Will 2023 be hydrogen’s year?

GUEST COLUMN

Scott Nyquist debates both sides of the hydrogen argument in this week’s ECHTX Voices of Energy guest column. Photo courtesy of Aramco.

Yes and no.

Yes, because there is real money, and action, behind it.

Globally, there are 600 projects on the books to build electrolyzers, which separate the oxygen and hydrogen in water, and are critical to creating low-emissions “green hydrogen.” That investment could drive down the cost of low-emissions hydrogen, making it cost competitive with conventional fuels—a major obstacle to its development so far.

In addition, oil companies are interested, too. The industry already uses hydrogen for refining; many see hydrogen as supplemental to their existing operations and perhaps, eventually, supplanting them. In the meantime, it helps them to decarbonize their refining and petrochemical operations, which most of the majors have committed to doing.

Indeed, hydrocarbon-based companies and economies could have a big opportunity in “blue hydrogen,” which uses fossil fuels for production, but then captures and stores emissions. (“Green hydrogen” uses renewables; because it is expensive to produce, it is more distant than blue. “Gray hydrogen” uses fossil fuels, without carbon capture; this accounts for most current production and use.) Oil and gas companies have a head start on related infrastructure, such as pipelines and carbon capture, and also see new business opportunities, such as low-carbon ammonia.

Houston, for example, which likes to call itself the "energy capital of the world,” is going big on hydrogen. The region is well suited to this. It has an extensive pipeline infrastructure, an excellent port system, a pro-business culture, and experience. The Greater Houston Partnership and McKinsey—both of whom I am associated with—estimate that demand for hydrogen will grow 6 to 8 percent a year from 2030 to 2050. No wonder Houston wants a piece of that action.

There are promising, near-term applications for hydrogen, such as ammonia, cement, and steel production, shipping, long-term energy storage, long-haul trucking, and aviation. These bits and pieces add up: steel alone accounts for about 8 percent of global carbon-dioxide emissions. Late last year, Airbus announced it is developing a hydrogen-powered fuel cell engine as part of its effort to build zero-emission aircraft. And Cummins, a US-based engine company, is investing serious money in hydrogen for trains and commercial and industrial vehicles, where batteries are less effective; it already has more than 500 electrolyzers at work.

Then there is recent US legislation. The Infrastructure, Investment and Jobs Act (IIJA) of 2021 allocated $9.5 billion funding for hydrogen. Much more important, though, was last year’s Inflation Reduction Act, which contains generous tax credits to promote hydrogen production. The idea is to narrow the price gap between clean hydrogen and other, more emissions-intensive technologies; in effect, the law seeks to fundamentally change the economics of hydrogen and could be a true game-changer.

This is not without controversy: some Europeans think this money constitutes subsidies that are not allowed under trade rules. For its part, Europe has the hydrogen bug, too. Its REPowerEU plan is based on the idea of “hydrogen-ready infrastructure,” so that natural gas projects can be converted to hydrogen when the technology and economics make sense.

So there is a lot of momentum behind hydrogen, bolstered by the ambitious goals agreed to at the most recent climate conference in Egypt. McKinsey estimates that hydrogen demand could reach 660 million tons by 2050, which could abate 20 percent of total emissions. Total planned production for lower-emission green and blue hydrogen through 2030 has reached more than 26 million metric tons annually—quadruple that of 2020.

No, because major issues have not been figured out.

The plans in the works, while ambitious, are murky. A European official, asked about the REPowerEU strategy, admitted that “it’s not clear how it will work.” The same can be said of the United States. The hydrogen value chain, particularly for green hydrogen, requires a lot of electricity, and that calls for flexible grids and much greater capacity. For the United States to reach its climate goals, the grid needs to grow an estimated 60 percent by 2030.That is not easy: just try siting new transmission lines and watch the NIMBY monsters emerge.

Permitting can be a nightmare, often requiring separate approvals from local, state, interstate, and federal authorities, and from different authorities for each (air, land, water, endangered species, and on and on); money does not solve this. Even a state like Texas, which isn’t allergic to fossil fuels and has a relatively light regulatory touch, can get stuck in permitting limbo. Bill Gates recently noted that “over 1,000 gigawatts worth of potential clean energy projects [in the United States] are waiting for approval—about the current size of the entire U.S. grid—and the primary reason for the bottleneck is the lack of transmission.”

Then there is the matter of moving hydrogen from production site to market. Pipeline networks are not yet in place and shifting natural gas pipelines to hydrogen is a long way off. Liquifying hydrogen and transporting is expensive. In general, because hydrogen is still a new industry, it faces “chicken or egg” problems that are typical of the difficulties big innovations face, such as connecting hydrogen buyers to hydrogen producers and connecting carbon emitters to places to store the carbon dioxide. These challenges add to the complexity of getting projects financed.

Finally, there is money. McKinsey estimates that getting on track to that 600 million tons would require investment of $950 billion by 2030; so far, $240 billion has been announced.

Where I stand: in the middle.

I believe in hydrogen’s potential. More than 3 years ago, I wrote about hydrogen, arguing that while there had been real progress, “many things need to happen, in terms of policy, finance, and infrastructure, before it becomes even a medium-sized deal.” Now, some of those things are happening.

So, I guess I land somewhere in the middle. I think 2023 will see real progress, in decarbonizing refining and petrochemicals operations and producing ammonia, specifically. I am also optimistic that a number of low-emissions electrolysis projects will move ahead. And while such advances might seem less than transformative, they are critical: hydrogen, whether blue or green, needs to prove itself, and 2023 could be the year it does.

Because I take hydrogen’s potential seriously, though, I also see the barriers. If it is to become the big deal its supporters believe it could be, that requires big money, strong engineering and construction project management, sustained commitment, and community support. It’s easy to proclaim the wonders of the hydrogen economy; it’s much more difficult to devise sensible business models, standardized contracts, consistent incentives, and a regulatory system that doesn’t drive producers crazy. But all this matters—a lot.

My conclusion: there will be significant steps forward in 2023—but take-off is still years away.

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Scott Nyquist is a senior advisor at McKinsey & Company and vice chairman, Houston Energy Transition Initiative of the Greater Houston Partnership. The views expressed herein are Nyquist's own and not those of McKinsey & Company or of the Greater Houston Partnership. This article originally ran on LinkedIn.

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Texas' oil and gas foundation could boost its geothermal future, UH says

future of geothermal

Equipped with the proper policies and investments, Texas could capitalize on its oil and gas infrastructure and expertise to lead the U.S. in development of advanced geothermal power, a new University of Houston white paper says.

Drilling, reservoir development and subsurface engineering are among the Texas oil and gas industry’s capabilities that could translate to geothermal energy, according to a news release. Furthermore, oil and gas skills, data, technology and supply chains could help make geothermal power more cost-effective.

Up to 80 percent of the investment required for a geothermal project involves capacity and skills that are common in the oil and gas industry, the white paper points out.

Building on its existing oil-and-gas foundation, Texas could help accelerate production of geothermal energy, lower geothermal energy costs and create more jobs in the energy workforce, according to the news release.

The paper also highlights geothermal progress made by Houston-based companies Fervo Energy, Quaise Energy and Sage Geosystems, as well as Canada-based Eavor Technologies Inc.

UH’s Division of Energy published the white paper, Advanced Geothermal: Opportunities and Challenges, in partnership with the C.T. Bauer College of Business’ Gutierrez Energy Management Institute.

“Energy demand, especially electricity demand, is continuing to grow, and we need to develop new low-carbon energy sources to meet those needs,” Greg Bean, executive director of the institute and author of the white paper, said of geothermal’s potential.

HETI leader reflects on four years focused on the energy transition

The View From HETI

It’s hard to believe only four years have passed since I joined the Greater Houston Partnership to lead the Houston Energy Transition Initiative. We talk about COVID years feeling simultaneously like just yesterday and a lifetime ago, and my time at HETI feels quite similar. The energy and climate landscape has evolved dramatically over the last few years, but one constant has endured…Houston remains at the heart of the energy industry.

When I joined HETI at the start of 2022, I could not have imagined the impact we would have over the next four years. Our vision, laid out in 2020 by then Partnership Chair Bobby Tudor, was bold – leverage Houston’s energy leadership to accelerate global solutions for an energy abundant, low-carbon future. Our mission was clear – ensure the long-term economic competitiveness of the Houston region in a changing energy landscape. Our strategy, developed with strong support from McKinsey, was sound – build a coalition of industry, academic and community partners to position Houston as a leading hub for energy and climate innovation, commercialization and economic growth.

And Houston’s energy leaders, across business, academia and community, came together to deliver that strategy. Bobby Tudor’s timely vision created an anchor for Houston’s energy community that allowed us to broaden the energy and climate discussion to one focused on meeting growing energy demand and reducing emissions. That vision was a catalyst for changing the perception of Houston from oil & gas capital to an “all of the above” energy capital with a thriving energy and climate tech innovation ecosystem. Houston is where you can work collaboratively to build new energy value chains and ensure an affordable, secure, and lower emissions energy mix for our region, our country, and the world.

In this fast-moving energy environment, it can be easy to focus on what to do next without taking time to reflect on the work and celebrate the wins. We took the opportunity at the end of 2025 to reflect on five years of impact. As we developed that report, I thought about how fortunate I have been to lead this work for the last four years. HETI’s impact has been incredibly meaningful for our region, our members, and the new companies and founders building the next generation of energy technology and talent. As my time as executive director comes to an end, HETI’s work continues. The need remains clear: more energy, less emissions, and continued collaboration that brings together innovation and infrastructure, policies and markets, and hard tech together with human ingenuity.

As I prepare to hand the reigns to HETI’s new SVP and executive cirector, Sophia Cunningham, at the end of March, I have been reflecting on the impact this role has had on me. Four years ago, I could never have imagined the opportunities, experiences and relationships this role has enabled. I am truly grateful for the support and engagement of Houston’s business and community leaders, the visionary leadership of Bobby Tudor, Scott Nyquist, HETI Members, and the Greater Houston Partnership in creating this initiative at exactly the right moment in time. I am incredibly proud of the HETI and partnership team members who have delivered with purpose and passion, and I greatly appreciate Houston’s energy and climate leaders and champions who have supported my agenda, challenged my thinking, broadened my perspectives, and worked with HETI to demonstrate the power of partnership in developing, innovating and advancing the ideas and technologies needed to meet this challenge for our region and the world.

As excited as I am to see where this next chapter takes me, I am even more excited to see where the work of HETI goes from here. I am still optimistic that the challenge of providing the world with affordable, reliable, and resilient energy while simultaneously reducing emissions is one Houston is uniquely positioned to meet.

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This article originally appeared 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.

Texas could topple Virginia as biggest data-center market by 2030, JLL report says

data analysis

Everything’s bigger in Texas, they say—and that phrase now applies to the state’s growing data-center presence.

A new report from commercial real estate services provider JLL says Texas could overtake Northern Virginia as the world’s largest data-center market by 2030. Northern Virginia is a longtime holder of that title.

What’s driving Texas’ increasingly larger role in the data-center market? The key factor is artificial intelligence.

Companies like Google and Microsoft need more energy-hungry data centers to power AI innovations. In a 2023 article, Forbes explained that AI models consume a lot of energy because of the massive amount of data used to train them, as well as the complexity of those models and the rising volume of tasks assigned to AI.

“The data-center sector has officially entered hyperdrive,” Andy Cvengros, executive managing director at JLL and co-leader of its U.S. data-center business, said in the report. “Record-low vacancy sustained over two consecutive years provides compelling evidence against bubble concerns, especially when nearly all our massive construction pipeline is already pre-committed by investment-grade tenants.”

Dallas-Fort Worth has long dominated the Texas data-center market. But in recent years, West Texas has emerged as a popular territory for building data-center campuses, thanks in large part to an abundance of land and energy. Nearly two-thirds of data-center construction underway now is happening in “frontier markets” like West Texas, Ohio, Tennessee and Wisconsin, the JLL report says.

Northern Virginia, the current data-center champ in the U.S., boasted a data-center market with 6,315 megawatts of capacity at the end of 2025, the report says. That compares with 2,423 megawatts in Dallas-Fort Worth, 1,700 megawatts in the Austin-San Antonio corridor, 200 megawatts in West Texas, and 164 megawatts in Houston.