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.

Aggreko’s Energy Transition Solutions division acquired a portfolio of nine community solar projects in the state of New York. Photo courtesy of Aggreko

Houston solar company secures 9 New York solar projects

solar solutions

A Houston-based energy solution company has made some big moves on the East Coast.

Aggreko’s Energy Transition Solutions division acquired a portfolio of nine community solar projects in the state of New York.

The ground-mounted installations will total approximately 59 MW of generating capacity Aggreko ETS also successfully connected the first of the nine projects to the grid, a 5.9 MWdc project in the town of Vernon, 40 miles east of Syracuse.

The nine community solar sites aim to assist low-and-moderate income New Yorkers in benefiting from clean solar energy without residential solar installations.

Aggreko ETS will be in charge of the construction of these projects. Aggreko, which is headquartered in Houston, is actively investing in more sustainable products, fuels, innovative technology, and services to make greener solutions accessible.

“We’re thrilled to complete this important transaction, which reinforces Aggreko’s capabilities as an experienced renewable energy developer, owner, and operator that can deftly structure and execute complicated asset acquisitions to scale its business,” says Prashanth Prakash, Aggreko ETS’s chief commercial officer in a news release.

According to a report, In the fourth quarter, Texas is expected to add about 3.7 gigawatts of solar capacity — more than the combined total for the previous three quarters. Photo via Getty Images

Report: Texas expected to shine as top state for solar installations in 2023

fourth quarter push

When all the numbers are tallied, 2023 should be a very sunny year for solar installations in Texas.

The Solar Energy Industries Association, SEIA, and energy research and consulting firm Wood Mackenzie predict Texas will be the top state for solar installations in 2023. In the fourth quarter, Texas is expected to add about 3.7 gigawatts of solar capacity — more than the combined total for the previous three quarters.

In 2021, Texas added nearly 6.07 gigawatts of solar capacity, with that figure falling to more than 3.66 gigawatts in 2022. But for 2023, SEIA and Wood Mackenzie anticipate Texas having added almost 6.24 gigawatts of solar capacity for residential, business, and utility customers.

A report released last week by SEIA and Wood Mackenzie indicates that sales volume for solar installations has declined in Texas and some other states due in part to higher costs for financing solar equipment. Solar sales volume in Texas started dropping off in late 2022 and has continued to shrink, says the report.

Wood Mackenzie forecasts 13 percent growth for the U.S. residential solar market in 2023. The report predicts the U.S. will have added 33 gigawatts of residential solar capacity in 2023, up from a record-setting 6.5 gigawatts in 2022. The U.S. added 6.5 gigawatts of residential solar capacity in the third quarter of 2023 alone, says the report.

“Solar remains the fastest-growing energy source in the United States, and despite a difficult economic environment, this growth is expected to continue for years to come,” says Abigail Ross Hopper, president and CEO of SEIA. “To maintain this forecasted growth, we must modernize regulations and reduce bureaucratic roadblocks to make it easier for clean energy companies to invest capital and create jobs.”

Solar accounted for nearly half (48 percent) of all new electric-generating capacity during the first three quarters of 2023, bringing total installed solar capacity in the U.S. to 161 gigawatts across 4.7 million installations. By 2028, U.S. solar capacity is expected to reach 377 gigawatts, enough to power more than 65 million homes.

“The U.S. solar industry is on a strong growth trajectory, with expectations of 55 percent growth this year and 10 percent growth in 2024,” says Michelle Davis, head of solar research at Wood Mackenzie.

“Growth is expected to be slower starting in 2026 as various challenges like interconnection constraints become more acute,” she adds. “It’s critical that the industry continue to innovate to maximize the value that solar brings to an increasingly complex grid. Interconnection reform, regulatory modernization, and increasing storage attachment rates will be key tools.”

BP's solar park is scheduled to begin operating in the second half of 2024. Photo via bp.com

BP breaks ground​ on Texas solar farm, plans to open it next year

sun-powered peacock

British energy giant BP, whose U.S. headquarters is in Houston, has started construction on a 187-megawatt solar farm about 10 miles northeast of Corpus Christi.

The Peacock Solar facility will generate power for a nearby chemical complex operated by Gulf Coast Growth Ventures, a joint venture between Spring-based energy company ExxonMobil and SABIC, a Saudi Arabian chemical conglomerate whose products are used to make clothes, food containers, packaging, agricultural film, and construction materials. SABIC’s Americas headquarters is in Houston.

Gulf Coast Growth Ventures opened the plant in 2022. The joint venture says the ethylene cracker and derivatives complex, located northwest of the town of Gregory, employs about 600 people.

BP says the solar project, which is expected to create about 300 construction jobs, will produce enough energy each year to power the equivalent of 34,000 homes. The solar park is scheduled to begin operating in the second half of 2024.

“We want to be good stewards of our environment,” Paul Fritsch, president of Gulf Coast Growth Ventures, says in a BP news release. “Once online, the solar-generated electricity will be used to partially power our plant and help reduce emissions in support of a net-zero future.”

At full capacity, Peacock’s renewable power could keep more than 256,000 metric tons of greenhouse gas emissions out of the atmosphere each year, BP says.

BP’s joint venture partner, British solar company Lightsource BP, is developing the solar project and managing construction on behalf of BP. In 2017, BP bought a 43 percent stake in Lightsource and now holds a 50 percent stake.

Canadian contractor PCL Construction is providing construction and engineering services for the solar setup, and Tempe, Arizona-based First Solar and Norwalk, Connecticut-based GameChange Solar are supplying the solar equipment.

Energy sources are often categorized as renewable or not, but perhaps a more accurate classification focuses on the type of reaction that converts energy into useful matter. Photo by simpson33/Getty Images

How is energy produced?

ENERGY 101

Many think of the Energy Industry as a dichotomy–old vs. new, renewable vs. nonrenewable, good vs. bad. But like most things, energy comes from an array of sources, and each kind has its own unique benefits and challenges. Understanding the multi-faceted identity of currently available energy sources creates an environment in which new ideas for cleaner and more sustainable energy sourcing can proliferate.

At a high level, energy can be broadly categorized by the process of extracting and converting it into a useful form.

Energy Produced from Chemical Reaction

Energy derived from coal, crude oil, natural gas, and biomass is primarily produced as a result of bonds breaking during a chemical reaction. When heated, burned, or fermented, organic matter releases energy, which is converted into mechanical or electrical energy.

These sources can be stored, distributed, and shared relatively easily and do not have to be converted immediately for power consumption. However, the resulting chemical reaction produces environmentally harmful waste products.

Though the processes to extract these organic sources of energy have been refined for many years to achieve reliable and cheap energy, they can be risky and are perceived as invasive to mother nature.

According to the 2022 bp Statistical Review of World Energy, approximately 50% of the world’s energy consumption comes from petroleum and natural gas; another 25% from coal. Though there was a small decline in demand for oil from 2019 to 2021, the overall demand for fossil fuels remained unchanged during the same time frame, mostly due to the increase in natural gas and coal consumption.

Energy Produced from Mechanical Reaction

Energy captured from the earth’s heat or the movement of wind and water results from the mechanical processes enabled by the turning of turbines in source-rich environments. These turbines spin to produce electricity inside a generator.

Solar energy does not require the use of a generator but produces electricity due to the release of electrons from the semiconducting materials found on a solar panel. The electricity produced by geothermal, wind, solar, and hydropower is then converted from direct current to alternating current electricity.

Electricity is most useful for immediate consumption, as storage requires the use of batteries–a process that turns electrical energy into chemical energy that can then be accessed in much the same way that coal, crude oil, natural gas, and biomass produce energy.

Energy Produced from a Combination of Reactions

Hydrogen energy comes from a unique blend of both electrical and chemical energy processes. Despite hydrogen being the most abundant element on earth, it is rarely found on its own, requiring a two-step process to extract and convert energy into a usable form. Hydrogen is primarily produced as a by-product of fossil fuels, with its own set of emissions challenges related to separating the hydrogen from the hydrocarbons.

Many use electrolysis to separate hydrogen from other elements before performing a chemical reaction to create electrical energy inside of a contained fuel cell. The electrolysis process is certainly a more environmentally-friendly solution, but there are still great risks with hydrogen energy–it is highly flammable, and its general energy output is less than that of other electricity-generating methods.

Energy Produced from Nuclear Reaction

Finally, energy originating from the splitting of an atom’s nucleus, mostly through nuclear fission, is yet another way to produce energy. A large volume of heat is released when an atom is bombarded by neutrons in a nuclear power plant, which is then converted to electrical energy.

This process also produces a particularly sensitive by-product known as radiation, and with it, radioactive waste. The proper handling of radiation and radioactive waste is of utmost concern, as its effects can be incredibly damaging to the environment surrounding a nuclear power plant.

Nuclear fission produces minimal carbon, so nuclear energy is oft considered environmentally safe–as long as strict protocols are followed to ensure proper storage and disposal of radiation and radioactive waste.

Nuclear to Mechanical to Chemical?

Interestingly enough, the Earth’s heat comes from the decay of radioactive materials in the Earth’s core, loosely linking nuclear power production back to geothermal energy production.

It’s also clear the conversion of energy into electricity is the cleanest option for the environment, yet adequate infrastructure remains limited in supply and accessibility. If not consumed immediately as electricity, energy is thus converted into a chemical form for the convenience of storage and distribution it provides.

Perhaps the expertise and talent of Houstonians serving the flourishing academic and industrial sectors of energy development will soon resolve many of our current energy challenges by exploring further the circular dynamic of the energy environment. Be sure to check out our Events Page to find the networking event that best serves your interest in the Energy Transition.


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

Going solar is now easier thanks to city and federal help. Photo courtesy of Houston Solar Tour

Houston charges up new program to help locals buy and install affordable solar panels

sunny days

Alternative-energy-seeking locals now have a sunny way to buy into a solar. The City of Houston has launched Texas Solar SwitchHouston, a new program aimed at helping Houstonians purchase and install rooftop solar panels and battery storage.

In partnership with Solar United Neighbors, the Solar Switch program offers hassle-free way to purchase solar panels by creating a massive, group discount for residents, be it home or small business needs.

This comes with the new Inflation Reduction Act’s clean energy incentives and is part of the City of Houston's Climate Action Plan goal to generate 5 million MWh per year of local solar, per a press release. Customers who install solar also receive a 30-percent tax credit, thanks to the The Inflation Reduction Act.

Registration for the program is free and available online. The City of Houston assures that there is "no obligation for homeowners to purchase solar panels." Discounts and installers are determined through a competitive auction process, per the City.

"With energy prices increasing, homeowners and small businesses are looking for opportunities to save on their energy bills and increase their resilience to climate-related events," said Mayor Sylvester Turner. "Texas Solar Switch Houston provides our community with a simple and straightforward way to become better informed about solar energy and access a competitive offer from a vetted, experienced solar installation company."

Signed and passed into law by the Biden Administration in August, the Inflation Reduction Act will invest some $369 billion in domestic energy production and manufacturing with a goal of reducing carbon emissions by 40 percent by 2030. That federal mandate means locals can now take steps towards power backup, while potentially easing up on the beleaguered Texas grid.

“More and more Houstonians are looking to solar and battery storage for self-sufficiency, which has the added benefit of making our grid more resilient,” said Hanna Mitchell, Texas program director for Solar United Neighbors, in a statement. “With the recent passage of the IRA, now is a particularly good time to go solar.”

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This article originally ran on CultureMap.

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Houston hub for clean energy startups names global founding partners

green team

EnergyTech Nexus, a Houston-based hub for clean energy startups, announced its coalition of Global Founding Partners last month at its Pilotathon event during Houston Energy and Climate Week.

The group of international companies will contribute financial and technical resources, as well as share their expertise with startup founders, according to a news release from EnergyTech Nexus.

“Our Global Founding Partners represent the highest standards of industrial leadership, technical expertise and commitment to innovation,” Juliana Garaizar, co-founding partner of EnergyTech Nexus, added in the release. “Their collaboration enables us to connect groundbreaking technologies with the resources, infrastructure, and markets needed to achieve global scale.”

Houston-based partners include:

  • Cemvita Inc.
  • Chevron Technology Ventures
  • Collide
  • Greentown Labs
  • Kauel
  • Oxy Technology Ventures
  • Revterra
  • Sunipro

“At Collide, we believe progress happens when the right people, data, and ideas come together. Partnering with EnergyTech Nexus allows us to support innovators with the insights and community they need to accelerate deployment at scale,” Collin McLelland, co-founder and CEO of Collide, a provider of generative artificial intelligence for the energy sector, said in the release.

"Revterra is thrilled to be a founding member of the EnergyTech Nexus community," Ben Jawdat, founder and CEO of kinetic battery technology company Revterra, added. "Building a strong network of collaborators, customers, and investors is critical for any startup — particularly when you're building novel hardware. The Energytech Nexus community has been incredible at bringing all of the right stakeholders together."

Other partners, many of which have a strong presence in Houston, include:

  • BBVA
  • EarthX
  • Endress+Hauser
  • Goodwin
  • Greenbackers Investment Capital
  • ISR Energy
  • Latham & Watkins LLP
  • Ormazabal
  • Repsol
  • STX Next
  • XGS Energy

Jason Ethier, co-founding partner of EnergyTech Nexus, said that partnerships with these companies will be "pivotal" in supporting the organization's community of founders and Houston's broader energy transition sector.

“The Energy and Climate industry deploys over $1.5 trillion in capital every year to meet our growing energy demands. Our global founding partners recognize that this energy must be delivered reliably, cost effectively, and sustainably, and have committed to ensuring that technology developed without our ecosystem can find a path to market through testing and piloting in real-world conditions," Ethier said. "The ecosystem they support here solidifies Houston as the global nexus for the energy transition.”

EnergyTech Nexus also recently announced a "strategic ecosystem partnership" with Greentown Labs, aimed at accelerating growth for clean energy startups. Read more here.

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.