Morgan Stanley sees a shale-style growth phase ahead for geothermal power

what happened

Analysts at Morgan Stanley, whose views were reported by Dow Jones Newswires, argue that geothermal energy is only in the early stages of its own shale-style revolution. Faster technology improvements and rising electricity demand tied to the AI boom are creating conditions for a sharp expansion of the industry. Geothermal has stayed at roughly 0.4% of U.S. utility-scale electricity generation for several years, while solar and wind have kept growing.

Geothermal projects have traditionally needed rare geological conditions found in only a few areas. According to the bank, newer drilling techniques developed for oil and gas could create those conditions almost anywhere, including through enhanced geothermal systems, or EGS. The analysts say EGS costs are falling as drilling performance improves.

The report highlights Ormat Technologies (ORA), rated overweight with a $123 price target, and Fervo Energy (FRVO), also overweight with a $23 target. Morgan Stanley also sees opportunities for oilfield-services companies SLB, Halliburton and Baker Hughes.

why it matters

Shares of both companies have been hit by a broad selloff in power and AI-linked stocks. Fervo has traded below $10 after listing in May at $27 a share, while Ormat has gained about 3% over three months. For Fervo, the key question is how well it executes its operational plans over the coming quarters.

market impact

Geothermal stocks and oilfield services: the bank's upbeat ratings support sector interest

tags

instruments