The International Energy Agency’s (IEA) groundbreaking report, The Future of Geothermal Energy, forecasts an extraordinary $2.5 trillion global investment in geothermal energy by 2050. This dramatic expansion reflects the accelerating global transition toward clean energy, with geothermal poised to play a pivotal role in meeting the world’s growing electricity and heating demands. If realized, geothermal could account for 15% of global electricity demand growth, marking a significant leap from its current contribution of just 1%.

Unleashing Geothermal Potential

According to the IEA, the deployment of advanced technologies could enable up to 800 gigawatts (GW) of geothermal energy capacity worldwide by 2050. This output would rival the combined electricity needs of the United States and India today. Central to this growth are next-generation geothermal systems, which promise to overcome traditional constraints by unlocking geothermal resources in previously untapped regions.

Enhanced Geothermal Systems (EGS), in particular, are driving this revolution. Unlike traditional geothermal plants that rely on naturally occurring reservoirs, EGS create engineered systems to extract heat from deep underground. These innovations expand geothermal’s reach beyond regions with ideal geological conditions, offering universal applicability and scalability.

Key Economic Benefits

Geothermal energy represents a rare opportunity to combine sustainability with economic growth. The IEA projects that costs for geothermal electricity generation could decline by as much as 80% by 2035, reaching an average of $50 per megawatt-hour (MWh). This would position geothermal energy as a cost-competitive alternative to fossil fuels and intermittent renewables such as solar and wind.

Additionally, the report highlights the economic synergies between geothermal and the oil and gas industry. Up to 80% of geothermal investment relies on transferable skills and technologies from oil and gas operations, including drilling, reservoir management, and exploration. This alignment could facilitate a smoother transition for the fossil fuel workforce into the clean energy economy, creating an estimated one million jobs globally in the geothermal sector by 2030.

Geothermal’s Decarbonization Impact

Geothermal energy is uniquely suited to support global decarbonization efforts. Unlike solar and wind power, which are dependent on weather conditions, geothermal offers a stable, round-the-clock energy source. This makes it a crucial complement to intermittent renewables in achieving net-zero emissions targets.

Beyond electricity, geothermal has vast potential in decarbonizing heating and cooling—a sector responsible for a significant share of global carbon emissions. Technologies such as geothermal heat pumps (GHPs) and district heating systems could revolutionize how energy is consumed in buildings and urban centers:

• Geothermal Heat Pumps: GHPs provide efficient heating and cooling for homes and businesses by leveraging stable underground temperatures. By 2050, the U.S. alone could deploy these systems in 28 million households, meeting 25% of national heating and cooling demand.
• District Heating Systems: In densely populated areas, geothermal district heating networks could replace fossil-fuel-based systems, potentially serving 45 million U.S. households by mid-century. Globally, these systems could drastically reduce reliance on natural gas for heating.

Policy and Regulatory Challenges

Despite its immense potential, geothermal energy faces significant barriers. Currently, only 30 countries have specific policies to promote geothermal development, compared to over 100 for solar and wind. Regulatory uncertainty, high upfront costs, and limited public awareness have hindered geothermal’s growth relative to other renewables.

The IEA emphasizes the need for clear, long-term policy frameworks to attract private investment and mitigate risks in the early stages of geothermal projects. Tax incentives, clean energy standards, and streamlined permitting processes are critical to leveling the playing field for geothermal energy. For example, the U.S. Department of Energy’s Enhanced Geothermal Shot™ initiative aims to expand geothermal deployment twentyfold by 2050, with robust federal support driving innovation and reducing costs.

Global Leadership and Regional Initiatives

Countries worldwide are recognizing the transformative potential of geothermal energy:

• United States: With abundant geothermal resources, the U.S. is poised to lead global efforts. The Department of Energy’s Pathways to Commercial Liftoff report envisions up to 90 GW of geothermal capacity by 2050, supported by advancements in EGS and favorable policies under the Inflation Reduction Act.
• Indonesia: Home to the world’s largest geothermal reserves, Indonesia has ambitious plans to expand its geothermal capacity to 9.3 GW by 2030, driven by government incentives and international partnerships.
• Europe: Countries such as Germany, Italy, and Iceland are investing heavily in geothermal energy for both electricity and district heating. Iceland, in particular, generates nearly 100% of its electricity from renewable sources, with geothermal playing a central role.

Technological Innovation

Innovation is at the heart of geothermal’s bright future. Advances in drilling techniques, reservoir management, and resource mapping are reducing costs and improving efficiency. Additionally, new technologies are making it possible to harness “superhot” geothermal resources, which could deliver significantly higher energy outputs than conventional systems.

The integration of artificial intelligence (AI) and machine learning in exploration and operations is another game-changer. These tools enable precise identification of geothermal hotspots, minimizing risks and optimizing resource extraction.

Economic and Environmental Co-Benefits

Geothermal energy offers a dual benefit of economic growth and environmental sustainability. Its development could offset more than 1.75 billion metric tons of carbon dioxide emissions annually by 2050—equivalent to removing 26 million cars from the road each year. Furthermore, geothermal projects have relatively small land-use footprints compared to other renewables, preserving ecosystems and biodiversity.

The expansion of geothermal energy also contributes to energy security and resilience. By diversifying the energy mix, countries can reduce dependence on imported fuels and enhance grid reliability, particularly in regions prone to extreme weather events.

The Path Ahead

Realizing the IEA’s $2.5 trillion investment forecast will require concerted efforts from governments, industries, and communities. Key priorities include:

1. Scaling Innovation: Continued research and development in EGS and other technologies are essential to unlock geothermal’s full potential.
2. Building Awareness: Public education campaigns can increase acceptance of geothermal energy and drive demand for its adoption in residential and commercial applications.
3. Strengthening Partnerships: Collaboration between public and private sectors, as well as between industries such as oil and gas and renewables, will accelerate geothermal deployment.
4. Global Cooperation: International agreements and knowledge-sharing platforms can help countries overcome common challenges and achieve shared goals.

Conclusion

As the world intensifies its fight against climate change, geothermal energy stands out as a powerful ally. Its ability to provide reliable, low-carbon energy around the clock makes it a cornerstone of the global clean energy transition. With the right policies, investments, and innovations, geothermal could deliver not only on its $2.5 trillion promise but also on its potential to transform the energy landscape and secure a sustainable future for generations to come.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

16th December, 2024