Big oil courts U.S. clean-energy startups in bid to speed green transition

Some oil firms have set up their own incubators

  
A Marathon Oil well site is seen, as oil and gas activity dips in the Eagle Ford Shale oil field due to the coronavirus disease (COVID-19) pandemic and the drop in demand for oil globally, in Texas, U.S., May 18, 2020.

A Marathon Oil well site is seen, as oil and gas activity dips in the Eagle Ford Shale oil field due to the coronavirus disease (COVID-19) pandemic and the drop in demand for oil globally, in Texas, U.S., May 18, 2020.

REUTERS/Jennifer Hiller

HOUSTON- U.S. clean-energy startups are booming as oil companies are giving them more attention and cash in a bid to speed up their own green transitions.

Investors want oil producers to accelerate a move away from fossil fuels by selling cleaner energy and developing technology to eliminate climate-warming gases.

Entrepreneurs proposing to harness energy from offshore wind and waves, generate hydrogen from waste gas and build fuel storage networks from old wells are attracting attention from Big Oil.

Oil companies are often partnering with and investing in new enterprises that have started at clean-energy incubators. Some oil firms have set up their own incubators and venture teams to find and fund greentech.

U.S. oilfield services firm Halliburton HAL.N works with eight clean-tech fledglings and is recruiting more for an in-house startup accelerator that provides each $100,000 in seed money.

Baker Hughes is collaborating with incubator Greentown Labs to get a window into emerging technologies and provide advice to startups. Oil majors Eni SpA  and Repsol SA have approached U.S. clean-tech ventures through investment arms.

There are roughly 20 clean-tech U.S. incubators tracked by the Electric Power Research Institute. But that number likely undercounts the total because of their rapid growth, said Julia Travaglini, vice president of marketing for Greentown Labs.

"We're seeing across-the-board an uptick in clean energy" incubators, added Lindsay Schuenke, director of content at the International Business Innovation Association, which works with business development groups.

Crunchbase, which measures venture capital investments, says clean-energy startups so far this year have taken in $11 billion, up from $5.6 billion for all of 2020. Startups still in business after five years is a key measure of success, said Chris Ilsley, chief executive of North Shore InnoVentures, a 12-year-old clean tech incubator outside of Boston.

It and Greentown Labs say 80% to 85% of their fledglings are still in business after that period, compared to just 20% of startups overall.

Another measure is corporate interest in the companies.

One of the companies that spent a year at North Shore InnoVentures developing a fast-charge battery, SES Holdings, later won deals with automakers General Motors GM.N and Hyundai Motors. Another, low-power semiconductor designer Arctic Sand Technologies, was bought by Japanese chip maker Murata Manufacturing for $68 million.

POWER FROM OLD WELLS

Moonflower Technologies' subsidiary PowerWell, a startup that proposes to convert abandoned oil wells into gravity-based energy storage systems, hopes to turn its concept into a commercial product, by winning support from Halliburton's incubator.

The Houston-based venture also drew interest from energy technology provider Baker Hughes, which has suggested helping with efforts to source materials, said co-founder Carrie Criado. Incubators have allowed it to “learn a lot and learn it faster with the resources they offer,” she said.

Thiozen Inc, a Massachusetts startup developing a way to turn a waste gas into a clean-burning fuel, talked to three incubators before choosing North Shore InnoVentures, said President Ryan Gillis.

Oil giant ENI recently agreed to help finance a pilot test of Thiozen's technology to generate hydrogen from sour gases that must be heavily processed.

Another startup, NanoTech Inc, aims to reduce energy waste in oil, chemical and construction industries through a unique fire-proofing and insulation coating. It won seed financing from Halliburton Labs.

TOUGH TRANSITIONS

Established businesses gain from incubators because the relationship "diversifies and distributes the risk" of new technologies, said Thomas McNulty, a managing director at business consultants ValueScope Inc.

It lets internal R&D teams "focus on commercialization and scale as the scouts find technologies out in the incubators," McNulty added.

But the risk for big oil companies looking to create new revenue steams is that these ventures may not grow fast enough or generate enough profit to replace declines in traditional businesses.

"If history is a guide, they will not be successful," said Chris Duncan, a research analyst at investment firm Brandes Investment Partners.

FLOCKING TO INCUBATORS

That has not stopped energy companies including BHP, Chevron, Engie or investment bank Tudor Pickering Holt & Co. from partnering with Greentown Labs' Houston operation.

Baker Hughes sends staff to listen to technology pitches, view work by researchers and to provide commercialization advice, said Nigel Jenvey, a Baker Hughes executive for strategy and growth initiatives.

Roy Robinson, CEO of Excipio Energy, which designs floating platforms that convert wind, ocean waves and tides to energy, said the relationships formed are mutually beneficial.

"The energy companies see that there is a transition, and that there is money to be made," said Robinson, a former Repsol manager.

The payoff can include a stake in a promising new venture. Halliburton gets a 5% share of startups that join its accelerator, said one startup founder who met with its executives.

(Reporting by Liz Hampton in Denver, additional reporting by Gary McWilliams in Houston; Editing by Cynthia Osterman) ((Liz.Hampton@thomsonreuters.com; +1 832 571 8115; Reuters Messaging: Reuters Messaging: liz.hampton.reuters@reuters.net))


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