Geothermal Energy Market Trends

Drivers

Increasing Demand for Renewable Baseload Energy

• As the world transitions toward a decarbonized energy system, the demand for reliable, continuous power sources has surged. Unlike solar and wind energy, which are intermittent, geothermal power provides a stable baseload energy supply that can operate 24/7, making it a crucial component of a sustainable energy mix. Countries like the United States, Iceland, and Indonesia are expanding their geothermal capacity to reduce reliance on fossil fuels. For example, in 2024, Fervo Energy completed a breakthrough in enhanced geothermal systems (EGS), demonstrating the viability of AI-driven subsurface modeling to improve energy extraction efficiency.

Government Incentives and Supportive Policies

• Many governments are actively promoting geothermal energy through subsidies, tax credits, and favorable regulatory frameworks to accelerate deployment. For instance, the U.S. Department of Energy (DOE) announced over $200 million in funding for geothermal R&D projects in 2024, aiming to enhance exploration techniques and develop next generation drilling technologies. Similarly, the European Union is integrating geothermal projects into its Green Deal strategy, providing financial backing to expand district heating networks using geothermal sources. These incentives are lowering financial barriers and attracting private investment into the sector.

Restraints

Alternative Renewables Options May Hinder the Market

• Geothermal power is considered one of the comprehensive sources due to vast monetary requirements from drilling to setting up a plant. A geothermal plant with a one-megawatt capacity will need USD 2 million - USD 7 million. Other renewable energy sources, such as onshore wind, offshore wind power, and solar photovoltaics, still offer lower costs due to the low cost incurred in the production. So, considering the long-term perspective, other renewable sources are expected to hamper the geothermal energy market share.

Geographical Limitations and Exploration Risks

• Geothermal energy is heavily dependent on geological conditions, meaning that only certain regions with high underground heat potential can benefit from it. Even within suitable areas, subsurface uncertainties make exploration a risky endeavor, as drilling may not always lead to commercially viable energy production. For example, in 2024, a geothermal project in Germany faced setbacks due to unexpected geological conditions, delaying operations and highlighting the challenges of accurately predicting geothermal reservoirs.