Transition Tearsheet - Geothermal Energy

Geothermal energy offers 24/7, low-emissions, dispatchable electricity and heating/cooling, with minimal land and material footprint compared to other renewables. It is weather-independent and can support grid stability.

With the adoption of next-generation geothermal systems, the total resource potential of geothermal is vastly expanded (50+ times higher in the US). If drilling to 7km becomes a commercial reality, the technical electricity generation potential of geothermal would be second only to solar among renewables. Conventional geothermal uses heat carried to the surface by fluids naturally occurring in the subsurface such as aquifers, where water trapped in porous or fractured rock is heated by the surrounding rock.

Next-generation geothermal refers to new engineered systems that harvest heat at greater depths. They include enhanced geothermal systems (EGSs) and closed-loop geothermal systems (CLGSs, also known as advanced geothermal systems (AGSs)).

Currently, geothermal supplies about 0.8% (15.5GW) of global electricity. Conventional geothermal is expected to grow by nearly 50% to 22-26GW by 2030 and up to 83GW by 2050, according to the IEA. The real step-change comes from next-gen geothermal:

with cost reductions and technology advances, cumulative investment could reach USD 1 trillion by 2035 and USD 2.5 trillion by 2050.

Policy support is critical for both conventional and next-gen geothermal. The US recently extended geothermal tax credits to 2034, confirming bipartisan support for the technology; Japan offers FITs and is reviewing further support for next-gen systems.

Indonesia, China, and the EU are also providing targeted incentives. We think policy momentum is increasing due to heightened geopolitical risks, tight power markets, decarbonization commitments, and competition to attract AI/data centers.

As we discuss here, data center electricity consumption growth is expected to be highest in the US, China, Europe, and Japan. A recent CBRE report forecasts APAC data center capacity to double by 2028, leading to a 15-25GW power supply shortage (a 25-42% gap).