Geothermal Market Poised for Accelerated Growth in Coming Years
Rystad Energy

Geothermal energy is set to play a significant, albeit small role in the power mix of the future, building on its currently modest 0.3% share of the world’s power supply. As global economies ramp up their efforts to decarbonize, the importance of renewable baseload energy sources such as geothermal is expected to increase in the coming years. Installed geothermal power generation capacity currently stands at 16.8 gigawatts electric (GWe) worldwide, with almost 800 megawatts electric (MWe) expected to be added this year. This year’s growth, mainly stemming from project start-ups in Indonesia and New Zealand, is expected to bring in investments worth $6.9 billion – a record high in recent years.

In the longer term, Rystad Energy estimates global installed capacity to reach 28 GWe by 2030 and upwards of 110 GWe by 2050, marking a significant ramp-up from current levels.

Shruti Raghuram, Senior Analyst, Geothermal Research

While greenfield project start-ups are expected to play a huge role in this growth, brownfield developments coupled with resource optimization at existing assets are vital to boost capacity in the short term. One such strategy being deployed in Indonesia is combining an organic Rankine cycle (ORC) turbine with the existing flash cycle turbines in a power plant to boost productivity of assets. This strategy is central to state-owned developer Pertamina Geothermal Energy’s vision to reach 1 GWe capacity in the next two years.

Apart from the fact that current geothermal projects are heavily location restricted, a major barrier holding the industry back is the risk borne by the developer. Geothermal projects are often considered high risk due to the many uncertainties involved, such as subsurface conditions and recoverable resource volumes – similar to oil and natural gas projects. Risk sharing is one of the ways in which the burden on the developer can be lessened. Kenya’s government in recent years rolled out a largely successful public-private partnership plan called the ‘Build, Own, Operate’ program, where the project risk is distributed among multiple partners, including state-owned Geothermal Development Company, the international developer concerned, utility company KLPC and the government itself.

Moves such as these are essential for the industry to scale up and play a larger role in the global energy mix. While geothermal has enjoyed some limelight from policymakers in recent years, there is still a long way to go to bring it to a level played field with solar or wind. Its myriad applications in the direct use sector can further contribute to global decarbonization efforts by providing renewable, baseload heating and cooling solutions. Geothermal projects also offer co-location opportunities for direct air capture and production of battery-grade lithium, green hydrogen and silica, each of which plays a major role in this era of energy transition. Geothermal energy today is still a largely untapped resource, but with the right combination of project strategies, advancements in technology and government support, it can overcome its key barriers and be scaled up to be deployed in many more regions of the world.

By Rystad Energy

 

 

 

Rystad Energy is an independent energy consulting services and business intelligence provider offering global databases, strategic advisory and research products for energy companies and suppliers, investors, investment banks, organisations, and governments. 

 

 

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