Global geothermal power, heating up for a moderate growth

Nearly 1GW worth of new additions was commissioned last year to reach a total global installed base of 15.4GW by the end of 2019, around 5% of the over 300GW of geothermal energy potential globally. While the installed capacity is spread across more than 30 countries, the top three markets including the United States, Indonesia and Philippines lead the global rankings with 24%, 14% and 13% of the global installed fleet respectively.

Figure 1: Geothermal power installed capacity versus global potential

Although the technology accounts for only 1% of the world's installed renewable energy fleet, it contributes more than 3% to the total generation of renewable energy owing to load factors exceeding 80%. As a result, in suitable geographies geothermal is competitive to other renewable energy systems on a levelized cost of electricity basis.

While geothermal generates clean, reliable and baseload power, its development requires very good to excellent high-temperature resources located relatively close to the earth's surface. Therefore, the exploration stage is accompanied by relatively large upfront investments and very high uncertainty associated with the availability of a quality resource. This often impacts the bankability of projects, causing unnecessary delays and requiring the government's backing and/or financing by multilateral agencies and international funding institutions including the World Bank and Climate Investment Funds.

With upcoming technological improvements, such as enhanced resource mapping, the very high uncertainty in the early phases can be reduced, and the costs of new developments are expected to decline further. As a result, IHS Markit estimates that geothermal capacity will more than double over the next decades offering promising investment opportunities in Indonesia, the United States, Turkey, Kenya and Philippines.

IHS Markit closely monitors the geothermal industry globally and publishes data, key insights and market analysis. Learn more about our geothermal energy research.

Guneet Kaur Dhingra is a Global Power and Renewables analyst for IHS Markit.

Andrei Utkin is a Senior Global Power and Renewables analyst for IHS Markit.

Posted 8 September 2020

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.