the view from heti

Houston: Where energy leaders create a low-carbon future

Learn more about the specific missions the Houston Energy Transition Initiative is focused on — from carbon management to finding funding. Photo via htxenergytransition.com

Houston is the energy capital of the world, and it faces a dual challenge: fulfilling growing global energy demand while actively reducing carbon dioxide emissions.

This is why energy leaders have come together at the Houston Energy Transition Initiative, within the Greater Houston Partnership, to strengthen the region’s position for an energy-abundant, low-carbon future. HETI’s impact work is conducted through sector-specific working groups that leverage Houston’s competitive advantage. These working groups include: Carbon Capture, Use and Storage (CCUS), Clean Hydrogen, Capital Formation, Power Management, and Industry Decarbonization.

Texas Gulf Coast as a hub for carbon management

The International Energy Agency (IEA) states that CCUS is a requirement to any realistic pathway to a low-carbon, even net-zero future. This is especially true in the Houston area, which is home to one of the nation’s largest concentrated sources of carbon dioxide. Houston has the geology, knowledge, and infrastructure to support CCUS at scale. The CCUS Working Group at HETI supports key policy enablers of scaling CCUS, including supporting the state to earn permitting authority (primacy) over carbon capture (Class VI) wells. The working group is also analyzing the cumulative impacts of carbon capture on the region’s existing infrastructure and identifying key infrastructure needs for CCUS to reach scale.

Gulf Coast preparing for clean hydrogen liftoff

The Clean Hydrogen working group has created an ecosystem for Houston to lead the clean hydrogen market. The Texas Gulf Coast region is currently home to the world’s largest hydrogen system. By assessing the impact of hydrogen on the economy and the environment, this working group is positioning Houston to be a leading clean hydrogen hub.

Houston as a leader in Industry decarbonization

Houston needs technologies including but not limited to clean hydrogen and CCUS for decarbonization. The HETI Decarbonization Working Group partners with the Mission Possible Partnership and Rocky Mountain Institute to provide a measurable baseline of emissions and identify recommendations for decarbonization pathways in the Houston region.

An energy-abundant, low-carbon future will impact our region’s power management

It is expected that there will be changes in supply and demand of electricity associated with proposed energy transition and decarbonization projects in the Houston area. HETI has partnered with Mission Possible Partnership and Rocky Mountain Institute to assess the impact of energy transition and decarbonization on the growth and resilience of Houston’s regional power grid and the transmission and distribution of energy.

Making Houston a hub for energy transition finance

Financing energy projects is extremely capital intensive. Houston currently serves as a hub for implementing new technologies, and it has the potential to become a major center for financing innovative energy solutions. This includes everything from more efficient, lower-carbon production of existing resources to technological breakthroughs in energy efficiency, renewables, energy storage, and nature-based solutions. For technological breakthroughs, Houston needs a consistent flow of capital to the region, including sources and financing models from venture capital to growth capital, to debt markets and government grants. HETI’s Capital Formation Working Group has mapped inflows and outflows of capital for the energy transition in Houston and found that we need to grow Houston’s capital inflows ten times by 2040 to $150 billion per year to lead the transition. The Working Group regularly convenes for learning sessions on capital markets.

Over the last year, HETI’s working groups have moved from strategy to impact. To learn more about the outcomes of these working groups, check out these resources.

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This article originally ran on the Greater Houston Partnership's Houston Energy Transition Initiative blog. HETI exists to support Houston's future as an energy leader. For more information about the Houston Energy Transition Initiative, EnergyCapitalHTX's presenting sponsor, visit htxenergytransition.org.

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A View From HETI

Fervo Energy has closed financing to support the remaining construction costs for the first phase of Cape Station. Photo via fervoenergy.com

Houston geothermal unicorn Fervo Energy has closed $421 million in non-recourse debt financing for the first phase of its flagship Cape Station project in Beaver County, Utah.

Fervo believes Cape Station can meet the needs of surging power demand from data centers, domestic manufacturing and an energy market aiming to use clean and reliable power. According to the company, Cape Station will begin delivering its first power to the grid this year and is expected to reach approximately 100 megwatts of operating capacity by early 2027. Fervo added that it plans to scale to 500 megawatts.

The $421 million financing package includes a $309 million construction-to-term loan, a $61 million tax credit bridge loan, and a $51 million letter of credit facility. The facilities will fund the remaining construction costs for the first phase of Cape Station, and will also support the project’s counterparty credit support requirements.

Coordinating lead arrangers include Barclays, BBVA, HSBC, MUFG, RBC and Société Générale, with additional participation from Bank of America, J.P. Morgan and Sumitomo Mitsui Trust Bank, Limited, New York Branch.

“As demand for firm, clean, affordable power accelerates, EGS (Enhanced Geothermal Systems) is set to become a core energy asset class for infrastructure lenders,” Sean Pollock, managing director, project Finance at RBC Capital Markets, said in a news release. “Fervo is pioneering this step change with Cape Station, a vital contribution to American energy security that RBC is proud to support.”

The oversubscribed financing marks Cape Station’s shift from early-stage and bridge funding to a long-term, non-recourse capital structure, according to the news release.

“Non-recourse financing has historically been considered out of reach for first-of-a-kind projects,” David Ulrey, CFO of Fervo Energy, said in a news release. “Cape Station disrupts that narrative. With proven oil and gas technology paired with AI-enabled drilling and exploration, robust commercial offtake, operational consistency, and an unrelenting focus on health and safety, we have shown that EGS is a highly bankable asset class.”

Fervo continues to be one of the top-funded startups in the Houston area. The company has raised about $1.5 billion prior to the latest $421 million. It also closed a $462 million Series E in December.

According to Axios Pro, Fervo filed for an IPO that would value the company between $2 billion and $3 billion in January.

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