Unlocking the Global Geothermal Energy Potential: Next-Generation Technologies Open New Pathways for Large-Scale Deployment

Unlocking Global Geothermal Energy Potential: Next-Generation Technologies Open New Pathways for Large-Scale Deployment

Geothermal energy is experiencing a historic turning point. Once a clean energy source constrained by specific geological resources, it now demonstrates enormous global potential, driven by advances in drilling technology from the U.S. shale revolution. According to the latest research by the Carnegie Endowment for International Peace, the global resource potential of next-generation geothermal technology has become second only to solar energy, making it the second pillar of renewable energy. This article, based on that research, analyzes technological breakthroughs, market prospects, and policy pathways.

Industry Background: From the Margins to the Center

Geothermal energy has been used to generate electricity from the Earth's internal heat for over a century. In 1904, Italy was the first to generate electricity using geothermal steam; subsequently, the United States, New Zealand, Japan, and other countries followed suit. The energy crisis of the 1970s prompted Iceland to develop geothermal energy on a large scale as a hedge against fuel shocks. By the end of 2022, global geothermal installed capacity stood at about 16 gigawatts, spanning at least 30 countries across six continents, yet accounting for only about 0.34% of the global electricity mix.

For a long time, geothermal development has relied heavily on hydrothermal resources—natural reservoirs that possess heat, fluid, and permeability simultaneously. This scarcity has concentrated geothermal projects mostly in plate boundary zones, such as the Pacific Ring of Fire and the East African Rift. Meanwhile, since the 1990s, the costs of natural gas, wind, and solar energy have fallen rapidly, making geothermal energy less economically competitive. As a result, new installed capacity grew slowly, and equipment manufacturing struggled to achieve economies of scale.

Current Developments: Next-Generation Geothermal Technologies Emerge

The turning point comes from the cross-industry application of drilling technologies from the oil and gas sector. The maturation of hydraulic fracturing and horizontal drilling has given humanity the ability to artificially create reservoirs in hot dry rock—this is known as Enhanced Geothermal Systems (EGS). In addition, closed-loop systems (AGS) circulate a heat-transfer working fluid through sealed wellbores without needing external fluids, further expanding the applicability of geothermal energy.

In the 2010s, the U.S. Department of Energy renewed its support for this field, providing research funding and public lands as test sites. Currently, both EGS and closed-loop systems are in the first commercial demonstration phase, with the first facilities expected to begin operation around 2026. Superhot rock technology, meanwhile, targets deep heat sources above 375°C, with per-well electricity generation potentially more than ten times that of conventional geothermal, though it remains in early-stage research and development.

The Carnegie Endowment research, using GeoMap™ data from Project InnerSpace, systematically assessed the resource endowments, industrial foundations, policies, and market environments of 30 countries worldwide. The study shows that, in addition to traditional geothermal countries such as Germany, Indonesia, Kenya, Mexico, and Turkey, countries including Australia, Romania, Colombia, and Vietnam are expected to become second-wave technology adopters; while Malaysia, Saudi Arabia, Tanzania, Argentina, and others possess long-term development potential.On the cost front, the current levelized cost of electricity (LCOE) for EGS is roughly US$100–240 per MWh, close to that of new nuclear power. However, analyses indicate that it could fall to US$80 by 2030 and further to US$50 by 2035, at which point it will be on par with thermal power generation and fall between onshore and offshore wind. Early EGS projects have already achieved a learning rate of 35%, even surpassing lithium-ion batteries (about 30%) and photovoltaics (about 24%), indicating considerable room for cost reduction.

The current costs of closed-loop systems vary widely, ranging from US$105 per MWh in high-temperature-gradient regions to US$321 in areas with poorer resources. However, with specialized production, costs could fall to US$64–160. Notably, closed-loop systems have a unique advantage in district heating—heat supply efficiency can reach as high as 90%, and no steam turbine is required, which can cut project costs by 30%–50%, offering an alternative for markets such as Europe that are cautious about fracturing operations.

Impact on the Energy System: Irreplaceable Flexibility

The core value of geothermal energy lies in its "flexible and reliable" nature. Unlike wind and solar power, which are affected by weather fluctuations, EGS and closed-loop systems can provide 24/7 dispatchable output, supplying the grid with stable baseload and peak-shaving capability. This is particularly critical in high-renewable penetration systems, as it can effectively reduce the system's dependence on energy storage and natural gas for peak shaving.

For energy security, geothermal resources are far more widely distributed than oil and gas, with almost every country possessing developable deep heat. This helps reduce dependence on energy imports and enhance energy autonomy. At the same time, geothermal projects can drive the transformation of the oil and gas service industry, providing sustainable new business directions for existing supply chains in drilling, fracturing, and other areas.

From an industrial chain perspective, the scaling of geothermal will give rise to new segments such as equipment manufacturing, wellsite services, and geological exploration, while also promoting the cultivation of engineering talent. In terms of carbon reduction, geothermal has extremely low lifecycle emissions and occupies far less land than wind and solar farms, helping to achieve decarbonization goals while protecting land resources.

Challenges Ahead: Tests from Technology to Institutions

Despite the bright prospects, the global deployment of next-generation geothermal still faces many obstacles.

Resource and geographic limitations: Although hot dry rock resources are far more abundant than hydrothermal systems, they are not available everywhere. EGS requires specific rock permeability conditions, and ultra-high-temperature resources are mostly buried deep underground, beyond the reach of existing drilling equipment.

Cost and financing pressures: Upfront exploration and drilling require huge investments and carry high risks. Despite excellent learning rates, the risk premium in capital markets may delay project deployment. Financing for early commercial projects will require support from policy banks and green investment institutions.

Policy and regulatory uncertainty: Many countries have yet to establish regulatory frameworks for deep geothermal resources, covering issues such as subsurface property rights, environmental standards, and liability for seismic risk. Some European countries are highly sensitive to the risk of earthquakes caused by fracturing, which could limit the promotion of EGS but instead provide a policy window for closed-loop systems.Water Resources and Environmental Impact: EGS fracturing consumes large amounts of water, which may lead to competition for water resources in arid regions. In addition, although the risk of induced seismicity is extremely low, it still requires rigorous monitoring and public communication.

Technology Maturity: The long-term durability of closed-loop systems, the high-temperature resistance of downhole materials, and the efficiency of large-scale drilling still need further verification. Supercritical geothermal, meanwhile, remains at the laboratory stage and is still far from commercialization.

Future Outlook: A New Variable in the Global Energy Landscape

The next five to ten years will be the critical window for next-generation geothermal to move from demonstration to scale. If EGS costs fall below $80/MWh as expected, its competitiveness will increase significantly, especially in regions with unstable wind and solar resources or scarce land. Closed-loop systems, meanwhile, may break through first in Europe's district heating market, creating a niche closed-loop market.

In terms of investment trends, major oil and gas service companies are entering the geothermal sector by leveraging their drilling technology advantages, and are expected to replicate the cost decline curve of the shale revolution. Support from public funds (such as the U.S. Department of Energy) and multilateral development banks will play a leveraging role in reducing risks for early-stage projects. Carnegie research recommends that countries improve resource mapping, streamline permitting processes, establish risk-sharing mechanisms, and promote technology transfer through international partnerships, much like Iceland's knowledge sharing with Kenya back then.

By 2040, next-generation geothermal is expected to become a clean baseload power source that cannot be ignored in the global electricity mix. Multilateral institutions such as the International Energy Agency (IEA) have already incorporated geothermal into long-term net-zero scenarios, and its "24/7 carbon-free electricity" attribute will continue to grow in value as wind and solar account for an ever larger share of power systems. Although geothermal is unlikely to expand exponentially like solar PV, it will rely on its unique attributes to fill the gaps left by renewables and become a critical ballast for the energy transition.

In the short term, countries such as Australia, Romania, Colombia, and Vietnam may become the next batch of breakthrough points; in the long term, as supercritical technologies mature, geothermal's global coverage will expand even further. The deep revolution of the energy world is quietly taking place underground.