As the world faces growing energy demands due to the rise of artificial intelligence, data centers, and electrification, one promising solution lies beneath our feet.
Geothermal energy, which harnesses heat from deep underground to generate zero-carbon electricity, is emerging as a reliable, clean alternative to traditional energy sources. J.P. Morgan has highlighted the potential of next-generation geothermal energy to meet 24/7 baseload power needs, making it an ideal solution for industries like data centers that require continuous and uninterrupted energy supply.
The U.S. Department of Energy (DOE) estimates that geothermal power could increase over 20 times its current capacity, potentially contributing up to 90GW of clean, firm energy by 2050. Although geothermal energy currently generates about 15 GW of global power, new technology that taps into deeper geothermal resources is proving to be commercially viable, paving the way for significant growth in the sector.
Historically, geothermal energy has been limited to regions where heat is close to the surface, such as the Geysers geothermal field in California. However, the latest innovations in technology, like Enhanced Geothermal Systems (EGS), are unlocking access to geothermal energy that lies much deeper beneath the Earth’s surface. This breakthrough technology has the potential to revolutionize the geothermal sector and make geothermal power a major contributor to the global energy mix.
Harnessing innovation to address the energy crisis
The history of American industrial innovation offers important lessons for the energy sector. When the U.S. faced natural gas shortages in the early 2000s, technological breakthroughs, supported by the DOE, unlocked vast new reserves, reducing CO2 emissions and fostering energy independence.
Today, the geothermal sector is poised for a similar transformation. Despite generating less than 0.5% of U.S. electricity, new technologies like EGS are set to make geothermal a key player in clean energy production. Geothermal energy not only has the potential to meet electricity demands but also to provide direct heat for industrial applications that are harder to electrify, offering a wide range of benefits for reducing carbon emissions.
In the early stages of geothermal’s next chapter, innovative partnerships between different sectors are sparking new possibilities. J.P. Morgan, for instance, has advised oil and gas company Devon Energy in their investment in the geothermal startup Fervo Energy. In 2023, Fervo began work on a project in Utah that aims to produce 400 MW of 24/7 geothermal power by 2028. These partnerships showcase how the oil and gas sector can leverage its expertise to diversify into geothermal energy production.
Policy and Financing: Key to Geothermal’s Future
Strong government policy support has played a critical role in geothermal projects’ success. In California, for example, a mandate to source 1GW of new capacity from renewable, zero-emitting sources has spurred the demand for next-generation geothermal energy. Going forward, policymakers must focus on streamlining permitting processes and de-risking early-stage geothermal projects to attract private investment.
Investment in geothermal startups has surged, with over US$700mn raised since 2020, according to J.P. Morgan. This influx of capital is essential for advancing geothermal technologies, driving down costs, and scaling clean energy production to a gigawatt scale. Collaborations that bring together patient capital, guaranteed offtake, and oil and gas industry expertise are crucial to overcoming the financial challenges faced by the geothermal sector.
J.P. Morgan’s history of fostering electrification innovation continues to play a pivotal role in the development of the geothermal industry. By partnering with industry and government leaders, J.P. Morgan is helping to bring geothermal power from pilot projects to large-scale commercial deployment, contributing to the energy transition and a more sustainable future.