Free electron lasers (FELs) have been highly anticipated as a new light source since they were developed in the 1970s because of their perfect wavelength tunability and high power potential. Various types of FELs have been developed over a wide range of wavelengths from mm waves to X-rays, and many technological advances have been made for devices and applications. In particular, X-ray free-electron lasers (XFELs), the fourth-generation synchrotron, have made a great contribution to the deep understanding of matter and nature. However, there have been relatively few advancements in industrial technology using FELs; for example, an FEL has not yet been directly used in the field. High-power light sources in the terahertz (THz) wavelength range are in high demand in industry and the field but have not been properly developed. The FEL is the most powerful light source in the THz range, and although the size of these FELs is still large, they have the spectral range with the greatest potential for industrial or field applications. This study examines the potential of compact THz FEL technology to meet market needs. The current status of various elements of the FEL is reviewed, and the prospects of a possible FEL system are described by combining these elements. An FEL system with an average power of 1 W operating in the THz center wavelength range of 300-600 mu m is expected to be realized in an FEL with a size of 1.5 m x 2 m.