After nearly two years, a Google-backed geothermal startup, AltaRock Energy, is finally getting the permit for a demonstration project in Oregon to show its novel technology does work.

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After nearly two years, a Google-backed geothermal startup, AltaRock Energy, has finally gotten the go-ahead for a demonstration project in Oregon to show its novel technology does work.

The Bureau of Land Management said earlier this month that it found no big environmental impact for the project, which is set to take place near Newberry Volcano in the Deschutes National Forest in central Oregon. The decision allows Seattle-based AltaRock to start the 2-year project of engineering an underground reservoir to create the hot water and steam needed to produce electricity.

BLM’s decision is crucial for the company to test its technology of creating “engineered geothermal systems” or “enhanced geothermal systems” and eventually design a geothermal power plant.  The idea is to create geothermal reservoirs in areas without naturally occurring steam fields. If successful, this technology could greatly boost geothermal power generation, which is a cleaner source of electricity than fossil fuel-based power and it can be produced around the clock. Making it work has proven a tough challenge, however.

AltaRock garnered a lot of attention when Google decided in 2008 to put money into the startup and cited a 2007 MIT report showing the vast potential of generating cleaner energy in the country with the type of technology AltaRock was developing. The startup, founded in 2007, was working on a demonstration project in California when technical problems with drilling through hard rocks prompted the company to give up that project in 2009. By then, AltaRock had raised some $26 million not only from Google but also from investors such as Kleiner Perkins, Khosla Ventures and Vulcan Capital.

The startup then looked to Oregon for a demonstration site and filed an application in May 2010.

The key to creating a geothermal reservoir is to drill a well deep into the earth and inject cold water to fracture the hot rocks. To produce electricity, a pump sends the water into the well, where it flows along fissures of the hot rocks and extends them. In the process, the water soaks up the heat. More wells are needed to reach down to the fractured hot rocks to retrieve the heated water and harvest the steam to run the turbines above ground.

The technology is more difficult to carry out than it sounds. The company needs special tools to break through tough rocks to drill wells that are few miles deep. It also needs to calibrate the right amount of water pressure to create a desired system of fractured rocks. Figuring out where to drill the production wells – to pull up the heated water – can be tricky. The company will have to predict the paths of the expanding fissures to make sure the production wells intercept them. Drilling a well typically costs a few million dollars.

Rock fracturing creates disturbances deep inside the Earth, and some critics say the technique could create earthquakes powerful enough to threaten the safety of nearby residents. That concern shut down a project in Switzerland. AltaRock faced similar protests from residents living near its original project site at The Geysers in Northern California.

For the demonstration project in Oregon, AltaRock will use an existing geothermal well of about 10,060 feet deep for injecting water and two new wells for pumping out the hot water (here is a fact sheet about the project).  The company has gotten a $21.4 million grant from the U.S. Department of Energy for the project.

The company will install a bunch of seismic sensors at the project site to monitor earthquake activities. BLM said the demonstration project shouldn’t create major earthquakes. AltaRock mainly wants to figure out the best way to engineer the reservoir, and the project won’t actually produce electricity.

The MIT study said enhanced geothermal system technology could create 100 GW of electricity by 2050 if the technology gets “reasonable investment in R&D.” Geothermal energy is sometimes seen as a better alternative to wind and solar for clean power generation because it could produce energy around the clock. But it’s so expensive to develop that making a good profit from it is hard. As a result, geothermal energy development seems to be on a slow march while solar and wind are taking off.

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