Policy Memo: Executive Action Can Unlock American Geothermal Resources Through Risk Mitigation

TO: The Honorable Chris Wright, Secretary of Energy, U.S. Department of Energy (DOE)
FROM: Kirian Mischke-Reeds, Energy Security Policy Analyst

Introduction

 

Next-generation geothermal energy represents the future of American energy dominance, providing reliable power to fuel an AI-led innovation boom, create rural jobs, and strengthen United States energy security, all while leveraging the existing expertise of the fossil fuel industry. The DOE’s Office of Energy Dominance Financing Liftoff Report projects over 90 GW of geothermal deployment by 2050, which could rise to over 300 GW with technological breakthroughs.[i] Yet development lags because capital markets are hesitant to finance the riskiest stage — resource exploration and confirmation — blocking projects before they can start.[ii]

This memo proposes a two-track approach:

(1) direct the Loan Programs Office (LPO) to pilot a Geothermal Appraisal Guarantee that backstops milestone-based exploration via existing loan authority; and

(2) seek permanent exploration risk insurance authority via statute.

 

The Problem: Early-Stage Risk Strands a Strategic Resource

 

AI-led load growth will increase U.S. electricity demand 25% from 2023 levels by 2030, with nearly half of growth to come from data centers.[iii] Next-generation geothermal offers a strategic and largely untapped solution: reliable 24/7 power, good-paying jobs leveraging existing oil and gas expertise, and energy security with minimal reliance on foreign critical minerals.[iv] Hyperscalers Meta and Google have already contracted nearly 300MW of geothermal, signaling strong market demand.[v]

Despite impressive cost declines, exploratory wells require multi-million-dollar outlays before a resource can be proven bankable.[vi] Drilling and wellfield development commonly account for ~30–50% of capital costs, thereby concentrating risk where failure is most expensive.[vii] The industry has historically had low drilling success rates: one in three conventional geothermal wells failed to validate a resource.[viii] While there is optimism that novel technologies can improve this rate for next-generation geothermal systems , high failure rates nevertheless threaten the buildout of this nascent industry.

With an average cost of capital of around 15%, drilling losses can quickly become deadly.[ix] While oil and gas companies manage similar risks through portfolio diversification, geothermal developers are typically smaller firms that cannot absorb exploration failures.

Despite these challenges, America has the heat and the hardware. What’s missing is a way to absorb a defined share of early drilling risk so private capital can finance the wells that prove and unlock, bankable, 24/7 domestic power at scale.

 

The Solution: Pilot Now, Legislate a Permanent Facility

 

Track 1 — Geothermal Appraisal Guarantee Pilot

LPO should launch a pilot program that guarantees loans for early drilling, sized to support 15-20 exploration wells over three years. Given an average exploration cost of $5-8 million per well, this would leverage LPO’s guarantee authority to unlock $75-160 million in private investment into early-stage projects[x].To ensure pilot projects move at the speed of the market, LPO should launch a dedicated, fast-track process for these smaller, standardized guarantee applications, prioritizing projects eligible for Categorical Exclusions (CX) to avoid triggering multi-year NEPA reviews.

Loans would be released in phases as projects meet verifiable milestones, moving from administrative benchmarks (e.g., permitting), to operational targets (e.g., reaching planned drilling depths on time and budget), and finally to subsurface proof points (e.g., confirmation of target temperatures and flow rates). Developers and lenders would still carry some risk, ensuring fiscal discipline, but LPO’s backing would make private financing viable for the initial “wildcat” phase.

Assuming a historically average success rate, a 15-well pilot could be expected to confirm at least one to two viable resource zones.[1]  While a single well does not constitute a commercial field, a confirmed discovery is the "green light" required for private capital to take over. These confirmed discoveries would de-risk the geology sufficiently to mobilize private financing for step-out (appraisal) drilling and reservoir delineation. Once supported by private follow-on investment, confirmed zones would have the geologic capacity to support hundreds of megawatts of 24/7 clean power — enough to power hundreds of thousands of homes and support critical AI infrastructure.

At the same time, the DOE and the United States Geological Service (USGS) should set up a shared data standard and require, as a condition of the guarantee, that developers contribute well data to the national repository, following a confidential exclusivity period. This model allows firms to fully capitalize on their findings while ensuring the long-term growth and de-risking of the entire domestic geothermal industry.

To demonstrate efficacy, LPO should publish regular updates on number of wells financed and private dollars mobilized. Evidence from the pilot would justify a permanent support program and highlight the limits of LPO’s existing authority, which can guarantee loans but not fully insure exploration.

 

Track 2 — Geothermal Exploration Risk Insurance Fund

Congress should authorize a Geothermal Exploration Risk Insurance (GERI) Fund allowing the DOE to issue exploration risk insurance with risk-based premiums. Public risk-mitigation facilities in France, Germany, and Turkey demonstrate the presence of international precedents.[xi] Norway implemented a similar exploration refund scheme for natural gas, which led to a 66% rise in exploration drilling between 2005 and 2015.[xii]

GERI would insure up to 75% of eligible exploration costs, with developers required to co-invest at least 25% of their own capital. This significant 'skin-in-the-game' requirement ensures fiscal discipline and incentivizes rigorous project selection. Premiums would vary by play, depth, and uncertainty. Claims are paid only when pre-agreed thresholds, such as temperature, flow, and injectivity, are not met.

Unlike a commercial insurer, GERI’s primary mandate is catalytic. It is designed to absorb the high initial "learning curve" costs of the industry to protect energy security. While the fund requires appropriations to cover early losses, these investments purchase the data and drilling experience required to lower the industry's failure rate over time. As program success expands exploration, drilling costs and risks will decrease. Early enhanced geothermal system (EGS)[2] pioneer Fervo Energy indicates that drilling costs are falling faster than expected, demonstrating the power of learning curves in practice.[xiii]

The goal is not a permanent government agency, but a temporary bridge. GERI should include automatic sunset reviews every five years. Phase-out is triggered not by an arbitrary date, but when data proves that failure rates have dropped sufficiently for private capital to finance exploration without government backing.

The financial mechanisms proposed here are essential to de-risking geothermal exploration. To fully unlock the industry's potential, however, these financing solutions must be paired with a parallel effort to streamline and accelerate the federal and state permitting process. [xiv]

 

Conclusion

 

Mr. Secretary, you have the authority to unlock American geothermal resources without waiting for Congress. A targeted pilot would provide strong evidence for the creation of a permanent exploration risk facility, converting today’s stranded geology into bankable, 24/7 domestic power while mobilizing private capital and protecting taxpayers. This is a pragmatic, finance-first path to energy security, resilient grids, and durable jobs built on American drilling.

The heat beneath our feet is America's inheritance. With your signature, we can start collecting.

 

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