Geothermal is the hottest thing in clean energy. Here’s why

Earth’s interior contains an inexhaustible supply of heat, its many layers continuously warmed by the furnace-like core of our planet. For millennia, humans have tapped into this abundance for cooking food and keeping warm. More recently, over the last century, countries have harnessed geothermal energy to produce electricity from volcanoes in Iceland and Indonesia, underground heat pockets in Kenya, and bubbling hot springs in Italy and the United States.

But these efforts have only scratched the surface of geothermal’s potential. As the urgency of addressing the climate crisis makes it necessary to find sources of always-on, emissions-free energy, the energy source is experiencing a surge of investment and policy support for new technologies that aim to access more heat in many more places.

Solar, wind power and battery-storage projects are already cleaning up the U.S. electrical grid. But energy analysts warn that these technologies might not be enough on their own to fully buck America’s reliance on fossil-fuel-burning power plants, which are the second-largest source of U.S. greenhouse gas emissions after transportation. The grid also needs carbon-free electricity available on demand to guarantee it can provide the sort of 24/7 power needed by cities, data centers and industrial facilities like aluminum smelters or steel mills.

At the moment, however, these so-called ​“clean, firm” sources remain elusive. Recent advances in geothermal technologies, demonstrated by a handful of real-world projects, suggest that harnessing the earth’s heat could be among the most promising ways to solve this clean-energy conundrum. But that can only happen if it can overcome the sizable challenges that stand in its way.

“If we can crack the nut on this new-generation geothermal, it means we can put geothermal just about anywhere,” Cindy Taff, CEO of the Houston-based startup Sage Geosystems, said during a March 9 panel at SXSW in Austin, Texas.

“We can complement the great things that solar and wind have already done — but with baseload energy,” she added.

Where geothermal stands today

Geothermal resources are available virtually everywhere. Getting to them is a different story.

Today’s geothermal plants primarily pull hot water or steam from relatively easy-to-reach places like hot springs or geysers to drive turbines and generate electricity. That significantly limits the places where geothermal power plants can go.

In the United States, just 3,700 megawatts (3.7 gigawatts) of geothermal power plants are operating across seven states, amounting to only about 0.4 percent of total U.S. electricity generation in 2023.

In recent years, both the U.S. government and private investors have started spending hundreds of millions of dollars to develop ​“next-generation” technologies that make it easier and cheaper to access the earth’s heat nationwide. If these systems reach commercial scale, they could expand the nation’s geothermal capacity by more than twentyfold, adding at least 90 GW of firm and flexible power to America’s grid by 2050, the U.S. Department of Energy said in a report released on March 18. That’s equal to nearly 10 percent of current U.S. electricity capacity.

Next-generation technologies include several different approaches, all of which rely to some extent on the expertise and deep pockets of another subterranean energy industry: oil and gas. One category in particular, ​“enhanced geothermal systems,” uses the same horizontal drilling and fracking techniques as the shale gas industry.

Dozens of startups are now crowding into the space. So far, only a few — including Eavor, Fervo Energy and Sage Geosystems — have successfully deployed full-scale, real-world projects in North America. Many steps still need to happen before the sector can grow beyond its buzzy beginnings, including reforming federal permitting, finding corporate buyers for clean energy and mitigating the potential for environmental impacts.

Still, the industry’s most pressing priority right now can be described simply as this: raising gobsmacking amounts of early-stage investment capital.

Geothermal developers need the money so they can iterate — that is, drill lots of holes — to both refine their technologies and drive down construction costs. Signs of this improving-by-doing approach are already emerging. Utah Forge, a $220 million initiative led by the DOE, improved drilling speeds by over 500 percent in three years on its enhanced geothermal project in Beaver County, Utah. Just next door, Fervo Energy reduced its drilling times by 70 percent, which helped cut costs nearly in half, from $9.4 million to $4.8 million per well, at its Cape Station project, the startup recently announced.

If this trend continues, next-generation geothermal could follow a trajectory similar to that of solar power or batteries — two clean-energy technologies that have risen to the top of the energy system as they’ve tumbled down the cost curve, said Jonah Wagner, a principal assistant director at the White House Office of Science and Technology Policy.

“If you look at why their costs have come down so fast, a huge part of it is driven by the nature of, as you expand your manufacturing base, as you make more repeat deployments of the same exact thing…you hit a point where you achieve cost-competitiveness,” Wagner said during the SXSW panel.

“And then you can totally ramp up,” he added.

Getting geothermal to stand on its own

To make the leap from intriguing new technology to a commercially viable energy player, next-generation geothermal will have to lean much less on public funding and become self-sufficient.

To reach that point — which the DOE calls ​“commercial liftoff” — the industry will need to deploy about 2 to 5 GW of projects across four to six states and in five to 10 different geologic settings to demonstrate to investors and utilities that the cutting-edge systems can deliver as promised. That scale of deployment would require about $20 billion to $25 billion of investment from government agencies, equity investors, corporate ventures and other capital providers. Of that total, about $5 billion is needed to finance first-of-a-kind developments in particular.

Many of those projects will likely take advantage of federal tax credits provided by the Inflation Reduction Act, which offers incentives for both clean-energy producers and their investors. The Bipartisan Infrastructure Law also includes sizable funding for large-scale pilot projects. In February, the Biden administration awarded a total of $60 million to three geothermal developers — Fervo, Chevron New Energies and Mazama Energy — to support their first-of-a-kind developments.

If everything goes to plan, commercial liftoff is ​“attainable as early as 2030,” according to the federal agency.

But ​“liftoff” is just the start. To achieve commercial scale — and become a cornerstone of a clean and reliable U.S. power grid — next-generation geothermal will need an additional $225 billion to $250 billion in investment to deploy another 88 to 125 GW of projects, the DOE estimates.

That’s a gargantuan leap from only a handful of megawatts in place today.

Last year, Houston-based Fervo began operating a first-of-a-kind plant in Nevada. The 3.5 MW project is now supplying electricity directly to the Las Vegas–based utility NV Energy. The enhanced geothermal system uses horizontal drilling techniques and fiber-optic sensing tools to create fractures in hard, impermeable rocks found beneath the surface. Technicians then pump the fractures full of water and working fluids. The hot rocks heat those liquids, eventually producing steam that drives electric turbines.

Enhanced systems involve drilling dozens or hundreds of wells to create more artificial reservoirs underground. But another type of next-generation technology, called ​“advanced geothermal,” typically involves drilling just one or several very deep boreholes. A sealed-off, closed-loop system circulates fluids from top to bottom, collecting heat from the hot rocks below and bringing it to the surface — without injecting fluids directly into the ground.

Canadian startup Eavor has been operating an advanced geothermal demonstration project since 2019 in the province of Alberta, though the system isn’t connected to the grid. Last year, Eavor drilled a hole 18,000 feet deep in southwest New Mexico to prove it could harness heat trapped in hard granite rock. Now the company is developing a project in Geretsried, Germany that aims to generate 8.2 MW of electricity and 64 MW of industrial heat by 2027.

The third, and least-developed, type of next-generation geothermal is called ​“superhot rock energy.”

The idea is to inject water to depths where rock temperatures exceed 750 degrees Fahrenheit (400 degrees Celsius) to power generators — potentially as deep as 8 miles down. Existing drilling equipment and well casings aren’t designed to withstand such extreme temperatures or pressure. But researchers are working on advanced tools. Quiase Energy, a startup with MIT origins, raised $21 million in new funding this month to develop high-frequency beams that melt and vaporize rocks.

On March 21, during the major energy conference CERAWeek in Houston, researchers released new findings about the global potential of superhot rock energy. A first-of-a-kind modeling tool suggests that tapping into 1 percent of superhot rocks in the U.S. alone could produce 4.3 terawatts (4,300 GW) of clean, firm power. That’s enough energy to power New York City 687 times over, according to the Clean Air Task Force and the University of Twente in the Netherlands.

While this approach faces big technical hurdles, it won’t take a scientific breakthrough to solve them, said Terra Rogers, the program director for superhot rock energy at the Clean Air Task Force.

“We don’t need a ​‘eureka’ moment,” she told Canary Media. ​“What we need is dogged iteration in the field and some bench-scale and laboratory infrastructure to get there.”

Capital, customers and permitting: The challenges at the core of geothermal 

Yet for all of its momentum, next-generation geothermal isn’t guaranteed to achieve commercial scale. The industry could still struggle to advance beyond today’s tiny number of bespoke and expensive early-stage projects.

“There are obstacles standing in the way of the massive growth and development of geothermal energy,” Jamie Beard, founder and executive director of Project InnerSpace, which advocates for expanding geothermal use, said during the SXSW panel.

“And if we don’t work really hard to solve those obstacles,” she added, ​“they will cause geothermal to fail to launch.”

The single largest barrier to scaling up next-generation geothermal is convincing banks and other large investors to pony up for these risky, unproven systems.

Right now, startups must cobble together investments from a small pool of equity and venture funding, which slows the pace of progress. The DOE estimates that companies looking to establish new next-generation geothermal projects in places with no previous development will need to raise around $450 million for a system that can yield 30 MW, or what the agency described as ​“a reasonable amount of power.”

For developers, a crucial way to drive that much-needed investment is to guarantee their projects will have customers — particularly ones willing to pay an initially higher price for electricity. To that end, tech giants Google and Microsoft and steelmaker Nucor recently announced a plan to aggregate their gargantuan energy demand to buy electricity from early-stage ​“clean, firm” projects, including next-generation geothermal, advanced nuclear, clean hydrogen and long-duration energy storage. Google is also a customer of Fervo’s Nevada facility.

Another solution to geothermal’s money problem is the oil and gas industry. Fossil-fuel companies are increasingly using dollars from their dirty business to invest in companies looking to harness clean heat from the earth.

From an investor perspective, ​“This is an area where, with technological advancements, you could get significant movement and acceleration,” Greg Matlock, the global energy and resources tax leader for Ernst & Young, said by phone from the sidelines of CERAWeek, where geothermal was a hot topic.

He likened the buzz to the start of the shale boom in the early 2000s, when fracking and horizontal drilling began cracking into untapped oil and gas formations. ​“That was a newer technology, and it had an inordinate amount of excitement around it from an investment-thesis perspective,” he said. Geothermal, by contrast, has the added benefit of being ​“renewable, reliable and sustainable.”

In recent weeks, Chesapeake Energy, the pioneering fracking company, led a $17 million funding round for Sage Geosystems, which is developing a 3 MW system in Texas. Meanwhile, Devon Energy, another leading fracking firm, led $244 million in new funding for Fervo Energy in March, building on Devon’s earlier $10 million investment in the startup.

The growing involvement of fossil-fuel companies has made some climate-minded investors and environmental watchdogs hesitate to embrace new geothermal. Taff, the CEO of Sage Geosystems, said some potential funders have expressed concerns that any advances in geothermal could be used to extract more oil and gas, which isn’t something Sage is pursuing.

But industry proponents say the arrangement is needed to help technologies achieve commercial scale and viability. Oil and gas companies not only provide money — they also bring scientific data and drilling know-how that geothermal startups need to develop their own projects. In many locations, very little data has been collected about the size or depth of geothermal resources, except where oil and gas activity is underway. For example, Texas has gathered about 56,000 different subsurface measurements across the state. Georgia, meanwhile, only has about two dozen.

Fervo’s technology collaboration with Devon Energy has yielded ​“some really powerful results,” Tim Latimer, Fervo’s CEO and a shale veteran himself, told Canary Media. ​“Devon is a company that has drilled thousands and thousands of wells, whereas Fervo has drilled about 10. We just don’t have the same sort of datasets or analytics that somebody that’s drilled down many wells has.”

Still, there are plenty of barriers that capital and experience can’t readily address. Lengthy permitting delays, for instance, make it harder and more expensive for next-generation geothermal companies to develop new projects. On March 14, a bipartisan group of U.S. senators introduced legislation to help streamline and accelerate the process of drilling new geothermal wells on public land.

And even as companies strive to move at breakneck speeds, they’ll need to proceed cautiously enough to limit the potential for environmental impacts, including induced earthquakes that rattle buildings and possible groundwater contamination from chemical compounds used in wells. Given the novelty of these technologies, companies should proactively engage with communities early on to reduce the risk of stalled timelines and project opposition, according to the DOE report.

“There will always be some risks that are associated with novel approaches to energy production, especially in such an abundant scale,” said Rogers of the Clean Air Task Force.

“I think a strong regulatory structure is important for all [geothermal] projects,” she said. ​“When this energy source is commercialized, we need to ensure that it is managed in a way as we would with any other large-scale project.”

The payoff of overcoming these varied challenges — and properly dealing with the risks — is potentially huge for the nation’s efforts to reshape the electricity grid into a system that can power homes, factories and data centers without wrecking the climate.

“One of these [new] technologies, or several of them grouped together, is going to break us through,” Taff said during the SXSW panel. 

“And once we break through that barrier,” she added, ​“then you’re a viable energy source.”