Geothermal energy is poised for a significant breakthrough in the clean energy landscape, increasingly recognized for its potential to provide reliable, low-emission power. A recent report by the International Energy Agency (IEA) indicates that geothermal could become the cheapest source of dispatchable electricity by 2035, with costs potentially dropping to $50 per megawatt-hour. This shift comes as technological advancements and growing demand from data centers and artificial intelligence operations drive interest and investment in geothermal sources.
Technological Innovations Fuel Growth
The current resurgence in geothermal energy is largely attributed to innovations in drilling techniques adapted from the oil and gas sector. Companies like Fervo Energy are at the forefront, developing enhanced geothermal systems (EGS) that utilize hot rock formations buried deep underground, far exceeding the capabilities of traditional hydrothermal reservoirs. According to a post by The Economist, competition is intensifying among firms, including Eavor and XGS Energy, signaling the dawn of what has been termed a “great geothermal renaissance” expected to unfold by 2026.
The IEA projects that with supportive regulatory frameworks, global geothermal investment could soar to $1 trillion by 2035 and reach $2.5 trillion by 2050. This optimism is bolstered by developments in closed-loop geothermal systems that aim to minimize both water usage and environmental impact. A report from MarketsandMarkets forecasts the global geothermal market will rise from $9.81 billion in 2024 to $13.56 billion by 2030, reflecting a compound annual growth rate (CAGR) of 5.3%. Employment in this sector is also expected to surge, potentially increasing sixfold to 1 million jobs by 2030, as former oil and gas workers transition into geothermal roles.
Demand from AI and Data Centers
The escalating demand for reliable, carbon-free energy from technology firms is a major catalyst for the geothermal sector’s growth. An article from OilPrice.com highlights that enhanced geothermal energy is drawing significant investments from tech giants like Google and Microsoft, who are looking to meet the power requirements of their AI operations. A recent demonstration of commercial viability by Fervo Energy in Nevada underscores this trend.
The Department of Energy’s GeoVision study outlines a future where geothermal could contribute up to 16% of the United States’ electricity supply by 2050, capable of heating 45 million homes. The potential for geothermal to supply up to 90 GW of clean energy by the same year plays a crucial role in the broader decarbonization effort.
Investment projections remain optimistic, with Straits Research estimating the geothermal market will grow from $9.03 billion in 2024 to $17.09 billion by 2033, realizing an 8.3% CAGR. Government incentives, such as India’s National Geothermal Energy Policy 2025, are also facilitating this growth, promoting lessons learned globally regarding the utilization of geothermal resources.
Despite the positive outlook, challenges remain, particularly in scaling superhot rock geothermal systems that target temperatures above 300°C at depths of 5-10 kilometers. The Clean Air Task Force notes that this technology could meet 15% of the projected global electricity demand growth by 2050. However, high upfront costs and technical risks associated with deep drilling present significant hurdles.
Innovations in drilling could reduce costs to approximately $80/MWh by 2027, potentially enabling geothermal energy to compete effectively against coal and nuclear power for baseload generation. Nonetheless, the complexity of developing deep, hot wells poses challenges for companies like Eavor and Quaise.
Regional initiatives in Europe showcase innovative approaches, with countries such as the UK transforming abandoned coal mines into geothermal energy hubs. According to Berkeley Lab researcher Eva Schill, there is potential for geothermal energy production to increase twentyfold worldwide by 2050, contributing to heating a significant portion of U.S. homes.
The transition to geothermal energy is predicted to have substantial economic impacts. As highlighted by the IEA, the sector’s growth could yield a sixfold increase in job opportunities, drawing upon the skills of those previously employed in fossil fuel industries. Geothermal energy, with its ability to provide consistent and cost-effective heating solutions, is emerging as a compelling alternative to traditional renewable sources, often costing significantly less than both wind and solar energy.
Looking ahead, regulatory clarity is essential to bolster investment returns and enhance geothermal energy’s competitiveness. The anticipated “renaissance” in the geothermal sector is expected to unfold around 2026, driven by innovative startups and established companies alike. As global policies increasingly favor sustainable energy solutions, geothermal energy is set to play a pivotal role in diverse energy mixes, from industrial applications to residential heating, meeting the growing demand for clean power in an environmentally conscious world.
