Closed-Loop Geothermal Systems (CLGS) extract geothermal heat by circulating a purpose-installed working fluid through a sealed underground circuit.
Unlike hydrothermal geothermal or Enhanced Geothermal Systems, the working fluid does not need to circulate through a permeable geothermal reservoir. Instead, heat transfers from the surrounding rock through the well structure into the circulating fluid.
The basic principle has a long history in shallow geothermal. Ground-source heat pumps have used closed ground loops and borehole heat exchangers for decades.
What is changing is the scale, depth and architecture. Newer deep closed-loop concepts aim to reach warmer formations and provide district heating, industrial heat and electricity generation.
This creates both an opportunity and an important commercial question: can these systems recover enough useful heat or power to justify the drilling, infrastructure and operating energy required?
What Is Geothermal Energy?
Key facts
- CLGS circulates a working fluid through a sealed subsurface circuit.
- Naturally occurring geothermal formation fluid is not produced.
- Reservoir permeability is not required for circulation in the same way as for hydrothermal geothermal or EGS.
- Closed-loop geothermal ranges from shallow ground loops to much deeper geothermal heat-extraction systems.
- Depth alone does not define CLGS.
- Deep systems can use coaxial, U-loop and multilateral well geometries.
- Projects can also scale through replicated wells or use existing wellbores.
- Heat is transferred primarily from the surrounding formation into the closed-loop system.
- CLGS can provide direct heat, heat-pump-assisted heat and electricity where sufficient temperature and thermal output are available.
- Deep CLGS has moved beyond proof of concept, but commercial competitiveness and large-scale repeatability are still being established.
- ThinkGeoEnergy does not use Advanced Geothermal Systems (AGS) as a synonym for CLGS.
What is a Closed-Loop Geothermal System?
A Closed-Loop Geothermal System circulates a purpose-installed working fluid through a sealed subsurface circuit and transfers heat from the surrounding rock without producing naturally occurring geothermal formation fluid.
The underground circuit can use different well geometries.
The common characteristic is that the working fluid remains inside the engineered circulation system.
This means CLGS does not depend on producing geothermal water or steam from surrounding formations.
It also does not require reservoir permeability to move fluid between separate production and injection wells.
This is the central distinction from both hydrothermal geothermal and EGS.
Geothermal Resources
“Closed loop” does not always mean CLGS
The term closed loop is used in several different geothermal contexts.
A shallow ground-source heat pump may use a closed ground loop.
A medium-depth or deep borehole heat exchanger can also be closed.
Hydrothermal operators sometimes even describe production, heat extraction and reinjection as a “closed-loop” process because the produced geothermal fluid is returned underground.
That does not make the project a Closed-Loop Geothermal System in the specific sense used here.
For ThinkGeoEnergy, the defining characteristic of CLGS is that the working fluid remains inside a purpose-installed sealed subsurface heat exchanger and naturally occurring formation fluid is not produced.
Closed-loop heat exchange is already widely used in geothermal heating and cooling.
A conventional ground-source heat pump (GSHP) can circulate water or brine through horizontal loops or vertical borehole heat exchangers.
Medium-depth borehole heat exchangers, sometimes described as MDBHE, and deeper borehole heat exchangers, or DBHE, extend the same principle to greater depths.
The boundary with deep CLGS is not defined by one universal depth.
Shallow and conventional borehole systems
In a conventional GSHP system, the underground loop primarily serves as the thermal source and sink for a heat pump.
The heat pump is central to delivering useful heating or cooling.
Deep closed-loop geothermal
In deep CLGS, the subsurface circuit increasingly becomes the primary geothermal heat-extraction technology.
Projects generally aim to reach warmer formations and recover larger quantities of heat for:
- district heating;
- industrial heat;
- thermal networks;
- electricity generation.
A heat pump may still be used where the recovered temperature needs to be increased.
ThinkGeoEnergy therefore distinguishes these systems primarily by purpose and architecture rather than depth alone.
How does a Closed-Loop Geothermal System work?
A working fluid travels down through part of the sealed underground system.
Heat from the surrounding formation passes through the well structure and into the circulating fluid.
The warmer fluid returns towards the surface.
Depending on its temperature, the recovered energy can then be:
- supplied directly into a thermal network;
- upgraded with a heat pump;
- used for an industrial process;
- supplied to a power cycle.
The cooled working fluid then returns underground and circulates again.
Formation fluid does not need to enter the system.
What types of Closed-Loop Geothermal Systems are being developed?
CLGS designs vary considerably.
It is useful to distinguish subsurface well geometry from the way multiple wells are deployed across a project.
Main subsurface geometries
Single-well coaxial systems
A coaxial system uses separate flow paths within the same wellbore.
Fluid can travel down one pathway and return through another while exchanging heat with the surrounding formation.
These systems are sometimes described as tube-in-tube geothermal wells.
U-loop systems
A U-loop creates separate downward and returning flow paths connected underground.
Different concepts use combinations of vertical, deviated and horizontal well sections.
Multilateral closed-loop systems
Multilateral systems extend several underground branches or laterals from one or more main wells.
The purpose is to increase the amount of sealed well surface exposed to hot rock.
Eavor's Eavor-Loop (TM) is currently the most prominent example of this architecture.
Project deployment approaches
The geometries above can be developed in different ways.
Replicated independent wells
Instead of creating one highly interconnected multilateral system, a project can potentially scale through arrays of separate or largely independent closed-loop wells connected to shared surface infrastructure.
This may offer different opportunities for drilling standardisation and modular development.
XGS Energy is pursuing an approach closer to this model.
Repurposed wells
A closed-loop heat exchanger can also be installed in an existing geothermal or oil and gas well.
Reusing an existing well can reduce the amount of new drilling required, although the geometry and condition of the original well constrain what can be achieved.
GreenFire Energy has demonstrated this approach at the Coso geothermal field in California.
Heat transfer is one of the defining technical features of CLGS.
Hydrothermal and EGS systems can transport large amounts of heat through fluid moving within the reservoir itself.
CLGS relies much more heavily on heat moving from surrounding formations into the sealed well system.
This occurs primarily through conduction, although groundwater movement can influence heat transfer in some geological settings.
Important factors include:
- formation temperature;
- rock thermal conductivity;
- well depth;
- lateral length;
- well diameter;
- heat-transfer surface area;
- casing and tubing design;
- insulation;
- working-fluid properties;
- circulation rate.
Reservoir permeability is therefore not required to establish the closed-loop circulation itself.
But the thermal properties of the surrounding formation remain fundamental to performance.
Why are well length and heat-transfer area important?
A sealed geothermal system can only collect heat through the area exposed to the surrounding formation.
Increasing that contact area is therefore a major focus of CLGS development.
Developers can increase heat-transfer area using:
- deeper wells;
- horizontal sections;
- lateral branches;
- multiple loops;
- repeated closed-loop wells.
But every additional metre drilled also has a cost.
Longer flow paths can also increase friction and circulation losses.
This creates a central CLGS engineering and economic trade-off:
More subsurface contact can increase heat recovery, but the additional thermal output must justify the drilling, completion and circulation requirements.
New drilling methods, materials and approaches to improving heat transfer can change this balance over time.
What is a geothermal thermosiphon?
A thermosiphon uses density differences between warmer and cooler working fluid to help drive circulation.
As fluid heats underground, its density can decrease.
Cooler fluid travelling downward is denser.
Under suitable conditions, the resulting density difference supports natural circulation.
This can reduce mechanical pumping requirements.
Thermosiphon performance depends on:
- temperature difference;
- working fluid;
- vertical depth;
- system geometry;
- friction losses.
It does not necessarily mean that no mechanical pumping is ever required.
Eavor has made thermosiphon operation an important part of its Eavor-Loop concept.
What working fluids can CLGS use?
Water is a common working fluid.
Other systems have proposed or tested:
- brines;
- carbon dioxide;
- refrigerants;
- hydrocarbons;
- other engineered fluids.
- Fluid choice affects:
- heat capacity;
- viscosity;
- density;
- pressure;
- circulation requirements;
- thermosiphon potential;
- safety;
- compatibility with well materials.
CLGS avoids exposure to some of the fluid-chemistry problems associated with producing natural geothermal brines.
But it does not eliminate materials or chemistry issues.
Working-fluid composition, corrosion, seals and long-term compatibility with casing and tubing remain part of system design.
Can Closed-Loop Geothermal Systems provide heat?
Heat is currently one of the most important potential applications for deep CLGS.
Depending on the temperature produced at the surface, geothermal energy can be:
- supplied directly into district heating;
- used for industrial heat;
- supplied to local thermal networks;
- upgraded using a large heat pump.
If a heat pump is added, the underlying geothermal system remains CLGS because subsurface heat is still being accessed through the sealed closed-loop installation.
Direct Use of Geothermal Energy
Why heat can change the economics
The value of geothermal heat is highly location-specific.
Electricity can generally be transported across large networks and compared with many competing generation technologies.
Heat is local.
Its value depends heavily on infrastructure and the available alternatives.
A relatively expensive geothermal heat source can still be commercially attractive where:
- a district-heating network already exists;
- natural gas or another fossil fuel is the principal alternative;
- electrifying the same thermal load would require substantial grid investment;
- industrial users require continuous low-carbon heat;
- carbon costs or policy materially change the comparison;
- energy security and reduced fuel imports carry additional value.
The reverse is also true.
Where low-cost alternative heat is available, or where no suitable thermal network exists, the same geothermal resource can be difficult to justify.
CLGS heat economics therefore need to be evaluated against the local thermal-energy market, not simply against wholesale electricity prices.
Can Closed-Loop Geothermal Systems generate electricity?
Yes. Closed-loop geothermal is already being developed explicitly for electricity generation, not only as a theoretical future application.
Geretsried produced first electricity from its first Eavor-Loop in December 2025. XGS Energy is also advancing a planned 150 MW geothermal power project in New Mexico that is intended to deliver electricity to the Public Service Company of
New Mexico grid in support of Meta data-center operations. Baker Hughes joined the project in 2026 for engineering and exploration work.
Electricity generation still requires sufficient geothermal heat to reach the surface at a useful temperature and thermal output.
The recovered heat can then supply a separate power cycle, typically a binary or Organic Rankine Cycle plant.
Compared with direct use of heat, electricity generation adds a conversion step and therefore places greater demands on thermal output, drilling cost and parasitic circulation requirements.
The three factors that become especially important are:
- thermal output per well or loop;
- drilling cost per unit of output;
- circulation energy.
Electricity is therefore a concrete development pathway for CLGS, but commercial competitiveness depends on achieving adequate net output from the installed well system.
Geothermal Energy Production & Utilisation
What determines the commercial viability of CLGS?
A technically functioning CLGS can demonstrate:
- drilling;
- well connectivity;
- sealed circulation;
- heat extraction;
- thermosiphon or assisted circulation.
Commercial viability requires an additional test.
The useful heat or electricity produced must justify:
- drilling cost;
- completion cost;
- number of wells or laterals;
- circulation energy;
- surface infrastructure;
- financing;
- operating cost;
- long-term thermal behaviour.
The commercial answer can also be different for the same technology in different energy markets.
A system targeting district heating in a gas-dependent city can face very different economics from one targeting wholesale electricity.
What is thermal drawdown in CLGS?
Heat extraction cools the rock immediately surrounding the underground heat exchanger.
As operation continues, heat must increasingly move from farther away towards the well.
This can reduce thermal output relative to initial operating conditions.
The effect is known as thermal drawdown.
Its scale depends on:
- thermal conductivity;
- well geometry;
- extraction rate;
- operating schedule;
- loop spacing;
- local groundwater behaviour.
Multiple nearby closed-loop systems can also begin to influence one another thermally.
Long-term project assessment therefore needs to consider output over the operating life rather than relying only on initial performance.
Why does pumping energy matter?
Working fluid may travel several kilometres through a CLGS.
Friction creates pressure losses.
Mechanical pumping may be needed to maintain circulation.
This electricity consumption is a parasitic load.
For heat projects, it increases operating cost.
For power projects, it reduces the net electricity available for sale.
Low-friction well design and thermosiphon effects can reduce this burden, but pumping requirements depend strongly on the individual system.
Can Closed-Loop Geothermal Systems scale?
Scalability has two different meanings.
Unit scale
The first question is how much useful heat or power can be produced by one well or connected loop system.
That depends strongly on temperature, drilled contact area and heat-transfer performance.
Project scale
The second question is whether wells or loops can be repeated efficiently across a large project.
Replication potentially allows:
- standardised drilling;
- parallel construction;
- learning effects;
- shared surface facilities;
- staged investment.
But large projects also need to manage:
- drilling metres per MW;
- underground spacing;
- thermal interference;
- well-pad requirements;
- construction logistics;
- capital intensity.
Modern EGS projects are now being developed at several-hundred-megawatt project scale, although those larger developments are themselves still largely under construction or development.
CLGS has not yet demonstrated comparable aggregate operating scale.
That is a statement about commercial maturity today, not proof of a fundamental CLGS scale limit.
Enhanced Geothermal Systems
Eavor and the multilateral closed-loop approach
Eavor Technologies has become the most visible developer of deep multilateral CLGS.
Its Eavor-Loop concept uses long underground laterals to create a large sealed heat-transfer system.
The company first demonstrated the architecture at Eavor-Lite in Canada and has subsequently developed a substantially larger project at Geretsried in Germany.
Eavor-Lite
The Eavor-Lite demonstration project in Alberta established the basic technical concept of a connected underground closed loop.
It provided operational experience with drilling, sealed circulation and thermosiphon behaviour.
The project is best understood as an important proof of the technical architecture rather than as a commercial-scale energy project.
Geretsried, Germany
Eavor's project at Geretsried in Bavaria is the most important current test of multilateral CLGS at larger scale.
The planned first phase consists of four Eavor-Loops, with an overall design target of around 8.2 MWe and 64 MWth.
Development is being carried out in stages rather than bringing all four loops online simultaneously.
The first loop has been drilled and connected to the surface facility.
First electricity was produced in December 2025, marking first power from the project.
Eavor subsequently reported that Loop 1 was producing around 8.5 MWth in May 2026.
The remaining loops had not yet been completed as part of the operating system by the latest information reviewed, with development of the next loop planned as the project continues.
This distinction between first operation and full project build-out is important.
Geretsried has demonstrated:
- complex multilateral drilling;
- successful underground loop completion;
- sealed geothermal circulation;
- heat extraction;
- first electricity generation.
It has not yet demonstrated the full output or economics of the complete four-loop development.
Independent commentary has also highlighted the importance of comparing drilling intensity and early output with the eventual performance of the complete project. These questions become more meaningful as additional loops are
constructed and longer operating data become available.
Geretsried is therefore best described as a first-of-a-kind commercial demonstration / early commercial CLGS project, rather than either a fully proven commercial reference or an unsuccessful experiment.
Read more:
Other Closed-Loop Geothermal approaches
Different developers are attempting to solve the heat-transfer and drilling challenge in different ways.
XGS Energy
XGS Energy is developing a modular closed-loop concept using proprietary Thermal Reach Enhancement materials intended to improve heat transfer around the well.
This differs from Eavor's strategy of creating a large interconnected multilateral underground loop.
XGS reported in 2026 that its water-independent geothermal demonstration at Coso had exceeded 3,000 operating hours.
Beyond the Coso demonstration, XGS is developing utility-scale electricity projects. Its planned 150 MW New Mexico project is intended to supply power to the PNM grid in support of Meta data-center operations, with Baker Hughes supporting engineering and exploration. XGS has also announced a 115 MW geothermal development agreement with California Community Power.
This is a company-reported milestone and should be understood as evidence of technology demonstration rather than independent proof of wider commercial economics.
GreenFire Energy
GreenFire Energy has demonstrated a different configuration at the Coso geothermal field.
Its GreenLoop concept uses a coaxial closed-loop heat exchanger and can potentially be deployed in existing wells.
This makes it relevant not only to new geothermal development but also to the possibility of repurposing underused or inactive geothermal and oil and gas wells.
The California Energy Commission has published an independent report on the Coso commercial demonstration (pdf).
Green Therma
Denmark-based Green Therma is developing its Heat4Ever concept primarily for geothermal heating.
The approach uses long subsurface closed-loop sections and is aimed at district-heating markets.
Projects and feasibility work in Denmark (e.g. in Aalborg) and elsewhere in Europe make it a useful example of a heat-first CLGS development strategy, although the concept remains at an earlier commercial stage.
Benefits and limitations of Closed-Loop Geothermal Systems
Potential benefits
No production of geothermal formation fluid.
The working fluid remains inside the closed-loop system.
No reservoir-permeability requirement for circulation.
CLGS can access heat where a productive hydrothermal reservoir is absent.
Reduced formation-fluid management.
Produced brine, reservoir-fluid disposal and some associated scaling and chemistry problems can be avoided.
Different induced-seismicity risk profile.
CLGS normally does not require permeability stimulation or injection into the formation, reducing the stimulation-related seismic risk associated with some EGS projects. This does not mean subsurface or geomechanical risk is absent.
Heat and power applications.
Recovered geothermal energy can supply direct heat, heat-pump-assisted systems and electricity where temperature and thermal output are sufficient.
Potential modularity.
Some concepts can scale by repeating wells or loops.
Existing-well opportunities.
Closed-loop heat exchangers may offer a pathway for repurposing suitable existing wells.
Limitations and challenges
Drilling intensity.
Substantial drilled length can be required to create enough heat-transfer area.
Conductive heat-transfer constraints.
Heat must continually move from surrounding rock into the sealed well.
Thermal drawdown.
Near-well rock cools during sustained heat extraction.
Pressure losses.
Long flow paths can increase pumping requirements.
Well complexity.
Some multilateral and horizontal architectures require technically demanding drilling and completion.
Well integrity and materials.
A sealed circulation system must remain reliable over long operating periods, while working-fluid chemistry and thermal cycling create materials considerations.
Commercial economics.
Useful output must justify drilling, completion and operating cost.
Limited large-scale operating history.
Deep CLGS remains much less established commercially than conventional hydrothermal geothermal.
Is closed-loop geothermal commercially proven?
Deep CLGS is no longer just a modelling concept.
Projects have demonstrated:
- sealed subsurface circulation;
- coaxial systems;
- multilateral drilling;
- heat recovery;
- thermosiphon behaviour;
- first electricity generation;
- repurposed-well configurations.
The sector is therefore moving from demonstration into early commercial deployment.
But the scale matters.
Current CLGS projects remain smaller in demonstrated aggregate output than the largest modern EGS developments now being built.
Long-term commercial competitiveness, repeated construction performance and large-project scalability remain under evaluation.
The answer may also emerge differently for heat and electricity.
Heat and electricity are likely to mature on different commercial pathways. District-heating projects can benefit from strong local heat markets, while projects such as XGS's planned 150 MW New Mexico development are testing CLGS directly at utility-scale power-project ambition.
How is CLGS different from other geothermal systems?
CLGS vs geothermal heat pumps and deep borehole heat exchangers
Both can use sealed underground circulation.
The distinction is primarily the role of the subsurface system.
A conventional GSHP or BHE primarily provides a heat source and sink to a heat pump.
Deep CLGS increasingly functions as the geothermal heat-extraction technology itself.
There is no universal depth boundary between them.
Geothermal Heat Pumps
CLGS vs hydrothermal geothermal
Hydrothermal geothermal produces naturally occurring geothermal water or steam from a permeable reservoir.
CLGS does not.
Heat is transferred instead into a separate working fluid contained within the sealed well system.
CLGS vs EGS
EGS engineers or improves permeability so fluid can circulate through the geothermal reservoir and fracture network.
The circulating fluid can interact with naturally occurring formation fluid.
CLGS keeps its working fluid within a sealed well system and does not require hydraulic connectivity through the formation.
The distinction is therefore based on resource access and circulation architecture, not depth.
CLGS vs superhot geothermal
CLGS describes a subsurface heat-access architecture.
Superhot geothermal describes a very-high-temperature resource and development regime.
In principle, a closed-loop system could access very-high-temperature rock.
In practice, extreme temperatures create major challenges for drilling, casing, materials, well integrity and working fluids.
What does “Advanced Geothermal Systems” mean?
Advanced geothermal is increasingly used as a broad term for newer geothermal technologies and development approaches.
There is no single universally accepted definition.
Depending on the source, it may include:
- EGS;
- CLGS;
- superhot geothermal;
- other emerging geothermal technologies.
ThinkGeoEnergy therefore does not use Advanced Geothermal Systems (AGS) as a synonym for Closed-Loop Geothermal Systems.
Frequently asked questions about Closed-Loop Geothermal Systems
What is a Closed-Loop Geothermal System?
A Closed-Loop Geothermal System circulates a working fluid through a sealed underground circuit and transfers heat from the surrounding rock without producing formation fluid.
What does CLGS mean?
CLGS stands for Closed-Loop Geothermal Systems.
How does closed-loop geothermal work?
Working fluid circulates underground through a sealed well system. Heat transfers from the surrounding formation into the fluid, which returns to the surface carrying geothermal energy.
Is closed-loop geothermal the same as a ground-source heat pump?
Not necessarily. Ground-source heat pumps commonly use closed loops, but deep CLGS uses the subsurface circuit primarily as a geothermal heat-extraction system.
How deep are Closed-Loop Geothermal Systems?
There is no universal CLGS depth. ThinkGeoEnergy distinguishes deep CLGS from heat-pump systems primarily by architecture and system purpose rather than a fixed depth threshold.
Does CLGS need a geothermal reservoir?
It needs accessible subsurface heat, but it does not require a permeable hydrothermal reservoir.
Does CLGS require permeability?
No. The working fluid remains inside the sealed underground circuit, so reservoir permeability is not required for circulation.
Does CLGS produce geothermal water?
No. Naturally occurring geothermal formation fluid is not produced.
What is a coaxial geothermal well?
A coaxial well contains separate downward and return flow paths within the same wellbore.
What is a multilateral closed-loop geothermal system?
A multilateral system uses several underground branches or lateral well sections to increase the amount of heat-transfer area exposed to hot rock.
What is a geothermal thermosiphon?
A thermosiphon uses density differences between warmer and cooler working fluid to support natural circulation and potentially reduce mechanical pumping.
Does thermosiphon mean a CLGS needs no pumps?
Not necessarily. Natural circulation can reduce pumping requirements, but actual pumping needs depend on temperature, fluid properties, well geometry and pressure losses.
What fluids are used in CLGS?
Water is common. Some concepts also use or propose carbon dioxide, brines, refrigerants or other engineered fluids.
Can CLGS provide district heating?
Yes. Deep CLGS can provide heat directly or work with a heat pump when higher delivery temperatures are required.
Can CLGS generate electricity?
Yes. Closed-loop systems have already produced first electricity at Geretsried, while developers such as XGS Energy are advancing utility-scale power projects. Commercial competitiveness still depends on temperature, thermal output, drillingcost and net circulation requirements.
What determines CLGS heat output?
Key factors include formation temperature, rock thermal conductivity, well geometry, total heat-transfer area, working fluid, circulation rate and long-term thermal drawdown.
What is thermal drawdown?
Thermal drawdown is the reduction in heat output that can occur as the formation around a closed-loop heat exchanger cools during sustained operation.
Does CLGS cause induced seismicity?
CLGS generally avoids the hydraulic reservoir stimulation used in EGS and therefore has a lower stimulation-related induced-seismicity risk. It should not be described as having no subsurface risk.
How is CLGS different from EGS?
EGS circulates fluid through an engineered or enhanced reservoir fracture network. CLGS keeps its working fluid inside a sealed underground circuit.
How is CLGS different from hydrothermal geothermal?
Hydrothermal systems produce naturally occurring geothermal formation fluid. CLGS transfers heat into a separate working fluid without producing that fluid.
Is Eavor a Closed-Loop Geothermal System?
Yes. Eavor's Eavor-Loop is a multilateral deep closed-loop geothermal architecture.
What has Eavor demonstrated at Geretsried?
Geretsried has demonstrated multilateral drilling, sealed circulation, heat extraction and first electricity generation from its first loop. The full four-loop Phase 1 output and long-term project economics have not yet been demonstrated.
Is closed-loop geothermal commercially proven?
Deep CLGS has progressed from pilot projects into early commercial deployment. Technical operation has been demonstrated, while broader commercial competitiveness and repeatability are still being established.
Can CLGS scale to hundreds of megawatts?
Capacity can potentially be increased by adding loops or wells, but CLGS has not yet demonstrated operating projects at that scale. Its future scalability will depend on drilling productivity, heat output, thermal interference and project economics.
Is CLGS the same as Advanced Geothermal Systems?
No. Advanced geothermal is a broad and inconsistently defined umbrella term. ThinkGeoEnergy uses CLGS specifically for sealed subsurface geothermal circulation systems.
Sources and further reading
Author: Alexander Richter, ThinkGeoEnergy
Last reviewed: 14 August 2026