Listen: Bridging the gap between conventional energy resources and newer technologies

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Dan Testa:

Welcome back to Energy Evolution, the podcast where we explore the ever-changing landscape of the energy industry. I'm your co-host, Dan Testa, and joining me is Taylor Kuykendall. Hey Taylor.

Taylor Kuykendall:

Hey, Dan. How's it going?

Dan Testa:

Not bad.

Taylor Kuykendall:

Good. Hey, today, we have a special guest joining us, Emily Easley, the CEO of Novus Energy Advisors. Emily is a Texan who grew up around the oil and gas business. Her father worked in the business and finance side of oil and gas. Today, though, she's based in Washington, DC, and works across the energy space, covering renewable energy and the oil and gas and utilities industries. What I want to know is what those at the forefront of the energy transition, those deploying renewables and battery storage, hydrogen technology, the people that we typically see on this podcast, what they can learn from conventional energy producers like oil and gas.

Dan Testa:

Okay, interesting. What did you learn from Emily?

Taylor Kuykendall:

We talked about all sorts of things, both how the old guard in the energy world can work with new developers, but also, we talked about how conversations and attitudes that renewable energy folks have towards oil and gas, and the attitudes that oil and gas has towards renewables have shifted a lot over the years. You know what? Actually, instead of spoiling it, Dan, let's just dive right into the conversation with Emily.

Dan Testa:

Sounds good. Let's get to it.

Taylor Kuykendall:

Emily, today we're going to be talking about how we bridge the gap between conventional energy and renewable energy. Before we get into that, I was hoping you could maybe give our listeners a little bit of your background, and help them understand why you're such a good person to speak to on this topic.

Emily Easley:

Thank you, Taylor, and it's a pleasure being here. This is a topic I have enjoyed sharing different perspectives about my entire career. I founded a boutique advisory firm about eight years ago. We're located in the DC area, but born and raised in Texas. After a decade in the renewable space in DC, moved back to Texas to interact with a number of oil and gas friends and family, and colleagues, and recognized the gap in information that they had as far as renewable power, at the time, was penetrating the market. We have been advising oil and gas firms large and small, from investors to pipeline companies over the years, and worked on, really, new venture growth opportunities as it relates to their core businesses.

Taylor Kuykendall:

Yeah. I'm wondering, how receptive have oil and gas companies been to this discussion about pivoting into renewable and greener spaces? How has that conversation changed, do you think, in recent years?

Emily Easley:

Yeah, it's evolved tremendously. I had moved into the energy business, with my very first job in solar in '03, straight out of school, and that was a completely different time. It was pre shale revolution, peak oil was in sight, renewables were pre-tax credits, extremely expensive, and the technologies had not really commercialized. Wind was evolving, because there were production tax credits. At that point, I would go home to The Petroleum Club, which is a place that I grew up going for family meals and whatnot, and knew that my father many business meetings there. The word pivot, I think, is important, because I wouldn't say that there's anyone wants to pivot in business. You grow, emerge. I really like the name of your podcast, evolution, because we've entered a new chapter, where was early days of eye rolls of being a female, and in a place in the renewable space that was speaking to oil and gas, very successful professionals, once the shale revolution took off, into, renewables were never going to make it to where they are now.

I've found myself in the lion's den many times, because I don't try to convince anybody of what their opinion should be. We've built a business of sharing information, and helping to gather consensus internally around core competencies of an energy business, and looking at projections of where different growth opportunities are, whether it's within your core business of upstream oil and gas, or is it a play on a water infrastructure, and new potential customers? I think there's been an evolution with understanding the market, and there's been a tremendous amount of internal assessments as to where oil and gas companies want to play, where it makes sense to play, where their shareholders find valuable. From there, we go back and forth, actually. It started with the green electron early on, and understanding the tax credits and the financial structures regarding green power.

And then, more recently, we're working on some really interesting carbon capture sequestration projects. I laugh, because the eye rolls early on were largely due to renewables being unreliable, expensive and subsidy driven. Now that CCS is emerging, and the expertise is with geological storage and pipeline infrastructure, it's a really, really fascinating place to be. I think there's still a diverse perspective on the government's involvement in commercializing industries, and then what is corporate market and capital markets, and capitalism. That is largely the big divide I see, but I think there's a lot of more broad discussions that are happening across the aisle than ever before.

Taylor Kuykendall:

When we talk about a bridge between conventional and renewable energy, do you see that as happening, say, oil and gas companies developing their own renewable arms? Do you see room for cooperation between these new businesses and the vanguard, if you will?

Emily Easley:

I have always tried to figure out where that line of connection is. I've found that many of my renewable colleagues were equally polarized, and not demonizing, but very proud of the great work that they're doing. However, the traditional resources, and the energy industry that got us to this point are not the enemy, and they really are the bridge to actually decarbonizing the economy in the way that all in the renewable and clean space want to get to. I think that the education around the molecules, and the business of what is bringing them to the table now, whether it be hydrogen or renewable fuels, is interesting, but I think that there is a lot more education they need in that space now.

And then, from the power side of the business, for the oil and gas industries, they are outside of feeling some pain in the additional regulation that was included in some of the penalties in the IRA. I think that they're finding their way, certainly. Now, that doesn't mean that there's not NGO's out there that are continuing to make some challenges for various projects and processes, but renewables are starting to feel that pain, too. They can align on a lot learned from what the oil and gas business has gone through and found as far as best community engagement and best practices.

Taylor Kuykendall:

When you mentioned some of the reticence from renewable energy companies, I was wondering, because of the reputation as being a big greenhouse gas emitter, is there a concern that, "We don't want to be used as a company's ability to greenwash their reputation?" How do you battle that concern, and get them to move past this public perception of those companies as being dirty versus clean, renewable companies?

Emily Easley:

Well, I frankly feel that a lot of progress has been made on the word dirty. Clean is defined in the regulatory market and some of the state policies, and that's pretty clear, but there's so much more that's going on outside of the energy industry that relates to bigger risk, cybersecurity data centers, AI, grid reliability. Once I start there with the renewable companies, they appreciate it, and frankly, they're looking to untapped markets. I like to talk about Elon Musk, and it's really interesting to see him evolve from his political stance of where he's supporting, at least from what I can tell, and the untapped market with EV's are the big right side of big trucks, and he's speaking a little bit more openly about that.

I think the other piece is, and I've been really impressed with some of the pioneer leaders in the renewable space regarding, they're getting in front of their own green carbon footprint. There's so much equipment, and just materials and minerals that go into these projects. It's clean and green once it's up and running, but to get it to that point of operation, there's a lot of stigma there that it's on them to be proactive, and ensuring that they're in front of the issue rather than trying to play catch up like the oil and gas business. And then, as far as greenwashing, that term has come a long way. The Federal Trade Commission is in the process of updating their green guidelines, and that's not due to oil and gas greenwashing, even though they get the the spotlight on them, but corporations overall of just washing anything with either sustainable resources for clothing, food, and the nature of what's organic and not. Consumers are becoming more educated in what they're buying.

Taylor Kuykendall:

I'm wondering too, because in some ways, a lot of these technologies are very different, but then, I think of an example, people are trying to extract lithium from brines, and the oil and gas industry has lot of experience in drilling, so there's some trade offs there. I was wondering, can you maybe share, what are some examples of things like that, where there's this knowledge the oil and gas industry, and other conventional energy sources have that can port over to maybe some new renewable energy technologies?

Emily Easley:

Well, and that's where we play. I think that's what's important. There was a sentiment, probably 10 years ago, with a lot of the younger generation looking to oil and gas as not a sustainable career. Labor across the board is hard to attract, good labor, reliable labor, but it's definitely labor that's going to go out into record heat, and be out in the field. I always break it down very simply in how my children are learning their sciences and engineering, it's the mechanical versus the geological explanation, or the physics. All of those are very technical skill sets, and you can be trained in one and look to the other but don't have to understand where the limitations are as far as the regulatory dynamics that really impact markets. Having access to the right intel to grow your knowledge, and then identify where your company's going to be best positioned to really scale your business at the speed that you need to with, really, the greatest impact, that's what's driving profitable businesses.

We've seen them invest in their human capital, and it pays dividends, because you can bring in new talent, but if you don't look to your core talent that you trust and know will be with you during those dark days, it can kill the morale. Frankly, that's the real risk. I look to the geological storage and the sinks, everything going on with carbon capture right now, that is very upstream, as oil and gas has always been, and looking to the reservoirs and places to extract resources. With the brining and Lithium, those are core competencies for refining. And then, as it relates to equipment service companies, you're seeing those big oil and gas service companies, they've grown into this space, realizing that it's all coming closer. I think it's a unique career to be in the energy business, and I think looking across broadly, at the skillsets and capabilities of those that you've worked with, and then trying to fill the gaps with some relief to get you there, is where we've found the biggest successes.

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Taylor Kuykendall:

I think we should also probably mention, the deep pockets of some of these oil and gas companies changes the perspective on what kind of capital might be available for some of these projects. I'm just wondering, how much does that matter, particularly in the light of the big changes in the landscape we saw with the Inflation Reduction Act? Is capital really still the biggest strength that maybe oil and gas might be able to bring to this transition?

Emily Easley:

I'm not at the FID discussions at the board level. We just make recommendations to what's going to move the mark, and what size checks they're going to write is going to be, ultimately, up to them. From private equity to the tremendous amount of funds that they've raised to what the federal government is allocating under the IRA to energy companies and their balance sheets, capital is not an issue. The issue is deploying it within a timely manner. The roadblocks between hitting permits, getting community engagement, proven technologies and scaling these emerging businesses, I think that's the biggest challenge. We saw a lot with renewable and natural gas as it was taking off about 18 months ago, and there are some real challenges in scale there. They're looking out for their shareholders, and putting capital where needs to be put into emerging spaces, but I don't know that looking at their balance sheets, outside of what they can reduce as far as cost for insurance once you're up and running, is what's going to be the breakthrough here.

I fundamentally think there's a lack of appreciation across America in what our energy infrastructure does for our local economy, and our country as a whole. The political divide is the real challenge, the back and forth in what's coming out of Washington, in my opinion.

Taylor Kuykendall:

Yeah, the Inflation Reduction Act is a big policy change, but we've seen a lot of similar, well, not similar in scale, but a lot of changes to, really, energy transition policy, and trying to move that forward. You did hint at one of the problems that I think we hear industry complain a lot about, that permitting is still really difficult, and there's obviously other regulatory hurdles. I'm just wondering, if tomorrow morning you could wave a magic wand and fix something in energy policy to make this energy transition happen faster, what would that be?

Emily Easley:

Well, I'm going to go back to one of your previous podcasts which I really appreciated, regarding the evolution of power markets, and where we are, and where we're going. When you have so much regulation at the level of public utilities, for example, and this is in the IRA, too, the requirements in the IRA are extensive, and that's another bottleneck that is creating some slowdown in the ramp up of these. With renewable penetration, the biggest issue with projects is interconnection, and grid planning. There's a whole transformation that's going on at the regional RTO level all the way up to FERC, to say, we were put in place to ensure that there weren't monopolies in these power players, and that Americans were going to have affordable, reliable power. That was our business, and now, and we're going to reflect back on what we're going to have proven case studies to show that this is what they demanded before, and this is why we need something approved through the PUC.

To have it so complex, and have to be forward-thinking, as one of your speakers had stated, that in its own right is not your traditional permitting reform, but the process is very complex. When you look at, going back to permitting, and let's say pipelines, the Mountain Valley Pipeline is the infamous one that, ultimately, would like to be bringing me more gas in Virginia. At the time when this was going on, I was actually living in a 1970s all electric house, and kept thinking through if EQT could get the gas out of West Virginia, and Manchin came to the table, there's so much pushback and "Not in my backyard."

I struggle with it, because financially, if a resource can be proven and de-risked to get to my family and businesses, to allow us more affordable energy, and we know what those mitigating factors are, that company is trusted to know that they're not putting my family at risk, I'm supportive of that. Back to your point about permitting, I don't think there is one magic wand for tomorrow. I think these each take very specific local interest, and having it come out of Washington, fundamentally, is just proven to be a bottleneck in its own right. If I could point to one piece that I think is moving forward as far as power, what they have accelerated just recently is transmission build out. If there could be alignment on the infrastructure for the molecules in our industry as well, that to me would be the sweet spot, and the golden ticket to really being able to move things.

Taylor Kuykendall:

It seems a couple of years ago, almost any discussion of emissions reductions felt like we were talking about some sort of regulatory driven reduction. I think increasingly, more and more, we're seeing a lot of voluntary commitments from corporations, but also, state and local levels popping up to clean energy commitments. I'm just wondering, how do you think that affects this discussion, and what would you to maybe a client in 2024 that doesn't have a energy on its books?

Emily Easley:

In a way, I feel that it's a little dis-genuine to what has happened in these announcements, and what's driven very, very large scale renewable projects so far from where that power is procured. It's certainly added volumes of renewables to the grids, but the commitment by corporates when not necessarily looked at from their actual corporate demand, but it is an offset, it's a cheaper cost to the company, but ultimately, is that really reducing your emissions? There's all different ways to calculate that.

My viewpoint, I think that announcements were huge early on, during the ESG wave. I think there's been a lot of reservation in what we read in sustainability reports as to what they're stating now. Now, you have corporate board governance to ensure that you have a plan for what you said you were going to do, and it's not going to be overly ambitious or expensive. And then, you can start to pay attention to, what is, really, the biggest issue? What is the biggest elephant in the room as far as emissions in your portfolio? Instead of divesting to improve, how could you make a difference with that one asset? That, to me, is how I always recommend that you look at opportunities. Whether you make the capital allocation to do so or assess the part, at least you know that your most vulnerable, lowest hanging fruit, but biggest impact to really overall emissions.

Taylor Kuykendall:

And then, the last question I just want to ask is, as we look forward, I'm going to ask you to do a good bit of speculation here, but if we go out and think about 2050, what do you think an energy mix that would be both ideal and realistic looks like? Are we talking no fossil fuels, fossil fuels with carbon capture, a diverse array of resources, or just renewables plus batteries? What are you envisioning, looking both ideal and realistic, in 2050?

Emily Easley:

I've always come from the middle. Balance is important. I frankly think that the move to all electrification is going to take a lot of time, but it also has certain risk that you all have covered regarding cybersecurity. Ultimately, energy security has two different levels, what we have as far as resources available, and then, where our vulnerable points are to counteract that. I do believe that natural gas is an abundant resource in the United States. We are, honestly, lucky to be a country that has the resources to be looking at, how does natural gas play in this evolution to what's next, and stabilize/reduce the risk to any of these issues on reliability and resiliency? And then, how does that decarbonize? I wish I had a 2050 angle for you. I know I will still be in my career at that point. If I put my money on it, I think where I see landfills going, and what we know as consumers is another abundant resource is using what we've used before.

If renewable natural gas can actually grow, and meet that natural gas need, you could have a similar type grid with the balance of the molecules and the electrons. I don't know that I'm necessarily fond of having so many renewables in line of sight. Texas is certainly seeing that in all of the wind farms that were developed during the pandemic and are being built out, now that the landowners are going, "Whoa, whoa, whoa." It's not that different from, if your neighbor didn't have the restrictions to build a skyscraper next to you. I think it's important to remember that landowners have a right to feel how their property is valued and impacted above the ground.

Taylor Kuykendall:

Makes sense. Emily, thank you so much for joining the show today. We appreciate you coming on.

Emily Easley:

Always happy to talk about any of the complex issues, but I hedge my bets a bit on the future, because it's certainly uncertain.

Taylor Kuykendall:

Yeah, I know it's a big ask anytime I ask anyone to pull out the crystal ball.

All right, listeners, thank you so much for listening to the latest episode of Energy Evolution. I want to give a special shout out to our incredible podcast team members. I am, once again, Taylor Kuykendall, but other people behind this podcast include Dan Testa, Camilla Naschert, Camellia Moors, Christopher Coats, Karen Willenbrecht, and our wonderful agency partner, the 199. To stay up to date with our upcoming episodes, be sure to subscribe to Energy Evolution on your favorite platform. If you have any ideas for future themes or guests, we'd love to hear from you. All you have to do is shoot us an email at energyevolution@spglobal.com. Look, if you like what you heard today, do consider sharing the podcast with others, or leaving a review on your preferred podcast platform. We can't wait to bring you more fascinating discussions in the future. Until next time, take care, and stay tuned for more from Energy Evolution.