As the world grapples with climate change, the need to adopt cleaner, renewable energy sources is pressing. Geothermal, with its vast potential and relatively low environmental impact, offers a viable path forward.

In Central Europe, the temperature increases by around 3°C per 100 metres into the ground. Geothermal energy harnesses this heat from the Earth’s core to generate electricity and provide heating solutions. It is a reliable and consistent power source, making it an ideal complement to other, more intermittent and weather-dependent renewable solutions, such as solar and wind.

Over half of Germany’s energy requirements are for heating or industrial purposes. But around 85% of this heat has so far been generated using fossil fuels such as oil, gas and coal. This is set to change. Experts estimate that 50% to 75% of the heating requirements in Germany could be covered by geothermal energy in the future.

In Germany, the transition from fossil fuels to renewable energy has been a significant policy focus. The country’s ambitious energiewende (energy transition) plan aims to reduce greenhouse gas (GHG) emissions, phase out nuclear energy and increase renewables. While wind and solar power have received much attention and investment, geothermal remains an under-utilised resource that could play a crucial role in achieving these goals.

Germany’s geothermal potential
Germany is geologically suited for geothermal energy production. The country sits on several geothermal hotspots, particularly in the Bavarian Molasse Basin and the Upper Rhine Graben. These regions offer high geothermal gradients, making them ideal for both deep and shallow geothermal projects.

In Geretsried, Bavaria, not far from Lake Starnberg, the ‘Eavor-Loop’ is a geothermal power plant that will supply the entire region with district heating in the medium term. The plant is a self-contained system that functions like a gigantic underground heat exchanger.

Two vertical boreholes are connected to 24 parallel horizontal boreholes at a depth of 4,500–5,000 metres, forming a circuit of 12 loops. Fluid circulates, is heated and feeds directly into the district heating network or, with the help of a power plant, converted into electricity. The liquid from which the heat has been extracted sinks back into the circulation system.

The process offers numerous advantages over conventional geothermal energy. In the latter, the heated water is brought to the Earth’s surface with the help of pumps and then fed back into the rock. In the Eavor-Loop case, however, the heated liquid flows upwards solely due to the temperature difference, requiring no further energy input, and reduces operating costs. As no fluids are extracted from layers of earth and pumped back into the closed system, the risk of seismic movements is non-existent.

The technology has been successfully tested in Canada since 2019; the project in Geretsried is the first commercial deployment. ING is part of a consortium of banks financing the project, directing finance to sustainable energy sources and further aligning the Bank with its goal to reduce the CO₂ emissions of its own loan book to net zero by 2050.

[Germany] sits on several geothermal hotspots, particularly in the Bavarian Molasse Basin and the Upper Rhine Graben, which offer high geothermal gradients.

Economic and environmental benefits
The economic benefits of geothermal energy are manifold. Initial investments in geothermal plants are substantial, but the long-term gains are considerable. Geothermal plants have low operational and maintenance costs compared to fossil fuel plants. Furthermore, they provide energy at a stable price, shielded from the volatility of global fossil fuel markets.

Environmentally, geothermal energy is a low-carbon solution. It produces minimal GHG emissions compared to coal, oil and natural gas. Another benefit is that geothermal energy is considered to be gentler on the landscape because the majority of the required pipeline systems are laid underground, and the surface can be renaturalised or used for other purposes once the drilling has been completed. This makes geothermal plants an attractive option for densely populated regions or areas with limited space for renewable energy installations.

However, challenges remain. High upfront costs and financial risks associated with drilling are significant barriers. The technology and expertise needed for geothermal development are still evolving, requiring further research and investment.

Government incentives, such as subsidies and tax breaks, can help mitigate these financial risks. Public-private partnerships are also essential in sharing costs and expertise, and continued investment in research and development will enhance technological capabilities and reduce costs over time.

The way forward
Geothermal energy is an untapped resource that could significantly contribute to Germany’s renewable energy portfolio. Its reliability, economic benefits and low environmental impact make it a viable alternative to fossil fuels.

The time is ripe for policymakers, industry leaders and the public to recognise and invest in geothermal energy, ensuring a sustainable and resilient energy future.

Society is transitioning to a low-carbon economy. So are our clients, and so is ING. We finance a lot of sustainable activities, but we still finance more that is not. You can see how we are progressing at ing.com/climate.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.

• Further reading: ‘The potential of geothermal energy in Europe’. In January, the European Parliament heard and adopted a resolution calling for a European strategy on geothermal energy. The resolution calls for mapping geothermal assets, launching an industrial alliance on geothermal energy, and the introduction of a harmonised insurance scheme to mitigate financial risk for the sector.
• Geothermal energy’s ability to make a positive contribution to the global energy mix has long been recognised. Unlike solar, it can be used to generate electricity at any time of the day or night. Unlike wind or wave power, its output is also constant. Around 88 countries worldwide are estimated to be using this renewable energy source currently.