Geothermal is too expensive, but Dig Energy’s impossibly small drill rig might fix that

On a farm near Manchester, New Hampshire, I was recently treated to a gusher of dirty water, not exactly the sort of thing that most startups will show a reporter. But for Dig Energy, the mud is a feature, not a bug, of its compact drilling rig. 

The startup, which has been operating in stealth for the last five years, developed the water-jet drilling rig in an effort to make geothermal heating and cooling so inexpensive that it will displace fossil fuel boilers and furnaces. The rig is central to that, promising to slash drilling costs by up to 80%.

On Tuesday, Dig Energy emerged with $5 million in seed funding, TechCrunch has exclusively learned. The round was led by Azolla Ventures and Avila VC with participation from Baukunst, Conifer Infrastructure Partners, Koa Labs, Mercator Partners, Drew Scott, and Suffolk Technologies.

Heating and cooling represent about a third of all energy use in the U.S., and in data centers, the figure can be as high as 40%. Geothermal can slash HVAC energy use while also saving grid operators up to $4 billion annually. To help stabilize its creaking electrical grid, the U.S. needs to drill 6 million feet of geothermal borehole daily through 2050, according to the Oak Ridge National Laboratory.

But geothermal doesn’t come cheap, at least not at first.

“In the United States, geothermal has been 1% of building installations for decades,” Dig co-founder and CEO Dulcie Madden told TechCrunch. That’s despite the technology’s low operating costs. “It’s really just because upfront cost is so, so, so expensive.”

There are two main flavors of geothermal: Enhanced geothermal drills down thousands or tens of thousands of feet. Companies like Fervo and Quaise that are drilling the deep are tapping very hot temperatures — usually in the hundreds of degrees — to generate electricity. The other, shallow geothermal, which is what Dig is focused on, is usually limited to hundreds of feet. At those depths, the ground maintains a consistent temperature year round, which is perfect for heating and cooling residential and commercial buildings.

In shallow geothermal, pipes carry water underground where it transfers heat to or from the earth. In the summer, it dumps excess heat, and the chilled water returns to the surface to cool a building. In the winter, it absorbs heat to warm it.

Installing the ground loop, as the underground piping is called, represents around 30% of the total cost of a ground-source heat pump and is one of the main reasons the technology remains more expensive than conventional heating and air conditioning systems. Tackling those costs was high on Dig’s list. 

“When we were getting started, we were like, can we build a lower-cost drill?” Madden said.

Madden and her co-founder, husband Thomas Lipoma, began exploring the space five years ago after winding down their previous startup, Rest Devices. They soon stumbled upon old research describing how to use water jets instead of traditional cutting bits to bore into the Earth.

But while there had been plenty of research into the technology, it still wasn’t ready for prime time. “A lot of the drilling technology has trickled down from oil and gas,” Madden said. Translation: It tends to be large, expensive, and overpowered for something like geothermal at the depths Dig is plumbing.

Dig has spent years refining the design of its rig, drilling test holes near its offices in New Hampshire. They’ve drilled through soil, gravel, clay, sand, and a range of different rock types, including sandstone, limestone, granite, slate, and shale. The team showed me test blocks of some very dense rock with neat holes blasted through the middle.

Today’s geothermal drill rigs can do the same, but they’re massive by comparison. The most commonly used versions sit on the back of large trucks. For easily accessible sites, they work well enough. But they are unable to squeeze through side lots into people’s backyards, and at crowded commercial building sites, they occupy precious free space.

While Dig’s prototype isn’t ready for commercial use, what I saw was substantially smaller than widely used geothermal drill rigs. The holes it drills are also straighter than those made by traditional rigs. Together, those two details mean that Dig’s bore holes can be placed closer together, a boon for any developer. 

When it’s ready for its first commercial pilots — something this seed round will help accomplish — Dig’s rig will grow in size slightly, but it won’t require the large, double-axle trucks that currently dominate the industry.

The company is planning to sell the devices to drillers, giving them another option for existing projects and potentially opening avenues to new ones. Other companies are exploring the technology, too. 

“We shouldn’t have to require people to buy a $2 million rig, it should be something that’s lower cost where they can get into the business,” Madden said. “Geothermal should be in 100% of buildings. It’s in 1% of buildings. So how do we close the 99%?” she added. “It’s effectively an untapped market.”