The International Energy Agency (IEA) has forecasted that China and India are well-positioned to become dominant players in the global geothermal energy sector as both nations look to reduce their dependence on coal and embrace cleaner, more sustainable energy sources.
Geothermal energy, which taps into the Earth’s natural hot-water reservoirs to generate electricity and provide heating, has traditionally been used in countries with easily accessible geothermal resources, such as the United States, Indonesia, and the Philippines.
Despite its potential, geothermal power only accounted for 0.3% of global electricity demand last year. However, the IEA’s report suggests this renewable energy source has massive untapped potential, especially in China and India.
While geothermal energy is used in over 40 countries today, a handful of nations dominate the sector. The ten largest consumers—China, the United States, Turkey, Sweden, Indonesia, Iceland, Japan, New Zealand, Germany, and the Philippines—together account for nearly 90% of global geothermal consumption.
Among these, Iceland stands out, meeting almost half of its energy needs with geothermal due to its abundant resources and long-standing government support for exploration and development since the 1920s.
In China, geothermal energy is primarily used for space heating, contributing to almost half of the country’s geothermal consumption. Meanwhile, geothermal is used in the United States for heating and electricity generation.
Turkey uses geothermal for electricity and heating, particularly in agriculture and wellness, while countries like Sweden and Germany rely on ground-source heat pumps.
However, the IEA, one of the world’s most respected sources of energy data, points to China and India as the two countries with the greatest market potential for next-generation geothermal technologies, alongside the United States.
Together, these three countries are projected to account for nearly 75% of the global market potential for geothermal electricity, particularly if costs for next-generation geothermal technologies decrease to competitive levels.
China’s energy transition is especially pressing. With high levels of electrification and a heavy reliance on coal, the country is facing major challenges in meeting its goal of carbon neutrality by 2060.
Beijing must deploy large amounts of clean, dispatchable power to achieve this. The IEA estimates that the country must add nearly 650 gigawatts (GW) of clean energy capacity over the next 25 years, with geothermal potentially contributing up to half of that capacity.
In addition to electricity generation, geothermal energy could meet a key share of China’s heating demand, particularly through district heating systems and industrial applications. This would be particularly valuable as the country aims to decrease its reliance on coal, which remains a major part of its energy mix.
Similarly, India urgently needs clean energy solutions to meet rising electricity demand while avoiding the construction of new coal-fired plants. Geothermal energy, alongside rapid solar growth, could help India meet its needs for dispatchable, low-emissions power, supporting the country’s ambitious renewable energy targets.
The report notes that India is set to become the third-largest market for next-generation geothermal power by 2050. This technology complements solar PV, which is projected to supply 35% of electricity by 2035 and 50% by 2050.
Moreover, next-generation geothermal energy could help meet growing demand, reduce reliance on coal, and offer a cost-effective alternative to CSP, hydro, and bioenergy. As a result, China and India could lead the charge in Asia’s geothermal market.
The report argues, “If costs for next-generation geothermal decrease to the low- or even medium-cost level, it could play an important role as a low-emissions dispatchable option in the electricity mixes of several regions. This would be particularly valuable in areas that currently rely heavily on coal-fired power – including China, India, and Southeast Asia – or aim to reduce their use of natural gas-fired power, such as Europe and the United States.”
Meanwhile, the United States, the second-largest market for next-generation geothermal, also remains a key player in the geothermal market and would benefit from abundant geothermal resources and technological leadership in the sector.
Expertise From Oil And Gas Industry Could Expand Geothermal Access Globally
The future of geothermal energy is undergoing a transformation driven by innovative techniques that were originally pioneered in the oil and gas industry.
According to a new report, the innovations in shale drilling, including horizontal drilling and deep-earth fracking, have unlocked geothermal energy’s potential to become a major and cost-competitive renewable power source.
Currently, geothermal energy meets less than 1% of global electricity demand. However, the IEA suggests that with an investment of US$2.8 trillion to fully harness geothermal potential, the sector could provide up to 8% of the world’s electricity supply by 2050.
The report highlights that these new technologies, coupled with expertise from the oil and gas sector, could make geothermal energy accessible to nearly every country on Earth.
The idea of tapping into the Earth’s heat through drilling is more than a century old. However, traditional geothermal systems have been limited to regions where geothermal resources are close to the surface, such as the United States, Indonesia, and Iceland.
Now, thanks to advancements in drilling technology—especially those honed in the oil and gas industry—the scope of geothermal energy has expanded dramatically.
The IEA says that the ability to drill up to 3 kilometers deep and horizontally into the earth is opening up geothermal potential in regions previously considered unsuitable.
These advances allow geothermal systems to extract heat from deeper underground reservoirs, making the energy source viable in areas where it was once impractical.
The IEA’s report further points out that geothermal power could become available to “nearly all countries,” regardless of their geographic location or closeness to surface-level geothermal sources with these new drilling techniques.
The IEA identifies two key technological innovations that are poised to transform the geothermal sector: the artificial fracturing of rocks to enable water injection and heating and a closed-loop system where water circulates within deep underground pipes, avoiding environmental impacts.
These methods increase the efficiency and accessibility of geothermal energy and offer an opportunity to scale up production in countries with limited geothermal resources.
If these technologies are fully developed and deployed, the IEA forecasts that geothermal electricity could become one of the most cost-effective and low-emissions power sources by 2035.
The report suggests that costs could fall by up to 80% and would bring geothermal power generation to around US$50 per megawatt-hour—comparable to, or even below, the cost of hydroelectric, nuclear, and bioenergy plants, as well as solar and wind power paired with battery storage.
Big Tech Embraces Geothermal Power
The rapid advancements in geothermal technology are attracting the attention of major players in the tech industry, particularly those seeking clean, reliable energy for their data centers. Microsoft, Google, and Meta are among the companies leading the charge in investing in geothermal projects.
Microsoft partnered with the UAE-based artificial intelligence company G42 in May to develop a geothermal-powered data center in Kenya. The program is one of the first large-scale applications of geothermal energy for tech infrastructure.
Just a month later, Google signed an agreement to purchase 115 MW of geothermal capacity from Fervo Energy, a US-based company that has used its oil and gas drilling expertise to create horizontal tunnels within geothermal reservoirs in Nevada.
Similarly, Meta (owner of Facebook and Instagram) announced a partnership with Sage Geosystems to explore geothermal solutions for its data centers, with the first project expected to come online by 2027, providing up to 150 MW of baseload geothermal power.
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