Repsol, the Spanish energy giant, has significantly revised its green hydrogen production targets for 2030, citing economic uncertainties, regulatory delays, and skepticism regarding widespread market adoption. The company's CEO, Josu Jon Imaz, announced a substantial reduction, slashing the initial 1.9-gigawatt (GW) target to a range of 0.7 GW to 1.2 GW.

Imaz attributed the revised targets to several factors, including protracted market development and sluggish regulatory progress. "We are prioritising return and prudence in the capital allocation over any capacity target," he stated during an analyst presentation, highlighting the company's shift towards a more cautious investment strategy. He expressed concerns about the economic viability of green hydrogen projects, particularly in sectors like steel, cement, paper, and chemicals, where widespread adoption remains uncertain.

A key component of Repsol's revised strategy involves leveraging existing infrastructure. Approximately 350 megawatts (MW) of the projected hydrogen production will originate from biomethane reforming at the company's refineries, reducing the need for extensive new electrolysis investments. This approach reflects Repsol's efforts to optimize existing assets and minimize capital expenditure in a challenging market.

The decision to scale back hydrogen ambitions comes amid broader financial pressures. Repsol's 2024 financial statement revealed a net income of €1.75 billion, a significant 45% decline from the previous year. Adjusted income also fell by 34% to €3.3 billion. In response, the company plans to limit net investments to €4 billion in 2025, down from €5.7 billion in 2024, reflecting a more conservative capital allocation strategy.

Furthermore, Repsol's hydrogen strategy has been impacted by regulatory uncertainties in Spain. Last October, the company halted three planned green hydrogen projects in the country after the Spanish government extended its windfall tax on energy companies. Although the government subsequently scrapped the permanent windfall tax on energy firms in November 2024, opting to extend it only for banks, the initial policy decision contributed to Repsol's reassessment of its investment plans.

The company's revised hydrogen targets reflect a broader trend within the energy sector, where companies are increasingly scrutinizing the economic feasibility of green hydrogen projects. While green hydrogen is seen as a crucial component of the energy transition, its high production costs and dependence on subsidies pose significant challenges. The industry's growth hinges on the development of a robust and supportive regulatory framework, as well as advancements in technology that can drive down costs.

Repsol's decision to prioritize financial prudence and optimize existing assets signals a pragmatic approach to navigating the evolving energy landscape.