Key takeaways
- Geopolitics is reshaping national energy priorities, accelerating the push for more secure, diversified, and domestically anchored energy systems.
- Advances in drilling, subsurface imaging, and enhanced geothermal systems are expanding development beyond regions with naturally occurring hydrothermal resources, making geothermal more scalable.
- Today, high appraisal costs and uncertainty around subsurface performance remain barriers to geothermal project development.
- Targeted government support can reduce early-stage risk and create the commercial certainty needed to secure widespread investment in geothermal systems, helping countries balance energy security and sustainability goals.
Geopolitical tensions are increasing pressure on global energy supply chains, causing governments and industries to prioritize diversifying supply and developing domestic energy resources. Energy demand is also growing at an unprecedented pace, driven in large part by expanding AI infrastructure and worldwide electrification efforts. In a recent Public First survey of 1,994 business leaders—drawn from mid-market and large organizations—79% agreed that “geopolitical instability has made electrifying more urgent,” a finding consistent across both emerging (82%) and advanced (74%) markets. However, many also said that government policy is slowing the pace of the shift.
Amidst this backdrop, there’s renewed interest in using coal and nuclear power and making steady investments in natural gas, renewables, and energy storage. Although geothermal has garnered less attention and policy support than other energy forms, its ability to provide dispatchable, lower-carbon, and domestically sourced power makes it an attractive resource in the current environment, particularly as countries seek to balance energy security and affordability with decarbonization goals.
No single power source can solve the energy trilemma alone
New investment in coal-fired power—both to extend the life of existing plants and to develop new capacity—is concerning, particularly given the progress made toward cleaner alternatives over the past decade. This resurgence is driven largely by the limited availability of dispatchable power sources and efforts to reduce exposure to disruptions in natural gas supply.
Recent conflicts in the Middle East and the ongoing Russia–Ukraine war exposed the vulnerability of globally traded energy commodities and the infrastructure required to transport them. For natural gas, geopolitical risk now affects both supply security and the reliability of transit routes. Even where natural gas is available, global turbine-manufacturing capacity and order backlogs are slowing deployment. Scale cannot meet today’s demand.
On the renewables front, the economics of solar and wind continue to improve, as does battery energy storage. Investments in these resources will undoubtedly continue, but they also face significant geopolitical risk as the supply chain for critical minerals and many clean energy components is heavily concentrated in a small number of countries. The International Energy Agency’s (IEA) Global Critical Minerals Outlook 2025 says China leads the pack, followed by the Democratic Republic of the Congo, and Indonesia.
Nuclear power is also attracting investment, although questions remain about how quickly it can scale and deliver broad commercial impact. Several countries have deployed nuclear generation at scale, including France and South Korea, but as was seen with the Vogtle power plant in the US, replicating successes elsewhere is often difficult due to workforce shortages, regulatory complexity, high financing requirements, and public-acceptance challenges.
Small modular reactors (SMRs) may be particularly well-suited to controlled sites such as military bases, where security, land use, and permitting can be more closely managed. Deployment near data centers or residential communities faces greater resistance. Because SMRs are still relatively nascent, widespread adoption will depend on developing clearer licensing, zoning, and permitting frameworks, which could delay deployment in the near term.
Each of these resources offers distinct benefits and trade-offs related to cost, reliability, and emissions. The pressing question is whether the supply chains, workforces, infrastructure, and policy frameworks are in place to deploy them at the scale and pace required by the energy transition. As global trade is increasingly shaped by geopolitical competition, the future of energy may depend less on resource availability than on the ability to build resilient, sustainable, diversified energy systems.
Advancing toward the full potential of geothermal
Geothermal is unique. It’s a domestically sourced, dispatchable energy option that faces far less geopolitical supply chain risk than imported fuels and many clean energy technologies. Somewhat contrary to popular belief, it's no longer a niche resource. Decades of successful development have demonstrated geothermal’s technical and commercial viability, and technology advances are expanding the addressable resource base far beyond conventional hydrothermal regions. However, for geothermal to meaningfully contribute to the global energy ecosystem, its deployment must accelerate significantly.
Enhanced geothermal systems (EGS) represent one of the most promising pathways for near-term scaling. Unlike conventional geothermal development, EGS isn't limited to naturally occurring hydrothermal reservoirs. Instead, it involves engineering a reservoir within hot, low-permeability rock by creating or enhancing fracture networks, allowing fluid to circulate through the formation, absorb heat, and return to the surface, where thermal energy can be used to generate electricity.
The technical potential of EGS is enormous. Tapping only 1% of the thermal energy stored in the Earth’s crust at depths of up to 5 km could theoretically meet current global energy demand for 3,500 years. While this figure reflects technical rather than economically recoverable potential, more realistic estimates still point to a substantial opportunity. The US Department of Energy projects that geothermal power could meet 12% of US energy demand by 2050.
The governments of Indonesia, the Philippines, and other countries are already introducing policies and programs to accelerate geothermal development. Advances in subsurface characterization, drilling, stimulation, and reservoir management are improving the industry’s ability to access and manage heat beneath the surface. Many of these capabilities have been developed and refined by the oil and gas sector, providing a strong technological foundation for EGS deployment.
Continued research and development is still required to deliver on the full potential of EGS, particularly in areas related to fracture behavior, water loss, and long-term reservoir management. Notwithstanding, the technologies and expertise needed to scale the technology are—for the most part—already in place.
Where geothermal differs from oil and gas
Although subsurface understanding has advanced considerably in recent decades, uncertainty remains over how a geothermal resource will perform once developed.
Two primary unknowns are the depth required to reach commercially viable temperatures and the thermal and geological characteristics of the target formation. Historical assessments and subsurface models can provide useful estimates, but project performance can't be confirmed with confidence until the first test well is drilled. This makes appraisal essential—and expensive. The Cascade Institute reports current drilling costs at USD 50 million to USD 100 million per well at depth, and USD 5.3 million for an economically viable well.
Unsuccessful wells can be devastating for geothermal projects. Consider Nevada-based Ormat Technologies: one failed well cost it USD 3.1 million, contributing 42% to an overall quarterly loss. In oil and gas development, the cost of several dry holes may be offset by a successful discovery elsewhere in a broader portfolio.
Geothermal projects generally also lack the same risk tolerance. Appraisal risk is concentrated with developers and investors; a single failed well can undermine project economics and limit a developer’s ability to raise additional capital. Because developers can’t handle risk alone, several European countries, as well as geothermal entities in Latin America and Africa, have created risk mitigation programs and tools. As long as developers carry the burden of appraisal risk, capital will remain cautious. Deployment will be constrained.
Managing geothermal’s commercial and execution risks
Resource uncertainty is only one hurdle geothermal projects face. There are also commercial and execution risks, and addressing them requires a full-stack policy approach combining exploration risk-sharing, streamlined permitting, and reformed power purchase agreements (PPAs). Existing PPAs alone often fail to fully recognize the value of geothermal’s high capacity factor and ability to provide firm power.
Governments can play a pivotal role in supporting the industry by tackling both early-stage resource uncertainty and long-term revenue stability. Such efforts could entail establishing risk mitigation facilities to absorb a portion of exploration risk—for example, the Sustainable Energy Fund for Africa.
Creating public-private models in which governmental entities undertake high-risk resource confirmation and drilling could work as well, as could introducing revenue support mechanisms such as contracts for difference, which provide two-way price guarantees, and feed-in tariffs, which offer fixed prices per unit of power. Both explicitly value geothermal as a reliable energy source. Together, such measures could provide the financial certainty needed to unleash private investment at scale.
Supporting geothermal with public-private frameworks
Indonesia and the Philippines offer strong examples of how the public-private approach can work. Indonesia’s USD 650 million Geothermal Resource Risk Mitigation facility, supported by government-led drilling programs, is intended to overcome the exploration barrier and enable greater private sector participation. Similarly, the Philippines, backed by the Asian Development Bank, is developing derisking facilities and incentive structures designed to strengthen investor confidence and support new developments.
Other countries have taken complementary approaches. In Kenya, the state-owned Geothermal Development Company assumes early-stage drilling risk, allowing private developers to enter after resources have been confirmed and projects are more bankable. Turkey has demonstrated how to pair risk-sharing mechanisms with feed-in tariffs of USD 0.09 to USD 0.11 per kilowatt-hour to accelerate deployment. Japan has also combined long-term tariff support with nearly USD 700 million in subsidies through its Green Innovation Fund.
These examples demonstrate how governments can absorb early-stage project risk, align policy instruments, and provide revenue certainty, enabling geothermal to move from a capital-constrained development model to a scalable source of lower-carbon power. Ultimately, by reducing exposure to global supply disruptions, strengthening domestic energy security, and addressing long-term climate risks, geothermal can help countries advance decarbonization goals without requiring policymakers to trade one objective for the other.
Scaling geothermal now depends on policy—not geology
Today, with data centers putting pressure on electricity grids, the need for additional energy is clear. Global data center electricity consumption is expected to more than double by 2030, driven largely by AI. Geothermal’s advantage is clear, as well: It’s been called the only renewable resource that generates electricity on a constant, predictable, dispatchable basis—precisely what always-on, energy-hungry data centers need.
EGS adds another clear advantage. Because the technology separates access to heat from the Earth’s geology, geothermal energy is available wherever drilling depth can be reached, even outside of tectonic environments. If geology is no longer a restraint, then what remains is grappling with policy and capital availability.
The upside of getting geothermal right is substantial. The IEA says geothermal could meet up to 15% of global electricity demand growth through 2050—equivalent to the current combined electricity demand of the US and India. That’s why adding geothermal to the mix of natural gas, nuclear, renewables, and storage can help countries—and the world—move closer to resolving the energy trilemma.
