Meet the startup backed by GV and a Bill Gates VC fund that raised $65 million on the promise of geothermal energy

  • Geothermal startup Dandelion Energy just raised another $30 million from investors including Breakthrough Energy Ventures. 
  • The startup spun out of Alphabet’s secretive X lab. 
  • Dandelion is trying to make clean, geothermal energy easier to install and less expensive for homeowners.
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On a torrid summer day, basements are the place to be. They typically run several degrees colder than the rest of the house, largely because the temperature below the Earth’s surface is cooler. 

In fact, no matter how hot or cold it is outside, the temperature 10 feet down remains roughly constant, at about 55 degrees Fahrenheit, according to the geothermal startup Dandelion Energy.

It’s this very idea that gave rise to Dandelion, a company that was conceived in Alphabet’s secretive research and development lab, X, before spinning out in 2017.

By heating and cooling homes using the temperature from deep underground, Dandelion promises customers savings of up to 50% on their heating and cooling costs, while also lowering their carbon emissions. Traditional systems use fossil fuels like natural gas or electricity. 

Founded by Google alums Kathy Hannun and James Quazi, Dandelion has had no trouble convincing big investors of the potential of geothermal energy, which has long been considered a niche product. The company’s key innovation is bringing down the cost of a system, making it accessible to a much larger market. 

Earlier this week, Dandelion said it raised another $30 million in a funding round led by Breakthrough Energy Ventures, a VC firm led by Bill Gates. GV, formerly known as Google Ventures, is also among the firm’s investors. Dandelion has raised $65 million to date. 

The simple promise of geothermal energy

Geothermal energy is actually a pretty simple idea. It involves digging a hole as deep as 500 feet into the Earth outside a building, through which water circulates in a U-shaped pipe called a ground loop. As the water descends into the Earth, it adjusts to the temperature of the ground, which is warmer than your house in the winter and cooler in the summer. The water then enters your home, where it’s converted to hot or cold air. 

“It’s just water circulating through a ground loop,” said Hannun, Dandelion’s president, who spent seven years at Google after graduating from Stanford with a degree in civil engineering. “It’s a closed loop, so the water is just going through an infinite circle.” 

Importantly, Hannun says, customers can still adjust the temperature in their homes using a thermostat. It’s not like it’s always stuck at 55 degrees. 

Making geothermal accessible 

Geothermal home energy is still a niche market, largely because most systems are expensive, costing as much as $30,000, according to EnergySage. 

“In the past, geothermal has been a huge renovation project,” Hannun, one of Business Insider’s 2020 rising stars of clean energy, said. “A professional engineer comes to your home, does all of these calculations, and then coordinates a bunch of subcontractors to figure out how to put geo in, so you run up a very large bill.” 

The innovation that Hannun came up while working as a product manager at X — where she had the coveted job of looking at all kinds of business opportunities — is around bringing down the cost. And it starts with turning geothermal into a more standardized consumer product, she said. 

“For one thing, there’s no custom engineering needed for every home,” she said of Dandelion’s approach. “We just have a standard set of designs.”

Dandelion developed software that automates the process for determining how big a system a particular home needs. It also invested in making a drill specifically for geothermal, instead of using water-well drills, which are common among other geothermal operations. Both of those innovations bring down cost, she said. 

Geothermal is still expensive if you pay for it upfront

A Dandelion system costs about $18,000 to $25,000 — so, still not cheap. The company also offers financing for $0 down, starting at $150 a month.

The big benefit is in lower monthly energy bills, the company says. An average New Yorker, for example, can save up to 50% on monthly heating and cooling bills, the company says. 

“Geothermal is actually by far the least expensive way to provide heating and cooling energy in buildings,” Hannun, said. “But it’s been held back in the past.”

There’s also the environmental benefit. Buildings account for more than a third of carbon dioxide emissions in the US, and HVAC makes up the largest chunk of that. Because geothermal doesn’t burn fuel or use much electricity, it’s relatively clean. 

This story was originally published on July 3, 2020. It was updated with a new funding announcement.

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