Geothermal is having a moment.

As 2024 wrapped, reporters declared it a breakout year for next-generation (“next-gen”) geothermal and the year of enhanced geothermal’s rise. In 2025, the momentum continues, with geothermal deemed the hottest thing in clean energy. But despite the buzz of promising pilot projects, bipartisan support, and geothermal’s potential to provide 24/7 clean baseload power, geothermal still makes up just a sliver of our energy generation mix. In this piece, we wanted to go beyond the headlines and examine what’s driving this surge of interest, how close the sector is to a true inflection point, and what breakthroughs—technical, financial, and policy—are still needed to unlock geothermal at scale. At Powerhouse Ventures we back seed-stage founders building innovative software to advance clean power generation and infrastructure, mobility, buildings, and industry, so we’ve also explored how software, data, AI, and ML is playing an ever increasing role in this nascent but expanding sector.  

TL;DR (Thermally Loaded; Deeply Reliable): Key Takeaways

• Next-generation geothermal could become a $50 billion market by 2050, delivering abundant, carbon-free, 24/7 baseload power.

• High development costs are a major bottleneck, but innovation is emerging. AI-powered subsurface mapping and new drilling techniques, oftentimes borrowed from the oil and gas sector, are slashing costs and boosting drilling success rates.

• Lack of financing is holding back scale. With few viable project finance pathways, developers face double-digit costs of capital. Creative solutions like Google’s Clean Transition Tariff and philanthropic dollars may be needed to help bridge the financing gap until the industry is deemed traditionally bankable.

• Regulatory processes can delay timelines, but policy reform and purpose-built tech solutions to expedite regulatory approvals offer an opening. New bipartisan legislation and the Trump administration’s pro-geothermal stance signal tailwinds for faster approvals.

• We see a significant opportunity for software-driven innovation, from drilling optimization and subsurface mapping to regulatory automation. But questions remain around market timing, developer risk appetite, and when pure software plays can start to thrive in the geothermal stack.

If you have also been looking closely at this space, or are building something in geothermal software, we would love to hear from you! Please navigate to our contact page to send us a message.

First, some basics

Geothermal refers to the internal heat of the Earth, produced from the slow decay of radioactive particles in the Earth’s core, and has been used for heating for millennia. Geothermal currently supplies less than 1% of global electricity, with the US leading at just over 4 GW generated—though this is only 0.4% of total US electricity generation. Today the vast majority of the 15 GW of global installed capacity is dominated by conventional or hydrothermal development methods where geothermal energy is derived from drilling up to two miles deep down into naturally occurring reservoirs of heat, water, and permeability. Conventional geothermal is therefore limited to regions with an existing perfect mix of resource conditions.

In contrast, next-gen geothermal technologies drill deeper into the Earth and can theoretically be deployed anywhere since their only requirement is the existence of heat. If you go deep enough, heat is everywhere. Next-gen geothermal technologies include:

• Enhanced geothermal systems (EGS): creates artificial reservoirs by fracturing hot rock between two wells and pumping water through the fractures to extract heat.

• Closed-loop systems, also known as advanced geothermal systems (AGS): circulates fluid through sealed underground pipes to absorb heat and bring it to the surface for power generation.

• Superhot, also known as superdeep or supercritical: this involves drilling to depths with supercritical water (>700°F), which holds four to ten times more energy and converts to electricity more efficiently.

Source: DOE Pathways to Commercial Liftoff: Next-Generation Geothermal Power

Why next-gen geothermal has us fired up

There is a lot to love about geothermal. Both conventional and next-gen solutions offer an untapped, carbon-free, baseload energy source. Unlike wind and solar, geothermal is not weather-dependent, does not require expensive foreign critical minerals, it aligns with national security strategies around reshoring, and takes up a much smaller land use footprint than renewables like wind and solar. Recently, developers like Fervo are testing new operating methods to allow plants to be flexible grid assets as well, using the inherent energy storage capabilities offered by reservoirs to generate more or less energy as needed. To put into perspective the energy potential of this sector overall, enough geothermal heat exists near the Earth’s crust to power the world thousands of times over if we can harness it using both conventional and next-gen approaches.

Despite next-gen technologies dating back to the 1970s, the industry has faced persistent barriers that have prevented their full potential from being realized. That’s starting to change. A wave of startups are emerging to unlock the 90 GW of power the DOE believes geothermal could economically provide in the US by 2050. This could be worth roughly $50 billion per year in electricity revenues assuming $70 per MWh for 24/7 power at a 90% capacity factor. With further technology breakthroughs or expanded use for flexible power use, the DOE projects geothermal could drive over 300 GW of deployment by 2050. Looking at the total US next-gen geothermal resource potential, it could provide over 5,500 GW—dwarfing the 40 GW cap of conventional resource potential.

Source: NREL

Five catalysts fueling geothermal’s market momentum

Why, after decades, does geothermal seem to finally be getting its moment in the spotlight? The short answer is that the sector is at a convergence point where technological maturity, the talent pool, market demand, and institutional urgency are aligning. We’ve summarized several market catalysts that make this a particularly unique time for the sector.

1) Opportunity to harness overlapping technology, labor, and supply chains from the oil and gas sector: 

• Shared infrastructure: Up to 80% of the investment in a geothermal project relies on the skills, data, technologies and supply chains common in oil and gas. Decades of oil and gas innovation—particularly in horizontal drilling, well stimulation, and downhole sensing—are now being repurposed for geothermal, especially EGS. This slashes technology risk, R&D costs, and timelines.

• Talent migration: It's not just a technology transfer—it’s a talent transfer. Emerging geothermal startups have started to recruit latent geologic, drilling, and fracking talent looking to make a shift into clean energy. Regionally, startups are setting up shop in Texas, a growing geothermal hub with the nation’s largest oil and gas workforce and billions in energy capital.

• Diversification strategy: The overlap also creates pathways for oil and gas companies to diversify. Many are already launching geothermal divisions to hedge against the risk of declining fossil fuel demand, pouring much-needed early millions into the sector. 

2) Recent breakthroughs in next-gen geothermal are attracting capital:

• Fervo’s performance milestones: In 2024, Fervo’s batch drilling reduced drilling times by 70%, cutting costs nearly in half to $4.8 million per well. By April 2025, the company upsized its Cape Station project from 400 MW to 500 MW without additional drilling, enabled by advances in well design and field development. Most recently, in June 2025, Fervo drilled its deepest and hottest well yet at 15,675 feet in just 16 drilling days, a 79% reduction compared to the DOE’s baseline for ultradeep wells. Fervo also indicated it had achieved several other drilling performance records, opening the door to EGS becoming commercially viable at greater depths and temperatures, paving the way to expansion outside the western US.

• Quaise’s first demonstration: In summer 2025, Quaise is conducting the first demonstrations of its novel millimeter-wave drilling technique on a full-scale oil rig outside of Houston. The company’s high-frequency beams melt and vaporize rocks to reach deeper, hotter rock at depths of over 12 miles.

• FORGE’s drilling speed improvements: Scientists at Utah FORGE, a DOE-funded lab, have improved drilling speeds by over 500% in three years, bringing it close to oil and gas rates. These new drilling records led NREL to revise their geothermal drilling cost curves in 2025, with cost reductions of up to approximately 25% for vertical and horizontal wells, improving project economics.

• Capital inflows accelerating: Breakthroughs are catching the attention of investors. Sightline Climate estimates that geothermal funding nearly tripled from $196 million in 2023 to $558 million in 2024. If deep cost reductions are achieved, the IEA projects cumulative investment in next-gen solutions could hit $1 trillion by 2035 and $2.5 trillion by 2050—or $140 billion per year, more than today’s global onshore wind investment.

Source: DOE Pathways to Commercial Liftoff: Next-Generation Geothermal Power

Source: Canary Media

3)  Large loads looking for clean 24/7 power are hungry:

• Massive markets emerging: Clean firm power will be essential to support data centers, electrified heat, green hydrogen, and carbon removal, markets with significant load growth potential. Geothermal is well-positioned to benefit from surging data center energy demand driven by AI as hyperscalers like Google and Microsoft pursue massive amounts of carbon-free energy.

• Google’s deals with Fervo: In 2021, Google and Fervo signed the world’s first corporate deal for enhanced geothermal, a 3.5 MW Nevada pilot that went live in 2023. In 2024, Google agreed to purchase another 115 MW from Fervo’s upcoming Corsac Station.

• Meta’s geothermal push: Last year, Meta announced a partnership with Sage Geosystems, another next-gen startup, to provide 150 MW to Meta’s data centers(check out Powerhouse’s recent Watt It Takes episode with Sage Geosystems CEO Cindy Taff here).This June, Meta announced a deal with XGS Energy, a closed-loop geothermal startup, to develop a 150 MW geothermal power plant in New Mexico.

4) Rare embrace by Trump Administration’s “drill, baby, drill” mandate:

• Clean energy exception: Geothermal was the only renewable energy source mentioned in Trump’s Executive Order declaring a national energy emergency in January, and geothermal’s investment and production tax credits were preserved in the GOP’s One Big Beautiful Bill.

• DOE’s industry ties: Secretary of Energy Chris Wright is particularly bullish on geothermal. When Wright was CEO of the fracking company Liberty Energy, they invested $10 million in Fervo in 2022. 

• Permitting momentum: A recent bipartisan bill seeks to expedite permitting for geothermal on public lands by applying exclusions already in place for oil and gas. 

• Mixed signals: However, despite the administration’s outward embrace of geothermal, several geothermal-specific DOE liftoff reports were unavailable for several months. Geothermal industry leaders will have to continue to navigate federal uncertainties in the next three years.

5) Tailwinds from industrial and national security strategy:

• Strategic infrastructure: Geothermal isn’t just a clean power play, it’s increasingly being framed as strategic infrastructure for industrial resilience, economic security, reshoring, and geopolitical stability. This emerging narrative is quietly becoming one of the most important tailwinds for the sector.

• Defense sector interest: This framing is catching the attention of national security and defense agencies. The DOD, for example, has been exploring geothermal to island critical facilities from grid disruptions.

Momentum builds but hurdles remain—unlocking EGS will require innovation

Several experts we spoke with estimate EGS is five to ten years from full commercialization and market stability, with closed-loop applications even further out. Key market and technical pain points remain but many can start to be addressed through innovation.

Pain Point #1: High Project Development Costs

Geothermal’s promise hinges on deep, accurate, and affordable drilling, and drilling deep today is expensive. The DOE estimates it costs $450 million to characterize and build a new 30 MW next-gen geothermal site. BloombergNEF puts capital costs at over $8.8 million per MW, far higher than onshore wind at $1.8 million per MW or solar at $1.1 million per MW. While drilling costs have come down, Fervo’s horizontal wells still cost nearly $5 million each and conventional geothermal wells historically have had low drilling success rates. Additionally, while drilling deeper yields hotter temperatures, it adds cost and risks, making the tradeoff a key challenge.

a. Opportunity: Improved drilling and reservoir engineering efficiencies

• Reducing cost through drilling and stimulation: Scaling next-gen geothermal will require innovation across the key levers for reducing high project costs—faster, cheaper, deeper drilling, and more effective reservoir stimulation and subsurface engineering to enhance rock permeability and optimize underground heat extraction.

• Optimizing with sensors and software: Downhole sensor data and control software innovation can also optimize drilling and generate valuable subsurface insights, especially in challenging superhot environments where traditional oil and gas tools may not be suitable.

• Example Startups: DeepPower, Hephae Energy Technology, Eden Power, 400C Energy

b. Opportunity: Use AI to infer subsurface characteristics and de-risk sites

• Lowering exploration costs with AI: As software investors, we’re especially attuned to how AI and ML can reduce upfront costs by scalably and quickly predicting subsurface conditions and increasing drilling success rates, cutting the need for spending millions on exploratory drilling particularly in areas without a history of subsurface exploration. Some startups in this space claim they could cut up to 90% of exploration drilling costs, making a significant dent in total development capital needed.

• Dynamics still unfolding: Market timing, project risk appetite, and developer buy versus build dynamics are still at play for AI-based startups at this stage, but claims of no-drill subsurface exploration is compelling and a potential market accelerator for the entire sector. 

• Example Startups: Zanskar, TLS Geothermics, New Mantle Technologies

Pain Point #2: Lack of traditional project financing

Access to capital is a major chokepoint for next-gen geothermal. Given the industry’s nascency and long development timelines, most traditional capital providers see project finance as too risky, forcing developers to rely on venture capital and strategic investors. Investors are being asked to underwrite oil and gas-style geological risk in a renewables-style project finance structure, and it’s not working. Since lenders can’t yet point to an EGS project demonstrated at a greenfield site, cost of capital hovers around 15% compared to 5% for wind and solar. Fervo is the only player to secure bespoke, likely unreplicable, debt financing—$206 million in 2025 from Breakthrough Energy Catalyst, Mercuria, and X-Caliber Rural Capital, as well as $120 million from Mercuria in 2024. Government support has also been limited, with federal funding in the millions, not billions, unlike other clean energy technologies. DOE estimates achieving commercial scale will require $225 to $250 billion in investment.

A quick request to our project finance friends reading this: next-gen geothermal seems stuck in a chicken-and-egg dilemma—it’s too capital-intensive to scale without debt, but not bankable without long-term performance data. At the same time, experts agree it can’t sustainably rely on venture capital alone. Without the financing the industry needs, geothermal developers are stuck in a loop of capital scarcity, relying on VC to fund what are effectively infrastructure projects. If you’ve seen creative ways around this, we’d love to hear them.

a. Opportunity: Innovation in power contract and tariff design

• Unlocking capital through creative structures: Since we can’t immediately finance geothermal through traditional means, creative contract design and tariff structures are needed to help lower the cost of capital.

• Google’s tariff: Google is experimenting with this through its proposed clean transition tariff with NV Energy for Fervo’s 115 MW plant, which was approved by the Public Utilities Commission of Nevada in May 2025. Instead of a traditional PPA—where NV Energy buys power from Fervo and resells it to Google at a fixed rate—the tariff lets Google pay the cost difference between Fervo’s project and NV Energy’s cheaper alternative, helping Google hedge energy price risk while enabling NV Energy to deliver 24/7 clean power without overbuilding solar or relying on gas.

• Expanding the offtake model: New offtake models could also leverage how geothermal offers multiple value propositions beyond power, such as direct heat for industrial applications or energy storage.

b. Opportunity: Tapping other sources of capital and building momentum

• Bridging the capital gap: Capital sources like philanthropic funding, public/private cost-share agreements, and drilling insurance programs may be needed in the near term to help get next-gen geothermal on its feet.

• Industry groups as catalytic players: Organizations like Project Innerspace, dedicated to rapid global deployment of geothermal energy, could play a key role in building momentum, much like industry groups did for solar. 

Pain Point #3: Regulatory hurdles and societal acceptance risk

Even if the technology works and the capital shows up, permitting delays and social pushback could stall or kill projects. Geothermal, especially EGS, straddles regulatory frameworks built for oil and gas or renewables, but fits neither cleanly.

• Permitting is a multi-agency maze: Developers face redundant, lengthy, and sometimes contradictory state and federal reviews, stretching development timelines and increasing unpredictability. The DOE estimates that streamlining permitting and licensing could cut timelines from seven to ten years to four to seven years.

• EGS-specific pushback: While geothermal opposition is minimal today, fracking opposition and potential induced seismicity are potential pushback points for EGS projects that could add delays and costs. To be clear, fracking in EGS development does not carry the same groundwater contamination risks seen in oil and gas—largely because it targets hot dry rock deeper than oil and gas reservoirs, and tends to use water-based fluids rather than chemicals. While EGS can trigger minor seismic activity, the risk is generally lower than fracking.

• Interconnection bottlenecks: Like other new generation projects, geothermal could face long waits in interconnection queues. 

a. Opportunity: Policy reform to accelerate deployment

• Permitting exemptions: A recent bipartisan bill aims to level the playing field by extending to geothermal the same permitting exemptions that oil and gas projects receive on public lands—reducing the number of separate environmental reviews required.

• Federal prioritization in 2025: An April 2025 Executive Order aimed at streamlining energy development includes geothermal among the domestic resources prioritized for faster approval.

• Vertical permitting models: Alaska’s vertical permitting framework streamlines project approvals by assigning a single coordinator to align all agency reviews, reducing delays and redundancy, a system historically used in its oil and gas sector. Recent legislation aims to extend this approach to geothermal, offering longer exploration periods and simplified licensing to attract more investment and accelerate development.

b. Opportunity: Specialized RegTech

• Purpose-built permitting software: Several startups, such as Blumen Systems, Spark, and Symbium, are already helping streamline lengthy and tedious regulatory and permitting processes for more mature sectors like solar and wind. We see a potential opportunity for early movers building geothermal-specific capabilities.

Powerhouse Ventures perspective: geothermal as a pillar of the energy transition

We believe geothermal is entering a new commercial era, powered by a new generation of tech-native founders, bipartisan policy momentum, and compounding demand pull from data centers, hydrogen, and carbon removal. This isn't just a story about heat, it's about resilient, clean, always-on domestic infrastructure and there is a wave of geothermal startups reimagining what this resource can be.

Tailwinds from the Inflation Reduction Act, which were spared by the GOP’s deep cuts to clean energy incentives, and national security strategy are starting to catalyze deployment. Innovations in drilling, subsurface modeling, and AI are compressing timelines and rapidly derisking early-stage projects, and the demand from large offtakers is real. We are particularly keen to watch for startups building software-defined geothermal platforms, expanding siting optionality, exploration, drilling optimization, and the critical datasets that will launch the sector forward. As momentum builds across multiple continents, geothermal is no longer a forgotten relative of the energy stack, it’s positioned to become a foundational pillar of the clean energy transition. 

If you have also been looking closely at this space, or are building something in geothermal software, we would love to hear from you! Please navigate to our contact page to send us a message.