Is Geothermal Worth The Cost?

Geothermal energy is a renewable energy source that utilizes the natural heat of the earth to generate electricity or provide heating and cooling. Geothermal power plants use steam or high-temperature water from deep underground reservoirs to drive turbines and generate electricity. Geothermal heating and cooling systems use much shallower wells or bodies of water to provide heating, cooling, and hot water in homes and other buildings.

The core question around geothermal energy is whether the costs of installing and operating these systems make sense compared to conventional energy sources. While geothermal systems have very low operating costs once installed, the upfront installation costs can be quite high. This article examines the costs and benefits of geothermal energy to evaluate whether it is a cost-effective renewable energy solution.

How Geothermal Energy Works

Geothermal power plants use heat from the Earth’s core to produce steam that drives turbines and generates electricity. The heat comes from hot water or steam reservoirs located a couple miles or more below the Earth’s surface. Wells are drilled into these underground reservoirs to tap the resource. The water or steam that comes up through the wells is piped to a power plant where it spins turbines, which activate generators and produce electricity.

According to the U.S. Department of Energy, three types of geothermal power plants are used today:

  • Dry steam plants use steam piped directly from underground wells to turn turbines.
  • Flash steam plants take high-pressure hot water from deep inside the earth and convert it to steam to drive the turbines.
  • Binary cycle plants pass moderately hot geothermal water through a heat exchanger, which heats a separate liquid that boils at a lower temperature than water. This causes the secondary liquid to flash to vapor, which then drives the turbines.

In each type of plant, the steam rotates turbines that power electric generators, producing clean, renewable electricity. After being used, the steam is cooled and condensed back to water so that it can be injected back into the reservoir to be reheated again.

Geothermal Energy Pros

Geothermal energy has several key advantages that make it an attractive renewable energy source (

worker maintains geothermal power plant

First, geothermal energy is clean and renewable. Geothermal plants emit very low levels of greenhouse gases, sulfur dioxide, and other pollutants. This makes geothermal an environmentally friendly alternative to fossil fuels.

Second, geothermal provides constant baseload power that is available 24/7. Unlike solar or wind which fluctuate based on weather conditions, geothermal can provide uninterrupted power around the clock.

Finally, geothermal reduces dependence on fossil fuels. Tapping the Earth’s internal heat can displace coal, natural gas, and other nonrenewable fuels to generate electricity. This enhances a region’s energy security and sustainability.

Geothermal Energy Cons

While geothermal energy has many advantages, there are some notable disadvantages to consider as well. One major downside is the high upfront installation costs required (Source). Installing a geothermal system can cost anywhere from $20,000 to $30,000 depending on the site, which is significantly more expensive than installing a traditional furnace or air conditioner. The drilling required to access underground heat sources adds substantial expense.

Another disadvantage is that suitable locations for geothermal energy are limited (Source). Geothermal energy is geography dependent, as it relies on accessing sites with optimal underground temperatures and appropriate geology. This restricts where geothermal systems can viably operate.

There are also potential emissions from geothermal wells to consider. Although geothermal sites emit far fewer greenhouse gases than fossil fuel plants, trace amounts of gases like sulfur dioxide, carbon dioxide, and hydrogen sulfide can be released from wells (Source). Proper well construction and emission controls help mitigate this.

Installation Costs

The costs of installing a geothermal power plant can vary greatly depending on the location and drilling requirements. According to the Center for Sustainable Systems, capital costs for conventional geothermal power plants in the U.S. are approximately $2,500 per installed kilowatt of capacity.

The main costs associated with installing a geothermal power plant include drilling wells, building the power plant facility, and connecting it to the electrical grid. Drilling geothermal wells is one of the biggest expenses, with costs ranging from $1-6 million per well depending on the depth required. Typically, a minimum of three wells are needed for a geothermal power plant. Building the above-ground power plant facility can cost between $2,000 – $4,000 per installed kW. Finally, transmission lines to connect the plant to the grid may cost $1 million per mile of power line.

Overall, installation costs for a 50MW geothermal power plant could range from $150 – $300 million. While the upfront costs are significant, once installed the geothermal power plant can provide decades of reliable baseload renewable energy.

Operational Costs

Geothermal power plants have relatively low operational costs compared to other energy sources. According to the International Renewable Energy Agency, the levelized cost of electricity from a geothermal power plant ranges from $0.04 to $0.14 per kilowatt-hour, assuming maintenance costs of 1-3% of initial capital costs per year.[1]

Ongoing operational costs for geothermal plants include maintenance, repairs, staffing expenses, and costs for supplementary electricity or fossil fuels when the plant is not meeting demand. Maintenance and repairs are needed for the wells, pipelines, turbine-generators, and other infrastructure. Staffing the plant requires engineers, technicians, and operations personnel.

According to the U.S. Department of Energy, operations and maintenance costs for geothermal plants range from $0.01 to $0.03 per kilowatt-hour generated, which is competitive with conventional fossil fuel power plants.[2] Proper maintenance helps ensure steady performance and generation over decades of operation.

Government Incentives

The federal government offers incentives like tax credits, grants, and loan guarantees to help offset the costs of installing a geothermal heat pump system. The most notable incentive is a federal tax credit that allows homeowners to claim 26% of the total system cost as a credit on their taxes in 2022. This tax credit will decrease to 22% in 2023. To qualify, the geothermal system must meet Energy Star efficiency criteria. The tax credit can be combined with solar and wind credits as well as energy efficiency upgrade credits.

There are also government grants and loan guarantees available. The U.S. Department of Energy provides grants for demonstration projects that advance geothermal technologies. The U.S. Department of Agriculture provides loan guarantees for businesses in rural areas to install renewable energy systems like geothermal. Many local and state governments also offer additional rebates and incentives for geothermal installation.

Cost per kWh

According to Geothermal Energy Factsheet | Center for Sustainable Systems, in 2016, the cost of geothermal electricity ranged between 7.8-22.5¢ per kWh. This is comparable to other renewable energy sources like wind (4-8¢ per kWh) and solar (4-8¢ per kWh).

Compared to fossil fuels, geothermal is more cost competitive. Geothermal Electric Technology states geothermal electricity costs between 1-3¢ per kWh, which is cheaper than natural gas (4-7¢ per kWh) and coal (3-5¢ per kWh).

So while geothermal has high upfront costs, the levelized cost per kWh over the system lifetime is quite low and competitive with conventional sources. This makes geothermal an economically viable renewable energy option.

Case Studies

There are several good examples of successful large-scale geothermal projects, including in Iceland and at Ball State University in Indiana.

Iceland is a leader in geothermal energy utilization, with over 90% of homes heated by geothermal and about 30% of electricity production coming from geothermal. Iceland offers a great case study for effective and widespread adoption of geothermal resources. Their unique geology gives them access to abundant geothermal resources. Through district heating systems, they are able to provide low-cost heating to a majority of buildings in the country.

Ball State University in Muncie, Indiana provides a good example of a large-scale geothermal heating and cooling system in the United States. Ball State installed two geothermal fields with over 3,600 boreholes totaling more than 9 miles in length. This system provides nearly 5 million square feet of heating and cooling, reducing the university’s carbon footprint dramatically while saving millions in energy costs.


When weighing the cost of installing and operating a geothermal heating and cooling system, there are several key factors to consider. The high upfront installation cost can deter some homeowners, with the average cost ranging from $20,000 to $30,000. However, there are often rebates and tax incentives available to help offset 30-50% of the initial investment.

Once installed, geothermal systems have very low operational costs, with some estimates putting it at 1/3 the cost of conventional HVAC systems. The lack of reliance on fossil fuels also provides insulation against fluctuating energy costs. Over the lifespan of the system, estimated to be 20-25 years, the operational savings can make up for much of the initial price tag.

While geothermal systems are more expensive upfront than alternatives like natural gas furnaces, the long-term energy savings and low carbon footprint can justify the costs for many homeowners. Improved efficiency technology and expanded tax credits may continue to make geothermal systems more financially viable in the future.

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