U.S. energy policy is now being pulled by two seemingly opposing forces. The Trump administration has moved climate action away from the center of federal policy, prioritizing increased production of oil, natural gas, and coal, deregulation, and “energy dominance.” At the same time, investment in the power sector continues, led by solar, battery storage, and natural gas, while electricity demand itself has returned to a growth trajectory. That growth is being driven by the data centers underpinning generative AI, semiconductor and battery plants, and the reshoring of manufacturing. The conventional framing of renewables simply as a means of decarbonization no longer adequately explains the U.S. market.

Amid this policy shift, geothermal energy occupies an exceptional position. At a time when wind and solar face mounting political headwinds, geothermal is valued not only as a renewable resource but also as a domestic energy source, a source of firm power capable of operating around the clock, a drilling industry able to redeploy technologies and workers from oil and gas, and even a potential source of critical minerals. U.S. geothermal policy is increasingly being recast not primarily as a greenhouse-gas reduction measure, but as an industrial strategy that brings together power security, competition in AI, manufacturing revival, and resource sovereignty.

A Diversifying U.S. Power Mix Anchored by Natural Gas

The U.S. power mix is characterized not by dependence on a single source, but by the coexistence of natural gas, renewables, nuclear power, and coal. According to the U.S. Energy Information Administration (EIA), utility-scale facilities generated approximately 4.43 trillion kWh of net electricity in 2025: natural gas accounted for about 41%, renewables 24%, nuclear 18%, and coal 17%. Renewables include hydropower, wind, solar, biomass, and geothermal. Separately, the EIA estimates that small-scale solar generated approximately 93.15 billion kWh. Because each percentage is rounded independently—and because petroleum contributed roughly 0.7% and other gases and miscellaneous sources about 0.2%—the displayed figures do not sum precisely to the underlying generation mix. The shale revolution and the proliferation of high-efficiency gas turbines made natural gas the country’s largest generation source, while coal declined over the long term. Wind and solar, meanwhile, expanded rapidly on the back of tax incentives, state mandates, and corporate power purchase agreements, lifting renewables above nuclear power in aggregate generation.

National averages, however, obscure pronounced regional differences. In Texas, wind and solar compete with natural gas; California has a high share of solar and battery storage; the Midwest is dominated by wind; the Southeast relies heavily on natural gas and nuclear power; and the West combines hydropower with geothermal. The transmission system is also highly regionalized. Growing interconnection queues, shortages of transformers and transmission lines, and protracted permitting have become bottlenecks for new generation. The U.S. challenge is no longer simply to add generating capacity in aggregate, but to expand resources that can deliver reliably, when needed, close to load centers.

The Accumulation of Renewable-Energy Policy and the Federal–State Dual Structure

Renewable deployment in the United States has been shaped by the interaction of federal tax credits and state-level policy. At the federal level, the Investment Tax Credit (ITC) and Production Tax Credit (PTC) provided long-term investment visibility, while the Inflation Reduction Act of 2022 (IRA) introduced large-scale support, including a transition to technology-neutral clean-electricity tax credits. At the state level, renewable portfolio standards, clean-energy standards, transmission planning, and procurement decisions by public utility commissions define the market. Long-term PPAs signed by major technology companies have also emerged as a demand-side driver independent of government policy.

Since 2025, the Trump administration has substantially revised the Biden administration’s decarbonization agenda through renewed withdrawal from the Paris Agreement, reviews of environmental regulation, and a reassessment of federal spending. Yet the U.S. renewable-energy market cannot be reversed by executive order alone. Tax policy is set by Congress, generation procurement is governed by state regulation and corporate contracts, and grid operation is managed by regional institutions. Policy uncertainty raises the cost of investment, but the market’s underlying fundamentals—electricity demand, state law, existing contracts, and declining equipment costs—remain intact. The U.S. energy transition should therefore be viewed not as a binary choice between continuing and abandoning decarbonization policy, but as a phase in which technologies are being differentiated and selectively supported.

Why Geothermal Escaped the Policy Cull

The first reason is that geothermal offers a different kind of power-system value from variable renewables. Geothermal plants typically achieve high capacity factors and are largely unaffected by the time of day or weather. With an appropriately designed reservoir and power plant, they can provide not only steady output but also load-following capability. In markets where the expansion of solar and wind has shifted attention from sheer generation volume to availability and capacity value, geothermal is a rare dispatchable resource that is also clean. It competes with natural gas, nuclear power, and battery storage while also complementing them.

The second reason is geothermal’s compatibility with the administration’s agenda of “energy dominance.” Executive Order 14260 of April 8, 2025, “Protecting American Energy From State Overreach,” as published in the Federal Register, explicitly names geothermal alongside oil, natural gas, coal, hydropower, biofuels, critical minerals, and nuclear energy as a domestic energy resource whose development, siting, production, investment, and use should be freed from impediments. Executive Order 14213 of February 14 that year, “Establishing the National Energy Dominance Council,” likewise lists geothermal heat among the resources to be expanded in order to secure U.S. leadership in AI and revive manufacturing. In the administration’s lexicon, geothermal is not a symbol of climate policy; it is an indigenous subsurface resource and a means of adding affordable, reliable electricity. Even without foregrounding decarbonization, it can be supported on the grounds of energy security, deregulation, and domestic investment.

The third reason is its technological continuity with the oil and gas industry. Horizontal drilling, well completion, directional control, subsurface imaging, reservoir management, and high-temperature materials are capabilities accumulated at scale by the shale industry. Next-generation geothermal can redeploy this supply chain and skilled workforce into low-carbon power generation. Rather than a “just transition” centered on employment conversion, it is a growth strategy that opens a new market for the existing drilling industry—making it more acceptable in conservative and oil- and gas-producing states.

Next-Generation Geothermal Redraws the Resource Map

Conventional geothermal development has been concentrated in volcanic regions of the western United States where high-temperature fluids and natural permeability occur together. Although the United States is already one of the world’s largest geothermal-power producers, geothermal still accounts for less than 1% of national electricity generation. The technologies poised to drive a market breakthrough are enhanced geothermal systems (EGS) and other next-generation approaches, including closed-loop systems. EGS creates engineered flow paths in hot rock and circulates fluid between injection and production wells. Closed-loop systems circulate a working fluid through sealed wellbores to extract heat from the surrounding rock. Both approaches reduce dependence on naturally occurring hydrothermal reservoirs and could greatly expand the addressable resource base.

Three representative development regions can be identified. The first is The Geysers in northern California. Located north of San Francisco on the southwestern margin of the Clear Lake volcanic field, it is a vapor-dominated geothermal field where naturally occurring steam stored in subsurface fractures is delivered directly to turbines. Commercial generation has continued there since 1960. As the world’s largest known dry-steam field, The Geysers has long been the core of the U.S. geothermal industry. In response to declining reservoir pressure after decades of production, the industry has also developed sophisticated mature-field management practices, including the underground injection of treated municipal wastewater to sustain steam supply.

The second is the Imperial Valley in southern California, including the Salton Sea geothermal field and East Mesa. This high-heat-flow region lies where the southern terminus of the San Andreas fault system intersects an extensional plate boundary, and it exploits high-temperature, highly saline brines around the Salton Sea. Unlike the dry-steam resource at The Geysers, development here centers on flash and binary-cycle plants. The first commercial-scale binary geothermal facility in the United States began operating in the region in 1980. Today, the area is attracting attention not only for power generation but also for the “Lithium Valley” vision, which combines geothermal production with direct lithium extraction from geothermal brines. It demonstrates how geothermal can connect not only to the power sector but also to a domestic supply chain for battery materials.

The third is the Basin and Range province, centered on Nevada—including Dixie Valley—and extending into western Utah and southeastern Oregon. In this region, east–west crustal extension has produced alternating basins and mountain ranges. Normal faults provide pathways for deep hot fluids to rise, creating numerous hydrothermal systems even away from active volcanic centers. Although individual resources are generally smaller than The Geysers, they are well suited to distributed, medium-scale development; flash and binary plants are deployed widely across Nevada. The DOE believes substantial undiscovered conventional geothermal resources remain in the western United States, including the Great Basin, and emphasizes improved exploration through fault-structure analysis, geophysical surveys, and temperature-gradient wells. Together, these three regions illustrate how conventional geothermal has depended on geological settings where heat, fluid, and permeability occur naturally—while also underscoring why next-generation technologies seek to overcome those geographic constraints.

At the center of next-generation geothermal R&D are Utah’s FORGE field laboratory, DOE demonstration grants, and commercial projects led by private companies. Faster drilling, longer well life, multistage stimulation, fiber-optic sensing, and digital reservoir characterization are driving cost reductions. If equipment and contracting models standardized in oil and gas can be applied, geothermal development can move from bespoke construction at individual sites toward a repeatable drilling and manufacturing process. This is the core of the U.S. industrial-policy approach: rather than merely subsidizing electricity purchases, the government is building the demonstration sites, technical standards, data resources, workforce, and supply chains needed to create a market in which private capital can unlock learning-by-doing at scale.

AI and Data Centers Create a Market for Round-the-Clock Power

The spread of AI could become the single largest demand driver accelerating commercialization. In the base case of the IEA’s special report Energy and AI, released on April 10, 2025, U.S. data-center electricity consumption is projected to nearly triple between 2024 and 2030 and account for almost half of the increase in U.S. electricity demand over that period. Globally, data-center electricity demand is expected to double to about 945 TWh by 2030, with AI-optimized data centers identified as the largest source of growth. AI facilities operate dense clusters of GPUs continuously and require extensive cooling and redundant power systems. Siting decisions therefore depend not only on electricity prices, but also on interconnection lead times, outage risk, access to around-the-clock clean power, and room for future expansion. For large users, a dependable resource that can begin supplying power on a predictable schedule may be more valuable than a cheaper source that cannot interconnect for several years.

Long-term contracts with data centers can help geothermal developers absorb early-stage drilling risk. If buyers pay a premium for round-the-clock clean power and developers can drill multiple wells in sequence, utilization and learning effects improve, making risk easier for lenders to assess. Building plants close to load centers can also ease transmission constraints. As exemplified by the partnership between Google and Fervo Energy, hyperscalers are becoming more than customers: they are anchor offtakers that make first-of-a-kind projects bankable, co-investors in technology demonstrations, and sources of credit support in capital markets.

Geothermal as Industrial Policy, Not Merely Decarbonization Policy

The significance of U.S. interest in geothermal cannot be measured solely in megawatts of generating capacity. First, it can build a domestic supply chain spanning drilling services, well equipment, cement, specialty steel, instrumentation, geological analysis, and power-generation equipment. Second, it creates a growth market for the skills, assets, and companies concentrated in oil-producing regions. Third, when paired with lithium recovery from geothermal fluids, it can contribute to domestic supplies of battery materials. Fourth, it can provide military installations, critical infrastructure, and remote communities with durable, fuel-free baseload power. Geothermal policy cuts across electricity, resources, manufacturing, employment, and national security.

This explains why geothermal has endured under the Trump administration. Even when the policy objective is reframed from “emissions reduction” to “abundant, reliable, domestically produced power,” geothermal remains aligned with the agenda. Indeed, positioning it as a resource for AI leadership and manufacturing reshoring, a next-generation export industry built on oil and gas expertise, and a form of subsurface resource development that includes critical minerals can make bipartisan support easier to secure. The explicit inclusion of geothermal among domestic energy resources in 2025 administration documents is emblematic of this shift.

From Subsidies to Market Formation

R&D grants alone will not establish geothermal as an industry. What is required is a single investment pathway linking risk capital before resource confirmation, post-demonstration construction finance, long-term power purchase agreements, grid interconnection, and access permits for federal lands. DOE R&D and demonstration funding, loan programs, tax credits, and national-laboratory data platforms each reduce risk at a different stage. Particularly important is a mechanism for transferring drilling and operating data from the first projects to those that follow. The role of public funding is not to subsidize uneconomic projects indefinitely, but to reduce technical and financial uncertainty in stages and enable repeat private investment.

A concrete example is the DOE’s September 21, 2026 announcement of up to $99 million for 21 geothermal-development projects. According to the DOE release, five projects are EGS field tests intended to validate technologies under real-world conditions, while 16 involve exploratory drilling to identify and assess promising next-generation geothermal and conventional hydrothermal resources. The program is not designed to subsidize power-plant construction uniformly. Its central purpose is to use public funding to reduce subsurface, technology, and resource-confirmation risks that private companies would struggle to bear alone before commercialization. Data generated by the projects will be published in the DOE’s Geothermal Data Repository, turning the results of individual companies into a shared learning asset for the industry.

Selected companies include Fervo Energy, Quaise Energy, Zanskar Geothermal, XGS Energy, Invenergy, and GreenFire Energy. Fervo Energy was selected for two projects: an EGS demonstration in Idaho and exploratory drilling in Nevada. Quaise Energy is developing next-generation drilling technology to access high-temperature rock; Zanskar Geothermal is known for data-driven resource exploration; XGS Energy for water-conserving closed-loop technology; and Invenergy for expertise in large-scale power development and marketing. At the Sierra Army Depot in California, GreenFire Energy plans to integrate existing data, geophysical surveys, well testing, and reservoir modeling with the drilling of a vertical well targeting temperatures of approximately 204°C to confirm a deep geothermal resource. The mix of awardees indicates that the DOE is not converging on a single architecture. Instead, it is supporting drilling, exploration, EGS, closed-loop systems, and the repurposing of oil and gas technologies in parallel, using competition among approaches to identify the most promising pathways.

The announcement, however, does not constitute final awards; it identifies projects selected to enter contract negotiations. The $99 million is the ceiling for the initial budget period, and additional funding will depend on congressional appropriations and achievement of agreed milestones and performance criteria. The DOE also expressly reserves the right to discontinue negotiations or rescind selections. This phased structure can be understood as stage-gated industrial policy: rather than assuming all risk, the government commits public funds as technical results are demonstrated and bridges successful projects into private investment.

Geothermal competitiveness should not be judged on levelized generation cost alone. In congested grid regions, it provides benefits such as firm capacity, capacity value, reserves, avoided transmission investment, and reduced price volatility. When post-generation heat use, district heating, greenhouses, food processing, and mineral recovery are included, a single wellfield can support multiple revenue streams. A business model not wholly dependent on power-market income can improve the bankability of capital-intensive geothermal projects. For states and municipalities, projects that generate property-tax revenue, land-use fees, and long-term employment also provide a different form of regional economic value from short-duration construction projects.

On the private-sector side, a market is emerging at the intersection of traditional utilities, oil majors, drilling contractors, startups, cloud providers, and infrastructure funds. Oil and gas companies contribute subsurface expertise and project-management capabilities; technology companies provide long-term demand and credit quality; and government reduces early-stage risk and supplies public data. If this division of roles functions effectively, geothermal can evolve from a niche renewable resource into a standardized, large-scale infrastructure asset. Conversely, if projects remain one-offs and permitting, interconnection, and offtake arrangements remain fragmented, technical success will not translate into industrialization. The U.S. market will be determined less by whether it can drill one outstanding well than by whether it can sustain a pipeline of investable projects.

Three Conditions That Will Determine Growth

Expectations alone do not guarantee market growth. The first condition is financing for first-of-a-kind projects. Government guarantees, insurance, phased demonstration support, and long-term offtake must be combined to address subsurface uncertainty and drilling-failure risk. The second is permitting and land access. On federal land, reviews by multiple agencies overlap, while environmental assessment, groundwater protection, induced seismicity, and consultation with Indigenous peoples and local communities can determine project schedules. Streamlining is essential, but without transparent monitoring data and tangible local benefits, it risks undermining social acceptance.

The third condition is ensuring that cost reductions do not end with one-off demonstrations. Geothermal depends on learning from each well; without a sustained project pipeline, utilization of rigs, personnel, and components will remain low. More than the presence or absence of tax credits and grants, industrialization will be determined by multiyear drilling demand, standardized contracts, shared performance data, and visibility on grid interconnection. Policy metrics should likewise shift from annual additions alone to learning indicators such as drilling days, output per well, redrill rates, cost of capital, and domestic-procurement shares.

Conclusion—Can Subsurface Resources Become a Scalable Power Source?

The U.S. geothermal market is not merely an extension of decarbonization policy. As electricity demand resumes growth, AI and data centers seek round-the-clock supply, and reshoring manufacturing and critical-mineral supply chains becomes a national priority, geothermal can serve several policy objectives at once. That is why it is unlikely to be excluded from support even under an administration reassessing climate policy. Competition in geothermal is shifting from the search for underground heat to the conversion of drilling and power generation into a repeatable industrial process.

The next test is whether next-generation geothermal can achieve costs and development timelines competitive with natural gas and nuclear power, and prove its grid value in regions where data-center demand is surging. If it succeeds, the United States will be able to redirect the subsurface capabilities forged by the shale revolution into the next era of the power industry. Geothermal’s essential character is not that of a small, environmentally friendly generation source, but of a domestic, reliable, high-value industrial infrastructure capable of supporting growth in the AI era.

References

1. U.S. Energy Information Administration, “Electricity in the United States,” 2025 utility-scale generation data (small-scale solar estimates reported separately).
2. U.S. Energy Information Administration, “Solar power generation drives electricity generation growth over the next two years,” January 16, 2026.
3. U.S. Department of Energy, “Geothermal Publications,” 2025 U.S. Geothermal Market Report and related publications.
4. U.S. Department of Energy, “Geothermal,” Overview of FORGE, EGS, and geothermal policy.
5. Executive Office of the President, Executive Order 14260, “Protecting American Energy From State Overreach,” 90 FR 15513, signed April 8, 2025 (published in the Federal Register on April 14).
6. Executive Office of the President, Executive Order 14262, “Strengthening the Reliability and Security of the United States Electric Grid,” 90 FR 15521, signed April 8, 2025 (published in the Federal Register on April 14).
7. The White House, Executive Order 14213, “Establishing the National Energy Dominance Council,” February 14, 2025.
8. International Energy Agency, Energy and AI, April 10, 2025.
9. International Energy Agency, “AI is set to drive surging electricity demand from data centres,” April 10, 2025.
10. Global Energy Monitor, “Trump administration’s policies support rapid growth of geothermal power in the United States,” March 2025.
11. U.S. Department of Energy, “Energy Department Announces $99 Million for 21 Projects to Advance U.S. Geothermal Energy Development,” September 21, 2026.
12. U.S. Geological Survey, “The Geysers Geothermal Field,” September 20, 2023.
13. U.S. Department of Energy, “Identifying Geothermal Resources in Western United States,” Discussion of conventional hydrothermal resources in the western United States and the Great Basin.
14. U.S. Energy Information Administration, “Geothermal Timeline,” History of commercial development at The Geysers and in the Imperial Valley.