What is our assessment?

Enhanced geothermal systems (EGS) are emerging as one of the most promising technologies for reliable, utility-scale, zero-carbon energy that can complement wind and solar and strengthen grid resilience. The technology, which is built on an existing base of technical and industrial expertise and capacity, is advancing rapidly through major R&D efforts and early commercial pilots. While large-scale deployment is still in its early stages and challenges remain around cost, execution, and social acceptance, we expect meaningful progress by the 2030s. For now, we will “Keep Watching” this solution.

What is it?

EGS are an energy technology that extracts heat from deep within the Earth’s crust to generate electricity. Unlike traditional geothermal systems that tap naturally occurring hot water or steam reservoirs, such as geysers or volcanic areas, EGS create artificial geothermal reservoirs by drilling into the earth, injecting and circulating water (or other fluids) through hot, dry rock formations, and then recovering the heated fluid or steam to generate electricity before reinjecting it back into the reservoir. Circulation of the water through the artificial reservoir can be in an open loop system, where the subsurface rocks are hydraulically fractured, or “fracked,” to increase permeability and allow water to flow between the injection well and the production well, or a closed loop system, where the water or other fluid is contained within pipes throughout the heat exchange circulation cycle. In addition to electricity, EGS can provide high-temperature heat for industrial processes or district heating, and enable geothermal energy storage by storing heat underground. 

Does it work?

Electricity production by an enhanced geothermal power plant emits virtually no greenhouse gases. Analysis by the National Renewable Energy Laboratory showed that the median life cycle emissions from enhanced geothermal power plants was 32 g CO₂‑eq /kWh, just 6% of the median life cycle emissions from a natural gas power plant, with most of the emissions generated during construction rather than operation. Geothermal energy has been used for more than a century, but EGS that use the horizontal drilling and hydraulic fracturing techniques developed by the oil and gas industry to access previously inaccessible underground heat resources are relatively new. To date, several small-scale and experimental EGS projects have successfully produced electricity, but no EGS plant has yet achieved full commercial operation at scale. 

Why are we excited?

Enhanced geothermal energy systems are a potentially transformative climate solution for several reasons. First, they could massively expand clean energy availability. EGS can be deployed in almost any region with hot subsurface rocks. Experts estimate the Earth’s accessible geothermal resources are staggeringly large, and that tapping just 0.1% of the heat under our feet could meet global energy needs for millennia. If technology improvements continue, advanced geothermal, including EGS, could supply around 15% of the world’s electricity by 2050. Second, unlike solar and wind energy, enhanced geothermal power plants produce steady baseload power, dispatchable power, and even energy storage. Currently, coal and gas power plants are commonly used to provide stability and backup power to electricity grids around the world. EGS can provide the same energy benefits, complementing wind and solar energy by providing firm capacity and grid stability services to a renewable-heavy electricity grid, without the harmful climate impacts. Third, EGS plants have a relatively small land footprint and can potentially be sited near demand centers (including repurposing old fossil plant sites), improving energy security for regions with limited solar or wind resources.

Recent technological breakthroughs have improved the prospects for EGS. The application of horizontal drilling and hydraulic fracturing techniques has produced higher fluid flow rates and extended reservoir life. This has dramatically increased the heat extraction per well, overcoming previous limitations and boosting the energy output and economics of EGS. Industry reports show drilling rates in hot rock have increased by 300–500% in the last few years, slashing upfront costs. A recent U.S. Department of Energy report projects that the cost of next-generation geothermal projects, including EGS, will fall below that of other baseload power sources such as nuclear and natural gas with carbon capture and storage (CCS) by 2035. Other projections suggest that geothermal electricity could drop to around US$50/MWh by the 2030s, competitive with other renewables and nuclear. Finally, EGS leverage a skilled workforce and supply chain from the oil and gas sector. The necessary drilling rigs, subsurface imaging, and engineering expertise already exist, which could help scale up EGS faster than entirely new industries. 

Why are we concerned?

Despite its promise, EGS face several challenges that temper its near-term prospects. To bridge the gap from pilot stage to commercialization, the industry needs more demonstration projects, case studies of success, and greater public trust. This is challenging because enhanced geothermal projects today have high upfront capital costs, primarily due to deep drilling and reservoir stimulation expenses, as well as high operational costs. Current EGS electricity is also far more expensive than conventional renewables, often hundreds of dollars per MWh. Until these costs decline, the industry may struggle to attract the investment financing needed to scale up. Moreover, the geological uncertainty in any given project is high because limited geophysical data in many regions makes it hard to pinpoint the best spots to drill. Developers must invest in exploration with no guarantee of finding an adequate resource, so early projects carry a significant risk of cost overruns. 

Safety and environmental concerns also pose challenges. Currently, many EGS use hydraulic fracturing to create the heat exchange reservoirs and circulate fluid underground. In some types of geologies, this can trigger small earthquakes. Some EGS have been halted after local earthquakes caused alarm and minor damage. Because they use water and circulate hot brines, EGS could pose risks for groundwater contamination or water consumption in arid regions, although EGS designs that use closed-loop systems or non-potable water can avoid these problems. Finally, geothermal projects often face regulatory and logistical hurdles and lengthy permitting processes. In many countries, regulatory regimes and incentives have focused on solar, wind, and even nuclear, while geothermal energy (and especially EGS) has received comparatively little support. This means EGS developers may struggle with financing and grid access due to policy gaps or obstacles.