Geothermal Energy: The Strategic Power Play for AI-Driven Data Centers in the Next Decade

The exponential growth of artificial intelligence (AI) and its reliance on energy-intensive data centers has ignited a global race to secure reliable, cost-effective, and sustainable power solutions. As data center electricity demand is projected to surge from 4.5% of total U.S. consumption in 2024 to 7–12% by 2028, geothermal energy is emerging as a critical infrastructure solution. With its high capacity factor, geographic flexibility, and long-term cost advantages, geothermal power is uniquely positioned to meet the 24/7 energy needs of AI-driven workloads while aligning with decarbonization goals.

Scalability and Strategic Fit for Data Center Growth

Geothermal energy's scalability is underscored by its ability to meet up to 64% of expected data center demand growth by the early 2030s, potentially reaching 100% if facilities are strategically located in geothermal-rich regions. This is particularly relevant as data centers require not only vast amounts of electricity but also efficient cooling systems. Geothermal systems can leverage stable underground temperatures to reduce cooling costs by 30–40%, offering a dual benefit of power generation and thermal management.

A prime example is Switch, a global data center operator, which recently signed a 20-year Power Purchase Agreement with Ormat Technologies for 13MW of geothermal power from Nevada's Salt Wells plant. This partnership highlights the growing industry confidence in geothermal's ability to deliver carbon-free baseload power. Ormat's planned upgrades to the Salt Wells facility- expected to enhance efficiency and output by Q2 2026-further illustrate the sector's momentum.

Cost-Competitiveness in a Shifting Energy Landscape

While geothermal's levelized cost of electricity (LCOE) ranges from $61–102/MWh, it outperforms intermittent renewables like solar and wind in critical areas. For instance, solar's LCOE of $28–117/MWh and onshore wind's $23–139/MWh are offset by the need for costly grid upgrades and energy storage to address intermittency. Geothermal, by contrast, offers 90%+ capacity factors and minimal weather dependence, reducing the need for backup infrastructure.

A theoretical 1-GW geothermal-powered data center could save $3.2 billion in operating costs over 30 years compared to traditional power sources. Enhanced geothermal systems (EGS) are further driving down costs: with current tax credits, EGS LCOE stands at $88/MWh, projected to fall to $50/MWh by 2035 as technology advances. This cost trajectory positions geothermal as a long-term winner in the data center energy market, especially as solar and wind face potential cost increases due to U.S. tax credit phaseouts after July 2026.

Investment Momentum and Policy Tailwinds

Geothermal energy is attracting record investments, particularly in North America, which led global funding with $1.6 billion in 2020–2025. Innovators like Fervo Energy and Sage Geosystems are leveraging advanced drilling techniques to reduce exploration risks, while government incentives-including tax credits and feed-in tariffs are accelerating project deployment. The U.S. alone has 3,400 GW of untapped geothermal potential, a resource base that could power the next decade of AI infrastructure growth.

However, scaling geothermal requires streamlined permitting and continued policy support. As BloombergNEF notes, geothermal projects can bypass grid interconnection bottlenecks, enabling data centers to be developed in 2–3 years versus the decades often required for traditional power projects. This speed-to-market advantage is a game-changer for tech firms racing to deploy AI capabilities.

Conclusion: A Strategic Infrastructure Play

For investors, geothermal energy represents a convergence of technological innovation, policy alignment, and market demand. Its ability to deliver firm, scalable, and cost-competitive power makes it an ideal partner for data centers navigating the AI revolution. As the geothermal market grows at a 5.3% CAGR through 2030, and potentially 4.2% through 2035 according to FactMR, the sector offers a compelling long-term value proposition.

The next decade will test the resilience of global energy systems. Geothermal, with its unique blend of reliability and sustainability, is not just a solution-it's a strategic imperative for powering the AI-driven future.