By Dr Marcos Pelenur, CEO, Energy Efficiency and Conservation Authority
Energy is a critical sector for Aotearoa New Zealand, and the task ahead is to make sure the system is as secure, affordable and reliable as possible while demand continues to grow. No single source of energy can do this alone, which is why it helps to think of our options as tools in a toolbox. Hydro, wind, and solar are all important, and geothermal infrastructure is an equally valuable part of that mix.
What makes geothermal distinctive is its reliability. With capacity factors often above 90 per cent, geothermal plants deliver steady, predictable output regardless of weather or rainfall. To put that in context, hydrogen electrolysers powered by renewable electricity typically achieve capacity factors closer to 40–50 per cent, depending on grid availability, and wind averages of around 40 per cent. That makes it a natural complement to other sources, helping to balance variability and strengthen the overall system.
At a national level, geothermal offers New Zealand a unique opportunity to strengthen energy security while reducing reliance on imported fuels. In 2024, geothermal accounted for nearly one-fifth of New Zealand’s annual electricity generation. Unlike solar and wind, which can be variable, geothermal provides consistent baseload supply. But the potential of geothermal does not end at electricity generation. Expanding geothermal development can also create regional jobs, foster local innovation, and position New Zealand as a leader in advanced geothermal technologies. For businesses, this means confidence in supply, backed by a technology that has been proven in New Zealand for decades.
Geothermal is also efficient and cost-effective for business. Power plants run with exceptionally high utilisation, while ground-source heat pumps – which tap into stable underground temperatures – can deliver three to five units of heating or cooling for every unit of electricity consumed. This efficiency translates directly into lower running costs and stronger resilience for organisations managing large buildings or campuses.
Up-front investment can be a barrier, particularly with drilling, but these costs reduce when spread over larger sites. Where businesses have long-term horizons and high energy demand, ground-sourced heating and cooling systems can deliver excellent returns over time.
Geography matters
In commercial settings, ground-source systems are most competitive in areas with high water tables, such as Christchurch and Dunedin, and where scale allows up-front costs to be spread. Medium to large buildings above 3000 to 4000 square metres with continuous year-round heating and cooling needs are especially strong candidates for the fuel source.
For schools, hospitals, or offices with heating and cooling loads above 500 kilowatts, the economics are often positive in the right locations. Payback periods can range from 8–12 years, depending on site conditions, but systems are designed to operate for decades, creating long-term savings. We’ve already seen this in practice in the Christchurch rebuild in buildings such as the Town Hall, Art Centre, Bus Exchange and Justice Precinct, and many others, where geothermal heat pumps made financial sense.
The opportunity extends well beyond buildings. In geothermal-rich regions such as the Taupō Volcanic Zone, direct heat from geothermal wells, as well as waste heat from power stations, can be harnessed for nearby industrial processes.
Industrial and regional opportunities
Planning geothermal heat recovery into new developments offers a cost-effective way to give businesses reliable energy at stable prices, while strengthening regional economies.
The examples we already have in New Zealand show what’s possible. Essity, for example, has integrated geothermal steam into its Kawerau tissue plant, helping decarbonise production while securing affordable energy. Other manufacturers in Kawerau that use geothermal steam in production, to wood pellet producers in Taupō, to airports using ground-source heat pumps, are all practical demonstrations of how geothermal can create competitive advantage while strengthening resilience.
Looking further ahead, the next frontier lies in ‘supercritical’ geothermal resources, found several kilometres below the surface at temperatures above 300 degrees Celsius. These resources hold the potential to produce more than three times more energy per unit than conventional geothermal fluids, enabling more output from the same land footprint and creating new opportunities for New Zealand to take a global leadership role in advanced geothermal development.
This ambition is backed by research investment. More than 20 leading global geothermal experts will explore the significant energy potential of the Central Taupō Volcanic Zone thanks to $10 million of government funding. The DeepHeat project, supported by the Endeavour Fund, will provide critical insight into supercritical geothermal energy – a technology with the potential to revolutionise energy production. Alongside this, $60 million has been ring‑fenced through the Regional Infrastructure Fund to advance geothermal innovation.
Geothermal is not a silver bullet, and nor should it be. But as part of a balanced renewable mix, it has unique strengths. It complements hydro, wind, and solar by providing stability, reliability, and efficiency. For businesses, it offers affordable long-term energy solutions, opportunities to lower operating costs, and greater resilience in the face of a changing energy landscape.
At the Energy Efficiency and Conservation Authority, we see geothermal as one of the highest-value opportunities to support New Zealand’s long-term energy security. Now is the time to build geothermal into long-term infrastructure strategies and unlock its potential across electricity, heating, cooling, and industrial applications. Geothermal can help ensure our energy system remains local, affordable, and reliable, now and into the future.