BP invests more than $4 billion in Houston renewable energy

A major deal in Houston's energy sector is making headlines as BP says it will spend billions on a growing source of renewable energy.

The energy company says it will pay $4.1 billion for Houston-based Archaea Energy, which formed just a few years ago, to use natural gas emissions from landfills and farms. The deal is being viewed as an important investment in the energy transition.

At the edge of the McCarty Road landfill in northeast Houston, a collection of machines and pipes is capturing the natural gas that simmers off the mountain of trash. Built by another company, it's the kind of technology that BP is investing in.

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Houston energy analyst Andy Lipow says the deal is not a surprise since all the major energy companies invest in alternative energy sources. "They see, as we move forward, we need to develop alternatives to fossil fuels."

In a statement, BP says in part, "This deal accelerates our ability to deliver cleaner energy, generate significant earnings in a fast-growing sector and help reduce emissions."

Biofuels are currently used for transportation, heating, and electricity generation, so demands will grow with added supply. BP expects its biofuels will generate the equivalent energy of 70,000 barrels of oil a day by the end of the decade to augment those needs.

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"Renewable natural gas will replace some of the fossil fuel natural gas, but we're decades from it replacing the entire supply of natural gas that we've come to depend on," says Lipow.

Jane Stricker who heads energy transition efforts at the Greater Houston Partnership says she expects similar deals in the future. "Where you develop your technology is one thing; where you scale your technology is 'Houston'."

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That's why Archaea Energy moved its headquarters to Houston a year ago. The city's energy sector offers infrastructure, assets, and investment in a growing list of ideas that might power the future.

"Finding a way to leverage things that would have, traditionally, been considered waste, and leveraging those things to create energy is a key part of using all the tools in the toolbox, for the energy transition," says Stricker.

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Currently, there are 350 renewable natural gas projects across the country. Archaea brings 50 of them to BP’s bottom line with deals to build more of them in the coming years.

The purchase should be complete by the end of the year.