Energy innovation at the center of many crucial transitions: an interview with Barbara Burger

Words of Wisdom with Barbara Burger & Christoph Frei

 

As former head of Chevron Technology Ventures, the energy giant’s corporate venture capital unit, Barbara Burger has had a front-row seat to the profound changes in energy innovation that have marked the last several decades.

In this interview, Emerald’s Head of Energy Christoph Frei speaks with Barbara about the energy-climate nexus in all its complexity and what needs to happen for the US—the world’s largest economy—to up its game in the energy landscape of tomorrow.

 

Big challenges in energy and innovation

Christoph: What keeps you awake at night about the energy transformation and innovation space?

Barbara: What we’re trying to accomplish with the energy transition is daunting, because we’re trying to change a system that has a huge number of stakeholders. And it’s not just about the economics of energy; it’s also about environmental impact in many dimensions. It’s also about equity in the community impacts. And those aren’t uniform. It’s really hard to think about how change will happen, but I’m confident that it will. We will make it happen. I’m generally an optimist, and I believe we’ll get through this transition, but it won’t be a straight shot, and we won’t get there as fast as we should.

Christoph: We’ve seen recent announcements from companies like Ørsted, Shell and others that they are delaying important transition and transformation projects. This has yet again created controversy about how big the contribution of those large corporates is going to be. What would you say about the ultimate contribution of those large legacy corporates when it comes to climate and energy innovation?

Barbara: There have been some delays, and I guess I would say fundamentally, the projects have to make business sense when they’re putting large dollars toward a commercial unit. Still, I think the corporates bring a lot to this game. They bring all kinds of capabilities and assets; they bring a balance sheet and they bring a time horizon that gets closer to what we need. A first plant may not have economics that pencil out relative to other projects that they might do, but they can often see through to multiple projects, and on a longer time horizon.

So that’s positive, but I don’t think you’re going to do projects where you can’t see the economics. Things could have changed because cost structures have changed, because you can’t find the offtake for the hydrogen or whatever it is, or because the policy framework isn’t stable enough to make good capital decisions. One issue is that, in the US at least, a lot of these technologies were developed based on the assumption that there will be cheap and abundant low-carbon power, and it’s neither cheap nor abundant, so that is one of the headwinds that these projects are facing.

Christoph: In a broad sense, do you feel that we could be nearing any transformation tipping points? What are the elements, if any, that would help trigger faster action?

Barbara: There are a lot of things preventing the transformation from moving more quickly: economics and politics, just to name a few. At least in US, we struggle to build things, because there’s this whole “not in my backyard” faction. Many things can push against that, including patient capital and government funding to get things off the ground. I’m a firm believer that ultimately the market has work toward the transformation on its own, but money up front to catalyze getting over those early humps can be extremely important. Cooperation and collaboration between the public and private sector and involvement of impacted communities are also crucial.

Innovating in a fast-changing power sector

Christoph: What are your thoughts about how we can manage the rise in load growth given all the competing and sometimes novel demands on the energy grid?

Barbara: In the last few years the whole notion of load growth—particularly in the US, but also in Europe—has really changed the game. Many of the technologies that I’ve been interested in—carbon management, whether it’s direct air capture, point-source carbon capture, what have you—these require energy up front, and you want it to be low-carbon. But the issue that many seem to have overlooked is that energy needs to be both firm and dispatchable. Then you layer on data centers and artificial intelligence (AI)—and this is a part of the economy in which speed really matters, so the big tech players will likely pay more than any other offtaker—and all of a sudden, you change the dynamic of a lot of these technologies that you’re trying to develop, and everything gets more expensive because your input, your “low-carbon” electricity is neither abundant nor cheap. So I’m not surprised that we have to rethink the prioritization and the attractiveness of some of the routes that have been developed.

Christoph: If you had to find a niche as an investor in this space, what would you do? How would you prioritize what needs to come first, second, third, etc., in innovation?

Barbara: I would look for anything and everything that is going to produce resiliency and flexibility in power, because the demand signals are pretty strong, and they look a lot shorter-term than some of the other things. More immediately investable. Frankly, if we solve those problems around power, many of the others will fall into place.

Just to illustrate this point, there was a study that the Department of Energy did in the US on hydrogen, and it found that by 2030, to make the same quantity of green hydrogen that we have gray hydrogen today, we would have to triple the amount of green hydrogen we currently have. We would need to add three times the amount of renewables we already have. And that doesn’t include all the power you need to add for manufacturing, residential and commercial uses. Transportation is electrifying; data centers are electrifying. I think it’s naive to imagine that those demands won’t compete against each other. And so I would start with, okay, what can we do to meet that demand for power? And then all the others will get a little easier.

Christoph: So how do we get to that promised land of power first and in massive volumes? We still have massive gaps to fill.

Barbara: I would remind everyone that there’s another piece of the puzzle we can focus on, which is transmission. This requires leveraging the kinds of tools that can create flexibility and looking at transmission technology that has lower rates of loss. I’m interested in how AI could potentially help operate the grid. But it’s really got to be an all-of-the-above solution. Distributed resources and on-site generation need to come into play. Governments need take a fresh look at nuclear. It’s a mix of faster deployment of what we have and leveraging entirely new approaches.

Christoph: You have also spent time in the carbon capture and storage (CCS) space, which all the climate studies now assert that we absolutely need, because otherwise we will not meet our commitments in the coming years. How do you see CCS shaping up going forward?

Barbara: I do believe that large-scale roll-out is necessary and inevitable. There used to be a feeling that point-source carbon capture just allowed us to continue to emit without any consequences. The reality is, though, that our society uses hydrocarbons, and so we will need to emit CO2 for the foreseeable future. So we will need CCS to meet our climate goals.

Given this reality, we’ve got to create business models and the policies to reward putting CO2 in the ground or reusing it, whether that’s a carbon tax or cap-and-trade system or tax incentives to justify the investments. There are a lot of emitters today, and if we can find a way to hook them up to pipelines and sequestration, I think we will scale CCS businesses. In a way, we’re playing catch-up, but better late than never. Some of this technology has been around for 30 years, so I think about how I’ll look back when I’m a really, really old lady and say, why didn’t we start all that in the last century, as opposed to now, when we’re all gnashing our teeth about it.

Policies and politics for a low-carbon future

Christoph: Thinking about the policies that will be necessary to take us to a low-carbon future, what would you point to?

Barbara: First, I’d say we need to take the politics out of it. I can really only confidently talk about the situation in the US, but we are facing similar issues in other places. It’s infuriating that there are a whole bunch of things that we can find common ground on, but at least in the US right now, it has just become so politicized, almost ideological, and that just gets in the way of progress.

Christoph: That sounds like a wonderful alternate reality, but thinking practically, what are the real, concrete steps we can take to get the politics out of climate and energy policy, at least in the US?

Barbara: The Inflation Reduction Act (IRA) was a step in the right direction. While it was unfortunately not bipartisan in how it got approved, the money has gone to many red states. And I do think when you start to see crossover like that, because of good business cases and good collaboration at the local level, you will start to see more buy-in. So I think that was a good baby step, with the federal government issuing grants at a local level across a wide variety of technology areas.

Christoph: How vulnerable is the IRA to current political headwinds?

Barbara: There are pieces of it that enjoy solid bipartisan support. CCS is one of them, because the beneficiaries are many big industrial corporates, including oil and gas. So you have some good opportunities for collaboration there. On the other hand, you have EVs, which have just been a lightning rod for Trump.

So the way I see it shaking out is that credits which are more industrial-focused—and this includes the power sector—will probably survive, but the ones which are more consumer-focused, like EVs, may end up on the chopping block.

Geopolitics and climate-tech supply chains

Christoph: Looking at geopolitics more broadly, China has gone big in certain crucial areas. This of course includes batteries and EVs, where they have a big lead. Where can and should the US muscle its way back in?

Barbara: There are many categories we could advance in. We’ve been blessed with lots of resources, so we should play to our natural strengths. This is one reason why I think CCS is important, because we have a huge amount of hydrocarbons, and if we’re going to work on them responsibly, we’ve got to deal with methane and carbon management and emissions. Geothermal is another area where our geography is a major asset. We don’t have a good battery supply chain. That’s something else we need to figure out.

It honestly scares me how much of the technology that we’re economically dependent on—not just in energy, but across the spectrum—is in supply chains that we don’t have very good leverage over. I think that’s something that we’re quite behind on.

Christoph: What about green or blue hydrogen and e-fuels more generally? What are your thoughts on the value chains for those commodities?

Barbara: The US is set up quite well for a centralized, industrial hydrogen supply chain for industries like steel and fertilizer. Transport, on the other hand, is a tough one. The US is very large, and hydrogen might work for very small, contained geographies, but for long-distance transport, like, say, on major highways, it’s hard to see that coming together.

One piece that’s interesting is the bio-energy and agriculture space. We are a very large farming country and the link between agriculture and energy is continuing to strengthen. This includes growing appreciation of both the energy needs for agriculture and the incorporation of bio-stocks into energy. So that’s an area we should double down on. Water challenges tie into this as well, and of course they’re exacerbated by climate and again require a lot of energy. So really doubling down on water technologies and getting that piece right—not just desalination, but investing in water purification and valuing water in a more rational way and boosting integrity in our municipal water supplies—all that is really important.

Christoph: One hot-button topic that we haven’t covered yet is fusion. What are your thoughts there, and again, looking at it in a US-specific context?

Barbara: It’s still very much in the moonshot phase. Chevron actually invested in two fusion companies, but in general it’s really hard from a venture perspective. The long-term investment horizons for climate-tech companies in general are already very murky, and we have to be honest about how will we scale this, how will we go from science to technology and engineering to actual scalable solutions in fusion? The National Labs and the Department of Energy have done some great work, but the current model of venture-funded capital has limitations, because you have to be really, exceptionally patient.


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