Grab a cup of coffee or tea. I’ve got an important one today. In this article I am going to present the case why enhanced geothermal power plants are an efficient, safe, clean and a cost-effective energy source for the grid and to power data centers.Before you think to yourself, “I already know about geothermal and all the limitations.” Allow me to introduce you to modern, next-generation enhanced geothermal systems or EGS. This is a technology old in concept but very new in commercial deployment. It has about 3 years of proven commercial operation. There will be two parts to this. The first part here will be about the technology, costs and serviceable near-term and long-term addressable market. The second article I will publish in a few days or less will be all about Fervo Energy (FRVO) and the highlights from their recent SEC S-1 filing. The modern enhanced geothermal revolution began when companies like Fervo Energy realized that the oil and gas industry had solved enhanced geothermal’s hardest problems. Horizontal drilling, hydraulic fracturing and distributed fiber optic sensing were the game changers. I’ll go deeper into this compelling technology later on.A Solution To The ProblemAbout three years ago I realized how significant AI was going to be in society and the economy. I brainstormed all the possible sources of energy that would be needed to power it, especially the clean energy. I realized the US was going to need all the energy it could get its hands on. We’ve all heard for some time the grid and data centers will need more power than can be delivered with current trajectories. There are already major shortfalls delaying data center builds. Only 25 gigawatts (GW) of new data center capacity was added to the funnel in Q4 2025, half of Q3 additions. Further corroboration comes from CBRE saying in a February report about 5,995 megawatts (MW) of data center capacity was being built at the end of 2025, down from 6,350 MW in 2024.Fortune reported in March 2026 that utilities simply "don't have either the grid capacity or the generating capacity to build it fast enough" to meet data center requests. It just takes longer to build the power infrastructure than the data centers themselves. Gartner predicts power shortages will restrict 40% of AI data centers by 2027.Today there are only around 66 utility scale geothermal power plants that are operating in the U.S. They are providing less than 0.5% of total U.S. electricity generation. The U.S. is the global leader in installed geothermal capacity. The current plants are almost entirely conventional hydrothermal plants. They rely on naturally occurring steam and hot water, not engineered rock fracturing enhanced geothermal provides. This is why geothermal growth has been modest to this point. There are zero enhanced geothermal plants at true commercial scale right now. That is about to change dramatically. The first large-scale commercial enhanced geothermal power plant in U.S. history is about to come online in about a month at 53 MW, then ramping to 500 MW and potentially 2 GW. Fervo Energy (FRVO) is building it. They have a $7 billion sales pipeline. They already have 658 megawatts of power purchase agreements, including a hyperscaler.” Text within this block will maintain its original spacing when publishedThe Future of Modern GeothermalFervo Energy (FRVO) has an upcoming IPO this month on Wednesday the 13th according to the site IPOScoop.com. Priced at $21-$24 a share at $1.25 billion. The IPO will value the company at $6.5 billion. The ticker will be FRVO. They announced in April on their website they filed the S-1 with the SEC for an IPO on the Nasdaq. J.P. Morgan, BofA Securities, RBC Capital Markets, and Barclays are lead bookrunning managers.Why am I so excited about Fervo Energy? Fervo can offer data center developers modular, 24/7/365 clean power that is cost effective. They are building the biggest and most ambitious commercial enhanced geothermal system (EGS) project in the world.Fervo’s first commercial project, Project Red in Nevada, has been actively powering Google’s data centers since 2023. Project Red is the longest-running and is the first ever use of horizontal drilling in an enhanced geothermal system. Project Red has surpassed 614 days of continuous operations, validating the long-term stability of the project and technology.Fervo is a Houston-based enhanced geothermal energy developer founded in 2017 and backed by investors including Google, Breakthrough Energy Ventures, CPP Investments, and Mitsubishi Heavy Industries. Fervo is proving that enhanced geothermal can compete at utility scale.Fervo Energy is currently building a geothermal power plant called Cape Station in Beaver County, Utah. It is going to be the largest next-generation geothermal development. It will deliver atleast 500 MW of clean energy. It will begin delivering electricity to the grid in 2026 and 100 MW by early ‘27. It is expected to be fully operational by 2028. They have power purchase agreements with Southern California Edison, Shell Energy, and several community government-run energy buyers. The full Cape Station development has received permitting approval to expand up to a very sizable 2 GW. The project will provide power to approximately 180,000 homes.What is the Technology?Advanced Geothermal Systems (AGSs) are deep, large, artificial closed loop circuits in which a working fluid is circulated and heated by sub-surface rocks through conductive heat transfer. They can theoretically be built anywhere. This makes them a strong candidate for future datacenter power.Think of it like a giant underground heat exchanger. The Earth’s interior is extremely hot. Fervo drills two horizontal wells deep underground into hot, hard rock. Cold water is pumped down one well, flows through natural and engineered fractures in the hot rock, absorbs that heat, and comes back up the other well as superheated fluid. That hot fluid spins a turbine to generate electricity. It’s the same basic principle as a coal or nuclear plant, just using Earth’s heat instead of burning fuel.What makes Fervo different from older geothermal is that it borrows techniques from the oil and gas industry, specifically horizontal drilling and fiber-optic sensing. Traditional geothermal only works in places with naturally occurring steam (like Iceland or Yellowstone). See the new enhanced geothermal illustration below:Fervo’s approach, called Enhanced Geothermal Systems (EGS), works almost anywhere with hot rocks, which is most of the planet. The fiber optics monitor the reservoir in real time, allowing engineers to optimize flow and catch problems early.Traditional geothermal is just one-off vertical wells. Fervo Energy can access vast quantities of subsurface heat by drilling many horizontal wells from a single pad with a compact footprint, dramatically reducing land disturbance. You can see the conceptual difference in the image below. This approach replicates the successful wellfield design used in the shale oil and gas revolution. However, unlike in shale, where operators typically target specific and sometimes narrow payzones. They can access progressively hotter rock the deeper they drill.See the difference between conventional and enhanced below:The Next Emerging Energy IndustryThe convergence of AI-driven power demand, falling EGS costs, a proven workforce from oil and gas, and fresh capital make this an obvious industry on the verge of a coming boom.Let’s start with the most conservative industry forecasts.McKinsey estimates that next-generation geothermal has a market potential of 85–110 GW in the U.S. alone by 2050, with roughly 40 GW by 2035, making it a major component of the future grid.Mordor Intelligence estimates the global installed geothermal base will grow at a 10.42% CAGR from 2026 to 2031, nearly doubling from 17.97 GW to 29.5 GW.MIT reported in March that over recent years, an influx of private capital and shifting energy and environmental policies have driven renewed interest in expanding development of geothermal energy. It is growing in the United States, Indonesia, New Zealand, and Turkey. Meta Platforms (META) backed enhanced geothermal company Sage Geosystems closed a $97 million Series B funding round this year, led by Ormat Technologies and Carbon Direct Capital.Text within this block will maintain its original spacing when publishedHuge Near-term Upside PotentialThe U.S. Geological Survey published an assessment in May 2025, titled “Enhanced Geothermal Systems Electric-Resource Assessment, Great Basin.” Its major finding is EGS resources in the Great Basin alone, covering Nevada and 5 adjoining states could generate up to 135 gigawatts of baseload power, enough to supply 10% of all current U.S. electricity demand!Reuters and the EIA all independently confirmed these figures. For context, geothermal currently supplies less than 1% of U.S. electricity. This would be a 10x leap just from one region. Fervo is focused on this area. Here is a map of it below:Text within this block will maintain its original spacing when publishedWait. It gets better.A peer-reviewed study published in Joule last June and analyzed by Princeton University finds even more promise. Joule Journal is one of the most respected scientific, peer-reviewed open-access journals published by Cell Press that covers Energy Research.Joule projects 250+ GW of enhanced geothermal deployment by 2050 if costs continue falling, potentially making it the third most significant clean energy technology behind only solar and wind.The study goes on to say installed EGS capacity indicate robust growth in the 2030s at low and baseline costs in all policy scenarios, with deployments being limited by build rate constraints in early periods not cost constraints. This early growth drives reductions in EGS costs, primarily in the less-mature wellfield, enabling additional deployments that reduce costs further in turn.They see a scenario of total installed EGS capacity in 2050 exceeding 250 GW in all scenarios and reaching more than 850 GW in the low EGS cost, zero-emissions policy scenario. 850 GW is more than the current entire US power grid! 850 GIGAWATT’s!!Such extensive deployment is enabled by substantial learning-driven cost reductions, with surface power plant costs reduced by roughly 50%.The reason it is so much more bullish is because the paper directly builds on and extends the earlier NREL Enhanced Geothermal Shot Analysis (2022), which projected 60 GW by 2050, and the DOE's Commercial Liftoff report targeting 90 GW by 2050. However, the Princeton paper explicitly models nationwide learning curves and cost feedback loops, which the earlier studies did not fully account for.The learning curve and feedback loops reflect learning-by-doing throughout the entire supply chain. Drilling crews get faster, rig designs improve, supply chains optimize, engineering firms accumulate institutional knowledge, and financing becomes cheaper as the technology de-risks.Opportunity In Old Oil and Gas Wells There are millions of abandoned oil and gas wells throughout the country. Over 500,000 of the disused wells are estimated to be suitable for producing geothermal energy, potentially generating up to 13 GW of clean energy. Drilling on The PeripheryFervo is teaming up with Baker Hughes (BKR), who will design and supply equipment for five Organic Rankine Cycle power plants at the Cape Station Phase II. Periphery investments around this coming geothermal push could be Devon Energy (DVN), who has already invested in Fervo and Schlumberger (SLB). Schlumberger (SLB) actually has a geothermal subsidiary called GeothermX and has been involved in 80% of the world’s geothermal projects. Overall, Ormat (ORA) continues to lead in commercial geothermal development, with 25 projects under development. They just recently announced a partnership with Schlumberger SLB. They were the first mover in enhanced geothermal in 2013 but it was just a very small 1.7 MW addition to an existing project. Fervo is the leader in EGS scale. Ormat has consistently grown revenue over recent years and the stock is up 62% over the last year. Text within this block will maintain its original spacing when publishedWhat About The Earthquake Concern?Fervo’s specific design significantly reduces the risk compared to older EGS methods. Let’s get into it and look at some studies that show very low risks. EGS involves injecting fluid into rock at pressure, which can cause small seismic events. A 2017 EGS project in Pohang, South Korea triggered a magnitude 5.5 earthquake and was shut down. This is the incident most critics point to.Stanford researchers who studied the Pohang failure concluded the operators ignored warning signs and injected fluid too close to a pre-existing fault under stress. It was a site selection and monitoring failure, not an inherent flaw in EGS itself.Fervo uses a different design. Fervo uses a closed-loop horizontal well system. Fluid is recirculated rather than injected at high pressure into open rock, which produces way smaller pressure changes than the Pohang design. This is the key architectural distinction.Lawrence Berkeley National Laboratory scientists told Power Magazine the method is “relatively safe” when pre-injection stress tests are performed to understand fault geometry first. The Geothermal Energy Association concluded: “EGS-induced seismicity need not pose a threat if site selection is carried out properly”More interestingly, a 2021 Caltech study found that geothermal production at California’s Coso field actually de-stressed the surrounding rock over 30 years, making the region LESS prone to large earthquakes. The opposite of the feared outcome.Perfect TimingFervo has said its projects can direct 24/7 carbon-free electricity not only to utilities, but to behind-the-meter partners including direct air capture, hydrogen production, and other energy-intensive industries.● Each project will consist of modular, parallel units of multiple 50 MW power plants.● Projects can be constructed in just 18 months, meeting data centers’ need for speed.This type of clean power and timeline is EXACTLY what the grid and hyperscalers need right nowAccording to a USGS report in the Fervo white paper, there is enough enhanced geothermal resource potential to support a 10 GW hyperscale data center cluster in at least 22 different U.S. states, not just the Great Basin.Fervo has 595,000 acres of lease positions across California, Colorado, Idaho, Nevada, New Mexico, Utah and Washington as of December 31, 2025. Fervo's lease positions are aligned with data center geographic preferences.Below is a map of current geothermal attractiveness and Fervo operations and leases from their white paper. Capital expenditures for Cape Station are budgeted at $6,000/kW, which is near the US DOE 2030 enhanced geothermal liftoff target of $5,000/kW. Fervo’s project is a decade ahead of the National Renewable Energy Laboratory Technology case. According to The Center on Global Energy Policy at Columbia University website, with help from the tax incentives in the Inflation Reduction Act, the project will be profitable from the start. Rystad Energy also expects Cape Station 1 to be profitable if it meets the right combination of lower discount rates and favorable power purchase agreements (PPA) with its offtakers.Text within this block will maintain its original spacing when publishedHow Do EGS Costs Compare?Electricity accounts for a large part of data center operational costs, making data centers very cost sensitive to the price of electricity. Enhanced geothermal offers an opportunity to reduce costs relative to other power options. It is already cost competitive with nuclear and traditional geothermal power. Current cost trajectories show that enhanced geothermal will be cost competitive with baseload natural gas before 2030. According to Lazard, enhanced geothermal will be half the cost of nuclear on proven geothermal resources. See below:Mckinsey thinks geothermal costs could drop to $45 to $65 per megawatt-hour for facilities over the next decade. Local microeconomics determine much of the project’s viability given variation in geothermal project elements (for example, temperature gradient) and competition like gas cost. The US Department of Energy sees similar costs.The US Department of Energy’s Enhanced Geothermal Shot targets EGS costs of $45/MWh by 2035 without tax credits aiming to make geothermal broadly competitive and even on par with utility-scale solar and wind with storage.These costs are possible because enhanced geothermal is adopting the newest breakthroughs in oil and gas drilling to drive costs down.These cost improvements will likely be driven by four factors: reduced drilling and hydraulic fracturing cost, improved well productivity, optimized exploration spend through better mapping and characterization of geological resources, and scaled supply chains for power plant equipment resulting in lower surface capital expenditures. Fervo has reduced drilling times by approximately 75% from 2022 to 2025 and lowering per-foot drilling costs by approximately 70% over the same period. You can see Fervo’s cost per foot and days spent drilling trend below from their SEC filing:They use data analytics and proprietary AI-based modeling to better predict operational conditions and accelerate design optimization.Comparing costs to solar and wind is somewhat misleading because solar and wind are not 24/7 like geothermal. When taking reliability into account, geothermal is more similar to nuclear or coal and gas-fired power plants.The table below shows how costs are decreasing even very early on substantiating the industry low-cost projections…Geothermal offers low operating costs and high capacity factors of >90%.Capacity factor measures how much of the time a power plant actually runs at full output. Geothermal's >90% capacity factor means it runs nearly 24/7/365. The Earth's heat doesn't stop at night or on cloudy days. This is critical because it eliminates the need for expensive battery storage or backup generation that solar or wind require.The other good news for geothermal is tax credits for utility scale geothermal was untouched by Trumps Big Beautiful Bill.The Data Center Cooling SituationData center chip cooling comes with benefits though they are a little nuanced. Traditional data center cooling uses electricity to cool the facility. Data center power density per rack is surging. The heat generated in the data center floor space has increased dramatically. This forced new AI builds into liquid cooling, which requires significantly more water. Even though the newest Nvidia chips are incredibly more water efficient geothermal has an overall edge. EGS can in theory use absorption chillers. Instead of electricity, it runs on heat as its energy input. Geothermal wells naturally produce hot water or steam as a byproduct of power generation. Rather than dumping that waste heat, it can be piped directly into an absorption chiller to cool the data center essentially for free. Think of it like using the exhaust heat from your car engine to run the air conditioning instead of drawing extra power from the engine. Fervo’s future development pipeline will only use dry cooling technology as stated on the website. The entire operation uses the deep underground saltwater and zero freshwater at the surface for a water-neutral solution. This also eliminates the cost of water treatment that must be in place for wet evaporative cooling towers for data centers. There are higher upfront capital costs for dry cooling but lower operational costs. In the extremely hot, dry states of the American West there is a slight power output efficiency penalty. Fervo has not disclosed any power output penalty data. My research through multiple academic sources found the power output penalty to be on average 3-6% power reduction annually. The high end can go to 10%. It is an acceptable tradeoff in water-stressed regions like the American West though. The good news for Cape Station is it is in Utah. Utah has cool night-time temperatures, so I see it staying in the 3-6% range. Geothermal doesn't automatically solve the chip-level cooling problem. EGS does offer potential for waste heat reuse from absorption chillers, offsetting electricity otherwise spent on cooling. That’s big. Air-cooled dry towers provide lower PUE (Power Usage Effectiveness), which is when waste heat offsets cooling loads so there is less total power is spent per unit of compute.Final ThoughtsAfter drilling down into the details I’m very confident in the long-term growth and investment opportunity of the EGS industry here in the US and globally. My research found Germany, Japan and Indonesia as countries with strong near-term strong growth potential also. I’m going to continue to keep my eye on the industry and any new IPO’s that might pop up. Be on the lookout for my next article, specifically on Fervo Energy coming in a few days or so.Full Disclosure: I am long ORA, DVN and plan on buying FRVO when it opens for tradingSources:Pathways to national-scale adoption of enhanced geothermal power through experience-driven cost reductions -Princeton Universityhttps://zero.lab.princeton.edu/wp-content/uploads/2025/06/Ricks-Jenkins-2025-Pathways-to-national-scale-adoption-of-enhanced-geothermal-Joule.pdfEnhanced Geothermal Systems Electric-Resource Assessment for the Great Basin, Southwestern United States -USGS.govUtilization of Oil and Gas Wells for Geothermal Applications Hakki Aydin, Seher Yüksel, Cihan Topuz Zorlu Enerji, Denizli, TurkiyeGeothermal's Rise a Hot Topic Worldwide, PowerMag April 1 ‘26https://www.energypolicy.columbia.edu/publications/the-potential-contribution-of-enhanced-geothermal-systems-to-future-power-supply-roundtable-summary/https://fervoenergy.com/wp-content/uploads/2025/07/Fervo_UIPA_The-Enhanced-Geothermal-Data-Center-Corridor_July-2025.pdfFervo’s SEC S-1 https://www.sec.gov/Archives/edgar/data/1853868/000162828026029515/fervoenergy-sx1a.htmhttps://www.rystadenergy.com/insights/fervo-energy-secures-dollar421-million-in-debt-boosting-its-ipo-prospects