I had the pleasure of attending Digital Wildcatter’s FUZE conference this past week. With a tagline like “Igniting Energytech”, and in the heart of Houston, the energy capital of the World, the event was absolute dynamite. Touting speakers and thought leaders from diverse energy backgrounds, the gathering made one thing clear: The energy transition is in good hands.
Jane Stricker, Executive Director of the Houston Energy Transition Initiative, kicked off the event by explaining why Houston is best positioned to lead the energy transition. The amount of talent and enthusiasm shared by the crowd was impressive. Jane’s opening remarks really resonated. She emphasized the importance of job security and leveraging the talent that currently exists in Houston and the broader energy industry. The best way to accelerate the energy transition is to leverage existing infrastructure and systems as much as possible when diversifying energy sources. This theme held true throughout the event.
And of course, I need to address the energy trilemma. When looking at current energy sources, it’s easy to argue that not all the pillars of the energy trilemma are successfully addressed. With an increasing emphasis on ‘green and clean’, it’s an unprecedented time for new energy solutions to take up more of the pie. The skill sets required to build and scale these energy technologies needed to mitigate and adapt to climate change are abundant in the oil and gas industry, so what are some ways we can leverage that?
The conference included a geothermal panel featuring experts Guillermo Sierra of Nabors, Jim Grant of Chesapeake Energy, Marcus Howell of UTI Energy, Mike Umbro of Fieldview Capital, and Nick Cestari of Criterion Energy Partners. Guillermo started off the panel by admitting that geothermal energy needs to happen for several reasons, both clean energy-focused and beyond.
First and foremost, energy needs are growing exponentially. We need too much energy, and some countries are still burning enormous amounts of coal. It would be impossible to achieve Affordable and Clean Energy goals and phase out coal with just wind and solar. There are too many production, deployment, and regulatory barriers to meet existing levels of consumption; let alone the millions of people who still lack access to energy as it is. Geothermal could fill a huge gap here, but it’s still stuck in the “other” category for energy modeling and low-carbon future scenarios.
Second, commitment culture will need to evolve to action. Several companies and countries have set renewable energy goals with no clear path or competency to get there. These commitments were historically unchallenged. Agencies like the SEC are beginning to take notice, and consumer behavior is starting to challenge these commitments. The pressure is on for these commitments to be reflected in business decisions and long-term planning. Ambitious near-term goals are highly unlikely to be met with wind and solar alone because of materials and land use challenges in addition to the integration challenge of intermittent resources. Geothermal energy is untapped, renewable energy directly under our feet, we just need to get it out of the ground.
Lastly, geothermal energy production can provide like-for-like jobs and transition an entire industry- think of all the infrastructure we don’t have to abandon! O&G companies can apply decades of exploration, drilling expertise and data collection to accelerate the deployment of geothermal energy and test the boundaries of what’s already been accomplished. The potential financial contribution of these majors alone could make geothermal a primary energy source. The Geothermal Energy from Oil and gas Demonstrated Engineering (GEODE) initiative will award up to $165 million to expand U.S. geothermal energy deployment by leveraging the technologies and workforce from the oil and gas industry.
Demystification of emerging energy sources Geothermal is undeniably unloved compared to solar and wind. Not enough people understand its advantages; it will never deplete, it’s predictable and stable, has the smallest physical footprint of energy sources, and can be deployed almost anywhere if the economics make sense. The energy industry has a responsibility to educate the broader public on its potential to provide renewable, safe, clean energy. Take Iceland for example. The entire country is tremendously well educated on their energy sources- there’s no fear regarding geothermal and the population loves it. They even use geothermal run-off as a number 1 tourist attraction and charge big money for it.
Regulatory Framework Currently, not all states have geothermal regulatory guidance. The precedent set by early moving states such as New York, Massachusetts and California, can fasten the speed of following states. Regulatory reform is required to help incentivize larger companies in focusing on geothermal. Oil and gas companies will begin to allocate more resources to geothermal energy when the permitting process becomes easier.
Intermediate wins The private sector is becoming more and more bullish on geothermal. VC-backed companies including Fervo Energy and Criterion Energy Partners were present at the event. The panel commented on the importance of smaller, intermediate wins that can encourage investment. Whether those wins come in the form of technological advancements, identification of new off-takers, perception changes, or regulatory achievements, the industry needs each small win.
Geothermal needs to be a major player in the energy transition., The talent, tools and infrastructure already exists within the energy industry. With regulatory reform, improvements in messaging and consistent investment we can let them go to work.
Another interesting panel included Patricia Loria of CarbonCapture Inc., Assaad Mohanna of ERM, Jon Cartlidge of Battelle, and Brandon Stackhouse of McKinsey. Each of them had unique perspectives on the CCUS market today and anticipation of where it’s going.
First and foremost, they addressed the question- is all this CCUS business real or just a grift? And for obvious reasons, the answer was a resounding “yes, this is real.” And not just because they’ve all devoted their lives to the space, but because the technology has existed for nearly 50 years. How it is being leveraged today for net zero achievement is up for debate. The challenge is to bring the cost down and create a new market that may be unfamiliar to a lot of people.
The market is divided into compliance and voluntary. A carbon compliance market exists in some states but is not yet regulated on a federal basis. The compliance market is valued at $800 B in notional value, but some favorable sources of CCUS don’t yet benefit. The much smaller voluntary carbon market is not regulated and has been historically exploited by greenwashers. Regulatory agencies are beginning to take notice and provide more structure. Lastly, carbon markets are mixed between reduction and removal technologies, with unclear and reactive valuations across both. The panelists seemed to disagree on the maturity of CCUS. CCUS comes in many different flavors; so naturally, some technologies can already be in their 7th inning just waiting for permit approval, whereas others can be more nascent. DAC, for example, has a challenging business case to justify and is only in its 1st inning.
The Inflation Reduction Act will be instrumental in CCUS. The adjusted 45Q tax credit, coupled with a 1.5 gigaton CO2 2030 US reduction goal, created a $150-200M opportunity. CCUS still has to overcome several hurdles on its way to broader adoption.
Policy Duration: CCUS development and deployment will be heavily dependent on policy duration and new incentives. The IRA sets us up nicely for 12 years, but what paradigm comes next? Maintaining and building on this policy momentum will determine how quickly these technologies can scale.
Public Perception: The carbon management economy is not well understood by the general public. Lack of understanding of the market potential can really inhibit its growth. The panelists gave Gen Z a lot of power in choosing new energy sources and climate technology. Early education and open discussion to demystify these technologies is going to be essential for long-term growth.
Creating a Value Chain: The CCUS market is decorated with large, uncertain projects. The projects are uncertain because the technology is early, but also because of a complex stakeholder map that very few people can successfully navigate. No clear value chain exists for CCUS, and people are hesitant to collaborate. There needs to be more buy-in and structure to the CCUS value chain to effectively minimize issues and monetize this opportunity.
Rational Economics: Most CCUS projects have uncertain economics. Hub development in the CCUS space can be the most rational solution to this problem in terms of sharing infrastructure costs, distributing risks, and leveraging other competencies (for example, DAC companies need help on the project development side). The more companies that benefit from CCUS development, the easier it will be to prove the business case and influence policy.
The FUZE attendees are well on their way in challenging and breaking down these barriers.
It seemed like almost every panelist was itching to talk about nuclear’s role in the transition. Chuck Yates, who should really get a job , even said, “if Nuclear was invented today- everyone would agree we found the solution.” I wouldn’t be surprised to see a dedicated panel next year, and if any ECV readers have strong opinions, I’d like to hear them. Feel free to respond to this email so we can start talking.
Value Impatience Erin Bobicki, CTO of Aurora Hydrogen, closed out her panel with a powerful statement, “Value Impatience”. Ambitious 2030 targets have been set, promises have been made, and the pressure is on. It is time we start to embrace urgency a little bit more and accelerate the deployment of new technologies.
Appreciate Complexity From Toby Rice lobbying for US LNG, to Mike Skelly appreciating renewables, the event highlighted the importance of energy diversification. Different energy mixes will be determined by geographies, social implications, and existing incentives. No single energy source will win, and if we neglect the development of some for political agendas we can end up burdening select groups with intolerable energy costs or unsafe living conditions. Instead, let’s appreciate the complexity of existing constraints, and model a better future where EVERYONE has access to clean, reliable energy.
Do Cool Shit I’d be remiss to not include an appreciation for Moji Karimi, CEO and co-founder of Cemvita Factory. Cemvita Factory recently announced the spin out of their Gold Hydrogen business. The coolest thing about Gold Hydrogen is it has the potential to preserve and transition an entire workforce- while providing clean energy! Cemvita’s subsidiary is essentially a Hydrogen E&P, with the same subsurface infrastructure and the addition of futuristic biology to produce a carbon negative energy source. Moji closed out his panel by admitting “we’re going to want to look back on this energy transition and say- we did some pretty cool shit”.