The Path Toward Increased Development of Geothermal for Electricity Production

Geothermal energy is renewable and diverse, as it provides reliable, flexible electricity generation and delivers unique technology solutions to heating and cooling demands. The unique characteristics of geothermal energy and its unrealized potential include (1) constant, secure, and renewable electric power generation whose flexible load-following capabilities contribute to grid stability and resiliency, (2) wide-ranging applications in electricity generation and residential, commercial, and district heating and cooling, and (3) job impacts in the manufacturing and geothermal sectors, the revenue potential for federal, state, and local stakeholders, and royalty potential for leaseholders. However, only a fraction of geothermal’s vast domestic energy potential has been realized due to technical and non-technical barriers constraining industry growth. 

Currently, the U.S. leads the world for installed geothermal capacity, with more than 3.7 GW. The U.S. also leads the world in the amount of geothermal electricity generation. In 2021, geothermal power plants in seven states produced about 16 terawatt-hours (TWh), equal to about 0.4% of total U.S. utility-scale electricity generation, according to the Energy Information Administration (EIA). Improving the tools and methodologies used to explore, discover, access, and manage geothermal resources reduces the costs and risks associated with their development. Such reductions could increase geothermal power generation to a 60 gigawatts (GW) capacity by 2050, making up 3.7% of total U.S. installed capacity and generating 8.5% of all U.S. electricity generation by that time, according to the U.S. Department of Energy. 

Geothermal energy harnessed for direct use or electricity generation comes from the heat that flows continuously from Earth’s interior to the surface, radiating from its core for about the last 4.5 billion years. This heat is continually replenished by the decay of naturally occurring radioactive elements in the interior and will remain available for billions of years, ensuring a virtually inexhaustible supply. As a result, there is a range of useful temperatures in the subsurface, ranging from thousands of degrees to just a few degrees above ground-surface temperatures–all of which can be used for productive purposes. 

The three main categories of geothermal resources are geothermal heat-pump resources (GHPs), hydrothermal resources, and enhanced geothermal systems (EGS). EGS are unconventional geothermal resources that contain heat similar to conventional hydrothermal resources but lack the required groundwater and/or rock characteristics to enable energy extraction without subsurface engineering. EGS creates artificial geothermal reservoirs to generate commercial electricity and can be implemented at any above-ambient temperature that supports energy conversion for application. EGS can access thermal energy in the Earth by drilling wells and connecting them with a fracture network. Water can then circulate to harness heat energy and convert it to electricity. 

Existing geothermal plants use conventional hydrothermal resources, but improved technology could facilitate using EGS resources for electricity generation. In addition, improved technologies that reduce the costs of EGS development and minimize water losses can broaden the geographic scope of geothermal power production. Realizing the potential of EGS resources will require research in faster, lower-cost drilling tools and methods, reservoir stimulation technologies, and new modeling tools and management approaches to ensure the sustainability of these systems. According to the U.S. Department of Energy, the total EGS resource potential is at least 5,157 GW, nearly five times the total installed utility-scale U.S. generation capacity in 2016. 

The most significant non-technical barriers to geothermal electricity projects include market conditions, land access and permitting, lack of transmission infrastructure, and delays in project financing. Utility procurement practices have yet to reflect the benefits of geothermal power. For example, grid integration costs associated with technologies such as added transmission capacity or additional power requirements to balance the load are often not considered in levelized cost calculations, yet geothermal helps avoid these costs. Although geothermal plants can operate flexibly, this would not be cost-effective under traditional power purchase agreement terms. These terms must be modified to compensate geothermal power plants for operating in a reserve and flexible capacity instead of a baseload. This might involve contracts with payment schedules defining the power price in response to a dispatch signal by the independent system operator and/or an increased ability for frequency regulation through power pricing with payments specifically for these types of services. 

The structure and duration of federal incentives, such as the investment or production tax credit, compared to long geothermal development timelines, make it difficult for these projects to rely on such incentives. There is a permanent 10% investment tax credit for investment in equipment used to produce, distribute, or use geothermal energy. These technologies also qualify for the renewable electricity production tax credit. The tax credits’ duration and incentive periods should be examined to accommodate geothermal energy projects’ longer project development timeframes. For instance, the production tax credit hardly lasts more than five years, while geothermal exploration and development typically take longer. 

Geothermal energy generation technology can help meet future U.S. energy demands. Energy consumption is growing, end uses are changing, and the power grid is being modernized and transformed to improve reliability and resilience. Geothermal energy has the potential to support these changes and contribute to emission reduction goals. Yet, for this to occur, several technical and non-technical barriers currently hampering geothermal development must be addressed. Improving market conditions, land access and permitting, transmission infrastructure, project financing conditions, and regulatory constraints will allow this renewable energy resource to prosper–as it should.  

Sean Deresh

Undergraduate Seminar Fellow

Sean Deresh is an undergraduate student in the Vagelos Integrated Program in Energy Research. Deresh is a 2022 Undergraduate Student Fellow and a Kleinman Center Student Advisory Council Member.