Europe stands at a critical juncture in its energy transition. The imperative to strengthen competitiveness, slash emissions, and shield citizens from energy price shocks has never been more urgent. Geothermal energy—local, steady, and renewable—offers a compelling piece of the solution that deserves far greater attention than it currently receives. Iceland’s remarkable transformation demonstrates what becomes possible when political will meets geological opportunity.
In the early 1970s, most Icelandic households still depended on imported oil for heating. When the oil crises struck, heating costs exploded, threatening both the national economy and household budgets across the country. Iceland’s response was decisive: the nation made a collective choice to tap into its own geothermal resources rather than remain dependent on volatile global energy markets.
Reykjavík led the charge, constructing and rapidly expanding a large-scale geothermal district heating system within just a few years. By the late 1970s, virtually every household in the capital had connected to geothermal district heating. Other municipalities quickly followed, often completing their transitions within a single decade. This swift transformation succeeded through a combination of unwavering government commitment, rare cross-party consensus, and innovative financing mechanisms that enabled households to switch with minimal upfront costs.
Today, all Icelandic homes enjoy renewable heating, more than 90% through geothermal. This transformation has dramatically reduced Iceland’s dependence on imported fossil fuels, saving the economy billions in oil imports while insulating households from the wild price swings that plague global energy markets. The shift represented far more than a technical upgrade—it was a profound social and political achievement. Citizens grasped the urgency of abandoning oil dependence, local authorities moved with remarkable speed, and the government created an enabling framework through robust institutions that coordinated exploration, research, and technical development. Strong public trust and a shared sense of national purpose made the transition both rapid and enduring.
The social dividend of clean heat
This energy revolution delivered benefits far beyond emissions reduction—it fundamentally improved quality of life across Iceland. Families in remote fishing villages now enjoy the same affordable heating comfort as those in Reykjavík’s city centre. The transition catalysed new industries and sparked innovation, creating skilled jobs in drilling, geological research, and engineering. It proved definitively that clean energy can serve as both a social equaliser and an economic catalyst—a foundation for genuinely shared prosperity.
The current Icelandic government, under Prime Minister Kristrún Frostadóttir’s leadership, remains determined to strengthen this foundation. This March, we launched an ambitious new initiative to expand surveying and utilisation for new areas, supporting innovation in low-temperature geothermal and heat-pump-based systems. Our aim is to make geothermal energy accessible to as many regions and towns as possible, regardless of their geological conditions.
We call this initiative “Geothermal levels the playing field” because that captures precisely what geothermal heating has achieved in Iceland. It has slashed energy bills, strengthened local communities, and greatly improved energy security. Geothermal has become an engine of equality across regions—ensuring that residents of smaller towns enjoy the same affordable comfort as those in the capital. It simultaneously serves as an engine of growth and value creation nationwide, powering industries, driving innovation, and building resilience against external shocks.
As the economist Mariana Mazzucato has compellingly argued, great challenges—from landing on the moon to reaching net zero—are never solved by markets alone. They require public missions that set bold directions and mobilise innovation across society. Missions provide clarity of purpose; they align ambition with action and transform uncertainty into opportunity. Geothermal energy is perfectly suited to this kind of mission-driven approach, offering tangible benefits that citizens can see and feel in their daily lives.
From Iceland’s Story to Europe’s Opportunity
Europe’s geological endowment and energy needs certainly differ from Iceland’s, but many crucial lessons translate directly. Geothermal potential is not confined to volcanic islands—it exists beneath much of Europe’s surface, waiting to be tapped. What matters most is not the resource base but the institutional framework: sustained political will, patient long-term investment, and public confidence in the transition. Iceland’s experience demonstrates that when governments set clear missions, coordinate institutions effectively, and invest in building capacity, transformative change can happen with surprising speed.
The European Commission’s forthcoming Heating and Cooling Strategy and the Geothermal Action Plan represent crucial steps toward unlocking this vast potential. These documents must recognise geothermal as a strategic renewable resource deserving of priority attention. To fully harness it, Europe will need clear, consistent policies, streamlined permitting processes, and predictable regulatory frameworks that give investors confidence.
Significant opportunities exist to expand geothermal district heating across European cities and to integrate geothermal with other renewables, building flexible and resilient energy systems fit for the twenty-first century. Strengthening research and innovation programmes, alongside developing innovative financing solutions to reduce upfront risks, can help realise this enormous potential.
Geothermal will not single-handedly solve Europe’s energy challenges. But it can make a substantial contribution to building a more resilient, diversified, and equitable energy system—one that truly serves citizens and strengthens communities from the ground up. Iceland’s experience illuminates what becomes possible when political will, public trust, and long-term investment align behind a common purpose. The time has come for Europe to give geothermal energy the strategic role it deserves in the continent’s energy future.
Jóhann Páll Jóhannsson is the Minister for the Environment, Energy, and Climate in Iceland.
