The Rising Potential of Geothermal Energy Stocks: Three Opportunities to Watch

The geothermal energy sector is experiencing a transformational moment. What was once considered a niche segment within renewable energy is now capturing serious attention from major institutional investors and oil companies alike. Industry experts point out that geothermal energy boasts remarkable efficiency metrics—turbine friction represents virtually the only significant energy loss in the system. Though geothermal currently accounts for just 5% of global renewable energy generation, its scalability potential signals substantial growth opportunities ahead.

Recent developments underscore this momentum. Oil majors are mobilizing capital for their most significant geothermal investments in three decades, signaling confidence in the sector’s commercial viability. This shift presents compelling opportunities for investors seeking exposure to clean energy transitions. Three stocks merit particular consideration for those bullish on geothermal’s expansion.

BP: An Energy Major’s Renewable Pivot

BP stands out among traditional energy companies for its strategic positioning in the renewable transition. The company benefits from two complementary tailwinds: rising oil prices supporting near-term cash generation, combined with substantial capital deployment capabilities for renewable ventures.

In early 2021, BP joined other industry players in investing $40 million into a Canadian geothermal technology firm developing next-generation energy solutions. This investment represents more than a one-off bet—it signals BP’s broader commitment to reshaping its energy portfolio. The company has publicly committed to achieving a 10-fold expansion in low-carbon investments by 2030, with targets reaching 50GW of net renewable capacity. This diversified approach encompasses solar, wind, and geothermal assets.

Context matters: the United States already leads globally with 3.7GW of installed geothermal capacity, representing 24% of worldwide total. Yet the untapped potential remains staggering—just 0.1% of Earth’s total heat content could theoretically satisfy humanity’s energy requirements for 2 million years. This mathematics underscores why companies like BP are increasing their bets on the sector.

Polaris Infrastructure: A Compelling Dividend Play

Polaris Infrastructure operates across multiple renewable platforms, managing 72MW of geothermal capacity in Nicaragua alongside hydroelectric facilities in Peru. The company trades at an unexpectedly modest valuation—a trailing twelve-month price-to-earnings ratio of 11.14—while delivering a dividend yield of 3.9%.

Financial fundamentals support dividend sustainability. During the first quarter of 2021, operating cash flow reached $9.4 million, annualizing to approximately $40 million. The balance sheet remained robust with $109.7 million in liquid assets. Management’s stated intention involves pursuing portfolio diversification through strategic acquisitions while simultaneously divesting non-core holdings. This focused growth approach suggests material upside potential remains unrealized.

Ormat Technologies: Aggressive Capacity Expansion

Ormat Technologies presents perhaps the most aggressive growth profile among pure-play geothermal energy stocks. The company recently completed a significant strategic acquisition, obtaining operating geothermal assets in Nevada including the Dixie Valley facility—one of the largest plants in the state—for $377 million.

Looking forward, Ormat has mapped ambitious capacity targets. The company aims to expand combined geothermal and solar capacity to between 1,182MW and 1,202MW by 2023, implying annual MW growth ranging from 27% to 29% over three years. Current project pipelines include 10 geothermal and 4 solar developments under active construction.

Financial flexibility supports this expansion trajectory. Ormat maintains $493 million in cash and equivalents, providing substantial cushion for capital deployment. Management guidance projects adjusted EBITDA of $400 million for the fiscal year. Stock pricing has created a potential entry opportunity—ORA traded near $128.87 in February 2021 before declining to $65.84 by mid-2021, suggesting a correction phase that may merit accumulation.

The Bigger Picture

The convergence of improving geothermal economics, major capital commitments, and advancing technology creates a compelling environment for geothermal energy stocks. These three companies—representing both pure-play and hybrid exposure—offer differentiated approaches to capturing sector growth. Investors positioning for the renewable energy transition may find meaningful opportunities within the geothermal segment.