Valero’s 2025 Geothermal Gambit: Why the Refining Giant is Ignoring the Sector

Industry Adoption: Valero’s Strategic Abstinence from Geothermal

Between 2021 and 2024, Valero Energy Corporation charted a clear and deliberate energy transition path that conspicuously excluded geothermal energy. While the broader energy sector discussed a wide range of renewables, Valero’s strategy was laser-focused on leveraging its core competencies in liquid fuel production. The company committed to a future centered on biofuels—specifically renewable diesel and ethanol—and the enabling technology of Carbon Capture and Storage (CCS). This was not a passive oversight; it was an active capital allocation decision, underscored by an investment of over $5.1 billion into its low-carbon fuels business by 2023. Commercial applications were scaled rapidly, with the Diamond Green Diesel (DGD) joint venture bringing its 470-million-gallon-per-year Port Arthur facility online and approving a major Sustainable Aviation Fuel (SAF) project. This period established Valero’s identity not as a diversified energy company, but as a specialized low-carbon refiner.

The period from January 1, 2025, to today has only hardened this strategic posture. Valero’s planned 2025 capital spending of $2 billion, with $400 million earmarked for growth, is directed squarely at its renewable fuels segment, with no mention of geothermal. This unwavering focus now stands in stark contrast to a nascent but significant trend among its peers. While Valero continues to decarbonize its existing assets via biofuels and CCS partnerships like the one with Summit Carbon Solutions, other major energy players are actively exploring geothermal. European oil and gas firm MOL Group initiated 3D seismic surveys to explore geothermal potential at its Danube Refinery, and Mexico’s state-owned Pemex included geothermal exploration in its new business plan. This divergence marks a critical inflection point: Valero is doubling down on decarbonizing liquid fuels for the transportation sector, while competitors are beginning to explore geothermal as a source of baseload renewable power and heat to decarbonize their own industrial operations, creating a potential new revenue stream that Valero is bypassing.

Table: Valero’s Low-Carbon Investment (Non-Geothermal)

Table: Valero’s Strategic Low-Carbon Partnerships (Non-Geothermal)

Geography: Valero’s US-Centric Strategy vs. Global Geothermal Exploration

Between 2021 and 2024, Valero’s clean energy activities were geographically concentrated within its existing US operational footprint. The US Gulf Coast, particularly Texas and Louisiana, emerged as the nexus for its renewable diesel and SAF ambitions, exemplified by the Port Arthur DGD plant. This region was chosen to leverage decades of refining infrastructure, logistics expertise, and port access. Simultaneously, its CCS strategy targeted the American Midwest, where its ethanol plants are located and could connect to the proposed Summit Carbon Solutions pipeline. The entire strategy was built on monetizing existing assets in familiar territories.

From 2025 onwards, this US-centric approach has continued, but the global context has shifted. Valero’s focus remains on optimizing its North American assets, a fact reinforced by its ongoing partnership with Summit for Midwestern ethanol plants. However, the geographic landscape for energy-company-led geothermal exploration is developing internationally. MOL Group’s project at its Danube Refinery in Hungary and Pemex’s interest in Mexico highlight a strategy of repurposing industrial sites for geothermal energy production outside the US. This geographical divergence is significant: Valero is deepening its specialization within the mature US market, while its peers are using their international footprints to pilot geothermal applications, creating a new set of geographically diverse capabilities that Valero currently lacks.

Technology Maturity: Valero’s Focus on Scaling vs. Geothermal Pioneering

In the 2021–2024 period, Valero’s technology choices reflected a clear preference for commercially mature and scalable solutions. Renewable diesel production, the core of its strategy, is a fully commercialized technology, which Valero scaled to become the North American market leader through its DGD joint venture. The company then moved to scale the next adjacent technology: Sustainable Aviation Fuel (SAF). The $315 million SAF project approved in 2023 was a signal of SAF moving from early commercialization to a full-scale growth engine. The one “emerging” technology in its portfolio was CCS, which it pursued through large, multi-party projects like the Houston Hub, indicating a move from pilot to commercial-scale deployment. Geothermal, with its associated exploration risks and different technology stack, was absent from this roadmap.

This strategy has been validated and continued from 2025 to the present. Valero is not a technology pioneer; it is a “fast scaler” of proven technologies within its domain. The company’s current focus is on executing its SAF and CCS projects, not on R&D for new energy verticals. The provided analysis points to other energy companies exploring “next-generation geothermal systems,” a field requiring expertise in subsurface geology, drilling, and power plant engineering—all areas outside Valero’s wheelhouse. This confirms Valero’s technological path is one of incremental innovation within its existing paradigm, optimizing and scaling low-carbon liquid fuel technologies rather than making a transformative leap into new renewable power generation technologies like geothermal.

Table: SWOT Analysis of Valero’s Geothermal Abstinence Strategy

Forward-Looking Insights and Summary

The data from 2025 signals an unwavering commitment from Valero to its chosen path: leading the production of low-carbon liquid fuels. Market actors should not expect a sudden pivot into geothermal. Instead, the key signals to watch will be Valero’s execution on its stated goals—namely, the successful completion and ramp-up of its SAF project at Port Arthur and the progress of its large-scale CCS initiatives with partners like Summit Carbon Solutions. These milestones will be the true test of its strategy.

What is gaining traction is Valero’s thesis that the fastest, most value-accretive path for a refiner is to decarbonize its products and processes within its existing paradigm. The idea that every oil and gas major must transform into a diversified renewable electricity producer is being challenged by Valero’s focused approach. The critical question for investors, competitors, and strategists in the year ahead is which strategy will ultimately prove more resilient and profitable: Valero’s disciplined, incremental mastery of low-carbon fuels, or the diversified, higher-risk ventures into new energy verticals like geothermal being pursued by its peers. Valero has made its bet; the market will now watch to see how it pays off.

Frequently Asked Questions

Why is Valero ignoring geothermal energy when other energy companies are exploring it?
Valero’s decision to ignore geothermal is a deliberate strategic choice, not an oversight. The company is focusing its capital and expertise on its core competencies in liquid fuel production. Instead of diversifying into new energy verticals like geothermal power, Valero is concentrating on becoming a specialized low-carbon refiner by scaling up biofuels (renewable diesel and SAF) and using Carbon Capture and Storage (CCS) to decarbonize its existing operations.

If not geothermal, where is Valero directing its energy transition investments?
Valero’s investments are heavily focused on two areas: biofuels and Carbon Capture and Storage (CCS). The company has invested over $5.1 billion into its low-carbon fuels business, which includes its Diamond Green Diesel (DGD) joint venture for renewable diesel and a major project to produce Sustainable Aviation Fuel (SAF). Additionally, it is a key partner in large-scale CCS projects, such as with Summit Carbon Solutions, to lower the carbon intensity of its ethanol products.

Is Valero’s strategy of avoiding geothermal considered a strength or a weakness?
According to the article’s SWOT analysis, it’s both. The primary strength is its disciplined focus, which allows Valero to leverage its expertise and avoid the high geological and operational risks associated with geothermal projects. The weakness is a lack of diversification into renewable power generation. This strategic gap is becoming more obvious as competitors like MOL Group and Pemex begin exploring geothermal, potentially gaining expertise and revenue streams that Valero will lack.

How does Valero’s geographic strategy for clean energy differ from peers exploring geothermal?
Valero’s clean energy strategy is distinctly US-centric, concentrated in areas where it already has a strong operational footprint. Its biofuel projects are focused on the US Gulf Coast (Texas and Louisiana), while its CCS initiatives are centered in the American Midwest near its ethanol plants. In contrast, the peers mentioned who are exploring geothermal (MOL Group and Pemex) are doing so internationally, in Hungary and Mexico respectively, using their global industrial sites as a base for these new energy ventures.

Should investors expect Valero to pivot to geothermal in the near future?
No, the article suggests that a pivot to geothermal is highly unlikely. Valero’s 2025 capital spending plans and long-term strategy show an unwavering commitment to leading the production of low-carbon liquid fuels. The key signals to watch are not for a change in strategy, but for the successful execution of its current goals, such as the ramp-up of its SAF project and the progress of its large-scale CCS partnerships.