Geothermal energy sits in the middle of the pack for electricity costs. New geothermal power plants entering service in 2030 are projected to produce electricity at about $59 per megawatt-hour, according to the U.S. Energy Information Administration. That’s more expensive than solar ($38/MWh) and onshore wind ($26/MWh), but only slightly above natural gas ($53/MWh). The full picture, though, depends on whether you’re talking about a utility-scale power plant or a heat pump for your home, and what you’re comparing it against.
How Geothermal Compares to Other Energy Sources
The standard way to compare energy costs is the levelized cost of electricity, or LCOE, which rolls upfront construction, fuel, maintenance, and financing into a single price per megawatt-hour over a plant’s lifetime. For facilities projected to come online in 2030, the EIA’s 2025 outlook puts the numbers in 2024 dollars like this:
- Onshore wind: $26.06/MWh
- Solar PV: $37.82/MWh
- Natural gas (combined cycle): $53.44/MWh
- Geothermal: $58.54/MWh
These figures include federal tax credits for eligible technologies. On a pure dollar-per-megawatt-hour basis, geothermal is roughly 55% more expensive than solar and more than double the cost of onshore wind. But that comparison misses something important: geothermal plants run nearly all the time, while solar and wind only generate when the sun shines or the wind blows.
Why Upfront Costs Are So High
Most of geothermal’s expense is concentrated at the very beginning of a project. Before a single watt of electricity is generated, developers have to drill deep wells, sometimes miles into the earth, to reach hot rock or underground reservoirs of steam and hot water. Drilling is inherently risky. Some wells come up dry or don’t produce enough heat to justify the investment, and there’s no way to know for certain until you’ve already spent millions.
For enhanced geothermal systems, which create artificial reservoirs by fracturing hot rock where no natural steam exists, wellbore construction is especially costly. Casing and cementing the wells alone accounts for 30% to 40% or more of total well costs, according to the Department of Energy. The equipment also has to withstand extreme underground temperatures that can destroy standard electronics and sensors, requiring specialized (and expensive) hardware.
Once the wells are drilled and the surface plant is built, however, operating costs are low. There’s no fuel to buy. The heat just keeps coming from the earth. This is the opposite cost profile of a natural gas plant, which is cheap to build but requires a constant supply of fuel whose price fluctuates with markets.
The Capacity Factor Advantage
Geothermal plants in the U.S. have averaged capacity factors around 69% to 76% over the past decade, meaning they produce power roughly 70% of the time or more. In some years, like 2018, U.S. geothermal hit 76%. For context, solar panels typically operate at 20% to 30% capacity factor, and onshore wind ranges from 25% to 45%, depending on location.
This matters because a power source that runs around the clock has different value to the grid than one that disappears at night or on calm days. Geothermal provides what grid operators call baseload power, the steady foundation of electricity that’s always available. Solar and wind need battery storage or backup generation to fill in the gaps, and those added costs don’t always show up in a simple LCOE comparison. When you factor in the cost of making solar or wind as reliable as geothermal, the price gap narrows considerably.
Where Geography Drives the Price Down
Geothermal costs vary dramatically by location. In places where hot rock sits close to the surface, drilling is shallower, cheaper, and less risky. Iceland, which sits on a volcanic rift, gets more than 90% of its heating from geothermal sources. Kenya, the Philippines, El Salvador, and New Zealand all generate significant shares of their electricity from geothermal because they have the right geology.
Globally, the weighted average cost of geothermal electricity was about $0.06 per kilowatt-hour in 2024, according to the International Renewable Energy Agency. That’s up slightly from $0.055/kWh in 2010, largely because newer projects are being built in locations with less ideal geology, pushing average costs higher even as technology improves.
In the U.S., geothermal development has been concentrated in the western states, particularly California, Nevada, and Utah, where volcanic and tectonic activity brings heat closer to the surface. Expanding geothermal to the rest of the country requires enhanced geothermal systems that can work anywhere, not just in geological hot spots.
How Much a Home Geothermal System Costs
If you’re thinking about geothermal for your house rather than a power plant, you’re looking at a ground source heat pump. These systems circulate fluid through underground loops to pull heat from the earth in winter and dump heat back into it in summer. They replace both your furnace and air conditioner.
Installation typically costs $15,000 to $40,000 or more in 2025, depending on your property size, soil conditions, and whether loops are drilled vertically or trenched horizontally. That’s two to four times the cost of a conventional HVAC system. Most of the expense comes from the underground loop installation, which involves either drilling boreholes or excavating large sections of your yard.
The payoff comes through lower energy bills. Ground source heat pumps use 25% to 50% less electricity than conventional heating and cooling because they’re moving heat rather than generating it. The Department of Energy estimates most systems pay for themselves in 10 to 15 years through energy savings. After that, you’re looking at decades of reduced utility costs, since the underground loops can last 50 years or more. The federal investment tax credit currently covers 30% of installation costs for residential systems, which can shave $4,500 to $12,000 off the price.
Tax Credits and Federal Support
The Inflation Reduction Act extended significant financial incentives for geothermal projects. Through at least 2025, utility-scale geothermal facilities can claim either an investment tax credit worth 30% of the project cost or a production tax credit of about $0.028 per kilowatt-hour generated, provided they meet prevailing wage and apprenticeship requirements. Smaller projects under 1 megawatt automatically qualify for the 30% investment tax credit.
These credits are already baked into the LCOE estimates above. Without them, geothermal’s cost per megawatt-hour would be notably higher. The credits exist specifically because geothermal’s upfront drilling costs create a financial barrier that discourages private investment, even though the long-term economics are strong.
How Costs Could Drop
The Department of Energy has set a goal of cutting enhanced geothermal costs by 90%, bringing them down to $45 per megawatt-hour by 2035. That would make geothermal cheaper than natural gas and competitive with solar.
Several lines of work are pushing toward that target. At the Frontier Observatory for Research in Geothermal Energy (FORGE) in Utah, researchers have already demonstrated faster drilling rates and successful rock stimulation techniques. The DOE is also funding competitions to develop better sensors and 3D-printed components that can survive extreme underground temperatures. One winning team designed a thermal insulation system that lets standard electronics work in high-temperature wells, cutting the typical development timeline for such equipment from over five years to under two.
Retrofitting existing infrastructure offers another path to lower costs. At The Geysers in Northern California, operators refurbished two previously abandoned wells and added 5.8 megawatts of capacity to an existing plant. In Nevada, stimulating a single non-commercial well added 1.7 megawatts. These projects skip much of the exploration and construction expense by piggybacking on wells and surface equipment that already exist. The DOE’s Wells of Opportunity initiative is exploring similar approaches using inactive oil and gas wells, which could open up geothermal development in regions far from traditional volcanic hot spots.