Impact VCs urge EU to unlock geothermal energy amid Iran war – fossil fuels 'dangerous and expensive'

A coalition of European clean energy investors has urged the European Commission to significantly strengthen its upcoming Geothermal Action Plan, warning that Europe risks missing a strategic opportunity as conflict in the Middle East lays bare its dependence on imported fossil fuels.

The open letter, coordinated by Cleantech for Europe, Future Cleantech Architects, and the European Geothermal Energy Council, was addressed to Commission President Ursula von der Leyen and several commissioners including Wopke Hoekstra and Teresa Ribera.

It was signed by more than 70 investors, startups, and NGOs, including European climate and deep tech VCs World Fund, Extantia, Carbon Equity, Planet A Ventures, Rubio Impact Ventures, Nordic Alpha Partners, and Underground Ventures.

"Europe's structural dependence on imported fossil fuels is dangerous, and expensive," Liza Rubinstein Malamud of Carbon Equity tells Impact Loop. "Geothermal energy doesn't move through the Strait of Hormuz. It doesn't depend on a transit state. It runs underground, 24 hours a day."

The Commission is expected to publish a Geothermal Action Plan in May. The investors warn it risks focusing too narrowly on heat and treating geothermal as a secondary priority.

Kristina Hagström-Ilievska, CMO at Stockholm-based geothermal specialist investment firm Baseload Capital, pointed to a wider pattern of missed industrial opportunities.

"Unlike the EV and solar sectors, where we ceded leadership to China – let's ensure we seize this opportunity," she told Impact Loop in a message.

Craig Douglas, founding partner at climate tech investor World Fund, said the current policy framework does not match the scale of what geothermal could deliver.

"The right support could significantly accelerate project deployment across Europe," he told Impact Loop via email.

Carbon Equity's Rubinstein Malamud drew a direct line between geothermal investment and Europe's recurring energy shocks.

"The reason Europe keeps being exposed is that it hasn't moved fast enough to replace the imports that make it vulnerable," she told Impact Loop. "Geothermal – at scale – is part of how you fix that structurally, not just crisis by crisis."

Signatories are calling for a dedicated EU geothermal de-risking facility for early-stage exploration and drilling, long-term revenue frameworks including two-way contracts for difference, faster permitting procedures, and a European Geothermal Industry Alliance.

The Commission did not immediately respond to a request for comment.

Geothermal energy: what investors need to know

Unlike wind and solar, geothermal energy runs around the clock, and because the resource can be produced locally, it carries little to no exposure to fuel price volatility or supply disruption.

Nevertheless, Europe currently only generates just 0.2% of its electricity from geothermal. Drilling has historically been prohibitively expensive, holding many projects back.

However, next-generation technologies are shifting the economics: new drilling and materials technologies combined with real-time downhole sensor data have already cut well costs by up to 30%, according to the International Energy Agency.

Think tank Ember estimates that around 43 GW of enhanced geothermal capacity, enought ompower around 40 million homes, could be developed in the EU at costs below €100/MWh, competitive with coal and gas.

There is also a critical minerals angle: geothermal projects in the EU and US currently under development could yield 47 kilotonnes of lithium per year by 2035, according to the International Energy Agency.

The market remains early-stage but is developing quickly.

Between 2020 and 2025, North America attracted $1.6bn in geothermal venture investment compared with $299m for Europe – a gap that signals both the lag and the opportunity for investors willing to move early.

Europe even has a dedicated geothermal energy fund, Underground Ventures – the family office of Joachim Ante, the German co-founder of gaming giant Unity. Other active investors in the space include Baseload Capital and deep tech VC Project A.

On the startup side, two German startups emerged from stealth in March with next-gen geothermal tech. Factor2 Energy raised a $9.1m seed led by At One Ventures to replace water with CO2 in geothermal systems, while Telura bagged €4.4m in a pre-seed led Nucleus Capital to use high-voltage pulses to break rock from within.