Energy industry beginning to get behind tech incubators

The Cannon has nurtured young companies for more than three years, expanding from its original outpost in west Houston to locations in downtown and the Galleria. As another sign of the innovation hub’s success, a key tenant recently signed a lease to significantly expand in the flagship facility in west Houston.

That company, however, was not a startup that recently scored a new round of funding, but rather the technology development arm of the oil major Chevron. Chevron Technology Ventures is increasing its footprint at The Cannon to more than 2,300 square feet to create a so-called makerspace, where teams from Chevron can collaborate with startups on innovations and leading-edge technologies that could aid Chevron’s oil and gas business.

Chevron’s expansion at The Cannon is part of the increasing involvement of Houston’s dominant energy industry in the local startup community, providing a boost to the region’s efforts to develop a robust innovation and technology sector.

The European oil major Royal Dutch Shell also maintains a presence at The Cannon, where it holds office hours for startups to pitch products and services and get feedback from Shell experts. In another part of town, Chevron and Texas oil major Exxon Mobil are supporting Rice University’s development of The Ion innovation hub in the old Sears building in Midtown.

A short distance from The Ion, the former Fiesta grocery store in Midtown will become the site of Greentown Labs Houston, a clean energy technology incubator. Shell, Chevron and other energy companies such as Houston merchant power company NRG provided the support that led Greentown Labs, based near Boston, to expand into Houston.

In July, Houston oil field services company Halliburton launched its own clean energy technology lab.

Several factors have contributed to the energy industry’s growing role in the region’s nascent innovation sector, including low oil prices that are forcing oil and gas companies to develop new technologies and practices to become more efficient. Under pressure from environmentalists, investors and governments, companies also are positioning themselves for a global energy transition demanding clean energy technologies and fewer fossil fuels.

“All of them want to promote themselves as energy companies, not oil and gas companies,” said Jan Odegard, interim executive director of The Ion. “They’re still making most of their money on oil and gas, but I think sustainability, resiliency and environmental impact is front and center for all of them.”

Fits and starts

Houston-area leaders, as part of their efforts to diversify the local economy, have worked in recent years to develop a technology and innovation sector. Progress at times has been slow and not without its setbacks — notably the city’s failure to make the first cut during Amazon’s search for a second headquarters location.

The effort, however, has moved forward. In addition to the proliferation of incubators and accelerators, venture capital investments in Houston-area startups have increased substantially, growing to $606 million in 2019, up 32 percent from 2018.

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But investment in Houston’s tech sector remains tiny in comparison to other tech centers. Some $2.2 billion in venture capital flowed into Austin, and more than $50 billion in venture capital financing went to Silicon Valley in 2019.

For the local innovation sector, the energy industry offers the opportunity to close some of that gap, bringing capital, customers and its own history and culture of innovation — a culture that has found and produced oil and gas from the deepest ocean depths and once-impenetrable shale rock.

“There’s been a tremendous amount of activity on the innovation side of the energy industry in Houston,” said Jose Beceiro, senior director of Global Energy 2.0, the energy transition initiative of the Greater Houston partnership, a business-financed economic development group. “Most of the initiatives in Houston are tied to the energy industry.”

Chevron’s new space at The Cannon will be dedicated to evaluating the development of what the company defines as “edge technology,” innovations that can be used in the field to aid Chevron’s production of oil and gas, said Barbara Burger, president of Chevron Technology Ventures.

Chevron’s association with The Cannon allows it “to be able to more closely interact with startups and entrepreneurs that might be looking for a Chevron-like customer to pilot their product,” said Maigen Berg, The Cannon’s managing director.

IT meets energy

The Ion innovation hub, located in the former Sears building in Midtown, is set to open in the spring. The 300,000-square-foot technology incubator will anchor the 16-acre Innovation District, being developed by Rice University’s real estate affiliate, Rice Management Co.

The Ion will reflect the energy industry’s increasing embrace of information technology to manage and analyze the vast amounts of data generated by sensors, drones and other smart equipment used to find and produce oil and gas. Energy companies want to mine that data to improve operations and efficiency.

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At The Ion, energy companies such as Chevron will share space with Microsoft, one of the leaders in cloud computing services that store and analyze large volumes of data. Microsoft has an interest in encouraging tech startups that might become customers for its services, as well as developing a workforce that might allow it to grow in Houston, The Ion’s Odegard said.

“They’re looking at this holistically,” Odegard said. “This is a great place to diversify their operation.”

Scale of change

In June, Greentown Labs, one of the nation’s leading clean energy incubators, said it would site its first location outside of Massachusetts in Houston. When it opens next spring, the 40,000-square-foot facility will provide office space, prototyping labs and other facilities for about 50 Houston-area technology startups.

Greentown Labs said it decided to come to Houston, the fossil fuel capital of the world, because of the depth of energy experience and expertise access to universities, such as Rice and the University of Houston.

Houston, said Greentown Labs CEO Emily Reichert, “needs to become the energy transition capital of the world, if we’re going to be addressing climate change on the scale we need to.”

Greentown Labs Houston’s founding partners include companies representing every facet of the energy industry, from multinational corporations such as Chevron, Shell and the Australian mining company BHP to the power companies ENGIE North America and NRG to the solar company Sunnova Energy.

Scott Burns, NRG’s vice president of retail innovation, said his team is eager to work with Greentown Labs’ startup companies, several of which are focused on data analytics, a field of research in which NRG has heavily invested. Better understanding data related to power usage can help retail electricity companies such as Reliant offer their customers new pricing options, such as lower rates during times of less power usage.

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NRG has also teamed with Canada’s Oil Sands Innovation Alliance to sponsor the $20 million Carbon Xprize, to be awarded to the organization that develops the best technology for reusing carbon dioxide captured from fossil fuel-fired power plants and other industrial facilities. The lack of markets for carbon dioxide has hindered the development of carbon capture technology, which removes the greenhouse gas from fossil fuel emissions.

Clean Energy Accelerator

In another example of the energy industry’s embrace of the local technology startup community, several big energy companies recently agreed to help fund the Clean Energy Accelerator, a 12-week program to support early-stage energy startups from around the world. Rice University’s Rice Alliance for Technology and Entrepreneurship launched the program in September.

Energy industry sponsors of the accelerator include European energy majors BP, Shell, Total and Equinor U.S. majors Chevron and Exxon, Saudi Arabia’s national oil company Saudi Aramco, NRG, Sunnova and Halliburton.

Rice Alliance plans to open applications for the first group of startup companies in the first quarter of 2021. The first cohort of 10 to 20 startups will begin the program in the second quarter.

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