Global energy demand is ramping up, forcing countries and companies to search for viable solutions to meet demand.

In the U.S. alone, demand is skyrocketing. Three years ago, the Federal Energy Regulatory Commission said that peak energy demand in 2029 would rise 23 gigawatts from 2022 levels to 840 GW.

The FERC estimate was eventually revised, with peak energy consumption is forecast to reach 947 GW by 2029 due to the energy demands of AI data centers.

To meet this challenge, companies and the federal government are taking an “all of the above” approach in sourcing power, with nuclear and natural gas being seen as prime candidates.

Even though those power sources have gotten much of the attention, there’s still room for geothermal to occupy a significant portion of America’s energy supply.

That’s why Ormat Technologies, Inc. (ORA), primarily known for the extraction and production of geothermal energy, is positioned to capitalize on this tailwind. However, the market has yet to realize just how profitable this company is.

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Global energy demand is ramping up and countries across the world are scrambling to make sure that their energy demands are met.

In the U.S. alone, energy demand is skyrocketing due to the AI boom.

Three years ago, the Federal Energy Regulatory Commission (“FERC”) said that peak energy demand in 2029 would rise 23 gigawatts (“GW”) from 2022 levels to 840 GW. A year later, FERC revised this estimate, projecting peak demand of 859 GW by 2029.

Due to AI workloads consuming lots of power, it’s expected that data centers are expected to consume as much as 12% of the electricity generated by the U.S. grid by 2030.

As a result, the FERC revised its estimates, forecasting that peak energy demand will surge to 947 GW by 2029.

Companies and governments are taking an “all of the above” approach in sourcing power due to intensifying demand.

This has led to the revival of the nuclear industry in the U.S., with companies entering into partnerships that involve nuclear reactor restarts. Meanwhile, a further push towards natural gas, renewables, and other clean sources of energy have intensified as well.

While these energy sources are seeing massive interest and attention, those aren’t the only choices as geothermal energy is starting to see a rise in adoption.

According to a forecast from the U.S. Department of Energy, next-generation geothermal power is expected to reach at least 90 GW of installed capacity by 2050 and could even rise to over 300 GW based on factors like land availability and the development of competing technologies.

Meanwhile, analysis from the International Energy Agency (“IEA”) forecasts U.S. geothermal capacity at roughly 150 GW by 2050.

Regardless of which analysis is adopted, it’s clear that geothermal will occupy a significant chunk of America’s energy mix in the years to come.

With demand for geothermal set to grow, companies that prioritize the production of this energy source are positioned to benefit.

An example of this is Ormat Technologies, Inc. (ORA), a vertically integrated company based in Reno, Nevada, that is primarily known for the extraction and production of geothermal energy.

The company develops, designs, and builds geothermal and recovered energy-based power plants and has expanded its offerings to include energy storage services and solar photovoltaic.

Currently, Ormat boasts an energy generation portfolio amounting to roughly 1.6 GW.

Around 1,268 MW comes from geothermal and solar generation spread among the U.S., Kenya, Indonesia, and other territories.

The company also has an energy storage portfolio of around 350 MW in the U.S.

Ormat also designs and sells power generating equipment and complete power plants.

The company is currently in the midst of a strategic pivot that’s led to the rapid expansion of its energy storage and enhanced geothermal systems segments.

And unlike pure-play independent power producers (“IPPs”), the company designs, manufactures, and installs its equipment and power plants, then operates those under long-term contracts.

As a result of this, the company generated revenues of $880 million last year. And during the third quarter of fiscal year 2025, it generated nearly $250 million in revenue, up 17.9% year-over-year.

Despite being a leading market player, as-reported metrics paint a picture that hides just how profitable this company is.

According to as-reported numbers, the company’s return on assets (“ROA”) has declined from its 2020 peak of 3% to just 2% last year.

However, Uniform Accounting paints a different picture, as Ormat’s Uniform ROA has remained above 3.5% since 2020.

With geothermal set to be a fixture in America and the world’s energy mix, Ormat is positioned to capitalize on this trend.

Consequently, the company, should it be able to maintain and grow its level of returns, could provide upside to investors who see just how much the market is underestimating this firm.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research