The term “geothermal” comes from a combination of two Greek words: “geo” which means earth, and “thermos” which means heat. So this word actually refers to “earth heat.” That's precisely what geothermal energy (GTE) is: the thermal energy generated inside the Earth.
GTE is used primarily for electricity production or heating and can captured in a variety of different ways. Sometimes heat pumps are also included in the category of GTE, although they utilize different physical effects. In heat pumps commonly found in space heating systems, the Earth is used as a huge heat exchanger whose temperature remains more or less constant. There are a number of various physical processes that contribute to generation of GTE: the decay of radioactive materials, volcanic activity, and even absorbed solar energy.
Geothermal power is generally clean, renewable, and sustainable. Therefore, it's considered a “green” type of energy. It is also more cost-effective than other renewables. There are several available geothermal resources: the heat in shallow ground, hot water and rock a few miles below the Earth's surface, and high-temperature magma deep in the Earth. Scientists estimate that every 328 feet below the Earth's crust the temperature of the rock increases about 5.4 degrees Fahrenheit. What this means is that the temperature of the rock can be high enough to boil water about 10,000 feet below the crust. This is the same heat that causes volcanoes, hot springs, and geysers to form. What geothermal systems do is take this heat and use it to power things that would normally be fueled by traditional fossil fuels that are considerably more harmful to the environment.


GTE power plants generally use the hot water or steam from the ground to spin a turbine of an electric generator, which produces electricity in the process. Wells can be drilled into the ground, tapping underground reservoirs to produce electricity that way. Currently, most of utility-scale plants are so-called flash steam plants. They use hot water at temperatures over 360F (182 oC). When it flows up to generation equipment at the surface, its pressure drops and it boils into steam. The steam is then used to produce a kinetic energy in a turbine that powers an electric generator. Any leftover water and condensed steam is returned back to the reservoir. In the so-called binary system, the underground water heats another “working fluid” by using heat exchanger. This working fluid vaporizes and drives the turbines. By using working fluids with lower boiling point than water, binary systems can operate in the areas with lower water temperatures (225F to 360F). The third type of the plants is dry steam plant. It uses underground steam that goes directly to a turbine. Moderate-temperature water is a more common geothermal resource, so in the future most GTE power plants will likely be binary-cycle type.


Since all GTE generators use steam or water as a “fuel”, their power source can be constantly renewed. Given the fact that geothermal systems have practically no external fuel requirements, the fuel has little bearing on the cost of geothermal electricity. On the other hand, such systems used to have a relatively large startup cost. This was the major drawback to using the underground heat as a primary source of power. However, the latest EIA energy outlook for 2014 indicates that this year GTE has the lower LEC. Costs notwithstanding, it is one of the cleanest forms of energy available. A GTE system doesn't rely on fossil fuels to power it, and the renewable nature of the energy means that it'll be available for years to come. Being a green power and highly sustainable makes it a popular resource to use for as electricity for small towns and larger cities alike. The lower maintenance costs may allow for the power plant to pay for itself over time, but the initial investment keeps cost-sensitive communities out of the running. The so-called levelized energy cost of GTE that takes into account expected power generation over its life, is currently about $0.05/kw-hr. This value is lower than LEC of coal and natural gas technology. For reference, in 2009 only about 0.4% of total US energy consumption came from GTE. However, as a type of renewable energy, geothermal will likely become more prevalent in the future if the initial costs become lower.

References and additional information:
Hydrothermal power systems- technologies overview
Geothermal basics- how it works