Investors Take Notice: France Warms Up to Geothermal

In the constant search for new sources of energy, France has returned to a very old source: geothermal. In the suburbs of Paris itself, midway between Orly Airport and the Eiffel Tower, Cofor and Schlumberger are sinking deep wells in search of heat for the homes and businesses of the region.

They’re seeking to expand what is already the second biggest concentration of low-energy geothermal installations in the world after Iceland. Semhach SA is the operator of the largest geothermal network of its type in Europe at Villejuif, Chevilly-Larue and L’Hay-les-Roses.

“I think it’s a really exciting area.” While at present there are only a small handful of geothermal stocks, “at some stage the sector will really start to get attention,” said Edward Guinness, portfolio manager of the Guinness Atkinson Alternative Energy Fund (GAAEX).

The source itself—underground hot water or springs—is pretty much free of controversy regarding pollution and other environmental impacts. It gets its heat directly from the earth’s core, so it’s not only practically the ultimate in renewability, it’s also more reliable as a steady source of energy for heating or electricity generation. Solar and wind depend on the weather, so they can’t match geothermal for continuous production.

But that doesn’t mean that the move toward more geothermal energy isn’t without its critics. That’s because some of the methods used to wring more capacity from existing underground sources of naturally occurring heat are coming under closer scrutiny—particularly since “cousins” to those methods, used to extract natural gas from shale, have been banned in France and are under attack elsewhere in the world.

Fracking has entered the geothermal debate, and in light of the controversies that have erupted over the use of fracking for natural gas wells in the U.S., and some geothermal operations in Europe, geothermal is no longer as controversy-free as it once was.

Geothermal energy from hot springs has been used to heat water for bathing since Paleolithic times, and the ancient Romans used hot spring energy not just for bathing, but to heat homes as well. Hot springs and pools are located all over the world, from Bath, England to Hot Springs, Arkansas, from Iceland and Japan and New Zealand to Yellowstone’s “Old Faithful” geyser in Wyoming. And while some operations take advantage of such sources of heat on the surface, more are seeking out sources deep underground.

That’s where fracking comes in. Fracturing the rock underground allows access to the hot water deep below the surface, just as it allows access to natural gas, but the problems are somewhat different for extracting heat than for extracting gas. And so are the methods, to an extent.

But some of the drawbacks of fracking are common to both purposes. Concerns over contamination of groundwater have made far more headlines in the debate over fracking shale for oil and natural gas deposits in the U.S. than in fracking for geothermal energy in Europe. Regardless, the concerns are there and what caused France to ban shale fracking in 2011. It was the first country to do so.

Shale fracking injects chemicals and water into the ground to break the rocks and allow access to the deposits. Geothermal fracking is different, say advocates, since it does not require chemicals and will rely instead on rock stimulation to open fissures allowing access to the heated water. Not only that, but in some areas where older projects are being resumed, experts say all that’s necessary is to reopen earlier fissures in the rock, not make new ones.