UpTrajectory Review
Morgan Stanley now compares geothermal energy to shale oil before the boom, arguing that the technology stands where hydraulic fracturing stood in the early 2000s—ready to scale but not yet scaled. The bank frames geothermal as a solution to the power crunch created by AI data centers, which demand constant electricity that solar and wind cannot reliably supply. Unlike wind or solar, geothermal plants run continuously, regardless of weather. The comparison to shale matters because shale transformed the global oil market within a decade; Morgan Stanley implies geothermal could transform power markets just as quickly. The technology has existed for decades, but recent advances in drilling—borrowed directly from the oil and gas industry—have cut costs and expanded viable locations. The bank's thesis: AI power demand will push tech companies and utilities to invest heavily in geothermal, driving down costs further and creating a self-reinforcing cycle.
For small-business operators, this matters because electricity prices affect every line item. Data centers already strain local grids, and utilities pass those costs to commercial customers. If geothermal scales as Morgan Stanley predicts, operators in western states—where geothermal resources concentrate—could see more stable or even declining power rates within five to ten years. Businesses with high energy intensity (manufacturing, cold storage, restaurants) should track which utilities add geothermal to their portfolios. Operators in Texas, California, and Nevada face the steepest near-term rate pressure from data center demand; those states also lead geothermal development. A business planning a facility expansion or relocation should factor in which utilities are diversifying into firm, carbon-free power versus those relying on natural gas peaker plants.
The shale analogy deserves skepticism. Shale succeeded because drillers could apply the same fracking technique to thousands of similar wells across a broad geography. Geothermal requires site-specific geology; a successful well in Nevada does not prove a well in Pennsylvania will work. Enhanced geothermal systems (EGS)—which fracture hot rock to extract heat—remain unproven at scale. Only a handful of commercial EGS plants operate worldwide. Morgan Stanley's comparison also glosses over permitting timelines. Oil and gas drilling permits move quickly; geothermal projects often face multi-year environmental reviews. The bank's timeline assumes regulatory acceleration that has not yet happened. We agree that geothermal offers firm, clean power that AI companies want. We question whether the technology can scale as fast as shale did.
Second-order effects extend beyond electricity rates. Oilfield service companies—drillers, cementers, equipment manufacturers—stand to gain a new revenue stream as they repurpose skills from declining oil regions to geothermal projects. Landowners in geothermal zones could see lease income similar to what shale brought to Texas ranchers. Rural counties with geothermal resources may attract data centers directly, bringing construction jobs but also water demand and grid congestion. Small businesses in those counties should prepare for both opportunity and disruption. A geothermal boom could also slow natural gas demand growth, affecting operators who supply gas equipment or services. The shift will not happen evenly; regions without geothermal access may face higher rates as data centers concentrate in areas with firm clean power.
Watch for three signals in the next eighteen months. First, whether major tech companies sign long-term geothermal power purchase agreements beyond the current handful of announcements. Second, whether Congress extends or expands geothermal tax credits in the next budget cycle; the current incentives phase down soon. Third, whether EGS projects in Nevada and Utah hit their output targets on schedule. Operators should ask their utility representatives directly whether geothermal appears in the integrated resource plan and what rate impact it carries. Businesses with sustainability commitments should also monitor whether geothermal certificates become available as a carbon-free procurement option. Morgan Stanley has identified a plausible path; the next two years will show whether the market follows it.
“Geothermal technology is in the early stages of its own shale revolution, Morgan Stanley says.” — MarketWatch Top Stories
Takeaway: Ask your utility whether geothermal appears in its resource plan; operators in western states may see rate relief within five years if drilling scales.
Excerpt from the original — MarketWatch Top Stories
Geothermal technology is in the early stages of its own shale revolution, Morgan Stanley says.