Geothermal Power Market - Forecasts from 2022 to 2027

The global geothermal power market was valued at US$1.434 billion in 2020 and is expected to grow at a CAGR of 2.81% over the forecast period to reach a total market size of US$1.740 billion in 2027. Geothermal power is a stable and independent renewable power generation source that uses the warmth and strength of the earth’s magma to generate power. Geothermal power plants utilize steam, which is produced from hot water found below the earth’s surface, to rotate turbines that ultimately start the generator which then produces electricity. At present, three types of geothermal power plants are operating- dry steam, flash steam, and binary cycles. Geothermal energy is less spread out as compared to other renewable sources since not all territories hold large pockets of trapped heat in their subsoil. However, this constraint does not hamper the development of the potential of geothermal energy.

According to the latest statistics from the 2020 IRENA report (International Renewables Energy Agency), the contribution of geothermal energy to the global renewable capacity amounts to 13 GW. Mounting concerns among governments and international environmental agencies and organizations related to climate change across the globe have boosted the demand for various renewable energy sources to be used as a substitute for fossil fuels to generate electricity. Moreover, the volatility of fossil fuel prices, their limited availability, and the rise in greenhouse gas (GHGs) emissions are also shifting the demand for electricity generated from renewable energy sources such as solar, wind, and geothermal. All these factors are adding up to the growth of different renewable energy sectors including solar, wind, and geothermal.

Continuous efforts by governments and global organizations to reduce the dependency on oil for domestic energy use. Several policies and initiatives are being implemented and undertaken to use as many renewable energy resources as possible as an alternative energy sources. Following the 2015 COP21 (Conference of Parties) conference held in Paris, the UN established the Global Geothermal Alliance with the aim of fast-tracking this renewable resource to support the energy transition process. In Indonesia, the government formulated a National Energy Policy, which includes guidelines for intensification, conservation, and diversification of energy.

The high capacity of geothermal power coupled with its cost-effectiveness is significantly driving the demand for geothermal power across the globe, which is bolstering the market growth. However, factors such as the high investment required for geothermal power plants and the negative impact of geothermal energy on the environment are hampering the growth of the geothermal power market. The presence of other viable renewable energy alternatives, especially solar, is also hindering the use of geothermal power to generate electricity.

Rising investments in geothermal energy across different countries will also continue to propel the growth of the geothermal power market during the forecast period. In March 2020, the investment firm- Breakthrough Energy Ventures- announced that it would invest $12.5 million in a geothermal project development company- Baseload Capital. It is a project investment firm that offers capital for the development of geothermal power plants with the use of the technology developed by Climeon, its Swedish parent company. The Philippines-based geothermal company EnergiMiinas has plans to set up two geothermal power plants in operation in Peru by 2026 or 2027 with an investment of US$1 billion in each project. Thrive Renewables has also recently announced its plans to invest around £6.5 million in the first geothermal power plant in the United Kingdom, with the aim of supplying approximately 3 MW of electricity to the National Grid and up to 12 MW of electricity for local use.

Continuous development of technologies to increase the efficiency of geothermal power plants is expected to offer a more lucrative opportunity for market expansion over the next five years. Geothermal funding in the United States will increase by 31% from $84 million in FY2019 to $110 million in FY2020. Out of this total funding, $20 million will be used by the Frontier Observatory for Research in Geothermal Energy (FORGE) project which aims to test and evaluate enhanced geothermal systems. UK Research & Innovation (UKRI) recently announced an early-stage investment for seventeen new projects related to offshore and geothermal clean energy innovation. In February 2020, Turkish geothermal player MASPO Energy established a national geothermal research and development centre aiming to increase the focus on equipment manufacturing in Turkey so as to reduce its dependency on international support and supply. Eavor Technologies, Inc., a Calgary-based company, is developing a groundbreaking prototype for a closed-loop geothermal system that will allow the generation of renewable energy using the earth’s natural heat.

North America holds a considerable share in the global geothermal power market

By geography, the global geothermal power market has been segmented into five major regional markets- North America, South America, Europe, Middle East and Africa (MEA), and Asia Pacific (APAC). North America held a significant share in the global geothermal power market in 2020 owing to the rising focus on geothermal energy sources in countries like the United States and Mexico. With an installed capacity of more than 3,500 MW in 2018, the U.S. is the global leader in geothermal energy. The country is home to the world’s largest geothermal complex- Geysers- which comprises more than 20 geothermal plants at its base in California. Mexico also has a substantial geothermal power capacity driven majorly by the Cerro Prieto Geothermal Power Station complex which has a capacity of around 820 MW.

However, the Asia Pacific (APAC) regional market for geothermal power is projected to witness a noteworthy compound annual growth rate during the forecast period owing to the large-scale production of geothermal energy in Indonesia, the Philippines, and Japan. Supportive government policies and programs to increase the share of geothermal energy in the total renewable energy mix will also contribute to fuelling the growth of the geothermal power market in this regional market during the forecast period. In the Philippines, the development of geothermal power has been continuously pushed in order to attain energy security while boosting the share of renewable energy in the total power mix. Recently, the government of this country has announced plans to advance a policy re-casting, through the Department of Energy (DOE) that will allow 100 per cent foreign ownership in renewable energy projects with a focus on geothermal to attract foreign investment. In China, the imposition of stricter emission rules on coal-fired power plants has created a lucrative opportunity for the geothermal energy sector to grow at a tremendous rate, thereby driving market growth. The Middle East and Africa (MEA) geothermal power regional market is also poised to grow at a decent CAGR between 2020 and 2027 on account of favourable government policies and increasing investments in geothermal projects in countries like Turkey, Ethiopia, and South Africa. The Ethiopian Energy Authority drafted a new bill in April 2020 to ramp up the geothermal development in Ethiopia by easing the registration and licensing processes. According to the Turkish Geothermal Power Plant Investors Association (JESDER), Turkey intends to increase its geothermal power generation capacity by nearly half, or 2,000 MW, by 2020, compared to 2018.

Key Developments

The geothermal power industry has seen substantial growth as a result of the increasing demand for renewable power as well as the escalating power consumption in countries all over the world.

In May 2022, Baseload Power Japan, a subsidiary of Baseload Capital, officially started its fourth geothermal power operation. The operation is the second phase of the Sansui Geothermal Power Plant's development, which is being carried out in collaboration with Furusato Power Generation and the Sansui Hot Spring Inn. The aggregate output of the two operations will be 700 MWh per year, which is about similar to the yearly power usage of 200 households.

The geothermal energy power plant in Menengai is expected to reduce high power bills. According to the Kenya News Agency, the country is currently making every effort to reduce carbon emissions and promote sustainability. Before the end of the year 2022, an Independent Electricity Producer (IPP) will begin generating geothermal power from steam wells dug on the bottom of the Menengai Crater near Nakuru by the state-owned Geothermal Development Company (GDC). Menengai phase one is part of the government's 5,000 MegaWatt initiative to create inexpensive, dependable, and environmentally friendly electricity.

According to the DGDCL, The Dominica Geothermal Development Company Limited, established by the Government of the Commonwealth of Dominica, has been working towards a project, initiated in February 2021, to provide power to almost 23000 households. The government has committed US$50 million towards this 10000KW project, as a step toward country’s renewable energy production.

The impact of COVID-19 on the geothermal energy industry

The recent COVID-19 pandemic outbreak has negatively impacted the geothermal energy sector as well, to some extent. For instance, Indonesia is facing some delays in geothermal energy deployment with construction being temporarily halted due to mandatory social distancing measures and nationwide lockdowns to curb the spread of the virus. According to Indonesia’s Ministry of Energy and Mineral Resources (ESDM), the realization of investment in the geothermal sector for the first quarter of 2020 only reached 15.52 percent (US$163 million) of this year’s target due to considerable challenges and risks in the geothermal development. The ongoing COVID-19 situation has indeed resulted in delays for geothermal targets in 2020, which now have been shifted to 2021. For example, the Sokoria geothermal power plant of 5 MW in Indonesia, which was originally targeted to be operational in February 2020, is estimated to shift to 2021. Global supply chain disruptions due to the coronavirus pandemic have brought seven geothermal projects of a total of 100 MW to a halt in Turkey as well. As per this drafted bill, geothermal resources will be classified into two categories- Grade One and Grade Two- depending on their energy capacity. In addition, three different licensed will be granted for different stages of geothermal development.

Competitive Insights

Prominent key market players in the global geothermal power market include Enel Spa, Fuji Electric Co., Ltd., Aboitiz Power Corporation., Calpine Corporation, Alterra Power Corp., Ormat Technologies Inc., U.S. Geothermal Inc., Berkshire Hathaway Energy, EthosEnergy Group, ThermaSource LLC, Korea Electric Power Corporation, Contact Energy, and MASPO Energy. These companies hold a noteworthy share of the market on account of their good brand image and product offerings. Major players in the global geothermal power market have been covered along with their relative competitive positions and strategies. The report also mentions recent deals and investments of different market players over the last two years.

Segmentation

By Power Station Type

Dry Steam

Flash Steam

Binary Cycles

By End-User

Residential

Commercial

Industrial

By Geography

North America

United States

Canada

Mexico

South America

Brazil

Argentina

Others

Europe

Germany

France

The United Kingdom

Italy

Others

Middle East and Africa

Saudi Arabia

UAE

Others

Asia Pacific

China

India

Japan

South Korea

Taiwan

Thailand

Indonesia

Others