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What do Texans do When Renewable Power Gets Cheaper than Gas?

This is not your father's cleantech sector from 2010 where subsidies mattered and we called renewables alternative energy because it was more expensive than conventional.

Yes, renewables from solar and wind power are now cheaper than fossil power. Yes. Without subsidies. And they come with a 30 year price hedge built in. In fact, the average cost of new renewables is now cheaper than the *marginal* cost to even an operate gas fired generation. Three guesses as to what that does to the value of fossil generation and oil & gas assets this next decade.

Driven between between Texas shales and renewables, the marginal cost of power, energy, and carbon abatement is going to be close to zero, and often even negative. The average cost is going to be de minimis. That changes everything in our lives. What do you do when energy becomes dirt cheap or even functionally free?

You build things that need energy, and you rewrite everything in the economy. And no, the fact that they are intermittent or in the wrong place doesn't actually matter all that much. In fact, I founded a startup Smart Wires, a decade ago, to address that coming issue of routing renewables where they need to go. Between power flow control, distributed energy, energy storage, our energy mix of renewables and gas is going to be just fine technically (once ERCOT and the Texas PUC gets their heads out of the sand and arrives in the modern century). In fact, the power is going to be free, but getting it to you? That's going to be the real issue.

Is Texas Toast? Not quite. Texas is the US leader in production of gas, oil, power, chemicals, refining, LNG and also CCS, wind and hydrogen. It's #2 in solar and closing fast. It will be the energy storage leader soon too. The ERCOT energy storage interconnect queue is basically full. Texas ranks as a single state, at the top of most countries in all those categories. In fact, the first major wind developer was from oil men in Houston, the largest US wind turbine manufacturer was Enron Wind, our state's advantages in renewables are built not just on resources, but on the oft maligned deregulation. Add that to the reasons Tesla is coming to Texas, and it's not just low taxes.

In college in 1997 I sat in the Catholic Students Union at Texas A&M University and listened to the retirement lecture of Dr. John Bockris, one of the first serious academics researching cold fusion, and some random non profit policy guy from Austin talking about the scope of Texas' renewable energy sources for wind, solar, ocean, geothermal, hydro, and biomass. There were 15 people in the room and it was off campus for a reason - A&M didn't want it on campus at the time, today its a research powerhouse in next generation energy. They were both nuts, and yet 25 years ahead of their time.

17 years ago I spun one of the first ever venture backed startups out of College Station, Texas. In fuel cells. The company is still around to this day. In a twist of fate the company was spun out of Lynntech, a private lab founded by two of scientists who got to Texas as post docs for that same Dr. Bockris. Today, what that policy guy was babbling about was half right. Biomass is not everywhere. Wind and solar? They are the vast bulk of all new generation added, not just in Texas, but in the country, and the developed world. At the time renewables cost 20x more than conventional power. Today they cost less. Even as crazy as he was, I don't think that policy guy had the guts to predict that.

Today, a company called Key Capture Energy is racing to finish the first large scale battery energy storage project in Texas in what in 1900 was a booming cotton and railroad town called Hearne, TX. In another twist of fate, that project is being constructed on former cotton growing and ranch land that in the 1990s was my father's ranch, and is developed by a guy who happens to have been my colleague when I was working on energy storage for ConocoPhillips a dozen years ago.

So what did I do? Well, I learned venture in the dotcom boom in San Francisco, seeded and founded a few startups in cleantech, and spent a few years helping get ConocoPhillips into venture and alternative energy (it didn't stick) and then Shell's 3rd attempt at a corporate venture arm launched (it did stick!). Then I took a break and ran for Senate. This week we announced Energy Transition Ventures. the first venture capital fund in the world's energy capital of Texas focused exclusively on the energy transition. We're backed by a family owned Korean conglomerate, GS Group, that started life in the 1960s as refining JV between what was then LG and Texaco, and still owns GS Caltex with Chevron, an 800 bopd refinery bigger than any in Texas and one of the 5 largest in the world. It also includes LNG, Coal, CHP, Biomass, E&P, wind, solar, ESS, fuel cell, and smart home assets, one of the largest construction companies in the world, battles 7-11 in the C-store business, and turned a home shopping network into a mobile commerce powerhouse. They've invested in dozens of startups and funds in Asia. And they're sending a venture capitalist to Houston to join us.

Don't kid yourself, the energy transition is already disrupting the ever living hell out of the 500+ global multi-billion energy companies, and it will interesting to watch which ones survive, which thrive, and which simply become a footnote in Texas and energy history.

We will invest in any startup team worth its salt that benefits from or drives the energy transition. And we may be first in Texas, but we're not alone, and we won't be the last.

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