Unlocking Global Geothermal Energy: Pathways and Prospects for the Scaled Deployment of Next-Generation Geothermal Technology

Unlocking Global Geothermal Energy: Pathways and Prospects for Scaling Deployment of Next-Generation Geothermal Technologies

Geothermal energy has long been regarded as a renewable energy source with enormous potential but difficult to scale up. However, with advances in drilling technology brought about by the U.S. shale revolution, a new generation of geothermal technologies—enhanced geothermal systems (EGS) and closed-loop geothermal systems (AGS)—are moving this resource from the "niche" to the "mainstream." A research report released by the Carnegie Endowment for International Peace in July 2025 points out that global geothermal resource potential has risen to second only to solar energy, and the first batch of commercial projects is expected to come online in 2026.

From the Margins to the Mainstream: The Development History of Geothermal Energy

Geothermal power generation has a history of more than a century. In 1904, Italy first used geothermal steam to drive turbines, and the technology gradually spread to the United States, New Zealand, and Japan. In the 1970s, Iceland vigorously developed geothermal energy in response to the oil crisis. By the 1980s, countries such as Mexico, the Philippines, Turkey, and Kenya also began to utilize geothermal energy. As of the end of 2022, global geothermal installed capacity was about 16 gigawatts, spread across at least 30 countries, but accounted for only about 0.34% of the global power mix.

Over the past few decades, cheap natural gas and the rapid rise of wind and solar power have put geothermal at a disadvantage in new installed capacity. The geothermal industry has struggled to achieve economies of scale; turbine equipment is mostly custom-made, and the learning rate is far lower than that of wind and solar. However, in recent years, Indonesia, Kenya, and Turkey have become engines of global geothermal growth, accelerating the development of the industry through policy support.

Next-Generation Geothermal Technologies: EGS and Closed-Loop Systems

The key to next-generation geothermal technologies lies in breaking through the geological limitations of conventional hydrothermal systems. Hot Dry Rock resources are widely available but lack natural fluids. In the 1970s, Los Alamos National Laboratory in the United States first attempted to create artificial reservoirs through fracturing, i.e., enhanced geothermal systems (EGS). France and Japan also made attempts in the 1980s, but all ended in technical failure. In the 2000s, tests in South Korea and Switzerland even triggered seismic activity, bringing research to a halt. Not until the 2010s, with government research funding and support for public lands, did the United States gradually solve some of EGS's technical challenges by leveraging the drilling and completion technologies accumulated during the shale revolution.

Meanwhile, closed-loop geothermal systems (AGS) emerged as an alternative approach in the late 2010s. It circulates fluid through a closed loop, requiring no external water and no rock fracturing. At present, both EGS and closed-loop systems are on the eve of commercialization, with the first facilities expected to be in operation by 2026. In addition, there is research on sedimentary basins and super-hot rock (SHR), but the latter is still in the early R&D stage.

Falling Costs and Market Competitiveness Cost is the key factor determining whether geothermal energy can be deployed at scale. The report shows that the current levelized cost of electricity for EGS is roughly between $100 and $240 per megawatt-hour, close to the cost of new nuclear power. However, analysts predict that by 2030, EGS costs could fall to $80 per megawatt-hour, and further to $50 per megawatt-hour by 2035, which would make it competitive with natural gas power generation and position it between onshore and offshore wind. More importantly, the learning rate for EGS drilling has reached 35%, higher than lithium-ion batteries' 30% and solar's 24%, indicating that economies of scale will emerge rapidly.

Closed-loop systems have greater cost uncertainty. In high geothermal gradient areas, costs are about $105 per megawatt-hour, while in low-grade resource areas they can reach $321 per megawatt-hour. However, the report notes that closed-loop systems have unique advantages in district heating, as heating efficiency can reach as high as 90%, while power generation efficiency is only about 20%. This means that in heating scenarios that do not require turbines, project costs for closed-loop systems can be reduced by 30% to 50%. In addition, closed-loop systems have low water consumption and avoid the seismic risks associated with hydraulic fracturing, which may give them a regulatory advantage in places like Europe.

Global Deployment Potential: Which Countries Will Lead?

Based on Project InnerSpace's GeoMap™ data, combined with industrial, policy, regulatory, and market indicators, the report assessed 30 countries suitable for deploying next-generation geothermal technologies. In addition to the traditional geothermal powerhouses—Germany, Indonesia, Kenya, Mexico, and Turkey—the report also found that countries such as Australia, Romania, Colombia, and Vietnam have second-tier potential, while Malaysia, Saudi Arabia, Tanzania, and Argentina have long-term potential. The report further points out that North America is a hotspot for geothermal innovation, but the global potential extends far beyond this.

This provides entirely new opportunities for countries lacking traditional hydrothermal resources. As technology matures, geothermal energy is expected to spread globally just like wind and solar power.

Challenges and Policy Recommendations

Despite the promising prospects, geothermal development still faces many challenges. Early EGS projects failed due to the complexity of well-completion technology, and some trials triggered seismic activity, raising public concerns. The fracturing process for EGS is also water-intensive and may be constrained in water-stressed regions. In addition, geothermal projects involve high upfront exploration and drilling costs and considerable risk, making investors cautious. Closed-loop systems avoid some of these problems, but their costs are still relatively high. Policy uncertainty is also an important factor affecting long-term investment.

The report recommends that countries adopt targeted domestic policies and strengthen multilateral cooperation to stimulate geothermal deployment. It particularly emphasizes that the United States has successfully advanced technology development through research grants and opening public lands as test sites, an experience worth learning from. At the same time, the report notes that international efforts are needed to provide technological and financial support to developing countries and reduce initial risks.

Future Outlook: The Role of Geothermal Energy in the Energy TransitionIn the long term, geothermal energy is expected to become an important pillar of the global clean energy transition. As a 24/7 dispatchable clean power source, geothermal energy can offset the intermittency of wind and solar power, providing stable support to the grid. The report projects that if the cost reduction pathway is realized, next-generation geothermal will demonstrate competitiveness in the 2030s. Against the backdrop of carbon neutrality, geothermal energy not only supplies electricity but also provides clean heat for industry and buildings, forming a multi-energy complementary pattern.

The global energy competition landscape is shifting, and geothermal resources are no longer confined to a few regions. As technology matures and capital flows in, geothermal energy is expected to grow from a "marginal player" into a "key role," and countries that position themselves early will gain an advantage in the clean energy supply chain. For energy companies, investors, and policymakers alike, now is the critical moment to assess the strategic value of geothermal energy.