Speaker 1: This is Dana Perkins, and you're listening to Switched on
Speaker 1: the B andF podcast. Today we're going to talk about
Speaker 1: direct air capture, which we're going to refer to often
Speaker 1: in today's show, just as dak and quite simply put,
Speaker 1: it is sucking carbon out of the air. You know
Speaker 1: that thing that plants do during photosynthesis where they breathe
Speaker 1: in carbon, but this time with a machine. It's a
Speaker 1: fairly new concept, first theorized in nineteen ninety nine, but
Speaker 1: increasingly becoming reality. They're clean tech companies out there pioneering
Speaker 1: this technology and other technical solutions which we'll actually get
Speaker 1: to talk about in the show today. And then there
Speaker 1: are larger companies that are investing in this and looking
Speaker 1: at how to reach their net zero targets in the
Speaker 1: long term. Let me just emphasize that really quickly, the
Speaker 1: net part of net zero. They're thinking about how to
Speaker 1: reduce their greenhouse gas emissions and then find ways to
Speaker 1: subtract carbon from the atmosphere. So who are the companies
Speaker 1: that are giving this a closer look, both on the
Speaker 1: technology side and as investors, and what does it cost?
Speaker 1: I'm going to give you a bit of a hint
Speaker 1: here it is not currently inexpensive when you compare it
Speaker 1: with other forms of voluntary carbon credits. But then how
Speaker 1: long will it take to get closer to cost parity
Speaker 1: and what is the learning rate we'll need to see?
Speaker 1: I think it might surprise you. Also, what do we
Speaker 1: do with the carbon once it's been removed from the air,
Speaker 1: and what do we need to consider when it comes
Speaker 1: to the chemicals that are found in these machines. To
Speaker 1: talk about this and more, I speak with two members
Speaker 1: of our sustainable materials team that are based in New York,
Speaker 1: Sharon Moustri and Brenna Casey. They are going to go
Speaker 1: through some of the highlights that are found in the
Speaker 1: recent research note titled direct air Capture Market and cost outlook.
Speaker 1: As always, if you like this podcast, make sure to
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Speaker 1: or Spotify, that's going to make us more discoverable by others.
Speaker 1: But right now we're going to jump into my conversation
Speaker 1: with Sharon and Brenna about direct air capture. Brenna, thank
Speaker 1: you very much for joining today.
Speaker 2: Thanks for having us.
Speaker 1: Dana and Sharon, thank you for joining as.
Speaker 3: Well, thank you Dana.
Speaker 1: So we've got you both here to talk about direct
Speaker 1: air capture today, and I promise we will get into that.
Speaker 1: But there's a few things I would really like us
Speaker 1: to talk about in order to give it some context.
Speaker 1: So the first one is carbon markets, So the difference
Speaker 1: between voluntary and compliance carbon markets and its most basic sense,
Speaker 1: because I see direct air capture as intrinsically linked with
Speaker 1: voluntary carbon.
Speaker 3: The short explanation is, there are compliance markets where usually
Speaker 3: a government sets up a whole system where different companies
Speaker 3: have to pay in and their emissions are cupped and
Speaker 3: they have to pay to admit above that cup, or
Speaker 3: there are other types of systems. For voluntary there's no
Speaker 3: one regulating these emissions except the companies themselves internally, so
Speaker 3: they will say we've committed to net zero in order
Speaker 3: to get there. Part of our strategy is to buy
Speaker 3: carbon offsets out of this voluntary market, and that's where
Speaker 3: direct air capture fits in as its kind of main
Speaker 3: business model at the moment.
Speaker 1: So direct air capture in its simplest sense, are for
Speaker 1: the companies that really care an awful lot about carbon
Speaker 1: math and we have had entire shows dedicated to voluntary
Speaker 1: carbon with Kyle in the past, so we will go
Speaker 1: too far down the road on that, although we will
Speaker 1: talk about some prices today for direct air capture. Another show,
Speaker 1: though that we did in the past, was one on
Speaker 1: this technology. It's a couple of years back, and we
Speaker 1: have decided to revisit the topic from a research standpoint
Speaker 1: as well as revisit the topic here on the show,
Speaker 1: And the question for you and for the listeners is
Speaker 1: why is now the right time for us to revisit
Speaker 1: direct air capture and essentially what was that catalyst for
Speaker 1: us to go in a little bit deeper this time.
Speaker 3: Yeah, So there are two things that we found interesting
Speaker 3: that are changing in the market. The first is on
Speaker 3: the technology side, there's a lot more information about new
Speaker 3: technologies and a lot more companies that are trying to
Speaker 3: bring those technologies from lab scale onto commercial scale today,
Speaker 3: so we're learning much more what the benefits of these
Speaker 3: technologies are at a large scale. The second is that
Speaker 3: we also needed to know more about the market. So
Speaker 3: the prices we thought that we're expected for director captured
Speaker 3: today they are now much higher, and we're trying to
Speaker 3: understand why and revising our whole projections for prices and
Speaker 3: for supply and demounts based off of that.
Speaker 1: So in its simplest sense, can you explain what these
Speaker 1: machines look like, and if there are different competing technologies,
Speaker 1: maybe kind of try and paint a picture in our
Speaker 1: minds of what we're looking at. If we're looking at
Speaker 1: essentially a machine that is sucking carbon out of the air.
Speaker 2: Really simply what DAK is, it's these massive fans that
Speaker 2: blow ambient air in through this content where a sorbent
Speaker 2: or solvent solution sits, so it can be either be
Speaker 2: liquid or solid DAC and we'll get into that in
Speaker 2: a second. That CO two, once it comes into contact
Speaker 2: with the sorbent or solvent, is then absorbed or absorbed
Speaker 2: onto that medium, and then it requires because that solution
Speaker 2: only has a finite capacity for the CO two, the
Speaker 2: cutwo has to be stripped from that and then regenerated,
Speaker 2: which can take large thermal requirements anywhere up to nine
Speaker 2: hundred degrees celsius depending on the type of technology that
Speaker 2: you're using. The ambient air that is now free of
Speaker 2: CO two is just blown out, and then the CO
Speaker 2: two is either stored underground or it can be utilized.
Speaker 2: So there's a couple major companies that are doing this
Speaker 2: climb works which we've all heard of carbon engineering. There's Remover,
Speaker 2: which is using a zeolite, and then Airloom carbon capture
Speaker 2: is doing it's like a passive DEACK, so it doesn't
Speaker 2: require these massive fans. The key difference between liquid DAC
Speaker 2: SO absorption and solid DAC absorption is really the energy requirements.
Speaker 2: So liquid DACK requires these covalent bonds. There'sus high affinity
Speaker 2: for it's like this aqueous alkaline sorment, so high affinity
Speaker 2: for that to the CO two. So it requires these
Speaker 2: extremely high temperatures, like I said, up to nine hundred
Speaker 2: degrees celsius, and then there's also a lot of waste heat,
Speaker 2: so it's not terribly energy efficient. SOLIDDAC on the other hand,
Speaker 2: you can use low grade heat sources because the zeolites,
Speaker 2: the membranes, things like that, they bind to the CU
Speaker 2: two with weaker physical interactions, and so you can use
Speaker 2: PV or wind, geothermal or even hydro to kind of
Speaker 2: move these to capture and regenerate the CO two. And
Speaker 2: so generally it's a bit cheaper because of those lower
Speaker 2: thermal requirements.
Speaker 1: I'm going to need a quick definition. What is zeolite?
Speaker 2: Zeolites there? You can actually find them on Amazon, which
Speaker 2: is which is really interesting. They're kind of little there
Speaker 2: balls almost. They are these highly porous structures, like crystalline
Speaker 2: structures that absorb CO two basically through those tiny pores,
Speaker 2: and you can manipulate the pores to different sizes to
Speaker 2: either accept CO two or kind of select against other
Speaker 2: molecules like nitrogen or things like that that are also
Speaker 2: in the atmosphere.
Speaker 1: Have you ever seen Orbi's no, So these are these
Speaker 1: things that my kids play with, and they're essentially these
Speaker 1: little balls colorful I'm guessing the ones in a direct
Speaker 1: air capture machine are not colorful. But they're these colorful
Speaker 1: balls that if you submerse them in water, they absorb
Speaker 1: all of this water and expand to a much bigger
Speaker 1: size and then the kids just play with them. They
Speaker 1: actually don't do anything particularly useful other than that they're
Speaker 1: fun by for the kids to play with. But I'm
Speaker 1: picturing these balls that you're explaining these zeo lights for
Speaker 1: them to be what roughly the size of a dime
Speaker 1: or a ten cent piece and pence much smaller.
Speaker 2: They're almost like the size of bebes from a BB gun.
Speaker 2: That's kind of how they look. One of the developers
Speaker 2: let us hold onto a couple of them, and yeah,
Speaker 2: they're really really tiny.
Speaker 1: They're pretty close to what an ORB sizes. Then there
Speaker 1: are orb's but filled with carbon instead instead of water. Well, okay,
Speaker 1: so you have these solid and liquid technologies. It does
Speaker 1: seem well, you've explained that on the solid side, the
Speaker 1: energy requirements are lower and you're able to use a
Speaker 1: wider range of clean energy in order to actually make
Speaker 1: these machines work. On the liquid side, Does that therefore
Speaker 1: mean that these machines are actually being powered by what
Speaker 1: we'd consider more traditional base load power sources like Dare
Speaker 1: I say coal in this circumstance or nuclear coal?
Speaker 2: I think is too far out of the question, because
Speaker 2: the carbon intensity of just running that process negates the
Speaker 2: benefit of DAK completely. So the levelized cost of avoidance
Speaker 2: is going to be you're going to basically break even
Speaker 2: essentially if you're using coal to power one of these facilities.
Speaker 2: What we're seeing right now is that carbon engineering is
Speaker 2: actually using natural gas to power DAK. There's a lot
Speaker 2: of contention around the topic of using something like that
Speaker 2: when it comes down to like the opportunity cost of
Speaker 2: using a dirty grid or even nuclear or even natural
Speaker 2: gas to power dack. When you could place a dack
Speaker 2: plant somewhere with a clean grid or where there's hydro
Speaker 2: or geothermal and just run this on clean energy, But
Speaker 2: the cost to run something on natural gas are really high,
Speaker 2: and then your bottom line dollar per ton cost is
Speaker 2: always going to be contingent on a natural gas price,
Speaker 2: and so it'll be easier to reduce the cost and
Speaker 2: scale these technologies if you're not reliant on something using
Speaker 2: coal using.
Speaker 1: Gas, and presumably then also from a natural gas standpoint,
Speaker 1: the net carbon or greenhouse gas emissions benefit is lower,
Speaker 1: So there's an inclination to want to co locate these
Speaker 1: with clean energy exactly. So let's talk a little bit
Speaker 1: about actually some of the companies that are operating in
Speaker 1: this space. I want to know a little bit about
Speaker 1: how big these companies are. Are they small largely what
Speaker 1: you would consider to be technology startups that are funded
Speaker 1: by VC community, or are they big sophisticated, publicly listed
Speaker 1: companies that are you know, in a very different lead.
Speaker 1: Tell me how big these companies are and really then
Speaker 1: who is funding and investing in them?
Speaker 3: Yeah, the whole DUC universe has dozens of companies, most
Speaker 3: of which will be really small startups that are still
Speaker 3: trying to prove their technology in the lab. But they're
Speaker 3: really important because, as Brenna mentioned, we need the second
Speaker 3: generation technologies for Duck in order to bring costs down
Speaker 3: and also make sure we're capturing as much carbon net
Speaker 3: in the process. So those are important, but really the
Speaker 3: ones we focus on in our note are the ones
Speaker 3: that are bringing the capture capacity online by twenty thirty
Speaker 3: and those are just four companies. So this space is
Speaker 3: quite dominated by a few players, and the top ones
Speaker 3: are Carbon Engineering that's from the US and Carbon Capture,
Speaker 3: also based in the US, and then climb Works that's
Speaker 3: originally from Switzerland, although they're building one of their new
Speaker 3: plants is going to be in the and Remover that's
Speaker 3: originally from Norway.
Speaker 1: So you mentioned the cost, What is the cost per
Speaker 1: ton right now? On this voluntary you know, anybody can
Speaker 1: set the price and you buy the carbon out there
Speaker 1: on that sort of a market.
Speaker 3: Yeah, so this is kind of what was shocking and
Speaker 3: what brought us back to doing more and more research
Speaker 3: on this. Originally we thought the price was around six
Speaker 3: hundred dollars per ton. This was, let's say, before COVID times.
Speaker 3: Were during COVID times, we had had an update and
Speaker 3: then we saw that a lot of the contracts in
Speaker 3: the market were selling much higher, and after conversations with
Speaker 3: companies in this space, the average price right now seems
Speaker 3: to be a little bit above one thousand dollars per ton,
Speaker 3: which is really it was really amazing to us because
Speaker 3: it's almost double what we were expecting and that was
Speaker 3: already quite high. So this is going to be one
Speaker 3: of the biggest challenges for the market is bringing this
Speaker 3: price down as a scale up.
Speaker 1: Because one of the things we're thinking about when it
Speaker 1: comes to other forms of voluntary carbon is that those
Speaker 1: prices really want to get closer to one hundred a ton,
Speaker 1: which makes them a bit more competitive with some of
Speaker 1: the compliance markets. Now, I know it ranges widely, and
Speaker 1: we're seeing things all the way up to three hundred
Speaker 1: and sometimes five hundred a ton, but in the thousands
Speaker 1: is really shocking for me, which then makes me think,
Speaker 1: you know, what sort of companies are looking at well,
Speaker 1: And essentially willing to pay this price because they believe
Speaker 1: so strongly in this technology.
Speaker 3: There are a ton of companies actually, and part of
Speaker 3: what we did in our research is try to figure
Speaker 3: out what is the size of this demand for removals,
Speaker 3: and what we found is that the total demand for
Speaker 3: removals is much much higher, like an order of magnitude
Speaker 3: or more higher in the next couple of decades than
Speaker 3: what director capture can supply. So we think there's an
Speaker 3: appetite for this technology out there, but the problem is
Speaker 3: that the prices. As I mentioned, so at the moment,
Speaker 3: the companies that have been historically interested in this are
Speaker 3: companies that have pretty high revenues and pretty low emissions
Speaker 3: relative to these revenues. So it's been tech companies or
Speaker 3: financial companies, and they've done a lot of deals in
Speaker 3: the past that were relatively small to get to these
Speaker 3: pilot scales. But the market is changing, so we saw
Speaker 3: in the last year or so really big deals. The
Speaker 3: first one came from Airbus that was for four one
Speaker 3: hundred thousand tons of CO two captured, and it was
Speaker 3: also important because it was an airline coming in and
Speaker 3: demanding deck and exploring that as one of the decarbonization
Speaker 3: technologies that industry can use. And then we saw also
Speaker 3: recently Amazon coming in to do another really big deal
Speaker 3: of two hundred and fifty thousand tons over ten years,
Speaker 3: as well as Microsoft a bit above three hundred thousand tons,
Speaker 3: and those deals are important also because of their scale.
Speaker 3: They're starting to compete with this very big air Bus deal,
Speaker 3: but because of the length of them, So ten years
Speaker 3: is enough for these companies to have a very secure
Speaker 3: off take and then go and get the financing they
Speaker 3: need for these projects.
Speaker 1: So what sort of learning rate would we need with
Speaker 1: this technology in order for it to well essentially for
Speaker 1: it to reach close to one hundred or thereabouts by
Speaker 1: let's say twenty fifty, when we need net zero to
Speaker 1: actually be a reality, and when this importance of carbon
Speaker 1: accounting and for us to be able to balance out
Speaker 1: the net part of net zero to be a reality.
Speaker 1: What sort of learning rate are we looking at here?
Speaker 3: When we were trying to find out whether or not
Speaker 3: the market can actually get to one hundred dollars per ton,
Speaker 3: we assumed for the learning rate about seventeen percent, which
Speaker 3: is not unreasonable for a lot of technologies that scale
Speaker 3: and our modular Obviously, there are some questions on whether
Speaker 3: DAK will be as easy to scale as things like
Speaker 3: solar batteries, but we think it's not unreasonable, especially as
Speaker 3: newer technologies come online. But we have other assumptions that
Speaker 3: we also took into account in order to get these
Speaker 3: costs down. So one was that the supply of the
Speaker 3: market would increase twenty five percent calgar, so y're on
Speaker 3: your and that's a pretty high kind of rate of increase,
Speaker 3: especially in a market that has had quite a lot
Speaker 3: of delays recently. And then the other one is that
Speaker 3: they reach about four hundred dollars per ton by twenty thirty,
Speaker 3: which is what we've heard on average from the players
Speaker 3: in this space. If they scaled to the one million
Speaker 3: tons scale by then.
Speaker 1: I mean, that's a pretty dramatic drop off in a
Speaker 1: fairly short period of time.
Speaker 3: Yeah, I mean, they're kind of in a complicated moment today,
Speaker 3: which is why prices are so high, because the first
Speaker 3: of a kind of anything, you're usually going to have
Speaker 3: higher costs than you expected, and that kind of unsettled
Speaker 3: the market. But they seem to be confident that they
Speaker 3: can bring those down rapidly as they get to these
Speaker 3: really big scales.
Speaker 2: On the technology side, another assumption that we're using to
Speaker 2: understand this market more is kind of how DAK is
Speaker 2: a little bit parallel to what we saw with batteries.
Speaker 2: So there were so many different battery chemistries that were
Speaker 2: being designed at the nacency of that industry, and then
Speaker 2: over time we saw the industry coalesce around one. So
Speaker 2: this lithium ion chemistry, obviously there's variance within that, but
Speaker 2: that helped bring it to scale, and that helped bring
Speaker 2: costs down pretty substantially, and so we're expecting to see
Speaker 2: some sort of market change like that. So rather than
Speaker 2: focusing on all of these different types of dacks, so
Speaker 2: liquid solvent, zeolite or solids heoltes, molecular organic frameworks, we're
Speaker 2: expecting to see maybe one or two of these technologies
Speaker 2: really take the forefront for the market to just take
Speaker 2: those two or three, develop them, build out the supply chains,
Speaker 2: and then bring those to scale. There are a couple
Speaker 2: different things that developers really are looking to achieve to
Speaker 2: bring these learning rates down. It's one optimizing the contactor itself.
Speaker 2: Because these fans are massive, they take up a lot
Speaker 2: of space, and if you optimize the solvent. With the contactor,
Speaker 2: you can maximize the surface area while also minimizing this
Speaker 2: pressure drop, which keeps costs low but also reduces the
Speaker 2: amount of steel you need. And with inflationary pressure, the
Speaker 2: cost of steel right now is extremely high, so this
Speaker 2: helps keep capex costs for these sorts of plants low.
Speaker 1: Can you explain what you mean by take up a
Speaker 1: lot of space? Because land use is something that I
Speaker 1: think we're all looking a little bit more closely at
Speaker 1: than we ever have before when it comes to various
Speaker 1: parts of carbon intensive technologies and then increasingly also with
Speaker 1: competition with agriculture. So what does take up a lot
Speaker 1: of space look like? Are these units the size of,
Speaker 1: let's say, an air conditioning unit or are they size
Speaker 1: of a boeing.
Speaker 2: They're basically the cargo containers, yeah, exactly that you see
Speaker 2: on a ship or on a train. But they're modular,
Speaker 2: so you stack them on top of each other and
Speaker 2: then you can build them outwards to the megaton scale.
Speaker 2: So when we're thinking about a scale like this, it
Speaker 2: obviously depends on the type of renewable energy that you're using,
Speaker 2: whether it be PV or wind or geothermal, but we
Speaker 2: see the land area DAC ticks up at around two
Speaker 2: kilometers squared for solid DAC. When we compare this to
Speaker 2: other forms of removals, so BES, for example, it's around
Speaker 2: three hundred kilometer squared, and then reforestation or a forestation
Speaker 2: to deliver the exact same amount of removals, it actually
Speaker 2: is around eight hundred kilometer squared. So while DAC does
Speaker 2: require a little bit of land, it is far less
Speaker 2: than some of the other removal types that we're seeing.
Speaker 1: So you mentioned some competitor technologies, BEX being bio energy
Speaker 1: with CCS, let's talk a little bit about, well, essentially,
Speaker 1: what else is going to be out there from a
Speaker 1: supply standpoint and competing with that you've already established is
Speaker 1: very high demand for carbon removal technology. Give us a
Speaker 1: quick definition of what this Bech's bio energy with CCS is.
Speaker 2: BEX. Basically, you take biomass, which, once burned, is technically
Speaker 2: a biogenic form of CO two because it's already drawn
Speaker 2: carbon down from the atmosphere. So when you burn it
Speaker 2: and capture that biogenic COO two, you can actually claim
Speaker 2: a negative emission. What's really interesting about BES is that
Speaker 2: because DAC, it's just a waste management technique. Essentially, bex
Speaker 2: can also produce and sell power to the market while
Speaker 2: also delivering removals, so you have this double revenue stream.
Speaker 2: So that's why it's really compelling right now.
Speaker 1: And is this bio energy essentially is it coming from
Speaker 1: things that have been farmed specifically for this technology or
Speaker 1: is it waste product?
Speaker 2: So it's a little bit of both. In the EU,
Speaker 2: they have a landfill directive which incentivizes the use of
Speaker 2: municipal waste for use to be burned. This it's a
Speaker 2: very contentious topic because there are regulations that define what
Speaker 2: sustainable biomass is which exclude old growth forests large trees
Speaker 2: like areas with large primary forests. I guess, however, what
Speaker 2: we're seeing is that companies are actually going in and
Speaker 2: cutting down those trees, procuring the biomass from the primary forest,
Speaker 2: or this unsustainable biomass. When you look at the life
Speaker 2: cycle assessment of the process, you can actually instead emit
Speaker 2: COO two rather than produce COO two from the atmosphere.
Speaker 2: So there needs to be more stringent frameworks in place
Speaker 2: to make sure we're doing this right.
Speaker 1: Let's next go into reforestation, which you brought up. I'm
Speaker 1: sure that some people listening are thinking about, well, why
Speaker 1: not trees. They certainly do a very similar job when
Speaker 1: it comes to removing carbon from the air as these machines,
Speaker 1: and I know a lot of the tension around talking
Speaker 1: about some of these technologies does then link back to
Speaker 1: voluntary carbon markets and this need to prove additionality and
Speaker 1: to show what it is that you're removing over what
Speaker 1: period of time, and to basically properly account for how
Speaker 1: much carbon is being removed. So let's talk a little
Speaker 1: bit first of all about what reforestation the term specifically addresses,
Speaker 1: and then under the circumstances that one I prefer dax
Speaker 1: technology to trees are first and best known form of
Speaker 1: carbon removal.
Speaker 3: With reforestation, I think it's important to say is it
Speaker 3: is a technology we will need as well, and it
Speaker 3: has a lot of added benefits like bringing in biodiversity.
Speaker 3: So reforestation is one of a suite of what we
Speaker 3: call nature based solutions for carbon removal, and they do
Speaker 3: have a place in the market, but as you mentioned, Dana,
Speaker 3: they have some controversies as well, so it's much harder
Speaker 3: to manage those projects and account for the carbon that
Speaker 3: they're actually storing and calculating that additionality, but also ensuring
Speaker 3: the permanence of it is much more complicated compared to
Speaker 3: things like DAK, where it's very easy to account for
Speaker 3: how much COTO you're capturing. You can literally measure it
Speaker 3: and then put it down, mineralize it into the ground,
Speaker 3: and you're not worried about any of this permanence issues
Speaker 3: as well. So they are kind of like almost two
Speaker 3: different technologies that should be in two different markets, but
Speaker 3: we put them together as one in removals, and there's
Speaker 3: a space for both of them. Also because of a
Speaker 3: timeline issue, so DAC will take much longer to scale
Speaker 3: at the levels we need. As I mentioned, there's a
Speaker 3: huge supply gap when we look at demand for removals
Speaker 3: versus DAK supply, and there bex or other solutions like
Speaker 3: reforestation can come and kind of fill the gap at
Speaker 3: the moment. As we scale the market and as we
Speaker 3: put in more stringent regulation, then we see DUCK being
Speaker 3: a very important player.
Speaker 1: Because of this specific need to be able to certify
Speaker 1: additionality or for another reason.
Speaker 3: Yeah, that's a big one. That's the main reason.
Speaker 1: How about technologies, It kind of sit. I would say
Speaker 1: halfway between technical and nature based, and what I'm thinking
Speaker 1: of specifically here is enhanced rock weathering and then ocean removals.
Speaker 1: Can you talk a little bit about where that technology
Speaker 1: is and whether or not it will be competing in
Speaker 1: a real way with direct air capture in the air term.
Speaker 2: I like to think of them not as competing, because,
Speaker 2: as Sharon says, we're going to need this large portfolio
Speaker 2: of solutions to actually get to the gig a toon
Speaker 2: scale of removals that's needed to reach net zero or
Speaker 2: even net negative in that case enhanced weathering. It's really
Speaker 2: interesting because I think especially in the US, where we
Speaker 2: have the comparative advantage is the amount of land that
Speaker 2: we do have, and so enhanced weathering, biochar things like
Speaker 2: that could be a pretty good option. The issue with
Speaker 2: a lot of these technologies right now, especially with ocean
Speaker 2: based removal, is that there isn't any long term research
Speaker 2: right now that shows that doing these techniques changing the
Speaker 2: biogeochemistry of the ocean and the long term or even
Speaker 2: local ecosystem impacts that will have that research non existent,
Speaker 2: and the way the ocean works and the carbon cycle
Speaker 2: in the ocean works is that you change one thing
Speaker 2: and it can have a butterfly and in effect global fisheries,
Speaker 2: so it can actually have a large impact on the
Speaker 2: economy as well. And Silicon Valley kind of just in
Speaker 2: my opinion, really jumped into this because they saw a
Speaker 2: business model and they saw something that they could make
Speaker 2: money off of. And I don't think there's enough research
Speaker 2: or even regulations to manage the large scale deployment of
Speaker 2: a lot of these technologies. So for now I'm team DAK.
Speaker 1: But perhaps looking at it very much the way that
Speaker 1: I was even forming the question. And thank you for
Speaker 1: challenging me to think a little bit differently about it,
Speaker 1: because I'm thinking about these in terms of supply and
Speaker 1: demand and market dynamics, and you're talking about it in
Speaker 1: terms of a holistic set of solutions. Really well, so
Speaker 1: let's continue to talk about some of these solutions. Obviously,
Speaker 1: the price or direct air capture is a concern, but
Speaker 1: are there other things that we need to consider? Are
Speaker 1: there ways aside from land use, that maybe it impacts
Speaker 1: the natural ecosystem? What are the other considerations one needs
Speaker 1: to think about when deploying this technology.
Speaker 2: I think the biggest thing is the availability of twenty
Speaker 2: four to seven clean power. And I'm going to use
Speaker 2: the US as an example here because it's across the board.
Speaker 2: Everybody's talking about the US as the epicenter of DAK.
Speaker 2: But I don't think that we would be talking about
Speaker 2: the US so much in terms of how it relates
Speaker 2: to DAK if the government didn't throw so much money
Speaker 2: at the technology. And I say this because a lot
Speaker 2: of the companies right now that are coming out and
Speaker 2: saying we're going to build these megaton scaled projects in
Speaker 2: the United States and we're only going to use renewable energy.
Speaker 2: It's kind of just like, where are you going to get.
Speaker 1: That and when did that start? Is this a direct
Speaker 1: response to something that was a part of the Inflation
Speaker 1: Reduction Act?
Speaker 2: Yeah, definitely. So following the Inflation Reduction Act, the carbon
Speaker 2: Capture Project five million tons was announced maybe a month
Speaker 2: or so after in Wyoming, and then we've also seen
Speaker 2: companies like climb Works or other European companies voice intent
Speaker 2: to move into the United States market to take advantage
Speaker 2: of these credits, and they're pretty steep. They're upwards of
Speaker 2: one hundred and eighty dollars per ton, so it makes sense.
Speaker 3: And then also only a couple of months ago, the
Speaker 3: US announced Kapech subsidies, so it's not only support on
Speaker 3: the opic side with the IRA, but then they're literally
Speaker 3: giving you each They chose kind of two broad projects
Speaker 3: and they're each getting in total a billion dollars, so
Speaker 3: that's enough for them to probably build these really big plants.
Speaker 3: And just like de risking, the financing bit of DAK
Speaker 3: in the US is working out to attract all of
Speaker 3: these companies.
Speaker 1: So this is essentially a technology that is in some
Speaker 1: sense synonymous with the United States. But are there other
Speaker 1: parts of the world where companies are looking at this
Speaker 1: more closely and you think it could potentially take off.
Speaker 2: In Iceland, there's lots of geothermal, that's where we saw
Speaker 2: a couple of the Climwork's pilot plants. And then they
Speaker 2: also have these ultramafic rocks, so you can do carbon
Speaker 2: mineralization there, which turns the CO two into just carbonate
Speaker 2: essentially stone in only two years, so you don't have
Speaker 2: to sit there and monitor the well forwards of one
Speaker 2: hundred years. And so Iceland's a really great spot. I know, well,
Speaker 2: Sweden is a little bit different, but Sweden has a
Speaker 2: reverse auction scheme for BEX and then there's also Norway
Speaker 2: that's planning to do that for DAK. And then we've
Speaker 2: also been seeing projects in Kenya, so there was I
Speaker 2: think it's Project Hummingbird. It's a thousand ton plant that's
Speaker 2: due to come online this decade because they have a
Speaker 2: lot of geothermal So I think actually Kenya could be
Speaker 2: a really great spot to just build up DAK capacity
Speaker 2: in because they have this fundamental renewable energy and we're
Speaker 2: not using natural gas, so we're not going to try
Speaker 2: and permit a nuclear plant to power DAC, which is
Speaker 2: dystopian and in some.
Speaker 1: Respects direct air capture could actually help the geothermal industry grow.
Speaker 3: Yeah, there's a lot of synergy.
Speaker 1: And you mentioned a term and I just want to
Speaker 1: kind of circle back on another definition ultramatic rocks picturing
Speaker 1: some sort of a ward a kid would get in
Speaker 1: high school for a math competition. So what's an ultramatic rock?
Speaker 2: Basically they are these it's volcanic rocks, so lots of magnesium,
Speaker 2: lots of cat eye that will readily react with the
Speaker 2: CO two to just turn it into that stone. So
Speaker 2: there's Iceland as a hot spot for that, but we
Speaker 2: also see places like Washington State having a lot of
Speaker 2: these sorts of rock, so that could be another place
Speaker 2: where carbon mineralization really takes off.
Speaker 1: I've never been to Iceland. Have you guys been to Iceland?
Speaker 3: No?
Speaker 1: No, we've got to.
Speaker 2: Do a show and I I was just about to say, Dana, Yeah, this.
Speaker 1: Is other than the invariably dubious parts of our emissions
Speaker 1: with our flight getting there, but hopefully we can get
Speaker 1: the direct air capture to make it a net neutral experience.
Speaker 1: Jumping into another question that really is kind of burning
Speaker 1: in my mind when you mentioned both of the solid
Speaker 1: and liquid technologies, is this presence of chemicals and really
Speaker 1: what the profile is of those chemicals from both an
Speaker 1: emission standpoint and from an end of life standpoint, because
Speaker 1: this really brings to light really thoughts of other areas
Speaker 1: that we also cover. Let's talk about batteries, for example,
Speaker 1: there's a lot of conversation at the moment regarding not
Speaker 1: only circular and stripping the batteries of those very important
Speaker 1: metals that can be used to make more batteries, but
Speaker 1: then also the proper treatment of this waste at the end.
Speaker 1: So the question behind the question is are these chemicals
Speaker 1: in and of themselves hazardous? What is their emissions dissociated
Speaker 1: with them, and really what's going to happen to them
Speaker 1: at the end of life.
Speaker 2: Short answer, a lot of these are toxic and highly corrosive,
Speaker 2: especially for liquid DAC. So those aqueous solvents that I
Speaker 2: mentioned earlier are not biodegradable and actually really harmful, and
Speaker 2: so that's one of the key components developers are working on.
Speaker 2: That's where they're putting a lot of the R and
Speaker 2: D efforts into. So it's making these solvents a bit
Speaker 2: more biodigradable in general, but also increasing the lifetimes of them,
Speaker 2: so rather than having maybe to dispose of them every
Speaker 2: couple cycles, or maybe extending the lifetime of these materials
Speaker 2: for five and ten years. And actually a really good
Speaker 2: example of this is the zeolites, because the zeo lights
Speaker 2: actually are biodegradable and they have lifetimes of three to
Speaker 2: five years if I remember correctly. And so it's really
Speaker 2: just developing new sorts of materials and new source of technologies.
Speaker 1: Let's now go back to prices, because really that is
Speaker 1: the lynchpin for scaling technology at least with the way
Speaker 1: the world is currently run right now, and you brought
Speaker 1: up another technology that is a parallel of sorts in
Speaker 1: that it's heavily technology reliant or machine reliant rather than
Speaker 1: a nature based solution, which is this bioenergy with ccs.
Speaker 1: What are the prices right now and what are our
Speaker 1: forecasted prices for that technology for essentially some of the
Speaker 1: companies out there that are looking to figure out what
Speaker 1: their next moves are in the voluntary carbon space.
Speaker 2: The competitiveness of BEX is highly contingent on the market
Speaker 2: because there's different policies in place. There's different obviously carbon
Speaker 2: prices in each of these markets, and then there's different
Speaker 2: power prices. You can sell whatever power you're producing at
Speaker 2: a different level depending on where you are. Another major
Speaker 2: thing is the feedstock. So if you're in the UK
Speaker 2: and you're importing biomass feedstock from the US, you're going
Speaker 2: to see extremely high prices upwards of three hundred and
Speaker 2: fifty dollars per ton when compared to Norway or anywhere
Speaker 2: in the Nordic region where they're able to just use
Speaker 2: this municipal waste and they can see feedstock costs sometimes
Speaker 2: under fifty dollars per ton for backs. In some of
Speaker 2: these more expensive regions, it's around upwards of two hundred
Speaker 2: dollars per megawat hour, and then if you're in the
Speaker 2: Nordic regions where you have access to cheap feedstock, you'll
Speaker 2: see costs like in the one hundred dollars per megawat
Speaker 2: hour range roughly. But when we took a global average,
Speaker 2: a global weighted average of all the different costs of backs,
Speaker 2: what we found is that the offset price required to
Speaker 2: make this technology feasible was at around one hundred dollars
Speaker 2: per ton right now, falling to around eighty dollars per
Speaker 2: ton come twenty thirty, and then around forty dollars per
Speaker 2: ton in twenty fifty. So if you're comparing it to DAK,
Speaker 2: just based on the offset price required, it's far more doable,
Speaker 2: especially near term when DAK it costs eleven hundred dollars.
Speaker 3: But just to rein a bit on Brennus, yeah, parade.
Speaker 3: There are some risks with BECs that could undermine kind
Speaker 3: of this trajectory downward. So the first one is availability
Speaker 3: of biomass, which we think we're doing a lot of
Speaker 3: research on this because there's a lot of sectors competing
Speaker 3: for biomass in order to decarbonize, and we think this
Speaker 3: will tend to push prices up and biomass will go
Speaker 3: to only the places that need it the most in
Speaker 3: the end. And then the other part is that as
Speaker 3: renewables come onto the grid, you'll see lower power prices,
Speaker 3: and probably BECs will be able to recover less of
Speaker 3: its costs through selling power and will require higher carbon
Speaker 3: credit prices. So it's a bit of a complicated dynamic
Speaker 3: with becks, as Brenna said, but we think it has
Speaker 3: the potential to come down, but we're not sure. Now.
Speaker 1: You mentioned earlier on in the show that there were
Speaker 1: really large companies, some of them tech companies, that were
Speaker 1: looking at buying this technology, or in fact already have
Speaker 1: and have bought quite a few tons of carbon removal.
Speaker 1: Are they buying them all as clients or have any
Speaker 1: of these companies gone in and tried to actually acquire
Speaker 1: these companies that are offering these credits or even perhaps
Speaker 1: buying the specific units themselves as opposed to the carbon removal.
Speaker 1: So the parallel that I'm thinking about is when a
Speaker 1: company puts a solar farm next to one of their
Speaker 1: sites and they fully own that solar farm and a
Speaker 1: company just came in and built that for them.
Speaker 3: Yeah, the investment panorama for Duck has changed a lot
Speaker 3: in the last year, so you're right. What we used
Speaker 3: to see it was mostly dominated by vcs and that
Speaker 3: funding was enough for these like lab scale, demo scale projects.
Speaker 3: As I was mentioning, now that we're going into the
Speaker 3: ten thousand ton applications and then very quickly into the
Speaker 3: one million ton projects, we need much much more money.
Speaker 3: So what's happening is we're seeing yes, a lot of
Speaker 3: it is coming from the government and government support, but
Speaker 3: also what you just mentioned, so more private players coming
Speaker 3: into the space and investing. And probably the largest deal
Speaker 3: we've seen so far was Oxy acquiring Carbon Engineering for
Speaker 3: a bit above a billion dollars. And now we have
Speaker 3: this oil and gas company that owns this director captured
Speaker 3: technology and is also associated to the direct air capture
Speaker 3: company that is trying to scale up the quickest and
Speaker 3: to the largest degree.
Speaker 2: I think something really interesting that we've just plus wanting
Speaker 2: Sharon here is that oil and gas and DAK have
Speaker 2: become inextricably linked over the past year, and so we've
Speaker 2: seen Chevron, Exon and again Oxy all invest in DAK,
Speaker 2: and it's mainly in the US where we're seeing this,
Speaker 2: and so I think the DAK narrative and all these
Speaker 2: oil and gas companies are becoming intertwined. And we're seeing
Speaker 2: a lot of these, especially occidental claim that they can
Speaker 2: utilize DAK in order to prolong fossil fuel use for
Speaker 2: the next seventy eighty years. And I think, especially while
Speaker 2: it's just these first of a kind plants that are
Speaker 2: up and running, that's kind of setting the stage for
Speaker 2: where the technology is going to go. And I think
Speaker 2: they're playing a little bit of a dangerous game exactly.
Speaker 3: And just to go back to your kind of challenges
Speaker 3: to the market question data, one of the big ones
Speaker 3: we're seeing is permitting. And this is really closely linked
Speaker 3: to what Brenna was just talking about, because there's less
Speaker 3: and less community acceptance or let's just say more skepticism
Speaker 3: and people looking more closely into how these things are
Speaker 3: being used. So we need to make sure that even
Speaker 3: for DUCK, where there is this like good accounting and
Speaker 3: additionality and permanence for these removals, that we are using
Speaker 3: them in the right way, and that it builds confidence
Speaker 3: on this technology.
Speaker 1: So I want you to give a solution to a
Speaker 1: skeptic and let's just go down that road for another minute,
Speaker 1: which essentially is, let's think about a company that is
Speaker 1: using the direct air capture technology to prolong their existing
Speaker 1: high carbon business as opposed to transitioning away from carbon,
Speaker 1: using it as a short term solution, and then essentially
Speaker 1: in the long run, only applying this technology to meet
Speaker 1: those hard to abate sectors where we maybe haven't fully
Speaker 1: figured out the solution completely yet. And I'm thinking in
Speaker 1: those circumstances things like even with sustainable aviation fuel the
Speaker 1: airline industry or cement as opposed to traditional energy sources
Speaker 1: and some of what the oil and gas community sells
Speaker 1: their products to. What interventions do you think will be
Speaker 1: required in order to ensure that DAK truly is filling
Speaker 1: that void in the market that makes the carbon accounting,
Speaker 1: you know, get to that net zero place. Is it
Speaker 1: policy intervention or do you think that this will really
Speaker 1: take care of itself as a solution in the market.
Speaker 3: One important place to start is just having the conversation
Speaker 3: with people about what it means to implement this technology.
Speaker 3: So if you are going to decarbonize, DAK is your
Speaker 3: last option, especially now, the costs are super super high,
Speaker 3: so you wouldn't really use DAK in order to offset
Speaker 3: all of your emissions. You use it as a last resort.
Speaker 3: But I think what people are missing is in order
Speaker 3: to buy that argument, is this regulation that ensures us
Speaker 3: that they are going to bring whatever kind of hypothetical
Speaker 3: company we're talking about, that they are going to bring
Speaker 3: these CO two emissions down. Because a lot of what
Speaker 3: we've seen so far is companies internally regulating themselves and
Speaker 3: committing themselves to net zero, but then sometimes stepping back
Speaker 3: and saying, oh, we're going to change this timeline or
Speaker 3: we're not so sure anymore. So just giving that security
Speaker 3: I think would help people know thats are going down
Speaker 3: and DAK is not really what you're gonna use for
Speaker 3: most of those emissions, but you do need it in
Speaker 3: the end for the last like let's say maximum ten percent,
Speaker 3: where removals make sense or it's just not possible to
Speaker 3: get maybe to full zero, so you need net zero.
Speaker 2: So something that we're seeing right now in the EU
Speaker 2: is that they've sat down. I guess we can compare
Speaker 2: it to the US, because with what the US did
Speaker 2: is we just threw a bunch of money at DAK
Speaker 2: in order to increase investor confidence, which obviously has worked.
Speaker 2: But what the EU is doing they took a couple
Speaker 2: steps back and sat down, taking a couple of years
Speaker 2: to just define and understand what good carbon removal looks like.
Speaker 2: And then once they have that baseline and that framework
Speaker 2: is when they're going to start throwing money at it.
Speaker 2: So it's kind of the exact opposite of what the
Speaker 2: US is doing. But I think obviously there needs to
Speaker 2: be that money to get this technology up and off
Speaker 2: the ground, but there has to be this framework of
Speaker 2: what does good look like to make sure this market
Speaker 2: stays regulated and then scales in a sustainable way.
Speaker 1: So we've been talking a bit about policy here, and
Speaker 1: really my final question comes down to as this technology grows,
Speaker 1: because demand is likely to spur it on, and with
Speaker 1: the learning rates that we're predicting, it does have a
Speaker 1: bright future, do you expect to see more policy intervention
Speaker 1: both spurring this technology on and also ensuring that it's
Speaker 1: applied to the parts of carbon and drive to net
Speaker 1: zero that really make it occupy the most useful space
Speaker 1: for us.
Speaker 3: It's hard to predict, but I do hope that there
Speaker 3: is more policy that comes online or more support from
Speaker 3: the government. These projects are huge. I mean they each
Speaker 3: cost roughly a billion for a one million ton plan,
Speaker 3: so it requires a lot of money for a technology
Speaker 3: that's still really new. And we often think about this
Speaker 3: in general to all like decarbonization solutions, to just throw
Speaker 3: everything at the board and see what sticks. And DAK
Speaker 3: does have the potential to scale, to bring casts down
Speaker 3: and to offer a reliable solution to removals in the future,
Speaker 3: which I do think we will need to some degree
Speaker 3: or another. So I think it's worth trying to make
Speaker 3: sure the policy supports the industry but also regulates it
Speaker 3: and brings the best possible technologies online because of the
Speaker 3: ones we're operating with today are not the most efficient,
Speaker 3: as Brenda mentioned.
Speaker 1: So I know I said my last question was my
Speaker 1: last question, but I was just kidding. I do have
Speaker 1: one more that just came up, which essentially I'm wondering, well,
Speaker 1: how these projects are financed and whether or not there
Speaker 1: any financial instruments that we can think about as a
Speaker 1: potential way of essentially inspiring this industry to grow.
Speaker 3: How these projects get financed today is usually a lot
Speaker 3: through government support, and then the rest is the company
Speaker 3: has raised this money, for example in the case of
Speaker 3: clim Works, through kind of vcs and kind of general
Speaker 3: tech startup methods. So in the future that is likely
Speaker 3: to change. And probably what we will see is that
Speaker 3: as the technology is proven, more traditional investors will come
Speaker 3: in and finances. So I'm not sure if they will
Speaker 3: use like a specific kind of bond or loan, but
Speaker 3: we do think that traditional banking might get into this
Speaker 3: space once we know okay, you can do it at
Speaker 3: a really big scale, and you could do it at
Speaker 3: reasonable costs, and that the market is there for it.
Speaker 3: And even though we say there's like a huge potential
Speaker 3: demand for removals, what the companies say themselves is yeah,
Speaker 3: but we need to actually have the contracts and the
Speaker 3: off take because otherwise we don't get those loans. So
Speaker 3: all of this is playing out and all of the
Speaker 3: moving parts will come together probably in the next five years,
Speaker 3: and we'll see, Okay, was it real, like did you
Speaker 3: actually build this huge plant and did the costs actually
Speaker 3: come down?
Speaker 1: Thank you so very much for joining today, for sharing
Speaker 1: an update on what's happening with direct air capture and
Speaker 1: really broadly linking back into what's happening with the voluntary
Speaker 1: carbon space, which I know we're all watching closely. It
Speaker 1: was great to have you both on the show.
Speaker 3: Thanks Na, it was great to be here.
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