Australia’s comfortable advantage in geothermal heating and cooling

Australia has always been defined by its surface extremes. The country builds cities in hot coastal belts and then complains about the cost of keeping them cool.

Every summer the same pattern repeats itself. Air conditioners hum across Sydney, Perth and Melbourne, grid peaks rise, and operators scramble to cover the load.

Yet just a few dozen metres below the pavement lies an energy resource that stays steady year-round.

It is not a volcanic heat source or a deep geothermal reservoir. It is the ordinary thermal stability of the ground and the shallow aquifers under almost every city. In most of Australia, that temperature is around 18–25 °C, which happens to be ideal for heating and cooling buildings with heat pumps.

Australia’s emerging conversation about geothermal heating and cooling sits squarely within the frame established by Beyond the Hype: Geothermal in Context, the 2025 report I published through TFIE Strategy Inc.

That report separated what actually works in geothermal from what only looks good on slides. It concluded that the real opportunity lies not in chasing ultra-deep, high-enthalpy wells or speculative enhanced geothermal systems, but in the practical and scalable domain of heat: district heating, aquifer thermal energy storage, and low-to-medium temperature geothermal paired with heat pumps.

In the report, I argued that geothermal’s future will not be measured in gigawatts of electricity but in gigawatts of heat displaced from fossil fuels. The message was simple. When geothermal plays to its strengths – steady subsurface temperatures, mature drilling methods, and long-lived infrastructure – it quietly delivers.

Australia already has world-class subsurface expertise, a key criteria for successful expansion of sophisticated geothermal in urban settings. Directional drilling, precise steering, and well management are not new technologies here.

For decades, the oil and gas industry has drilled horizontal wells through the Cooper, Carnarvon and Perth basins. The coal-seam-gas sector has mastered shallow directional drilling at 300–800 m depths, often in close proximity to farms and small towns.

Every one of those projects required accurate drilling, groundwater protection and careful well completion. That is the exact skill set needed for geothermal and aquifer thermal energy storage. On top of that, civil contractors already run fleets of horizontal drills under highways and rivers to install water and electrical infrastructure.

Australia has the rigs, the engineering, the trained crews, and the supply chain for drilling. What it does not yet have is a consistent market for subsurface thermal systems.

Aquifer thermal energy storage (ATES) – pumping excess heat to subsurface aquifers in the summer and extracting it in the winter – is already a mature and widely deployed technology in northwestern Europe.

The Netherlands alone has more than three thousand operating systems providing heating and cooling to office buildings, hospitals, universities and entire precincts. Dutch municipalities now require new large developments to assess ATES potential as part of planning approval. Sweden, Denmark and Germany have hundreds of additional installations, many of which have been operating for more than a decade.

These systems take advantage of permeable aquifers that allow water to be injected and extracted seasonally, storing summer heat for winter use and winter cold for summer cooling. The result is a large and stable base of technical experience, trained contractors and standardised design practices.

Europe’s success demonstrates that aquifer-based thermal energy storage can move from experimental status to routine urban infrastructure when geology, regulation and market conditions align.

The most obvious candidates for geothermal heating, cooling and ATES are Australia’s southern coastal cities. Perth, Adelaide, Melbourne and Canberra each have different combinations of geology and temperature extremes that make the economics interesting.

Perth sits on sandy, permeable aquifers that already host one of the world’s largest managed aquifer recharge programs. The geology is perfect for injecting or extracting thermal energy seasonally. The city’s summer cooling load is heavy and its electricity prices are high, which makes ATES systems financially attractive.

Adelaide has a multi-layered limestone aquifer system used for stormwater storage, with decades of operational data. Its climate is mild enough that heating and cooling needs balance well over the year, a condition that helps ATES performance.

Melbourne has moderate heating and cooling loads and suitable aquifers in its southeastern suburbs. The water chemistry is more complex, but that is a manageable problem.

Canberra has colder winters and strong government interest in low-carbon building technologies. Hobart and Sydney are less suitable for aquifer systems but could use borehole thermal storage or closed-loop ground heat exchangers.

Australia already has a handful of working examples that prove the technology works here. The Fairwater housing development in Blacktown, west of Sydney, uses geothermal heat pumps for both cooling and heating in hundreds of homes. The Australian War Memorial in Canberra is installing 320 boreholes to provide temperature control across the precinct.

The City of Salisbury in South Australia has built one of the largest stormwater-to-aquifer systems in the world, which can be adapted for ATES. Several aquatic centres and universities in Perth use geothermal wells for pool and space heating.

In Victoria, Monash University is integrating ground loops and thermal storage into its Net Zero precinct plan. These are not theoretical studies. They are operating or funded systems that show how the concept translates to Australian conditions.

Australia’s growing network of data centers represents both a thermal challenge and a renewable opportunity. Each facility expels large quantities of low-grade waste heat that currently vanishes into the air through cooling towers and chillers. That heat could instead be captured and injected into shallow aquifers for use in aquifer thermal energy storage.

In a city like Sydney, Melbourne or Perth, where electricity demand for cooling dominates summer peaks, recovered data center heat could charge an ATES system during the day, then be drawn down in winter to provide building heating or feed district energy loops.

The steady 30–40 °C thermal output of modern server farms, 60-70° with liquid cooling, aligns well with ATES temperature ranges, and the co-location of data centers with business parks and residential precincts simplifies the integration.

The result would be a closed thermal circuit where data centers effectively become anchors for urban heat networks, reducing wasted energy, stabilising grid demand, and turning one of the fastest-growing electricity loads into part of Australia’s clean heat solution.

Heating and cooling are not small pieces of the energy economy. In dense urban cores like Sydney, Melbourne and Perth, HVAC represents roughly 40% of total building electricity consumption.

A single central business district can spend $400–600 million a year on energy for temperature control. A geothermal or ATES system that trims even 20% off that figure could save $80–120 million annually and reduce stress on the grid at peak times. At scale, the avoided energy use runs into billions of kilowatt-hours and millions of tons of avoided carbon dioxide.

The capital and operating costs are becoming well understood. Building-scale closed-loop systems cost around $1,200–2,000 per square metre of conditioned floor area. They typically deliver 20–50% reductions in HVAC energy use with paybacks of 5–10 years.

Aquifer thermal energy storage costs $2–4 million per megawatt thermal capacity and can cut energy consumption by 30–60%, reaching payback in under a decade. District systems that combine multiple buildings can cost more to install, often $5–10 million per kilometre of network piping, but they open up shared infrastructure and higher efficiency.

Operating costs are low because there are no cooling towers, large fans or gas boilers to maintain. The technology aligns naturally with rooftop solar and battery storage, balancing heating and cooling loads across the seasons.

The blockers are familiar. Regulatory frameworks are inconsistent. Some states treat shallow geothermal as a mining activity, others as a water issue, and others have no category at all.

Ownership of subsurface heat and groundwater rights is still unclear in many jurisdictions. There are no national design codes for borehole or aquifer systems, so engineers rely on imported European standards.

Building owners face split incentives, where landlords pay for capital expenditure and tenants pay for electricity. Architects and developers are often unaware of the option because it is not embedded in planning guidelines.

All of these are governance and awareness problems, not technical ones. They can be fixed the same way Australia mainstreamed rooftop solar and stormwater reuse: through clear rules, demonstration projects and normalisation.

A credible path forward would start with mandatory feasibility assessments for all new precinct developments above a certain size. City-scale energy planning should include ATES and geothermal options alongside batteries and rooftop solar. A single national code and approval pathway would help projects get off the ground faster.

Funding from ARENA or the Clean Energy Finance Corporation could support a first wave of urban demonstration systems in Perth, Adelaide, Melbourne and Canberra. Training programs could redirect existing drilling and HVAC trades toward geothermal installations. The groundwork already exists.

Thermal energy storage is the missing link in the decarbonisation puzzle. The grid can decarbonise electricity production, but a large share of urban energy still goes into heat.

Batteries handle hours. ATES and geothermal handle seasons. Subsurface storage can soak up excess solar energy in summer and deliver it back in winter. Geothermal cooling can shave peak loads from urban grids when they are under stress. The same engineering mindset that built the oil and gas fields can repurpose the ground beneath the cities to stabilise temperature and load.

When I first started looking at geothermal options for this article, I examined the idea of repurposing decommissioned oil and gas wells for heat recovery, similar to what one startup is pursuing in the United States.

It seemed logical at first glance: reuse existing wells, avoid drilling costs, and turn fossil legacies into clean energy assets, although I was always dubious about the geographical proximity to heat demand centers.

But the deeper I went into Australia’s well data, the less relevant it became. The country simply doesn’t have enough abandoned wells near major population or industrial centers to make it practical.

Most decommissioned wells are hundreds of kilometers from the nearest load, scattered across the Cooper, Carnarvon, or Surat basins where there’s no meaningful heating or cooling demand. Heat doesn’t travel, and piping or transmitting it isn’t economical. Electrical generation from those wells is equally unrealistic given their low temperatures and flow rates.

It’s a potentially clever idea in dense oil regions like Texas or Alberta, but for Australia, the geography and geology make it a dead end. I set the concept aside early in this work and focused instead on where geothermal heat can actually reach people – under Australia’s cities, not under the desert. Australia’s advantage is in skills and rigs reuse, not well reuse.

Australia already knows how to drill precise wells thousands of metres deep through hard rock to hit a gas pocket the size of a football field. The technical capacity, workforce and hardware are all in place. What is missing is intent.

The transition to a low-carbon economy is not only about wind turbines and solar panels. It is also about using the most stable, abundant and local energy source available: the thermal inertia of the earth itself.

With clear policy and steady investment, the ground beneath Australian cities can become a quiet but powerful part of the national energy transition.