Background
Next-generation geothermal (NGG) technology has advanced significantly in recent years, resulting in cost reductions and a strong cohort of startup companies seeking to develop projects that produce electricity at grid scale. The potential amount of power that could be generated by a mature geothermal industry, and the geographic flexibility of the technology, could significantly alter the generation mix across the United States. As a carbon-free power option drawn from an inexhaustible energy source with a small land use footprint, commercialization and wide adoption would help meet many energy sector objectives, such as domestic supply diversity, emissions reductions, and round-the-clock power generation for reliability needs. These attributes have earned NGG bipartisan support. Nonetheless, continued advancement and scaling are far from inevitable.
Methodology
To understand the commercial barriers NGG faces in the near term, we assessed the current status of the technology across a full spectrum of adoption risks. Specifically, we performed an evidence-based evaluation of the risks next-generation geothermal technologies face in the marketplace using the Department of Energy's Commercial Adoption Readiness Assessment Tool (CARAT).1 CARAT assigns risk levels for 17 distinct dimensions that address the technology's value proposition to users, the demand it gains in the marketplace, the maturity of supply-side inputs, and the social license to operate. More broadly, as a research tool, CARAT provides a common language for market risks, spotlights commercial readiness objectives, identifies metrics for tracking progress, and helps manage risk across projects.2 Table 1 details the scope of our assessment.
Table 1: CARAT Scope of Assessment
| Technology scope | Enhanced geothermal systems (EGS) and advanced geothermal systems (AGS) for large-scale electricity production |
| Value chain scope | Complete chain from raw materials to power plant operation |
| Timeline for evaluation | 2025–2030 |
| Policy environment | Federal and state policy as of October 2025 |
We reviewed publicly available literature and interviewed geothermal practitioners to evaluate risks across CARAT's 17 dimensions. We considered both EGS and AGS within each risk dimension. Where the evidence supported different risk levels, we note the difference in our results; elsewhere, we provide a single risk designation.
EGS uses engineering to link geothermal wells and allow fluid circulation, typically boosting circulation through hydraulic or chemical stimulation of hot but low-permeability rock. AGS uses sealed wells to circulate fluid within hot subsurface environments without direct fluid contact with the rock, thus obviating rock permeability.3 AGS technologies are sometimes referred to as “closed-loop geothermal,” or CLG.
Results and Conclusions
With a very large potential market, attractive round-the-clock power generation profile, increased cost competitiveness, and favorable supply chain conditions, NGG is positioned for accelerated growth. However, it faces serious headwinds, including limited large-scale project experience; a lack of capital for project development; broad power-system infrastructure limitations; and challenging regulatory, permitting, and policy environments. Nevertheless, policy reforms could mitigate many of these key risks, creating positive momentum for building more projects and delivering the benefits that come from learning effects.
Natural gas combined cycle power plants are the best comparison for cost parity for next-gen geothermal. The U.S. Energy Information Administration (EIA) projects that these plants will cost $55–$80/MWh in 2030.4
For both EGS and AGS, cost projections are indicative engineering estimates. Uncertainty remains because there are no commercial-scale next-gen geothermal plants operating today in the U.S.5 to provide an empirical basis for analysis.
Next-gen geothermal technologies are more than five years away from cost parity with incumbent round-the-clock natural gas power plant technology, but technology advances and permitting improvements are possible pathways to parity for EGS.
Technology solution is either: a) currently more cost effective than the incumbent or competing technology; or b) close to cost parity and on a clear cost curve to achieve cost parity within 3 years; and fundamental cost components (e.g., cost of critical inputs) are not at risk of significant market swings.
Technology solution is more than 5 years away from achieving cost parity with incumbent or competing technology but is on a clear path to be more cost effective; and / or there are some fundamental cost components that are at risk of market swings.
Technology solution is more expensive than the incumbent or competing technology and there is no clear path to cost competitiveness without substantial R&D advances.
Conventional geothermal has a multidecade track record for continuous power output.12 However, NGG's limited operational history creates performance uncertainty.
NGG's round-the-clock performance capabilities are comparable to NGCC and nuclear, while offering functionality benefits that include (depending on technology comparison) a fuel-free renewable energy resource base, zero carbon emissions, comparable or lower land and water impacts, and higher modularity.13
NGG could perform equivalent to round-the-clock power technologies such as natural gas, but its limited operational history makes its performance uncertain. Compared with its competitors, NGG technologies have functionality advantages relative to size and environmental impacts.
Technology solution provides sustained improved performance and/or benefits that justify a premium (if any) in an existing end-use case or value in a new end-use case.
Technology solution provides equivalent functionality to existing products (i.e., same performance on all key parameters); or improved performance does not justify current premium; or performance differential will not be sufficiently sustained (e.g., lack of fundamental competitive advantage or weak IP protection allows incumbent or competitors to reduce differential quickly).
Technology solution provides poorer functionality than solutions currently in place.
Basic power turbine-generator technologies underpin NGG power plants,19 similar to long-dominant fossil/nuclear power equipment but using Organic Rankine Cycle20 technology.
93 geothermal power plants operate across 8 states in organized wholesale markets and nonregional transmission organization (RTO) grids, spanning a variety of utility offtakers and plant operators such as Calpine, Ormat, Pacificorp, and Northern California Power Agency.21
Geothermal power plants use familiar turbine-generator technology, and numerous utilities and third-party market participants have direct, long-term experience with these facilities, providing entry points and pathways of diffusion through peer exchange that make NGG essentially plug-and-play with current infrastructure and markets.
Technology solution is easy for a typical user/operator to use/operate, and maintain (e.g., highly intuitive with little need for additional training, or similar to existing systems) and is plug-and-play with current infrastructure / equipment.
Technology solution can be operated and maintained by a typical user/operator after some training, and allows for interoperability with existing infrastructure / equipment with minor adjustments.
Technology solution deployment requires extensive operations and maintenance training of personnel and/or there are meaningful integration costs to successfully use/integrate the product.
Utilities and merchant generators that own coal, gas, and nuclear power plants dominate the sector,2223 but wind and solar have overcome barriers to entry,24 illustrating alternatives' viability.
Competitive wholesale markets offer low barriers to entry where there is demand from large customers.
Although competing technologies and incumbent generation providers present barriers to entry, solar and wind successfully entered the market and grew, illustrating that alternatives can be viable. Letters of intent, long-term PPAs, and geothermal-friendly tariffs demonstrate offtake avenues and market interest for NGG.
There is a clear path for the technology solution to be introduced in a target market and gain initial traction; and there is standardized offtake (e.g., long-term agreements, hedgeable commodity market, accessible consumer market).
Technology solution would need to overcome substantial barriers to market entry posed by competing technologies but has a clear path to do so; and there is a developing standardization of offtake.
Technology solution’s ability to enter the market is limited due to incumbent advantages; or offtake is not easy/standardized and does not meet the needs of technology solution deployment.
The scale of an early commercialization buildout of NGG is tiny compared to U.S. electricity consumption, and NGG supply locations align well with demand growth across multiple regions. Market conditions position NGG to compete in many regions, in both front- and behind-meter configurations.
Technology solution is well-positioned to compete strongly in a large and existing market or dominate market share in a small and existing market; technology solution can be broadly adopted across geographies.
Technology solution addresses only a moderately sized existing market opportunity, and / or there is moderate uncertainty whether the market will materialize; technology solution may be limited to select markets because of geographic or other constraints.
Technology solution is limited to small markets, and/or relies on a market that has yet to materialize.
Business models must work and there must be technology acceptance at each step along the chain of intermediaries between a geothermal power producer and electricity consumers, including utilities and grid operators, as well as aggregators, power marketers, and retail choice providers.31
Project developers can increase technology acceptance among intermediaries and consumers by demonstrating project success. Policymakers can enable successful business models by reforming power-sector market design and planning parameters.
Power-market rules, planning processes, and key value chain players favor established technologies, disadvantaging NGG in the marketplace. However, reforms that recognize NGG's viability and value, along with a growing list of project success stories, can level the playing field and enable NGG expansion.
Path to market is clear; business proposition and technology solution features work within existing incentives/business models or the technology newly aligns incentives for stakeholders along the value chain.
Path to market requires realigning value chain; business model and technology acceptance level are not clear for one or more participants in current value chain.
Value chain is nonexistent, highly fragmented, and/or technology solution benefits do not accrue to critical decision makers/gatekeepers across value chain.
DOE analysis indicates that approximately $20 billion–$25 billion in cumulative capital is required to support 2 to 5 gigawatts of NGG deployment across multiple states (including $5 billion for first-of-a-kind projects).35
Overall, capital availability — particularly equity — is improving, yet scaling still requires concessional financing and public participation. Exploration uncertainty, limited risk-mitigation mechanisms, and ongoing bankability concerns continue to constrain near-term financing for NGG projects.
Institutional investors confirm that the technology solution’s return profile is commercially competitive with holdings in their broader portfolios. Deal flow/risk profile is sufficient to develop regular equity and debt approval processes at relevant investment institutions and ratings agencies. Major risks are insurable.
There exist one or more "valleys of death" along the required capital stack to full deployment, but hurdles can be overcome, and capital flow and financial and insurance availability are beginning to increase.
Significant additional investment from sources of concessionary/patient/high-risk pools of capital (e.g., public sector, philanthropic, and catalytic venture capital) required to achieve deployment.
Next-generation geothermal draws on established expertise in drilling, subsurface engineering, and large infrastructure delivery.47
Standardized engineering, procurement, and construction (EPC) processes, contracting templates, vendor experience, and permitting playbooks are still forming, given the limited number of NGG projects under development (Fervo, the leading NGG firm, has 4 projects48).
Demonstration successes show technical feasibility, but project numbers are too modest to build repeatable, on-budget, on-schedule delivery of full-scale geothermal projects.
Mature processes and capabilities exist (e.g., within EPC contractors) to develop, integrate, and manage full projects using the technology solution; demonstrated by a track record of on-budget, on-time projects using the technology solution or comparable projects.
Some processes and capabilities exist to develop, integrate, and manage full projects using the technology solution; but these remain unproven.
Deployment of the technology solution requires building new or significantly improved project development, integration, and management processes and capabilities compared with the industry status quo; demonstrations and deployments at scale face substantial budget and timeline risks as a result.
Grid interconnection queues, driven by limited infrastructure, present a significant timing risk, an issue common across new generation sources.52
AGS's lower water use and seismicity risk loosen its siting limitations compared with EGS, which softens AGS's infrastructure risk due to higher potential to make use of existing transmission lines.
Remote resource locations and transmission congestion present notable siting and interconnection hurdles, creating high risk to broad NGG deployment prospects.
Technology solution can be broadly deployed within existing large-scale physical and digital infrastructure.
Technology solution can be broadly deployed with minimal investment in large-scale infrastructure (i.e., existing infrastructure can be adapted to use with new technology solution) or there exists a clear and economically viable path for investors and developers to build required infrastructure.
Technology solution can be broadly deployed only with additional significant investments in new large-scale infrastructure, and path to required infrastructure remains unclear.
NGG wells use land-based rigs and supporting hardware similar to those deployed for oil and gas production. Adaptations such as enhanced drill bits, high-temperature tools, and cooling systems can address distinctive geothermal needs.57
Turbines and heat exchangers draw from established power-sector suppliers such as Turboden and Ormat,58 using processes comparable to fossil plants.59 Although the global market is small, modest manufacturing expansion could supply GWs over several years.
While specialized components exist, no entirely new manufacturing ecosystem is required.
The U.S. currently operates approximately 580 active oil and gas land rigs,60 a level substantially below recent peaks, indicating available capacity within the drilling equipment supply chain.
Next-gen geothermal can leverage mature oil-and-gas and power supply chains, using off-the-shelf or adaptations of existing products, making manufacturing risk low for early scale deployment.
Technology solution deployment relies on off-the-shelf or simple adaptation of existing supply base products and existing manufacturing capabilities.
Technology solution deployment requires new components or products that are aligned with existing supply base capabilities but that may require minor upgrades or retooling of manufacturing and other processes.
Technology solution deployment requires creation of new manufacturing processes or supply chain components that are not currently in place, or deployment will overwhelm existing supply chain capacities.
Nickel and chromium alloys used for high-temperature, corrosion-resistant power plant equipment present a notable sourcing exposure.61 The same temperature and chemistry environments can affect casings, cement, and instrumentation.62 Depending on site geology, temperature, and project design, developers may pursue significant critical mineral content.
Geothermal shows low dependence on copper, lithium, cobalt, zinc, and rare earths, reducing exposure relative to some of the constrained components of wind, solar, and battery supply chains.63
NGG relies on materials that are distinct from those used in other energy technologies, and low volume requirements relative to global supply should avoid significant risk.
Technology solution relies on materials that are readily available in a competitive and distributed market and can be procured off the shelf with little to no geopolitical risk.
Technology solution relies on materials that are abundantly available but may face some risks (e.g., rely on new processing methods to make suitable for the application, geographic concentration).
Technology solution relies on materials that are limited in supply relative to demand, may be difficult to obtain, may face geopolitical risks, or are very costly to produce in the needed quantities.
75% of geothermal project investment relates to activities that significantly overlap with oil and gas sector skills and expertise.66
Across both subsurface expertise (geoscientists and drillers) and surface (power plant engineers, construction, and operation), DOE estimates there is an existing workforce with transferable skills comparable in size to the needs of a fully scaled geothermal industry.67
A strong labor base from the oil and gas and power sectors can readily support early projects if geothermal training and successful recruitment efforts scale up with NGG deployment.
Existing workforce has the necessary skills to manufacture and deploy technology solution with little additional training or significant scale-up.
Existing workforce requires additional training to either manufacture or deploy/install technology solution; workforce training pipelines exist but may need to be scaled.
Workforce is nearly nonexistent; significant training is required for initial technology solution introduction and scale-up.
State regulation can significantly affect geothermal project development whether on federal, state, or private land.70
Federal regulations encompass land leasing and a variety of environmental reviews involving numerous agencies.71
Gaps in state regulations and complex, uncoordinated federal regulations spanning many agencies seriously challenge the broad deployment potential of NGG.
Technology solution can be broadly deployed within existing regulatory framework and standards, and those frameworks and standards are applied in a well-understood and fast-moving process with minimal risk of delays.
Technology solution can be broadly deployed with minor changes to regulations and standards, and/or regulatory hurdles are well-understood but time-consuming and at risk of delays.
Technology solution can be broadly deployed only with major changes to regulations and standards or entirely new regulations and standards; or there are significant challenges to navigating existing regulations and standards.
At the federal level, the Energy Act of 202076 and Infrastructure Investment and Jobs Act77 provided demonstration-project funding; the Inflation Reduction Act and the One Big Beautiful Bill Act provided geothermal-eligible tax credits78; and federal agencies have promulgated categorical exclusions to streamline permitting for exploration activities.
Several states — California79 and New Mexico,80 for example — have enacted policies and programs such as capital provision and clean firm procurements supporting geothermal. Texas81 and West Virginia82 have recently clarified ownership and established regulations.
While helpful, existing federal and state policies have not removed enough of the commercialization risks for broad NGG deployment, as evidenced by the very limited flow of projects in the development pipeline and the many high- and medium-risk dimensions herein. Several key policy wins, however, could reverse this.83
Despite significant political momentum and several important policy interventions, policymakers have given NGG limited targeted attention and provided only modest support mechanisms. To achieve broad deployment, policymakers must implement significant additional interventions to overcome hurdles and clearly signal a desired role for NGG.
Technology solution requires minimal additional policy intervention to encourage adoption as a preferred solution; policymakers are well-aligned with any changes needed to encourage adoption.
Technology solution requires moderate policy intervention for broad deployment and is well-aligned with current governmental policies.
Technology solution requires significant policy intervention to achieve and/or sustain broad deployment; and/or policymakers are not aligned with implementing required intervention to encourage adoption.
The interconnection authorizations84 and local permitting decisions85 that encumber energy project development broadly, and that can delay other authorization steps, are also potential bottlenecks for NGG.
Multiple layers of permitting and a lack of government capacity and coordination create a complex, lengthy, unpredictable landscape for geothermal project development.
Permitting and siting process is easy, well-understood, timely, and repeatable
Permitting and siting can be time-consuming, but jurisdiction is clear, and complexity is low. Speed can be achieved with repetition.
Permitting and siting are highly complex and time consuming, with multiple overlapping jurisdictions in play.
NGG is a zero-carbon resource with a small land footprint. Induced seismicity and water impacts are noteworthy but manageable risks for EGS and are minimal for AGS.
Technology solution has minimal inherent environmental or safety risk; results in net zero carbon or negative carbon solution.
Technology solution has potential for environmental degradation and for safety concerns, but the risks can be managed through current processes and/or anticipated future processes or solutions.
Technology solution has potential to create significant environmental degradation or increases carbon emissions over currently fielded solutions, and/or poses significant safety concerns that are challenging to mitigate.
Public awareness of geothermal technologies is low,97 which could present a challenge to community acceptance.
Early outreach can boost community openness.98
Low visibility and low to modest air and water impacts relative to other power technologies are assets for public acceptance of NGG.
Pockets of resistance may arise, but the presence of geothermal or oil and gas operations in many communities bodes well for public alignment in key development locations. With community involvement, NGG's advantages could inspire positive public reception.
Technology solution is likely to be favorably received by the public
Technology solution may create pockets of public resistance but enjoys a strong level of support overall. No systemic challenges are anticipated, and local communities accept deployment in key locations.
Technology solution is likely to generate negative public or community reactions that could derail or significantly delay deployment.
The authors would like to thank the following individuals for their contributions to this research project. Niskanen interns Chelsey Gilchrist, Isabella Cho, and Swad Sathe provided research support. Dr. Roland Horne at Stanford University, Dr. Michael Matson at Boston Consulting Group, and Alice Wu at the Federation of American Scientists provided valuable comments on the manuscript draft; manuscript review does not imply endorsement. We would also like to thank our interviewees for insightful discussions on NGG technology deployment.