Geothermal Energy: An Overview

Contributed by The Hartford Steam Boiler Inspection and Insurance Co.

The following was a brief overview of geothermal energy and its energy market, published in January of 2009. While the article is a few years old, and though the statistics may have changed, we feel that this is a good primer for those looking to build or replace conventional systems, to take advantage of possible long-term savings. That being said, this article is only meant as an introduction to the topic and a starting place for additional research.


Geothermal energy technology uses the Earth either as a heat source/sink for heating and cooling or as a heat source for power generation. Each of these applications requires different methodologies and equipment to extract the heat from the Earth at varying depths. The Earth is comprised of several different layers; the inner core, the outer core, the mantel and the crust. The mantel, which is comprised of liquid rock, or magma, is approximately 1,790 miles thick and has an average temperature of 3300°F (1816°C). The surface of the Earth, called the crust, varies in thickness from about 2.5 miles to 37 miles.

The top 10 to 15 feet of the Earth’s surface maintains a relative average, year-round temperature of between 50°F and 60°F (10°C to 15.6°C). The deeper into the Earth’s crust one drills, the hotter the surrounding rocks become. The magma in the mantel heats the surrounding rock and vast underground reservoirs in the Earth’s crust. It is these areas of hot rock and superheated water that provide the source for geothermal energy. On average, for every 328 feet (100 meters) downwards, the temperature will increase by 5.4°F (3°C). However, depending on the region this value can vary anywhere from 1.8°F (1°C), common in areas with very little geological activity, to 9°F (5°C) or more. A very active geothermal region is in an area called the Pacific “Ring of Fire,” which is an area of frequent earthquakes and volcanic eruptions encircling the basin of the Pacific Ocean.


Geothermal heating can be accomplished two different ways.

Direct Hot Water Heating: The easiest and most energy efficient is to directly pump water from hot underground reservoirs through a network of pipes into surrounding homes and businesses. The hot water circulates throughout the building, radiating its heat, much the same way as traditional hot water boiler heating works. This is done in a variety of locations world-wide. Boise, Idaho has been using this method to heat their homes since 1892 and nearly 90% of all homes in Iceland are also heated this way. Even the residents of Pompeii were known to heat their houses through geothermal means. This method can only be used in areas where hot water reservoirs are easily accessible.

Ground Source Heat Pumps: Virtually any locality can utilize the Earth with ground source heat pumps for heating and cooling. Approximately 50,000 new installations are installed in the United States each year. A heat pump, which is essentially a reversible air conditioning unit, works on the principles of refrigeration. Since heat naturally flows from areas of higher temperature into areas of lower temperature the refrigeration cycle can remove the heat from one space and transfer it into another. Since the ground remains at a relatively stable temperature, it will provide a better heat source in the winter and a heat sink in the summer than air. A ground-source heat pump system is more expensive to install than a regular air conditioning system because of the need for buried piping. The payback is generally quicker than conventional air conditioning at between 3 and 10 years. System life is usually 25+ years for interior components, and anywhere from 50-200 years for the ground loop. Annual energy savings of 30-60% are common.

Electrical Power Generation

Geothermal energy can also be used to generate electricity. Geothermal power generation facilities can vary from a few hundred kilo-Watts (kW) in size to hundreds of mega-Watts (MW). The simple theory behind all geothermal power plants is that the high grade heat trapped deep in the Earth’s surface can be converted to a form of energy that can be used, either directly or indirectly, to spin a turbine generator. There are many different ways in which the energy to drive the turbine may be created. Four main types of geothermal power plants currently exist:

Binary Cycle: Binary cycle plants are the most common type of plant because water of relatively low temperature—around 212-302°F (100-150°C)—can be used. The hot water from these subterranean wells is pumped through a heat exchanger, where its heat is transferred to a secondary liquid with a lower boiling point, such as isobutene or R-134a (a common refrigerant.) This secondary liquid will expand, providing the energy required to spin the turbine. See Figure 2 to the right for a simplified diagram of the cycle.

Dry Steam: Dry steam is the simplest way to produce geothermal power, but requires very special conditions. There are only two dry steam facilities in the world—The Geyers in California and Larderello, Italy. Steam is directly pumped from an extremely hot geothermal reservoir to spin the turbine. This is different from other types of plants which use hot geothermal fluid to create steam. The dry steam reservoirs are much hotter, thus producing steam straight out of the well. Although dry steam plants are the least common they produce over 60% of all geothermal power in the United States. This is because dry steam is the easiest and cheapest geothermal resource to tap. The disadvantage to dry steam plants is that the steam can contain many gaseous impurities which can cause erosion, corrosion and deposits in the piping system and turbine components.

Flash Steam: Flash steam uses geothermal fluids above 360°F (182°C). The high-pressure fluid is pumped into a low pressure flash tank where some of the fluid is immediately converted (or “flashed”) into steam. This resulting steam is used to spin the turbine. Flash steam differs from dry steam facilities due to the quality of the steam. The steam in a flash steam facility may contain water droplets, which if used directly will damage the turbine. The steam may also contain dissolved minerals and other contaminates described above.

Hot Dry Rock: Also known as Enhanced Geothermal System (EGS) this is the newest type of geothermal plant. High pressure water is pumped into an injection well where it will then travel through fractured rocks, absorbing their heat. The water will then be forced out of a second well where one of the above technologies will then convert it into electricity. EGS essentially allows for the creation of a good geothermal reservoir where one did not exist before.

Potential Occupancies



Geothermal heating and cooling can be used anywhere and with nearly any size building. This scalable nature makes the technology appropriate for small homes to larger businesses. Very tall buildings would need to drill much deeper wells to benefit from geothermal heating and thus may be cost-prohibitive. Geothermal heating systems can be installed in pre-built structures, however these will require ample yard space in which to bury the pipes. The actual change in HVAC equipment can be accomplished with little difficulty and cost compared to purchasing an entirely new system. These systems will be most cost-effective in newly built structures with geothermal heating planned from the beginning.

Power Production

As of 2005, 24 countries had over 250 geothermal power plants rated at over 8,900 MW. 20% of Iceland’s and 25% of the Phillipines’ energy comes from geothermal power production. In regards to geothermal power, the United States is currently the largest producer in the world, generating over 16,000 GWh a year. Although this constitutes only 0.36% of the total U.S. energy need, geothermal power is the third largest clean, renewable energy resource after hydroelectric and wind. Total U.S. capacity is currently just under 3,000 MW with California producing the majority of this at over 2,555 MW. Nevada comes in second at 318 MW. However, geothermal is able to produce more energy per installed MW because of its much higher availability rate. Most geothermal power plants will have availability rates of over 90%. As a comparison, coal plants have availability rates between 70-90%. So even though wind has over twice the installed capacity, geothermal and wind power produce close to the same amount of energy per year. (Within about 1,000 MWh.)

Geothermal power is base load power, meaning that power production happens at a constant rate, 24 hours a day, 7 days a week. This puts geothermal in the same category as coal, oil, nuclear and hydroelectric plants, all of which are designed as base load power supplies. This separates geothermal from wind and solar power, which can only produce power when conditions are optimal—either a strong enough wind is blowing or when sunlight can hit photocells respectively.

Geothermal plants are scalable, meaning they can be designed to power a specific load. Plants usually range in size from 10 to 110 MW, although smaller scale geothermal installations have been developed. A notable plant at Chena Hot Springs Resort in Alaska which is rated at 450 kW is a binary cycle plant that uses 165°F water. Another notable plant is a 1.6 MW plant located at Amadee, CA. It is designed to run autonomously and if it detects a problem will radio the operator. As of August 2008 an additional 100 geothermal plants, rated at around 3,950 MW, are under development in the United States.




A home heating/cooling ground source heat pump system will typically cost around $2,500 per ton of capacity. The premium of a geothermal system over a traditional HVAC system will be around 50-100% although energy savings of 30-60% are common.

Power Production

Larger plants will cost less per kW installed due to economies of scale. The cost to install a plant depends heavily on the location of the installation. Places where hot rock can be found closer to the surface will drastically reduce the cost of a plant.

Costs for an average size geothermal power plant will typically be about $2,000-3,000 per installed kW while installations under 1 MW may cost anywhere from $3,000-$5,000 per kW installed. A large part of this price will be in the drilling, with each well costing from $2M to $5M. The cost of the well will depend heavily on location, depth, diameter, temperature, composition of material to be pumped and other factors. The 450 kW installation at Chena, Alaska cost approximately $2 million and had a simple payback period of 4 years in energy savings.

Major Players


Calpine: owns a number of natural gas and geothermal plants in North America. They currently have 15 geothermal plants in operation in California with a rated capacity of 725 MW.

Ormat: currently owns 323 MW of geothermal power in the United States and 91 MW worldwide. Ormat has built or supplied over 1000 MW of geothermal and Energy Recovery Generation (ERG) equipment and currently has over 150 MW currently under construction.

CalEnergy: owns a number of power and steam generating facilities totaling over 1,290 MW of power. CalEnergy owns 10 geothermal plants in the Imperial Valley of California that are rated at a total of 327 MW.

For Further Reading

The following is a list of references found helpful in the development of this article. Further inquiry into geothermal design, construction, cost, or market analysis may be directed here or to the appropriate HSB resource.

Dickson, Mary H. and Fanelli, Mario. “What is Geothermal Energy?” Feb 2004. Instituto di Geoscienze e Georisorse, SNR, Pisa, Italy.

Hance, Cedric Nathanael. “Factors Affecting Cost of Geothermal Power Development.” Aug 2005. Geothermal Energy Association.

DOE’s Office of Energy Efficiency and Renewable Energy. Geothermal Energy Association. Geothermal Resources Council

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