A power generation system in which a thermally expandable fluid, e.g., R134a, CO2, is circulated in a loop between a first location and a second location, the second location being at a higher elevation than the first location. The fluid is heated at the first location to expand it, so that it rises to the second location where it is cooled and contracted. The cooled fluid, being denser, then falls back to the first location under hydrostatic pressure, causing a circular fluid flow. This flow is used to generate power in a power transfer system. The system is regulated so that the fluid does not flash to a vapor, i.e., the fluid does not change state, which improves the efficiency of the system. The system is suitable for use in any situation where a height difference exists, and is particularly suited for geothermal heating sources.