Repsol Geothermal: Uncover the 2025 Strategy Pivot
Repsol’s Geothermal Pivot: From Strategic Ambition to Cautious Reality in 2025
Industry Adoption: Repsol’s Geothermal Strategy Shifts from Broad Exploration to Risk-Averse Investigation
Between 2021 and 2024, Repsol established a clear, strategic ambition to enter the geothermal sector, viewing it as a natural extension of its subsurface expertise. This period was marked by foundational moves: the creation of a dedicated business unit, Repsol Earth Solutions Holding (April 2024), to centralize geothermal and hydrogen efforts, and the successful acquisition of public funding, including a €16 million grant for studies in Spain. The company’s strategy was to leverage its oil and gas experience to de-risk exploration and develop both urban heating and power generation projects, positioning itself as an active developer. However, 2025 marked a significant inflection point. The company’s actions shifted from strategic expansion to cautious realism, highlighted by the withdrawal from a major geothermal exploration project in La Palma in January 2025. This move, blamed on permitting delays that threatened financial aid, exposed the company’s low tolerance for the regulatory and development risks inherent in nascent geothermal markets. Post-withdrawal, Repsol’s activity has been confined to lower-risk, technical evaluations, such as a modeling study with DTESS and IF Technology to improve borehole thermal capacity and attendance at a showcase for advanced drilling tools like the Anchorbit. This starkly contrasts with its decisive, large-scale investments in green hydrogen, such as the planned €300 million for an electrolyzer in Cartagena. The pattern reveals a clear strategic pivot: while geothermal remains a long-term option, Repsol is currently unwilling to lead development, instead prioritizing capital for more mature or heavily subsidized low-carbon technologies. This creates an opportunity for specialized geothermal developers to lead projects but poses a threat to the rapid scaling of the industry, which relies on the capital and execution power of energy majors like Repsol.
Table: Repsol’s Key Geothermal Investments and Capital Strategy
| Partner / Project | Time Frame | Details and Strategic Purpose | Source |
|---|---|---|---|
| Geothermal Studies in Spain | Jan 2024 | Awarded €16 million in public funding for comprehensive geothermal studies in Tenerife, La Palma, and Madrid. The purpose was to de-risk exploration and assess resource viability for future development. | ThinkGeoEnergy |
| Strategic Update 2024-2027 | Feb 2024 | Formally included geothermal within its “Upstream CCS/Geothermal projects” investment category, signaling planned capital allocation through 2027 as part of its low-carbon transition. | Repsol |
| EIG Upstream Divestment | Sep 2022 | Sold a 25% stake in its upstream business to EIG for $4.8 billion to unlock capital for low-carbon ventures, explicitly including a “green exploration business” targeting geothermal projects. | EIG |
Table: Repsol’s Geothermal Partnerships and Collaborations
| Partner / Project | Time Frame | Details and Strategic Purpose | Source |
|---|---|---|---|
| DTESS and IF Technology | May 2025 | Engaged in a joint study to model increases in thermal capacity per meter of borehole using specialized software. This reflects a focus on technical optimization and efficiency rather than project development. | DTESS |
| Delft Inversion | Oct 2024 | Partnered in a project to overcome technical and economic risks in geothermal investment, aiming to build public and investor confidence in the technology. | Delft University of Technology |
| Spanish Public-Private Partnership (PPP) | Feb 2024 | As part of a PPP, secured €43.1 million in state aid to explore geothermal potential by drilling into Tenerife’s volcanic rifts, demonstrating a strategy of using public-private collaboration to mitigate exploration risk. | Renewables Now |
| Strategic Alliances in the U.S. | Nov 2022 | Actively forming undisclosed strategic alliances in the U.S. to advance low-carbon projects, specifically including geothermal and CCUS, to leverage favorable regulatory environments. | Repsol USA |
Geography: Repsol’s Contracting Footprint
Between 2021 and 2024, Repsol’s geothermal activities were geographically concentrated in Spain, with a strategic focus on high-potential volcanic and urban regions. The Canary Islands (Tenerife and La Palma) and Madrid were the epicenters of its exploration efforts, backed by significant public funding. This demonstrated a clear strategy to lead geothermal development in its home market. The company also indicated an interest in the United States through the formation of strategic alliances, aiming to capitalize on its favorable low-carbon policy landscape. However, 2025 has seen a significant contraction of this geographic footprint. The withdrawal from the La Palma project effectively removed one of the key pillars of its Canary Islands strategy. Current activities, such as the modeling study with DTESS, appear to be desk-based and not tied to a specific field location. This shift suggests that even in Europe’s most promising geothermal regions like the Canary Islands, regulatory and economic instability poses a greater risk than Repsol is willing to bear, pushing its geographic focus away from active field projects and towards non-location-specific technical analysis.
Technology Maturity: Repsol’s Retreat to Foundational R&D
From 2021 to 2024, Repsol’s approach to technology was focused on adaptation and early-stage deployment. The company aimed to transfer its existing oil and gas technologies for exploration and production to geothermal applications, as seen with initiatives within its Technology Lab and participation in Project InnterSpace. Projects were aimed at both pilot-scale urban heating in Madrid and future electricity generation in the Canary Islands, signaling an intent to commercialize proven technologies. In 2025, the focus has retreated to an earlier point in the technology lifecycle. Repsol is now primarily engaged in scouting and evaluating next-generation enabling technologies rather than deploying existing ones. Attending a showcase for the Anchorbit, an advanced drilling tool, and engaging in a modeling study to enhance borehole efficiency are acts of technology assessment, not commercialization. This pivot indicates that Repsol views the technology stack for large-scale, cost-competitive geothermal—particularly Enhanced Geothermal Systems (EGS)—as not yet mature enough for major capital deployment. The company has shifted from a position of applying existing tech to waiting for breakthrough innovations to de-risk the sector.
Table: SWOT Analysis of Repsol’s Geothermal Strategy
| SWOT Category | 2021 – 2024 | 2025 – Today | What Changed / Resolved / Validated |
|---|---|---|---|
| Strengths | Leveraging extensive subsurface expertise from its oil and gas business to de-risk geothermal exploration and production. | Demonstrating deep technical capabilities in specific areas like borehole thermal capacity modeling through a joint study with DTESS and IF Technology. | The broad strength of subsurface knowledge was narrowed and applied to a highly specific, pre-development technical problem, confirming its expertise but in a research context. |
| Weaknesses | Exposure to high upfront capital costs and geological risks inherent in geothermal exploration, a new area for the company. | Demonstrated aversion to regulatory risk, leading to the withdrawal from the La Palma geothermal project due to permitting delays. | The theoretical weakness of risk exposure was validated as a practical dealbreaker, proving that regulatory uncertainty outweighs geological potential in Repsol’s decision-making. |
| Opportunities | Actively securing public funding and forming public-private partnerships, such as the €16M grant for studies and the €43.1M PPP for drilling in Tenerife. | Positioned as a “fast follower” to enter the market once technology (e.g., EGS) and economics improve, while monitoring innovations like the Anchorbit drilling tool. | The strategy shifted from actively capturing near-term funding opportunities to passively monitoring long-term market and technology triggers for a future entry. |
| Threats | Internal competition for capital from more mature and scalable low-carbon businesses like solar, biofuels, and green hydrogen. | Capital decisively allocated to other ventures, such as the €300 million investment in a green hydrogen electrolyzer, while geothermal projects are halted. | The internal threat of capital competition was fully realized. Geothermal lost the budget battle to green hydrogen, which has clearer government support and a more defined development path. |
Forward-Looking Insights and Summary
The most recent data from 2025 signals a clear and definitive shift in Repsol’s geothermal strategy from ambitious exploration to cautious observation. The withdrawal from the La Palma project was not an isolated event but a strategic choice, demonstrating that the company’s risk-reward calculus for geothermal is currently unfavorable compared to other low-carbon ventures. For the year ahead, expect Repsol to remain a “fast follower,” not a leader. The company will likely continue low-cost, high-value technical studies and technology scouting while avoiding direct capital expenditure on drilling and development. The key signal to watch is not Repsol’s own announcements, but external market changes. A significant shift in Spanish or EU policy that drastically simplifies permitting and subsidizes exploration drilling could lure Repsol back into active projects. Likewise, a technological breakthrough in Enhanced Geothermal Systems (EGS) that materially lowers the Levelized Cost of Energy (LCOE) could trigger a strategic re-evaluation. Until then, Repsol’s serious decarbonization capital will flow towards its established solar portfolio and high-potential green hydrogen projects, leaving its geothermal ambitions on a strategic hold. For energy professionals, this case highlights a critical lesson: for energy majors, subsurface synergy alone is not enough to drive investment; it must be met with regulatory certainty and competitive returns.
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Frequently Asked Questions
Why did Repsol change its geothermal strategy in 2025?
Repsol shifted its strategy in 2025 from ambitious development to cautious observation due to a low tolerance for regulatory and development risks. The withdrawal from the La Palma project, which was caused by permitting delays threatening financial aid, demonstrated that the company is currently unwilling to bear the risks inherent in nascent geothermal markets.
Is Repsol completely abandoning geothermal energy?
No, Repsol is not completely abandoning geothermal. The article states that it remains a long-term option, but the company has adopted a “fast follower” position. Its current activities are limited to lower-risk, pre-development work like technical modeling studies and scouting advanced technologies, rather than investing capital in active exploration and drilling.
How does Repsol’s investment in geothermal compare to its other low-carbon projects?
There is a stark contrast. While Repsol has halted major geothermal development, it is decisively investing in other areas. For example, the company plans to invest €300 million in a green hydrogen electrolyzer. This shows a clear strategic pivot to prioritize capital for more mature or heavily subsidized low-carbon technologies over geothermal for the time being.
What was the significance of the La Palma project withdrawal?
The withdrawal from the La Palma project in January 2025 was a key inflection point. It was not just a project cancellation but a signal of a broader strategic shift. It exposed the company’s low risk appetite for regulatory uncertainty and validated the idea that, for Repsol, these risks currently outweigh the geological potential of a project.
What would it take for Repsol to become an active geothermal developer again?
The analysis suggests two key triggers could bring Repsol back into active development. First, a significant shift in government policy, such as simplified permitting and new drilling subsidies. Second, a technological breakthrough, particularly in Enhanced Geothermal Systems (EGS), that materially lowers the cost and risk of projects.
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