Driving Geothermal Innovation in the EU’s Energy Transition : understanding the Role of Venture Capital

Sammanfattning

The transition to a low-carbon energy system in the EU depends on scaling innovative energy technologies like geothermal energy. Despite its potential as a reliable and low-carbon energy source, geothermal innovation faces persistent barriers to finance and market integration. This thesis addresses this by investigating what affects the interest of investing in and scaling of geothermal energy technologies within the context of EU’s energy transition. Drawing on the Multi-Level Perspective (MLP) and the conceptualization of venture capitalists as a transition intermediaries, the study examines how investment structures, norms, and actors shape the development of geothermal energy innovations. The empirical analysis is based on semi-structured interviews with venture capitalists, energy experts, and industry stakeholders. The findings from thematic analysis show that prevailing investment norms – such as short-termism or risk aversion – function as regime-level selection mechanisms that systematically disadvantage capital-intensive, long-horizon innovations like geothermal. At the same time, the study finds that specialized or strategically positioned venture capitalists can act as legitimators, risk absorbers, and expectation coordinators, helping geothermal technologies gain credibility and visibility. However, their transformative influence is limited by the relatively small scale of the VC sector compared to other investor groups, e.g., institutional investors, as well as by the mismatch between geothermal’s complexity and the financial logics that dominate innovation funding. This study concludes that while VC can act as a driving force, broader systemic change in financial priorities requires coordinated support from public policy, long-term capital, and institutional reform to reshape financial market priorities and enable decarbonization.