This week, the Department of Energy (DOE) released a notice of funding opportunity (NOFO) announcing the the largest single tranche of funding for enhanced geothermal energy systems in the history of the sector: $171.5 million in grant capital to support research, development, and, most importantly, early commercial demonstration of enhanced and conventional geothermal systems. This announcement could shape the future of the industry. It is the right amount of money applied to the right set of measures to rapidly commercialize a mature technology with the potential to quickly unlock gigawatts of clean, firm power—and to cement the United States as the global leader in this industry. This funding opportunity is a huge win for anyone seeking to grow our clean, firm energy supply fast.

However, there are questions regarding how DOE identified and released these funds that introduce potential risks. It is possible that some of the funding defies congressional intent, risking to destabilize the unique, long-term bipartisan support that geothermal energy has enjoyed. The funding opportunity also limits itself to certain types of geothermal systems, excluding certain nascent geothermal technologies that are demonstrating promise in the field today. But, overall, this funding is a welcome windfall for an industry that is both ready for it and needs it right now.

Second fiddle no more: Geothermal funding begins to match ambition

Geothermal technologies have historically received a fraction of the support that other clean energy technologies have. The budget of the Office of Geothermal (OG, formerly the Geothermal Technologies Office, or GTO), grew slowly from about $40 million in 2014 to $120 million last year and, until the passage of the Infrastructure Investment and Jobs Act (IIJA), this funding was concentrated entirely in research & development. IIJA supported demonstration funding for the first time, but, as the graph that I built for the Pathways to Commercial Liftoff: Next-Generation Geothermal Power report shows, the $84 million it received represented hardly 0.04 percent of the demonstration funding allocated to DOE. With this announcement, DOE more than doubles that sum, providing geothermal energy projects with a stronger pathway to commercialization.

To be sure, even that IIJA investment has made a huge impact. Fervo’s 500 MW Cape Station project, which received $24 million of IIJA support in 2023, is now among the gold-standard of enhanced geothermal energy projects worldwide. DOE’s investment helped Fervo demonstrate the modular, repeatable nature of Enhanced Geothermal (EGS) deployment; success in that area allowed the company to crowd in over $1 billion in equity on its way to an earlier-than-scheduled commercialization date (COD) later this year (a remarkable three-year turnaround from award to power). Mazama’s Newberry Project, which also received IIJA funds, successfully executed a hydraulic fracture of “superhot” rock, a feat never before accomplished and a major reason for increased venture and equity investment into superhot geothermal companies.

Despite a recent and somewhat dramatic increase in private-sector geothermal investment, concessionary demonstration capital is desperately needed to grow the pipeline of projects that could rapidly supply electricity for demand growth. Right now, nearly 90 percent of the capital raised for geothermal has gone to exactly one project: Fervo’s Cape Station.

Admitting this is not a knock on the industry nor on Fervo; rather, it reflects how capital reacts to risk. Commercial-scale EGS projects are built and scaled through the repeated drilling and hydraulic fracturing of dozens of wells across a given plot of land. The first wells are both much more expensive to drill and more risky than subsequent wells, simply because the developers must learn how the subsurface geology responds to their engineering processes before they can build a repeatable workflow and begin drilling for heat in a “rinse-and-repeat” manner. Those first wells may also demonstrate that a project may not be as productive as initially scoped, leaving infrastructure investors exposed to project risks that they’re generally unwilling to take. The combination of risk and cost leaves many good projects searching far too long for their first capital investments to prove the viability of their fields. It’s telling that, aside from Fervo, most of the investment into geothermal energy technologies since 2021 has been through equity, rather than as project debt.

DOE’s new funding aims to address that exact gap. Topic Area 1 of the DOE’s Notice of Funding Opportunities (NOFO) commits up to $100 million to support developers performing early commercial-scale drilling (called “field tests” in the NOFO) at a “variety of geologic environments.” This will fund a validation suite that, as shown in the Liftoff Report, will provide the critical class of project finance and infrastructure investors with the data they need to trust that EGS projects can be deployed repeatedly—driving a virtuous cycle where project risks fall and developers secure project finance earlier in the process. With this funding, DOE is taking the plunge of investing in derisking the geothermal project pipeline. Success in this area, as stated in Liftoff analyses, could unlock up to $20–25 billion in new investment and 5–10 GW of new clean, firm power within five years. It is a good investment across the board.

The origins of this funding create uncertainties

While it is no question that the funding is valuable, there are questions surrounding a portion of the funding’s validity. The NOFO itself states that funding was derived from appropriations made in FY 2023, 2024, and 2025. However, the sources of funds are unspecified. There are no unspent Congressionally-appropriated funds to geothermal technologies that meet that criteria. It is likely that these funds were reprogrammed from another purpose, and may face Congressional intent concerns.

Senior Democrats who have been supportive of geothermal have publicly expressed their skepticism about the NOFO’s lack of a specified funding source. Senator Patty Murray (D-WA), Vice-Chair of the Senate Appropriations Committee, and Rep. Marcy Kaptur (D-OH), the ranking member of the House Appropriations Subcommittee on Energy and Water Development, released a joint statement calling on the Government Accountability Office to “determine whether the Department of Energy’s spend plan violates critical appropriations laws.” Their statement notes that, while the DOE’s NOFO makes $146 million available, Congress had only appropriated $118 million in FY2025. While it is clear that the geothermal industry would benefit substantially from access to these funds, the lack of clarity around their origin creates challenges for the important bipartisan nature of the federal government’s support for geothermal energy.

Congressional appropriators who remain supportive of the technology may now be expressing concerns about the funding because of the precedent it sets in allowing the Executive branch to override Congressional direction. There is a risk that this action could make geothermal energy an unwitting flash point in a much wider battle about the separation of powers between the branches of government, as well as the executive branch’s power of the purse.

DOE implicitly acknowledges this uncertainty through the fast-paced NOFO timeline. DOE wants application submissions in two months, award selections two months after that, and contract negotiations concluded two months after that. The process would be done by October. This is far faster than most DOE funding processes. If DOE can meet this ambitious timeline, money will be in the hands of companies faster, and there will be new clean, firm energy projects breaking ground during an administration otherwise quite skeptical of clean energy. But, once money has left the building, Congressional Democrats may also find it more politically challenging to push for accountability over appropriations.

If achieved, this timeline would be a remarkable feat, one that industry has been clamoring for for years. There are some reasons to question how it will be met: The recent reorganization of DOE, which moved the Geothermal Office to a new vertical, required a restructuring of their contracting authority, which takes time. Furthermore, many of the contract officials and staff needed to select and negotiate projects have left the DOE through deferred resignations and early retirements. However, there are also reasons to imagine the timeline is plausible: For example, the Loan Programs Office continues to close large loans despite its diminished staff.

Promising technologies are left out—for now

Another unusual aspect of this NOFO is that it takes the trouble to describe a comprehensive set of topic areas that capture the wide range of technologies being developed today for geothermal power production, but it then states that most of those topic areas are currently closed for funding. DOE is signaling a preference for EGS and conventional systems over alternative advanced geothermal technologies, such as closed-loop systems, by focusing only on projects that have already demonstrated the technical and economic potential for scale. It remains unclear if DOE intends to bring other geothermal technologies into the fold of the NOFO in the near future. However, the details in the descriptions of the closed-loop and superhot topic areas suggests that DOE intends to revisit them in the future, and by including them in this NOFO, that process can happen quickly.

Closed-loop technologies are making significant headway, and to this point, their developers have not received any DOE funding. Eavor has recently demonstrated that it can successfully generate power from their first-of-a-kind closed-loop project in Bavaria, Germany; XGS has also demonstrated successful long-term operations from a closed-loop project in California. DOE support will enable these promising technologies to move faster, iterate, and scale—which will be immensely valuable for the industry as a whole. EGS technologies aren’t a reasonable-cost choice in many geologic environments, such as heavily fractured bedrock. Closed-loop systems may be the preferred choice for those terrains; as such, we look forward to DOE opening those topic areas soon.

The NOFO is a still a very useful opportunity for the geothermal industry

At a time when many states across the country are concerned about adding clean, firm energy supply to their grids to support grid reliability and stabilize electricity markets for ratepayers and large load customers, this NOFO is a demonstration of the DOE’s commitment to derisking a promising new clean, firm energy resource and supporting its widespread deployment. While there remain uncertainties around the appropriations, DOE’s strategy of using its funding to target early-stage commercial drilling and “field tests” of the resources is precisely what the geothermal industry needs to transition from equity-funded pilots to project debt-supported infrastructure projects. Developers and investors alike can relish in the rare opportunity to rapidly grow the pipeline and the industry.

Note: This article has been updated to better reflect the real and perceived risks associated with the Department of Energy’s geothermal NOFO.