Friday, March 24, 2023

Innovating Our Way Out of Crisis

Texas is among the most energy-abundant states on the planet. It’s America’s hub of oil and natural gas production, by far the greatest source of potential wind-energy generation, the second-largest home of potential solar energy generation, the source of abundant geothermal resources, and a hotbed of research and innovation.

Yet despite this diverse portfolio, even with all these smart minds and energy resources, the Texas grid this year was abruptly crippled — not by terrorist attack, not by devastating tornado or hurricane. By a cold snap of epic proportions.

The estimated costs have soared past $200 billion — four times the annual budget for Texas schools. The crisis has cast glaring new light on some of the most fundamental assumptions about markets and regulations, not only in this state but across the U.S. and beyond.

But perhaps most of all, the grid disruption in February laid bare the profound vulnerabilities facing our electric grid and energy systems — and the need for leading energy organizations to repair and prepare, yes, but also incorporate a new ethos of system-wide innovation.

What does this mean exactly? It’s not simply “innovation theater:” trotting out a short-lived “incubator” with day-glo walls and cold brew, let alone some two-bit “fellowship” that’s little more than public relations. And it’s more than mere operational improvements.

Lasting innovation demands a system and a mindset: a clear-eyed decision to embrace and manage risk, to wholly evaluate the outcomes of new ventures, and integrate the successes while trimming the failures.

This should be familiar to most Texans — especially in the energy space. The “Lucas Gusher” in East Texas marked the launch of the global oil industry. Eighty years later, a “slick-water frack” introduced technology that, by the mid-2000s, would transform America into the world’s largest energy producer. For more than a century, Texas has led the way on global energy innovation.

Too often, though, existing incentives work against innovation: Electric and gas utilities, charged with keeping the lights on and the heat pumping, are cautious of anything that might interrupt the flow of electrons and gas molecules. Some oil and natural gas producers experience immense push-back from peers when attempting to become overtly cleaner and greener.

It’s time to change course. And in true Texas tradition, we’re seeing trailblazers lead the way: Dallas-based Hunt Energy Enterprises, for example, which traces its roots to the Hunt Oil Company in 1934, is now agnostic as to where its molecules and electrons come from. This spring  it announced announced an energy storage project pipeline of 500MW across Texas’s ERCOT market.

Occidental is investing in carbon capture. BP, Shell and Equinor are harnessing their offshore oil and gas expertise and workforces to build offshore wind. Four Texas electric utilities, operating within adjacent geographic territories, are now exploring ways to speed innovative practices and better serve customers by collaborating regionally. Even the oil and gas majors are shifting, with Texas’s own

These organizations are building cultures of innovation by shifting expectations on what it means to earn a return on investment — to incorporate not just financial boons, but meaningful, systems-changing innovation that bring those on the fringes along with those in the main. They boast executives who understand that innovation is everyone’s responsibility, not simply the remit of some “chief innovation officer” figurehead, and introduce incentives for innovation across their organizations. They have the insight to understand redeployment of existing technologies in new and creative ways is innovative. Moreover, they understand the speed and pace of innovation must grow because the intensity and rate of the demands are increasing.

There’s an old proverb: “If racing against foot soldiers wearies you, what will you do when they come on horseback?”

Well folks, they have come on horseback.

Whether deep freezes in Texas, wildfires in California, hurricanes along the Gulf Coast, or any other calamity, our innovations today will build the reliable, resilient, equitable, and prosperous grid tomorrow. Innovation, in short, combines the dream of what’s possible with the pragmatism of what’s practical. That’s the big-idea, hard-reality approach that helped transform Texas into the world’s energy powerhouse — from oil and gas, to zero-emissions wind, sun, and, soon, geothermal.

It’s time to make the production and consumption of energy faster, smarter, cleaner, more resilient and more efficient. Business leaders, political leaders, the energy sector and savvy citizens have the power to put investment and practices in place that support a robust energy innovation ecosystem. So, saddle up.