How the IRA is affecting clean energy project development, events not to miss, and more things to know this week. Photo via Getty Images

3 things to know this week: Energy startups announce big wins, evaluating the IRA's first year, and more

hou knew?

Editor's note: It's a new week — start it strong with three quick things to know in Houston's energy transition ecosystem. Three energy tech startups are celebrating big wins, experts evaluate the IRA's first year, and events not to miss this week.

Eyes on the IRA

How did the IRA affect energy transition project development? Experts discussed the positive impacts — as well as the challenges still to overcome. Photo courtesy of Renewable Energy Alliance Houston

August 16 marked one year of the Inflation Reduction Act's enactment, and many have taken this first anniversary as an opportunity to look back on its effectiveness and where it's fallen short.

For Carbon Clean, a United Kingdom-founded company, the IRA made all the difference in its expansion into the United States — by way of Houston.

"The impact of the IRA cannot be overstated for our industry, especially for point source carbon capture technology companies like Carbon Clean," Co-Founder, Chair, and CEO Aniruddha Sharma shares with EnergyCapital in an interview. "The momentum created by the law's passage, along with our existing activity in North America, led to the opening of our US headquarters in Houston in March this year. We will double our US headcount to meet demand for CycloneCC, our breakthrough, fully modular carbon capture technology."

At a recent event at Rice University, experts zeroed in on the effect on clean energy project development. While the IRA opened doors for new funding, it also revealed shortcomings when it came to permitting.

"The IRA for developers has been very positive. It provided certainty and allowed developers and investors alike to plan long term," says Omar Aboudaher, senior vice president of development for Leeward Renewable Energy. "With that comes challenges, including exacerbating some existing problems with permitting."

Energy tech startup wins

These three startups have something to celebrate. Photo via Getty Images

Three energy tech startups had some big wins last week — let's take a look.

  • Nauticus Robotics, a Houston-based tech company providing software and hardtech solutions for industrial and government entities, secured a $2.1 million contract extension with one of its biggest clients. Read more.
  • France-based Engie announced that it will acquire Houston-based battery storage startup Broad Reach Power in $1 billion deal. The company launched in 2019 with backing from EnCap Energy Transition, an arm of Houston-based private equity firm EnCap Investments. Read more.
  • Austin-based energy software company P6 Technologies closed a $3.25 million seed round of funding with support from a handful of Houston investors from GOOSE Capital, Artemis Energy Partners, Tupper Lake Partners, and Veritec Ventures. Read more.

Upcoming events to put on your radar

Mark your calendars. Photo via Getty Images

Plan the rest of your August accordingly.

  • August 28-30 — Industrial IMMERSIVE Week attracts the most industrial, energy, and engineering tech professionals making investment, strategy and tactical decisions, or building, scaling and executing pioneering XR/3D/Simulations, digital twin, reality capture, edge /spatial computing, AI/ML, connected workforce & IIoT projects within their enterprise.
  • August 30 — 2023 Energy Research Day will be a showcase of outstanding energy-related research by University of Houston graduate and postdoctoral students. Sponsored by the Division of Research and Graduate School, the event gives industries in the Greater Houston area a chance to see UH research up close and network with future collaborators.
  • August 30-31 — Carbon & ESG Strategies Conference, presented by Hart Energy, will highlight carbon capture and storage projects and technologies onshore and offshore, direct air capture, enhanced oil recovery, responsibly sourced gas, renewable natural gas, federal funding challenges and insurance issues, ESG initiatives, regulatory concerns and much more.

Broad Reach Power's battery storage assets piqued a French company's interest. Photo via broadreachpower.com

French company to acquire Houston-based battery storage startup in $1B deal

M&A Moves

A French utility company is buying the bulk of Houston-based Broad Reach Power’s battery energy storage business in a deal carrying an equity value of more than $1 billion.

Engie, has agreed to purchase the majority of the startup’s battery storage business from EnCap Energy Transition Fund I and three investment partners — New York City-based Yorktown Partners, Switzerland-based Mercuria Energy, and New York City-based Apollo Infrastructure Funds.

“This acquisition is fully in line with Engie’s strategy: It will contribute to the development of a low-carbon, affordable, and resilient energy system where flexible assets will play a critical role alongside renewables,” says Catherine MacGregor, the utility’s CEO.

Broad Reach launched in 2019 with backing from EnCap Energy Transition, an arm of Houston-based private equity firm EnCap Investments. Apollo Global Management, an asset manager that controls Apollo Infrastructure Funds, bought a 50 percent stake in Broad Reach in 2021.

The deal includes 350 megawatts of grid-scale battery assets that already are operating and 880 megawatts of assets under construction, primarily in the territory served by the Electric Reliability Council of Texas (ERCOT). It also includes a 1.7-gigawatt pipeline of battery storage projects that are in the advanced stage of development and a significant pipeline of early-stage projects.

In July, Broad Reach said it had lined up $435 million in credit facilities to support the 880 megawatts’ worth of systems under construction in Texas and California.

The Broad Reach acquisition does not include the company’s 1.8-gigawatt portfolio of solar and wind power projects, or its four gigawatt-hours’ worth of battery storage in the Mountain West.

The deal is expected to close in the fourth quarter of this year. The purchase price wasn’t disclosed, but the Bloomberg news service reports the deal will cause Engie to “take a $1.6 billion hit” to it net debt.

Shawn Cumberland, managing partner of EnCap and chairman of Broad Reach, calls Broad Reach “the top battery storage player in the U.S. market.” And Corinne Still, an infrastructure partner at Apollo, refers to Broad Reach as “the leading and most innovative” battery energy storage operator in North America.

“It has been a terrific honor and pleasure to be part of the rapid growth of the U.S. energy storage sector from the very beginning and see our company grow into one of the top developers,” says Doug Moorehead, founder and COO of Broad Reach.

How did the IRA affect energy transition project development? Experts discussed the positive impacts — as well as the challenges still to overcome. Photo courtesy of Renewable Energy Alliance Houston

Houston experts evaluate the impact of the IRA on cleantech project development

one year later

It's been officially a year since the Inflation Reduction Act was enacted, so it's no surprise that looking at the IRA's impact dominated the discussion at a recent industry event.

The second annual Renewable Energy Leadership Conference, presented by Renewable Energy Alliance Houston and Rice Business Executive Education, featured thought leadership from 20 experts on Tuesday, August 22. While some panels zeroed in on hiring and loan options for energy transition companies, the day's program kicked off with a couple panels looking both back and forward on the IRA.

When looking at the IRA's impact, the experts identified a few key things. Here's what they said at the conference.

Going beyond tax credits and regulation

Greg Matlock, EY's global energy and resources industry tax leader, kicked off the IRA discussion after John Berger, CEO of Sunnova, gave a keynote address.

Matlock set the scene for the IRA, explaining that previous legislation incentivizing clean energy changes mostly stayed within regulation and tax credits. Credits as a tax policy fail to incentivize organizations that are, for various reasons, are tax exempt or are already paying insignificant taxes. The fundamental switch of the IRA was to a "want to" rather than a "have to."

"Everyone has had aspirations, but with aspirations without capital, it's hard to get movement," Matlock says. "But what the IRA did was create a liquidity in the market and added access to an investor base. Now you're pairing aspirations and capital, and now you're seeing movement in the market."

The IRA, Matlock continues, also got the ball rolling on expanding requirements for tax incentives. Previously, a specific technology has to be clearly identified to be qualified for a credit. Moving forward, the IRA improved this qualification process and in the future, there will be be technology neutral incentives.

One thing Matlock also highlighted was the limitations of tax credits — dollar for dollar credit.

"Two years ago, if you called an organization that was tax exempt (about) a project that generates tax credits, why would that want that?" Matlock says. "For the first time, you can sell federal tax credits — not all of them — for cash and tax free to businesses who are paying taxes."

Explaining that there are limitations, Matlock says this process had a significant impact encouraging movement in this space — especially from surprising sources.

"We're seeing companies that have absolutely no connectivity to our energy industry making investments through the purchase of tax credits to fund the development of projects," Matlock says.

A focus on carbon capture and hydrogen

Matlock continues to explain how carbon capture and hydrogen became two case studies for the impact of the IRA.

Prior to the IRA, over 16 countries incentivized hydrogen production, he explains, and the United States was not one of them.

"With the signing of the IRA, we went from the worst to the first," Matlock says.

Carbon capture development was directed more at traditional energy industries. The IRA enactment represented a switch for these companies from regulatory moves to incentivization, which has been more effective in general, Matlock says.

Over the past year, according to the American Clean Power Association, more than $271 billion in investment in clean energy projects has occurred since the IRA was enacted. When it comes to jobs, over 170,000 clean energy jobs have been announced since the IRA.

Problematic permitting and pricing volatility 

In a subsequent panel, the three thought leaders looked at the IRA a bit more critically. While the IRA spurred momentum, it also shined a spotlight on some of the industry's challenges.

"The IRA for developers has been very positive. It provided certainty and allowed developers and investors alike to plan long term," says Omar Aboudaher, senior vice president of development for Leeward Renewable Energy. "With that comes challenges, including exacerbating some existing problems with permitting."

Aboudaher explains that the IRA-inspired burst of projects has caused a lot more permits for the increase of development. And, he adds, there's not a concentrated effort. It's happening in silos on the various levels of government.

"On the permitting side, there's a big need to streamline permitting," Aboudaher says. "In some parts of the country, it can take 6 to 10 years to permit your project."

On the investor side, it's also a problem, adds Fred Day, managing director of investments at Brookfield Asset Management.

"Even though we have this IRA, a lack of permitting reform does create a bottleneck," he says.

Another challenge is a disconnect between supply and demand. While the IRA has incentivized solar energy generation per hour of energy, meaning that its cheaper than ever to make energy via solar panels, there's not yet the demand infrastructure for this energy. This incentivization structure has already been in place for wind power.

"I think it's going to be a real problem. It's a real problem with wind today," Doug Moorehead, COO of Broad Reach Power, says, explaining that there's volatility in pricing. "When the wind is high, prices are really low. When wind is low, prices are high."

All of this is leading to an imbalance of market demand and supply, he continues. Jessica Adkins, partner at Sidley Austin LLP and moderator, adds that there's built in volatility for solar since solar energy is confined to the time of day when the sun is out.

"Any time you're incentivize to produce regardless of demand, it's going to be an issue," Moorehead says.

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Houston company plans to install the first commercial direct lithium extraction plant in the US

coming soon

Houston-based International Battery Metals, whose technology offers an eco-friendly way to extract lithium compounds from brine, is installing what it’s billing as the world’s first commercial modular direct-lithium extraction plant.

The mobile facility is located at US Magnesium’s operations outside Salt Lake City. The plant, expected to go online later this year, will process brine produced from lithium-containing waste-magnesium salts. The resulting lithium chloride product will provide feedstock for high-purity lithium carbonate generated by US Magnesium.

Under its agreement with US Magnesium, International Battery Metals (IBAT) will receive royalties on lithium sales, as well as payments for equipment operations based on lithium prices and performance.

IBAT says its patented technology is the only system that delivers a 97 percent extraction rate for lithium chloride from brine water, with up to 98 percent of water recycled and with minimal use of chemicals.

“Commercial operations will serve growing lithium demand from automakers for electric vehicle batteries, as well as energy storage batteries to support growing electricity demand and to balance the grid from increased renewable energy integration,” IBAT says in a news release.

Initially, the less than three-acre plant will annually produce 5,000 metric tons of lithium chloride. The modular plant was fabricated in Lake Charles, Louisiana.

“Our commercial operations with US Mag will advance a productive lithium extraction operation,” says Garry Flowers, CEO of IBAT. “Given current lithium demand, supply dependence on China, and permitting challenges, our expected commercial operations are coming at an ideal time to produce lithium at scale in the U.S.”

IBAT says the technology has been validated by independent reviewers and has been tested in Texas, California, Michigan, Ohio, and Oklahoma, as well as Argentina, Canada, Chile, and Germany.

IBAT says its modular concept positions the company to be a key supplier for rising U.S. lithium demand, providing an alternative to China and other global suppliers.

John Burba, founder, CTO and director of IBAT, says the modular extraction technology “will be the basis of future lithium extraction from brine resources around the world.”

Houston hospital system to launch all-electric fleet of delivery drones

looking up

A Houston hospital system has announced that it has plans to launch a drone delivery service that will replace traditional car deliveries in 2026.

Memorial Hermann Health System announced that it intends to be the first health care provider in Houston to roll out drone delivery services from San Francisco-based Zipline, a venture capital-backed tech company founded in 2014 that's completed 1 million drone deliveries.

"As a system, we are continuously seeking ways to improve the patient experience and bring greater health and value to the communities we serve. Zipline provides an innovative solution to helping our patients access the medications they need, quickly and conveniently, at no added cost to them," Alec King, executive vice president and CFO for Memorial Hermann, says in a news release.

Zipline boasts of achieving delivery times seven times faster than traditional car deliveries and can usually drop off packages at a rate of a mile a minute. The drones, called Zips, can navigate any weather conditions and complete their missions with zero emissions.

Per the release, the service will be used to deliver medical supplies and prescriptions to patients or supplies or samples between its locations.

"Completing more than one million commercial deliveries has shown us that when you improve health care logistics, you improve every level of the patient experience. It means people get better, faster, more convenient care, even from the comfort of their own home," adds Keller Rinaudo Cliffton, co-founder and CEO of Zipline. "Innovators like Memorial Hermann are leading the way to bring better care to the U.S., and it's going to happen much faster than you might expect."

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This article originally ran on InnovationMap.

Know before you go: Offshore Technology Conference 2024

things to know

An annual conference that showcases technology for the offshore energy business is taking over Houston's NRG Park for the majority of the week.

Here's what you need to know before you go out to the event, which will take place Monday, May 6, to Thursday, May 9.

Attend the Distinguished Achievement Awards on Sunday, May 5

OTC's annual awards reception, the Distinguished Achievement Awards, will kick off the week on May 5. The three award honorees for OTC 2024 have been named and will be honored at the event. Click here to learn more about this year's honorees.

Visit the Energy Transition Pavilion 

The Energy Transition Pavilion will feature panels and presentations about the future of sustainability in the energy industry. The programming takes place Monday through Wednesday, and the exhibit is located at NRG Center in Hall C.

Zoom in on offshore wind

This year, OTC is featuring a dedicated thread to offshore wind technology. A mix of panels, keynotes, and technical presentations, the programming will take place over Monday through Wednesday.

Don't miss the exhibition hall

Over a thousand companies will be exhibiting at OTC this year, and the hall can be a bit overwhelming. Check the program or the map online to see who's exhibiting and where to find them.

Catch the three university showcases 

OTC's University R&D Showcase will feature three schools — the University of Houston, Texas A&M International University, and the University of São Paulo. You can find each university's booth open all four days of OTC.