German Chancellor Olaf Scholz said on Thursday that deep geothermal energy had great potential for heat generation in Germany, as Berlin aims to phase out fossil fuels in its heating system.

Germany is home to one Europe’s biggest geothermal reserves, which have been largely untapped but surging energy prices last year triggered new interest in the renewable energy source, with big municipal utilities and German and international fossil fuel companies exploring possible investments in the country.

With "deep" geothermal energy, heat is extracted from geothermal reservoirs at depths greater than 400 metres.

"Our goal is to tap as much geothermal energy as possible by 2030," Scholz said at an event for his Social Democrats party (SPD) in Bavaria.

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German Chancellor Olaf Scholz has pushed an expansion of geothermal energy in Germany.  (Fox News)

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Berlin aims to expand geothermal energy generation so it could feed 10 times as much energy into the heating network as it does today by 2030, Scholz said, adding that the number of geothermal power stations will rise to 54 from 42 in the future.

"Deep geothermal energy is of particular interest to our communities and their heat supply," he said.

The geothermal energy sector in Europe's biggest economy has been calling for a law to expand the energy source's potential and remove many obstacles, including local opposition against drilling and low government subsidies.

Geothermal energy could cover more than a quarter of Germany's annual heat demand with a production potential of over 300 terawatt hours, a study by Fraunhofer Institute showed last year.