Powering the Future: Geothermal Energy’s Global and Local Rise
- June 17, 2025
The International Energy Agency’s new report, The Future of Geothermal Energy, highlights geothermal as a powerful but underused renewable resource. Despite a century of use, it remains a minor player globally. Now, breakthroughs in technology, falling costs, and new funding models are poised to push geothermal into a larger role in the global energy mix.
Geothermal energy taps into underground heat for everything from heating buildings to generating electricity. Once mainly used for direct heating, it’s now gaining traction as a reliable source of constant, round-the-clock power—unlike intermittent renewables. The sector’s future growth is expected to center on electricity production powered by geothermal heat.
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Global geothermal snapshot
Despite its largely untapped potential, the IEA notes that geothermal energy remains a small player in the global electricity mix. As of 2024, installed capacity stood at roughly 16 gigawatts (GW), supplying just 0.4% of global power. Countries with significant geothermal use include the U.S., Indonesia, the Philippines, Turkey, and New Zealand.
In terms of output, the US tops the global charts for geothermal power, with more than 4 GW installed—enough to supply around 3 million homes. Most of this is clustered in the geologically active West, especially California and Nevada, home to The Geysers, the world’s largest geothermal field.
Meanwhile, Indonesia has risen as the top geothermal electricity producer outside the US. In 2022, the global geothermal output recorded was at around 92 billion kilowatt-hours (kWh).
Advances in technology and rising clean energy demand position geothermal for strong growth.
The IEA forecasts it could supply 8% of global electricity by 2050 if backed by robust policies. Emerging methods like Enhanced Geothermal Systems (EGS) could unlock heat resources far beyond traditional volcanic hotspots, using deep drilling to create artificial reservoirs in dry rock.
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Philippines’ geothermal scene
Geothermal energy is a cornerstone of the Philippines’ renewable energy (RE) strategy, given the country’s location within the Pacific Ring of Fire. Presently, the country holds the spot as the world’s third-largest geothermal energy producer, actively pursuing new projects to tap into its vast untapped geothermal reserves.
Geothermal energy continues to lead the Philippines’ renewable sector, accounting for 53.2% of the country’s green energy output, according to the Department of Energy (DoE).
Global research firm Fitch Solutions states that geothermal is expected to become the country’s second-largest source of RE after hydropower within the next decade. In 2021, installed geothermal capacity stood at 1,918 megawatts (MW), with average annual growth projected at 1.1% from 2022 to 2032.
Power generation from low to medium enthalpy geothermal sites–which have moderate underground heat levels–is gaining momentum, according to DOE Undersecretary Rowena Guevara. She said the agency is working on projects to assess the viability of small-scale geothermal systems and prepare investor-ready data packages to attract private sector interest.
She stated, “This path to greener geothermal generation will have its challenges, but it is a path that we will walk together so we can build a future when clean energy is not just a necessity, but a legacy of responsible stewardship for generations to come.”
Guevara also expressed optimism that the Philippines could reclaim its former rank as the world’s second-largest geothermal energy producer, with nearly 400 MW of potential capacity in the pipeline. The country lost that position to Indonesia in 2018.
Although the country began harnessing geothermal energy in the 1970s, development has slowed significantly since 2007. Despite the passage of the Renewable Energy Act in 2008, Guevara noted that only 86 MW has been added to the total installed capacity.
Government support
DoE has been calling on the private sector to boost investment in geothermal energy to help unlock untapped resources and strengthen the country’s RE supply. The agency has begun assessing the viability of small-scale geothermal projects to meet local energy needs. It has also prepared detailed data packages to attract future private-sector investment in these resource areas.
Last 2024, the Philippines began exploring partnerships with the US to introduce next-generation geothermal technologies. The initiative aims to leverage US advances in techniques for accessing deep underground heat to boost geothermal development.
Then Energy Secretary Raphael Lotilla noted that collaboration would focus on private sector involvement. Among potential partners is the Lopez-led Energy Development Corporation (EDC), which may pursue joint ventures with American firms.
Currently, EDC is advancing four geothermal projects with a combined capacity of 82.6 MW.
The company’s total installed capacity exceeds 1,464.5 MW, representing nearly one-fifth of the Philippines’ RE portfolio. Its geothermal assets alone make up 1,169.85 MW, accounting for 80% of the nation’s geothermal capacity.
Earlier this year, First Gen Corporation, the parent company of EDC, announced plans to scale back its capital expenditure for 2025, concentrating primarily on geothermal development.
According to First Gen’s President and COO Francis Giles B. Puno, the company’s 2025 capex is set at around P35 billion, with nearly 90% earmarked for geothermal projects—mainly drilling new wells. The focus remains on advancing drilling efforts and completing power plant construction, aiming to bring 83 MW online by next year.
Local geothermal developments
Here are some notable geothermal developments in the Philippines, aimed at boosting energy security:
Tanawon Plant
Location: Sorsogon, Bicol
Developer: Bac-Man Geothermal Inc. (EDC subsidiary)
Capacity: 22 MW
Status: In January 2025, the Energy Regulatory Commission (ERC) approved the plant’s connection to the Luzon grid.
Bago Binary Plant
Location: Bago City, Negros Occidental
Developer: EDC
Capacity: 5.6 MW
Status: The Bago plant was mechanically completed in late 2024.
Biliran II Plant
Location: Naval, Biliran
Developer: AG&P Industrial
Capacity: 50-70 MW
Status: The project is in the pre-development stage. AG&P Industrial joined a consortium with Cresphil, Energy Stream, and Royal Eijkelkamp to develop geothermal projects, handling construction while partners manage permits and compliance.
Tiwi Binary Plant
Location: Tiwi, Albay
Developer: AP Renewables Inc.
Capacity: 17 MW
Status: Completed on schedule within 2023, the project is now fully operational.
Barriers to geothermal expansion
According to the IEA, geothermal energy offers clear benefits but comes with distinct risks that private investors must carefully navigate to ensure projects remain financially viable.
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Significant initial investment
Building geothermal plants demands heavy upfront spending, mainly for exploration, drilling, and construction. These high initial costs can deter smaller companies or newcomers to the sector. The IEA projects that by 2025, capital expenses will account for over half of geothermal’s total electricity cost, estimated at $140 per megawatt-hour (MWh) out of a $250 per MWh levelized cost.
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Challenges in technology and geology
Uncertain underground geology poses major risks for geothermal projects, especially when drilling deep wells over 500 meters. Mistakes in assessing resource quality can cause costly delays. To tackle these challenges, strategies like public-private partnerships, government incentives, and cost-sharing are vital for reducing financial risks.
In 2024, the Philippine government announced plans to secure $250 million to support its geothermal de-risking strategy, aiming to reduce financial risks for developers. Partnering with the Asian Development Bank, the program will share early-stage drilling costs with qualified private firms, with state banks and the DoE managing eligibility and funding.
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Ecological threats
Though geothermal energy is renewable, it poses environmental challenges that require careful management. These include high water use, land sinking, and the release of harmful pollutants like arsenic, mercury, and hydrogen sulfide. Emissions of greenhouse gases such as CO2 and methane also contribute to climate change. Energy producers must actively mitigate these risks and adhere to strict environmental regulations.
Bottom Line
The IEA report states that the private sector remains optimistic about geothermal energy’s future, boosted by technological progress, favorable policies, and growing demand for clean power. EGS could unlock vast energy potential by creating artificial reservoirs in areas with hot underground rock but no natural geothermal sources.
Rapid growth in global geothermal capacity is expected as EGS costs plummet and investments from both public and private sectors surge. The IEA projects an 80% cost drop per megawatt by 2030, with cumulative investments hitting $1 trillion. At $50 per MWh, geothermal power would become one of the cheapest, most reliable energy sources worldwide.
Moreover, The IEA sees strong geothermal growth ahead as businesses seek reliable, low-carbon power. Cost reductions and government support will be key to competing with other energy sources.
Sources:
https://www.iea.org/reports/the-future-of-geothermal-energy
https://tribune.net.ph/2023/09/30/more-private-sector-investments-in-geothermal-energy-urged
https://powerphilippines.com/first-gen-eyes-p35-billion-budget-for-geothermal-focus-in-2025
https://www.bworldonline.com/corporate/2025/01/24/648665/erc-oks-edcs-connection-facility-for-tanawon-geothermal-in-bicol/
