Shell’s 2025 Geothermal Pivot: From European Operator to US Offtaker

Industry Adoption: How Shell’s Geothermal Strategy Shifted from Cautious Exploration to Aggressive Offtake in 2025

Between 2021 and 2024, Shell’s approach to geothermal energy was defined by cautious, operator-led exploration. The company leveraged its subsurface expertise to engage in partnerships focused primarily on geothermal heat. This was evident in its activities in the Netherlands, where it initiated drilling for a district heating pilot in Leeuwarden and secured exploration licenses with partner D4 in the Rhineland. In Canada, it entered a joint development agreement with Kitselas Geothermal to appraise a reservoir. This strategy, however, was perceived as tentative. Critics pointed to analyses suggesting Shell generated just 0.02% of its energy from renewables in 2022, and the company notably passed on internal proposals for next-generation geothermal, leading key talent to depart and found successful startups like Sage Geosystems. The focus was on de-risking conventional projects in a hands-on, capital-intensive manner, which proved slow and ultimately lacked sufficient perspective.

The year 2025 marks a sharp and decisive inflection point. In February 2025, Shell confirmed its strategic shift by announcing it would stop its geothermal development activities in the Netherlands after six years, signaling a move away from the direct operator model. Just two months later, in April 2025, the company made a powerful countermove by pivoting to a role as a key offtaker in the U.S. market. Shell Energy North America signed a 15-year Power Purchase Agreement (PPA) with Fervo Energy for 31 MW of 24/7 geothermal power from the Cape Station project in Utah. This deal not only represents a pivot from heat to baseload power but also a strategic endorsement of next-generation Enhanced Geothermal Systems (EGS). By becoming the first offtaker for what will be the world’s largest EGS project, Shell is moving from a cautious developer to an agile, market-facing enabler, using its commercial strength to secure scalable, carbon-free energy needed for high-growth sectors like AI data centers. This new model offloads development risk while positioning Shell to capitalize on a technology projected to see costs fall to $50 per megawatt-hour by 2035.

Table: Shell’s Geothermal Investment & R&D Allocation (2021-2025)

Table: Shell’s Evolving Geothermal Partnerships (2021-2025)

Geographic Pivot: Shell’s Geothermal Focus Shifts from the Netherlands to the U.S.

Between 2021 and 2024, Shell’s geothermal activities were geographically centered on Europe, particularly the Netherlands. Projects in Leeuwarden, Westland, and the Rhineland region were aimed at harnessing geothermal heat for district heating and agriculture, reflecting a strategy tailored to local European energy needs. A secondary exploratory front was opened in Canada with the Kitselas Geothermal partnership in British Columbia. This geographic footprint was characterized by a focus on developed economies with strong regulatory support for decarbonizing heat.

The year 2025 witnessed a dramatic geographic re-centering to the United States. Shell’s withdrawal from its broad Dutch geothermal development in February 2025 was a clear retreat from its previous European focus. This capital and strategic reallocation was immediately redirected to the U.S., crystallized by the landmark PPA with Fervo Energy for its Cape Station project in Beaver County, Utah. This pivot is driven by the superior scalability and commercial momentum of next-generation geothermal in the U.S., which benefits from a favorable policy environment under the Inflation Reduction Act (IRA) and a massive, growing demand for 24/7 clean power. The U.S., with its leadership in EGS technology, has become the new nexus of Shell’s geothermal ambitions.

Technology Maturity: Shell’s Bet on Next-Gen Geothermal Pays Off

In the 2021-2024 period, Shell’s technology focus was on the commercial but site-specific application of conventional geothermal for heat. The company acted as a direct developer, engaging in the exploration and pilot phases for projects like the one in Leeuwarden, Netherlands. This involved applying its traditional drilling and subsurface expertise to a mature technology. However, its engagement with next-generation technologies like EGS was limited and indirect, as evidenced by its decision to pass on internal proposals that later formed the basis for the startup Sage Geosystems. The strategy was to de-risk known technologies on a project-by-project basis.

Starting in 2025, Shell’s strategy shifted to enabling the commercial scaling of next-generation technology. By signing a major PPA with Fervo Energy, Shell is no longer just an explorer; it is a crucial enabler for Enhanced Geothermal Systems (EGS), a technology transitioning from successful pilots to utility-scale deployment. Fervo’s Cape Station, which Shell is backing, is set to be the largest EGS project globally and is demonstrating rapid maturation with record-breaking drilling performance, including a 79% reduction in drilling time compared to DOE baselines. This move validates EGS as a bankable technology and allows Shell to secure its benefits—24/7 carbon-free power—without bearing the direct risks of upstream technology development.

Table: SWOT Analysis: Shell’s Geothermal Strategy Evolution (2021-2025)

2025 Forward Outlook: What Shell’s Fervo Deal Signals for the Geothermal Market

Shell’s strategic pivot in 2025 serves as a powerful signal for the year ahead. The offtaker model, exemplified by the Fervo PPA, is now Shell’s clear blueprint for geothermal engagement. We should expect Shell Energy to pursue additional long-term PPAs with other leading next-generation geothermal developers in the U.S. to build out its 24/7 clean power portfolio, a crucial offering for industrial customers and the booming AI sector.

Market actors should closely watch the progress of Fervo’s Cape Station. The successful commencement of power delivery in 2026 and progress on the announced 500 MW expansion—including Shell’s follow-on 100 MW offtake—will serve as the ultimate validation of both EGS technology and Shell’s offtaker strategy. This symbiotic relationship, where an energy major provides a bankable contract that unlocks financing for a technology developer, is poised to become a dominant model for accelerating the deployment of capital-intensive climate technologies. Shell is no longer just participating in the geothermal sector; it is actively shaping its commercial viability, betting that a smart, de-risked offtake strategy is the fastest way to scale a critical source of baseload renewable energy.

Frequently Asked Questions

What is the main difference between Shell’s old geothermal strategy (2021-2024) and its new one in 2025?
The primary difference is a shift from being a hands-on ‘operator’ to an ‘offtaker.’ Between 2021 and 2024, Shell acted as a direct developer, focusing on capital-intensive geothermal heat projects in Europe. In 2025, Shell pivoted to an offtaker model in the U.S., where it signs long-term contracts (PPAs) to purchase geothermal power from other developers, thereby offloading development risk and focusing on its commercial strengths.

Why did Shell pivot from developing projects in Europe to buying power in the U.S.?
Shell’s European projects, focused on district heating, proved to be slow and ultimately lacked sufficient perspective, leading the company to halt most of its Dutch activities. The U.S. presented a better opportunity due to the superior scalability of next-generation Enhanced Geothermal Systems (EGS), a favorable policy environment under the Inflation Reduction Act (IRA), and a massive, growing demand for 24/7 clean power from sectors like AI.

What is a Power Purchase Agreement (PPA) and why is Shell’s deal with Fervo Energy significant?
A Power Purchase Agreement (PPA) is a long-term contract to buy electricity at a pre-agreed price. Shell’s 15-year PPA with Fervo Energy is significant because it makes Shell the first offtaker for the world’s largest next-generation geothermal (EGS) project. This deal provides a bankable contract that helps Fervo finance the project, validates EGS as a commercially viable technology, and allows Shell to secure a large volume of 24/7 carbon-free power.

Is Shell no longer directly developing any geothermal projects?
While Shell has largely moved away from the direct operator model, it has not exited completely. The company stopped its broad development activities in the Netherlands (like the Aardwarmte Rijnland consortium) but remains a partner in the Geothermie Delft project, which secured €50 million in financing in April 2025. This indicates a more selective continuation of promising ventures.

What are the benefits for Shell in adopting this new ‘offtaker’ strategy?
The ‘offtaker’ model allows Shell to leverage its commercial and trading expertise rather than its capital-intensive drilling operations. Key benefits include: offloading development and technology risk to specialized partners like Fervo; enabling faster scaling to meet market demand; and securing a portfolio of baseload, carbon-free power needed for high-growth sectors like AI data centers, all with lower direct capital expenditure.