Geothermal Energy: Germany and Nordic Geothermal Potential

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“Defoes joins the dots between Germany’s deep‑geothermal roadmaps and the Nordics’ quietly scaled heat‑pump and district‑heat fleets — arguing that beneath Europe’s gas‑centric heating mix lies a sizeable, still‑undervalued geothermal resource that could shift both power and heat decarbonisation trajectories over the next two decades.”

In continental Europe, geothermal has long been treated as a curiosity next to the dominant wind‑solar‑gas triangle. Germany and the Nordic countries show why that view is starting to look dated. Germany is building a policy and project pipeline around deep geothermal heat and power just as it tries to cut gas dependence, while the Nordics are quietly integrating geothermal and ground‑source heat into some of the world’s most decarbonised energy systems. From a Defoes standpoint, the bullish stance is that these regions collectively illustrate how a once‑niche resource can evolve into a meaningful, infrastructure‑grade component of Europe’s power and heat transition.

Germany: from roadmap to project pipeline

Germany’s geothermal endowment is larger than its installed base suggests. A joint roadmap from Fraunhofer and Helmholtz research centres estimates that deep geothermal could supply up to a quarter of Germany’s heat demand over the long term if resource, regulatory and financing constraints are addressed. The German Research Centre for Geosciences (GFZ) notes economically exploitable resources in several basins — including the Molasse, Upper Rhine Graben and North German Basin — with temperatures suitable for district heating and, in some cases, power generation. Despite this, geothermal currently contributes well under 1% of final energy, reflecting a historic focus on gas and, more recently, hydrogen as the primary vectors for heat‑transition debates.

That balance is shifting. A 2026 legal and policy analysis points out that the federal government’s target to decarbonise 50% of heat in buildings by 2030, combined with the push to phase out fossil‑fuel boilers, has triggered renewed interest in deep geothermal as a baseload heat source for cities. States such as Bavaria and Baden‑Württemberg are expanding support schemes and streamlining permitting, while municipal utilities in Munich and elsewhere have announced plans to build multiple new geothermal district‑heating plants over the coming decade. In parallel, a growing number of projects are exploring medium‑depth geothermal for industrial clusters, using 2–4 kilometre wells to supply process heat in the 80–150°C range. The investment signal is clear: the policy framework is starting to treat geothermal as critical heat infrastructure rather than an experimental add‑on.

Nordic countries: mature heat systems, emerging geothermal layers

The Nordics already have some of the cleanest power and heat systems in the world, with around two‑thirds of total energy consumption met from renewables across the region. In this context, geothermal’s role is more incremental but still structurally important, particularly on the heating side. Iceland is the outlier, using geothermal to supply roughly a quarter of its electricity and about 90% of space heating through a network of wells and district‑heating systems, demonstrating what full‑spectrum exploitation of high‑enthalpy resources looks like. For investors, Iceland shows the upper bound: geothermal as a dominant national heat and power source with utility‑scale assets and municipal infrastructure underpinned by long‑lived resources.

Elsewhere in the Nordics, the resource is different but the direction is similar. A regional review of geothermal energy use notes that Finland, Sweden, Norway and Denmark are integrating shallow and medium‑depth geothermal into district‑heating networks and building‑scale systems, often via ground‑source heat pumps tied into increasingly electrified, low‑carbon grids. In Finland, for example, deep borehole projects near Helsinki are testing 6‑kilometre‑plus wells to supply heat directly into urban networks, while Sweden has built one of the world’s largest ground‑source heat‑pump markets, with more than a million installed units. NREL’s work on Arctic and Nordic resilience highlights geothermal — in both deep and shallow forms — as a way to provide stable, local heat and power in cold‑climate communities facing climate‑driven variability in hydro and changing heating loads. The common thread is that geothermal is being woven into established district‑heating architectures and electrification strategies rather than built from scratch.

Untapped potential, converging drivers

Globally, the IEA’s “Future of Geothermal” analysis, powered by Project InnerSpace data, concludes that modern geothermal technologies could technically meet a significant share of future power and heat demand, with Europe identified as one of the regions where non‑volcanic resources are most underutilised relative to population and GDP. For Germany and the Nordics, the combination of reliable subsurface data, mature drilling industries and strong policy commitments to heat decarbonisation gives them a structural advantage in unlocking that potential. Germany’s deep‑geothermal roadmap explicitly calls for scaling to hundreds of projects by 2040, backed by exploration risk‑sharing and updated mining and water laws. Nordic strategies focus on expanding geothermal’s role in heat networks and industrial clusters, leveraging existing district‑heating companies and strong municipal balance sheets.

The bear case is not trivial. German projects face exploration risk, high upfront capex and public sensitivity around induced seismicity, particularly after past incidents in the Upper Rhine Graben. Nordic developments must compete with already low‑carbon alternatives such as waste‑to‑energy, biomass and large‑scale heat pumps, and in several markets the policy and pricing frameworks for heat do not yet fully reward geothermal’s resilience and local‑resource attributes. These constraints mean geothermal will not displace other technologies wholesale.

Even so, the structural drivers are hard to ignore. Europe’s push to reduce gas dependence, the need for firm low‑carbon heat in dense urban centres, and the search for long‑duration, infrastructure‑grade assets all point in the same direction. From a Defoes perspective, the bullish stance is that Germany and the Nordics are likely to be among the first European regions where geothermal moves from underexploited to systemically planned — not as a single “silver bullet”, but as a portfolio of deep and shallow projects that quietly reshapes the heat and power mix over the next two decades.