The Geothermal Opportunity
The Earth beneath our feet holds an almost comically simple solution to our energy problems. Drill down a few kilometers anywhere on the planet and you’ll find temperatures hot enough to boil water.
Run that water through a turbine, generate electricity, reinject the cooled water into the ground, repeat. No fuel needed. No emissions. Just heat from the planet’s molten core, which will remain hot for billions of years – long after anyone stops caring about quarterly earnings reports.
This isn’t some exotic technology. Humans have been harnessing geothermal energy for millennia. The ancient Romans built elaborate bath complexes over hot springs. In the 14th century, residents of Chaudes-Aigues in France piped geothermal water through the world’s first district heating system. The Maori of New Zealand cooked food in geothermal steam pits for centuries before European contact.
In 1904, an Italian prince named Piero Ginori Conti successfully powered five light bulbs with geothermal power in Larderello, Italy – the first time geothermal energy had been converted to electrical power anywhere on Earth.
That should have been the beginning of a revolution. Instead, geothermal power has spent the past century as energy’s perennial also-ran. Modern deployment creeps forward slowly, highly concentrated in a handful of countries blessed with obvious volcanic geology. Kenya and Iceland lead the list of countries where geothermal plays an outsized role, by virtue of being located on tectonic plate boundaries where the Earth’s heat rises closest to the surface. The list traditionally also includes El Salvador, New Zealand and Nicaragua, all in locales with similar geological features.
Meanwhile, 80 percent of geothermal energy consumed globally goes to heating and cooling, 20 percent to electricity generation. While the two technologies have fundamental differences, there’s a clear link – even if just in people’s imagination. The pools of Iceland’s Blue Lagoon are perhaps the most famous example of the broader benefits of geothermal power. Indeed, the pools of the outdoor spa operational throughout Iceland’s dark, cold winters are filled with the pristine-clean waste water of one of HS Orka’s power plants. These brine pools now attract so many paying tourists that they account for a sizable portion of the energy company’s revenues.
By now we know that geothermal’s potential extends well beyond happenstance based on winning the geological lottery – spectacular where you can find it, useless everywhere else. Recent drilling innovations, particularly those borrowed and adapted from the oil and gas industry, are making it increasingly viable to tap geothermal resources in ordinary geology beneath ordinary places. Not just in volcanic hotspots, but places where people live and work. Under Iowa. Under Germany. Perhaps under most of the planet’s surface.
The Quiet Revolution
While solar panels have been leading the renewables revolution, geothermal heating and cooling have been scaling up with minimal fanfare. Global geothermal heating and cooling capacity now exceeds 170,000 thermal megawatts and is on path to almost double by mid-century. More than half of that installed capacity, and around half of the expected growth, is in China alone – though Iceland still holds the crown for the highest capacity per capita by far. This isn’t speculative future capacity. These are systems operating today, keeping buildings comfortably warm with direct heat produced without burning fossil fuels.
The economics are compelling, and it begins with the physics. Ground-source heat pumps exploit the fact that underground temperatures remain relatively constant year-round – cool in summer, warm in winter compared to surface air. Moving heat is thermodynamically cheaper than creating it through combustion. For heating applications, geothermal systems can easily achieve efficiencies of 300-400 percent, with some advanced technologies reaching 600 percent or more. The theoretical maximum for a gas furnace is 100 percent, the practical around 95 percent – meaning that heat pumps deliver three to four or more units of heat for every unit of electricity consumed. Physics, not wishful thinking.
Heating demand from geothermal sources is projected to nearly double by 2050, driven primarily by three factors. First, district heating systems in cold climates, where geothermal can displace fossil fuel boilers that currently spew carbon into urban airsheds. Second, residential and commercial buildings adopting ground-source heat pumps as costs fall and carbon-sparing policies tighten. Third, and most significantly, China’s aggressive coal-to-heat replacement policies, which aim to eliminate the small-scale coal boilers that have choked Chinese cities in toxic smog for decades along with delivering their portion of greenhouse gas.
The Xiong’an district heating project illustrates what’s possible when policy, state-owned enterprises and finance align. Located in Hebei Province near Beijing, Xiong’an has replaced nearly all its coal-fired heating with geothermal energy, serving almost a million residents. The project didn’t succeed through market forces alone – it required government mandates, subsidized drilling, and the muscle of China’s state-owned oil companies repurposing their expertise toward heat extraction. The result is a replicable model that China is now deploying across dozens of cities.
In the United States, similar projects are emerging through thermal energy networks: shared, ambient-temperature geothermal loops that connect multiple buildings with clean thermal infrastructure. Pilot projects, such as Colorado Mesa University’s campus-scale system and utility-owned networks in Massachusetts, demonstrate how pairing diverse building loads on a centralized loop can cut emissions and stabilize energy costs when supported by policy and financing.
This matters because heating represents a massive slice of global energy consumption and carbon emissions. In cold climates, heating can account for 50 percent or more of building energy use. Electrifying heating with renewables is part of the answer. However, heating demand peaks on cold winter evenings when direct solar output falls to zero and wind may or may not cooperate. Batteries help, but geothermal neatly sidesteps this problem – or perhaps better, nicely complements more standard approaches. Geothermal heat is both clean and firm – always on, weather-independent, season-independent, ready when needed. And what goes for geothermal heating and cooling applications goes equally for geothermal electric power.
Baseload Power Without Compromise
If geothermal heating is the quiet success story, geothermal electricity generation is the promising underachiever. Current global capacity sits at around 17 gigawatts – a rounding error compared to solar or wind. Conventional geothermal power plants are geographically constrained to rare hydrothermal reservoirs, typically found along the Pacific Ring of Fire and rift zones where tectonic activity brings hot water or steam close enough to the surface to tap economically.
This geographic lottery has relegated geothermal to niche status in most energy planning. If you’re not sitting on a hydrothermal reservoir, conventional wisdom says geothermal power isn’t an option. Better to build solar and wind instead, add batteries to handle intermittency. But this approach ignores geothermal’s rare combination of attributes that no other renewable energy source can match.
Geothermal power is firm, meaning it delivers consistent output on demand. It operates 24/7, unaffected by clouds, darkness, calm air or seasons. There is no need for a nuclear non-proliferation treaty to try to rein in military uses of the technology. It’s zerocarbon once built. It has extraordinarily low land-use intensity – a geothermal plant occupies a fraction of the land required for equivalent solar or wind capacity. Thanks to low downtime, capacity factors typically exceed 90 percent, compared to 25 to 30 percent for solar and 35 percent for wind. This turns geothermal into a backup power source for renewables, or simply baseload power to begin with.
The system-level implications are profound. Clean grids of the future with substantial geothermal capacity will need far less renewables overbuild or battery storage than ones without any clean, firm power. Right now, geothermal means less backup gas or – god forbid – coal. A simple levelized-cost comparison that treats all kilowatt-hours as equivalent regardless of when they’re delivered, is thus unlikely to show the full system-level benefits of power that requires no storage or backup and little land to boot.
The real excitement lies in next-generation geothermal technologies that could break free from geographic constraints entirely. Enhanced geothermal systems, closed-loop systems, and superhot rock drilling could expand geothermal power to most regions globally and unlock hundreds of gigawatts of potential capacity. The heat content in the upper 10 kilometers of Earth’s crust contains roughly 50,000 times more energy than all the world’s oil and gas resources combined. We’re not talking about eking out a few percentage points of our energy mix. We’re talking about a resource base that could, in principle, power human civilization for millennia.
Enhanced geothermal systems work by creating reservoirs in hot rock that lacks natural permeability. Drill down to the rock, fracture it hydraulically, inject water into one well, collect steam or hot water from another. The technology mirrors hydraulic fracturing techniques developed for shale gas – controversial in that context for good reason, but applied here to create a zero-carbon energy source. Closed-loop systems go further, circulating fluid through a sealed wellbore that extracts heat through conduction alone, eliminating any interaction with groundwater or need for permeable geology. Superhot rock drilling targets temperatures above 374°C where water becomes supercritical, dramatically increasing energy output per well.
These aren’t fantasies. Multiple companies are drilling, testing and demonstrating these technologies right now. Fervo Energy has operated enhanced geothermal systems in Nevada. Eavor has built closed-loop systems in Canada and Germany. The learning curves that drove down costs in solar and wind can and should apply to geothermal. Early projects are expensive; later ones cost a fraction. The big question is whether – when – we’ll fund enough early projects to move far enough down that cost curve for geothermal to take off.
The Barriers That Bind
The barriers to scaling geothermal are real, interconnected, but solvable with sufficient policy attention and capital.
Exploration risk dominates. Tens of millions of dollars need to get spent upfront before confirming a viable resource. Failed wells can exceed $10 million per site, and earlystage projects might drill multiple failed wells before finding success or giving up. This adds up to an unattractive risk profile for investors – huge upfront capital requirements with binary outcomes and years before any revenue.
Oil and gas exploration faces similar risks, but those industries have mature financing mechanisms, government support and decades of risk pooling to spread exposure. Geothermal has none of this institutional infrastructure.
Drilling costs make up 35-40 percent of total project capital expenditure and represent the largest source of levelized cost variability. A well projected to cost $5 million instead of $8 million can mean the difference between a project that attracts financing and one that dies in the planning stage. Incremental improvements in drilling speed, reliability and cost effectiveness compound rapidly over the life of an industry. Yet geothermal drilling gets a tiny fraction of the innovation funding that upstream oil and gas commands, despite the technologies being largely transferable.
Players on the frontier of drilling technology are showing what’s possible. Quaise’s millimeter-wave technology vaporizes rock without mechanical contact, potentially reaching superhot depths much faster than conventional methods. GA Drilling’s plasma-based drilling system cuts through hard rock faster than conventional rotary drilling. HyperSciences uses projectiles accelerated to hypersonic speeds to pulverize rock. These approaches sound exotic, but they’re reaching pilot and field-testing stages, demonstrating real potential to slash drilling costs and enable geothermal access in more problematic geology.
Geographic dependence remains a constraint for conventional hydrothermal resources, though next-generation technologies are loosening this straitjacket. Still, the best near-term opportunities cluster in regions with favorable geology, and those regions aren’t always close to demand centers. Long-distance electricity transmission adds cost and complexity, though geothermal’s firm output makes it more valuable for transmission investment than intermittent sources that might not deliver during peak demand.
Financing challenges extend beyond exploration risk. Geothermal projects have long lead times – five to 10 years from initial exploration to commercial operation. Developers need patient capital willing to wait years for returns. Traditional project finance requires proven resources and stable revenues before committing, creating a classic chicken-and-egg problem. Government-backed insurance schemes, modeled on those used for nuclear power and large infrastructure projects, could mitigate exploration risk and unlock private capital. Blended finance structures mixing concessional public funding with commercial investment could bridge the gap until track records accumulate. These mechanisms exist in other sectors; geothermal needs them, too.
Workforce bottlenecks slow deployment even where resources exist and financing is available. The skilled workforce for geothermal drilling overlaps with oil and gas: drilling engineers, geologists, rig operators, completion specialists. As the energy transition accelerates, these workers face an uncertain future in fossil fuel extraction. Geothermal offers a natural landing spot, but workforce development requires coordination between industry, government and educational institutions. Drilling schools need to train for geothermal applications. Certification programs must recognize geothermal-specific skills. Veterans of oil and gas need pathways to transition their expertise toward heat extraction.
Permitting, for its part, represents a Kafkaesque maze that varies wildly by jurisdiction. In the United States, a geothermal project might require permits from federal, state and local agencies covering environmental review, water rights, land use, drilling operations and more. Timeline uncertainty kills projects – developers can’t commit capital without knowing when they might begin drilling. Streamlined permitting that reflects geothermal’s low environmental footprint would accelerate deployment, but reform requires political will and bureaucratic cooperation that’s often absent.
The Oil and Gas Industry to the Rescue?
Here’s where things get interesting and a bit uncomfortable. The industry with the deepest expertise in subsurface drilling, reservoir engineering and resource extraction as well as a decades-long record of effectively lobbying for what it needs is precisely the one that clean-energy fiends are trying to phase out – and for good reasons. Oil and gas companies possess the technical capability, workforce, equipment and financial resources to scale geothermal rapidly. They also face a future in which their core business becomes increasingly untenable as carbon constraints tighten.
This ought to be a win-win. The BPs, Chevrons, ExxonMobils, Shells and Totals of the world have geothermal capacity that dwarfs most pure-play geothermal developers. They understand drilling in ways that startups don’t, and won’t for decades. Their supply chains, logistics networks and operational expertise transfer directly to geothermal applications. Their workforces need jobs in a decarbonizing economy.
The potential synergies are enormous. Oil and gas companies could repurpose offshore platforms for geothermal development, use depleted oil fields as geothermal reservoirs, co-produce geothermal electricity from active oil fields, and redeploy drilling rigs toward heat extraction. Italy and Indonesia are already seeing this happening, with oil and gas companies diversifying into geothermal using their existing capabilities. China’s stateowned oil giants lead the country’s geothermal heating and power expansion, applying their drilling expertise and capital access to a new application.
This isn’t about giving oil and gas companies a pass on climate damage or pretending they’re climate heroes. It’s about recognizing that a just transition requires creating pathways for workers and capital currently tied up in fossil fuels. Geothermal offers precisely such a pathway – similar technical requirements, comparable risk profiles, directly transferable skills. The alternative is layoffs, stranded assets and fierce political resistance to climate action from workers and communities facing economic stagnation or worse.
Policy should embrace this transition explicitly with tax credits for oil and gas companies investing in geothermal, support for retraining, regulatory changes that ease the transition of drilling permits from oil to heat, and labor agreements that protect union jobs in the shift from extraction to clean energy. This isn’t complicated. It requires acknowledging that the same people who drilled for oil can drill for heat, and it’s in everyone’s interest to help them do so.
Beyond The Binary: Geothermal As Thermal Infrastructure
The conventional framing treats heating and cooling on the one hand and electric power on the other as separate energy silos requiring separate solutions. This binary is correct at one level, but limiting. They’re all thermal services, and they’re more interconnected than most energy planning acknowledges. A geothermal resource can provide direct heating, drive heat pumps for cooling, generate electricity or do all three simultaneously depending on temperature, depth and end-use requirements.
This integrated view clarifies geothermal’s potential as foundational thermal infrastructure rather than niche power generation. Consider a geothermal system serving a city district. The hottest fluid drives a power plant generating electricity. Waste heat from power generation feeds a district-heating network. In summer, the same wells provide cooling via absorption chillers. A single resource serves multiple end uses, maximizing efficiency and economics.
Industrial applications extend this logic further. Many industrial processes require direct heat rather than electricity – think food processing, chemical manufacturing, mineral processing, desalination. Geothermal can provide this heat more efficiently than generating electricity and converting it back to heat. Co-location of geothermal resources with industrial facilities reduces transmission losses and creates resilient local energy systems. Co-production of heat and power creates other synergies and lowers costs.
The rise of AI and data centers creates its own unique opportunities. Geothermal systems can provide both the electricity to run servers continuously and the cooling to remove heat, creating a closed-loop thermal management system. Several hyperscale data center operators are already exploring geothermal partnerships.
Then there are some unexpected complementarities. Geothermal and nuclear are typically seen as competing for attention by those in search of clean, firm, baseload power. Both face high upfront costs and long development timelines. But there may be roles for both together. A clean energy system could integrate large nuclear plants for major load centers with distributed geothermal serving smaller cities, industrial facilities and district heating networks.
Critical minerals represent another unexpected opportunity. Geothermal brines often contain lithium, zinc, manganese and other minerals that can be extracted during power generation. This co-production can improve project economics and provides domestic sources of materials essential for batteries, electronics and clean energy technologies. The Salton Sea in California contains one of the world’s largest lithium deposits, accessible through geothermal operations. Extracting lithium from brine generates far less environmental disruption than hard rock mining, offering a pathway to secure mineral supply chains while producing zero-carbon power.
The Policy Vacuum
None of this will happen automatically. Carbon pricing that made fossil fuels pay their full social cost would help geothermal compete on operating cost, though they would do nothing to address the exploration risk and upfront capital barriers. Direct subsidies, production tax credits and investment tax credits could work if scaled appropriately – the United States now offers tax credits for geothermal that are too small to move the needle for most projects. And there is a long list of other, more direct policy interventions.
Exploration risk insurance deserves particular attention. A government-backed insurance program that covers some portion of dry hole costs would unlock private capital almost immediately. Iceland’s model is instructive: the government assumes exploration risk, developers repay from successful projects and the program becomes selfsustaining as success rates improve and knowledge accumulates. The European Union has since set out to duplicate the model elsewhere across the continent. The United States should look to Europe to implement something similar at national scale.
Streamlined permitting is unglamorous but essential. Geothermal projects shouldn’t face more regulatory burden than fossil fuel extraction when their environmental footprint is dramatically lower. Time limits on permit decisions, consolidated permitting authority and clear standards would provide the certainty that developers need to commit capital.
Research funding remains wildly disproportionate to potential impact. The Department of Energy’s geothermal budget is roughly $100 million annually – less than 2 percent of its renewable energy spending despite geothermal’s potential to provide firm capacity at scale. Targeted research into drilling technology, enhanced geothermal systems and supercritical fluids could accelerate commercialization and drive down costs. The returns on such research compound over decades as the technology improves and deploys globally.
Renewable portfolio standards could explicitly include geothermal and reward firm capacity more highly than intermittent generation sources. A kilowatt-hour delivered during the evening demand peak in January is more valuable than one delivered at noon in August, but most renewable energy mandates treat them identically. Capacity markets, firm power requirements or other mechanisms that value reliability would shift investment toward geothermal and other dispatchable resources.
Workforce development requires coordination that market forces alone won’t provide. Community colleges near oil and gas regions could offer geothermal drilling programs. Labor unions could negotiate transition agreements that protect workers moving from fossil fuel extraction to geothermal. Federal job training programs could target displaced oil and gas workers for retraining. The skills are largely transferable; the barrier is organizational, not technical.
A Framing Shift
The real opportunity isn’t just adding geothermal capacity to our energy mix. It’s recognizing geothermal as foundational infrastructure that complements rather than competes with other clean energy sources. Solar power is still king; solar and wind plus batteries may do the lion’s share of decarbonization, while geothermal provides the firm foundation – the baseload power, the district heating and the industrial heat.
There is no one-size-fits-all energy source that does it all everywhere. But geothermal can move well beyond its current Icelandic and Kenyan bases and shift from geological lottery to universal resource, from marginal player to foundational component.
The geothermal opportunity is simple: use the heat beneath our feet instead of burning things dug up from ancient rocks. The barrier isn’t technical or economic in any fundamental sense. It’s institutional, political and cognitive. We lack the financing mechanisms, policy frameworks and mental models to deploy geothermal at scale. These are all fixable problems, and they are definitely worth wanting to fix to get nearly unlimited, 24/7 power and heat regardless of weather, season or geopolitics. The question is whether we’re clever enough to use it.
Gernot Wagner is a climate economist at the Columbia University Business School and faculty director of its Climate Knowledge Initiative.
This essay was first published by the Milken Review (4 May 2026). It is the fourth in a mini-series; the prior essays are titled "Taming Carbon" (23 October 2023), "Tipping Carbon" (24 July 2024), and "Cementing Carbon" (22 January 2026).
