To achieve the United Nation’s 2050 net-zero goals, decarbonizing the electricity grid and replacing fossil fuels are imperative. However, to accomplish this, we need renewable energy sources that can consistently provide power and replace conventional natural gas and coal plants. Offering diverse applications of geothermal energy, this could be a promising solution that aligns with these criteria.

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Over $22 billion have been invested in geothermal energy during 2015-2019, while in the last three years, the installed capacity of geothermal energy power projects has increased from 15GW in 2020 to circa 18GW in 2023 and is estimated to reach >25GW by 2030 which is a 5% year-on-year increase on average.

In 2022, VC investments in geothermal early-stage firms will exceed $50 million, with later-stage startups raising over $300 million. The United States accounted for more than 60% of total geothermal investment, followed by Canada and the United Kingdom. New projects and finances are being launched, such as the US Department of Energy's $165 million grant to expand geothermal energy deployment to a consortium. Other investors, such as private equity firm Kerogen Capital, put €17 million into Geothermal Limited, a UK-based geothermal operator.

Exploring the characteristics and applications of geothermal energy

If you’ve ever seen an erupting volcano or a geyser, you’ve seen geothermal energy in action.

Geothermal energy is made from the heat that emanates from the Earth’s crust. The Earth’s crust is made of rocks and water, a layer of molten rock called magma (hotter than the sun's surface) deep below. This heat contains 50 times more energy than all the oil and natural gas resources combined.

Geothermal energy is the least explored source of energy, but it is a renewable, low-carbon, and sustainable energy source for electricity generation, heating, and cooling purposes.

How does geothermal energy work?

Geothermal power plants generate electricity through various methods, all based on the same fundamental principle. Fluids are drawn from underground reservoirs and then injected into the deep underground hot rocks to produce steam. As illustrated below, this steam rises up a borehole under its own pressure to drive a turbine and generate electricity.

Types of geothermal energy

Different types of geothermal energy require different technologies depending on their depth, temperature, and final energy form. The main categories are:

• Very Low Temperature: Found between 10–200m below the ground and can harness temperatures under 30°C. The low heat makes it ideal for heating single-family homes or commercial buildings.
• Low Temperature: Found at depths between 200–2,500m below the ground, at temperatures between 30–90°C. This type is better used to heat entire neighborhoods or industrial areas.
• Medium Temperature: This type works with temperatures between 90–150°C and is found at depths of up to 4,000m. The higher heat makes it ideal for electricity production in power plants.
• Very High Temperature: This type utilizes temperatures over 150°C and is typically found in plate borders and hot spots with high tectonic activity. This type of geothermal is used in power plants.
• Supercritical/Ultra-Deep Geothermal: Ultra-deep geothermal refers to depths up to 10,000m to access temperatures of 300–350°C. This is the most promising technology as it can be found anywhere in the world due to its low depths and can be used for large-scale, heat-extensive processes.

Most current geothermal power plants access depths up to 4,000m under the ground, but new technologies and startups are emerging, targeting ultra-deep geothermal power that will unlock a renewable energy base load supply for the electricity grid.

Use cases of geothermal energy technology

Geothermal energy is used in utility, residential, and industrial settings, depending on the geothermal resources available in a given area. Geothermal resources are typically easier to reach in geysers, hot springs, and volcanoes that experience extensive geological activity.

Engineers have created a few methods to produce power from geothermal wells drilled into the ground as geothermal technologies progress. However, there still needs to be global standards, guidelines, or codes to classify geothermal potential effectively and the risks associated with its development.

Today, geothermal energy is being utilized either in power generation (electricity) or directly in the form of heat (so-called “direct use“):

Electricity generation

• Dry steam geothermal power plant: Underground steam flows directly to a turbine to drive an electricity generator — this is the most common type of geothermal energy used today.
• Flesh steam geothermal power plants: A pump pushes and sprays hot fluid into a tank at the surface.
• Binary cycle geothermal energy: This system utilizes two types of fluids — a hot liquid sourced from underground heat, while the other is employed in a heat exchanger.

Direct use

• This is when geothermal energy is directly in the form of heat for heating buildings, greenhouses, and aquaculture ponds. It can also be used for cooling through absorption chillers or drying crops and lumber.
  • Geothermal Heat Pumps: Ground-source heat pumps, also known as geothermal heat pumps, use the relatively stable temperature of the Earth just below the surface to provide both heating and cooling for residential and commercial buildings.
  • District Heating: Geothermal energy is often used to provide heat for district heating systems, where a centralized geothermal plant distributes hot water or steam through a network of pipes to heat homes and businesses
  • Industrial Processes: Some industries utilize geothermal energy for various processes, such as food dehydration, milk pasteurization, and other manufacturing operations that require heat.
    • Agriculture: Geothermal energy can be used for soil sterilization, which helps eliminate pests and diseases in the soil, improving crop yields.
    • Desalination: Geothermal energy can power desalination processes, where seawater is heated to produce freshwater through evaporation and condensation.

Among these sectors, real estate is the most promising since buildings account for more than a quarter of global energy-related emissions. So far, few all-electric HVAC solutions are at the right price point for larger properties. In addition, geothermal energy can reduce overall energy consumption by 30–70% while providing air conditioning and heating in home applications. O&G technology can be reengineered and redesigned for geothermal direct-use heating and cooling for buildings. To make this technology more feasible, coordination, precision, and a combination of hardware and software solutions are needed from construction to maintenance.

Innovation fields and geothermal energy market map of startups

Utilizing geothermal energy involves accessing technologies in various fields within the space. While most innovations and startups focus on producing power plants, many players have developed solutions in specialized equipment, analytics modeling, and utility-scale development.

Some Plug and Play partners in the Energy Vertical recognized the importance of geothermal energy, such as Dominion Energy, which is working with Swiss startup Enerdrape, founded in 2021.

Enerdrape captures both geothermal heat and waste heat present in underground environments (such as underground parking garages, tunnels, and stations) and converts it into a renewable energy source for buildings' heating and cooling needs through an architecturally integrated technology.

Other VCs are also increasing their investment to raise a significant share in renewable energy through early-stage funding, which has shifted partly from solar startups to wind, bioenergy, and geothermal.

Recent geothermal deals

• XGS Energy, a Palo Alto, CA-based geothermal harvesting technology, raised $19 million in Series A funding from Anzu Partners.
• Geothermal Engineering, a London, UK-based developer and operator of geothermal energy plants, raised $18M from Kerogen Capital and Thrive Renewables.
• Bedrock Energy, an Austin, TX-based company, just announced an $8.5 million seed round, which aims to bring this all-electric, energy-cost-saving through their autonomous drilling technology and advanced subsurface simulation software to enable widespread, affordable, and accessible installations of geothermal heating and cooling.
• Eavor, a Calgary, AB-based geothermal energy startup, raised C$182 million ($133 million) led by OMV.
• Fervo Energy, a Houston, TX-based geothermal project developer, raised $10M in strategic investment from Devon Energy Corporation. Fervo Energy demonstrated its enhanced geothermal technology is feasible at scale.

Key takeaways and geothermal energy trends

Geothermal energy is essential in the market because it offers characteristics that set it apart from other renewables such as wind, solar, and hydroelectric. While wind and solar energy are affected by season, temperature, and weather, geothermal energy is infinite and always available. This allows it to be produced consistently and at full capacity for around 8,600 hours per year, making it predictable and programmable. Aside from the competitive rate, geothermal energy has a highly extended life of 80–100 years. Geothermal energy plants, with most of their components, including heat exchangers, buried underground, require relatively less surface area for infrastructure. This is possible by utilizing appropriate drilling technology and leveraging data for the underwriting and creditworthiness of geothermal asset classes. According to data collected by the Energy Services Manager (GSE), it generates more indirect jobs than any other form of renewable energy.

Although geothermal energy is not a novel technology, the absence of international norms, regulations, and requirements for geothermal energy projects is causing the market to grow more slowly and also considering that the development of geothermal projects is a complex and time-consuming process that requires several experts (developers, suppliers, and regulatory bodies) involvement in setting objectives and that subsurface bore field component is expensive and time-consuming and space-demanding to install.

Government assistance and regulations are essential to lowering prices, expediting implementation, and improving specifications so everyone can use this climate-tech HVAC solution.

Innovation may play an essential role in increasing geothermal energy from various perspectives:

• Improving current hardware and software infrastructure to accelerate geothermal adoption
• Sensors, data, and satellites will be used to track the progress of this technology throughout time.

Future applications of geothermal energy

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Improvements have been developed to enable greater energy capture in each plant during drilling and data collection. New materials and manufacturing processes will witness more advancements. Non-metallic flexible pipes for geothermal fluids can lessen the influence of corrosion on surface facilities because materials used for wells and downhole equipment must be able to survive tremendous temperatures and pressures, as well as the corrosive character of geothermal fluids. Additive manufacturing is a manufacturing technique that involves the controlled layer-by-layer deposition of materials into precise geometric structures. This enables the use of novel materials to make parts with geometries that would have been impossible to achieve using more standard production procedures.