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

guest column

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.

———

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

Texas gets a gold star when it comes to projected wind power capacity. Photo via Getty Images

Texas ranks among the leading states for projected wind power capacity

We're No. 1

A new report ranks Texas in the top three states that are blowing away nationwide wind power capacity projections.

Texas, Wyoming, and Iowa are standing out in terms of wind power capacity, according to a report from Texas Real Estate Source, a Texas real estate, travel, and lifestyle website, that analyzed all 50 states and ranked them by total projected capacity, capacity per capita, and capacity per square mile.

Nationwide wind power capacity is projected to grow exponentially in the coming years, with Texas, Wyoming, and Iowa leading the charge. With 44,974 megawatts of projected wind power capacity, Texas leads the country in terms of volume. Wyoming, meanwhile, leads the nation in projected wind power capacity per capita with 6,679 MW serving a population of 581,381, and Iowa takes first place in projected wind power capacity per square mile.

"As renewable energy continues to command center-stage attention and massive financial investment, wind power has proven to be an indispensable tool in the clean energy toolbox," reads the report.

In its top spot, Texas' projected wind power capacity is more than triple the capacity of second place, Oklahoma, but the Lone Star State falls to ninth place in the ranking of capacity per capita with 1.5 kilowatts.

“It’s no surprise to see Texas significantly outpacing the nation in installed and projected wind power capacity," says a spokesperson from Texas Real Estate Source. "The combination of boundless land, favorable wind patterns, and highly-respected research institutions has made it the perfect place for wind power adoption. It’s revealing, however, to see the per capita and per square mile rankings: they give us a more complete picture of which states are at the forefront of wind power development.”

A few other states to take note of in the report are California and Arkansas. California ranks No. 7 when it comes to total projected wind power capacity but only is No. 24 in the per capita ranking. And, considering the state has only 104 MW currently under construction, California doesn't seem to be keeping up with its population.

Arkansas, meanwhile, has 180 MW currently under construction — previously having a projected zero MW of wind power capacity. Once this is done, Arkansas will outperform 17 other states.

When it comes to wind power jobs, the Lone Star State is making some moves on that front too, according to another report. The SmartAsset study found that 2.23 percent of workers in the Houston area hold down jobs classified as “green.” Per the Department of Energy, Texas tallied almost 25,500 wind energy jobs in 2021.

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.

------

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

Ad Placement 300x100

Ad Placement 300x600

CultureMap Emails are Awesome

Property Showcase

Texas ranks low on most energy-efficient states report

by the numbers

Texas has room to improve when it comes to energy efficiency, recent data from WalletHub shows.

The personal finance website ranked Texas at No. 35 on the latest Most & Least Energy-Efficient States list. Texas improved by one spot on the 2025 report, after coming in at No. 36 last year.

The report measured and ranked the efficiency of auto energy and home energy consumption in the 48 U.S. mainland states based on data from the U.S. Census Bureau, National Climatic Data Center, U.S. Energy Information Administration and the U.S. Department of Transportation – Federal Highway Administration.

Texas earned an overall score of 50.60. It was ranked No. 27 for home energy efficiency and No. 41 for auto efficiency. By comparison, No. 1-ranked Vermont earned a score of 85.30, ranking No. 2 for home energy and No. 6 for out energy.

The top five overall states included:

No. 1 Vermont
No. 2 California
No. 3 Washington
No. 4 New York
No. 5 Massachusetts

South Dakota earned the top rank for home energy efficiency, and Massachusetts earned the top rank for energy efficiency.

“Energy efficiency doesn’t just help save the planet – it also helps save you money by lowering the amount of electricity, gas, oil or other types of energy you need to consume. While there are some steps you can take to become more energy-efficient on your own, living in the right area can give you a big boost," WalletHub analyst Chip Lupo said in the report. "For example, certain states have much better public transportation systems that minimize your need to drive, at least in big cities. Some places also have better-constructed buildings that retain heat better during the winter or stay cooler during the summer.”

According to the report, some progress is being made in increasing energy efficiency across the country. The U.S. Energy Information Administration expects 26 percent of electricity generation in 2026 will come from renewables. A number of them are being developed in the Houston area, including recent announcements like the Pleasure Island Power Collective in Port Arthur.

Still, Houston earned an abysmal ranking on WalletHub's greenest cities in the U.S. report earlier this year, coming in at No. 99 out of 100. Read more here.

Port Houston reports emissions progress as cargo volumes climb

greener growth

Port Houston’s initiatives to reduce emissions have shown some positive results, according to new data from the Port of Houston Authority.

Pulling from the Goods Movement Emissions Inventory (GMEI) report, which tracks port-related air emissions, Port Houston cited several improvements compared to the most recent report from 2019.

The port has seen total tonnage and container volumes increase by 16 percent and 28 percent, respectively, since 2019. However, greenhouse gas emissions have increased at a slower rate, growing only by 10 percent during the same time period, according to the data.

Additionally, emissions of nitrogen oxide fell by 7 percent, and emissions of particulate matter fell by 4 percent, despite adding 280 more pieces of cargo handling equipment.

“These results show that our emission-reduction efforts are working, and we are moving in the right direction,” Chairman Ric Campo said in a news release.

The Port Commission also recently approved items related to the $3 million U.S. Environmental Protection Agency Clean Ports Program (CPP) grant, which it received last year. The items will allow the port to work towards five new sustainability initiatives.

They include:

An inventory of the port’s Scopes 1, 2, and 3 for greenhouse gas emissions
A Port Area Climate Action Plan for the area and surrounding communities
A CPP Truck Route Analysis
Creation of the CPP Trucking Industry Collaborative
Design of a customized website for Port of Houston Partners in Maritime Education, which is a non-profit leading maritime workforce development effort in local schools.

Port Houston aims to be carbon neutral by 2050.

---

This article originally appeared on our sister site, Innovation Map.

7 innovative startups fueling the energy transition in Houston

Meet the Innovators

Houston has long been touted as the energy capital of the world, and it's now it's also a leading player in the energy transition — home to numerous startups and innovators working toward a cleaner future.

As part of the 2025 Houston Innovation Awards, presented by InnovationMap, the Energy Transition Business category honors innovative startups that are providing solution within renewables, climatetech, clean energy, alternative materials, circular economy, and more.

Seven energy transition companies have been named finalists for the 2025 award. They range from a spinoff stimulating subsurface hydrogen from end-of-life oil fields to a company converting prickly pear cactus biogas into energy.

Read more about these climatetech businesses, their founders, and their green initiatives below. Then join us at the Houston Innovation Awards on Nov. 13 at Greentown Labs, when the winner will be unveiled at our live awards ceremony.

Tickets are now on sale.

Anning Corporation

Clean energy company Anning Corporation is working to develop geologic hydrogen, a natural carbon-free fuel, using its proprietary stimulation approaches and advanced exploration modeling. The company said that geologic hydrogen has the potential to be the lowest-cost source of reliable baseload electricity in the U.S.

The company was founded by CEO Sophie Broun in 2024 and is a member of Greentown Labs. Last month, it also announced that it was chosen to participate in Breakthrough Energy’s prestigious Fellows Program. Anning raised a pre-seed round this year and is currently raising a $6 million seed round.

Capwell Services

Houston-based methane capture company Capwell Services works to eliminate vented oil and gas emissions economically for operators. According to the company, methane emissions are vented from most oil and gas facilities due to safety protocols, and operators are not able to capture the gas cost-effectively, leading operators to emit more than 14 million metric tons of methane per year in the U.S. and Canada. Founded in 2022, Capwell specializes in low and intermittent flow vents for methane capture.

The company began as a University of Pennsylvania senior design project led by current CEO Andrew Lane. It has since participated in programs with Greentown Labs and Rice Clean Energy Accelerator. The company moved to Houston in 2023 and raised a pre-seed round. It has also received federal funding from the DOE. Capwell is currently piloting its commercial unit with oil and gas operators.

Deep Anchor Solutions

Offshore energy consulting and design company Deep Anchor Solutions aims to help expedite the adoption of floating offshore energy infrastructure with its deeply embedded ring anchor (DERA) technology. According to the company, its patented DERA system can be installed quietly without heavy-lift vessels, reducing anchor-related costs by up to 75 percent and lifecycle CO2 emissions by up to 80 percent.

The company was founded in 2023 by current CEO Junho Lee and CTO Charles Aubeny. Lee earned his Ph.D. in geotechnical engineering from Texas A&M University, where Aubeny is a professor of civil and environmental engineering. The company has participated in numerous accelerators and incubators, including Greentown Labs, MassChallenge, EnergyTech Nexus LiftOff, and others. Lee is an Activate 2025 fellow.

Eclipse Energy

Previously known as Gold H2, Eclipse Energy converts end-of-life oil fields into low-cost, sustainable hydrogen sources. It completed its first field trial this summer, which demonstrated subsurface bio-stimulated hydrogen production. According to the company, its technology could yield up to 250 billion kilograms of low-carbon hydrogen, which is estimated to provide enough clean power to Los Angeles for over 50 years and avoid roughly 1 billion metric tons of CO2 equivalent.

Eclipse is a spinoff of Houston biotech company Cemvita. It was founded in 2022 by Moji Karimi (CEO and chairman of Cemvita), Prabhdeep Sekhon (CEO of Eclipse), Tara Karimi, and Rayyan Islam. The company closed an $8 million series A this year and has plans to raise another round in 2026.

Loop Bioproducts

Agricultural chemical manufacturing company Loop Bioproducts leverages the physiology of prickly pear cactus grown in Texas to produce bioenergy, food, and remediate industrial wastewater streams. The company uses its remote sensing technology, proprietary image-based machine learning model, and R&D innovation to capture raw biogas from the cactuses and is focused on scaling cactuses as an industrial crop on land.

Rhiannon Parker founded Loop Bioproducts in 2023.

Mars Materials

Clean chemical manufacturing business Mars Materials is working to convert captured carbon into resources, such as carbon fiber and wastewater treatment chemicals. The company develops and produces its drop-in chemical products in Houston and uses an in-licensed process for the National Renewable Energy Lab to produce acrylonitrile, which is used to produce plastics, synthetic fibers, and rubbers. The company reports that it plans to open its first commercial plant in the next 18 months.

Founded in 2019 by CEO Aaron Fitzgerald, CTO Kristian Gubsch, and lead engineer Trey Sheridan, the company has raised just under $1 million in capital and is backed by Bill Gates’ Breakthrough Energy, Shell, Black & Veatch, and other organizations.

Solidec

Chemical manufacturing company Solidec has developed autonomous generators that extract molecules from water and air and converts them into pure chemicals and fuels that are free of carbon emissions onsite, eliminating the need for transport, storage, and permitting. The company was founded around innovations developed by Rice University associate professor Haotian Wang.

The company was selected for the Chevron Technology Ventures’ catalyst program, Greentown Labs, NSF I-Corps and was part of the first cohort of the Activate Houston program. It won first place at the 2024 startup pitch competition at CERAWeek. Solidec was founded in 2023 by Wang, who serves as chief scientist, CEO Ryan DuChanois, and CTO Yang Xia. It closed a $2.5 million seed round earlier this year.

-----

The Houston Innovation Awards program is sponsored by Houston Community College, Houston Powder Coaters, FLIGHT by Yuengling, and more to be announced soon. For sponsorship opportunities, please contact sales@innovationmap.com.

View All Listings

ENERGYCAPITALHTX EMAILS ARE AWESOME