March 1, 2023

Magnus Brandberg, Baseload Group's largest investor and chairman, was interviewed by the Nikkei in December 2022. Here are the questions and answers discussed during the interview.


  • The development of geothermal energy, as an integral part to create balance in the grid system, must be accelerated.
  • Developments occurring in the U.S. will eventually occur in Japan as well.
  • The energy crisis will accelerate geothermal expansion in Japan.
  • Binaries are less risky than flashes, which contributes to the revenue stream of hot spring operators.
  • The entry of overseas suppliers will create cost competition thus leads to cost reduction.  Even without FIT, the geothermal power structure should be cost-competitive.
  • Investors need to understand the risks that come with geothermal energy.
  •  Japanese investors are needed to expand geothermal energy generation in Japan. It is crucial for global and local investors to combine their knowledge to develop the market.
  • Our goal is to fund, grow our business, and collaborate with Japanese investors to expand the binary market through Baseload Power Japan.

Why do you invest in renewable energy, what was the starting point?

  • I majored in energy engineering at university. Electricity and geothermal are part of everyday life and national security as well.
  • The ratio of CO2 emissions from power generation accounts for 30%. Therefore, the transformation of our current energy system is an urgent topic.
  • Solar and wind power are growing rapidly. Solar accounted for 50% of global investments in renewable energy sources during 2022, wind 40%, and geothermal less than 1%. Therefore, geothermal development must be accelerated.
  • Solar and wind power alone cannot fully meet energy demand.  In California, it is difficult to further increase the number of solar and wind farms due to load control on the grid. For this reason, California has decided to install a total of 1 GW of geothermal power by 2026. In California alone, the total deployment is more than Japan’s total installed capacity 0.65GW.
  • More than 95% of the Earth’s volume consists of temperatures above 500 degrees. If this geothermal can be extracted, society can be kept warm for eternity. Geothermal energy has such potential. Imagine a boiled egg. We live in a thin layer of the earth's surface. There are a lot of geothermal reserves in the lower layers. The Earth's core is as hot as the surface of the Sun. Using this geothermal to generate electricity for all of society is what we hope to realize through Baseload Power.

Does geothermal power have the potential to replace thermal power?

  • Yes. Although we don’t, there are companies that do deep drilling. It is an amazing technique that uses steam extracted from the depths to generate electricity instead of fossil fuels.

Geothermal is only 1% – why is that?

  • Compared to solar and wind power, development is more difficult because it requires an understanding of underground conditions.
  • There is an awareness problem surrounding geothermal. Not enough people know about the potential of it. However, this is changing slowly as we have more focus on the topic.

Does that make it harder to invest?

  • Yes. But things are changing.
  • Oil and gas companies are drilling for oil and gas while they need to switch away from fossil fuels. Over 50,000 oil and gas wells were drilled in 2021, while around 1,000 were drilled for geothermal in the same year. If oil and gas companies switch to geothermal energy, the situation will change. The geothermal power generation is expected to achieve significant growth.
  • That's why we're working on geothermal expansion through Baseload Power companies.

Are oil and gas well drilling technically the same as geothermal?

  • They are similar.
  • It will take several years to improve the technology, but oil and gas drilling companies have already started drilling for geothermal.

Which countries have the most active companies in geothermal drilling?

  • It's the United States. There's a lot going on in the geothermal industry on the West Coast.
  • Solar and wind power is already abundant (as mentioned above), and a baseload power source is needed to create balance in the grid. At the same time, there are many oil and gas companies that are trying to invest in other areas than fossil fuels. For example, our partner Chevron and geothermal related service company Baker Hughes (BH).

Is there any possibility of reaching 1 GW?

  • Yes.  There is Ormat, a leading geothermal company. The company has announced that it will build a multi-million MW power plant.
  • Similar developments to those occurring in California will eventually occur in countries with geothermal potential, such as Japan and Taiwan which sits on the Pacific Ring of Fire.

As seen in California, will the power grid problems drive the shift to geothermal power in Japan and Taiwan as well?

  • Energy security issues will drive the shift. Both Japan and Taiwan import most of their energy, but they want to generate electricity with their own domestic energy.
  • Japan has the world's third-largest geothermal potential of 23 GW, yet only 0.65 GW has been deployed. 1 GW is equivalent to a single nuclear power plant.

Energy prices are soaring in Japan as well, and electric power companies are forced to switch to domestically produced energy to be profitable. Are social challenges like the Russia-Ukrainian War encouraging increased investment in renewable energy around the world?

  • Yes. While Europe is investing in renewable energy, the continent also imports fossil fuels because renewable energy alone cannot meet demand. We must increase the energy self-sufficiency rate through renewable energy.

Japan has geothermal potential, but development has not progressed as expected due to challenges such as concerns from hot spring operators and restrictions in national parks. Do other countries face similar problems?

  • Baseload Power Japan aim to build relatively small-scale power plants. Since they do not require a large amount of land, they can be built in national parks.
  • We want to contribute to increasing the income of hot spring operators through the power generation business. In recent years, hot spring operators have been struggling with a nation-wide decrease in the number of visitors, leading to economical struggles for many. If we can establish the power generation business in a way that benefits local communities, there is a possibility for them to continue their hot spring business. We want to show that binary power generation can be integrated into the local communities and that there are advantages to them.
  • It’s often an awareness problem. What you are not familiar with tends to be scary, but by working closely with the communities we can find solutions benefiting all parties.

Why do you focus on binary power generation?

  • Small-scale power plants are less risky. Flash power generation is a large-scale project and is expensive to develop. A lot of land is also required.
  • There is a high return on risk.
  • The market for binary power generation has not yet matured.
  • Binary power can contribute to the strengthening of local communities.

Will the geothermal expansion catch up with the time frame in which society seeks carbon neutrality (CN)?

  • To catch up, you need both flash and binary. In addition, not only solar and wind power but also nuclear power generation is required. All of them are fossil-free.
  • If we switch away from fossil fuels, we will have to meet all our electricity needs with these sources. Another challenge is to get all the necessary amount into the grid.

What is the difference between investment in Japan and overseas?

  • The geothermal market in Japan is not as dynamic as overseas. It is traditional and the supply chain is not well developed.  Although there are drilling companies and EPC, they are mostly domestic companies. In other countries, there are many global companies in the geothermal value chain.

How can we increase the number of geothermal suppliers?

  • In Japan, for example, there are restrictions such as the number of drillings per year, and it takes a lot of time to drill.
  • If global drilling companies can make an entry in Japan, the principle of competition will bring benefits such as reduced drilling periods and prices. We would like to attract many overseas operating companies to the binary power generation business. If competition is created, the technological development of power plants can be promoted.

We need help from the government in addition to investors. Is there any government aid in the U.S.?

  • Among the markets we have entered, there is a FIT system in Japan and Taiwan. This system allows us to predict costs and profits with a 15-year warranty. FIT is an important institution for promoting development.
  • The U.S. has tax credits for clean energy businesses, but no FIT. That is why we need to improve our cost competitiveness.
  • Iceland also does not have a FIT, so it is necessary to negotiate directly with electricity buyers. Profitability from both power generation and geothermal supply must be demonstrated.
  • Electricity prices are very low in Iceland and the United States. In Japan, we need to expand the market, increase cost competitiveness, and make it cheaper.

If geothermal energy can be proven overseas as a profitable business model, will that apply to Japan as well?

  • The cost in Japan is very different from other countries.  The cost of drilling, EPC, and importing generators is very high. We have to reduce prices through cost competitiveness.
  • Geothermal power generation companies need to learn how to build  generators.[SO1]  If you mature the market by learning how to make them, the cost will decrease.
  • Since the cost structure of Japan is still high, it is necessary to gradually reduce costs while benefiting from the initial investment and FIT.

What insights can you gain by collaborating with oil majors?

  • We, investors, share the vision of geothermal expansion with oil and gas companies. They understand the risks involved in achieving this vision.
  • Breakthrough Energy Ventures understand the risks associated with starting and expanding businesses, while SDCL understands the risks associated with promoting sustainable projects. BH and Chevron understand the risks associated with energy-related projects.
  • We, the investors, will combine these strengths to achieve our shared vision.

What specific risks do you understand?

  • Investment decision risk: We need to make investment decisions amid uncertainty. There is also the risk of investing in something unprecedented. We must accept that there is no guarantee of success. If you try again, it will cost you even more.
  • Drilling risk: There’s usually a need to drill multiple wells in search of sufficient geothermal sources and fumaroles. Drilling multiple wells can reduce the risk of some of them being unsuccessful. However, since drilling multiple wells is costly, investors need to actively invest.

To develop geothermal energy in Japan, do you think Japanese companies need to utilize the knowledge gained through their participation in overseas projects?

  • Yes.
  • We also need Japanese investors. Just as there are U.S. investors such as Chevron in the U.S., Japan needs Japanese investors. They will bring their own networks, credibility, business opportunities, know-how and funds.  It is extremely important for Japanese investors and overseas investors like us to bring our knowledge together.

What is your commitment to the Japanese market?

  • Like Baseload Power Japan, we start businesses in countries with high geothermal potential, hire local human resources, and operate them with sufficient funds from investors. At the same time, we also put power plants into operation, and build up pipelines. Another goal is to find investors in Japan.
  • To start a business, grow the business, and find the best partners to work with. This is our goal. We want to grow the Baseload Power companies significantly.

You can read the article published on NIKKEI GX (Japanese only).


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