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Bayou Business Download: Energy's Changing Impact on the Houston Economy

Published Aug 31, 2020 by A.J. Mistretta

offshore oil rig energy.jpg

In this episode of Bayou Business Download we discuss a question that we often get asked here at the Partnership—just how dependent is Houston’s economy on the oil and gas industry and how has that changed through the years. We’ll also look at employment in the sector and what the future might hold for this important sector here in Houston. 

Key topics include: 

  • The makeup of the energy industry in Houston. 
  • The impact of price fluctuations on various segments of the industry. 
  • How much the industry contributes overall to the region's GDP today compared with its height. 
  • How overall employment has changed in the energy industry in recent years. 
  • What transition to newer forms of energy looks like and how that will impact the Houston economy. 

Learn more about Houston's energy industry

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A Look at Houston Energy Talent and Key Energy 2.0 Wins in 2020

In spite of the dual challenges Houston faced with an oil downturn and global pandemic, the region marked several achievements in the Energy 2.0 space in 2020.  We asked Jose Beceiro, Senior Director of Global Energy 2.0 at the Greater Houston Partnership, to reflect on the past year and offer insight on what lies ahead for Houston.  What trends have we seen in the energy workforce this year? How has that changed Houston’s energy landscape? One of the biggest challenges - and opportunities -  for Houston’s energy transition strategy is the ability to successfully transition Houston’s energy workforce into new Energy 2.0 jobs. Houston has one of the largest and deeply skilled energy workforces in the world with 250,000 energy workers, which is a major draw for new Energy 2.0 companies to relocate and expand in the region.   Recent Energy 2.0 corporate announcements, including Greentown Labs, cite Houston’s talented energy workforce as the primary decision factor for selecting Houston for their expansion projects. Unfortunately, with the downturn in oil and gas markets, several major energy companies in Houston have announced large layoffs. However, we’ve also learned that several Houston-based cleantech companies such as Sunnova, Broad Reach Power, Key Capture Energy and EDF Energy North America are actively hiring displaced oil and gas workers for engineering, project management, construction, finance/accounting, and other technical and management positions within the cleantech sector.   Finally, we are also seeing a trend of major digital technology companies likes Google, Amazon, and Microsoft hiring oil and gas workers in the Houston region to support the ongoing development of new digital technologies for the energy sector, which is helping to accelerate the transition of the global energy economy. At least 21 of Houston’s 40 corporate R&D centers are focused on energy technology. How do Houston’s R&D capabilities factor into the growth of energy tech in the region?  Houston is a world leader in energy innovation and research and the critical mass of global energy R&D centers has spurred the growth of over 50 startup development organizations (SDOs) dedicated to supporting new energy technology startups in the Houston region. They include Greentown Labs, Plug & Play, MassChallenge, Capital Factory, The Cannon and The Ion.   Many of the major energy companies who have R&D centers in the region also have corporate venture arms that are actively investing into new energy innovation startups and also working with entrepreneurs to commercialize new energy technologies. That includes Halliburton, which launched a dedicated cleantech incubator called Halliburton Labs, as well as BP America, which announced their support of the Houston Climate Action Plan and committed to investing $5 billion annually into cleantech. You also have Chevron's expansion into the Ion's Smart and Resilient Cities Accelerator. and Rice University's Clean Energy Accelerator program, which will launch in 2021 and be back by several major energy companies.  Another important factor that will spur the growth of new energy tech companies in the Houston region is our concentration of major energy investments firms, such as EnCap Investments and Mercury Fund.  Houston saw incredible momentum in the Energy 2.0 space this year in spite of the dual challenge brought on by the global pandemic and oil and gas downturn. What are some ways Houston can keep that momentum going in 2021?  Houston is not only the Energy Capital of the World, but it's also leading the world in energy transition. We’ve already seen several major Energy 2.0 announcements this year, but the momentum for Houston’s Energy 2.0 economy and energy transition leadership will continue to accelerate in 2021. The primary reason is due to the fact that the future of the global energy industry is being driven by the development and adoption of new digital technologies.   Houston has a strong base of nearly 9,000 digital technology companies and 235,000 tech workers who are working collaboratively with Houston’s energy industry on new digital innovations, such as data analytics, remote sensing, cloud computing, machine learning, artificial intelligence and robotics technologies. The convergence of digital tech and energy is very strong in Houston and this nexus will continue to enhance oil and gas companies’ abilities to increase production and lower carbon emissions. The development of energy digital tech in Houston will also be important for other fast growing segments of Houston’s energy economy, such as solar, wind, battery energy storage, electric vehicle infrastructure, blue and green hydrogen technologies, as well as carbon management solutions.   Learn how Houston is leading the global energy transition. Learn more about the work of our Energy 2.0 Committee and other Regional Economic Development Advisory committees. 
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State's Largest Battery Storage Operator Ramping Up TX Projects, Houston Presence

The energy industry has faced significant challenges this year with an oil price collapse compounded by an unprecedented drop in demand and a global pandemic. Yet there’s growing evidence that these factors are not only accelerating the energy transition to a more sustainable, lower carbon world, but also creating new, industry-changing opportunities and dramatic shifts in new energy technology adoption.  Key Capture Energy is a prime example of how these trends are playing out in Houston. Founded in 2016, the battery storage company is the largest owner and operator of battery storage projects in Texas with 50 megawatts of operating projects and three projects under construction, totaling 204 MW, including KCE TX 7 in West Texas (pictured on the right).  “Global energy markets are changing rapidly as the electric grids are converging around power – traditionally coal, natural gas and hydro –transportation with oil, and heating with natural gas,” said Jeff Bishop, co-founder and CEO of Key Capture Energy. “Wind and solar potential, coupled with the rapid decline in technology costs, makes clean energy often the lowest-cost option." Bishop said the Texas energy market is no different and is rapidly evolving from fossil fuels to low-carbon energy sources. "With that transition comes intermittency as wind and solar patterns vary. This creates the need for large-scale battery storage projects provide the missing piece to keep the electric grid stable.” Key Capture is moving into a new office space in Downtown Houston in the coming months, where many of the company’s analysts, power marketers and project developers are based. Bishop said the growth and development of battery storage in the Energy Capital of the World is driven by Houston’s energy expertise and strong innovation infrastructure.  “Houston understands energy and has all of the elements to be at the forefront of the energy transition – the right infrastructure, workforce, mindset, and entrepreneurial focus. I hope that The Ion in Midtown, combined with Greentown Labs moving in across the street, will lay the foundation for other folks like me to start companies to keep Houston relevant in the energy economy in the decades to come.” According to global consulting firm IHS Markit, batteries are a key part of the energy transition, providing grid energy storage and electrifying transport. These storage systems have grown significantly in the United States in just the past few years. In 2010, seven battery storage systems accounted for 59 MW of power capacity. By 2018, there were 125 battery storage systems for a total of 869 MW of installed power capacity.  Bishop said battery storage is a natural fit in Texas' broader energy landscape.  “Texas has always been an all-of-the-above energy market. Battery storage is economic in Texas not just because the Lone Star State leads the U.S. in wind generation and is quickly gaining in solar generation, but also because of the increase in electricity demand from West Texas fracking rigs, Gulf Coast petrochemical plants, and a growing number of costal LNG export terminals.” With 2021 is just a few weeks away, Bishop said the company is already looking at the next few years ahead. “We remain focused on getting our projects built, securing new offtake contracts for our 2022-2024 projects, and operating our existing projects. We look forward to moving into a new office space in Downtown Houston in the coming months when the pandemic subsides, and continued growth in our Houston-based team, capabilities and revenues.” Learn how Houston is leading the global energy transition. See major Energy 2.0 developments in 2020.
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