Emerging Resources - Geothermal

Updated June 2025

What is Geothermal

Geothermal is a renewable energy resource found in rocks and fluids deep beneath the Earth’s surface that can be harnessed for heating and electricity generation. The Earth’s thermal energy comes from two sources: residual heat from the Earth’s formation and heat from the decay of radioactive elements, mostly uranium, thorium, and potassium. Radioactive decay is the main source of heat in the Earth’s crust. 

Geothermal energy is produced and used based on the geothermal system and the quality of the resource in place. “A geothermal system is made up of three main elements: a heat source, a reservoir, and a fluid, which is the carrier that transfers the heat.” (Dickson and Fanelli 2003)¹. Some geothermal systems are endowed with naturally occurring hot aquifers (a hydrothermal system), whereas other systems create artificial reservoirs by injecting water into hot, dry rock to extract heat (enhanced geothermal system). Geothermal can be categorized into high-, medium-, or low-temperature resources. Medium- and high temperature resources are more suitable for power generation, whereas low temperature resources are suitable for heating and other applications. Alberta geology supports mostly low and medium temperatures ranging from 80°C to 170°C.

Some geothermal systems harness the Earth’s heat from a few metres underground, while others require drilling deep wells. Based on the geothermal system and technology, there are three possible applications: electricity generation, geothermal heat pumps, and direct-use applications (e.g., industrial or commercial uses of heat).

Regulatory Framework for Geothermal Development

The Government of Alberta (GoA) enacted the Geothermal Resource Development Act (GRDA) in December 2021. The GRDA establishes a regulatory framework administered by the Alberta Energy Regulator (AER) for the responsible development of geothermal resources and related wells and facilities in Alberta. The GRDA covers deep geothermal resources occurring below the base of groundwater protection, while shallow geo-exchanges remain regulated by Alberta Environment and Protected Areas.

In June and August 2022, the GoA released the Geothermal Resource Development Rules (GRDR), and the AER released Directive 089: Geothermal Resource Development. Effective August 15, 2022, the GRDR and effective February 7, 2025, the updated Directive 089 set out the conditions and requirements for industry to develop geothermal resources from project initiation to closure, including new provisions for converting oil and gas wells to geothermal wells and extending the Licensee Management Program to include geothermal developments.

Alberta has a competitive advantage over many other geothermal producers globally. Alberta has access to innovative drilling technologies, with a highly developed oil and gas skill set and a robust subsurface data set essential to a successful geothermal industry. There is a potential opportunity to repurpose Alberta’s existing wells; geothermal wells can be located alongside oil and gas wells.

Alberta and Federal Incentive Programs Relating to Geothermal

The provincial and federal governments have geothermal incentive programs to promote geothermal energy development. A few of these programs are listed below:

• Alberta Innovates (Renewable and Alternative Energy Program): Provides funding and support for projects developing and commercializing clean and sustainable energy technologies. Project funding can range from 25% to 50% of the total project costs and typically does not exceed $2 million per project. 
• Emissions Reduction Alberta (Technology Funding Program): Provided financial support and incentives to promote clean energy technologies, including geothermal in Alberta.  
• Alberta Indigenous Opportunities Corporation (AIOC): The organization provides financial support for Indigenous-led renewable energy projects and capacity building. An AIOC loan guarantee reduces the risks to lenders if an investor fails to meet its commitment to repay.
• Smart Renewable and Electricity Pathways Program: A federal government program focused on advancing renewable energy and smart grid technologies to modernize Canada's electricity systems, enhance energy efficiency, and reduce greenhouse gas emissions. 
• Investing in Canada Infrastructure Program for green infrastructure: A federal government program that funds environmentally sustainable projects, such as geothermal. 

Production in 2024 and Base Case and Forecast

In 2024, an estimated 7.5 gigawatt-hour (GWh) of geothermal electricity was generated in Alberta. This represents a decline from the previous year, primarily due to technical issues and financial constraints affecting the profitability and operational efficiency of geothermal projects. We considered higher risk factors for the existing projects due to their status. Looking ahead, we anticipate a compound annual growth rate of 26% in geothermal electricity generation throughout the base case forecast period, with production expected to reach 76.2 GWh by 2034 (see Figure S9.3). The production forecast involves weighing the likelihood of projects meeting their operational date and production capacity. Compared with last year’s forecast, we downgraded our final year projection by 35%, reflecting significant development risks and the currently unfavourable economics of geothermal projects.

Figure S9.3 shows the geothermal electricity generation base case and tariff case forecasts.

One-Year Tariff Scenario (Tariff Case)

Under the tariff case, the impacts on the geothermal energy sector lead to a short-term decline in power generation—17% in 2026, 6% in 2027, and a significant 45% in 2028 compared with the base case. These reductions stem from increased project risks and potential delays in development timelines, resulting in lower production capacity. In the long term, while power generation stabilizes, initial setbacks may slow growth overall and the expansion of geothermal infrastructure. By 2034, production under the tariff case remains 3% below the base case. 

Projects

Several companies in Alberta have announced geothermal projects:

• No. 1 Geothermal Limited Partnership owns the Alberta No. 1 geothermal energy project developed by Terrapin Geothermics. The proposed project includes an electricity power plant, a district heating system, and several geothermal wells at a depth of four kilometres. When completed, the project capacity will be 10 MW of clean baseload electricity and 985 terajoules per year of heat.
• The Novus Earth Latitude 53 project is a 4 km deep closed-loop system that proposes to deliver geothermal energy for direct-use heat and electricity generation in Hinton, Alberta. When completed, the project capacity will be 3.1 MW of electricity.
• E2E Energy Solutions aims to power and heat the town of Rainbow Lake entirely with geothermal renewable energy by 2028. This project, which will generate 50-100 MW of power, represents a significant step towards sustainable energy solutions.

Numerous companies in Alberta are pioneering breakthrough technologies. For example, Algar Geothermal is developing a more efficient geothermal technology that better retains heat and reduces heat loss. Additionally, the Wonder Valley project, a partnership between O’Leary Ventures and the Municipal District of Greenview, aims to build off-grid natural gas and geothermal power infrastructure to support the world’s largest AI data centre industrial park.

Alberta's Shallow and Deep Geothermal Potential

Alberta has considerable geothermal energy potential, with resources suitable for heating and electricity generation. Geothermal resources are classified as shallow or deep, depending on their temperature and depth. Although deeper resources tend to be hotter, this relationship varies based on local geological conditions. Traditional geothermal systems target naturally porous and permeable rock formations where hot water can flow into a wellbore and to the surface. Newer geothermal systems, such as closed-loop, rely on heat transfer from the rocks to a working fluid through conduction. Enhanced systems use artificial stimulation to extract heat from dry rock. 

Shallow geothermal sources have temperatures below 90°C and are commonly used for direct heating in homes, greenhouses, aquaculture, and industry. Geothermal heat pump systems typically function below 45°C and use the ground to store and retrieve heat. A temperature range of 45°C to 90°C is suitable for direct heat use in district energy networks, agricultural operations, and other medium-temperature heating needs. Deep geothermal systems target temperatures above 90°C, typically at depths of 2 to 4 kilometres (see the image below). These systems generate electricity using special power plants or provide high-temperature heat for industrial processes.  In areas of northwestern Alberta  , and in some parts of west-central Alberta, the underground temperature changes more with depth and usable heat may be accessible at shallower depths.

The Alberta Geological Survey (AGS) has published the Geothermal Atlas of Alberta to support geothermal resource evaluation and mapping. The atlas is the first in Canada province-wide, formation-scale geothermal favourability mapping application. This first edition is now publicly available on the AGS website. The atlas uses data from Alberta’s extensive oil and gas drilling history to assess three key geological parameters: subsurface temperature, the presence of fluids, and fluid storage capacity. The atlas highlights three geological units with promising deep geothermal potential (see below). For more information on the methodology of resource estimates, see the technical documentation in the Geothermal Atlas of Alberta.

• The Leduc Formation is estimated to contain about 4.06 trillion gigajoules (GJ) of heat in place (HIP), 66 gigawatts (GW) of gross thermal power, and 8.97 GW of gross electrical power capacity. 
• The Swan Hills and Slave Point Formations combined are estimated to hold 1.86 trillion GJ of HIP, 36.82 GW of gross thermal power, and 7.0 GW of gross electrical power capacity. 
• The Granite Wash is estimated to contain 522 billion GJ of HIP, 9.45 GW of gross thermal power, and 1.36 GW of gross electrical power capacity. 

Even deeper, the Precambrian basement rock, which is hot, dry, and dense, also has potential for geothermal energy. In parts of western Alberta, modelled temperatures at the top of the basement exceed 180°C (shown in the map below), where electricity generation could be more efficient. These conditions make the basement a promising target for advanced geothermal technologies (e.g., closed-loop systems and enhanced geothermal systems). While resource estimation for the Precambrian basement rock requires a different approach than that used for sedimentary formations, the AGS is assessing the viability of the Precambrian rock for geothermal development. 

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Limitations or Risks to the Outlook

Geothermal energy is not as economically viable as wind or solar. The pace of geothermal commercialization in Alberta could slow because of competition from lower-cost, lower-risk renewable alternatives. According to the latest International Energy Agency (IEA) report published in December 2024, geothermal energy faces significant development risks. However, up to 80% of the investment required in a geothermal project involves capacity and skills that available in the oil and gas industry. 

 ^{1Dickson, Mary H., and Mario Fanelli. 2003. Geothermal energy: utilization and technology. United Nations Educational, Scientific and Cultural Organization.}