Geothermal power generation is expected to take off in the coming years, with global expenditure on wells drilled breaking through the $1 billion barrier this year before soaring to $3 billion in 2026, according to analysis from Rystad Energy.
There has been renewed interest in the geothermal sector in recent years, remarked the consultancy, with oil and gas majors making investments in numerous start-ups.
The number of new wells being drilled for power generation is due to exceed 200 this year for the first time.
According to Rystad's geothermal dashboard — which covers more than 1700 geothermal power generation and direct use projects globally — there has been an increase in drilling activity in the past six years.
It estimates that, between 2015 and 2020, around 1100 geothermal wells were drilled, with an average of 180 per year in the period.
In contrast, it predicts that the sector is set for significant growth with around 500 wells drilled in 2025.
Rystad’s forecast is split between announced and unannounced projects.
For unannounced projects, it estimated the wells countries will need to drill to reach government-set targets on geothermal installed capacity, adding that, historically, such estimates have tended to exceed actual capacity additions.
However, given the high level of interest in geothermal and the pace of innovation, more countries could enter the field.
“Whether or not geothermal targets will be met relies on the development of new systems like enhanced geothermal systems (EGS) and advanced geothermal systems (AGS),” said Daniel Holmedal, energy service research analyst at Rystad.
“If successful, we should see a big surge in well activity in multiple countries. Although targets have previously proved to be too ambitious, the current push in this growing industry is promising and could provide attractive opportunities for well services players.”
The geothermal sector has traditionally been dominated by regions of high enthalpy (areas that generate a lot of heat) where wells have been drilled at depths of between 2000 and 3000 metres, typically with reservoir temperatures exceeding 200 degrees Celsius needed for power generation.
Given these temperature requirements, explained Rystad, well locations have often been a bottleneck for the scalability of geothermal because the number of countries with high-temperature reservoirs located at depths of 2000 metres or more is limited.
This is where new techniques such as EGS and AGS could boost access to geothermal power.
However, Rystad does not believe this mooted paradigm shift will happen any time soon, arguing ESG and AGS are unlikely to be fully realised commercially before 2030.
Nevertheless, it forecasts the number of active wells for geothermal power generation will surpass 10,000 by the end of the decade, an increase that could support a total installed capacity of 36 gigawatts by 2030, more than double the installed capacity this year.
Most of this capacity will be added between 2025 and 2030, with levels in 2025 expected to be around 23GW.
In addition to using geothermal heat for power generation, Rystad said geothermal district heating (GDH) is also gaining ground, with Europe and China being the two main markets.
Although there has been some recent focus on GDH in the US from the Department of Energy’s National Renewable Energy Laboratory, no specific policies have yet been put in place.
Some countries in Europe have already outlined ambitions for GDH out to 2050.
The Norway-based consultancy cited the example of Austria, the Energy Agency of which expects to spend around $1.2 billion on GDH wells and infrastructure between 2020 and 2050, with $215 million lined up for the period to 2030, spending that could translate into 40 wells being drilled between 2020 and 2030.
Rystad said the Netherlands has an even more ambitious GDH plan, with 20 wells per annum planned to be drilled between 2020 and 2025, increasing to 40 per annum between 2026 and 2030.
Additional interest in geothermal may be generated by the repurposing of existing oil and gas infrastructure as well as the extraction of lithium.
Rystad said abandoning oil and gas wells is predominantly a zero-return activity in economic terms, meaning geothermal could offer a life-extension opportunity to operators.
It highlighted multiple examples of this approach, including the Zsana-Kiskunhalas project in Hungary that started up earlier this year.
Lithium extraction from geothermal wells has also made headlines in the UK as it has a higher return compared with traditional uses of geothermal.
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