By Fitch Solutions

Key View

  • Global geothermal capacity will grow at an annual average rate of 2.8% over the next decade, increasing by just over 4GW between year-end 2020 and 2029.
  • During this period, geothermal will make up less than 1% of total global non-hydroelectric renewable capacity. This is due to both the lower costs of wind and solar power as well as the fact that geothermal developments are restricted to markets with natural geothermal resources.
  • The Asia region will be the largest geothermal market by installed capacity with more than 7.8GW by 2029. This will be driven primarily by Indonesia, which will install 1,250MW of new capacity over our 10-year forecast period.
Indonesia Key Geothermal Growth Driver
Global – Heat Map Of Geothermal Capacity Additions By Country, MW (2021-2029)
e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, Fitch Solutions

Key Forecast Takeaways

  • Global geothermal capacity will grow by 4.1 gigawatts (GW) from year end-2020 to 2029, reaching a level of 18.6GW. However, geothermal will still remain small in the overall renewables market, accounting for an annual average of 2.3% of global non-hydropower renewables output and less than 1% of non-hydro renewables capacity. This is due to the continuously falling costs and quicker project turnaround times of solar and wind power projects, as well as geothermal projects being limited to areas with natural geothermal potential.
  • By the end of our forecast period in 2029, Asia will be the largest regional market by installed geothermal capacity with a total of 7.8GW. North America will be the second-largest with 2.8GW. The SSA region will have the second-lowest capacity despite having the largest geothermal project pipeline as a result of limited progress and delays to planned power plants.
  • Indonesia and Turkey will be the largest growth markets for geothermal capacity over the next decade, with 1,250 megawatts (MW) and 948MW respectively. Ethiopia, despite having an installed capacity of only 17MW, will be the ninth-largest growth market globally during this period.

Generation, Geothermal, TWh89.993.796.3100.1102.5105.1
Generation, Geothermal, % y-o-y2.
Capacity, Geothermal, MW14452.115206.515651.516042.316403.016764.7
Capacity, Geothermal, % y-o-y2.
e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National Sources, Fitch Solutions

Key Global Geothermal Trends

  • Role Of Geothermal To Remain Limited In Global Non-Hydropower Renewables Market

We forecast that global geothermal electricity capacity will grow at a y-o-y rate of 2.8% from 2021 to 2029, increasing from a level of 15.2GW to 18.6GW. However, as can be seen from the chart below, geothermal electricity generation will account for a very small share of total non-hydropower renewable electricity output over the next decade at just over 2% on an annual average basis. This is due to multiple factors, including the much lower costs and quicker turnaround times of wind and solar power projects. Furthermore, geothermal electricity development is limited to markets where there is natural geothermal resource potential.

This informs our view that large development banks and international financial institutions will play a key role in developing new geothermal projects. This is especially pertinent in developing markets aiming to reduce their reliance on fossil fuel power, as geothermal is both a non-intermittent source (unlike solar or wind power) and has zero emissions (unlike biomass projects).

Geothermal Role In Total Global Renewables Output To Remain Small
Global – Non-Hydropower Renewable Electricity Generation By Type, TWh
e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National Sources, Fitch Solutions
  • Asia Region To Be Largest Geothermal Market Globally

As can be seen from the chart below, Asia will be the region with the largest installed geothermal capacity by the end of our forecast period in 2029. At a level of 7.8GW, this is more than twice as large as the North America region with the second-highest capacity of 2.8GW.

In contrast, the SSA region will be the second-smallest market in terms of geothermal capacity, despite having the largest geothermal project pipeline globally. This is largely due to slow progress on the bulk of the planned projects in the region. We highlight Kenya and Ethiopia, with the two markets set to account for virtually all of SSA’s installed capacity.

Asia To Lead In Global Geothermal Capacity
Total Installed Geothermal Capacity By Region (2029f)
f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National Sources, Fitch Solutions
  • Indonesia And Turkey To Be Geothermal Growth Drivers Over Next Decade

The largest growth in geothermal capacity over our forecast period to 2029 will come from Indonesia and Turkey, with forecasted installations of 1,250MW and 948MW respectively – as indicated in the chart below. In Indonesia, we forecast geothermal to be the primary growth driver of the market’s non-hydropower renewables capacity with the government setting a target of 7GW of geothermal capacity by 2030. At the same time, Turkey’s government has set a target for 4GW of geothermal capacity, also by 2030.

Ethiopia, which has an estimated geothermal capacity of only 17MW as of 2020, will be the ninth largest growth market over the next decade with 155MW set to come online through 2029. While not yet factored into our forecasts, we note an additional 320MW of geothermal capacity in the pre-construction phase, highlighting the potential for further growth in the market.

Indonesia And Turkey Largest Geothermal Growth Markets Over The Next Decade
Top 10 Markets By Geothermal Capacity Installations (2021f-2029f)
f = Fitch Solutions forecast. Source: EIA, IRENA, National Sources, Fitch Solutions

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. 

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