Global geothermal power market was valued at US$1.403 billion in 2019 and is expected to grow at a CAGR of 2.72% over the forecast period to reach a total market size of US$1.649 billion in 2025. Geothermal power is a stable and independent renewable power generation source which uses warm strength of the earth’s magma to generate power. Geothermal power plants utilize the 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 latest statistics from the 2019 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 of fossil fuels to generate electricity. Moreover, volatility of fossil fuel prices, their limited availability, and 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 of governments and global organizations to reduce the dependency on oil for domestic energy use. For doing so, several policies and initiatives are being implemented and undertaken respectively to use as much as renewable energy resources as an alternative energy source. Following the 2015 COP21 (Conference of Parties) conference held in Paris, UN established the Global Geothermal Alliance with an aim to fast-track 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.
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 high investment required for geothermal power plants and negative impact of geothermal energy on the environment are hampering the growth of 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 geothermal power market during the forecast period. In March 2019, the investment firm- Breakthrough Energy Ventures- announced to invest $12.5 million in a geothermal project development company- Baseload Capital. It is a project investment firm which 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 into operation in Peru by 2026 or 2027 with the 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 an aim to supply approximately 3 MW of electricity to National Grid and upto 12 MW of electricity for local use.
Continuous development of technologies to increase the efficiency of geothermal power plants are expected to offer more lucrative opportunity for the market expansion over the next five years. Geothermal funding in the U.S. will increase from $84 million in FY2019 to $110 million in FY2020, representing an increase of 31 per cent. 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. Recently, UK Research & Innovation (UKRI) has 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 center 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 ground-breaking 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, 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 the significant share in the global geothermal power market in 2019 owing to the rising focus on geothermal energy source 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 leading producer of 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, 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, 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 fuel the growth of geothermal power market in this regional market during the forecast period. In Philippines, the development of geothermal power has been continuously pushing in order to attain energy security while boosting the share of renewable energy in the total power mix. Recently the government in this country has announced 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 for attracting foreign investment. In China, imposition of stricter emission rules on coal-fired power plants has created a lucrative opportunity for geothermal energy sector to grow at a tremendous rate, thereby driving the market growth. Middle East and Africa (MEA) geothermal power regional market is also poised to grow at a decent CAGR between 2020 and 2025 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 2019 to ramp up the geothermal development in Ethiopia by easing the registration and licensing processes. As per the Turkish Geothermal Power Plant Investors Association (JESDER) estimates, Turkey has plans to increase its geothermal power generation capacity by nearly 50 per cent, that is 2,000 MW, by 2020 from 2018 figures.
Impact of COVID-19 on global geothermal energy industry
The recent COVID-19 pandemic outbreak has negatively impacted the geothermal energy sector as well to some extent. Indonesia, for instance, 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 the 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 per cent (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, 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 coronavirus pandemic has brought seven geothermal projects of total 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.
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 in 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 position and strategies. The report also mentions recent deals and investments of different market players over the last two years.