Mr Cameron said that Britain was well-placed to benefit from the technology, which has the potential to generate up to ten per cent of the UK's electricity, according to research by the Geothermal Research Programme.
He claimed incentives to develop the technology would give the geothermal industry "the shot in the arm it needs to get going".
Geothermal projects will now be eligible for Renewable Obligation Certificates, which will help them attract private investment.
Meanwhile, the Chilean government is set to reduce its dependence on imported energy by harnessing geothermal energy.
The government has identified 120 areas that have a high-potential for geothermal energy generation.
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