Bring Your Own Power: Why geothermal energy may be the answer to data center energy independence

The race to build AI data centers has hit an unexpected wall - and it's not about chips, talent, or cooling technology. It's about power. Across major tech hubs, data center developers face a sobering reality: grid interconnection queues stretching beyond five years, leaving valuable real estate in limbo.

What if data centers could colocate their energy sources, reducing dependence on overloaded grids and accelerating deployment? While solar, wind, and nuclear solutions offer paths to energy independence, geothermal energy presents a particularly compelling option. While others wait in interconnection queues, forward-thinking developers are discovering how geothermal energy can help deliver energy independence, giving them greater flexibility to build in more locations and on faster timelines while maintaining their sustainability commitments.

The power crisis holding back data center development

The rapid growth of data centers in major markets like Northern Virginia, Silicon Valley, and Dallas is straining power grids, resulting in long interconnection queues that can delay new power generation projects by months or even years. These backlogs drive up costs, create uncertainty for developers, and risk hindering data center expansion and the transition to alternative energy sources.

The consequences of these grid constraints extend beyond mere delays. In Virginia's Loudoun County, a key data center hub, Dominion Energy's 2022 moratorium on new connections forced developers to pause or relocate planned projects¹. Berkeley Lab reports that the typical duration from interconnection request to commercial operation has increased from less than two years for projects built between 2000 and 2007 to over four years for those built between 2018 and 2023, with a median of five years for projects built in 2023².

Berkeley Lab’s December 2024 report states that data centers consumed about 4.4% of total U.S. electricity in 2023 and are expected to consume approximately 6.7 to 12% of total U.S. electricity by 2028. The report indicates that total data center electricity usage climbed from 58 TWh in 2014 to 176 TWh in 2023 and estimates an increase between 325 to 580 TWh by 2028³.

Total data center electricity use from 2014 to 2028

Source: Lawrence Berkeley National Laboratory

In high-demand regions, grid capacity bottlenecks are capping growth in the locations best suited for data centers. The financial toll of these delays is mounting—extended project timelines inflate labor, financing, and materials costs, while postponing revenue generation and market entry. Missing a market window can allow competitors to secure customers and establish dominance, compounding the long-term costs for developers.

Geothermal BYOP (Bring Your Own Power): A Competitive Solution to Grid Constraints

When it comes to powering data centers independently, geothermal energy offers unique advantages over other "bring your own power" options. Here's why:

Reliability without compromise

Unlike solar and wind, geothermal energy delivers 24/7 baseload power without expensive storage systems. Small Modular Reactors (SMRs) offer safety advantages over traditional nuclear plants but still face challenges with fuel logistics and waste management⁴ costs.

Breaking geographic and speed barriers

Traditional views of geothermal energy as location-restricted are outdated. In addition to traditional hot rock geothermal, new technologies coming from the oil and gas industry are enabling geothermal energy to be sourced from many sedimentary basins that are much more broadly available globally. Hot Sedimentary Aquifer (HSA) technology has already expanded potential sites beyond volcanic regions. Enhanced Geothermal Systems (EGS) go further, making geothermal theoretically possible in more places across the world using proven oil and gas drilling techniques.

EGS differs from traditional hot rock geothermal systems in that it involves artificially enhancing permeability in deep rock formations to create an engineered reservoir. In contrast, hot rock systems rely on naturally occurring permeability and high temperatures to generate geothermal energy, which restricts them to specific geological regions. However, it is important to note that EGS is not universally applicable, as some locations may still lack the necessary geological conditions for effective deployment.

How Enhanced Geothermal Systems significantly expands the geographical possibilities of geothermal energy Source: U.S. Department of Energy Geothermal Technologies Office

This geographic flexibility creates powerful advantages for data center developers:

• Rapid deployment compared to traditional power infrastructure

• Capacity that can scale alongside data center growth

• Reduced upfront financial risk through phased development

• Faster time to power generation compared to 5-10 year grid connection queues

The economics of energy independence

Geothermal's true value emerges when comparing total system costs:

• LCOE between $64-106 per MWh beats U.S. nuclear ($142-222 per MWh)⁵ and competes with fossil fuels

• Low operating costs ($0.01-0.03 per kWh)⁶ and high capacity factors (~90%)⁷ offset upfront investments ($3,000-6,100 per kW)⁸

• Eliminates costly storage systems needed for some other renewable options

Strategic advantages of geothermal

By bringing their own geothermal power, data center developers can:

• Prioritize customer proximity over grid availability

• Skip lengthy interconnection queues

• Enhance power reliability across a broader range of locations

Hybrid Approaches: Maximizing Reliability and Efficiency

While geothermal provides excellent baseload power, hybrid approaches can further optimize data center energy systems. Locations with access to both geothermal resources and complementary energy sources offer compelling advantages:

Geothermal + Solar + Energy Storage

Solar power, combined with battery storage, can provide short-term backup for critical loads during maintenance downtimes, particularly in regions with abundant sunlight. Solar can also directly power cooling infrastructure (e.g., chillers or fans) during daylight hours, easing the load on geothermal. This combination leverages solar's decreasing costs while relying on geothermal as a stable, dispatchable backbone.

While battery storage helps smooth energy fluctuations, its duration is typically limited (e.g., 2–4 hours), making it best suited for short-term backup and peak load management rather than extended outages. In some cases, thermal energy storage (TES) can be integrated to store excess geothermal heat for later use in power generation or cooling, further enhancing system flexibility.

Geothermal + Natural Gas

Where existing natural gas infrastructure is available, this pairing can provide redundancy and peak load management, ensuring uninterrupted operations. Natural gas systems can also be rapidly deployed alongside developing geothermal resources, serving as a transitional pathway until full geothermal capacity is realized.

For off-grid locations, natural gas remains an option through on-site LNG or CNG storage,. In some cases, local biogas or synthetic natural gas (SNG) production could provide an alternative, reducing dependency on external supply chains.

Shaping the Future of Data Center Development

These hybrid approaches are particularly attractive for phased development strategies, allowing data centers to establish operations quickly while gradually scaling toward more sustainable power solutions. Regions that offer these complementary energy combinations may emerge as new frontiers for data center development, potentially shifting the industry map away from traditional hubs constrained by grid limitations.

Perhaps most critically, geothermal power offers certainty in an increasingly uncertain energy landscape. While other power sources may face shifting regulatory frameworks, international supply chain risks, and volatile policy environments, geothermal's domestic, self-contained nature provides investors and operators the control of their timelines and costs.

Geothermal power's strategic benefits extend far beyond mere power generation. By achieving complete energy independence from grid constraints, data center developers gain unprecedented flexibility in site selection, allowing them to prioritize customer proximity and market opportunity over power availability. The technology's minimal land footprint—particularly when compared to sprawling solar or wind installations—makes it ideal for urban and suburban locations where space comes at a premium. Furthermore, geothermal's unique dual-use potential for power generation and cooling creates operational efficiencies.

These advantages, combined with geothermal's natural alignment with sustainability goals, position it as more than just an energy solution—it's a strategic tool that can transform how data centers approach expansion and market entry. Enhanced Geothermal Systems (EGS) particularly benefit from leveraging existing oil and gas industry expertise in subsurface characterization and drilling technologies, though some technological advances are still needed as companies pursue deeper, hotter reservoirs for greater thermal returns. Despite these ongoing development challenges, the combination of reliability, geographic flexibility, competitive costs, and deployment adaptability—backed by proven subsurface engineering capabilities—makes geothermal a compelling choice for data centers seeking true energy independence in an increasingly competitive landscape.

Conclusion

As grid constraints increasingly dictate data center development timelines, geothermal power represents more than an alternative energy source—it's an advantage that can help reshape the competitive landscape. Examining McKinsey's latest data center market analysis suggests that the players who can bypass grid dependencies will capture an outsized share of the multi-billion dollar data center construction pipeline through 2030⁹.

The window of opportunity for securing prime geothermal sites is now. Early movers are already conducting geological surveys in key markets, recognizing that suitable locations for geothermal development—particularly those near major demand centers—are finite resources. Just as early hyperscalers gained lasting advantages by securing prime real estate in top markets, today's forward-thinking developers can establish similar long-term competitive positions through strategic geothermal site acquisition.

Success in geothermal development requires deep expertise in subsurface characterization, drilling technology, and energy systems integration. Organizations like ThinkOnward are helping bridge this expertise gap, combining oil and gas industry knowledge with geothermal innovation to de-risk projects and accelerate deployment. By leveraging advanced resource assessment capabilities and technical expertise, it can help developers more confidently evaluate and secure promising geothermal sites. Geothermal uniquely combines operational simplicity, price stability, and environmental benefits without complex fuel supply chains or regulatory hurdles. For developers willing to explore new power solutions, geothermal offers a promising route toward energy independence. Those who move early to explore geothermal opportunities may unlock new degrees of energy independence—gaining greater flexibility in site selection and potentially securing long-term competitive advantages.

References

1. Dominion Energy admits it can't meet data center power demands in Virginia, Data Center Dynamics, https://www.datacenterdynamics.com/en/news/dominion-energy-admits-it-cant-meet-data-center-power-demands-in-virginia/ Dominion Resumes New Connections, But Loudoun Faces Lengthy Power Constraints, Data Center Frontier, https://www.datacenterfrontier.com/energy/article/11436951/dominion-resumes-new-connections-but-loudoun-faces-lengthy-power-constraints

2. Queued Up: Characteristics of Power Plants Seeking Transmission Interconnection, Lawrence Berkeley National Laboratory, https://emp.lbl.gov/queues

3. 2024 United States Data Center Energy Usage Report, Lawrence Berkeley National Laboratory, https://eta-publications.lbl.gov/sites/default/files/2024-12/lbnl-2024-united-states-data-center-energy-usage-report.pdf

4. Nuclear waste from small modular reactors, Proceedings of the National Academy of Sciences of the United States of America (PNAS), https://www.pnas.org/doi/10.1073/pnas.2111833119

5. Levelized Cost of Energy+ 2024 Report, Lazard, https://www.lazard.com/research-insights/levelized- cost-of-energyplus/ Regarding Hot Sedimentary Aquifer (HSA) geothermal: Limited data is available on the LCOE of HSA geothermal, but it is expected to be competitive with or even lower than that of traditional hydrothermal geothermal. This is due to the shallower depths of HSA resources, which can reduce drilling costs and overall capex. One study estimated the LCOE for an HSA geothermal project in Nevada to be between 10 and 20 cents/kWh. See Sedimentary Geothermal Resources in Nevada, Utah, Colorado, and Texas, National Renewable Energy Laboratory, https://www.nrel.gov/docs/fy20osti/76513.pdf Regarding Enhanced Geothermal Systems (EGS): The LCOE of EGS is currently higher than that of traditional hydrothermal geothermal, primarily due to the higher costs associated with drilling and stimulating EGS reservoirs. These reservoirs are often located in hard rock formations, which are more challenging and expensive to drill than the sedimentary formations typically encountered in traditional hydrothermal and HSA geothermal projects. Additionally, EGS requires reservoir stimulation techniques, such as hydraulic fracturing, to create or enhance permeability, further adding to the costs. That said, the IEA estimate that, with the right support, costs for next-generation geothermal could fall by 80% by 2035. See The Future of Geothermal Energy, International Energy Agency (IEA), https://www.iea.org/reports/the-future-of-geothermal-energy/executive-summary

6. Electric Technology, Whole Building Design Guide (WBDG), https://www.wbdg.org/resources/geothermal-electric-technology

7. Geothermal FAQs, U.S. Department of Energy, https://www.energy.gov/eere/geothermal/geothermal- faqs; Geothermal Energy Factsheet - Center for Sustainable Systems, University of Michigan, https://css.umich.edu/publications/factsheets/energy/geothermal-energy-factsheet

8. Statista, Average installed cost for geothermal energy worldwide from 2010 to 2023, https://www.statista.com/statistics/1027751/global-geothermal-power-installation-cost-per-kilowatt/

9. AI power: Expanding data center capacity to meet growing demand, McKinsey, https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/ai-power- expanding-data-center-capacity-to-meet-growing-demand; The role of power in unlocking the European AI revolution, McKinsey, https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/the-role-of-power-in- unlocking-the-european-ai-revolution,