Geothermal Energy: The Sleeping Giant Beneath Our Feet?
"The world has only around 17GW of geothermal power across approximately 35 countries. It generated around 97TWh of electricity in 2022, yet still accounts for less than 1% of global power generation."
Those figures should make every institutional investor pause.
At a time when governments are searching for reliable clean energy, data centres are placing unprecedented demands on electricity grids, and investors are questioning where the next wave of infrastructure returns will come from, geothermal energy remains one of the least discussed opportunities in global markets.
The irony is extraordinary.
Unlike solar, the sun doesn't have to shine.
Unlike wind, the breeze doesn't have to blow.
Unlike hydro, rainfall doesn't dictate output.
Geothermal energy is available 24 hours a day, 365 days a year.
It is one of the very few renewable energy sources capable of delivering continuous baseload power.
So why does it remain such a small part of the world's energy mix?
Perhaps more importantly, are investors overlooking one of the most compelling long-term infrastructure opportunities of the coming decades?
The world's hidden power station
Geothermal energy is hardly a new technology.
Countries such as Iceland, New Zealand, Kenya, Indonesia and the Philippines have relied upon it for decades.
Yet globally, geothermal capacity remains tiny compared with other renewables.
Wind and solar have understandably dominated the investment conversation over the past twenty years.
Costs have fallen dramatically.
Governments have introduced subsidies.
Institutional capital has poured into renewable infrastructure.
Meanwhile geothermal has remained something of an overlooked specialist.
That may now be changing.
AI is changing the energy equation
Artificial intelligence has become one of the defining investment themes of our time.
Every new generation of AI requires more computing power.
Every new generation of computing requires more data centres.
Every new data centre requires enormous amounts of electricity.
The challenge is that AI cannot simply switch off when the weather changes.
Unlike intermittent renewable generation, AI infrastructure demands constant, reliable electricity.
That changes the economics of power generation.
Suddenly, the conversation is no longer simply about producing clean electricity.
It is about producing clean electricity every hour of every day.
That distinction matters enormously.
Baseload power is becoming valuable again
For many years the energy debate focused on replacing fossil fuels with renewable generation.
The next phase is proving more complicated.
As solar and wind penetration increase, electricity systems require dependable generation capable of balancing intermittent supply.
Historically that role has been played by:
coal;
natural gas;
nuclear.
Geothermal offers another possibility.
It provides renewable baseload generation without depending upon weather conditions.
That combination is becoming increasingly attractive.
Particularly for:
AI data centres;
hospitals;
manufacturing;
transport systems;
critical national infrastructure.
Investors should take notice.
The environmental case
Geothermal possesses several characteristics that make it unusually attractive from an environmental perspective.
It produces extremely low lifecycle carbon emissions.
It occupies relatively small land footprints.
Visual impacts are generally limited compared with many other infrastructure projects.
Unlike large-scale hydro projects, it typically requires far less landscape disruption.
Unlike offshore wind, it avoids many marine construction challenges.
It also reduces dependence upon imported fossil fuels, strengthening national energy security.
At a time when governments are increasingly concerned about resilience alongside decarbonisation, geothermal offers both.
But geothermal is not risk free
If geothermal were straightforward, every country would already be exploiting it.
The challenges are considerable.
High upfront exploration risk
Perhaps the biggest obstacle is uncertainty.
Developers often invest millions before knowing precisely what lies beneath the surface.
Exploration drilling is expensive.
Some wells prove commercially viable.
Others do not.
That geological uncertainty creates investment risk unlike many other renewable technologies.
Significant capital requirements
Geothermal projects require large initial investment.
Exploration.
Drilling.
Infrastructure.
Grid connection.
Development periods can stretch over many years before revenues begin.
For investors seeking quick returns, geothermal is unlikely to appeal.
For long-term infrastructure investors, however, those characteristics may prove advantageous.
Geographic limitations
Unlike wind or solar, geothermal cannot simply be built anywhere.
Successful projects depend upon geological conditions.
Countries located along tectonic boundaries naturally possess greater potential.
That partly explains why Iceland, Kenya and Indonesia have become global leaders.
Emerging technologies may gradually expand viable locations, but geography will always remain an important consideration.
Regulatory uncertainty
Energy policy continues to evolve.
Planning frameworks.
Permitting.
Grid access.
Environmental approvals.
Public acceptance.
All influence project viability.
Long-term investors therefore need regulatory certainty as much as technological certainty.
Why institutional investors should care
Despite these challenges, geothermal aligns remarkably well with the characteristics many institutional investors seek.
Long asset lives.
Predictable cashflows.
Inflation-linked revenues.
Infrastructure characteristics.
Strong sustainability credentials.
Growing strategic importance.
Pension funds and insurers increasingly require precisely these kinds of investments.
Not speculative technology.
Not rapid trading opportunities.
Long-duration assets capable of delivering resilient income.
Geothermal potentially offers all of these.
The transition from climate investing to resilience investing
Perhaps the most interesting aspect of geothermal is what it says about the broader evolution of sustainable investing.
Ten years ago much discussion centred around carbon reduction.
Today investors face a broader challenge.
How do societies remain economically competitive whilst decarbonising?
How do electricity systems remain reliable?
How do we support AI?
How do we strengthen energy security?
How do we finance resilient infrastructure?
Geothermal sits at the intersection of all these questions.
It is no longer simply an environmental story.
It is becoming an economic one.
Financing the opportunity
Large-scale geothermal deployment will require significant capital.
Governments alone cannot finance the transition.
Institutional investors will play a critical role.
Potential financing structures include:
infrastructure funds;
green bonds;
transition finance;
public-private partnerships;
sovereign investment vehicles;
blended finance.
The challenge will be allocating risk appropriately between governments, developers and long-term investors.
Exploration risk may require public support.
Operational assets may attract pension capital.
This layered financing model has already proved successful in offshore wind.
Geothermal may follow a similar path.
Technology is changing the equation
One reason investors are becoming more interested is technological progress.
Enhanced Geothermal Systems (EGS) aim to access geothermal resources previously considered uneconomic.
Advances in drilling technology, many adapted from the oil and gas industry, are reducing costs and expanding potential locations.
Digital monitoring and AI-driven reservoir management may further improve operational efficiency.
If these technologies continue to mature, geothermal's addressable market could expand dramatically.
Europe cannot ignore the opportunity
Europe faces a particularly difficult energy challenge.
It must:
reduce emissions;
strengthen energy independence;
support industrial competitiveness;
power AI infrastructure;
maintain affordable electricity.
No single technology provides every answer.
But geothermal deserves greater attention than it currently receives.
Countries such as Italy, France and Germany already possess geothermal resources.
Others are beginning to reassess their potential.
Institutional investors should be asking whether geothermal remains underrepresented within long-term infrastructure portfolios.
The investment question
Perhaps the most important question is not whether geothermal will replace solar or wind.
It will not.
The real question is whether investors have underestimated its role within a diversified energy system.
Infrastructure investing has always been about balancing risk, resilience and predictable returns.
Geothermal fits remarkably well within that framework.
Yet capital allocation has remained modest.
Is that because the opportunity genuinely lacks scale? Or because investors have become accustomed to following familiar renewable technologies?
History suggests markets often overlook opportunities hiding in plain sight.
Responsible capital allocation
The debate around sustainable investing has evolved considerably.
The focus today is less about labels and more about practical capital allocation.
Geothermal illustrates this perfectly.
It contributes to:
energy security;
economic resilience;
decarbonisation;
industrial competitiveness;
AI infrastructure;
long-term portfolio stability.
These are no longer separate conversations. They are becoming the defining investment questions of the next decade.
A conversation worth having
For institutional investors, geothermal should not simply be viewed as another renewable technology.
It raises far broader questions.
How should long-term capital support energy resilience?
How should investors balance innovation with dependable infrastructure?
What role should governments play in reducing early-stage development risk?
Can pension funds help finance assets that may operate for fifty years or more?
And perhaps most importantly:
If artificial intelligence, electrification and economic resilience are reshaping the global economy, can we really afford to overlook one of the few renewable energy sources capable of delivering clean, reliable power around the clock?
The world has spent decades searching for cleaner energy.
Perhaps one of the most promising solutions has been quietly waiting beneath our feet all along.
