What Is Geothermal Power and How Does It Work?

Could the answer to our energy demand conundrums lie beneath our feet? And no, I’m not talking about oil, coal, or natural gas. I’m referring to the fundamental stuff of energy itself: heat. Geothermal power is having something of a moment as a non-carbon-emitting source of electricity that everyone seems to like — including climate activists, the oil and gas industry, technology companies, and even the Trump White House and Republican-controlled Congress.

Geothermal energy has been in use for decades, but has seemingly faced fundamental geological and physical restrictions in how much of a resource it could ever be. Now, however, thanks to new technological and process developments, including some borrowed from the oil and gas industry, geothermal could become a pillar of the energy system, potentially making up as much as 90 gigawatts of capacity by the middle of the century, roughly equal to nuclear power today.

But I’m getting ahead of myself — let’s start with the basics.

What is geothermal energy?

At its most fundamental, geothermal energy is the heat from the Earth’s core made usable up here on top of the crust. The International Energy Agency estimates that the Earth holds 45 terawatts of continuous heat flow, thanks to a mixture of energy left over from the planet’s formation and the radioactive decay of isotopes in its core and mantle of layers, where the temperature is probably around 5,000 degrees Celsius. In general, temperatures go up around 25 degrees per kilometer you go beneath the Earth’s crust.

How does geothermal energy generation work?

Any geothermal system needs three things: heat, fluid, and permeability. The energy comes from heat, which is transferred through fluid, and the fluid has to move through permeable rocks to reach the surface. Traditional geothermal involves finding fluid — typically water or steam — that can be brought to the surface and used to spin turbines that generate electricity. Sometimes this happens directly with underground steam; in other cases, extremely hot water under high pressure is converted to steam as it’s brought to the surface; in still other cases, geothermal heat is used to heat another liquid, which is then vaporized to spin a turbine.

Traditional geothermal is inherently limited, however — there’s only so much hot water already under the Earth’s surface that can be economically tapped. “It’s a great solution, but only in a handful of places on Earth where those conditions are met,” Drew Nelson, vice president of programs, policy, and strategy at Project InnerSpace, a geothermal nonprofit, told me. Iceland, Kenya, Indonesia, certain parts of the American Southwest have the ideal mix, but that still leaves a lot of untapped energy. “It’s hot everywhere underground,” Nelson said.

The number of hot rocks through which fluid can be pumped is far, far greater than the amount of naturally occurring hot steam or water. Enhanced geothermal systems bring fluid to already hot rocks, in a sense creating a reservoir that otherwise you’d have to rely on nature to supply. This is done using techniques borrowed from the oil and gas industry, including horizontal drilling and hydraulic fracturing, to run fluid through the hot rocks before bringing it back up to the surface.

A related technology, closed-loop geothermal (sometimes called “advanced geothermal”), runs fluid through underground pipes that harvest heat from rocks, instead of turning the rock themselves into a reservoir for hot fluid.

How much geothermal power does the U.S. currently use, and how much could it use in the future?

The United States is the once and perhaps future champion of geothermal power. We still have the world’s largest installed base of geothermal generation — but it’s largely from projects that were built between 1980 and 1995, according to the International Energy Association. About half of the United States’ roughly 4 gigawatts of geothermal capacity came online in the 1980s alone, according to Energy Information Administration data. Most of this is in California and Nevada.

The Department of Energy has estimated that geothermal could provide at least 90 gigawatts of power, or around 4% of total U.S. generation capacity, by 2050. In practice, however, geothermal could be more valuable on the grid than other more plentiful energy sources because it’s not weather dependent, meaning that much more of that capacity is consistently available.

Either way, the geothermal industry by 2050 will look very different from the one today. Recent growth has been concentrated in California, where utility regulators and the state legislature have instituted aggressive mandates for geothermal procurement, seeing it as a round-the-clock source of non-carbon-emitting power. Future growth, however, has started throughout the American West, and could, thanks to new technologies, flourish all over the world.

Who’s investing in and buying geothermal?

As with any source of power, especially if it can be used 24/7, the answer is likely technology companies. The Rhodium Group estimated that geothermal could supply “up to 64%” of future data center demand.

Last year, Meta signed a deal for 150 megawatts of geothermal power from Sage Geosystems, a Texas-based next-generation geothermal startup that specializes in long-duration power generation, and specifically energy storage. That would likely come online in 2027.

One of the leading enhanced geothermal companies, Fervo, has been providing power from a site in Nevada since 2023, and is developing a substantially larger, 500-megawatt project in Beaver County, Utah, near an existing Department of Energy research facility. That should be online by 2026. More recently, Fervo has inked deals with the likes of Google and Nevada utility NV Energy, and is working with the Department of Energy to expand its drilling and bring down costs.

The company has also hinted that it has a megadeal in the works, but even without that, Fervo has achieved impressive scale and results. The company has reported steadily decreasing drilling costs, falling from over $9 million per well to under $5 million from 2022 to 2024, and raised hundreds of millions of dollars from investors including Breakthrough Energy Ventures, DCVC, and Devon Energy.

Who supports geothermal politically?

What has made geothermal distinctive among the array of non-emitting energy sources is that Republicans like it, too. Tax credits accessible to geothermal developers were largely spared in the One Big Beautiful Bill Act, which featured deep cuts to wind and solar incentives. A gaggle of Republican lawmakers have visited Fervo’s Utah site, and Fervo Chief Executive Tim Latimer recently spoke alongside fossil energy executives with the American Energy Dominance Caucus, a bipartisan House caucus. Past bills to streamline permitting for geothermal exploration have had Republican and Democratic sponsors, often from Mountain West states.

Even Trump likes geothermal. The White House’s new AI Action Plan, released in July, calls on policymakers to “prioritize the interconnection of reliable, dispatchable power sources as quickly as possible and embrace new energy generation sources at the technological frontier,” including, by name, “enhanced geothermal.”

Is there anything that could slow down geothermal development?

One major near-term risk for the geothermal buildout is Trump’s tariff regime, which will likely mean higher input costs for geothermal producers on materials like steel. Another is the new restrictions on tax credits established in the One Big Beautiful Bill Act, which penalize companies with supply chain or financial connections to so-called “foreign entities of concern,” a list of countries that includes North Korea, Iran, Russia, and most importantly in this context, China.

While the exact nexus between China and geothermal is not entirely clear, “there are parts of geothermal technologies, such as pressure valves and drill casings and well casings and the like, that are not unique to geothermal that are very much part of the fracking industry that could be exposed to Chinese investment or Chinese supply contracts,” Advait Arun, senior associate for energy finance at the Center for Public Enterprise, told me.

There’s also the issue of getting next-generation geothermal projects financed. While geothermal companies themselves are able to raise money from investors — Sage Geosystems raised a $17 million series A round last year, for instance, while XGS, a closed-loop geothermal startup, raised $13 million — getting normal project financing from banks and other traditional entities is more of a challenge compared to mature technologies like fracking for oil and gas.

“There was and remains an inherent risk in traditional hydrothermal that the financial community has been very aware of,” Project InnerSpace’s Nelson told me — that is, the scarcity of existing underground water resources. Next-generation geothermal could hopefully see less risk, though, because developers aren’t not searching for a particular reservoir of steam or fluid.

“Getting the financial community to understand that there’s far less risk there is an important piece of it,” Nelson added.

How much does geothermal cost? How does it compare to other sources of power?

Industry estimates put conventional geothermal’s levelized cost between $64 and $106 per megawatt-hour, while the DOE has estimated that first of a kind of enhanced geothermal comes in at around $200 per megawatt-hour. Compare that to between $38 and $78 for solar, the fastest-growing source of new zero-carbon energy, and between $48 and $107 for natural gas, and you’ll see a challenge to be overcome.

The Biden administration’s goal was to drive next-generation geothermal costs down to $45 per megawatt-hour by 2035. Project InnerSpace projects that “enhanced geothermal can achieve an $88 per megawatt-hour levelized cost of energy” using first of a kind technology, assuming the project can access the investment tax credit and assuming some technologies of scale and efficiencies, which would make it competitive with many other non-carbon power sources. Those costs could come down to “between $50 and $60 per megawatt-hour” by 2035.

At that level, according to the IEA, geothermal would be “one of the cheapest dispatchable sources of low-emissions electricity, on a par or below hydro, nuclear and bioenergy,” and “would also be highly competitive with solar PV and wind paired with battery storage.”

Is there value to geothermal that isn’t captured by cost?

Yes, so it would seem. As Carnegie Endowment researchers have pointed out, these levelized cost projections may not reflect the true value of geothermal. Key to geothermal’s appeal is its dispatchability, not dependent on the weather, and can be turned on or off or ramped up and down as needed.

Read more:

• What Goes on Inside a Solar Panel?
• The Ins and Outs of Wind Energy
• How Do Batteries Work on the Grid?
• Why We Need Carbon Removal