Houston has long maintained the title as the world’s energy epicenter. But, as the oil and gas sector enters the energy transition, the region must be proactive in securing its lead in creating a low-carbon future.
This goal isn’t far-fetched considering Houston’s position as a leading hydrogen producer. But, there is still room to pioneer new ways of producing hydrogen as well as expanding into new applications and uses for it, according to top energy executives at the Greater Houston Partnership & Center for Houston’s Future conference.
The key to building will be the development of energy talent, said Chevron’s vice president of energy transition, Daniel Droog.
“Our belief is energy is about people: those who use it and those who create the projects that produce it,” Droog said during the conference held June 29-July 1.
While Houston has the expertise to scale technologies that can decarbonize the energy supply chain, human ingenuity will drive the advances in hydrogen and carbon capture, utilization and sequestration (CCUS). Droog said this will be essential to Houston sustaining a competitive advantage over other cities contending to be the energy leader.
“Houston is ideally positioned to develop the first truly integrated power market, given Houston's leadership and installed renewable capacity to go along with its dominance in oil and natural gas, as well as its position to grow new energies,” he said.
A recent study by Rice University’s Baker Institute for Public Policy showed Houston’s comparative advantages include a workforce comprised of 57,000 engineers—one of the largest concentrations of engineering talent in America. Additionally, Houston is the most diverse city in the country and the greatest majority-minority community in America, making it a highly dynamic environment that feeds innovation, the report noted.
“At Chevron, we see Houston as a critical partner and an ideal platform from which to lead,” Droog said
With this, the company has led many of its recent low carbon actions out of Houston, including its $300 million Future Energy Fund II.
“We’re investing a half-billion dollars in emerging technologies, testing their effectiveness and scaling the best solutions that can have a real impact,” he said.
A report published by the Greater Houston Partnership explained that reaching global net-zero goals will require new innovations that have yet to be brought to market, advancements in technology that have yet to be developed, and supportive public policies that have yet to be enacted.
“This is an imperative for Houston and Chevron,” Droog noted.
In support of Houston innovation, Chevron was an early founding partner of Greentown Labs’ expansion into the city. The cleantech-focused center will act as an incubator to nurture climate tech startups and serve as a center for collaboration and partnership.
In 2020, the company’s joint venture with California-based Novvi LLC reached first production of 100% renewable base oil from Novvi’s Deer Park Houston facility.
The Chevron-Novvi partnership leverages the technologies of Chevron’s long-standing expertise in hydroprocessing, particularly ISODEWAXING, with Novvi’s innovative use of renewable feedstocks to produce and market high-performance, synthetic and renewable premium base oils.
Working to groom talent, Chevron developed its Digital Scholar Program in partnership with Rice University where employees attend Rice full time for one year—focused on skill and experience development—to accelerate innovation back into the company.
“These investments demonstrate our optimism about the future of energy and the leadership role Houston and Chevron will play in achieving it,” he said.
Additionally, Chevron’s Houston-based business development team launched a new carbon capture project with Microsoft, Schlumberger and Clean Energy Solutions. The project is designed to utilize agricultural waste from California to produce renewable power while capturing and storing the CO₂.
“We’re also working here in Houston to scale hydrogen business that can deliver the lower carbon products our customers are seeking,” he said. “We believe hydrogen can play a key role in decarbonizing sectors that renewables have difficulty serving like heavy-duty transportation, hard to abate and heat or energy-intense manufacturing, and also for stable power and grid resiliency.”
According to Droog, a refined energy transition strategy focused on higher returns and lower carbon has already lowered the carbon intensity of Chevron’s operations. It has helped the company exceed its greenhouse-gas reduction goals for 2023 and made way for the rollout of a $2 billion capital program for 2028 that aligns with the Paris Agreement.
Green Hydrogen is the ‘New Horizon’
Clean hydrogen will play a growing role across the economy as the world transitions towards net-zero. But, the role and size of hydrogen in a net-zero future will depend on costs and technology development of the decarbonization method.
Green hydrogen will be the avenue to getting the costs down of clean hydrogen production, according to the Energy Transitions Commission’s (ETC) global hydrogen lead Andreas Wagner.
“Clean hydrogen at this point in time is more expensive than fossil derived hydrogen without any form of carbon pricing,” he said. “So we think green hydrogen will actually dominate in terms of the cost perspective.”
In research conducted by the ETC, it concluded that green hydrogen derived from electrolysis will become the cheapest clean production route. In favorable locations with low costs renewables like Chile and Australia, the ETC predicts green hydrogen will be competitive with blue hydrogen in the 2020s.
The research showed that 50 gigawatts of electrolyser capacity would unlock green productions costs of $2/kg in average locations, making it competitive in predominately blue and some grey hydrogen regions.
“In a long-term scenario, we think green hydrogen will take the major share of supply by 2050 with over 75% based on the fact there will be lower costs,” he said. “However, blue hydrogen will take a greater share of supply in the next decade, while green hydrogen ramps up faster in the 2030s to compensate.”
The ramp-up in green hydrogen will require a major increase in green electricity generation post-2030, he noted. Total electricity demand would need to multiply by 3.5 to 5x usage by 2050, growing from 27,000 terawatt-hours (TWh) today up to 90,000 to 130,000 TWh.
“We do not see inherent barriers to scaling, but planning and incentivizing will be required to actually design an optimal power market,” he said. “The presents a significant opportunity for cumulative investments to create this hydrogen ecosystem.”
The investments will need to amount to $15 trillion globally to grow clean hydrogen by 2050, peaking at roughly $800 billion per year, ETC research found.
“Houston has enormous potential to play an important role in this,” he said.
By far, Texas has provided the biggest renewables investments for solar and wind generation of all the states in the U.S. given its illustrious solar and wind resources. Additionally, the Gulf Coast is the best suited across the globe to enable new hydrogen production in a cost-efficient manner.
“Beyond power and CCS, Houston has a fantastic existing hydrogen infrastructure, some of the longest hydrogen pipelines in the world, and three out of six of the hydrogen salt caverns to store hydrogen,” he said. “So there's everything in place to really kick start the development of the clean hydrogen hub in Houston.”
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