Houston has held the title Energy Capital of the World for at least a century, but many local business leaders worry the globally recognized title could soon be under siege.
“The energy mix is changing, and it could be changing even faster than we thought even a few years ago,” said Bob Harvey, president and CEO of the Greater Houston Partnership, or GHP, the business advocacy group for the region. “We’d like to be known as the ‘New Energy Capital’ as well.”
Some GHP member companies have sounded alarms as renewables such as solar and wind keep growing at a rapid clip. In January, Harvey convened a small group of eight to 10 executives from local renewable energy companies to discuss ways GHP could attract what the group is now calling “new energy” companies to Houston.
“A group of players were saying, ‘We’re doing interesting things but no one in Houston seems to know it, or notice, or care. In fact, it’s not even clear whether what we’re doing is even being appreciated by Houston,’” Harvey recalled.
The group Harvey put together grew rapidly to include representatives from about 40 companies, including traditional oil and gas majors like Chevron.
The goal is to recruit renewable energy companies to the region. There are also discussions on creating awareness campaigns, bringing major renewable energy conferences to Houston, and finding ways to add renewables to existing conferences, such as the oil industry’s venerable CERAWeek that occurs in Houston each spring.
GHP has also dusted off the failed bid the city developed to entice Amazon to move one of its headquarters offices here, hoping to apply lessons learned about attracting tech companies and tech talent away from places like the Silicon Valley and Boston.
Houston running late to game
The group has yet to achieve any major milestones and Harvey is the first to admit that Houston is behind.
“Our first concern is that Houston have a healthy, dynamic economy,” Harvey said. “And we don’t want to be in a position where we have not picked up on emerging technologies.”
John Berger, founder and CEO of Houston-based Sunnova Energy Corp., has been a longtime vocal critic of those in Houston who are too slow to recognize the prominent future of solar energy.
“I think we need to take this very seriously,” Berger said, cautioning that the region can’t “just put our hands in our pockets.”
Berger founded Sunnova six years ago. The privately held company provides residential solar and battery storage to 60,000 customers in the U.S and its territories, including Guam, Puerto Rico and the Northern Mariana Islands.
Berger said he’s seeing a convergence of technologies in solar and energy storage that could be as disruptive as the Apple iPhone. And Houston, he said, needs to be onboard when that happens.
Michael Skelly, founder and chairman of Clean Line Energy Partners, a Houston company that builds transmission lines for wind and solar projects, said Houston has come a long way, but desperately needs more renewable companies in its roster.
“We’re in the top five cities on wind and we’re not even in the top 10 on solar,” said Skelly. “And if you believe, as many people do, that renewables are going to be a bigger and bigger part of the energy mix, being in the very top cities is very important.”
Skelly said he believes Houston still has time to make gains. But it better keep moving. “Right now, it’s a jump ball and it’s not clear who is going to win, but there’s a big prize.”
That prize is indeed sizable: Global investment in renewables is expected to reach nearly $230 billion in 2018, according to research firm Frost & Sullivan.
According to the BP Statistical Review of World Energy, renewable power grew by 17 percent in 2017, the largest increase on record. Wind provided more than half of the growth of renewables, while solar contributed more than 30 percent despite accounting for just 21 percent of the total.
Costs to produce electricity from renewables is dropping significantly, to the point where some analysts predict they could significantly displace hydrocarbons. The cost of producing electricity using solar photovoltaics decreased by 69 percent between 2010 and 2016, edging it closer to fossil fuels. Onshore wind costs fell 18 percent over the same period, according to the International Renewable Energy Agency, or IRENA, which has 159 member countries.
Installed capacity of renewable energies – such as solar, wind, hydropower and geothermal – has been growing 8 percent to 9 percent annually since the start of the decade, more than double the growth for legacy energy sources. Just last year, 167 gigawatts of renewable capacity were installed globally, which IRENA said is enough to power all of Brazil.
Large-scale projects, motivated by climate change concerns as well as affordability, are in the works that will take large chunks away from the oil and gas industry. For example, Massachusetts and Rhode Island are planning massive offshore wind projects that combined will produce 1,200 megawatts of electricity, enough to power more than 500,00 homes. And California, the fifth-largest economy in the world, recently approved an ambitious goal to eliminate all fossil fuels from its electric grid by 2045.
Beyond that, electric cars are increasingly becoming more affordable and more popular. According to the Union of Concerned Scientists, sales of electric vehicles in the United States have increased 35 percent in just the last year as 123,000 new electric vehicles were registered in the first half of 2018 compared to 91,000 over the same period in 2017. Sales of the vehicles have more than doubled since 2015.
The next five years
The International Energy Agency, or IEA, predicts the fastest growth to date for renewables will be over the next five years with more than 1 trillion watts of electricity generated by renewables coming online. That’s roughly the amount of power Russia consumes annually.
Renewables are expected to grow 20 percent by 2023 when they will account for 12.4 percent of global energy demand, according to the IEA. The fastest growth will be in the electricity sector where renewables are expected to provide almost 30 percent of power demand in 2023, up from 24 percent in 2017.
In all, renewables will account for 70 percent of the global growth of electricity during that span led by solar and followed by wind, hydropower, and bioenergy, IEA said in a market forecast released in October.
None of this means hydrocarbons are going completely away anytime soon.
“Hydrocarbons are going to be a very critical part to our economy for a very long time,” said Jason Schenker, an economist and futurist and president of Prestige Economics. “Hydrocarbons are an extremely efficient form of energy and it’s difficult seeing this changing anytime soon.”
Schenker said he believes Houston will find a way.
“I’d be worried about Houston if Houston’s nickname was ‘Coal Town,” Schenker said.
What Houston does best
Houston has been the epicenter of the oil industry ever since sometime after the 1901 Spindletop gusher near Beaumont. The Houston region is home to more than 500 oil and gas exploration and production companies along with 4,000-plus businesses that provide various direct services and support to the industry.
The city also has a bevy of refineries as well as petrochemical plants that are taking advantage of an abundance of cheap natural gas that some say could supply them with hydrocarbons for 100 years or more.
There are more than 100 companies involved in some aspect of solar power have offices in Houston, including Sunnova, Distributed Power Partners, EDP Renewables, First Solar, Texas Solar Outfitters and VERT Solar Finance.
There are 30 wind-related companies, most of which are tied to manufacturing and not power generation. They include Clean Line Energy, Pattern Energy, EDP Renewables, Quanta, GE Renewable Energy, and Shell Wind Energy. Wind is king in Texas, which has 22,599 megawatts of installed wind power. The Lone Star State has more wind capacity than all but five countries, including the rest of the U.S. The states with the next largest wind capacity are Oklahoma at 7,495 megawatts, Iowa with 7,308 megawatts, and California with 5,555 megawatts of installed wind capacity.
Major oil companies such as Exxon Mobil, Shell, Chevron and BP, are looking at a future of declining oil demand and increased pressure from greenhouse gas rules. In turn they are investing more in renewable energy technologies and projects. Most of their largest investments, however, are outside of Houston and nearer to new energy hubs.
“How energy companies provide energy in the future is evolving…and fuel sources are getting increasingly diversified,” said Barbara Burger, president of Chevron Technology Ventures, who is known as Chevron’s tea-reader in the new energy space.
Burger said Chevron is reaping benefits from being part of the GHP new energy group, rubbing elbows with pure-play solar, wind and storage companies.
“Everybody in oil and gas in Houston knows each other,” Burger said, adding that being part of a group that includes pure play solar, wind and storage companies means “we can really test each other.”
Houston has led the world for decades in technical innovations that have revolutionized the oil and gas industry. But it has lagged in embracing wind, solar, energy storage and other so-called new energies. The city of Houston does little to encourage residential solar systems and minimal solar research is done here, especially compared to new energy tech hubs like the Silicon Valley and Boston.
There is also very little venture capital available in Houston targeting alternative energy, leaving Austin as the top in the state for such startups.
But what Houston does best – developing largescale projects both on-and-offshore – may be its niche in new energy.
“We found that Houston might have already found its way to having a very interesting position in the new energy space as being a developer-operator,” Harvey said.
Those could include large-scale offshore wind projects where the oil and gas industry has expertise in drilling and construction.
“That’s kind of where the big bucks are,” Harvey said.
Onshore, Houston is filled with workers skilled in finding productive land, putting together parcels, negotiating with property owners and navigating permitting processes.
Sunnova’s Berger said awareness of Houston’s capabilities is key.
“I think the first thing is that we need to have a sign out front that says, ‘We love solar, we love batteries, and we love electric cars,’” Berger said. “I think the other thing the city can do is embrace companies like Sunnova and tell them you’re wanted here.”
Berger said while some express concern that Houston’s talent pool may not be geared toward new energy, he’s finding it to his liking.
“We have a lot of former oil and gas people here at Sunnova and we work hard to get more of them every day,” Berger said. “The skills they have are very valuable.”
What Berger wants more than anything is for Houston to be known for more than oil and gas.
“We want Houston to be all of it,” he said, adding that people are finally starting to listen.
“I’m pretty optimistic about where Houston is moving,” Berger said. “If you don’t take an action, you take an action. I’ve seen more and more of the leadership (in Houston) finally get that.”