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

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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Oxy's $1.3B Texas carbon capture facility on track to​ launch this year

gearing up

Houston-based Occidental Petroleum is gearing up to start removing CO2 from the atmosphere at its $1.3 billion direct air capture (DAC) project in the Midland-Odessa area.

Vicki Hollub, president and CEO of Occidental, said during the company’s recent second-quarter earnings call that the Stratos project — being developed by carbon capture and sequestration subsidiary 1PointFive — is on track to begin capturing CO2 later this year.

“We are immensely proud of the achievements to date and the exceptional record of safety performance as we advance towards commercial startup,” Hollub said of Stratos.

Carbon dioxide captured by Stratos will be stored underground or be used for enhanced oil recovery.

Oxy says Stratos is the world’s largest DAC facility. It’s designed to pull 500,000 metric tons of carbon dioxide from the air and either store it underground or use it for enhanced oil recovery. Enhanced oil recovery extracts oil from unproductive reservoirs.

Most of the carbon credits that’ll be generated by Stratos through 2030 have already been sold to organizations such as Airbus, AT&T, All Nippon Airways, Amazon, the Houston Astros, the Houston Texans, JPMorgan, Microsoft, Palo Alto Networks and TD Bank.

The infrastructure business of investment manager BlackRock has pumped $550 million into Stratos through a joint venture with 1PointFive.

As it gears up to kick off operations at Stratos, Occidental is also in talks with XRG, the energy investment arm of the United Arab Emirates-owned Abu Dhabi National Oil Co., to form a joint venture for the development of a DAC facility in South Texas. Occidental has been awarded up to $650 million from the U.S. Department of Energy to build the South Texas DAC hub.

The South Texas project, to be located on the storied King Ranch, will be close to industrial facilities and energy infrastructure along the Gulf Coast. Initially, the roughly 165-square-mile site is expected to capture 500,000 metric tons of carbon dioxide per year, with the potential to store up to 3 billion metric tons of CO2 per year.

“We believe that carbon capture and DAC, in particular, will be instrumental in shaping the future energy landscape,” Hollub said.

Fervo Energy selects Baker Hughes to provide supply geothermal tech for power plants

geothermal deal

Houston-based geothermal energy startup Fervo Energy has tapped Houston-based energy technology company Baker Hughes to supply geothermal equipment for five Fervo power plants in Utah.

The equipment will be installed at Fervo’s Cape Station geothermal power project near Milford, Utah. The project’s five second-phase, 60-megawatt plants will generate about 400 megawatts of clean energy for the grid.

Financial terms of the deal weren’t disclosed.

“Baker Hughes’ expertise and technology are ideal complements to the ongoing progress at Cape Station, which has been under construction and successfully meeting project milestones for almost two years,” says Tim Latimer, co-founder and CEO of Fervo. “Fervo designed Cape Station to be a flagship development that's scalable, repeatable, and a proof point that geothermal is ready to become a major source of reliable, carbon-free power in the U.S.”

Cape Station is permitted to deliver about two gigawatts of geothermal power. The first phase of the project will supply 100 megawatts of power to the grid beginning in 2026. The second phase is scheduled to come online by 2028.

“Geothermal power is one of several renewable energy sources expanding globally and proving to be a vital contributor to advancing sustainable energy development,” Baker Hughes Chairman and CEO Lorenzo Simonelli says. “By working with a leader like Fervo Energy and leveraging our comprehensive portfolio of technology solutions, we are supporting the scaling of lower-carbon power solutions that are integral to meet growing global energy demand.”

Founded in 2017, Fervo is now a unicorn, meaning its valuation as a private company has surpassed $1 billion. In March, Axios reported Fervo is targeting a $2 billion to $4 billion valuation in an IPO.

Over the course of eight years, Fervo has raised almost $1 billion in capital, including equity and debt financing. This summer, the company secured a $205.5 million round of capital.

Houston-area sustainable steel company emerges from stealth with $17M in VC funding

heavy metals

Conroe-based Hertha Metals, a producer of substantial steel, has hauled in more than $17 million in venture capital from Khosla Ventures, Breakthrough Energy Fellows, Pear VC, Clean Energy Ventures and other investors.

The money has been put toward the construction and the launch of its 1-metric-ton-per-day pilot plant in Conroe, where its breakthrough in steelmaking has been undergoing tests. The company uses a single-step process that it claims is cheaper, more energy-efficient and equally as scalable as conventional steelmaking methods. The plant is fueled by natural gas or hydrogen.

The company, founded in 2022, plans to break ground early next year on a new plant. The facility will be able to produce more than 9,000 metric tons of steel per year.

Hertha said in a news release that its process, which converts low-grade iron ore into molten steel or high-purity iron, “doesn’t just materially lower cost and energy use — it fundamentally expands our capacity to produce iron and steel at scale, by unlocking a wider range of iron ore feedstocks.”

Laureen Meroueh, founder and CEO of Hertha, says the company’s process will fill a gap in U.S. steel production.

“We’re not just reinventing steelmaking; we’re redefining what’s possible in materials, manufacturing, and national resilience,” Meroueh says.

Hertha says it’s in talks with magnet producers — which make permanent magnets and magnetic assemblies from raw materials such as iron — to become a U.S. supplier of high-purity iron. In its next stage of growth, Hertha will aim to operate at a capacity of 500,000 metric tons of steel production per year.

The company won the Department of Energy's Summer Energy Program for Innovation Clusters (EPIC) Startup Pitch Competition last summer. Read more here.