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Simulation of heat production in high-enthalpy geothermal systems is associated with a complex physical process in which cold water invades steam-saturated control volumes. The fully implicit, fully coupled numerical strategy is commonly adopted to solve the governing system composed of mass and energy conservation equations. A conventional nonlinear solver is generally challenged by the strong nonlinearity present during phase transition because of a huge contrast of thermodynamics between hot steam and cool water. In the process of solution, due to the steam condensation, the reduction in fluid volume reduces the pressure in the control volume. This generates multiple local minima in the physical parameter space, which indicates the Newton initial guess should be carefully selected to guarantee the nonlinear convergence. Otherwise, the Newton iteration will approach a local minimum and the solution based on Newton’s update cannot converge and needs to be repeated for a smaller timestep. This problem brings simulation to the stalling behavior where a nonlinear solver wastes a lot of computations and performs at a very small timestep. To tackle this problem, we formulated continuous localization of Newton’s method based on an Operator-Based Linearization (OBL) approach. In OBL, the physical space can be parameterized in terms of operators with supporting points at different levels of resolution. During the simulation, the operator values at supporting points are obtained through reference physics and the remaining part of the space is interpolated. In this way, the nonlinear physical parameter space can be flexibly characterized with different degrees of accuracy. In our proposed approach, the nonlinear Newton iterations are performed in parameter space with different resolutions from coarse to fine. Specifically, the Newton solution under coarser resolution is taken as the initial guess for that under finer resolution. A coarser parameter space represents more linear physics, under which the nonlinear solver quickly converges to a localized solution near the true solution. With refinement in physics, the Newton iteration will approach the true solution and the stalling behaviour in the simulation is avoided. Therefore, a larger timestep can be utilized in the simulation compared with the conventional nonlinear solvers.