Houston, the United States’ fourth largest city, is an industrial powerhouse with several claims to fame. It boasts the largest life science complex in the world: the Texas Medical Center. It is home to NASA’s Johnson Space Center and earned the name “Space City” during the pivotal space exploration era of the 1960s. It has been named the most diverse city in the United States. And it is perhaps most famous for being the energy capital of the world.

But what will Houston be known for in the future? The city is boldly striving for a new title: the energy transition capital of the world.

Faced with the challenge of climate change, Houston is bringing its track record of innovation to the table—and it’s already making headway. Hundreds of clean energy startups have recently made Houston their home, including the next-generation geothermal company Fervo Energy, founded by Tim Latimer (Cohort 2018).

“We are seeing broad recognition that as the energy capital of the world, Houston has both an opportunity and a responsibility to lead the transition to an energy-abundant, low-carbon future,” says Lou Ann Duvall, senior director of marketing and communications at the Houston Energy Transition Initiative (HETI), a coalition of industry, academic, and community partners led by the Greater Houston Partnership. She sees Houston becoming as pivotal for the energy transition as Silicon Valley has been for technology if it builds on its strong foundation and strengthens its ecosystem.

A Change in the Weather

For almost a century, Houston was defined by oil and gas. And as recently as six years ago, this remained a steadfast vision for the foreseeable future. But a series of turning points has led the city in a new direction.

The climate crisis hit home in August 2017, when Hurricane Harvey devastated the Houston metropolitan area and South Texas. A Category 4 storm, Harvey flooded around 100,000 homes and caused $125 billion in damage, becoming the United States’ costliest disaster that year. Experts say that the warming climate increased the severity of the storm, and had it not been for climate change, 30-50 percent fewer homes would have been flooded.

“We also saw that things we thought were never possible were actually possible. It gave us some flexibility to start thinking about how to do things differently—because we had to do things differently.”

— Lara Cottingham

“That was a point where, from a City of Houston perspective, we had gone from not really talking about climate change very often, to not not talking about it—that every action that the city did, every dollar spent, was now looked at through a very real climate lens,” says Lara Cottingham, vice president of strategy, policy, and climate impact at Greentown Labs and former chief sustainability officer for the City of Houston. “That really put Houston on the international stage in terms of climate change, both in terms of being impacted by climate change, but also then [considering] what was our role and responsibility as the energy capital of the world?”

Around that same time, news of other catastrophic hurricanes, destructive winter storms, and megadroughts and their resultant fires dominated headlines. “And that to me was this point where people went from talking about climate change academically to talking about it in terms of ‘what is your plan.’ And that resonated throughout Houston's business community and throughout the energy industry because their operations were impacted.”

And then the COVID-19 pandemic hit, upending business as usual in Houston. “We saw how fragile our ecosystems, how fragile our supply chains are,” says Cottingham. “We also saw that things we thought were never possible were actually possible. It gave us some flexibility to start thinking about how to do things differently—because we had to do things differently.”

Before recent years, Houstonians were frequently divided: you were either “for energy” or “for climate action.” But Cottingham saw a distinct mindset change when she was authoring the Houston Climate Action Plan that was launched in 2020. She was working with industry partners to set climate goals and figure out which new technologies would need to be developed to meet them. Industry partners saw what a big role they could play in climate solutions, and that’s when she noticed Houston become “activated.”

There was a collective realization: “No place is better than Houston to [develop and] take that technology and deploy it on a national and an international scale,” she says. “And you see that continuing today when we talk about things like carbon capture, hydrogen, utility-scale renewables, and storage—that these are really big challenges that require really big solutions.”

Houston’s Got Talent

“No place is better than Houston to [develop and] take [new climate] technology and deploy it on a national and an international scale.”

— Lara Cottingham, Greentown Labs

There are many reasons Houston is poised to deliver big solutions for clean energy and take a leading role in enabling a lower-carbon future. One of the region’s most valuable assets is its workforce—the city is bursting with diverse talent and a huge concentration of technical skill. An established leader in energy, life sciences, aerospace, manufacturing, and logistics, Houston thrives on innovation. Additionally, it’s an attractive place to do business, offering unparalleled access to partners in the energy industry, energy financing expertise, established physical infrastructure, and an economical cost of living, among other advantages. In short: Houston has what it takes.

“The energy transition requires extensive technology development and innovation across key technologies including CCUS, hydrogen, circular solutions, energy storage and infrastructure, etc.,” says Duvall. “Because of Houston’s extensive talent base and physical infrastructure, the Houston region is where these technologies can grow to scale in the near- to medium-term. Transitions take time and resources, and we believe that collaboration between energy tech startups, incumbent energy corporations, and everyone in between will accelerate innovative energy solutions.”

Houston’s hard-tech orientation could be what differentiates it from other technology hubs like Silicon Valley or Boston. “We have a lot of potential to address industrial-scale problems, not just consumer-scale problems. And these problems are mostly in the physical realm,” says Wogbe Ofori, founder of the Houston-based venture development firm Wrx Companies. “Houston has a lot of potential to be a global hub for hard-tech innovation… In my hope and vision, Houston will be a place where the world comes to solve some of its hardest problems.”

Innovating from the Ground Up

In order to foster clean energy innovation, Houston is rapidly expanding its startup ecosystem—the resources, networks, infrastructure, and opportunities it can offer new companies that plant their roots in Houston.

The Ion houses labs, companies, and meeting and lecture spaces with a robust program covering science and entrepreneurship topics.

The recently opened Ion District is a physical manifestation of Houston’s new innovation ecosystem. The walkable and transit-friendly 12-block-long area is described on the Ion website as “a job-generating neighborhood fueled by clean and sustainable technologies and the entrepreneurial drive to find a better way.” The Ion represents the district’s nucleus—the former Sears department store is now a sleek multi-use space featuring workspaces, a prototyping lab, an investor studio, and bars and restaurants. The space is intentionally designed to foster connection, inviting not only startups but community members, including corporate, academic, and civic leaders, to come together to reimagine the future.

Boston-based Greentown Labs expanded to Houston in 2021, recognizing the city’s unique capacity for innovation. It opened Houston’s first climate-tech incubator, a 50,000-square-foot space in Midtown, and already hosts 79 companies. In 2022, it launched Texas Entrepreneurship Exchange for Energy (TEX-E), a “first-of-a-kind collaboration among Greentown Labs, MIT’s Martin Trust Center for Entrepreneurship, and universities across Texas to create a powerful student-driven entrepreneurship ecosystem in Houston, focused on energy innovation and implementing lessons learned from building a successful ecosystem in the Greater Boston area.”

The region's universities offer a rich source of opportunities for innovative students.

The Ion District and Greentown Houston are nested within the Houston Innovation Corridor, which is a four-mile strip connecting key destinations across Houston with light rail, bike lanes, and pedestrian walkways. From north to south, the corridor encompasses Downtown, Midtown, the Ion District, the Museum District, the Texas Medical Center campus, and Rice University.

Houston’s 10+ higher education institutions are also powerful innovation hubs. Their engineering strengths contribute to Houston’s ecosystem, and many offer startup support. For example, Rice University’s Rice Alliance for Technology and Entrepreneurship offers a tech startup accelerator, mentorship, educational opportunities, and venture programs to foster investor relationships. Not far away, the University of Houston’s UH Technology Bridge provides a comprehensive support system for students, faculty, and industrial partners, and is situated in a physical park featuring an innovation center, incubator labs, and several facilities dedicated to research.

A City of the Future

Driven by the City of Houston’s recent commitment to climate action and the energy industry’s new direction, Houston is becoming a model of a sustainable community. Since 2020, the city’s municipal facilities have been powered by 100 percent renewable energy with a goal of city-wide carbon neutrality by 2050. Houston is leading the United States in its concentration of solar and wind companies (it has more than 130). And Houston is on its way to enabling Texas to have the country’s first zero-carbon grid.

What’s needed is more investment, and the Inflation Reduction Act will help with this challenge. “For Houston to realize its ambition to become the energy transition capital of the world, capital flows for energy transition will need to scale to $150B p.a. in Houston by 2040. That’s a factor of ten vs. 2021 estimated energy transition capital flows,” says Duvall. “With the passage of the Inflation Reduction Act (IRA), even greater economic incentives exist for investors to allocate capital to many energy transition technologies.”

“Next, state and federal policymakers need to address significant regulatory and permitting issues to improve project investment and viability,” she says. “As these questions are answered, we will see more projects announced, constructed, and put into operation.”

Houston’s goals may be ambitious, but its progress is already surpassing expectations. Cottingham looks back just a few years: “When we were doing the Climate Action Plan with the City of Houston, one of our goals was having 25 climate startups in five years [by 2025]… And right now Greentown has 79 startups. That's not including the Ion. And that's not including Halliburton Labs. And that's not including the folks that are coming out of Rice and coming out of A&M and all these places. So it shows you how fast the Houston ecosystem has grown beyond what we thought possible.”