Geothermal Energy Explained
Table of Contents
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Two Completely Different Technologies Share One Name
When someone says "geothermal energy," they might be talking about two completely different technologies that happen to draw heat from the same source: the Earth. Understanding the distinction is essential, because the practical implications for where each technology is viable, what it costs, and what it can do differ enormously.
Utility-scale geothermal electricity is only viable in tectonically active regions where volcanic heat comes close to the Earth's surface: Iceland, the US West, New Zealand, Kenya. It produces continuous electricity from steam or hot water pumped from the ground.
Ground-source heat pumps (also called geothermal heat pumps) work almost anywhere in the world. They exploit the fact that a few feet down the ground stays at a fairly constant temperature, and at about 30 feet it holds at roughly 50°F to 59°F year-round, regardless of surface weather (DOE). They do not generate electricity. They use electricity very efficiently to move heat.
Utility Geothermal: Tapping the Earth's Volcanic Heat
The Earth's core is thousands of degrees hot. This heat, generated partly by the decay of radioactive isotopes and partly left over from planetary formation, conducts slowly outward through the mantle and crust. Most of the time, this heat is too diffuse and too deep to access economically.
In tectonically active regions, heat concentrates close enough to the surface to use. Magma intrusions push heat upward; permeable rock allows water to circulate near the heat source; and the result is a hydrothermal reservoir that can be tapped with wells.
A conventional geothermal power plant works simply: drill wells to 1–3 km depth, pump hot water or steam to the surface, run it through a turbine to generate electricity, and reinject the cooled fluid back into the reservoir to maintain pressure. The three main plant types (dry steam, flash steam, and binary cycle) differ in how they handle the temperature and phase characteristics of the geothermal fluid.
Where Geothermal Electricity Works
Iceland is the most dramatic example: geothermal plants generate 31% of Iceland's electricity, with nearly all the rest from hydropower, and geothermal heat warms about 90% of its homes. The country sits directly on the Mid-Atlantic Ridge, with readily accessible volcanic heat almost everywhere.
The United States leads the world in geothermal electricity-generating capacity at just over 4 gigawatts. In 2025 its plants were in seven states and produced about 0.4% of US utility-scale electricity; California generated 68.6% of it and Nevada 24.7%, followed by Utah, Hawaii, Oregon, Idaho and New Mexico (EIA). The Geysers in Northern California is the largest known dry steam field in the world. These regions have the volcanic geology that makes shallow hydrothermal resources accessible. Most of the eastern United States lacks this geology and has essentially no utility-scale geothermal electricity potential with current drilling technology.
Geothermal electricity is especially valuable because it is baseload power: it generates continuously, day and night, regardless of weather. Unlike wind and solar, which are intermittent, geothermal runs most hours of the year: the US geothermal fleet's capacity factor was 65.9% in 2025, against 34% for wind and 24% for solar photovoltaics. Iceland demonstrates what a grid with abundant geothermal looks like: extremely stable electricity, minimal storage requirements, low carbon emissions.
Enhanced Geothermal Systems: The Next Frontier
Most of the Earth's accessible rock is hot but dry: no natural water to circulate. Enhanced Geothermal Systems (EGS) aim to fix this by injecting water into fractured rock at depth (3–10 km), creating an artificial hydrothermal reservoir. The potential is large: DOE's 2022 Enhanced Geothermal Shot analysis found US geothermal could reach 90 gigawatts of electricity by 2050 if enhanced systems achieve aggressive cost reductions, but the technology remains expensive and technically challenging.
Fervo Energy, based in Houston, has been developing EGS projects in Nevada and Utah. Its Cape Station in Utah reached First Power on September 24, 2026: Phase I is about 100 MW in three 33 MW blocks, the first expected to reach commercial operation by October 1, 2026 and the other two by January 1, 2027, with a further 400 MW under construction for 2028. Costs still have to fall for EGS to compete widely.
Ground-Source Heat Pumps: The Technology You Can Actually Use Anywhere
A few feet below the surface, the ground stays at a relatively constant temperature, and at about 30 feet it holds at roughly 50°F to 59°F year-round across most of the United States. That ground is warmer than winter air and cooler than summer air. The surface temperature swings wildly; the subsurface does not.
A ground-source heat pump exploits this stable temperature as a heat exchange medium. In winter, it extracts heat from the ground (which is warmer than the outside air) and moves it into your home. In summer, it removes heat from your home and deposits it into the ground (which is cooler than the outside air). It is not generating heat from combustion. It is moving heat from one place to another using a refrigerant loop buried in the ground.
The Coefficient of Performance Difference
A gas furnace burns fuel and converts it to heat at 80–98% efficiency, a COP (coefficient of performance) of 0.8–0.98. For every unit of energy in the gas, you get slightly less than one unit of heat.
A ground-source heat pump moves three to five units of heat for every unit of electricity it uses, according to DOE, and reaches 300% to 600% efficiency (a COP of 3 to 6) even on the coldest winter nights. The extra energy is not created. It is extracted from the ground. This is why heat pumps can dramatically reduce energy bills even though electricity costs more per unit than natural gas: you use far less of it.
Air-source heat pumps work on the same principle but exchange heat with outdoor air rather than the ground. They are cheaper to install but less efficient: DOE puts central ducted air-source heat pumps at 175% to 250% (a COP of 1.75 to 2.5), and their efficiency falls as outdoor air gets colder. DOE says geothermal systems can cut energy use by 25% to 50% compared with air-source heat pumps, because the ground holds a steady temperature.
System Configurations
The ground loop (the buried pipe through which refrigerant or glycol solution circulates) can be installed in several configurations:
- Horizontal closed-loop: Pipes buried in trenches at least four feet deep (DOE). Requires substantial land area but is generally the most cost-effective option for homes where space permits.
- Vertical closed-loop: Pipes run in deep drilled boreholes. Requires much less surface area (suitable for suburban lots), but drilling costs more.
- Pond/lake loop: Pipes submerged in a pond or lake. Requires a large, deep water body near the home but is cost-effective where applicable.
- Open-loop system: Uses groundwater directly from a well, circulates it through the heat pump, and returns it to the aquifer or discharges it to a pond. Highly efficient but requires suitable groundwater and local regulatory approval.
Who Geothermal Heat Pumps Are Suited For
Ground-source heat pumps work in all 50 states: the stable ground temperature they exploit is available everywhere. But the upfront cost (a NYSERDA study of Long Island installations averaged $10,570 per ton, about $31,700 for a 3-ton system, before incentives) means they make the most financial sense in specific situations: high-heating-load climates, homes replacing old inefficient heating systems, and properties with good geology for vertical boring or sufficient land for horizontal trenching.
The 30% federal homeowner tax credit that used to improve the economics ended for systems installed after December 31, 2025, so 2026 buyers should look for state and utility rebates instead. We cover the full cost and payback analysis in our companion piece on geothermal heat pump costs and savings. For comparison, residential solar panels follow a similar investment pattern and can be combined with a geothermal system for a highly efficient all-electric home. See our overview of how solar panels work.
Frequently Asked Questions
How does geothermal energy work?
Utility geothermal plants drill wells into hydrothermal reservoirs in tectonically active regions, bring hot water or steam to the surface, run it through a turbine to generate electricity, and reinject the cooled fluid. Ground-source heat pumps work differently: they use buried pipes to exchange heat with ground that stays near a constant temperature (roughly 50°F to 59°F at about 30 feet, per DOE) to heat or cool buildings, moving three to five units of heat for each unit of electricity used.
Where is geothermal energy used in the United States?
In 2025, US geothermal power plants operated in seven states and produced about 0.4% of US utility-scale electricity, according to EIA. California generated 68.6% of it and Nevada 24.7%, followed by Utah, Hawaii, Oregon, Idaho and New Mexico. The Geysers in Northern California is the largest known dry steam field in the world. Ground-source heat pumps, by contrast, work in all 50 states because they use shallow ground temperature, not volcanic heat.
Is Iceland 100% geothermal powered?
No. Geothermal plants generate about 31% of Iceland's electricity, according to the Icelandic government, with nearly all the rest from hydropower. Geothermal's bigger role is heat: it supplies about 90% of the energy used to heat Icelandic homes, mostly through district heating. Iceland sits on the Mid-Atlantic Ridge, with accessible volcanic heat across much of the country.
What is the difference between geothermal energy and a heat pump?
A ground-source heat pump is a type of geothermal technology that uses the stable temperature of shallow ground for heating and cooling. It does not generate electricity. Utility-scale geothermal power plants tap volcanic heat in deep wells to generate power. Both are called 'geothermal,' but they serve different purposes and are viable in very different locations.
What is the COP of a geothermal heat pump?
DOE says geothermal heat pumps reach 300% to 600% efficiency (a COP of 3 to 6) even on the coldest winter nights, against 175% to 250% for central ducted air-source heat pumps and under 100% for a gas furnace. In a NYSERDA field study, New York systems averaged a seasonal heating COP of 3.6 to 3.8.
What is enhanced geothermal energy?
Enhanced Geothermal Systems (EGS) create artificial reservoirs in hot but dry rock by injecting water at depth. DOE's 2022 Enhanced Geothermal Shot analysis found US geothermal could reach 90 gigawatts by 2050 if costs fall sharply. Fervo Energy's Cape Station in Utah, a roughly 100 MW first phase, reached First Power on September 24, 2026, the first utility-scale EGS project to do so, according to Fervo.
How deep do geothermal power plants drill?
Conventional geothermal power plants drill wells often a kilometer or more deep (thousands of feet) to reach hydrothermal reservoirs, and enhanced geothermal systems drill into hot rock where no natural reservoir exists. Ground-source heat pump loops are far shallower: horizontal loops sit in trenches at least four feet deep, and vertical loops run down drilled boreholes.
