sure these projects get built. And so, we’ll see where it ends up in the next couple of weeks because it is a very contentious debate.
I know, right now in Sacramento.
[00:40:29] Mark Hinaman: Yeah. Well, we might be releasing this after
[00:40:32] Mike Umbro: after the debate’s done, so folks might know the answer already, but Yeah. Yeah. We’ll be able to look back on the conversation.
[00:40:40] Mark Hinaman: Yeah. Yeah, that’ll be good. Can you share how much you guys expect this to cost? I mean, lcoe metric or dollar per wat, or But what’s that look like?
Yeah, and it’s okay if you can’t share, but I think you mentioned like 30 to $50 a megawatt hour or the peaking prices was kind of your target market. They were trying to displace, right?
[00:41:03] Mike Umbro: Yeah, so we’re looking at um, there’s a lot of consideration. So what we’re excited about is you might not need to build as much transmission as you’d think because we’re co, we’re looking at turning our power on when transmission capacity is available. So that’s kind of one of our first key considerations and really why we scaled the demonstration down to 10 megawatts. We were initially looking at a 50 megawatt demonstration, but the substation near our field we think we can squeeze that power in.
At the existing stu substation in the evening when the grid needs us. So that’s been one important metric that we’re looking at before we do kind of a broader, bigger interconnect study. But in terms of the price per kilowatt hour, we’re looking at coming on at rates that are competitive with traditional and enhanced geothermal systems in the state.
So those are generally. You know, seven to 15 cents a kilowatt hour, depending on if you’re kind of a traditional geothermal resource or if you’re going into hot, hard, dry rock, you’re gonna, you’re gonna need a higher price. You’re seeing a lot of companies look at power purchase agreements for clean power.
Obviously there’s levelized cost of storage and different metrics that can make traditional photovoltaic and lithium ion batteries look as cheap as, you know, 3 cents a kilowatt hour. So, we don’t necessarily compare it to those systems. It’s not really a just comparison in that you’ve got, you know, well that it’s not providing the same
[00:42:38] Mark Hinaman: service, right.
It’s like you guys can actually turn on when you need it. It works at night, right? It works for days.
[00:42:45] Mike Umbro: Exactly. What about the capital requirement? I, yeah. Know, I share we’re cost competitive. Okay.
[00:42:52] Mark Hinaman: Okay. I mean that capital requirements for projects like this are all over the place, right?
PV Solar, 20 grand, you can have a system on your roof. Vogel. Other end of the spectrum, right? 33 billion for a power nuclear power plant in Georgia.
Which is really strange to me, right? Like that’s just how much these power projects can vary in capital costs. Especially when they don’t need to, I mean, the new scale project, they’re estimating something like $18 per watt versus the Koreans can just built a project at UAE for two and a half dollars a wat.
How’s your guys’ project scale or compared to that?
[00:43:22] Mike Umbro: So we’re looking at probably about a hundred million for the demonstration. And 1.8 billion for a 400 megawatt build out. So massive capital spend. Now as a byproduct of this process, given that we’re using oil reservoirs as our containers you will produce oil as a, you know, a contaminant, if you will, to the process.
And so, that’s one key consideration that will offset the. The costs significantly, at least in the first, you know, five to 10 years of this project. So there’s some beneficial attributes to the economics that would be different than a typical, you know, power generation facility that you’ve mentioned.
Gotcha. So it’s, to us, that’s exciting. You know, that’s unpalatable to some environmental justice groups because there is a big push to have. Absolutely. No oil produced in the state of California, even though we consume 600 million barrels a year. So to that, I look at our carbon intensity score per the California Air Resources Board, which is a 2.8.
So to con to compare that to. Ecuador, Saudi, Iraq, they’re all above 12. So, so we’re like one fifth the carbon intensity of anything being burned in the state. So, and beyond that, I say, Hey, we’ll sell it to an asphalt plant and it will never be combusted because we still have to make roads. So, so there’s some really interesting nuances to how we can pay for this without emitting carbon.
[00:44:57] Mark Hinaman: Yeah. Absolutely. What about the jobs piece? You know, that’s often important in communities. And thinking about like coal plants closing do you expect these facilities to have a lot of labor requirements or are they just kind of run, run by themselves?
[00:45:10] Mike Umbro: Yeah, we think we’ll have at least 2000 construction jobs when this is being built. Paying prevailing wages, so paying very high wages to workers, which is awesome. And. Also, you know, probably on the order of 200 permanent jobs. So there will be, you know, you’ve gotta maintain your solar array, you’ve gotta clean it.
Now I think there’s robotic systems that can drive in between the rows and wash ’em and spray ’em, and things of that nature. You can turn these systems, you know, kind of. Upside down. So they’re pointing down in, in inclement weather and things like that. But a whole host of maintenance that will occur, you know, like an oil and gas well, you’re presumably gonna be pulling wells and maintaining wells throughout the life of this project.
So you’re gonna need, you know, work over crews. You’re gonna need crews maintaining surface equipment where scaling might present itself in, you know, Heat exchangers or other surface equipment you’re gonna do you know, maintenance turnarounds on those pieces of equipment. So, that’s a really exciting thing for us because when you zoom out and you look at Kern County from a disadvantaged community perspective, and that’s.
You know, that’s a big federal and state initiative to support disadvantaged communities specifically those like Kern County, which are totally dependent on fossil energy and fossil related jobs. What do you do with people like that? Do you just say, go get another job? Well, we know that a traditional photovoltaic.
Field really doesn’t have any ongoing jobs. You might need an electrician and you might need to wash those PV panels, but there aren’t a whole lot of moving parts and you just kind of build them and move on. And so, I think that’s a big issue for the clean power transition or integration, however folks want to term it.
You know, you can’t just lay people off. That’s not equitable. It’s not it’s not sustainable because these people are getting paid. In the oil field case as you know, as we know, you know, we’re over 60% Hispanic workforce, we’re paying people over $120,000 a year, and they’re not even required to have a high school diploma.
They just have to have work ethic, and that’s the type of workers that are in the oil field, people that work hard, people that want to provide for their family. And they might not have a college degree, they might not have a high school diploma. They might have been to prison, and we will still give them jobs.
And that’s a major selling point for a project like ours is, you know, you don’t need to retrain these people. They can take their current skillset. Come do it over here for us and we’ll build a clean power project. So it’s something that we are, to me, that’s the most exciting part about the project.
In addition to, you know, providing clean power is really supporting the people of California. I don’t wanna move outta California, I wanna make jobs for people here at home. So, yeah. It’s exciting.
[00:48:20] Mark Hinaman: Awesome. What’s the timeline like you guys are doing this pilot project, but how long until the pilot’s up and running and what’s your vision for how long it’s gonna take to get the whole system up or the larger plan up if all goes well?
[00:48:33] Mike Umbro: Yeah. Great. Great question. So, so we’ve had the good fortune of being at this for five years now. And so we’ve done we’ve done. Almost all of our biologic surveys, flora Fauna, for the demonstration. We’ve got two drilling pads ready to go, that can support up to 24 wells. We’ve got a lot of surface out there that’s already disturbed and used for the 40 acre solar array.
We will complete those additional remaining, you know, bio surveys. This year and into 2024, we will submit our underground injection control application for class two water injection which is kind of standard in the oil field for thermal enhanced oil recovery. You’re injecting steam, or for water disposal, you’re injecting water.
So that application will be fit. Exactly for this process. And that will go in this week. And that’s a, depending on how long that takes, that can be as short as six months or as long as a year or two. So earliest we could, you know, really start building everything is middle of 2024. We could start drilling before then.
And then you’re drilling wells, you’re installing the solar array and you’re heating the reservoir. So that puts us into about late 2025 2026 to when we’re bringing power to the grid. So it sounds like a long time, but now that I’ve been in the developer arena for five years, it’s like, “wow, we could be going in three years!” That’s not, that’s right around the corner.
[00:50:10] Mark Hinaman: That’s faster than a lot of projects. Faster than every nuclear project out there.
[00:50:15] Mike Umbro: Right. Yeah. Yeah.
[00:50:16] Mark Hinaman: This is uh, this has been great. We’re coming up on our time.
I, I wanna be respectful of your time, so Yeah, no worries.
Curious on where you think this is going. You know, if you guys get this up and running, do you foresee a bunch more of these projects coming up? Do you think they’re more niche and there won’t be a bunch of ’em, or we kind of already answered this a little bit previously, but paint us a picture.
What’s the world look like in say, five to 10 years?
[00:50:38] Mike Umbro: Yeah, I think we will demonstrate it. I’m very confident that we’ll prove it works. We’re very confident that it works. We’ll prove it, we’ll build it, we’ll build the bigger plant I want to build it to a gigawatt by the next five to six years. I think it’s possible. I really do.
I think that we’re gonna see politicians start moving at warp speed because they realize that, hey, 2035 when we’ve mandated everybody drives an ev. We need a lot of power. And if we don’t get going now, you know, we’re talking like for our timeframe, 20 27, 20 28, 20 29, we better have some of these systems built.
So, I think we’ll build it, we’ll prove it works. A lot of the operators in the area are really focused, particularly the large operators era, crc, Chevron on carbon sequestration. So I think the broader oil and gas industry in California is focused. Elsewhere, which is fine. But we would be absolutely thrilled to to partner with those companies to, to make this a broader initiative.
But hopefully we just knock down the first one and knock it outta the park and then build from there.
[00:51:46] Mark Hinaman: Great note to end on, so Absolutely. Really appreciate the time. Thanks so much.