Europe is facing its second energy crisis in four years, with households and businesses feeling the pinch of volatile fossil fuel prices. The solution lies in domestic clean power, and geothermal energy is one of the EU's largest untapped sources. Yet, while the United States and Canada are turning this technology into a thriving industry, Europe is still debating how to proceed.
Geothermal energy works by drilling deep into the Earth, where temperatures rise, and using that heat to warm buildings or generate electricity. For decades, it was only viable in areas with natural hot water or steam near the surface. But advances in drilling and new technologies, such as enhanced geothermal systems (EGS), are expanding the possibilities. EGS could cost-effectively generate around 300 terawatt-hours of electricity annually in the EU—roughly a tenth of current demand—at prices below €100 per megawatt-hour, making it competitive with gas and coal.
Unlike wind and solar, geothermal provides firm, zero-carbon power that can complement intermittent renewables. It can bridge gaps when the sun isn't shining or the wind isn't blowing. In Spain, for example, strong renewable growth has already weakened the link between gas and power prices, saving households about €10 per month during the recent crisis.
The missing Geothermal Action Plan
When the European Commission published its Electrification Action Plan on July 16, many expected a dedicated Geothermal Action Plan to follow. It didn't. The Electrification Action Plan does acknowledge geothermal as an "underutilised resource," but the specific plan requested by EU Energy Ministers and the European Parliament over two years ago has been postponed repeatedly and has now vanished from the Commission's agenda.
Meanwhile, across the Atlantic, geothermal is no longer just a promising technology—it's a business. Fervo Energy, a US company developing EGS, completed its initial public offering in May. Canada's Eavor Technologies was ranked second on TIME's list of top greentech companies. Europe is still discussing basic policy direction, risking a brain drain of its own startups to more supportive markets.
The US understood the opportunity a decade ago. Through the FORGE programme, the Department of Energy funded demonstration drilling and shared results openly, setting a target of 60 GW of geothermal capacity by 2050 with costs falling to $45/MWh. This public investment de-risked the industry, allowing private capital to follow. Fervo, which built on FORGE's research, now supplies round-the-clock power to Google's data centres. Meta and others are signing gigawatt-scale deals to power AI, turning a state-supported technology into a market race.
Canada is following suit. Alberta is building a public drilling test site open to all companies, and Eavor received a further grant for its closed-loop technology, which avoids seismicity and groundwater concerns. Europe, by contrast, funds individual projects but lacks a systematic approach. Eavor's Bavarian plant, Europe's first commercial closed-loop project, received €91.6 million from the EU Innovation Fund and more from the European Investment Bank. Welcome as that is, one-off grants are not the same as economy-wide de-risking.
Europe's biggest gap is in absorbing the cost of exploration drilling—the riskiest phase. Developers fall back on a patchwork of national schemes, and many countries offer none. That's why some European startups have relocated abroad. The talent and technology are here, but the framework to build a home-grown industry is not.
Germany's Geothermal Energy Acceleration Act, which entered into force last year, is a step forward, and several countries have adopted national strategies. But EU-level action is needed to share geological data, set common standards, and coordinate financing across borders. Europe has the expertise—from its oil and gas drilling sector, strong engineering firms, and existing district heating networks—but lacks the coordinated push to scale.
The Geothermal Action Plan is the opportunity to establish shared risk, common rules, and a continental market. It should focus on barriers the private sector can't remove alone, such as European risk-sharing instruments. Without it, Europe risks watching the geothermal industry flourish elsewhere, while its own potential remains buried. As households take energy matters into their own hands, the EU must act decisively. The technology is ready; the strategy is not.
