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Houston expert: The role of U.S. LNG in global energy markets

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U.S. LNG is essential to balancing global energy markets for the decades ahead. Photo via Getty Images

The debate over U.S. Liquefied Natural Gas (LNG) exports is too often framed in misleading, oversimplified terms. The reality is clear: LNG is not just a temporary fix or a bridge fuel, it is a fundamental pillar of global energy security and economic stability. U.S. LNG is already reducing coal use in Asia, strengthening Europe’s energy balance, and driving economic growth at home. Turning away from LNG exports now would be a shortsighted mistake, undermining both U.S. economic interests and global energy security.

Ken Medlock, Senior Director of the Baker Institute’s Center for Energy Studies, provides a fact-based assessment of the U.S. LNG exports that cuts through the noise. His analysis, consistent with McKinsey work, confirms that U.S. LNG is essential to balancing global energy markets for the decades ahead. While infrastructure challenges and environmental concerns exist, the benefits far outweigh the drawbacks. If the U.S. fails to embrace its leadership in LNG, we risk giving up our position to competitors, weakening our energy resilience, and damaging national security.

LNG Export Licenses: Options, Not Guarantees

A common but deeply flawed argument against expanding LNG exports is the assumption that granting licenses guarantees unlimited exports. This is simply incorrect. As Medlock puts it, “Licenses are options, not guarantees. Projects do not move forward if they are unable to find commercial footing.”

This is critical: government approvals do not dictate market outcomes. LNG projects must navigate economic viability, infrastructure feasibility, and global demand before becoming operational. This reality should dispel fears that expanded licensing will automatically lead to an uncontrolled surge in exports or domestic price spikes. The market, not government restrictions, should determine which projects succeed.

Canada’s Role in U.S. Gas Markets

The U.S. LNG debate often overlooks an important factor: pipeline imports from Canada. The U.S. and Canadian markets are deeply intertwined, yet critics often ignore this reality. Medlock highlights that “the importance to domestic supply-demand balance of our neighbors to the north and south cannot be overstated.”

Infrastructure Constraints and Price Volatility

One of the most counterproductive policies the U.S. could adopt is restricting LNG infrastructure development. Ironically, such restrictions would not only hinder exports but also drive up domestic energy prices. Medlock’s report explains this paradox: “Constraints that either raise development costs or limit the ability to develop infrastructure tend to make domestic supply less elastic. Ironically, this has the impact of limiting exports and raising domestic prices.”

The takeaway is straightforward: blocking infrastructure development is a self-inflicted wound. It stifles market efficiency, raises costs for American consumers, and weakens U.S. competitiveness in global energy markets. McKinsey research confirms that well-planned infrastructure investments lead to greater price stability and a more resilient energy sector. The U.S. should be accelerating, not hindering, these investments.

Short-Run vs. Long-Run Impacts on Domestic Prices

Critics of LNG exports often confuse short-term price fluctuations with long-term market trends. This is a mistake. Medlock underscores that “analysis that claims overly negative domestic price impacts due to exports tend to miss the distinction between short-run and long-run elasticity.”

Short-term price shifts are inevitable, driven by seasonal demand and supply disruptions. But long-term trends tell a different story: as infrastructure improves and production expands, markets adjust, and price impacts moderate. McKinsey analysis suggests supply elasticity increases as producers respond to price signals. Policy decisions should be grounded in this broader economic reality, not reactionary fears about temporary price movements.

Assessing the Emissions Debate

The argument that restricting U.S. LNG exports will lower global emissions is fundamentally flawed. In fact, the opposite is true. Medlock warns against “engineering scenarios that violate basic economic principles to induce particular impacts.” He emphasizes that evaluating emissions must be done holistically. “Constraining U.S. LNG exports will likely mean Asian countries will continue to turn to coal for power system balance,” a move that would significantly increase global emissions.

McKinsey’s research reinforces that, on a lifecycle basis, U.S. LNG produces fewer emissions than coal. That said, there is room for improvement, and efforts should focus on minimizing methane leakage and optimizing gas production efficiency.

However, the broader point remains: restricting LNG on environmental grounds ignores the global energy trade-offs at play. A rational approach would address emissions concerns while still recognizing the role of LNG in the global energy system.

The DOE’s Commonwealth LNG Authorization

The Department of Energy’s recent conditional approval of the Commonwealth LNG project is a step in the right direction. It signals that economic growth, energy security, and market demand remain key considerations in regulatory decisions. Medlock’s analysis makes it clear that LNG exports will be driven by market forces, and McKinsey’s projections show that global demand for flexible, reliable LNG is only increasing.

The U.S. should not limit itself with restrictive policies when the rest of the world is demanding more LNG. This is an opportunity to strengthen our position as a global energy leader, create jobs, and ensure long-term energy security.

Conclusion

The U.S. LNG debate must move beyond fear-driven narratives and focus on reality. The facts are clear: LNG exports strengthen energy security, drive economic growth, and reduce global emissions by displacing coal.

Instead of restrictive policies that limit LNG’s potential, the U.S. should focus on expanding infrastructure, maintaining market flexibility, and supporting innovation to further reduce emissions. The energy transition will be shaped by market realities, not unrealistic expectations.

The U.S. has an opportunity to lead. But leadership requires embracing economic logic, investing in infrastructure, and ensuring our policies are guided by facts, not political expediency. LNG is a critical part of the global energy landscape, and it’s time to recognize its long-term strategic value.

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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 appeared on LinkedIn.

Scott Nyquist on what the path to net-zero will look like. Graphic via mckinsey.com

Column: Houston expert on what the path to net-zero will look like

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The $275 trillion question: What does the road to net-zero look like?

That’s a good question, and McKinsey took a serious stab at providing an answer in a 2022 report, it considers the net-zero scenario described by the Network for Greening the Financial System (NGFS), a consortium of 105 central banks and financial institutions. McKinsey then describes the costs, benefits, and social and economic changes that would likely be required for the world to start, stay on, and finish the pathway described by the NGFS.

Here is what the report isn’t, and what it doesn’t do. It isn’t a roadmap to net zero, and it does not make predictions. Rather, it offers estimates related to one specific scenario. It does not say who should pay. It does not address adaptation. It doesn’t even assume that restricting global temperature rises to 1.5 degrees Celsius by 2050 is achievable. It doesn’t assert that this is the best or only way to of. Indeed, it notes that “it is likely that real outcomes will diverge from these estimates.”

What the report does do is more interesting: with rigor and thoughtfulness, it thinks through what a genuine, global effort to get to net zero would take. Here are a few insights from the report I found particularly noteworthy.

It won’t come cheap. Capital spending by 2050 under the NGFS scenario would add up to $275 trillion, or $9.2 trillion per year on average. That is about $3.5 trillion a year more than is being spent today, or the equivalent of about half of global corporate profits in 2020. In addition, about $1 trillion of current spending would need to shift from high- to low-emissions assets. In short, it’s a lot of money. Of course, some of these costs are also investments that will deliver returns, and indeed the share that do so will probably rise over the decades. Upfront spending now could also reduce operating costs down the line, through greater efficiency and lower maintenance costs. And it’s important to keep in mind the considerable benefit of a healthier planet and a stable climate, with cleaner air and richer land. But the authors do not shy away from the larger point: “Reaching net-zero emissions will thus require a transformation of the global economy.”

Some countries are going to be hit harder than others. It’s hardly surprising to read that countries like Saudi Arabia, Russia, and Venezuela, which rely heavily on oil and gas resources, are going to have a more difficult time adjusting. The same is true for many developing economies. To some extent their residents can leapfrog to cleaner, greener technologies, just as they skipped the landline in favor of cellphones. But other factors weigh in. For example, developing countries are more likely to have high-emissions manufacturing as a major share of the economy; services are generally lower emission. In addition, poorer countries still have to build much of their infrastructure, which is costly. All this adds up. The report estimates that India and sub-Saharan Africa would need to spend almost 11 percent of its GDP on physical assets related to energy and land to get to net zero; in other Asian countries and Latin America, it is more than 9 percent. For Europe and the United States, by contrast, the figure is about 6 percent.

Now is better than later. An orderly, gradual transition would likely be both gentler and cheaper than a hasty, disorderly one. The report sees spending as “frontloaded,” meaning that there is more of it in the next decade to 15 years, and then it declines. That is because of the need for substantial capital investment. But why does this matter? There is timing, for one thing. If low emissions sources do not increase as fast (or preferably faster) than high-emissions ones are retired, there will be shortages or price rises. Both would be unpleasant, and could also cut into public support for change. And then there is the matter of money. If a coal plant is built today—as many are—and then has to be shut down, abruptly and well before its useful life over, a lot of money that was invested in it will never be recouped. The report estimates that as much as $2.1 trillion assets in the power sector alone could be stranded by 2050. Many of these assets are capitalized on the balance sheets of listed companies; shutting them down prematurely could bring bankruptcies and credit defaults, and that could affect the global financial system.

The world would look very different. Under the NGFS scenario, oil and gas production volumes in 2050 would be 55 percent and 70 percent lower, respectively, and coal would just about vanish. The market share for battery or fuel cell-electric vehicles would be close to 100 percent. Many existing jobs would disappear, and because these assets tend to be geographically concentrated, the effects on local communities would be harsh. For example, more than 10 percent of jobs in 44 US counties are in the coal, oil and gas, fossil fuel power, and automotive sectors. On the whole, McKinsey estimates that the transition could mean the loss of 187 million jobs—but the creation of 202 million new ones. Reaching net zero would also make demands on individuals, such as switching to electric vehicles, making their homes more energy efficient, and eating less meat like beef and lamb (cows and sheep are ruminants, emitting methane, a greenhouse gas).

There’s a lot else worth thinking about in the report, which goes into some detail about forestry and agriculture, for example, as well as the role of climate finance and what can be done to fill technology gaps. And its closing sentence is worth pondering: “The key issue is whether the world can muster the requisite boldness and resolve to broaden its response during the next decade or so, which will in all likelihood decide the nature of the transition.”

So, is something like this going to happen? I don’t know. There is certainly momentum. As of January 27, 2022, 136 countries accounting for almost 90 percent of both emissions and GDP, have signed up to the idea. But these pledges are not cast in stone, or indeed in legislation, in many places, and as a rule policy is running far short of the promise. “Moving to action,” the report notes dryly, “has not proven easy or straightforward.”

And while some things can be done from the top down, others cannot—such as the considerable shift in human diets away from high-emissions (and delicious) beef and lamb and more toward poultry and legumes. Moreover, inertia and vested interests are powerful forces. “Government and business would need to act together with singular unity, resolve, and ingenuity, and extend their planning and investment horizons even as they take immediate actions to manage risks and capture opportunities,” the report concludes. That’s a big ask.

So, like McKinsey, I am not going to make predictions. But for an analysis of what it would take, this is a valuable effort.

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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 on January 28, 2022.

Scott Nyquist on the future of technology and how they affect the energy industry. Photo via Getty Images

Houston expert: Where is tech going? And can the energy industry keep up?

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When smart people come together to consider the future, it’s worth listening to them.

Not long ago, McKinsey brought together more than 60 experts, and asked them to name the most important technology trends for business. They started from the premise that the next 10 years will see more technological progress than in the previous 100 years—and that this will up-end companies and industries everywhere.

“We believe the technology disruption over the next few years will be equal to the industrial revolution,” says Nicolaus Henke, a McKinsey alum who participated in this Tech Trends Index, which will be updated annually.

Here are some of the specific predictions. More than three-quarters of enterprise-generated data will be processed by edge or cloud computing by 2025. Ten percent of global GDP could be associated with blockchain by 2027. Renewables will produce 75 percent of global energy by 2050. 5G could reach 80 percent of the world’s population by 2030.

Time will tell if any or all of these are right; personally, I think renewables will have to wait a little longer for that kind of dominance. But by and large, I found the list, and the underlying thinking, compelling. And given my background in oil-and-gas, I thought it was striking that parts of the energy industry are working on just about every single one of them. Here is the list:

  • Next-level process automation and visualization.
  • Future of connectivity.
  • Distributed infrastructure.
  • Next-generation computing.
  • Applied artificial intelligence (AI).
  • Future of programming.
  • Trust architecture.
  • Bio revolution.
  • Next-generation materials.
  • Future of clean technologies.

Specifically, the first half-dozen items are all connected to digitization, and while the energy industry may not be at the cutting edge of development, it has a long track record of integrating these technologies and safely deploying them in order to deliver low-cost and reliable supply.

For example, the oil and gas industry has used AI for years to evaluate reservoirs and to plan drilling—one of many improvements over the traditional “one rock, two geologists, three opinions" way of doing things. And advanced materials, such as composites, engineered polymers, and low-density/high-strength metals and alloys are commonly used to lower costs and improve performance, for example in deep water oil and gas production and rotating equipment. As for connectivity, there is no shortage of commitment, but I think it is fair to say that the full potential has not been tapped.

McKinsey has estimated that making use of advanced connectivity alone—to optimize drilling and production, as well as to improve maintenance and field operations—could translate into $250 billion in value by 2030. That is something that the industry could really use, given recent price fluctuations. Taken as a whole, while the industry is nowhere near completing a full digital transformation, it is certainly well on its way.

As for the item most clearly connected to the industry — No. 10, clean technologies — at first glance, this might seem like bad news for traditional energy players. Not so fast. There are clear opportunities in areas such as clean coal, carbon capture, and energy storage. Moreover, other kinds of clean technologies can help the industry decarbonize its operations—something that will become more important as carbon regulation gets more stringent.

As I see it, then, while parts of the industry may seem old-school, it is actually heavily engaged in almost everything on the list. That should come as no surprise. From the first time oil was pumped in Pennsylvania in 1859, it has innovated and adapted to integrate technologies that improved productivity, safety, and environmental performance. In fact, it could it could even be said that the sector is part of what is often known as the Fourth Industrial Revolution—the convergence and interaction of physical, digital, and biological technologies.

I, and many others in the industry, believe that the ongoing energy transition will likely suppress demand for fossil fuels in the long term. But while the items on the Tech Trends Index, together and separately, will be disruptive, requiring big changes in business models and day-to-day operations, they could also help the industry to adapt.

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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 on October 4, 2021.

Methane emissions are rising—about 25 percent in the past 20 years, and still going up— but they are difficult to measure and track. What can be done? Photo via Canva

Houston expert: Moving the needle on methane emissions

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Here’s the bad news. In 2019, methane (CH4) accounted for about 10 percent of all U.S. greenhouse gas emissions from human activities, such as those related to natural gas extraction and livestock farming. Methane doesn’t last as long in the atmosphere as carbon dioxide, but is more efficient at trapping radiation; over a 100-year period, the comparative impact of CH4 is 25 times greater than CO2. To put it another way, one metric ton of methane equals 84 metric tons of carbon dioxide (see chart). Finally, while methane emissions are rising—about 25 percent in the past 20 years, and still going up—they are difficult to measure and track.

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Source: McKinsey.com

And here’s the good news. Five industries—agriculture, oil and gas, coal mining, solid waste management, and wastewater—account for almost all of human-made methane emissions. There are practical things these industries can do, right now, at reasonable cost and using existing technologies, that could cut emissions by almost half (46 percent) in 2050. That said, it will be easier for some industries than for others. Take agriculture. Most of its emissions come from cows and sheep, which produce methane during digestion; in fact, animals account for more carbon dioxide equivalent (CO₂e) emissions than every country except China, according to a recent McKinsey report. Dealing with billions of animals, dispersed on farms small and large all over the world is, to put it mildly, complicated. Certain kinds of feed additives, for example, can reduce the formation of methane, cow by cow—but is expensive ($50 per tCO₂e and up). This add costs to farmers, without any economic benefits to them, and makes food more expensive. That’s a tough sell.

On the other hand, the energy industry accounts for 20 to 25 percent of methane emissions; its operations are fairly consolidated, and there are significant resources and expertise at hand. Plus, in many cases, there are genuine economic opportunities. For example, plugging methane leaks means less gas gets lost. Large volumes of methane emissions that are now treated as a waste could be recovered and sold as natural gas—something that is not always economic to do, but could be as gas prices rise or conditions change. According to the International Energy Agency (IEA), the industry flares approximately 90 Mt of methane per year, losing $12 billion to $19 billion in value. Over time, too, normal maintenance and upgrading strategies can also reduce emissions, for example, by replacing pumps with instrument air systems. There are many different ways to prevent losses in upstream production, including leak detection and repair, equipment electrification, and vapor recovery units.

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Source: McKinsey.com

In the short term, meaning over the next decade, the IEA says that these and other changes could reduce emissions 40 percent (at 2019 gas prices), while more than paying for themselves. In effect, there is low-hanging fruit out there. The full potential, according to McKinsey, is 75 percent fewer emissions by 2050, but to get there, things get more expensive, somewhere in the range of $20 per tCO₂e.

Naturally, oil and gas players are not eager to embrace added costs, and these will eventually be passed on to consumers. But the industry is looking at a future that is carbon-constrained in one way or another, either through a price on carbon, or regulation, or both. It might well be that addressing methane emissions provides a way to decarbonize its operations at reasonable cost. And while there is little brand equity to natural gas at the moment—no one shops for it by name—it is possible that in decades to come, companies that can show they are producing low- or zero-carbon gas might be able to command a price premium.

Much of the oil and gas industry doesn’t disagree with this analysis. The International Group of Liquefied Natural Gas Importers, a trade group, has made the case that “abating greenhouse gas emissions (from wellhead to terminal outlet), in particular fugitive methane emissions,” is important. On the oil side, the American Petroleum Institute, as part of its climate action plan, has called for the development of methane detection technologies, and reducing flaring to zero: “We support cost-effective policies and direct regulation that achieve methane emission reductions from new and existing sources across the supply chain.” And the Oil and Gas Climate Initiative, whose companies account for almost 30 percent of global production, are also on board, calling the reduction of methane emissions to near zero “a top priority.” Back in 2017, the Houston Chronicle, the home paper of the Texas oil and gas industry, argued for better practices: “If Texas wants the world to buy our LNG exports, a sign of environmental good faith would go a long way.” And in fact there has been progress: the OGCI estimates that methane emissions are have declined 33 percent from 2017-20.

On the whole, then, this looks like one area of climate policy where there is broad consensus. Methane matters. According to one science paper, dealing with it “could slow the global-mean rate of near-term decadal warming by around 30 percent.” Just the oil-and-gas industry’s share, then, could make a measurable difference. I am not saying getting methane emissions way down will be easy, but the industry knows what to do and how to do it. It is in its interest, and that of the planet, to do so.

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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 on October 21, 2021.

Leaders across Houston shared their thoughts on the Future of Global Energy today. Image courtesy of HETI.

Energy leaders across Houston provide a global perspective​

IT TAKES A VILLAGE

Just over one month ago, a major Houston drilling executive challenged the energy industry to embrace partnering to attain the sustainability goals of the energy transition. The sentiment echoed across multiple sessions held throughout Houston and broadcast virtually at today’s Future of Global Energy Conference presented by Chevron.

Read on for key statements made by leaders across the city at Day 2 of this three-part event, hosted by the Greater Houston Partnership, Houston Energy Transition Initiative (HETI), and Center for Houston’s Future.

SESSION 1: COMMUNITY ENGAGEMENT AND EQUITY

“My work over the past 20 years… has allowed me to connect with communities that live in the shadows of large industrial facilities,” says John Hall, CEO of Houston Advanced Research Center (HARC).

“If energy companies, and the rest of the business sector, and government could come together… we have the opportunity, if we work innovatively and creatively to mesh all of those resources together, through a process of deliberate and thoughtful conversations, and engagement with some of the most disadvantaged communities in this state–we have the opportunity, without having to spend extra money, but through cooperative collaboration and solution building… not only achieve corporate goals, but uplift these communities.“

SESSION 2: BUILDING A WORKFORCE FOR THE TRANSITION

“We have to educate younger people that are coming into the workforce where the jobs are, and where the where the jobs are going to be in the next 10-15 years,” declares Tim Tarpley, president of the Energy Workforce & Technology Council. “We do not have enough young people coming into the energy space to [back]fill the folks that are retiring. And that’s a big problem.”

Tarpley continues, “Younger people don’t always feel like there’s going to be opportunities in this industry going forward. That couldn’t be further from the truth. There is tremendous opportunity.”

SESSION 3: INNOVATION & TECHNOLOGY FOR THE ENERGY TRANSITION

“Being able to take technology from lab development to commercialization, crossing that barrier of risk–we have to do that as an industry and as a society,” explains Billy Bardin, Global Climate Transition Director, Dow Inc.

“Houston has a leading role to play in that, given the deployed assets, the expertise, the workforce development plans we heard about in the previous session with our academic partners. This portfolio of capabilities is ultimately required. At Dow, we talk about a decarbonizing growth strategy – where we want to decarbonize our assets but at the same time make safer, more sustainable materials that our customers need.”

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“Partnerships are critical with earlier stage startups, but also partnerships on deployment are critical. When thinking about scaling up, and the challenges of scaling up, it’s really hard to find one company that can do it all,” says Jim Gable, President, Chevron Technology Ventures. “Every solution has to fit within the rest of the system. It’s not just one breakthrough that’s going to resolve the world’s challenges related to decarbonization or lowering our carbon footprint.”

SESSION 4: FUNDING THE ENERGY TRANSITION

“One of the vexing issues is the demand side of the equation,” posits Kassia Yanosek, Partner, McKinsey & Company. “We are in a different world today, where we have to think, ‘How do we scale new molecules?’ Green LNG, hydrogen and ammonia made from green hydrogen or blue hydrogen–we don’t have a deep market for those types of molecules. The challenge we are facing today, in addition to the supports on the supply side, is creating a market and demand for these molecules that cost more but also have a greener content.”

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

Will 2023 be hydrogen’s year?

GUEST COLUMN

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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3 Houston energy companies rank among most innovative startups in Texas

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Three Houston companies claimed spots on LexisNexis's 10 Most Innovative Startups in Texas report, with two working in the geothermal energy space.

Sage Geosystems claimed the No. 3 spot on the list, and Fervo Energy followed closely behind at No. 5. Fintech unicorn HighRadius rounded out the list of Houston companies at No. 8.

LexisNexis Intellectual Property Solutions compiled the report. It was based on each company's Patent Asset Index, a proprietary metric from LexisNexis that identifies the strength and value of each company’s patent assets based on factors such as patent quality, geographic scope and size of the portfolio.

Houston tied with Austin, each with three companies represented on the list. Caris Life Sciences, a biotechnology company based in Dallas, claimed the top spot with a Patent Asset Index more than 5 times that of its next competitor, Apptronik, an Austin-based AI-powered humanoid robotics company.

“Texas has always been fertile ground for bold entrepreneurs, and these innovative startups carry that tradition forward with strong businesses based on outstanding patent assets,” Marco Richter, senior director of IP analytics and strategy for LexisNexis Intellectual Property Solutions, said in a release. “These companies have proven their innovation by creating the most valuable patent portfolios in a state that’s known for game-changing inventions and cutting-edge technologies.We are pleased to recognize Texas’ most innovative startups for turning their ideas into patented innovations and look forward to watching them scale, disrupt, and thrive on the foundation they’ve laid today.”

This year's list reflects a range in location and industry. Here's the full list of LexisNexis' 10 Most Innovative Startups in Texas, ranked by patent portfolios.

  1. Caris (Dallas)
  2. Apptronik (Austin)
  3. Sage Geosystems (Houston)
  4. HiddenLayer (Austin)
  5. Fervo Energy (Houston)
  6. Plus One Robotics (San Antonio)
  7. Diligent Robotics (Austin)
  8. HighRadius (Houston)
  9. LTK (Dallas)
  10. Eagle Eye Networks (Austin)

Sage Geosystems has partnered on major geothermal projects with the United States Department of Defense's Defense Innovation Unit, the U.S. Air Force and Meta Platforms. Sage's 3-megawatt commercial EarthStore geothermal energy storage facility in Christine, Texas, was expected to be completed by the end of last year.

Fervo Energy fully contracted its flagship 500 MW geothermal development, Cape Station, this spring. Cape Station is currently one of the world’s largest enhanced geothermal systems (EGS) developments, and the station will begin to deliver electricity to the grid in 2026. The company was recently named North American Company of the Year by research and consulting firm Cleantech Group and came in at No. 6 on Time magazine and Statista’s list of America’s Top GreenTech Companies of 2025. It's now considered a unicorn, meaning its valuation as a private company has surpassed $1 billion.

Meanwhile, HighRadius announced earlier this year that it plans to release a fully autonomous finance platform for the "office of the CFO" by 2027. The company reached unicorn status in 2020.

Tech entrepreneur turned climate investor is on a mission to monetize carbon removal

now streaming

The climate conversation is evolving — fast. It’s no longer just about emissions targets and net-zero commitments. It’s about capital, infrastructure, and execution at industrial scale.

That’s exactly where Yao Huang operates. A seasoned tech entrepreneur turned climate investor, Yao brings sharp clarity to one of the biggest challenges in climate innovation: how do we fund and scale technologies that remove carbon without relying on goodwill or government subsidies?

In this episode of the Energy Tech Startups Podcast, Yao sits down with hosts Jason Ethier and Nada Ahmed for a wide-ranging conversation that redefines how we think about decarbonization. From algae-based photobioreactors that capture CO₂ at the smokestack, to financing models that mirror real estate and infrastructure—not venture capital—Yao lays out a case for why the climate fight will be won or lost on spreadsheets, not slogans.

Her message is as bold as it is practical: this isn’t about saving the planet for the sake of it. It’s about building profitable, resilient systems that scale. And Houston, with its industrial base and project finance expertise, is exactly the place to do it.

The 40-Gigaton Challenge—and a Pandemic Pivot

Yao’s entry into climate wasn’t part of a long-term plan. It was sparked by a quiet moment during the pandemic—and a book.

Reading How to Avoid a Climate Disaster by Bill Gates, she came to two uncomfortable realizations:

  1. The people in power don’t actually have this figured out, and
  2. She would be alive to suffer the consequences.

That insight jolted her out of the traditional tech world and into climate action. She studied at Stanford, surrounded herself with mentors, and began diving into early-stage climate deals. But she quickly realized that most of the solutions she was seeing were still years away from commercialization.

So she narrowed her focus: no R&D moonshots, no science experiments—just deployable solutions that could scale now.

Carbon Optimum: Where Algae Meets Infrastructure

That’s how she found Carbon Optimum, a company using algae photobioreactors to remove CO₂ directly from industrial emissions. Their approach is both elegant and economic:

  • Install algae reactors next to major emitters like coal and cement plants.
  • Feed the algae with flue gas, allowing it to absorb CO₂ in a controlled system.
  • Harvest the algae and convert it into valuable commodities like bio-oils, fertilizer, and food ingredients.

It’s a nature-based solution, enhanced by engineering.
One acre of tanks can capture emissions and generate profit—without subsidies.

“This is one of the few solutions I’ve seen that can scale profitably and quickly,” Yao says. “And we’re not inventing anything new—we’re just doing it better.”

The Real Problem? It’s Capital, Not Carbon

As an investor, Yao is blunt: most climate startups are misaligned with the capital markets.

They’re following a tech startup playbook—built for SaaS, not steel. But building climate infrastructure requires a completely different approach: project finance, blended capital, debt structures, carbon credit integration, and regulatory incentives.

“Climate tech is more like real estate or healthcare than software,” Yao explains. “You don’t raise six rounds of venture. You build a stack—grants, equity, debt, tax credits—and you structure your project like infrastructure.”

It’s not just theory. It’s exactly how Carbon Optimum is expanding—through partnerships, offtake agreements, and real-world deployments. And it’s why she believes many climate startups fail: they don’t speak the language of finance.

Houston’s Role in the Climate Capital Stack

For Yao, Houston isn’t just a backdrop—it’s a strategic asset.

The city’s deep bench of project finance professionals, commodity traders, lawyers, and infrastructure veterans makes it uniquely positioned to lead the deployment phase of climate solutions.

“We’ve been calling it the wrong thing,” she says. “This isn’t just about climate—it’s an energy transition. And Houston knows how to build energy infrastructure at scale.”

Still, she notes, the ecosystem needs to evolve. Less education, more execution. Fewer workshops, more closers.

“Houston could be the epicenter of this movement—if we activate the right people and get the right projects over the line.”

From Carbon Capture to Circular Economies

The potential applications of Carbon Optimum’s algae platform go beyond carbon capture. Because the output—algae biomass—can be converted into:

  • Renewable oil
  • High-efficiency fertilizers (critical in today’s geopolitically fragile supply chains)
  • Food ingredients rich in protein and nutrients
  • Even biochar, a highly stable form of carbon sequestration

It’s scalable, modular, and location-agnostic. In island nations, Yao notes, these systems can offer energy independence by turning waste CO₂ into local energy and fertilizer—without needing to import fuels or food.

“It’s not just emissions reduction. It’s economic sovereignty through circular systems.”

Doing, Not Just Talking

One of Yao’s key takeaways for founders? Don’t waste time. Climate startups don’t have the luxury of trial-and-error cycles stretched over years.

“Founders need to get real about what it takes to scale: talent, capital, storytelling, partnerships. If you’re not ready to do that, maybe you should be a CSO, not a CEO.”

She also points out that founders don’t need to hire everyone—they need to tap the right networks. And in cities like Houston, those networks exist—if you know how to motivate them.

“It takes a different kind of leadership. You’re not just raising money—you’re moving people.”

Why This Episode Matters

This conversation is for anyone who’s serious about scaling real solutions to the climate crisis. Whether you’re a founder navigating capital markets, an investor seeking return and impact, or a policymaker designing the frameworks — Yao Huang offers a grounded, urgent, and actionable perspective.

It’s not about hope. It’s about execution.

Listen to the full episode of the Energy Tech Startups Podcast with Yao Huang:


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Hosted by Jason Ethier and Nada Ahmed, the Digital Wildcatters’ podcast, Energy Tech Startups, delves into Houston's pivotal role in the energy transition, spotlighting entrepreneurs and industry leaders shaping a low-carbon future.


Rice scientist receives $2 million award for research on 'new type of fuel'

winner, winner

Rice University chemistry professor László Kürti was named as a recipient of the 2025 Ross M. Brown Investigator Award from the California Institute of Technology’s Brown Institute for Basic Sciences.

Kürti is one of eight mid-career faculty members to receive up to $2 million over five years for their research in the physical sciences.

“I’m greatly honored,” Kürti said in a news release. “We will learn a tremendous amount in the next five years and gain a much clearer understanding of the challenges ahead.”

Kürti was selected for the research he’s been developing for six years on a molecule called tetrahedral N4, which studies show can release large amounts of energy on demand. The molecule can also decompose directly into nitrogen gas without producing carbon dioxide or water vapor. Kürti believes N4 can be used as a "new type of fuel for vehicles."

“Eventually, N4 and other stable, neutral polynitrogen cages could be used to power rockets, helping us reach the moon or Mars faster and with heavier payloads,” he added in this release.

The Brown Investigator Awards were founded by entrepreneur and Caltech alumnus Ross M. Brown and established by the Brown Science Foundation in 2020. The organization has recognized 21 scientists over the last five years.

“Midcareer faculty are at a time in their careers when they are poised and prepared to make profound contributions to their fields,” Brown said in the news release. “My continuing hope is that the resources provided by the Brown Investigator Awards will allow them to pursue riskier innovative ideas that extend beyond their existing research efforts and align with new or developing passions, especially during this time of funding uncertainty.”

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