Geothermal: The Hottest Underground Movement in Energy
Tapping into the Earth’s limitless heat could be the key to unlocking a stable, sustainable energy future — if we can overcome the challenges beneath our feet.
Sep 12, 2024
Gabriel Méhaignerie
TL;DR:
Geothermal energy is a reliable, renewable power source that harnesses the Earth’s internal heat for electricity generation and heating, offering constant, baseload energy, unlike solar or wind.
Emerging technologies, such as Enhanced Geothermal Systems (EGS) and advanced drilling, are expanding geothermal potential, making it accessible in more locations and lowering environmental risks.
Challenges remain, including high upfront costs, regulatory hurdles, and technical risks, which have limited geothermal to just 0.4% of U.S. electricity generation.
Our take: We’re excited about enabling technologies, particularly in advanced drilling and geothermal resource mapping, which could significantly reduce risks and costs, making geothermal an attractive area for investment and expansion.
Introduction
The world’s energy needs are growing fast, and while oil and gas have powered much of our progress for over a century, it’s come with a heavy environmental cost. Even now, 81.5% of global energy still comes from fossil fuels, driving climate change. As the impacts become more visible, the push for cleaner, more sustainable energy sources is stronger than ever.
But what if the solution has been right under our feet all along? Beneath the Earth’s surface lies an enormous source of heat, and tapping into even 0.1% of it could power the world for millions of years. Unlike solar and wind, geothermal energy provides constant, reliable power.
So, why aren’t we using more of it? In this article, we’ll break down what geothermal energy is, where the industry stands today, and the exciting innovations that could unlock its vast potential.
What is Geothermal Energy?
Geothermal energy is a renewable and sustainable source of heat and electricity derived from the Earth’s internal heat. It can be harnessed for various applications, including electricity generation, direct heating, and residential heating/cooling systems. This energy source is particularly valuable due to its reliability, as it provides a constant power supply, unlike intermittent renewables such as solar and wind.
How do we access it?
Today, geothermal energy is economically accessible in regions with geological features like tectonic or volcanic activity. It relies on the heat from the Earth, a carrier fluid (typically water), and permeability within rock formations to transfer the heat. When natural permeability is insufficient, techniques like hydraulic fracturing are used to improve fluid flow, enabling more effective heat extraction. However, the depth and temperature required for geothermal systems vary based on location.Geothermal technologies are categorized into two main types:
Conventional Geothermal Resources and Hot Dry Rock Resources, each with distinct applications and depth requirements.Conventional Geothermal Resources — the incumbentGeothermal Heat Pumps: These systems exploit shallow-earth resources where the ground temperature remains stable year-round (7°C — 21°C). Heat pumps are widely used for residential and commercial heating and cooling, requiring shallow drilling to depths ≤180m.
Hydrothermal: These systems use high-temperature reservoirs found at depths ≤2,000m, converting heat into electricity through binary systems (95°C+) or flash steam systems (200°C+). However, hydrothermal plants are resource-constrained as they require naturally existing fluids, heat, and permeability, which limits their application to specific regions. These plants also face high exploration risks due to the unpredictability of subsurface conditions.Today, more than 500 geothermal power plants worldwide generate over 16 gigawatts of energy, with the United States, Indonesia, and the Philippines being the top producers.
Enhanced Geothermal Systems — the new entrants
Open-loop Enhanced Geothermal Systems: These systems create artificial reservoirs by fracturing deep rock layers in the subsurface and injecting water to generate energy from high-temperature heat sources (above 150°C). Open-loop EGS systems are highly scalable and suitable for both residential and utility-scale applications. However, they involve high drilling costs and face challenges related to seismic risks and regulatory constraints, such as fracking bans.
Closed-loop Enhanced Geothermal Systems: Closed-loop EGS relies on an artificial reservoir to circulate a working fluid to extract and store heat. Compared to open-loop, it does not rely as much on permeability or the rocks because there is no fracking involved. Closed-loop systems are considered the future of geothermal energy due to their lower reliance on geological conditions, minimal exploration risks, and reduced environmental impact. However, they require complex and costly drilling techniques.
Why Should We Care about Geothermal?
Geothermal energy holds the potential to decarbonize both energy production and industrial heat applications. Its ability to provide a baseload power supply makes it an attractive solution for stable electricity generation and industrial heat processes. If the U.S. could harness just 2% of the thermal energy available two to six miles beneath the surface, it could generate more than 2,000 times its total annual energy consumption.
Geothermal energy also has a smaller land footprint compared to other power plants. For example, to generate one-gigawatt hour (GWh) of energy, a geothermal plant requires 1,046 square kilometers (404 square miles) of land, while wind energy requires 3,458 square kilometers, solar photovoltaic systems need 8,384 square kilometers, and coal plants consume 9,433 square kilometers for the same amount of energy.
Additionally, geothermal plants can often achieve capacity factors (the ability of a plant to operate at its stated capacity) greater than 80%. This is substantially higher than the capacity factors for hydropower, solar energy, and wind, meaning that capital is deployed very efficiently.
Why Haven’t We Fully Tapped Into Geothermal Energy?
Despite its potential, geothermal energy currently represents just 0.4% of U.S. electricity generation, with a global capacity of 16,355 MW as of 2023. The main barriers to wider adoption include geological, economic, technological, and regulatory challenges.
Geographical and Geological Limitations
Geothermal energy isn’t evenly distributed across the globe. High-temperature resources are typically found in tectonically active areas, such as Iceland, where the geothermal gradient reaches 100°C/km. In contrast, countries like Germany or Poland have much lower gradients of around 30°C/km, making large-scale geothermal projects far less feasible.
High Upfront Costs and Technical Risks
Drilling for geothermal energy is expensive and risky. Wells can cost millions, and there is no guarantee they will produce sufficient heat to make a project viable. For example, a deviation of just 20 centimeters during drilling can double project costs. The technology required for geothermal extraction must also withstand extreme temperatures — sometimes reaching 1,000°C — which quickly degrades equipment, increasing maintenance costs.
Regulatory and Sociopolitical Obstacles
Geothermal projects face significant regulatory hurdles, with permits taking years to secure. Additionally, geothermal energy lacks the political and public support that solar and wind energy enjoy. This absence of a strong advocacy network, combined with skilled labor shortages, slows down innovation and project execution.
Moreover, injecting fluids into the Earth can cause small earthquakes, adding to deployment challenges, especially near urban areas. Geothermal operations can also release toxic gases like hydrogen sulfide, further complicating regulatory approval.
In short, geothermal energy holds immense potential, but its high costs, technical complexity, and regulatory challenges have hindered its widespread adoption. However, with ongoing advancements in technology, geothermal could play a major role in the future of clean energy.
What are some answers to the challenges in harnessing geothermal energy?
Geothermal energy is experiencing significant innovation across various sectors, each addressing core challenges like cost, scalability, and technological complexity. In commercial and residential applications, companies such as Dandelion Energy (2017, backed by GV and Lennar) and Bedrock Energy (2022, backed by Divergent Capital and Climate Capital) are advancing geothermal heat pump technology. These pumps harness stable underground temperatures for efficient heating and cooling, with the potential to reduce U.S. electricity demand by 15% annually and eliminate up to 7 billion metric tons of carbon emissions by 2050. By bringing geothermal systems into homes and businesses, these companies are making sustainable energy more accessible and affordable for widespread use.
In the utility-scale geothermal sector, companies like Fervo Energy (2017, backed by Breakthrough Energy Ventures and Capricorn Investment Group) are pioneering technologies that improve geothermal plant flexibility. By developing advanced reservoir engineering techniques, Fervo enables geothermal plants to operate as long-duration energy storage systems, helping to balance the intermittent nature of wind and solar power. Their recent $244 million Series D funding will be used to scale these innovations. Geothermal’s role as a reliable baseload power source complements other renewables, ensuring grid stability and resilience.
The advanced drilling and fracturing technologies segment is key to unlocking deeper geothermal resources. Quaise Energy (2018, backed by Collaborative Fund, Engine, and Prelude Ventures) is pushing the boundaries with millimeter-wave drilling, aiming to reach unprecedented depths. With $70 million Series A funding, they plan to drill up to 20 kilometers into the Earth’s crust. Other companies like GA Drilling (2008, backed by Planet A) and Earth Grid are developing plasma-based drilling methods, which could significantly reduce geothermal development costs. Eden Geopower (2017, backed by TechEnergy Ventures) is focusing on using high-voltage electricity to enhance fracture permeability, making geothermal systems more efficient without the environmental risks of traditional hydraulic fracturing.
In the closed-loop systems sector, companies are innovating to eliminate the need for natural geothermal reservoirs. Eavor Technologies (2017, backed by Microsoft Climate Fund) is leading this charge with their EavorLoop technology, which raised C$182 million to scale. This system circulates a working fluid through a closed loop, transferring heat without relying on natural geothermal formations. By eliminating the need for fracking and reducing environmental impact, closed-loop systems are expanding geothermal’s potential to new regions. XGS Energy (2008, backed by VoLo Earth Ventures) is another key player, focusing on reusing water in closed-loop systems to further enhance efficiency.
Additionally, companies are looking to repurpose existing infrastructure for geothermal use. AltaRock Energy (2007, backed by Khosla Ventures and Kleiner Perkins) is exploring ways to convert fossil fuel power plants into geothermal facilities, leveraging existing infrastructure to reduce costs and environmental impact. Similarly, Gradient Geothermal (2020) and Critical Energy (2024, backed by Climate Capital) are adapting oil, gas, and coal plant technologies for geothermal applications, allowing these plants to transition smoothly to renewable energy production.
Finally, exploration and risk mitigation technologies are advancing to reduce the financial risks associated with geothermal drilling. Zanskar (2019, backed by Lower Carbon Capital) and Optic Earth (2019, backed by Deep Science Ventures) are developing detailed geothermal resource maps and advanced sensing tools to improve the success rate of geothermal exploration. These innovations could dramatically lower the upfront costs of geothermal projects, making the energy source more attractive to investors and more feasible in regions previously considered unviable.
This diverse array of technological advancements and innovative companies is driving geothermal energy toward broader adoption, addressing the key challenges and making it a critical player in the global shift toward renewable energy.
Here at Pace Ventures, we’re particularly excited about the potential of enabling technologies — like advanced drilling and downhole sensing — that could transform how we tap into geothermal resources. Innovations in geothermal resource mapping are also key, as they significantly lower risks and make projects more financially accessible. Finally, the ability to mobilize existing technologies from the oil and gas sectors presents a powerful opportunity to drive broader adoption, making it an attractive space for companies looking to diversify into clean energy.
Conclusion
Geothermal energy holds enormous potential, but realizing its full promise will require significant financial and political commitment. While the idea of tapping into the Earth’s limitless heat is exciting, major challenges remain. The technology is progressing, but we’re not there yet. Geothermal’s key advantage is its ability to provide reliable, round-the-clock power — unlike intermittent sources like solar and wind. Its low environmental impact and consistent energy output make it vital for a sustainable energy future. However, to scale geothermal, we must go beyond regions with natural advantages and start tapping into deeper, hotter reservoirs.
We’re at a tipping point where continued investment, innovation, and policy support could make geothermal a cornerstone of global energy. Geothermal plants offer low emissions and minimal land use, with widespread adoption of heat pumps potentially cutting U.S. electricity demand by 15% and eliminating 7 billion metric tons of carbon emissions by 2050.
Collaboration between the private sector, governments, and international partners is essential. R&D investment is critical to reduce costs and improve efficiency, and startups will drive much of the innovation needed to scale geothermal. With the right mix of investment, innovation, and policy, geothermal could become a major pillar in the global shift to cleaner, more resilient energy sources.
TL;DR:
Geothermal energy is a reliable, renewable power source that harnesses the Earth’s internal heat for electricity generation and heating, offering constant, baseload energy, unlike solar or wind.
Emerging technologies, such as Enhanced Geothermal Systems (EGS) and advanced drilling, are expanding geothermal potential, making it accessible in more locations and lowering environmental risks.
Challenges remain, including high upfront costs, regulatory hurdles, and technical risks, which have limited geothermal to just 0.4% of U.S. electricity generation.
Our take: We’re excited about enabling technologies, particularly in advanced drilling and geothermal resource mapping, which could significantly reduce risks and costs, making geothermal an attractive area for investment and expansion.
Introduction
The world’s energy needs are growing fast, and while oil and gas have powered much of our progress for over a century, it’s come with a heavy environmental cost. Even now, 81.5% of global energy still comes from fossil fuels, driving climate change. As the impacts become more visible, the push for cleaner, more sustainable energy sources is stronger than ever.
But what if the solution has been right under our feet all along? Beneath the Earth’s surface lies an enormous source of heat, and tapping into even 0.1% of it could power the world for millions of years. Unlike solar and wind, geothermal energy provides constant, reliable power.
So, why aren’t we using more of it? In this article, we’ll break down what geothermal energy is, where the industry stands today, and the exciting innovations that could unlock its vast potential.
What is Geothermal Energy?
Geothermal energy is a renewable and sustainable source of heat and electricity derived from the Earth’s internal heat. It can be harnessed for various applications, including electricity generation, direct heating, and residential heating/cooling systems. This energy source is particularly valuable due to its reliability, as it provides a constant power supply, unlike intermittent renewables such as solar and wind.
How do we access it?
Today, geothermal energy is economically accessible in regions with geological features like tectonic or volcanic activity. It relies on the heat from the Earth, a carrier fluid (typically water), and permeability within rock formations to transfer the heat. When natural permeability is insufficient, techniques like hydraulic fracturing are used to improve fluid flow, enabling more effective heat extraction. However, the depth and temperature required for geothermal systems vary based on location.Geothermal technologies are categorized into two main types:
Conventional Geothermal Resources and Hot Dry Rock Resources, each with distinct applications and depth requirements.Conventional Geothermal Resources — the incumbentGeothermal Heat Pumps: These systems exploit shallow-earth resources where the ground temperature remains stable year-round (7°C — 21°C). Heat pumps are widely used for residential and commercial heating and cooling, requiring shallow drilling to depths ≤180m.
Hydrothermal: These systems use high-temperature reservoirs found at depths ≤2,000m, converting heat into electricity through binary systems (95°C+) or flash steam systems (200°C+). However, hydrothermal plants are resource-constrained as they require naturally existing fluids, heat, and permeability, which limits their application to specific regions. These plants also face high exploration risks due to the unpredictability of subsurface conditions.Today, more than 500 geothermal power plants worldwide generate over 16 gigawatts of energy, with the United States, Indonesia, and the Philippines being the top producers.
Enhanced Geothermal Systems — the new entrants
Open-loop Enhanced Geothermal Systems: These systems create artificial reservoirs by fracturing deep rock layers in the subsurface and injecting water to generate energy from high-temperature heat sources (above 150°C). Open-loop EGS systems are highly scalable and suitable for both residential and utility-scale applications. However, they involve high drilling costs and face challenges related to seismic risks and regulatory constraints, such as fracking bans.
Closed-loop Enhanced Geothermal Systems: Closed-loop EGS relies on an artificial reservoir to circulate a working fluid to extract and store heat. Compared to open-loop, it does not rely as much on permeability or the rocks because there is no fracking involved. Closed-loop systems are considered the future of geothermal energy due to their lower reliance on geological conditions, minimal exploration risks, and reduced environmental impact. However, they require complex and costly drilling techniques.
Why Should We Care about Geothermal?
Geothermal energy holds the potential to decarbonize both energy production and industrial heat applications. Its ability to provide a baseload power supply makes it an attractive solution for stable electricity generation and industrial heat processes. If the U.S. could harness just 2% of the thermal energy available two to six miles beneath the surface, it could generate more than 2,000 times its total annual energy consumption.
Geothermal energy also has a smaller land footprint compared to other power plants. For example, to generate one-gigawatt hour (GWh) of energy, a geothermal plant requires 1,046 square kilometers (404 square miles) of land, while wind energy requires 3,458 square kilometers, solar photovoltaic systems need 8,384 square kilometers, and coal plants consume 9,433 square kilometers for the same amount of energy.
Additionally, geothermal plants can often achieve capacity factors (the ability of a plant to operate at its stated capacity) greater than 80%. This is substantially higher than the capacity factors for hydropower, solar energy, and wind, meaning that capital is deployed very efficiently.
Why Haven’t We Fully Tapped Into Geothermal Energy?
Despite its potential, geothermal energy currently represents just 0.4% of U.S. electricity generation, with a global capacity of 16,355 MW as of 2023. The main barriers to wider adoption include geological, economic, technological, and regulatory challenges.
Geographical and Geological Limitations
Geothermal energy isn’t evenly distributed across the globe. High-temperature resources are typically found in tectonically active areas, such as Iceland, where the geothermal gradient reaches 100°C/km. In contrast, countries like Germany or Poland have much lower gradients of around 30°C/km, making large-scale geothermal projects far less feasible.
High Upfront Costs and Technical Risks
Drilling for geothermal energy is expensive and risky. Wells can cost millions, and there is no guarantee they will produce sufficient heat to make a project viable. For example, a deviation of just 20 centimeters during drilling can double project costs. The technology required for geothermal extraction must also withstand extreme temperatures — sometimes reaching 1,000°C — which quickly degrades equipment, increasing maintenance costs.
Regulatory and Sociopolitical Obstacles
Geothermal projects face significant regulatory hurdles, with permits taking years to secure. Additionally, geothermal energy lacks the political and public support that solar and wind energy enjoy. This absence of a strong advocacy network, combined with skilled labor shortages, slows down innovation and project execution.
Moreover, injecting fluids into the Earth can cause small earthquakes, adding to deployment challenges, especially near urban areas. Geothermal operations can also release toxic gases like hydrogen sulfide, further complicating regulatory approval.
In short, geothermal energy holds immense potential, but its high costs, technical complexity, and regulatory challenges have hindered its widespread adoption. However, with ongoing advancements in technology, geothermal could play a major role in the future of clean energy.
What are some answers to the challenges in harnessing geothermal energy?
Geothermal energy is experiencing significant innovation across various sectors, each addressing core challenges like cost, scalability, and technological complexity. In commercial and residential applications, companies such as Dandelion Energy (2017, backed by GV and Lennar) and Bedrock Energy (2022, backed by Divergent Capital and Climate Capital) are advancing geothermal heat pump technology. These pumps harness stable underground temperatures for efficient heating and cooling, with the potential to reduce U.S. electricity demand by 15% annually and eliminate up to 7 billion metric tons of carbon emissions by 2050. By bringing geothermal systems into homes and businesses, these companies are making sustainable energy more accessible and affordable for widespread use.
In the utility-scale geothermal sector, companies like Fervo Energy (2017, backed by Breakthrough Energy Ventures and Capricorn Investment Group) are pioneering technologies that improve geothermal plant flexibility. By developing advanced reservoir engineering techniques, Fervo enables geothermal plants to operate as long-duration energy storage systems, helping to balance the intermittent nature of wind and solar power. Their recent $244 million Series D funding will be used to scale these innovations. Geothermal’s role as a reliable baseload power source complements other renewables, ensuring grid stability and resilience.
The advanced drilling and fracturing technologies segment is key to unlocking deeper geothermal resources. Quaise Energy (2018, backed by Collaborative Fund, Engine, and Prelude Ventures) is pushing the boundaries with millimeter-wave drilling, aiming to reach unprecedented depths. With $70 million Series A funding, they plan to drill up to 20 kilometers into the Earth’s crust. Other companies like GA Drilling (2008, backed by Planet A) and Earth Grid are developing plasma-based drilling methods, which could significantly reduce geothermal development costs. Eden Geopower (2017, backed by TechEnergy Ventures) is focusing on using high-voltage electricity to enhance fracture permeability, making geothermal systems more efficient without the environmental risks of traditional hydraulic fracturing.
In the closed-loop systems sector, companies are innovating to eliminate the need for natural geothermal reservoirs. Eavor Technologies (2017, backed by Microsoft Climate Fund) is leading this charge with their EavorLoop technology, which raised C$182 million to scale. This system circulates a working fluid through a closed loop, transferring heat without relying on natural geothermal formations. By eliminating the need for fracking and reducing environmental impact, closed-loop systems are expanding geothermal’s potential to new regions. XGS Energy (2008, backed by VoLo Earth Ventures) is another key player, focusing on reusing water in closed-loop systems to further enhance efficiency.
Additionally, companies are looking to repurpose existing infrastructure for geothermal use. AltaRock Energy (2007, backed by Khosla Ventures and Kleiner Perkins) is exploring ways to convert fossil fuel power plants into geothermal facilities, leveraging existing infrastructure to reduce costs and environmental impact. Similarly, Gradient Geothermal (2020) and Critical Energy (2024, backed by Climate Capital) are adapting oil, gas, and coal plant technologies for geothermal applications, allowing these plants to transition smoothly to renewable energy production.
Finally, exploration and risk mitigation technologies are advancing to reduce the financial risks associated with geothermal drilling. Zanskar (2019, backed by Lower Carbon Capital) and Optic Earth (2019, backed by Deep Science Ventures) are developing detailed geothermal resource maps and advanced sensing tools to improve the success rate of geothermal exploration. These innovations could dramatically lower the upfront costs of geothermal projects, making the energy source more attractive to investors and more feasible in regions previously considered unviable.
This diverse array of technological advancements and innovative companies is driving geothermal energy toward broader adoption, addressing the key challenges and making it a critical player in the global shift toward renewable energy.
Here at Pace Ventures, we’re particularly excited about the potential of enabling technologies — like advanced drilling and downhole sensing — that could transform how we tap into geothermal resources. Innovations in geothermal resource mapping are also key, as they significantly lower risks and make projects more financially accessible. Finally, the ability to mobilize existing technologies from the oil and gas sectors presents a powerful opportunity to drive broader adoption, making it an attractive space for companies looking to diversify into clean energy.
Conclusion
Geothermal energy holds enormous potential, but realizing its full promise will require significant financial and political commitment. While the idea of tapping into the Earth’s limitless heat is exciting, major challenges remain. The technology is progressing, but we’re not there yet. Geothermal’s key advantage is its ability to provide reliable, round-the-clock power — unlike intermittent sources like solar and wind. Its low environmental impact and consistent energy output make it vital for a sustainable energy future. However, to scale geothermal, we must go beyond regions with natural advantages and start tapping into deeper, hotter reservoirs.
We’re at a tipping point where continued investment, innovation, and policy support could make geothermal a cornerstone of global energy. Geothermal plants offer low emissions and minimal land use, with widespread adoption of heat pumps potentially cutting U.S. electricity demand by 15% and eliminating 7 billion metric tons of carbon emissions by 2050.
Collaboration between the private sector, governments, and international partners is essential. R&D investment is critical to reduce costs and improve efficiency, and startups will drive much of the innovation needed to scale geothermal. With the right mix of investment, innovation, and policy, geothermal could become a major pillar in the global shift to cleaner, more resilient energy sources.
TL;DR:
Geothermal energy is a reliable, renewable power source that harnesses the Earth’s internal heat for electricity generation and heating, offering constant, baseload energy, unlike solar or wind.
Emerging technologies, such as Enhanced Geothermal Systems (EGS) and advanced drilling, are expanding geothermal potential, making it accessible in more locations and lowering environmental risks.
Challenges remain, including high upfront costs, regulatory hurdles, and technical risks, which have limited geothermal to just 0.4% of U.S. electricity generation.
Our take: We’re excited about enabling technologies, particularly in advanced drilling and geothermal resource mapping, which could significantly reduce risks and costs, making geothermal an attractive area for investment and expansion.
Introduction
The world’s energy needs are growing fast, and while oil and gas have powered much of our progress for over a century, it’s come with a heavy environmental cost. Even now, 81.5% of global energy still comes from fossil fuels, driving climate change. As the impacts become more visible, the push for cleaner, more sustainable energy sources is stronger than ever.
But what if the solution has been right under our feet all along? Beneath the Earth’s surface lies an enormous source of heat, and tapping into even 0.1% of it could power the world for millions of years. Unlike solar and wind, geothermal energy provides constant, reliable power.
So, why aren’t we using more of it? In this article, we’ll break down what geothermal energy is, where the industry stands today, and the exciting innovations that could unlock its vast potential.
What is Geothermal Energy?
Geothermal energy is a renewable and sustainable source of heat and electricity derived from the Earth’s internal heat. It can be harnessed for various applications, including electricity generation, direct heating, and residential heating/cooling systems. This energy source is particularly valuable due to its reliability, as it provides a constant power supply, unlike intermittent renewables such as solar and wind.
How do we access it?
Today, geothermal energy is economically accessible in regions with geological features like tectonic or volcanic activity. It relies on the heat from the Earth, a carrier fluid (typically water), and permeability within rock formations to transfer the heat. When natural permeability is insufficient, techniques like hydraulic fracturing are used to improve fluid flow, enabling more effective heat extraction. However, the depth and temperature required for geothermal systems vary based on location.Geothermal technologies are categorized into two main types:
Conventional Geothermal Resources and Hot Dry Rock Resources, each with distinct applications and depth requirements.Conventional Geothermal Resources — the incumbentGeothermal Heat Pumps: These systems exploit shallow-earth resources where the ground temperature remains stable year-round (7°C — 21°C). Heat pumps are widely used for residential and commercial heating and cooling, requiring shallow drilling to depths ≤180m.
Hydrothermal: These systems use high-temperature reservoirs found at depths ≤2,000m, converting heat into electricity through binary systems (95°C+) or flash steam systems (200°C+). However, hydrothermal plants are resource-constrained as they require naturally existing fluids, heat, and permeability, which limits their application to specific regions. These plants also face high exploration risks due to the unpredictability of subsurface conditions.Today, more than 500 geothermal power plants worldwide generate over 16 gigawatts of energy, with the United States, Indonesia, and the Philippines being the top producers.
Enhanced Geothermal Systems — the new entrants
Open-loop Enhanced Geothermal Systems: These systems create artificial reservoirs by fracturing deep rock layers in the subsurface and injecting water to generate energy from high-temperature heat sources (above 150°C). Open-loop EGS systems are highly scalable and suitable for both residential and utility-scale applications. However, they involve high drilling costs and face challenges related to seismic risks and regulatory constraints, such as fracking bans.
Closed-loop Enhanced Geothermal Systems: Closed-loop EGS relies on an artificial reservoir to circulate a working fluid to extract and store heat. Compared to open-loop, it does not rely as much on permeability or the rocks because there is no fracking involved. Closed-loop systems are considered the future of geothermal energy due to their lower reliance on geological conditions, minimal exploration risks, and reduced environmental impact. However, they require complex and costly drilling techniques.
Why Should We Care about Geothermal?
Geothermal energy holds the potential to decarbonize both energy production and industrial heat applications. Its ability to provide a baseload power supply makes it an attractive solution for stable electricity generation and industrial heat processes. If the U.S. could harness just 2% of the thermal energy available two to six miles beneath the surface, it could generate more than 2,000 times its total annual energy consumption.
Geothermal energy also has a smaller land footprint compared to other power plants. For example, to generate one-gigawatt hour (GWh) of energy, a geothermal plant requires 1,046 square kilometers (404 square miles) of land, while wind energy requires 3,458 square kilometers, solar photovoltaic systems need 8,384 square kilometers, and coal plants consume 9,433 square kilometers for the same amount of energy.
Additionally, geothermal plants can often achieve capacity factors (the ability of a plant to operate at its stated capacity) greater than 80%. This is substantially higher than the capacity factors for hydropower, solar energy, and wind, meaning that capital is deployed very efficiently.
Why Haven’t We Fully Tapped Into Geothermal Energy?
Despite its potential, geothermal energy currently represents just 0.4% of U.S. electricity generation, with a global capacity of 16,355 MW as of 2023. The main barriers to wider adoption include geological, economic, technological, and regulatory challenges.
Geographical and Geological Limitations
Geothermal energy isn’t evenly distributed across the globe. High-temperature resources are typically found in tectonically active areas, such as Iceland, where the geothermal gradient reaches 100°C/km. In contrast, countries like Germany or Poland have much lower gradients of around 30°C/km, making large-scale geothermal projects far less feasible.
High Upfront Costs and Technical Risks
Drilling for geothermal energy is expensive and risky. Wells can cost millions, and there is no guarantee they will produce sufficient heat to make a project viable. For example, a deviation of just 20 centimeters during drilling can double project costs. The technology required for geothermal extraction must also withstand extreme temperatures — sometimes reaching 1,000°C — which quickly degrades equipment, increasing maintenance costs.
Regulatory and Sociopolitical Obstacles
Geothermal projects face significant regulatory hurdles, with permits taking years to secure. Additionally, geothermal energy lacks the political and public support that solar and wind energy enjoy. This absence of a strong advocacy network, combined with skilled labor shortages, slows down innovation and project execution.
Moreover, injecting fluids into the Earth can cause small earthquakes, adding to deployment challenges, especially near urban areas. Geothermal operations can also release toxic gases like hydrogen sulfide, further complicating regulatory approval.
In short, geothermal energy holds immense potential, but its high costs, technical complexity, and regulatory challenges have hindered its widespread adoption. However, with ongoing advancements in technology, geothermal could play a major role in the future of clean energy.
What are some answers to the challenges in harnessing geothermal energy?
Geothermal energy is experiencing significant innovation across various sectors, each addressing core challenges like cost, scalability, and technological complexity. In commercial and residential applications, companies such as Dandelion Energy (2017, backed by GV and Lennar) and Bedrock Energy (2022, backed by Divergent Capital and Climate Capital) are advancing geothermal heat pump technology. These pumps harness stable underground temperatures for efficient heating and cooling, with the potential to reduce U.S. electricity demand by 15% annually and eliminate up to 7 billion metric tons of carbon emissions by 2050. By bringing geothermal systems into homes and businesses, these companies are making sustainable energy more accessible and affordable for widespread use.
In the utility-scale geothermal sector, companies like Fervo Energy (2017, backed by Breakthrough Energy Ventures and Capricorn Investment Group) are pioneering technologies that improve geothermal plant flexibility. By developing advanced reservoir engineering techniques, Fervo enables geothermal plants to operate as long-duration energy storage systems, helping to balance the intermittent nature of wind and solar power. Their recent $244 million Series D funding will be used to scale these innovations. Geothermal’s role as a reliable baseload power source complements other renewables, ensuring grid stability and resilience.
The advanced drilling and fracturing technologies segment is key to unlocking deeper geothermal resources. Quaise Energy (2018, backed by Collaborative Fund, Engine, and Prelude Ventures) is pushing the boundaries with millimeter-wave drilling, aiming to reach unprecedented depths. With $70 million Series A funding, they plan to drill up to 20 kilometers into the Earth’s crust. Other companies like GA Drilling (2008, backed by Planet A) and Earth Grid are developing plasma-based drilling methods, which could significantly reduce geothermal development costs. Eden Geopower (2017, backed by TechEnergy Ventures) is focusing on using high-voltage electricity to enhance fracture permeability, making geothermal systems more efficient without the environmental risks of traditional hydraulic fracturing.
In the closed-loop systems sector, companies are innovating to eliminate the need for natural geothermal reservoirs. Eavor Technologies (2017, backed by Microsoft Climate Fund) is leading this charge with their EavorLoop technology, which raised C$182 million to scale. This system circulates a working fluid through a closed loop, transferring heat without relying on natural geothermal formations. By eliminating the need for fracking and reducing environmental impact, closed-loop systems are expanding geothermal’s potential to new regions. XGS Energy (2008, backed by VoLo Earth Ventures) is another key player, focusing on reusing water in closed-loop systems to further enhance efficiency.
Additionally, companies are looking to repurpose existing infrastructure for geothermal use. AltaRock Energy (2007, backed by Khosla Ventures and Kleiner Perkins) is exploring ways to convert fossil fuel power plants into geothermal facilities, leveraging existing infrastructure to reduce costs and environmental impact. Similarly, Gradient Geothermal (2020) and Critical Energy (2024, backed by Climate Capital) are adapting oil, gas, and coal plant technologies for geothermal applications, allowing these plants to transition smoothly to renewable energy production.
Finally, exploration and risk mitigation technologies are advancing to reduce the financial risks associated with geothermal drilling. Zanskar (2019, backed by Lower Carbon Capital) and Optic Earth (2019, backed by Deep Science Ventures) are developing detailed geothermal resource maps and advanced sensing tools to improve the success rate of geothermal exploration. These innovations could dramatically lower the upfront costs of geothermal projects, making the energy source more attractive to investors and more feasible in regions previously considered unviable.
This diverse array of technological advancements and innovative companies is driving geothermal energy toward broader adoption, addressing the key challenges and making it a critical player in the global shift toward renewable energy.
Here at Pace Ventures, we’re particularly excited about the potential of enabling technologies — like advanced drilling and downhole sensing — that could transform how we tap into geothermal resources. Innovations in geothermal resource mapping are also key, as they significantly lower risks and make projects more financially accessible. Finally, the ability to mobilize existing technologies from the oil and gas sectors presents a powerful opportunity to drive broader adoption, making it an attractive space for companies looking to diversify into clean energy.
Conclusion
Geothermal energy holds enormous potential, but realizing its full promise will require significant financial and political commitment. While the idea of tapping into the Earth’s limitless heat is exciting, major challenges remain. The technology is progressing, but we’re not there yet. Geothermal’s key advantage is its ability to provide reliable, round-the-clock power — unlike intermittent sources like solar and wind. Its low environmental impact and consistent energy output make it vital for a sustainable energy future. However, to scale geothermal, we must go beyond regions with natural advantages and start tapping into deeper, hotter reservoirs.
We’re at a tipping point where continued investment, innovation, and policy support could make geothermal a cornerstone of global energy. Geothermal plants offer low emissions and minimal land use, with widespread adoption of heat pumps potentially cutting U.S. electricity demand by 15% and eliminating 7 billion metric tons of carbon emissions by 2050.
Collaboration between the private sector, governments, and international partners is essential. R&D investment is critical to reduce costs and improve efficiency, and startups will drive much of the innovation needed to scale geothermal. With the right mix of investment, innovation, and policy, geothermal could become a major pillar in the global shift to cleaner, more resilient energy sources.