Experts: To power an energy revolution, a financing evolution is needed

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Investors in Houston and across Texas are proving to be transformational partners to finance and grow energy hardware startups. Photo via Getty Images

Texas is a national leader in wind and solar, generating more energy in these categories than any other state since 2006 and double that of next placed California. As investment in renewable energy continues to skyrocket, the limitations of the 19th-century grid prevent the industry from realizing the benefits of this 21st-century technology.

For years, Texas has grappled with insufficient infrastructure for its current mix of energy sources, which includes surging renewables. The Alternating Current (AC) grid — the standard since the 1800s — requires matching supply and demand in real-time to maintain a stable frequency, which is complex and costly, especially with renewable energy when the sun doesn’t always shine and the wind doesn’t always blow.

Startup firms are busy developing technologies to solve this issue. For example, it’s possible to modernize the AC grid to control the voltage of the distribution network precisely, to ensure fast adjustments to demand, and to adapt to changes in supply from renewables. Enoda, a U.K.-based scale-up, is an example of an innovative company developing and delivering technology to enable the AC grid to accommodate much higher levels of renewable energy and electrification.

Equally important to these technical innovations are innovations in financing for energy startups. On two levels, investors in Houston and across Texas are proving to be transformational partners to finance and grow energy hardware startups.

1. Innovative Funding Structures

Because of the long timelines, hardware investing requires, in part, more patient capital than the typical Silicon Valley venture capital model prevalent in startup investments. Their playbook is best suited for software companies that develop new features in weeks or months. Energy hardware startups require a longer timeline because of the far greater complexity and upfront capital outlay.

Texas investment firms and family offices are, however, accustomed to investing in complex energy projects with longer development timelines. This complexity presents a high barrier to entry for competitors, which significantly increases the upside potential that risk-capital investors seek should the innovation find market traction. At the same time, up-front capital requirements have decreased considerably, making hardware more appealing to investors.

2. Visionary partnership

Attracting investors and demonstrating early-stage traction differs for hardware companies because of the lengthy pre-revenue R&D process. Software innovators can launch with a minimum viable product, gain a few early customers, and then grow incrementally. By contrast, energy hardware technology must be fully developed from launch. Each Enoda PRIME exchanger, from the first unit sold, represents a piece of critical infrastructure on which households will rely for their electricity supply for its 30-year lifespan. For venture investors who focus on software, it’s easy to assess the health of a software company based on well-established metrics related to customer growth and the cost of customer acquisition.

Hardware investing requires investors to have a much deeper understanding of the problem being solved and assess the quality of the solution objectively rather than rely on early customers for a minimum viable product. Texas investors have been quick to understand the problems that the energy industry must solve around energy balancing and keeping the frequency of a system stable in order to grow renewable energy. Why the keen insight? Because that problem is being solved today by gas power plants. A visionary investor with many years of deep industry perspective is far more likely to appreciate that than a VC firm looking across many industries based on a standard set of metrics.

Visionary partnership is precisely what energy startups need because it’s important not to evaluate the company as it is today but what it will be in five years. Hardware startups need visionary investor partners who understand the importance of parallel pathing fundamental innovation, product development and delivery, and customer development to grow and succeed. Hardware startups succeed only when they can do these things simultaneously—and require investors who can imagine a possible future and understand the path to reach it.

Changing the way investment works

Many energy startups are worthy inheritors of Houston’s bold entrepreneurial spirit that led to technological innovations like deep-sea drilling and hydraulic fracturing. They will continue to need equally bold investors who recognize the world of opportunities at their doorstep.

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Paul Domjan is the founder and chief policy and global affairs officer at Enoda. Derek Jones and Paul Morico are partners at Baker Botts.

Accenture's Houston hub will introduce a new generative AI studio. Photo via Getty Images

Global corporation to open generative AI studio geared toward energy, chemicals industries in Houston

coming soon

Accenture has announced a new studio coming to Houston that will help its industrial clients with generative artificial intelligence.

The company announced that it will launch a network of studios across North America that will work with clients to explore generative AI applications in business. The initiative will support companies in navigating use cases, conducting AI pilots, and scaling programs. The studios will be in Accenture Innovation Hubs in Chicago, Houston, New York, San Francisco, Toronto and Washington, D.C.

“The studios are designed to help our clients move from interest to action to value, in a responsible way with clear business cases,” Manish Sharma, North America CEO of Accenture, says in the news release. “We are constantly refreshing our learnings from more than 3,000 client conversations on generative AI this year. We use these conversations as demand signals to understand the real-world challenges our clients face and invest in the areas of greatest need and opportunity.”

Each of the studios will have a specific industrial focus as well as broad support. Houston's location will specialize in Industry X, chemicals, energy and utilities industries. The other five markets, according to Accenture, are as follows:

Chicago will specialize in financial services, health, life sciences, consumer goods and services, Industry X and manufacturing.
New York will specialize in life sciences and financial services.
San Francisco will specialize in software and platforms and communications, media, and technology.
Toronto will specialize in financial services, retail, health, and public service.
Washington, D.C. will specialize in health, public service, including federal government services.

The initiative is a part of Accenture’s $3 billion investment in data and AI, and each of the studios will leverage Accenture’s top data and AI experts and partners, including expertise from within Accenture's Center for Advanced AI. Resource access also includes more than 1,450 patents and patent applications in AI solutions, as well as learnings from more than 300 active generative AI projects the company has worked on.

“Clients are ready to move beyond generative AI experimentation. They want to harness generative AI at scale to fundamentally reinvent their business,” Sharma adds. “Clients will come to the studios to access the latest innovations, experiment with new technologies, tools, and approaches to advance their skills, and develop roadmaps to adopt generative AI at scale.”

Asking ChatGPT what all was made from petroleum produced surprising results - the answer: everything. Photo by Sanket Mishra/Unsplash

Energy truly IS everywhere according to ChatGPT

EVERYDAY ENERGY

I sat down to have a conversation with ChatGPT from OpenAI about energy by-products; specifically, everyday items we use that contain some form of petrochemicals. My first prompt was rather broad, so I wasn’t surprised to get back a rather broad answer highlighting product categories instead of specific examples. Plastics, synthetic fibers, cleaning products, personal care products, medicines, paints & coatings, and adhesives were all succinctly summarized, but I wanted to dive deeper.

Given that AI has an almost limitless reach, I asked for a comprehensive list of all the products we use in everyday life that are made from petrochemicals. Turns out, ChatGPT has some healthy boundaries, so it pushed back, only offering a slightly more detailed list of the categories produced from the first prompt.

Not to be deterred, I asked for additional examples. I didn’t want to continue getting spoon-fed 10 items at a time, so I asked for 200. Less than comprehensive, more than the crumbs I was getting.

In entertaining fashion, ChatGPT told me compiling a list of 200 items might be challenging, but that it could offer up 100. The brazen negotiation made me smile.

I complimented the list and nudged a bit, encouraging ChatGPT it could come up with another 100 items if it tried. Much like a teenager wishes to stave off further questioning from a nosy parent, ChatGPT proffered up a second response of 100 items–almost half of which were simply things before which it added the qualifier “synthetic.” Salty.

As my intention is not to bore you, but rather enhance the knowledge of our readers by understanding how pervasive petrochemical products are in our everyday life, I settled on a more direct inquiry with a capped demand prompt: “What would you say are the 10 most surprising things in common everyday use that contain petrochemical products?”

Most of the answers featured wax-based products, like lotions, crayons, and lipstick–not necessarily earth-shattering realizations given my familiarity with cosmetics as petroleum by-products. I was pleasantly surprised to learn that chewing gum, with its synthetic rubber base enabling theoretically endless chewing, is derived from petroleum. I was also surprised to learn that many artificial sweeteners, like saccharin and aspartame, are made from petrochemicals. Huh.

There was one item on the list, however, that helped me see how truly pervasive the energy industry is, and not just for petrochemicals. Tucked in nonchalantly at #6 was Deodorant. My brain jumped immediately to the waxy base of a solid sweat deterrent, but my eyes got a curveball. ChatGPT writes, “Many deodorants contain aluminum, which is often derived from bauxite, a mineral that is usually mined from the earth using petroleum-powered machinery.” Now that was an answer I wasn’t expecting.

While my initial inference stood true – the smooth glide of a buttery solid antiperspirant is without a doubt derived from petrochemicals (not to mention the plastic packaging surrounding it), I wasn’t expecting ChatGPT to rope in the oft petroleum-fueled tools used to make said product. If that’s true, then nearly every item on the planet is derived from petroleum. Or at the very least, some source of energy. Regardless of whether the machinery used runs on gasoline, electricity, or wind power, literally almost everything that is produced on this earth is related to the energy industry.

Even if it’s hand-made, it’s technically still energy-adjacent, assuming we all bathe regularly with soap, yet another on the list of commonly used items derived from petroleum by-products. It’s certainly directly powering some manual activities, for those busting stress and bad breath with gum, or drinking a diet soda to power through. No pun intended.

I share this amusing tale simply to clarify the ubiquitous nature of energy in all parts of the modern world. As we look toward the #futureofenergy, we must be cognizant of its universal reach. It’s not necessarily realistic to switch from one source of energy to another overnight, but we do have a responsibility to seek cleaner, healthier, more efficient sources of energy while sustaining the life to which we have all grown accustomed.

Much like ChatGPT thought she couldn’t come up with 200 items derived from petroleum products, many think Houston will be unable to drive the Energy Transition, given our extensive petroleum focus. But like so many fellow Houstonians before us, we love a good challenge.

Just keep prompting us, and we’ll eventually unlock infinite potential for the #futureofenergy. It’s a limitless time to be in Houston, absorbing wisdom the city so willingly wants to share with the growing ecosystem of innovators. Just ask the growing number of almost 5,000 Energy-related firms in Houston. We’re just getting started.

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Lindsey Ferrell is a contributing writer to EnergyCapitalHTX and founder of Guerrella & Co.

Rising temps could result in rolling brownouts this summer–unless we work together to reduce the strain on the electric grid. Photo via Shutterstock

NERC warns of summer energy shortfalls–what you can do now

THINGS ARE HEATING UP

The North American Electric Reliability Council (NERC) issued a warning with the 2023 Summer Reliability Assessment yesterday – energy shortages could be coming this summer for two-thirds of North America if temperatures spike higher than normal.

“Increased, rapid deployment of wind, solar and batteries have made a positive impact,” Mark Olson, NERC’s manager of reliability assessments says in the release. “However, generator retirements continue to increase the risks associated with extreme summer temperatures, which factors into potential supply shortages in the western two-thirds of North America if summer temperatures spike.”

For Texans, the combined risk of drought and higher-than-normal temperatures could stress ERCOT system resources, especially in the case of reduced wind. But before there’s a mad rush on generators, keep in mind, electricity consumers can take simple actions to minimize the possibility of widespread shortfalls.

Electricity demand begins rising daily around 2 P.M. in the summer and peaks in the final hours of daylight. These hours are generally not only the warmest hours of the day but also the busiest. People return from work to their homes, crank down the air conditioner, turn on TVs, run a load of wash, and prepare meals using multiple electric-powered appliances.

If everyone takes one or two small steps to avoid unnecessary stress on the grid in the hours after coming home from work, we can prevent energy shortfalls. Modify routines now to get into the habit of running the dishwasher overnight, using the washer and dryer before noon or after 8 pm and pulling the shades down in the bright afternoon hours of the day.

Try to delay powering up devices – including EVs – until after dark. Turn off and unplug items to avoid sapping electricity when items are not in use. And if you can bear it, nudge that thermostat up a couple of degrees.

Energy sustainability demands consistent collaboration and coordination from every consumer of energy. Let’s get in the habit of acting neighborly now with conservative electricity practices before we start seeing temperatures–of both the literal and figurative kind–flare.

The convergence of green banking with evergreen experimentation in support of a growing green economy sounds like just the right shade of green. Photo by micheile henderson/Unsplash

Green banking meets evergreen R&D with recent MOU

MONEY + MATTER

The term “Energy Transition” doesn’t merely imply change, it demands it. And with change comes another kind of change–usually of the dollars and cents kind.

While many aspire to embrace more sustainable and cleaner energy solutions in their communities, the affluence needed to deploy necessary infrastructure often sits just outside of reach. Until now, that is.

With the rise of “green banking,” securing financing for the adoption of energy efficiency, implementation of decarbonization technologies, and broader provision of renewable energy is now more accessible. Funds at green banks, backed by a blend of public and philanthropic contributions, tap into the modern trend of crowdfunding to support egalitarian and climate improvement efforts.

However, green bank financing is structured with repayment of–or a return on–capital expected at the end of the term, meaning approval tends only to be granted to proven and established projects well past the research and development stage. Given the Energy Transition is, for the most part, still in its infancy, clearing such hurdles can be difficult.

But Houston is full of dreamers and doers; researchers and entrepreneurs eager to tackle the next big challenge. It would come as no surprise then, that Texas’ first green bank, the Clean Energy Fund of Texas (“CEFTx”), bucks tradition with a novel Memorandum Of Understanding (“MOU”) co-signed by the Houston Advanced Research Center (“HARC”) to finance efforts staunchly entrenched in R&D activity.

As the Energy Transition foothold grows, Houstonians are compelled not just to invest in green initiatives, but to drive them. Which only makes sense, considering the deep expertise in energy innovation led most recently by the Houston-area shale revolutionaries from Mitchell Energy. Established over 40 years ago by George P. Mitchell himself, HARC plants the seeds of transformation at the intersection of science, resilience, sustainability, and the environment.

Per the March 29 news release from CEFTx, John Hall, President & CEO of HARC says, “We are excited to join forces with the team at Clean Energy Fund of Texas as they drive green investment in low-income and disadvantaged communities. Our research expertise and experience in managing state and federal grants will be a true benefit to Texans.”

The recent MOU brings Energy Transition visionaries the capital necessary to explore, test, develop, and deploy innovative solutions from conception to maturity. Entrepreneurs at all stages of the business lifecycle are encouraged to apply for funding on the CEFTx website or connect with HARC at an upcoming event to discover how the two entities can take ideas from dream to reality.

“It’s an honor to work with the esteemed researchers at HARC, who have been studying sustainability for decades,” says Stephen Brown of CEFTx in the release. “Together we can be even more effective at kickstarting investments in solar power, retrofits, and other technologies that help create the green workforce of tomorrow.”

The fresh approach to funding set up by CEFTx and HARC positions new companies to succeed and enables existing companies to progress in the transition to a more sustainable #futureofenergy. It’s just the sort of sense that is needed to truly drive change.

Nabors executive Subodh Saxena challenged leaders to think more like Generation Z at OTC2023. Photo courtesy of nabors.com

Drilling executive calls for a new course of action to achieve success

EMPOWERING TRANSITION

Gone are the days of people, process, and technology. Welcome to purpose, partnering, and governance.

In the early morning hours of the third day of OTC2023, Subodh Saxena, senior vice president at Nabors Industries, succinctly summarized both the challenges and opportunities faced by an industry in the middle of an identity crisis.

The upstream energy industry focused the better part of the last two decades on physical safety, division and clarity of responsibilities, and technology adoption and adaptation. Rightfully so, given the Macondo incident of 2010, the Enron collapse in 2002, and the general wildfire growth of technology in the workplace over the same time frame.

But as leadership that came of age during these tragedies takes the reigns, a new set of challenges arises. Consistent lack of positive financial returns, a shrinking talent pool, and of course, the climate crisis, combine to form the perfect storm for an industry just trying to manage the rising and falling tides of unstable commodity pricing.

To avoid completely capsizing during this squall in which the industry finds itself, Saxena describes three opportunities for improvement.

Attracting new talent by creating psychological safety in our workplaces and improving the perception of technology adaptation in the industry

Embracing a collaborative approach to building new solutions to limit the amount of siloed rework that currently stymies rapid advancement

Improved financial discipline with greater honesty about ROI for the entire supply chain

“We have a mindset in the industry, that we have to build everything ourselves," Saxena laments. "We have to learn to partner because [if] every company invests in new technology to create transition, whether that's hydrogen or any other source of green energy, that return on invested capital is going to become negative. We need to learn to collaborate to ensure that we are all going to be successful.”

The requests made by Saxena represent a growing movement within the incumbent industry to think not of the energy transition as a shift from one energy source to another but as a transition in mindset. Collaboration is the name of the game now, as are mindfulness, responsibility, and above all else, sustainability.

Revisiting purpose, partnering, and governance to identify room for improvement will ultimately determine whether organizations will sink or sail.

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CenterPoint launches $65B capital improvement plan

grid growth

To support rising demand for power, Houston-based utility company CenterPoint Energy has launched a $65 billion, 10-year capital improvement plan.

CenterPoint said that in its four-state service territory — Texas, Indiana, Minnesota and Ohio — the money will go toward building and maintaining a “resilient” electric grid and a safe natural gas system.

In the Houston area, CenterPoint forecasts peak demand for electricity will increase nearly 50 percent, to almost 31 gigawatts, by 2031 and peak demand will climb to almost 42 gigawatts by the middle of the next decade. CenterPoint provides energy to nearly 2.8 million customers in the Houston area.

In addition to the $65 billion capital improvement budget, which is almost 40 percent higher than the 2021 budget, CenterPoint has identified more than $10 billion in investment opportunities that could further improve electric and natural gas service.

“Every investment we make at CenterPoint is in service of our approximately seven million metered customers we have the privilege to serve,” CenterPoint president and CEO Jason Wells said in a news release.

“With our customer-driven yet conservative approach to growth, we continue to see significant potential for even more investment for the benefit of our customers that is not yet reflected in our new plan,” he added.

UH projects propose innovative reuse of wind turbines and more on Gulf Coast

Forward-thinking

Two University of Houston science projects have been selected as finalists for the Gulf Futures Challenge, which will award a total of $50 million to develop ideas that help benefit the Gulf Coast.

Sponsored by the National Academies of Science, Engineering and Medicine’s Gulf Coast Research Program and Lever for Change, the competition is designed to spark innovation around problems in the Gulf Coast, such as rising sea levels, pollution, energy security, and community resiliency. The two UH projects beat out 162 entries from organizations based in Alabama, Florida, Louisiana, Mississippi, and Texas.

“Being named a finalist for this highly competitive grant underscores the University of Houston’s role as a leading research institution committed to addressing the most pressing challenges facing our region,” said Claudia Neuhauser, vice president for research at UH.

“This opportunity affirms the strength of our faculty and researchers and highlights UH’s capacity to deliver innovative solutions that will ensure the long-term stability and resilience of the Gulf Coast.”

One project, spearheaded by the UH Repurposing Offshore Infrastructure for Continued Energy (ROICE) program, is studying ways to use decommissioned oil rig platforms in the Gulf of Mexico as both clean energy hydrogen power generators as well a marine habitats. There are currently thousands of such platforms in the Gulf.

The other project involves the innovative recycling of wind turbines into seawall and coastal habitats. Broken and abandoned wind turbine blades have traditionally been thought to be non-recyclable and end up taking up incredible space in landfills. Headed by a partnership between UH, Tulane University, the University of Texas Health Science Center at Houston, the city of Galveston and other organizations, this initiative could vastly reduce the waste associated with wind farm technology.

wind turbine recycled for Gulf Coast seawall. Wind turbines would be repurposed into seawalls and more. Courtesy rendering

"Coastal communities face escalating threats from climate change — land erosion, structural corrosion, property damage and negative health impacts,” said Gangbing Song, Moores Professor of Mechanical and Aerospace Engineering at UH and the lead investigator for both projects.

“Leveraging the durability and anti-corrosive properties of these of decommissioned wind turbine blades, we will build coastal structures, improve green spaces and advance the resilience and health of Gulf Coast communities through integrated research, education and outreach.”

The two projects have received a development grant of $300,000 as a prize for making it to the finals. When the winner are announced in early 2026, two of the projects will net $20 million each to bring their vision to life, with the rest earning a consolation prize of $875,000, in additional project support.

In the event that UH doesn't grab the grand prize, the school's scientific innovation will earn a guaranteed $1.75 million for the betterment of the Gulf Coast.

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This article originally appeared on CultureMap.com.

ERCOT steps up grid innovation efforts to support growing power demand

grid boost

As AI data centers gobble up more electricity, the Electric Reliability Council of Texas (ERCOT) — whose grid supplies power to 90 percent of Texas — has launched an initiative to help meet challenges presented by an increasingly strained power grid.

ERCOT, based in the Austin suburb of Taylor, said its new Grid Research, Innovation, and Transformation (GRIT) initiative will tackle research and prototyping of emerging technology and concepts to “deeply understand the implications of rapid grid and technology evolution, positioning ERCOT to lead in the future energy landscape.”

“As the ERCOT grid continues to rapidly evolve, we are seeing greater interest from industry and academia to collaborate on new tools and innovative technologies to advance the reliability needs of tomorrow’s energy systems,” ERCOT President and CEO Pablo Vegas said in a news release. “These efforts will provide an opportunity to share ideas and bring new innovations forward, as we work together to lead the evolution and expansion of the electric power grid.”

In conjunction with the GRIT initiative, ERCOT launched the Research and Innovation Partnership Engagement (RIPE) program. The program enables partners to work with ERCOT on developing technology aimed at resolving grid challenges.

To capitalize on ideas for grid improvements, the organization will host its third annual ERCOT Innovation Summit on March 31 in Round Rock. The summit “brings together thought leaders across the energy research and innovation ecosystem to explore solutions that use innovation to impact grid transformation,” ERCOT said.

“As the depth of information and industry collaboration evolves, we will continue to enhance the GRIT webpages to create a dynamic and valuable resource for the broader industry to continue fostering strong collaboration and innovation with our stakeholders,” said Venkat Tirupati, ERCOT’s vice president of DevOps and grid transformation.

ERCOT’s GRIT initiative comes at a time when the U.S. is girding for heightened demand for power, due in large part to the rise of data centers catering to the AI boom.

A study released in 2024 by the Electric Power Research Institute (EPRI) predicted electricity for data centers could represent as much as 9.1 percent of total power usage in the U.S. by 2030. According to EPRI, the share of Texas electricity consumed by data centers could climb from 4.6 percent in 2023 to almost 11 percent by 2030.

A report issued in 2024 by the federal government’s Lawrence Berkeley National Laboratory envisions an even faster increase in data-center power usage. The report projected data centers will consume as much as 12 percent of U.S. electricity by 2028, up from 4.4 percent in 2023.

In 2023, the EPRI study estimated, 80 percent of the U.S. electrical load for data centers was concentrated in two states, led by Virginia and Texas. The University of Texas at Austin’s Center for Media Engagement reported in July that Texas is home to 350 data centers, second only to Virginia.

“The U.S. electricity sector is working hard to meet the growing demands of data centers, transportation electrification, crypto-mining, and industrial onshoring, while balancing decarbonization efforts,” David Porter, EPRI’s vice president of electrification and sustainable energy strategy, said. “The data center boom requires closer collaboration between large data center owners and developers, utilities, government, and other stakeholders to ensure that we can power the needs of AI while maintaining reliable, affordable power to all customers.”

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