Many Americans are looking to limit the use of fossil fuels, which has led policymakers to mandate and subsidize renewable energy sources like geothermal power. Despite government assistance, geothermal power only generated 0.4 percent of U.S. electricity in 2014. In the Reliability of Renewable Energy: Geothermal report, the Institute of Political Economy (IPE) at Utah State University examined the economic, physical, and environmental implications of geothermal power to determine its overall reliability as an energy source. IPE found that geothermal electricity production is physically reliable and more environmentally friendly than fossil fuels, but it is not economically reliable without government subsidies in many cases.



Much of the geothermal industry’s growth relies on government subsidies to overcome high capital costs and to mitigate the financial risks of exploring for and developing geothermal resources. Without subsidies, these high costs and risks often discourage private investment in geothermal projects. After its initial startup costs, geothermal power plants can produce electricity cost-effectively because they have zero fuel costs and low operations and maintenance costs. New technologies that decrease the capital costs and exploration risks associated with geothermal development would make geothermal power more attractive to investors and, as a result, more economically reliable.


Geothermal power plants are physically reliable because they can produce electricity without interruption and adjust output as electricity demands fluctuate. Geothermal power production, however, is geographically constrained because only certain locations have accessible geothermal reservoirs. This constraint can be overcome with Enhanced Geothermal Systems (EGS), which produce geothermal power using man-made underground reservoirs in areas with high underground temperatures. EGS is still an emerging technology and is predicted to be more costly than traditional geothermal power. As long as geothermal power plants are constructed in viable locations, they can reliably meet consumer electricity demands.


Geothermal energy has fewer environmental impacts than fossil fuels. Although geothermal energy is one of the most environmentally friendly types of energy, it still has some environmental impacts. Geothermal fluids contain toxic chemicals that can pose a danger to water sources, but geothermal developers have been successful at containing geothermal fluids. The extraction of geothermal fluids from reservoirs can produce emissions of nitrous oxide, sulfur dioxide, carbon dioxide, and hydrogen sulfide, but these emissions are minimal compared to the emissions produced by fossil fuels. Geothermal energy can also induce seismic activity, but these earthquakes are generally minor. Proper action prevents or lessens these environmental impacts, making geothermal energy environmentally reliable.


Iceland currently produces 29 percent of its electricity from geothermal plants. Despite Iceland’s success with geothermal power, the country’s geothermal industry has been dependent on government assistance for decades. Attempting to replicate the success of geothermal energy in Iceland would be prohibitively expensive for the United States. The United States already produces three times more geothermal power than Iceland, yet geothermal energy accounts for just 0.4 percent of the United States’ total electricity generation. If all undeveloped geothermal resources were suddenly harnessed, geothermal could potentially account for 4.8 percent of total U.S. electricity production, but this would require massive subsidization to overcome upfront costs and risks associated with geothermal development, as well as to construct the infrastructure to transmit power from remote geothermal resources to population centers. Iceland’s experience, however, does illustrate that geothermal power is reliable in ideal locations.


Geothermal energy can meet electricity demands consistently and it is more environmentally friendly than traditional fossil fuels. Despite geothermal power’s physical and environmental benefits, the largest barriers to its development continue to be its high capital costs and financial riskiness. Much of the geothermal industry’s growth relies on government subsidies to help overcome these barriers, but improvements in geothermal drilling and exploration technology may help the geothermal industry become more financially independent. Whether geothermal power will become economical within the next few decades is an open question best addressed by markets, not subsidies or mandates.