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What is geothermal energy and how does it work?

Long considered the forgotten member of the clean energy family, geothermal energy has the potential to become a viable alternative to fossil fuels. With the price of energy soaring, supply chains in a state of disruption, and climate change an ever-present threat, it’s more important than ever to accelerate the shift away from fossil fuels and towards renewable energy.

How geothermal can power the energy transition

Anyone who has soaked their sore muscles in a thermal spa like Iceland’s Blue Lagoon or watched in amazement as Yellowstone’s Old Faithful erupts into the sky knows first-hand the heat and power that lie beneath our feet. But geothermal energy has the potential to do so much more than calm and captivate us: Just a few miles below the surface, the Earth’s crust has enough energy to sustain humankind for generations to come.

Admittedly, the headlines have not been relaxing reading lately. From skyrocketing energy prices to supply chain disruptions and from unsettling geopolitical crises to the latest report from the Intergovernmental Panel on Climate Change (IPCC), it can be easy to feel despondent.

But here’s some good news: a new global energy system based on renewables, electric vehicles, and other clean technologies is growing. Geothermal energy will be a vital component of that system. Long overshadowed by solar and wind power, it is one of the most reliable and environmentally friendly solutions for generating electricity and heat for green buildings.

The basic principles at work in geothermal energy production, and three different ways the Earth's heat can be converted into electricity. © U.S. Department of Energy

How does geothermal energy work?

Geothermal energy is heat generated and stored beneath the Earth’s surface, typically in the form of naturally occurring pockets of hot water. Wells drilled into these underground reservoirs transport steam and very hot water to the surface, where they can be used to heat or cool buildings directly and generate electricity. Many people don’t know that the heat deposited within 10,000 meters (approx. 32,000 feet) of the Earth’s surface is estimated to contain 50,000 times more energy than all of the world’s oil and gas resources combined.

Production of renewable geothermal energy at Blue Lagoon, Grindavik, Iceland.

The most active geothermal resources are typically found along major tectonic plate boundaries, so efforts to tap this renewable energy source are concentrated in these areas. And indeed, countries in these regions are already some of the leaders capitalizing on geothermal energy. The list of the world’s top 10 geothermal countries is headed by the United States, with an installed capacity of approximately 3.722 gigawatts (GW) at the end of 2021. Indonesia, the Philippines, Turkey, and New Zealand round out the club of nations with over 1 GW of installed capacity. Iceland, one of the most tectonically active places on Earth, is another success story – roughly 90% of homes in this country are heated using geothermal energy.

Applications of geothermal energy

Archeological evidence suggests that humans have been flocking to hot springs to bathe, clean, and cook for millennia. Nowadays, we are turning to geothermal energy to keep entire buildings – from greenhouses to warehouses – at the perfect temperature. In general, geothermal energy systems can be classified into three broad groups:

  1. direct-use and district heating systems,
  2. geothermal heat pumps (GHPs),
  3. geothermal power plants.

1. Direct-use and district heating systems

In direct-use and district heating systems, hot water from below the Earth’s surface is used immediately without adding any specialized technology. This low-temperature geothermal energy can heat structures from single homes to entire communities.

District heating

Author: Laura Toffetti, DensityDesign Research Lab. This file is licensed under the Creative Commons Attribution-ShareAlike 4.0 International license.

2. Geothermal heat pumps

Geothermal heat pumps are a bit more sophisticated: they use heat exchangers and pumps to transfer heat from the ground into buildings during the winter and reverse the process in the summer. Businesses are catching on to these advantages and increasingly using geothermal heat pumps to design carbon-neutral buildings, reduce their carbon footprint, and deliver on their ambitious Environmental, Social and Governance (ESG) agendas.

An energy-efficient heating and cooling alternative, the geothermal heat pump system moves heat from the ground to a building. © U.S. Department of Energy

3. Geothermal power plants

Geothermal power plants use hot water or steam from geothermal reservoirs to drive turbines that generate electricity directly (dry steam). They do this in two ways: by converting hot water into steam (flash steam) or by transferring the heat from hot water to another liquid, which then turns to steam (binary cycle). 

Sunset above the Geothermal Power Plant in Golemo Selo, Bulgaria.

As you can see, geothermal energy is a real all-rounder, delivering the renewable heat and power that companies and communities will need to accelerate the shift to a zero-carbon economy.

A rechargeable battery running on Lithium-Ion.

Can geothermal energy solve the lithium shortage too?

And here’s more good news: geothermal waters contain significant amounts of lithium. Conventional lithium mining has a heavy environmental toll: an estimated 15 tons of carbon dioxide are released for each ton extracted from hard rock mines. And global demand for lithium is expected to skyrocket by 500% by 2050 due to the widespread adoption of lithium-ion battery technology to power electric vehicles and energy grid storage. Indeed, a shortage of lithium is already stalling efforts to roll out more electric cars.

Researchers have found that the hot, concentrated saline solution from underground reservoirs, known as geothermal brine, is rich in minerals like lithium, boron, and potassium. Companies are now testing ways to extract lithium from this geothermal brine on an industrial scale. Initial results show huge promise. Moreover, with lithium in short supply and high demand, its price might also help make geothermal energy projects even more rewarding. 


Ground source heat pumps for heating and cooling use 75% less energy than traditional heating and cooling systems.


The United States has tapped less than 0.7% of geothermal electricity resources.

50 billion

Electricity generated from geothermal plants is projected to increase from 17 billion kWh in 2020 to 50 billion kWh in 2050.

Advantages and disadvantages of geothermal energy

So why does geothermal energy only account for a fraction of our energy supply? Well, the single-largest drawback to geothermal energy is that it is location-specific, so plants need to be built where this resource is accessible. And geothermal energy has to be used where it’s found, which, in many cases, is too far away from urban centers.

Geothermal energy facilities also have high upfront costs that take years to recoup, and many developing countries rich in geothermal resources might not have the sophisticated infrastructure or capital required. What’s more, there are some concerns that injecting high-pressure streams of water can trigger seismic activity or subsidence.

The Philippines is one of the world's top producers of geothermal power.

But geothermal has some clear advantages over other types of energy: first and foremost, geothermal energy is a renewable resource available in abundant supply. No need to worry if the sun isn’t shining or the wind isn’t blowing – geothermal energy systems can operate around the clock. Geothermal energy is also zero-carbon and relatively clean, emitting only water vapor, and requires much less space than other power plants. After the upfront investment, geothermal plants can last for decades if managed properly. Geothermal energy technology is also becoming increasingly affordable.

Geothermal power station in Barangay Puhagan, Negros Oriental, Philippines. © By Mike Gonzalez, This file is licensed under the Creative Commons Attribution-ShareAlike 3.0 license.

One more note: In an age when oil and gas are becoming increasingly obsolete, geothermal energy is a growing industry. And those oil and gas workers already skilled in exploration and drilling might just find the perfect place to embark on a new clean energy career at geothermal power plants.

A promising future?

One thing is clear: the global economy needs clean energy. Although geothermal energy technology faces challenges, this resource will undoubtedly be an essential piece of the puzzle as the world looks for ways to accelerate decarbonization. All things considered, and with the right incentives and policies in place, there’s no reason why we shouldn’t be taking advantage of the heat beneath our feet. 

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Published: September 2022

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