By Mrinalika Roy and Seher Dareen

Dec 19 (Reuters) -

Geothermal energy startups are on the upswing with Big Tech

companies looking to feed their power-intensive AI data centers,

but long-term investments remain uncertain as oil majors double

down on natural gas.

Meta and Alphabet's Google are among the

tech companies partnering with startups proposing to produce

geothermal electricity, to power their data centers.

Large data-center operators are also racing to meet the

energy needs of artificial intelligence, accelerating a range of

clean technologies in the process.

"We believe geothermal, along with abundant natural gas, can

be part of the all-of-the-above energy mix we need to meet the

demand," said Trey Lowe, chief technology officer at U.S. shale

gas producer Devon Energy ( DVN ), an investor in geothermal

startup Fervo Energy.

Geothermal has been promoted as a faster way to generate

carbon-free electricity than nuclear, and without the

intermittency of wind and solar. But the startups still face

high upfront costs, particularly for drilling, and long project

approval times.

That has soured some of the initial enthusiasm, with limited

investments so far - analysts estimate just over $700 million in

financing has been contributed to overall geothermal projects

since 2020.

Top shale oil producers Chevron ( CVX ), Diamondback Energy ( FANG )

and Exxon Mobil ( XOM ) have also begun advocating for

natural gas as the mainstay fuel for electric power, offering to

work with utilities to couple their power plants with carbon

sequestration projects that cut greenhouse emissions.

"In general, (there is) a lot more interest from smaller oil

and gas producers as well as service companies ... we've talked

to Chevron ( CVX ) and Shell but the supermajors seem to be

taking more of a wait-and-watch view," said Cindy Taff, CEO of

Sage Geosystems, which is developing energy storage and

geothermal baseload technologies deep in the earth.

Sage recently closed a $30 million fundraising led by U.S.

shale gas producer Expand Energy ( EXE ), formerly Chesapeake

Energy, and plans to launch its Series B round in January.

In December, Colorado-based Gradient Geothermal - which

generates geothermal energy using existing oil and gas

infrastructure - announced it was providing Chord Energy ( CHRD )

services to help generate power at one of its oil and

gas sites in North Dakota.

Gradient Chief Operating Officer Johanna Ostrum said most

mid-size and smaller independent energy firms were interested in

geothermal energy for their own power needs, not to create

electricity for resale.

Geothermal aims to compete on cost. The average levelized

cost of electricity (LCOE) of the conventional geothermal

projects in the U.S. is around $64 per megawatt-hour (MWh),

which is competitive with other dispatchable energy sources such

as combined cycle gas, which is around $77/MWh on average, and

nuclear, which is around $182/MWh, according to energy

consultancy Rystad Energy.

Thanks to an improving investment landscape, more than 60

startups have sprung to life in the last two years, said Bryant

Jones, executive director of industry association Geothermal

Rising.

"Texas is becoming the 'place to be' for geothermal

exploration and development across the board," said Matt Welch

at the Texas Geothermal Energy Alliance (TxGEA). "Much of this

is due to an abundance of identified geothermal resources,

1-stop shopping permitting process and our regulatory

certainty."

Ten of the 22 geothermal startups launched in the U.S.

between 2016 and 2022 were headquartered in Texas, according to

a report published last year.

The current lower commodity prices could also encourage more

shale companies to diversify their revenue streams by tapping

geothermal power.

The sector is receiving increased bipartisan interest as

well. The CLEAN Act and HEATS Act recently passed the House and

are awaiting Senate approval. If they become law, it would make

it easier to set up geothermal projects in the country.

"Government incentives and private investments are

increasing...combination of a low decline asset with high

certainty on pricing piques the interest of many investors,"

said Devon's Lowe.