Geothermal Is Having A Moment In The Sun, But Black Swans Are Casting Shade

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Last Updated on: 15th March 2025, 06:46 pm

For several years now, people have been asking me about enhanced or deep geothermal energy. I’ve fielded questions from readers, investors, policymakers, and fellow analysts, and it’s clear there’s renewed enthusiasm for geothermal’s potential role in our energy future. It’s time I delved into this topic comprehensively, and this article marks the beginning of a series where I’ll critically examine geothermal’s actual role in the energy landscape — beyond the hype and headlines.

Geothermal energy is once again capturing attention, hailed by some as the stable, reliable renewable resource that can balance the intermittency of wind and solar power. Headlines announce breakthroughs, pilot projects multiply, and policymakers rush to fund demonstration sites. Yet, my experience tells me enthusiasm often overlooks historical realities, especially when measured against criteria I consistently use to assess energy solutions: technical viability, economic competitiveness, and human acceptability. It’s important to carefully scrutinize geothermal’s promise against its complex reality.

Historically, geothermal energy has been repeatedly touted as the renewable savior — clean, reliable, and providing essential baseload power right beneath our feet. However, despite periodic waves of excitement, actual global growth has been modest at best. As the current wave of enthusiasm builds, it’s prudent to ask: will this geothermal revival finally deliver, or is history poised to repeat itself?

Throughout this series, I’ll examine geothermal’s key technologies, including enhanced geothermal systems (EGS), traditional hydrothermal reservoirs, closed-loop geothermal systems, and emerging concepts like advanced geothermal drilling, supercritical geothermal energy, and even more speculative ideas like plasma drilling and millimeter wave (MWW) systems, which have captivated my inner nerd (but not my inner pragmatic techno-optimist) due to their ambitious use of advanced physics and cutting-edge technology. I’ll explore their technical maturity, deployment challenges, and economic feasibility using frameworks like Bent Flyvbjerg’s insights into technological readiness and long-tailed risks.

Central to geothermal’s appeal is its reliability — after all, the Earth never sleeps, offering the alluring concept of renewable baseload power. Yet, practicalities often dampen this optimism. EGS, frequently highlighted as the next breakthrough, continues to grapple with technical, economic, and seismic uncertainties. Notably, EGS has emerged as a predominantly American endeavor, significantly influenced by the nation’s advancements in hydraulic fracturing technology. The U.S. experience with fracking in the oil and gas sectors has provided a foundation for developing EGS, involving injecting fluids deep underground to create or expand fractures in hot rock formations. Projects once praised for their potential, such as those in Basel, Switzerland, and Pohang, South Korea, became cautionary tales, experiencing induced earthquakes, public resistance, and investor losses. Additionally, there remains an open question regarding EGS’s real-world operational flexibility — can it genuinely complement variable renewables, or is its flexibility overstated?

I’ll also critically assess claims of geothermal’s unique advantages over wind and solar, particularly concerning inertia replacement and land-use efficiency. Additionally, we’ll discuss geothermal’s environmental footprint, including induced seismicity, water usage, and land disruption.

Recent advances in battery storage, demand response technologies, and grid flexibility are increasingly undermining geothermal’s claim of unique baseload capability. Baseload power, once viewed as indispensable, is becoming less critical in grids dominated by variable renewables paired with sophisticated storage and flexible transmission systems. Geothermal’s competitive edge is being eroded, given that intermittent renewables and storage often provide cheaper and quicker-to-market solutions to grid stability.

Currently, the global operational geothermal power capacity stands at approximately 13.9 gigawatts (GW), having seen only modest growth over recent years. For example, recent additions like the 17 MW Tiwi and 29 MW Palayan plants in the Philippines, alongside a smaller 2 MW installation on Biliran Island, illustrate this incremental growth pattern. Compounding the challenge, the levelized cost of electricity (LCOE) for new geothermal deployments has risen due to macroeconomic pressures and higher interest rates, diminishing its economic competitiveness compared to other renewables.

Geothermal isn’t without merit. In ideal geological locations like Iceland, parts of the western United States, and countries along the Pacific’s Ring of Fire, geothermal remains practical, cost-effective, and environmentally sound. Yet, these favorable locales are exceptions rather than norms. When scaled globally, geothermal’s promise rapidly diminishes under geological complexity, economic uncertainty, and political challenges.

Throughout this series, I’ll also analyze the investment landscape, exploring why venture capital continues to flow into geothermal despite these challenges, and identifying when and where these investments might actually pay off.

Investors and policymakers should temper their enthusiasm with historical awareness. Recognizing geothermal’s inherent limitations will save resources, reduce unrealistic expectations, and guide wiser investment choices. As past cycles demonstrate, unchecked optimism without diligent scrutiny often leads to disillusionment, setbacks, and stagnation.

I write in large part to create form, structure, and rigor out of my research and analysis, and the timing for this series is good. I’ve had an opinion on the potential for both conventional and enhanced geothermal for years, but haven’t written it out more fully before. In presentations to global investors through Jefferies investment bank and presentations to India’s electrical utilities last year, I put geothermal in the global rounding error category with tidal energy, with both being under 1% of installed capacity and delivered energy. As I said to the global investors, deep geothermal is interesting but multiplies long-tailed risks.

Since then I’ve spent a lot more time on subsurface geology and engineering (which doesn’t make me a geologist or subsurface engineer of any kind, just more informed about the conditions, solutions, and risks). While I’d known the risks of tunneling for years based on my assessments of both pumped hydro and transportation tunnels, I hadn’t known as much about fracking specifically. However, I spent a bunch of time in the past year looking specifically at underground gas and pressurized water storage solutions, many of which leveraged fracking technologies, which meant reading a lot of governmental, industry, and peer-reviewed literature on the technologies. As I noted for one of the proposed solutions, fracking the same underground volume over and over is specifically called out in the literature as a very bad idea, yet that’s what one of the proposed solutions is designed to do. All of that will inform this deep dive into geothermal.

The timing is good because a repeat energy client, a South American/European energy firm that operates globally, is pulling me into its venture capital arm’s offsite strategy session again in a couple of weeks. I assisted them with their investment theses a couple of years ago, and enhanced geothermal was on their radar. I expressed my general opinion that I was skeptical due to long-tailed risks — the black swans of the title — but we didn’t dig into the subject in detail then. I suspect it will have remained in their focus, so it will be good to be deeper into the space.

Ultimately, geothermal’s greatest contribution may be as a specialized resource rather than a transformative global solution. Clearly identifying this practical ceiling allows more effective strategies in energy planning and avoids costly detours from proven pathways like wind and solar. Geothermal deserves careful consideration — but always with eyes wide open to its inherent complexities and constraints.