Project InnerSpace, the non-profit research organisation accelerating geothermal energy, has partnered with the Society of Petroleum Engineers (SPE) to launch the Geothermal Resources Management System (GRMS), designed to unlock capital for the scaling up of geothermal energy.
The new initiative – a standardised framework for classifying, reporting and communicating geothermal resources and reserves – is funded by Project InnerSpace and based along the lines of the Petroleum Resources Management System (PRMS), the global standard for classifying and communicating petroleum resources and reserves which is managed by the SPE and has unlocked significant levels of oil and gas investment. In 2022 the SPE extended this initiative to non-hydrocarbon resources, including geothermal energy.
Despite strong and growing demand for geothermal energy, capital flows into this industry remain very limited in comparison with the US$600bn invested globally in the oil and gas industry. The GRMS is designed to close that gap by giving the financial community the confidence to release capital at the scale required to accelerate geothermal development.
The launch follows a two-year exercise by Project InnerSpace, involving multiple stakeholders, to identify geothermal financing barriers. This concluded that the absence of a standard, publicly accessible and independently verifiable information framework is the biggest barrier to investment, which could be addressed by developing a system that both financial institutions and the oil and gas industry already use and understand to value geothermal resources.
An initial GRMS framework is expected to be developed within a year, which will give geothermal projects the same financial credibility that oil and gas assets have possessed as a result of the PRMS and means that the financial community can use a trusted and familiar system to evaluate geothermal projects, without having to learn a new system. It is expected to unlock other financing mechanisms including reserves-based lending; insurance underwriting; farm-in/farm-out agreements and joint ventures, secondary market liquidity and SEC reporting compliance.
Significant reductions in legal and transactional structuring costs as well as deal execution timelines are expected through the use of standardised contractual frameworks through the GRMS, which could save more than US$100mn in annual legal cost savings across the industry within four years, it is estimated.
“The financial community already understands how to use the language of large-scale subsurface energy development through oil and gas,” commented Simon Seaton, CEO of the Society of Petroleum Engineers International. “The creation of a Geothermal Resources Management System (GRMS) is a foundational step toward building the market structures and financing mechanisms needed to accelerate geothermal development.”
“GRMS is the equipment of GAAP for accounting – the shared language that gives the financial world the confidence to engage at scale,” added Jamie Beard, executive director of Project InnerSpace. “With it in place, every other financial mechanism we need to scale geothermal becomes viable.”