The World Is Shifting To Clean Fuels. Can Houston Still Be A Global Energy Leader?
President-elect Joe Biden caught the ears of many in Houston when he said his administration would transition away from oil and gas.
But that idea is nothing new to the energy industry.
A shift is already underway, and if Houston plays its cards right, it can continue to be the energy capital of the world through the transition to a low-carbon future, according to Houston energy leaders.
But the energy industry needs a big scientific breakthrough, and existing oil and gas companies are among those providing the resources, according to Scott Gale of the newly formed Halliburton Labs, an accelerator program for early-stage clean energy tech companies.
"It’s not just going to be one, two or three big breakthrough technologies," Gale said. "Certainly those will play a role, but it’s going to be hundreds, if not thousands of different incremental technological improvements that will enable that as we go along."
And Gale said he and others are setting the stage for those incremental advancements.
"We’re bringing in something like 12 to 15 companies a year to participate," he said. "Because of that, we get an opportunity to look at and help a pretty broad range of applications in the energy space, from energy generation distribution, energy storage, energy conservation."
That's the approach many oil and gas companies are taking: creating separate companies that in turn support start-ups.
The Greater Houston Partnership estimates the city has seen $3.7 billion dollars of cleantech venture funding in recent years. However, that's a small amount compared to the budgets for most major oil and gas companies, which normally reach the tens of billions of dollars.
The city of Houston has also committed public resources to transition to cleaner energy, and a recent University of Houston report mapped out what technologies will keep the region a global energy leader.
Some of the research taking place today could lead to a future seen in Sci-Fi favorites, according to UH Energy Fellow Ed Hirs.
"With the containment of a fusion reaction, we now can enter Star Trek levels of clean energy development and use," he said — though he added that we're decades away from that.
"The next best thing to fusion reaction is synthetic photosynthesis," Hirs said.
That's a process where solar or wind energy is used to split water molecules. It creates what's being called “green hydrogen,” which can be combusted or used to produce electricity.
Hirs warned that green hydrogen is also a couple decades away, though. That's why oil and gas companies aren't waiting for new technology and new energy sources. They're already making current processes greener.
"As we transition, there’s still a number of industries where the source of energy is a heat source, and it is hydrocarbons," said Barbara Burger, president of Chevron Technology Ventures. "So CO2 is produced and we need to capture it, store it or use it."
Burger’s company is supporting projects related to carbon capture, use, and storage, as well as new innovations, she said. While its parent company Chevron is based in California, Chevron Technology Ventures is headquartered in Houston.
And Burger said Houston has a pretty good case to become the energy transition capitol — universities, local leaders, start-up companies, and existing businesses are all working on solving problems today that could lead to a Star Trek-style future.
Coal was the fuel of choice for centuries. It powered the Industrial Revolution and two world wars. But by 1998, it was going out of style in the United States.
Taking coal's place was oil, which is easier to handle, a bit better for the environment, and — most importantly for energy companies — cheaper. So people left coal jobs in states like Pennsylvania and West Virginia, and brought their knowledge and skills to oil and gas rich Houston. Throughout the 1990s the Bayou City gained 4,500 energy jobs.
If Houston takes certain lessons into account, it could once again benefit from an energy transition, like it did from coal to natural gas and oil.
One of those lessons is to remember what's behind these changes from one energy source to another. Scott Gale with Halliburton Labs said it's simple: there's a constant, global, demand for access to cleaner, affordable energy.
"Whether that’s driven by energy poverty or climate change," he said, "whatever the source of that demand around the globe, the need for that is clear."
We've also learned that it takes a long time to move towards new energy sources — decades or more, Gale said.
And, new sources don't just replace old ones. They phase in slowly.
For example, natural gas has coal beat as Texas' top energy source, according to the Energy Information Administration. However, coal is still part of the mix even though we've been moving away from it for more than two decades.
Gale said he expects something similar with oil and gas as we expand to new and cleaner fuels.
The president of the Greater Houston Partnership, Bob Harvey, said there's another lesson the city has learned over and over again: Houston companies should stay flexible.
"When these changes happen, you need to react quickly on the one hand," Harvey said. "On the other hand, you don’t want to put all your eggs in one basket."
That means businesses should branch out from oil and gas, putting resources into finding new energy sources and making existing ones cleaner, he said.
Even if Houston leaders are keeping these lessons in mind, some are worried the city is already missing the mark when it comes to the energy transition.
"I don’t think the conversation is framed the right way at all," said Rice Energy Fellow Michelle Michot Foss. "I think it needs to change fundamentally."
Past transitions have moved us to denser, more efficient forms of energy. Wind and solar are too often framed as the solution — but they just aren't as efficient as oil and gas, Foss said.
"What we need to be doing instead is just focusing on the energy density problem," she said.
To do that, Foss suggested that Houston lean into existing strengths, like its robust plastics industry.
"Every single thing that people talk about wanting to do in some version of energy transition," Foss said, "is going to require advanced composites, plastics, materials that are essential for being able to build things, operate things."
If Houston focuses on those resources, the story of this transition could boost the local economy, similar to when oil and gas became king over coal.
It's going to take decades for Houston — and the world — to move away from fossil fuels and towards cleaner energy. And policies from the incoming presidential administration could speed up, or slow down, the momentum.
President-elect Joe Biden said his administration will aggressively pursue a clean energy plan that will create jobs. He's pledged $1.7 trillion dollars of investment in order to reach a clean energy economy by 2050.
But some worry that Houston's reputation as an oil and gas city means we'll get passed over in terms of federal dollars for that clean energy future. The fear is the federal government will instead bet on states known for their robust tech industries.
That's a mistake. according to energy expert and entrepreneur Katie Mehnert.
"The business environment is very favorable,” she said. “In fact, it’s more favorable in Texas than it is in California."
Mehnert — who founded an online digital community for women and others underrepresented in the energy industry, called Ally — said her company is specifically focused on creating an equitable energy transition. And it’s a transition in which she said Texas is already leading the way.
"I see a lot of opportunity for Texas," Mehnert said. "And that does not mean without oil and gas. It means with oil and gas, bridge fuels like (liquified natural gas), and the renewables piece in the mix."
One of the most important things leaders can do is not shy away from the complexity of this transition, Mehnert said. It's going to take decades, it's going to take investment, it's going to mean losing some jobs but gaining others — and, she said, it's going to require a more diverse and equitable energy workforce.
Mehnert and other energy experts say the incoming administration should focus on creating the environment for innovation in clean energy, instead of doubling down on just one type of technology or fuel source. The energy transition instead has the potential to lead to a future in which electricity and fuel comes from many different sources.
Overall though, the number one thing federal leaders can do to accelerate the energy transition is get the coronavirus pandemic under control, she said.
The energy industry has been hit especially hard by the global pandemic, and Mehnert said coming out of this downturn, the oil and gas market will be smaller in terms of the number of companies.
"I believe the healthiest balance sheets, the healthiest cultures, the healthiest workplaces are going to be emerging the winners," Mehnert said.