About the Energy Transition Technology Profile series: These profiles draw on, and update, the Institute’s analysis of specific safe-bet and wild-card technologies that are driving Canada’s clean energy transition.
Strengths and cautions
Can provide clean, dispatchable power and heat almost anywhere to complement intermittent wind and solar.
Not yet commercially viable due to high upfront costs and a sluggish track record.
Major breakthroughs in the last few years in enhanced and closed-loop geothermal are moving the technology closer to full market readiness.
What is advanced geothermal energy?
Geothermal energy is heat energy from deep beneath the Earth that is transported to the surface as water or steam for various uses. It contributes a tiny share of the world’s overall energy, approximately 16 gigawatts of total capacity installed worldwide—though in locations of particular abundance, such as Iceland, it’s a significant source of clean, reliable energy.
Advanced geothermal refers to a new wave of innovations in geothermal technology now in the early stages of commercial development. Geothermal has long been big on promise (“the sun beneath our feet,” as boosters refer to it) but underwhelming in practice (“the perpetual also-ran of renewable energy,” as energy journalist David Roberts puts it). Advanced geothermal technology promises to close the gap between promise and practice.
Why does it matter now?
Advanced geothermal has the potential to bring replicability, economies of scale, and a much wider range of locations into the equation, which could send its costs plummeting on learning curves similar to the ones wind and solar have followed over the past decade. Advanced geothermal energy also has some notable advantages over both dispatchable fossil fuels and intermittent renewables. Because the systems are emissions-free and operate mostly underground, they face very few environmental or social barriers. They can be scaled to match demand and provide consistent and predictable power for grids. And once they’re built, they’re much cheaper to operate than other dispatchable sources like coal, gas, and nuclear.
The three advanced technologies closest to market readiness are:
- enhanced geothermal, which employs hydraulic fracturing technology commercialized for the oil industry to increase the availability and quality of geothermal resources in rock formations;
- closed-loop geothermal, which operates like a giant radiator, circulating fluid through a closed loop of two vertical pipes and a network of horizontal pipes deep beneath the Earth, where the fluid heats to a high temperature and is pumped back towards the surface to generate heat and power; and
- deep geothermal, which involves drilling extremely deep wells to reach superheated pockets of geothermal energy many kilometres beyond current approaches.
Enhanced and closed-loop systems are by far the closest to market-ready, and both claim to be deployable across a much wider range of locations than older geothermal technologies. Deep geothermal company Quaise Energy, meanwhile, is raising funds for a demonstration project to be completed by 2028, and hopes to demonstrate commercial viability by the 2030s.
Closed-loop geothermal is a new, dispatchable, renewable energy source with massive potential to be the workhorse of net-zero electricity and heating systems in the coming years.
Eavor Technologies, the pioneer in closed-loop geothermal, believes its technology has the potential to generate heat and power almost anywhere on Earth. The company has attracted hundreds of millions of dollars in venture capital with its promise of truly ubiquitous, dispatchable renewable energy and is working on a commercial-scale project in Germany .
Eavor’s early successes are potentially big news for Canada, since Eavor is a Calgary-based company developed by veterans of the oil patch repurposing oil-and-gas drilling technology. As the company’s chief executive John Redfern told The Globe and Mail, “This is our shot. If we move now, Canada can be a world leader in geothermal technology.”
Is it a safe bet or wild card?
Owing to their promise of dispatchable renewable energy across a much broader geography, enhanced and closed-loop geothermal are being seen as increasingly attractive investments. The leading companies have launched the first commercial-scale projects. Fervo Energy’s first pilot project, a 3.5-megawatt power plant in Nevada developed in partnership with Google, is at the forefront of enhanced geothermal; and Eavor’s first commercial-scale closed-loop geothermal plant in Germany will supply 64 megawatts of heat and 8 megawatts of electricity once it’s up and running.
But these projects are one-offs, at least for the moment, and advanced geothermal’s ability to compete at scale with hydro, nuclear, and gas as a clean and affordable source of firm or dispatchable power is yet to be determined. For these reasons, we consider advanced geothermal a wild card for now.
What challenges must it overcome to become a safe bet?
Geothermal energy’s progress has long been hampered by the scarcity of suitable locations (limited mostly to areas of significant tectonic activity where hot magma is relatively close to the Earth’s surface) and the technology’s high capital costs. But costs are falling—an impressive 22 percent from 2021 to 2022 alone—to the point where some hydrothermal systems are now cost-competitive with gas plants and cheaper than coal. And the United States Department of Energy is heavily backing what it calls an “earthshot” to reduce the cost of enhanced geothermal systems like Fervo’s by 90 per cent in the next ten years (from roughly $450 per megawatt to $45 per megawatt), which would make enhanced geothermal competitive with combined-cycle gas plants and, potentially, the cheapest non-polluting source of firm and dispatchable power.
Some hydrothermal systems are now cost-competitive with gas plants and cheaper than coal.
These attributes alone, however, are not enough to make advanced geothermal a safe bet for the path to net zero. The technologies must first overcome several formidable challenges. In addition to high capital costs, both enhanced and closed-loop technologies are not yet in widespread use, leaving many uncertainties regarding performance and reliability, particularly given the slow pace of advances in the geothermal sector historically. And the promise of advanced geothermal to be readily replicable and easily maintained has yet to be demonstrated. In the case of enhanced geothermal, there are also environmental and permitting concerns regarding the use of hydraulic fracturing, especially near sites of known tectonic activity.
What are the next steps for policy makers?
Policymakers can accelerate the adoption of advanced geothermal energy by clarifying permitting and regulatory rules for the new technologies, and by providing direct investment and acting as a first customer or early adopter for new projects. The Canadian government has already taken steps in this direction, investing $90 million in Eavor Technologies through the Canada Growth Fund.
Advanced geothermal should continue to benefit from federal Investment Tax Credits as it matures—particularly if it starts to find government champions the way some other energy technologies have. For wild card technologies like advanced geothermal, governments can improve the investment climate by ensuring long-term certainty through policies such as carbon prices.
The federal government’s Investment Tax Credits are also helpful for advanced geothermal, but these apply to a wide range of technologies, and governments are understandably wary of betting too heavily, too soon on new and unproven innovations like advanced geothermal. But closed-loop geothermal represents a unique export opportunity for Canada and a way to take a real lead in a new, dispatchable, renewable energy source with massive potential to be the workhorse of net-zero electricity and heating systems in the coming years.
Profile text by Chris Turner.
