Houston, the acknowledged energy capital of the United States, can lure substantial investments and create thousands of jobs by stepping up to lead the transition to a low-carbon future, top city leaders said this week.
The Greater Houston Partnership on Tuesday unveiled a bold strategy for the fourth largest city in the country. In kicking off a three-day Future of Global Energy conference, city leaders offered a roadmap of sorts.
“Houston should be the world’s energy transition laboratory,” Tudor, Pickering, Holt & Co. CEO Bobby Tudor said in the call to action.
Tudor, long an advocate for energy transition growth, chairs the Partnership’s Houston Energy Transition Initiative. He was keynote speaker on the opening day of the conference. He noted that city leaders early this year began developing the strategy with support from consultancy McKinsey & Co.
The goal was based on a “core belief” that “Houston has a responsibility and an opportunity to leverage our energy leadership to accelerate global solutions for a low-carbon future.”
The region’s “enormous port, rail and air infrastructure represents a significant platform for implementing large-scale decarbonization initiatives,” he told the audience.
Attracting ‘New Energy’
On one hand, the goal is to sustain the massive oil and gas industry concentrated in the region. In parallel, the goal is to attract the “New Energy” companies and the 500,000-plus estimated jobs they could bring.
“The global energy transition can either be viewed as a huge threat or as an extraordinary opportunity for Houston,” said Partnership CEO Bob Harvey. “We choose to view this as a tremendous opportunity to enhance the long-term economic future and global competitiveness of Houston.”
Houston “has the knowledge base, skill sets and infrastructure to help guide this work, “and it is simply imperative that we do so.”
There’s no clear path to determine how society will solve the dual challenge to continue to produce energy while eliminating the carbon emissions. However, Tudor said, “It is the kind of challenge that Houston is uniquely equipped to lead, primarily because of our incumbent energy industry and our understanding of this complex system.”
There are few places in the world that can match Houston “for its concentration of energy infrastructure,” Tudor said. In addition, the “incumbent energy companies are already making significant investments in low-carbon solutions and are working to reduce emissions within their operations.”
The Partnership is a powerful business voice, serving 900 member companies in the 12-county region. It is not prescribing one strategy nor advocating for changes to business models to transition to lower carbon dioxide (CO2) emissions.
“However, it is our job to attract new businesses and investment that position the region as a great, global city,” Tudor said.
McKinsey modeled Houston’s potential job growth under three scenarios: business as usual, accelerated transition and a 1.5 C pathway.
The business-as-usual model would continue existing trends, capturing expectations of how global consumption and future technologies would evolve. The accelerated transition is a scenario where there is faster development of lower-carbon technologies and “more aggressive government policies” to scale them. Under the 1.5 C pathway, CO2 emissions by 2050 would be cut by 90% from the business-as-usual projection and 70% from the accelerated scenario.
Creating 560,000 Jobs
“McKinsey’s analysis suggests that as many as 560,000 jobs could be created by 2050 in the region if we were to take decisive action to lead in the energy transition, which means Houston would have to work aggressively to capture a significant share of the trillions of dollars that will be invested globally in the transition,” Tudor said.
“The flip-side of this is a point I made last year. The incumbent oil and gas industry will not be the same driver for growth in the next 25 years, as it has been in the previous 25 years. The transition will be a part of this, but much of this is due to flattening demand and improved efficiencies.
“There are a number of upstream oil and gas jobs that we will never recover, and new company formation in the incumbent oil and gas industry is already dramatically lower than in the prior two decades.”
The job creation analysis was used as a “best proxy of our goal of opportunity for all,” Tudor said. In addition, Houston would be able to leverage its “large, diverse and technically oriented workforce.”
The new skills required for the expanding alternative energy jobs would complement the Houston region’s massive oil and gas workforce.
“The miles of pipelines, refineries, storage facilities and logistics capacity all lend themselves to rapidly scaling new energy technologies” including carbon capture, utilization and storage (CCUS), as well as hydrogen and advanced plastics recycling.
Houston also benefits from significant renewable generation capacity, Tudor noted.
“Houston taps directly into the Texas power grid, which generates more wind power than any other state and more solar power than any but California. This advantages Houston to be at the center of developing renewable-based solutions, such as green hydrogen.”
The Houston Ship Channel (HSC), for example, has the nation’s largest concentrated point source emissions, pipeline and logistics infrastructure. It also has “energy consuming manufacturing facilities,” all of which offer “an ideal ecosystem” to capture and transport CO2, produce and distribute hydrogen, as well as reprocess plastics.
The HSC also provides a huge outlet to transport hydrogen, ammonia, biofuels, lower-carbon liquefied natural gas and other products, Tudor noted. The first step is to jumpstart emerging technologies and markets where Houston has a strategic advantage.
‘Obvious’ Place For CCUS
The region is an “obvious place” to develop and implement CCUS technologies, Tudor said. ExxonMobil recently suggested a bold plan to decarbonize the HSC, which it estimated would cost around $100 billion. If the landmark project were to be built, ExxonMobil estimated that by 2030, the initial phase of the CCUS project could capture 50 million metric tons/year of CO2 from the mega refineries, chemical and manufacturing facilities along the HSC.
Houston also could be a major hub for low-carbon hydrogen production and application, according to Tudor.
The upper Texas coast near Houston is home to the world’s leading hydrogen system, producing about one-third of the nation’s supply a year, he said. “The region also encompasses a network of 48 hydrogen production plants supported by over 900 miles of hydrogen pipelines, which is more than half of the U.S.’s hydrogen pipelines and one-third of the world’s hydrogen pipelines.”
The second leg of the strategy is to attract and support companies in established and growing “New Energy” industries. The third leg would enable continued growth across the region’s entire energy industry.
“Houston will need to be the home of innovative solutions that will be produced locally and deployed globally,” Tudor said. “This will prevent the displacement of workers and ideally, maintain Houston’s standing as a global hub for energy expertise.”
Said Tudor, “Make no mistake. The energy transition will not be easy, nor will it be cheap.”
The strategy is rooted in “the city’s eagerness for innovation; our appetite for high-risk and high-reward business investments; and our capacity for executing on massive, complex projects around the world.”
Houston Mayor Sylvester Turner, who also spoke at the opening of the conference, referenced the city’s long identity as the nation’s energy capital.
“That title is ours to lose,” Turner said. “If we move forward in the energy transition in a smart and resilient way, we will stay at the forefront of the energy sector. The City of Houston’s innovation and adaptability will be key as the energy industry diversifies.”
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