European investment on geothermal expected to reach USD 7.4 billion

European investment on geothermal expected to reach USD 7.4 billion European Commission (source: Sébastien Bertrand / flickr, creative commons)
Carlo Cariaga 28 Sep 2022

The total installed geothermal heating capacity in Europe is expected to increase by 58% by 2030 according to a research done by business intelligence company Rystad Energy.

Analysis and consultancy company Rystad Energy has published the results of their research that shows that the European geothermal heating market is expected to grow substantially in the next several years. More specifically, the total installed capacity is projected to surpass 6.2 GWt in 2030, a 58% increase from today’s total capacity of 3.9 GWt. Moreover, these future developments are expected to cost an estimated USD 7.4 billion.

Despite geothermal being a reliable source of energy, its development has been hampered by high development costs and risks related to uncertain subsurface conditions and drilling success rates. However, the sudden drop in supply of Russian gas has prompted many players, some of which come from the oil and gas industry, to start investing on the geothermal market.

Installed capacity for geothermal heating projects (Source: Rystad Energy)

The graph above emphasizes how the geothermal heating market has diversified starting 2010. From being dominated largely by Iceland, Hungary, and Italy, more countries like Germany and the Netherlands started developing a stronger presence. In the last 10 years, the installed capacity in Germany doubled from 200 MWt in 2012 to 400 MWt today. This is expected to approach 850 MWt by 2030 with an investment of USD 1.5 billion. The Netherlands is also expected to add 1 GWt capacity from 2022 to 2030.

Development in the UK has been quite slow with only 20 MWt of installed geothermal heating capacity today. This is expected to pick up pace on account of a USD 470 million investment to reach a capacity of 100 MWt by 2030.

The research of Rystad Energy does not consider the cost of developing heating networks, as these are typically funded and installed at the local level. With this exclusion, the cost of drilling remains the primary driver of geothermal project costs.

The uncertainty of drilling success further exacerbates the risk that goes into geothermal drilling. Drilling success varies widely and is largely dependent on the location of the project and the maturity of the industry in that particular country. In Germany and Hungary, drilling success often exceeds 90%. In the Netherlands, this can be as low as 70% due to the relative infancy of the Dutch geothermal industry.

The levelized cost of heating (LCOH) of geothermal projects also vary widely and is influenced by factors including project size, well depths, and ground-level temperature. According to the Rystad research, the average weighted LCOH for Europe (excluding Iceland) is at USD 39. However, there may be large variances across countries.

Source: Rystad Energy