Unlocking Global Geothermal Energy: Pathways and Country Opportunities for Scaling Next-Generation Geothermal Deployment

Unlocking Global Geothermal Energy: Pathways and Country Opportunities for Next-Generation Geothermal Scale-Up

Geothermal energy is not a new concept, but it is entering a new technology cycle. A July 2025 report by the Carnegie Endowment for International Peace, *Unlocking Global Geothermal Energy*, notes that the drilling, fracturing, and wellbore management capabilities accumulated during the U.S. shale revolution are now being redirected to develop next-generation geothermal resources, typified by hot dry rock. This lifts global geothermal power potential from a very small share of total demand in the past to a renewable resource potential second only to solar. At the same time, dozens of countries already possess the geological, industrial, and policy conditions needed to cultivate a next-generation geothermal industry.

Industry Background: Why Traditional Geothermal Power Has Long Remained "Small but Beautiful"

The commercial history of geothermal power generation spans more than a century. In 1904, Italy was the first to use geothermal energy to drive turbines; afterward, the United States, New Zealand, and Japan gradually introduced it in their post-World War II energy construction. The oil crises of the 1970s prompted Iceland to develop geothermal energy systematically and gradually convert it into exportable engineering capability. By the 1980s, geothermal development had begun to expand to Mexico, the Philippines, Turkey, and later Kenya, which has come to be widely regarded as a success story.

But as of 2022, cumulative global geothermal power capacity stood at only about 16 gigawatts, spread across at least 30 countries and accounting for roughly 0.34% of global electricity generation. The report argues that traditional geothermal power is highly dependent on natural hydrothermal reservoirs—specific subsurface formations where sufficient heat, fluid, and permeability coexist. This geological constraint makes it difficult for geothermal to develop standardized supply chains and economies of scale like those achieved in wind and solar. Over the past three decades, falling costs of natural gas, wind, and solar have continued to compress the competitive space for traditional geothermal, and growth in new global geothermal capacity has been concentrated mainly in a few markets such as Indonesia, Kenya, and Turkey.

Current Developments: EGS, Closed-Loop Systems, and Superhot Rock Technology Pathways

The Carnegie report focuses on two next-generation technology pathways with clear commercialization timelines.

Enhanced Geothermal Systems (EGS) apply the artificial fracturing methods used in the oil and gas industry to create artificial thermal reservoirs in low-permeability hot dry rock. This concept originated in experiments at Los Alamos National Laboratory in the 1970s, but early projects failed due to complex drilling conditions. Around the early 2000s, induced earthquakes in South Korea and Switzerland stalled research for a time. From the 2010s onward, U.S. federal research funding and public test sites provided support, while the engineering experience gained from the shale revolution helped the industry solve key technical difficulties in drilling and reservoir maintenance.Closed-loop geothermal systems (AGS), also known as advanced or closed-loop geothermal systems, attempt to rely entirely on neither external fluids nor reservoir fracturing. Instead, they use a sealed circulation loop between injection and production wells to carry geothermal heat to the surface. This approach began to attract attention in the late 2010s. Its advantage lies in its replicability under a wider range of geological conditions and its smaller impact on water resources, making it suitable for regulated markets such as Europe that are cautious about fracturing.

In terms of first-generation demonstration projects, the report expects both EGS and closed-loop systems to see their first commercial facilities begin operation around 2026. In addition, superhot rock/supercritical geothermal projects remain in the early R&D stage. Their goal is to extract heat from rocks above 375°C, potentially enabling a single well to generate ten times the electricity of conventional geothermal. However, this requires drilling to greater depths with more advanced drilling technology, and faces challenges in high-temperature materials and reservoir control.

Impact on the Energy System: A "Dual Market" for Dispatchable Clean Power and Heat

The key value of next-generation geothermal is not simply to replace wind and solar, but to provide a continuous, dispatchable source of clean power. The Carnegie report specifically cautions that measuring geothermal solely by levelized cost of electricity (LCOE) undervalues its system value. EGS and closed-loop technologies are around-the-clock dispatchable power generation technologies that can perform baseload and flexible peak-shaving duties during evening peaks or periods of weak wind and no sunlight.

On the application side, another market for closed-loop geothermal is district heating. Geothermal power generation efficiency is about 20%, while direct use for heating can reach up to 90%. If heating is the objective, a closed-loop system can omit the steam turbine stage, reducing total project costs by about 30%–50%. This means that next-generation geothermal could enter both the power market and the heating market simultaneously, changing the current structure in which most clean technologies are oriented solely toward power-sector transformation. The report also proposes that oilfield service systems and geothermal development are forming a new synergy: oil and gas companies and service providers can transfer drilling assets, geological data, and project management capabilities to geothermal development, thereby extending the economic life of equipment.

Challenges Ahead: The "Last Mile" from Well Depth to Policy Frameworks

Although engineering concepts are becoming increasingly mature, global-scale deployment still faces several deep-seated problems.

First, cost and financing pressure. Currently, the levelized cost of EGS is estimated at approximately $100–240 per MWh, comparable to new nuclear power. Recent analyses cited by the report suggest that EGS costs could fall to about $80/MWh by around 2030 and $50/MWh by 2035, but this path depends on sufficient demonstration project accumulation and sustained learning. Closed-loop systems cost about $105/MWh under favorable thermal gradients, but can rise to $321/MWh in less favorable rock formations; only after industrialization and specialization could they fall to the $64–160/MWh range. Upfront exploration and drilling investment is enormous, and existing financial institutions still lack mature assessment tools for subsurface resource risks.Second, geological and environmental uncertainty. EGS relies on hydraulic fracturing, which not only consumes water but also reignites public concerns about induced earthquakes. In tightly regulated markets such as Europe, such technologies may require longer permitting timelines or strict approval processes. Although closed-loop systems avoid fracturing operations, their long-term heat recovery rates, wellbore sealing, and cost reduction at scale have yet to be fully validated.

Third, the industry chain and policy response are insufficient. The report observes that conventional geothermal equipment has long been dominated by customized production and has not followed the repetitive manufacturing learning curve that wind and solar power have experienced. To make geothermal projects a reality in the thirty target countries, resource surveys, permitting, district heating planning, grid connection rules, and public financing instruments need to be coordinated. Developing countries in particular need technology transfer, drilling support, and low-cost capital from international development institutions.

Future Outlook: Who Will Take the Second-Mover Position in Next-Generation Geothermal

Based on GeoMap data from Project InnerSpace, the Carnegie research team, combining industrial, policy, regulatory, and market indicators, categorized countries with geothermal conditions and the potential to adopt new technologies into multiple types. Besides traditional, relatively mature geothermal markets such as Germany, Indonesia, Kenya, Mexico, and Turkey, the report argues that Australia, Romania, Colombia, and Vietnam are likely to become fast followers of second-generation technology, while Malaysia, Saudi Arabia, Tanzania, and Argentina show long-term development potential.