Global Geothermal Energy Reaches a Turning Point: Next-Generation Technologies Open New Pathways for Large-Scale Deployment

Global geothermal energy reaches a turning point: next-generation technologies open new paths for large-scale deployment

Introduction: Although geothermal power generation has a history of more than a century, it has long accounted for only a tiny share of the global electricity mix due to scarce hydrothermal resources. Today, thanks to the drilling technology advances brought by the U.S. shale revolution, extracting clean energy from ubiquitous hot dry rock is moving from dream to reality. According to assessments by international research institutions, global geothermal power generation potential has risen to a level second only to solar power. Enhanced Geothermal Systems (EGS) and Advanced Geothermal Systems (AGS/closed-loop systems) are accelerating toward commercialization and are expected to reshape the global energy transition landscape.

Industry background: from limited resources to vast potential

Traditional geothermal power generation relies on natural hydrothermal reservoirs—geological formations that possess heat, fluid, and permeability simultaneously. As of the end of 2022, global geothermal installed capacity was approximately 16 gigawatts, spread across at least 30 countries and regions, accounting for only 0.34% of the global electricity structure. Since Italy first used geothermal energy to generate electricity in 1904, the United States, New Zealand, Japan, and other countries developed it successively after World War II, while Iceland achieved energy independence through geothermal energy during the oil crisis of the 1970s. From the 1980s onward, developing countries such as Mexico, the Philippines, Turkey, and Kenya also began introducing geothermal technology, with Kenya becoming a successful example. Its technology transfer experience fully demonstrates the role of international cooperation in expanding geothermal utilization.

However, the development of traditional hydrothermal resources is constrained by specific geological conditions and is difficult to bring to economies of scale, causing geothermal costs to fall far more slowly than those of wind and solar power. The horizontal drilling and hydraulic fracturing technologies brought by the U.S. shale revolution have provided new ideas for geothermal development—extracting heat from hot dry rock by artificially creating reservoirs. This technology, known as Enhanced Geothermal Systems (EGS), together with closed-loop systems (AGS) that do not require external fluids, forms the core of next-generation geothermal technology. It is estimated that these new technologies have elevated global geothermal power generation potential from a negligible level to a position second only to solar power, offering new possibilities for the global energy transition.

Current developments: accelerating commercialization and global deployment

Next-generation geothermal technology is at a critical stage of moving from demonstration to commercialization. The first commercial facilities using EGS and closed-loop systems are expected to begin operation around 2026. The U.S. Department of Energy has advanced this process through research funding and support for public land test sites, while the participation of the oil service industry also provides a sustainable transition path for traditional energy companies.On cost, the current cost of electricity from EGS is estimated at between $100 and $240 per MWh, close to the cost of new nuclear power. But analysis shows that as deployment scales up, EGS costs are expected to fall to $80 per MWh by 2030, and further to $50 by 2035, when they will be able to compete with natural gas power generation and fall between onshore wind and offshore wind. Notably, the learning rate for early EGS projects has already reached 35%, exceeding the 30% of lithium-ion batteries and the 24% of photovoltaic modules, demonstrating huge cost-reduction potential.

Although closed-loop systems are currently more costly, district heating may be the first area to achieve a breakthrough. Since heating efficiency can reach 90%, far higher than the 20% for power generation, closed-loop systems can reduce project costs by 30% to 50% in applications that do not require turbines. This gives closed-loop systems a unique advantage in markets that lack EGS geological conditions or are cautious about hydraulic fracturing technology, especially in Europe. In addition, closed-loop systems consume less water and are more scalable, providing a complementary path for the globalization of geothermal energy.

In terms of international deployment, research by the Carnegie Endowment for International Peace has identified 30 countries best suited to adopt next-generation geothermal technology early. In addition to traditional geothermal powerhouses such as Germany, Indonesia, Kenya, Mexico, and Turkey, countries including Australia, Romania, Colombia, and Vietnam also have the conditions to become members of the second tier. Malaysia, Saudi Arabia, Tanzania, Argentina, and others show long-term potential. These countries' resource potential, industrial base, policy environment, and market demand will determine the speed of global diffusion of next-generation geothermal technology.

Impact on the Energy System: Stable Baseload and System Synergy

The greatest advantage of geothermal energy lies in its dispatchability and all-weather power generation capability. Unlike the intermittency of wind and solar, geothermal power plants can operate 24/7, providing stable baseload power to the grid. This flexibility is crucial for high-renewable systems—it can balance the fluctuations of wind and solar generation, reduce the need for energy storage, and improve grid stability.

At the same time, geothermal energy also helps enhance energy security. By developing local geothermal resources, countries can reduce their dependence on imported fossil fuels and lower the risk of energy supply disruptions from geopolitical shocks. For developing countries with abundant geothermal resources, geothermal energy can also drive the development of local industrial chains, create jobs, and promote economic growth.

In addition, next-generation geothermal technology creates new synergies with the oilfield services industry. Oil well drilling and completion technologies are core capabilities for geothermal development. Oil companies can apply their expertise to the geothermal sector, diversifying their businesses while also providing the geothermal industry with a mature supply chain and talent pool. This synergy not only helps reduce the development cost of geothermal projects but also offers traditional fossil energy companies a practical path to low-carbon transition.

Challenges Facing: Technology, Cost, and Policy BarriersDespite the bright prospects, next-generation geothermal technology still faces multiple challenges. First, EGS relies on hydraulic fracturing to create thermal reservoirs, which may induce earthquakes. Although the magnitudes are usually small, public acceptance and regulatory risks remain major obstacles. Previous research projects in South Korea and Switzerland were halted due to induced seismicity. In addition, EGS has high water demand and may be constrained in water-stressed regions.

Second, closed-loop systems avoid fracturing risks, but current drilling costs are relatively high, reaching up to $321 per megawatt-hour at low-quality resource sites—far higher than EGS. Although costs may fall to $64–160 in the future, the path to commercialization remains unclear.

Third, superhot rock (SHR) technology is still in early R&D. Although supercritical geothermal has the potential to increase power output per well tenfold, most superhot resources are located extremely deep, beyond the reach of existing drilling technologies, and require materials capable of withstanding temperatures above 375°C—posing enormous challenges to wellbore design, completion, and reservoir maintenance.

Fourth, policy uncertainty. Many countries have not yet established technical standards and regulatory frameworks for next-generation geothermal, especially regarding subsurface operations, environmental impact, and land-use rights. On financing, geothermal projects have high upfront exploration and drilling costs and high risk, often discouraging investors. In addition, the approval process for geothermal projects is complex and development cycles are long, further increasing uncertainty and financing costs.

Future Outlook: Global Landscape in the Next 5-20 Years

In the next five years, the geothermal industry will see the commissioning of the first batch of commercial EGS and closed-loop projects, validating the technology and accumulating operating data. As learning effects take hold, geothermal costs are expected to decline significantly, and by the early 2030s, EGS could reach a level competitive with fossil fuel power generation. In district heating, closed-loop systems are expected to achieve large-scale application first, particularly in Europe—where many cities already have mature district heating networks and the public holds conservative attitudes toward fracturing technology.

Over the next decade to two decades, the share of geothermal energy in the global power mix is expected to rise steadily. Although it will be difficult to match the absolute installed capacity of wind and solar, geothermal, as a clean, dispatchable baseload power source, will play an irreplaceable role in carbon neutrality goals. In terms of investment trends, venture capital and infrastructure funds are increasing investment in geothermal startups, and oil majors and engineering companies are beginning to position themselves in this field. At the policy level, major economies such as the United States, the EU, Japan, and South Korea may introduce more proactive support policies, such as tax credits, drilling risk sharing, and streamlined approvals.The global energy landscape will therefore become more diversified. Traditional geothermal resource countries will continue to develop, while emerging market countries (especially Southeast Asia, East Africa, and Latin America) will achieve leapfrog development with the help of next-generation technologies. International multilateral institutions such as the International Energy Agency (IEA), the International Renewable Energy Agency (IRENA), and the World Bank are expected to play a catalytic role in technology transfer and financing mechanisms. The globalization of geothermal energy is just beginning, but the curves of technological breakthroughs and cost declines are already clearly visible. As the Carnegie Endowment for International Peace research institute pointed out, geothermal energy's "moment has arrived."

Editor's note: This article is based on the report "Unlocking Global Geothermal Energy: Pathways to Scaling International Deployment of Next-Generation Geothermal" published by the Carnegie Endowment for International Peace on July 10, 2025. The report data comes from Project InnerSpace's GeoMap™ and public industry materials. The article content was independently reviewed by the editors and does not constitute investment advice.