TOKYO/KAGOSHIMA, Japan -- Property developer Mitsui Fudosan looks to achieve Japan's first commercial deployment of a next-generation geothermal system that can be introduced in areas where conventional projects have not been feasible.

The technology, known as a closed-loop geothermal system, injects water from the surface that circulates through pipes installed deep underground and recovers heat for power generation. The system depends less on the presence of geothermal water -- naturally occurring groundwater heated by the Earth's internal energy -- offering the possibility of wider use.

Mitsui Fudosan will develop the project with Shin Nippon Biomedical Laboratories, a contract drug developer that also operates geothermal power facilities, and J-Nec, a startup developing geothermal generation systems.

The companies have completed drilling at an existing geothermal power site owned by Shin Nippon Biomedical in the Kagoshima prefecture city of Ibusuki on Japan's southernmost main island of Kyushu. They plan to build a demonstration plant and begin operations in fiscal 2028, with commercial deployment targeted for fiscal 2029.

The project envisions output of several thousand kilowatts per heat-recovery well. Total generating capacity and investment at the commercialization stage will be based on results of the demonstration.

Mitsui Fudosan seeks to expand beyond office buildings and commercial facilities, advancing urban development projects centered on industries like semiconductors, life sciences and space. The company plans to use its strengths as a comprehensive developer in identifying sites, coordinating with partners and working with government authorities for its next-generation geothermal power efforts.

Over the longer term, it aims to find project locations and corporate partners across Japan, helping raise the country's energy self-sufficiency and stimulate regional economies. In addition to using the carbon-free electricity at its own facilities, Mitsui Fudosan is exploring selling power to other companies.

Expanding geothermal power generation would bolster Japan's energy security. The country ranks behind only the U.S. and Indonesia in geothermal resources, with estimated potential equivalent to 23.5 gigawatts of generating capacity.

Conventional geothermal development often faces obstacles because promising sites are near hot-spring resorts, where communities worry that development could reduce water volumes. Developers also cannot know whether sufficient geothermal water exists until drilling is complete, and projects can take more than a decade from exploration to operation, making them risky.

As a result, Japan has used only about 2% of its estimated geothermal potential. Closed-loop systems, while offering greater flexibility in site selection, still face substantial upfront investment for drilling and facility construction.

Development has progressed overseas. Eavor Technologies, a Canadian geothermal company backed by the likes of Japan's Chubu Electric Power, began partial commercial operations in Germany in 2025.

Japan's government plans to support development of cost-reduction technologies to accelerate commercialization. Mitsui Fudosan's project has received approval from the Japan Organization for Metals and Energy Security for a geothermal survey program.

Closed-loop systems and other next-generation geothermal technology are also included in 17 strategic sectors for priority investment highlighted by Prime Minister Sanae Takaichi. The government is targeting 1 trillion yen ($6.32 billion) in public and private investment, with an eye toward expanding generating capacity to 1.4 GW by fiscal 2040.