Latest / Radio Davos / How cutting emissions is future-proofing industries beyond the 'green premium'

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How cutting emissions is future-proofing industries beyond the 'green premium' · Radio Davos

0:01
I look at climate as really not a David versus Goliath story.
0:04
It's a David and Goliath story.
0:06
Some of the large companies need to partner with these startups
0:09
because that's their paths to having a very competitive solution.
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Welcome to Radio Davos, the podcast from the World Economic Forum
0:15
that looks at the biggest challenges and how we might solve them.
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This week.
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We can transition heavy industries to clean technologies.
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But how to start?
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We speak to people aiming to get the first mover's advantage.
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It's always important when you are doing a new disruptive technology
0:31
to drive it into the market with first movers and with green premiums.
0:35
However, you have to develop technologies that will not require
0:39
a green premium forever.
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For industries that have been burning fossil fuels for decades.
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Switching to greener processes
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may initially be more expensive, creating what is known as that green premium.
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We hear from companies determined to bring that premium down to zero or even below.
0:54
The key is to see the green premium as the bridge, right?
0:57
That's not the destination.
0:59
The way we can achieve reducing the green premium is by scaling.
1:03
The way we have done steel investments, cement investments with all heavily
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based on looking at an architecture that will actually give you a lower cost
1:10
than actually how fossil fuels are done today.
1:13
Follow Radio Davos where we get podcasts, or visit wef.ch/podcasts
1:16
will also find our sister programmes, Meet the Leader and Agenda Dialogues.
1:19
I'm Robin Pomeroy at the World Economic Forum,
1:21
and with this look at the first movers who are decarbonising heavy industry to.
1:25
Get rid of a green premium.
1:27
It's just a deployment story.
1:29
The more you build, the cheaper gets.
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The cheaper gets, the more you build.
1:33
This is Radio Davos.
1:36
Welcome to Radio Davos.
1:37
On this episode we're looking at the people and companies
1:40
working to decarbonise big industry in some really surprising ways.
1:45
If you're interested in technological innovation
1:47
or if you're interested in real action to reduce greenhouse gas emissions,
1:51
keep listening.
1:52
We have some eye-opening real-life examples that are already having
1:55
an impact on this episode.
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I have a co-host.
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He's my colleague Noam Boussidan. Hi, Noam.
2:01
How are you? Hello, Robin. I'm very well, thank you.
2:03
How are you? I'm very well, thank you.
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You are ahead of the First Movers Coalition. Keen, very keen listeners
2:09
to Radio Davos.
2:09
What I've heard you before on this show talking about the First Movers Coalition.
2:12
For those few people listening to this, who
2:15
we who are listening to that, what is the First Moving Coalition.
2:17
Should certainly have listened to the first episodes, but
2:22
The First Movers Coalition,
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FMC, by its short name, is a collective effort
2:28
that was born about five years ago, in 2021 and 21 or early 22.
2:34
And the fundamental premise behind this initiative is that we try and pull
2:38
collective demands for clean tech.
2:42
And I mean products, technologies and services.
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By 2030, we try to aggregate those as a
2:49
as a strongest demand signal possible that can be sent to the markets,
2:53
to investors to really get those markets going.
2:56
Because the key issue we're facing today is that those key climate techs
3:00
for the future, we're talking clean hydrogen, we're talking carbon capture
3:04
and storage, we're talking batteries, etc.
3:06
a lot of them aren't yet that scale aren't available at commercial prices.
3:10
And so the whole premise behind the First Coalition is that
3:13
we get companies who are buyers, who are willing
3:16
to send off-take demand signals to the markets.
3:19
We try and get them to pull it so that they can give the confidence
3:23
to investors and, to product developers to really get going.
3:28
Because you're looking at really big industries
3:31
here, big, often very polluting industries
3:34
that in theory, on paper, there are ways to decarbonize them,
3:38
to make them not polluting or far, far less polluting than our at the moment.
3:42
But in the real world, it's very hard because there are startup
3:46
costs and uncertainty about market conditions.
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And those are the things you're addressing, right?
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That's absolutely right.
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And as a matter of fact, they're called hard-to-abate sectors.
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It's precisely for a reason.
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So we have seven sectors that are covered today three in the material space.
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We'll talking aluminium steel.
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So the metals piece as well as cement and concrete.
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We have three in the mobility space shipping trucking and aviation.
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And we have a seventh sector
4:12
which is a bit more cross-cutting which is called carbon dioxide removal.
4:16
So we had this meeting.
4:17
You had this meeting,
4:19
which I did the three short interviews we're going to listen to today.
4:22
Just remind me what I mean.
4:24
I was in a room doing interviews.
4:25
What were you doing on that day? What was the meeting?
4:28
So we ran, second
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edition of what we call the First Movers Coalition Day.
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And, it takes place about kind of, midway throughout the year.
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And it's really the key moments apart from Davos, where
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whereby we gather leaders at the top level of CEOs and ministers.
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So that takes place in Davos.
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And the First Movers Coalition Day, FMC Day.
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We try and you know, kind of take stock of where we stand,
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where we stand approximately halfway throughout the year.
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And we gather very senior decision-maker still, but not top-level decision- makers.
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It's very difficult to get CEOs and ministers always throughout the year.
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But we get, you know, people who are very close to them.
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We take stock.
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We try and also look into specific dimensions.
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So this particular edition of FMC Day was really anchored around
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what's working well
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and how do we replicate what's actually working well, in particular,
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looking at the broader international context,
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this took place as well
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with a key with a background of a number of conflicts,
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including the war in Iran and the Middle East.
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And so the number of disruptions that are taking place
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to the energy market in particular.
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And so we really wanted to make sure that this was a moment
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where we could spend a bit of time together
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as an initiative, as a coalition, looking at where our members stood.
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So the FMC Day, it's not mostly the CEOs,
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as you say, those CEOs of these enormous companies
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who we really need to get taking action on climate change.
5:56
Our meeting at the Annual Meeting of the World Economic Forum in Davos,
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which happens every January, this, which happened a few weeks
6:02
ago, is a recording that's over the European summer
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was people probably closer to the action in many ways.
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I mean, what what how did you come away from that day?
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What what did you learn?
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What what what inspired you coming out of that look?
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It was extremely energising.
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And it's,
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you know, it's a lot of work that goes into putting these meetings together.
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There's a lot of competing offerings,
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but it's great when you gather a group of 60 or 70 people
6:25
who are really committed to the cause, they're not committed to the cause
6:28
just for the sake of the cause itself, because it only gets you so far.
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They're committed to the cause because they understand that it's really
6:35
what is going to make, make or break their businesses tomorrow.
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And that's also why it's great that they have this direct line
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of connection to their CEOs, to their ministers, to their principles.
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Because though that message doesn't kind of dilute itself,
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the reports to them back and forth in terms of the progress
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that is being made, in terms of what's cooking, in terms of the challenges
6:55
that are also being met by their peers, by their competitors to a certain extent,
7:01
but also in terms of what's what's coming and what's replicable,
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and what is really helping us to address the key issues that we're facing.
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One of the key points I would like to make sure goes through is
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this is not about idealism.
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This initiative was launched five years ago, and back then
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were very aware that the conditions were very different.
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Climate action was at its peak.
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The momentum was extremely high.
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There was a lot of mobilisation.
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It was all about ambition.
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FMC Day, five years
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later, takes you into a place whereby those commitments were made.
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The ambition is what is set.
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The direction of travel is very clear.
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It's now all about that shift towards delivery.
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If we want to live up to the commitments that were made, if we want to make sure
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that we're perceived by the markets,
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by, you know, everyone out there in terms of
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this is real, this is impactful, this is going to change the world.
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Literally. We need to live up to those commitments.
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And that's hard to do.
8:01
And that's exactly what was discussed.
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The fact that it's hard to do, the fact that we're not going to go away from them.
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And what are the key solutions
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that we can deploy today in order to actually live up to them.
8:12
Once a year?
8:12
You mentioned that five years ago was a very different environment.
8:14
You're setting the goals now.
8:16
It's really about implementation.
8:17
I wonder also, though, you know,
8:20
the pendulum swings on climate action sometimes it's everywhere.
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And, you know, the Paris Climate Agreement quite a long time ago.
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Now everyone's on board to do this.
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In some countries politically, there's been a swing away from climate action.
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People even now talk about green
8:35
hushing companies that used to show how green they were.
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And now, even if they are green, they're not shouting about it.
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Interesting.
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The three people I met
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there were so energised at this meeting, and they were absolutely convinced
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the direction of travel has not changed at all.
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But I'm wondering, have you come across that
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this kind of slight hesitancy, big companies, they're not shouting
8:58
from the rooftops that, hey, we're getting net zero by date X?
9:02
Look, first of all, your observation that the pendulum swings is absolutely
9:06
a right one.
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I've been myself personally involved with the climate, space
9:11
or sphere, including international climate negotiations for more than 15 years.
9:15
It is quite clear that when you look at it
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over the course of the last ten, 15, 20
9:21
or almost years, we've seen those movements back and forth.
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But the important thing is not to jump to conclusions and to stay the course.
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And so I think why the three people you talked
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to were so energised by this meeting is precisely that.
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Because and that's what really, the Paris Agreement managed to do, no matter
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the political ramifications or changes the direction of travel is set.
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The course is set.
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It's all about trying to understand how we get there.
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And again, it's how we get there, not just for the sake of getting there, but it's
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because what makes economic sense, what makes business sense,
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and of course, as well serves the protocols of
10:01
how do we ensure that the pendant remains livable?
10:04
Absolutely.
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Well, I think the three interviews are about to hear
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each of those people in their own way, make that point.
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They're making a business case for this.
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The last person we'll speak to is an investor.
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So very much putting the case for if you put money
10:19
into some of these technologies, he's hoping for a big financial return,
10:23
as well as any impact that might have on, halting climate change.
10:27
Let's get to the first of these three then.
10:29
So, Noam, this is the chief executive of something called Lanzatec.
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She's called Jennifer Holmgren.
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I'll let her explain exactly what she does.
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But in a nutshell, her company is capturing carbon,
10:45
which is coming out usually as carbon dioxide or carbon
10:48
monoxide from, in her case, steel plants.
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Imagine a massive steel plant.
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She's capturing it, but she's not just sequestering it.
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She's doing something very interesting with it.
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It's making usable, valuable product.
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This is Jennifer Holmgren.
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My name is Jennifer Holmgren.
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I'm the CEO of LanzaTech.
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What does LanzaTech do? Jennifer.
11:09
Yeah, LanzaTech recycles carbon emissions, so it takes emissions
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that would naturally be emitted from an industrial site as CO2,
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and we capture them and convert it to products.
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So call it a carbon efficiency play carbon recycling.
11:26
Now, I've
11:26
looked up a bit about your technology and it seems to involve fermentation.
11:30
Is that correct?
11:31
Absolutely right.
11:32
So the way we do this conversion of waste carbon
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into useful products is actually with a bacteria.
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The bacteria eats the carbon emissions and converts them to product.
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So is this actually working in the real world now.
11:47
Yeah, absolutely.
11:48
So we have four commercial plants operating in China
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taking steel or ferroalloy gases and converting them to ethanol.
11:56
And we have a plant in Belgium, in Ghent with ArcelorMittal that also takes carbon
12:02
emissions from their steel mill and converts them to ethanol.
12:06
So it's literally if I was to come and look at this, one of these plants,
12:09
what what what would I see? You describe it to me.
12:12
It looks like a biorefinery connected to the steel mill,
12:15
because it has to be at the steel mill
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so it can capture the carbon from the steel mill.
12:20
And you're used to fermentation of sugar.
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And that looks like a big, bad process, right?
12:26
Because fermentation takes a long time.
12:28
Well, I fermentation takes seconds.
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So instead you're actually looking at something that looks like a refinery
12:36
rather than a fermenter gassing product out.
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And the gas is carbon dioxide itself is a is a gas.
12:45
But what you're going to getting out of an industrial plant will be lots
12:48
of other pollutants and things in there that you have to have to actually make it
12:51
carbon dioxide in before your process works.
12:55
Yeah. So actually this is a really great question.
12:57
So we can use carbon dioxide,
13:01
but we also can use carbon monoxide.
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So in a steel mill often the carbon
13:07
monoxide is converted to power.
13:10
Or it's literally flared okay.
13:13
When it is flared usually there are also particular
13:17
emissions and other emissions that are toxic to our environment.
13:22
So what we are doing
13:23
is we're preventing that from happening because we're taking that carbon monoxide.
13:27
And instead of letting it go out the flu, we actually capture it and convert it.
13:32
And is there a byproduct as well.
13:35
Then from this fermentation, I imagine, as a chimney coming out of the top.
13:38
That's interesting.
13:39
So our technology and there's only two products they're made right.
13:44
One is the ethanol that we produce.
13:48
The other is the bacteria itself.
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So the bacteria is alive in the bioreactor.
13:53
And we are going to plug the reactor if we just let it divide continuously.
13:58
Right.
13:59
So we have to remove some of the bacteria.
14:01
We dry it.
14:03
It's 90% protein.
14:05
We sell it as fish food. It's animal. Food.
14:08
So you end up with this product which is ethanol.
14:11
What is that useful. Yeah.
14:13
So that's a great question.
14:15
Ethanol can go into marine fuel.
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So it's currently people talk about methanol for marine.
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But more and more people are realising that you can put ethanol
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in the same engines as you do methanol,
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except it has 40% more energy density to put more cargo on your boat.
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So that's one direct use.
14:34
The other uses, you can take ethanol and convert it to sustainable aviation fuel.
14:40
So a drop-in hydrocarbon that can be used in aviation.
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And we actually have a large commercial plant converting ethanol
14:48
to sustainable aviation fuel in Georgia at a 10 million gallons a year scale.
14:54
The freight you use that was drop-in fuel.
14:56
So these are fuels that can be used on existing.
14:59
It doesn't require a new technology.
15:01
These are ships that use fuel.
15:03
Planes that use fuel.
15:05
This product can be used there.
15:07
Then I guess
15:08
us to the green premium because those companies are buying
15:11
a bunker fuel or their aviation fuel, usually fossil fuels.
15:16
Presumably your fuel is more expensive.
15:19
Is it? Tell us about the green premium.
15:22
So absolutely right.
15:23
I think it's always important when you are doing a new disruptive technology
15:28
to drive it into the market with first movers and with green premiums.
15:33
However, you have to develop technologies that will not require
15:38
green premium forever.
15:39
There is no industry that can sustain a delta price forever.
15:45
And so just like solar, just like wind, which were very expensive,
15:49
just like cellphones, very expensive initially,
15:52
but we drove them down the cost curve with more and more deployment.
15:56
I think that is the same thing we have to do with these new technologies.
16:00
So you see solar used to wind, those make green electrons.
16:06
There is no real green premium for green electrons anymore, is there?
16:10
They are competitive.
16:12
The same thing will happen with green molecules.
16:14
Whether it's ethanol or sustainable aviation fuel.
16:18
These will go down the cost curve.
16:20
The more we deploy to get rid of the green premium.
16:24
It's just a deployment story.
16:26
The more you build, the cheaper gets, the cheaper gets, the more you build.
16:30
As well as producing fuel that is not derived from fossil fuels,
16:35
you're removing carbon dioxide, the greenhouse gas
16:38
that otherwise would end up in the atmosphere.
16:41
Are you making money out of that as well?
16:43
Yeah. So actually our partners are making money.
16:46
So we have, like I said, four commercial plants in China.
16:49
Our JV in China just went public in the Hong
16:53
Kong exchange and they are definitely making money.
16:57
They have 20 to 30% margins in their operating plants.
17:02
Because there are schemes for carbon removal.
17:06
So that's really interesting.
17:08
No actually they're
17:10
they're not
17:11
leveraging any carbon removal or green ethanol.
17:15
They're just simply selling ethanol into the road transport market.
17:19
They do get a premium relative to just plain fossil,
17:23
but they don't get a different green premium than anybody else
17:27
that's contributing alternative to fossil carbon.
17:32
So what is the incentive for someone to buy that product?
17:34
Then?
17:35
There's a lot of companies that need to decarbonize
17:38
and that need to be talking about decarbanizing.
17:41
And so there are regulations that require them to deccarbonize.
17:45
So those are the people that are buying it.
17:47
So in China, it's the Sinopecs of the world.
17:50
Tell us about your journey then from PhD scientist, chemist
17:54
I believe through and you worked in the classic toner petrochemicals industry.
18:00
Is that right? How did you come to where you are now?
18:02
So actually, I, I worked at a company called UOP
18:06
that serves the traditional petrochemical world,
18:09
and I started working on alternative feedstocks.
18:13
There was an energy security play that required alternative feedstocks.
18:18
And when I started doing that, I went ahead and worked on
18:23
drop in diesel fuel.
18:25
And of course, from drop in diesel to drop in alternative
18:29
jet fuel is is just one simple step.
18:32
And so I developed the technology for UOP Honeywell
18:35
to do drop-in sustainable aviation fuel.
18:39
That's the HEFA route that everybody talks
18:41
about that uses oils, fats and greases.
18:44
And I found that the renewable energy business at Honeywell
18:49
and from that I realised that we needed to diversify
18:53
the feedstock pool further, you know, than fats, oils and greases.
18:58
And so I started looking at LanzaTech, which can use industrial waste
19:03
gasified municipal solid waste trash, basically rubbish, gasified
19:08
If I could,
19:10
you know,
19:10
agri sector and forestry sector waste.
19:13
And I said, okay, finally, a technology approach
19:18
that can scale the way the refining industry scaled.
19:21
That's the thing I think most people don't realise.
19:23
The world uses 100 million barrels
19:27
a day of fossil carbon.
19:30
So how do we get away from that?
19:32
You need something that has a massive feedstock pool,
19:37
and that's what LanzaTech has is a massive foodstock pool.
19:42
What needs to happen now.
19:44
So kind of global scaling of this to really make an impact.
19:50
What I've just seen in business terms,
19:53
in industrial terms, in policy terms,
19:56
are the big things that you're hoping will happen that could change the game.
20:00
Well, I mean, at the end of the day, you have to deploy,
20:03
deploy, deploy, and to deploy you need technology-neutral standards.
20:08
You need policy that is completely technology-neutral
20:11
so that it allows all types of solutions is seat at the table.
20:16
A lot of policy is actually feedstock specific.
20:21
And if you do that you create barriers.
20:24
The first time we build our first industrial carbon
20:28
recycling scheme, we didn't qualify for anything.
20:31
Nobody understood where we fit.
20:34
So I think these boxes need to be technology neutral.
20:37
The other thing that needs to happen is we have to mentally
20:40
stop thinking about molecules the same way we think about electrons.
20:46
You know, ten year offtake agreements
20:48
for molecules with a fixed price offtake, which is what's financeable
20:53
is very difficult in a world that trades molecules.
20:57
Nobody trades electrons in the same way.
21:00
But because solar and wind get down the cost curve and gap finance with
21:04
ten year PPAs, right, we try to do the exact same thing with molecules.
21:10
Nobody does that with molecules.
21:12
And so you will end up deploying
21:15
if you first of the kind that way and financing them that way.
21:19
You will not finance the molecule energy transition that way.
21:23
So you've got to think about well, not one size fits all, but how do you fit
21:31
to an industry, to an approach?
21:33
Why could you not get those
21:36
long-term contracts now?
21:39
Is it because oil is widely available?
21:42
The price is moving all the time.
21:44
People are doing futures contracts.
21:47
It's the combination of all those things.
21:50
And it's also the magnitude of the problem.
21:52
You know, if you're going to have the higher
21:55
priced molecules today,
21:59
a ten year contract on those higher priced molecules
22:03
is tens of millions of dollars for a company
22:06
committing hundreds of millions of dollars to a ten year offtake agreement.
22:10
Today, justice is very, very difficult, right?
22:14
Especially for the industries we work in aviation.
22:18
Do they really want to commit to pay $5,000
22:21
a tonne when conventional jet fuel is $2,000 a tonne?
22:25
And do they want to make that commitment for ten years?
22:28
That's massive.
22:30
And scary.
22:31
That is not true of the solar industry today, right?
22:35
We're talking cents and pennies per kilowatt hour.
22:39
It's just a matter of size perspective.
22:42
So how do you bridge that gap?
22:43
I guess that's partly what First Movers Coalition's aimed at.
22:46
It is exactly what the First Movers Coalition is about.
22:49
How do you build the first ones?
22:50
Once you build the first ones, maybe the green premium gets smaller and smaller
22:55
so that others can follow and adopt consumer companies.
23:00
The companies that will be buying your products,
23:02
are they rewarded for doing that, for coming in and being okay?
23:05
I'll take the first step.
23:06
I will promise you x number of years.
23:09
I think that will be true of the first.
23:11
The first movers will do, then we work with IAG and they're willing to do that.
23:17
I heard Vattenfall talk about it today, but it took persistence on their part.
23:22
It took visionary leadership.
23:24
And they are of course a leader in the First Movers Coalition.
23:28
The problem
23:29
is that it isn't enough to create the volumes we need.
23:33
And so you need the fast followers now to start to jump in.
23:38
We've seen this year this kind of disruption
23:41
in the oil supply in the oil market because of the Strait of Hormuz.
23:46
Some people have said to me, is this idea of resilient supply chains
23:50
getting at least some of their supply of, in that case, energy
23:54
locally or from different providers.
23:58
Do you think that will have a knock-on benefit for you
24:01
and for what you're trying to do?
24:02
Absolutely.
24:03
I think energy security is quite important.
24:06
And that's the beauty of what we do, is we use local resources.
24:10
I think it's also really important.
24:12
We always talk about energy efficiency.
24:14
And what I'm talking about is carbon efficiency.
24:17
How do you make the most out of the molecules
24:19
you've already dug out of the ground?
24:20
Use them over and over again, and that extension of the supply
24:25
that you have purchased from somewhere else, generally,
24:29
that's energy security and that's really important.
24:33
I do think people should also talk about energy diversification.
24:36
We have spent way too much time with molecules
24:41
and with electrons coming from the same exact resources.
24:44
We've got to find other supplies, we've got to use other supplies.
24:48
We've got to get them down the cost curve.
24:50
Where do you see your industry in five years time or in ten years time?
24:55
I think it's ten years time for sure.
24:56
We will be cost competitive with the current feedstock resources.
25:01
I think in five years time, I think we'll transition from people saying
25:06
these things are getting built to a lot of plants being built
25:11
that is what's really important is we've got to stop taking five years
25:15
to finance a plant.
25:16
We need to take two years, and if we can do that, we'll build more,
25:20
and that's what we'll get rid of.
25:22
This green premium.
25:23
Why China?
25:25
Why China?
25:26
China builds things very, very fast and speed matters.
25:30
I also think China doesn't just build fast.
25:33
China also prototypes fast.
25:37
You know, fast fail fast build.
25:41
This is how you get new technologies to market.
25:44
You look at what they're doing in batteries.
25:46
The West is focused on lithium.
25:48
And they managed to find a way to use sodium and lithium and then sodium,
25:52
which is available. It's plentiful.
25:55
I should add that I think the West has fallen
25:58
into a trap of thinking that China doesn't innovate.
26:02
I disagree with that.
26:03
They are innovating.
26:05
They're not just duplicating.
26:07
When do you see these kinds of plants rolling out?
26:12
When do you think this will just be a normal thing?
26:14
We will say, oh yeah, there's one of these down the road for me.
26:17
Our company is based in North America, but our first Western plant, shall we
26:22
say, is in Belgium, in Ghent with ArcelorMittal.
26:26
You know, we are going to have to make that transition in the next five years.
26:30
I think in the next five years, I already have enough projects
26:33
in the pipeline and industrial sites that you will see construction in the West.
26:37
I saw you doing a talk online and you're saying, I know this
26:41
sounds like science fiction, you know, creating
26:45
energy out of pollution.
26:48
That was maybe 6 or 7 years ago.
26:49
I think that took a people still amazed when you say this to them.
26:53
Or is it now becoming a bit more mainstream?
26:56
You know, it's interesting, I think that it is becoming more mainstream,
27:01
but I still see eyes open when I show a picture
27:04
of what one of the plants looks like and show that it's real.
27:08
It's taken so long that it's still.
27:12
Interesting.
27:13
You're the chief executive officer of LanzaTech,
27:16
but you're also the scientist.
27:19
It's not that often, is it? Sometimes.
27:21
You know, the scientist does the science and the business person does the business.
27:25
How have you managed to combine those two roles?
27:29
I don't honestly, I, I know enough science
27:33
to be able to talk to my team about it, but they're doing the science.
27:36
I, I'm not doing science or engineering.
27:39
I'm not even biologists.
27:40
I wouldn't know biology.
27:42
So no, no, I, I just know enough to be dangerous.
27:47
That was Jennifer Holmgren, the CEO of Lanzatec.
27:51
Really interesting.
27:52
Noam, the thing that struck me in that interview.
27:55
I'll quote her again.
27:58
You have to develop technologies
28:00
that will not require a green premium forever.
28:04
What does she mean by that?
28:05
And what do you think?
28:07
Look, the whole question of the green premium has been one that is really
28:12
something that has come time and again within those conversations.
28:15
And the bottom line is this we're looking at alternatives
28:20
to fossil fuel technologies that are, by essence cheaper
28:23
because we've known how to do these for ages,
28:26
sometimes tens of or even sometimes hundreds of years.
28:29
So any alternative solution that we're discussing today,
28:33
be it in the case of Jennifer, for sustainable aviation fuels, but,
28:38
you know, there are seven other sectors and there are many technologies that are
28:41
that are being discussed here.
28:43
Is the fact that they're going to be more expensive.
28:45
And that's what we call the green premium.
28:48
The alternative technology to fossil
28:50
fuel traditional technologies costs more.
28:54
Who pays for that?
28:55
How do we absorb that cost?
28:57
How is it dissolved over time?
28:59
Some argue that there should not even be green.
29:02
Green premium.
29:03
The green premium is indeed sometimes referred referenced
29:07
as a bridge type of moment to a new world or a new reality
29:12
whereby that alternative, higher cost
29:15
technology of today is essentially going to be the base case for tomorrow.
29:19
And that's essentially what we're aiming at.
29:21
But indeed, right now that's not the case.
29:24
And so the converse, the whole conversation is around
29:26
how do we cover for this?
29:27
What are the mechanisms be the financial and otherwise that we can use
29:32
in order to reduce that green premium and to make sure that that technology
29:37
more expensive today is something we can use on tomorrow as a base case.
29:42
Let's say the second of the three interviews that I did
29:45
at your FMC Day, this is Rebecca Boudreaux.
29:49
She's the president, chief executive of Oberon Fuels.
29:52
A fairly niche, industry sector, at least from my point of view,
29:56
because she works in the area of chemicals that are used
30:00
as aerosol propellants.
30:03
But she makes them from waste materials.
30:07
So we're going to hear all about that from Rebecca Boudreaux.
30:11
I'm Dr. Rebecca Boudreaux, and I'm the CEO of Oberon Fuels overall fuels.
30:15
And what is Oberon Fuels today?
30:17
So Oberon Fuels converts various waste streams to renewable
30:20
fuels and chemicals so we can take things like waste left over from trees.
30:24
When you break down a tree to make pulp and paper
30:27
for cardboard boxes, diapers, all the important things in our lives.
30:30
There is a waste stream from naturally occurring methanol in a tree.
30:34
So that's one of the waste streams we use at our current production facility.
30:38
But you can also use any type of organic waste, food
30:41
waste, agricultural waste, and a variety of others.
30:44
And you'll mention what kind of fuel.
30:46
So that tree waste, we convert to renewable DME,
30:50
which stands for dimethyl ether.
30:52
It can be blended into propane to reduce this carbon footprint,
30:55
but it also is used as an aerosol propellant.
30:58
So it can be used in a specialty chemical space.
31:00
So dimethyl ether DME.
31:03
So everyone needs to know about.
31:05
And it's sustainable because you're recycling stuff that would
31:08
otherwise be wasted.
31:09
And is there a green premium for that.
31:12
Does it cost more to buy your recycled DME than to buy just DME?
31:17
Yeah.
31:17
So we think of a green premium really as the bridge.
31:20
So starting off our production at small scale using small scale feedstocks.
31:24
So costs more.
31:25
So there's ways you can offset that in the fuel sector.
31:28
There's often incentives at the federal and state level in the U.S.
31:32
to help pay for that green premium.
31:35
But the key is to see the green premium as the bridge.
31:38
Right. That's not the destination.
31:40
And so the way we can achieve reducing the green premium is by scaling.
31:45
And while we started off at using renewable
31:49
DME and the fuel sector, we're also expanding the market.
31:52
So creating more demand.
31:54
One example aerosol propellants.
31:56
So renewable DMEs is an excellent replacement for hydrofluorocarbons.
32:00
So it's an environmentally friendly substitute for that.
32:04
And that gives an opportunity.
32:06
And specialty markets for sunscreen disinfectants,
32:09
hairspray, all of these products that are used globally.
32:13
And what scale are you at the moment.
32:16
Yeah.
32:16
So we currently have one production facility in Southern California.
32:20
There.
32:20
We are producing renewable DME initially fuel-grade renewable DMEs.
32:25
So that's being sold today as a blend with propane,
32:28
LPG, powering forklifts and on-road vehicles.
32:32
We're now in the process of scaling up that facility.
32:36
Also being able to make a higher purity
32:39
form a renewable DMV for the aerosol market.
32:42
So we are taking our facility to nameplate capacity.
32:45
So increasing production there, but also looking at opportunities
32:49
for additional production sites in the US as well as elsewhere in the world.
32:54
So you bridge the gap between where you have a green premium,
32:58
which I guess relies either on goodwill of companies to say, yes,
33:01
we like what you're doing, we support it, we will pay you a premium for it.
33:05
And/or there's some kind of regulatory incentives, as you mentioned,
33:10
that do exist until such a time as these are cost competitive and you're outselling
33:15
just the other alternatives, the more traditional alternatives.
33:19
Yes. So and the fuel sector, we, you know,
33:22
relied on incentives to help deal with the green premium.
33:25
What's interesting with, as we look in expanding into new markets like aerosol
33:30
propellants, the hydrofluorocarbons we are replacing are quite expensive.
33:34
So we can offer a renewable
33:37
molecule that is better for the environment,
33:40
not just from the feedstock perspective, but also the global warming potential.
33:44
As the world looks to cap and reduce the consumption of fluorocarbons.
33:49
And it's actually cost competitive with hydrofluorocarbons.
33:53
And now not only are you getting something with less global
33:56
warming potential, but you're also getting something from a renewable feedstock.
34:00
So what needs to happen in your sector?
34:02
And maybe also just more widely, you know, lots of other companies
34:08
that you've maybe met at the World
34:09
Economic Forum, the First Movers Coalition, were involved in
34:13
sustainable products that were very difficult to decarbonize.
34:17
What are the key things that need to happen to allow that to scale?
34:21
Yes, there's a few key things that have to happen to allow that to scale.
34:25
I'm trained as a scientist, so you start off
34:28
thinking the best science, the best technology always wins.
34:31
And we know that's not the case.
34:33
That is just one piece of the puzzle.
34:35
In the world of chemistry, you can have all the right ingredients,
34:38
but if you don't have the right reaction conditions,
34:41
you're never going to get the product you want.
34:43
And it's really the same way in commercialising and growing these markets.
34:47
You can have the right technology, the science can work,
34:50
but you also need the entire supply chain to line up.
34:52
You need the regulations in place.
34:54
You need all the right people at the table.
34:56
And that's where I think the First Movers Coalition is absolutely key,
35:00
because they create those reaction conditions.
35:02
They bring in government, they bring customers, the buyers,
35:07
the producers, they bring everyone together to be able
35:11
to have those conversations
35:13
and to be able to move forward and help to grow these new sectors.
35:17
I think First Movers Coalition, it's often about
35:20
kind of longer-term agreements from companies.
35:24
So yes, we will support this, will agree to buy this from
35:27
you is creating a market that might not otherwise be there.
35:30
Is that your experience?
35:32
That's my experience.
35:33
And it's been interesting over the 15 years I've been with the team
35:36
at Oberon, moving this technology to commercialization, expanding markets.
35:41
We've had partnerships with Volvo trucks, Mack Trucks, Ford
35:45
Suburban Propane, now working with Aeropress, the largest manufacturing
35:49
distributor of aerosol propellants in the U.S., as well as L'Oreal
35:53
and what's interesting in working with these large corporations
35:57
is making sure you have the right decision-makers at the table.
36:01
The people who can champion it and also bring in the procurement team,
36:07
bring in safety, bring in the R&D team, bring in all the key stakeholders
36:12
to move this forward because it's not the same as what they've already done, right.
36:17
So I'll give you an example.
36:18
We were working with one company and they used the fossil version of DME.
36:23
And we have the renewable version.
36:26
However, the protocol they used
36:28
even on testing couldn't exactly be translated to the renewable version.
36:33
And so they needed to figure out how do we do this.
36:36
Normally that someone has a supply was like, well, we don't have your
36:40
aerosol-grade renewable DME yet, but we will in X amount of time.
36:44
Now it's about 60 days for now.
36:46
So how do they test it.
36:47
And so these are the conversations you have to have.
36:49
Because what exists
36:51
in the corporate infrastructure doesn't necessarily work for something new.
36:55
Right. So something innovative.
36:56
So you need those key champions
36:58
who can bring all the stakeholders to the table in the corporate.
37:01
Yeah. And you're disrupting aren't you.
37:03
If people have been doing something one way for decades.
37:08
So I'm moving a oil tanker around isn't it.
37:10
I would imagine I've not done it, but to go into a boardroom and say, okay,
37:13
we can now provide this, but it means you got to change 1 or 2 things.
37:18
Does that is that a frustrating thing?
37:20
Is it a fun challenge? To be honest with me.
37:23
It is a fun challenge.
37:25
Yeah.
37:25
Times it can be frustrating,
37:26
but it's amazing when you see the the ship start to turn
37:30
and you see the power of the corporation that has all of these people behind it,
37:35
and how once you turn the ship, it can move quite quickly.
37:38
And it's beautiful to see an example of L'Oreal.
37:41
So they created the L'Accelerator.
37:44
I mean, we were fortunate to be one of 13 companies
37:46
that selected out of 1000 globally to be part of their first cohort,
37:50
and it's led by their Chief Corporate Responsibility Officer.
37:55
And she,
37:56
through this programme, created it and able to bring all the stakeholders
38:00
to the table.
38:00
So as we look to test our new renewable ingredient for their applications,
38:06
bringing procurement to the table, safety, R&D, all the right teams to the table.
38:12
But it takes that champion and that structure inside the corporate
38:16
to be able to do that, and is a great example of a way to navigate that.
38:21
Do you notice a difference in kind of political climate
38:25
because you mentioned a corporate sustainability officer?
38:28
Sometimes these things are
38:29
all the rage and sometimes they're a little bit out of fashion.
38:33
Does that make a difference in the kind of what you do?
38:36
And I'll ask a second question.
38:38
Then obviously it all comes down to the bottom line.
38:41
Eventually, if a product isn't going to increase
38:44
a company's bottom line, or at least it's going to make the bottom-line worse.
38:48
Oh, we could take this one because it's corporately sustainable and responsible,
38:52
but we're going to make less money in the long run.
38:55
People aren't going to do that.
38:56
There has been, I think certainly in the West,
38:59
a shift away from corporate social responsibility.
39:02
Do you notice that or is that just noise that the rest of us are hearing?
39:06
And you do see that in?
39:08
There's a shift in the conversation.
39:10
It used to be, how does your product help us on the carbon front?
39:14
Now the conversation in the breath right after that is what is it cost?
39:19
When can I get it and how does it scale?
39:21
And I think that's
39:22
also it's a political environment, but it's also the maturing of the sector.
39:26
Right.
39:27
Because the you want the sustainable solution to be
39:30
the right business solution.
39:32
And that's what happens as the market grows.
39:34
That is the goal to get to.
39:36
So you see a shift.
39:38
But I think it's an important shift.
39:39
And it's going to help the market continue to grow
39:42
by making this sustainable choice the right business choice.
39:45
That was Rebecca Boudreaux,
39:46
President Chief Executive Officer of Oberon Fuels. Noam,
39:50
She used the same expression
39:52
you did earlier, this idea of a bridge, the green premium, i.e.
39:56
the extra cost or the extra price you're paying for something that is greener,
40:04
she called it a bridge.
40:05
It's a bridge for now.
40:06
It's to get us where we need to be.
40:08
By which time these technologies, such as the one her company makes,
40:12
will be cost competitive.
40:13
It's really.
40:14
It was a running theme on your FMC Day, wasn't it?
40:16
It is. Absolutely.
40:17
And you know FMC Day and the the previous five years.
40:22
But it's interesting to notice how the debate over the green premium has evolved.
40:27
When I joined those conversations and I, you know, embarked
40:31
during the journey of FMC, a lot of the conversation you used to have
40:35
at some point would hit the roadblock of, yes, but there is a green premium.
40:40
So, you know, there is, willingness, there are partnerships.
40:44
There's a lot of, political will within the companies with, policymakers.
40:51
But you hit the roadblock, there's a green premium, and who pays for it?
40:54
And actually, what we've seen lately, in particular, earlier this year,
40:58
we had a metals round table with the First Movers Coalition.
41:01
We also had an aviation day.
41:03
So in a way, kind of more focused types of conversations around
41:06
what some of the seven sectors that we're covering
41:09
and informed by the global geopolitical context,
41:13
that evolution of the notion of green premium itself,
41:17
some call
41:17
it to what they call this a security premium.
41:21
And the premise here is the fact that what you're paying for actually
41:24
is no, not no longer just necessarily the carbon benefits
41:29
of the alternative product, but actually it provides you
41:33
with a series of benefits that you wouldn't otherwise get.
41:37
For example, diversification of your sources,
41:41
where the Strait of Hormuz
41:43
is being blocked and 20% of the global
41:47
oil and gas flows are kind of hindered.
41:52
Where do you get your supply security of supply is a big piece of the equation.
41:56
So there's all of these pieces whereby if you look at
42:01
the additional price that you still have to pay in order to get to different
42:05
kinds of technologies, you get also a number of added benefits
42:09
that go above and beyond, just quote-unquote, the carbon benefits per se.
42:15
And that actually is opening up a whole new field, a whole new avenue,
42:18
a whole new way of thinking about why would you make those investments? Yes.
42:22
Today they are still to a certain extent, more expensive.
42:27
And it's all about deployment.
42:28
It's all about scale.
42:30
But the reasons as to why you would make those investments
42:33
to convince your boardroom, ultimately, your CFO and or CEO
42:37
go beyond the only potential carbon benefits that you may get.
42:41
That's that's significant.
42:42
Shift has been happening.
42:44
We've witnessed it.
42:45
And it's it's really quite striking.
42:47
Well, let's talk about investments then.
42:49
This is the third and final interview that I did at the FMC Day.
42:53
It's not someone who's making new technology.
42:56
It's someone who's going around the world looking for those new technologies
43:00
to put his money in.
43:01
This is a phenomenal interview.
43:04
With Rajesh Swaminathan of Khosla Ventures.
43:09
I space in Silicon Valley, as you'll hear in this.
43:12
And as I put it to him, is anyone in Silicon
43:15
Valley really interested in green technology?
43:18
Surely all the money is going into artificial intelligence right now.
43:22
For the last three years,
43:23
he has some very interesting things to sell because indeed his company,
43:27
he says, was one of the earliest investors in OpenAI, for example.
43:31
So they're not messing around.
43:33
They're not doing this for fun.
43:34
This is really nuts and bolts.
43:37
Investment return on investment.
43:40
Let's hear from Rajesh Swaminathan.
43:45
This is Rajesh
43:46
Swaminathan, partner at Khosla Ventures.
43:49
Been driving many of our climate investments
43:51
over the last six and a half years. What is Khosla Ventures?
43:54
Khosla Ventures is a Silicon Valley venture capital firm,
43:57
been around for about 20 years, been investing in
44:01
CleanTech 1.0, climate 2.0, everything in between.
44:04
It's a genderless firm.
44:05
We invest in other areas as well,
44:06
but climate continues to be a big area of focus for us.
44:09
So in Silicon Valley, investing in exciting things, I'm thinking
44:15
computer technology, artificial intelligence, self-driving cars.
44:19
Why would you be interested in climate change?
44:23
We invest in those things as well, and I'll give you a good example.
44:27
But we started investing in clean tech 1.0 20 years ago, right?
44:31
Because it was so important, it was very important.
44:33
Not to make those investments.
44:36
It was absolutely needed 20 years ago.
44:37
It's even more needed today.
44:39
We've been investing in fusion cement, steel, geothermal, all of those things
44:44
that are high impact and changes the world in a big way if done right.
44:47
And we are a generalist firm.
44:50
We invested in Commonwealth Fusion in 2018
44:53
around the same month we invested in OpenAI.
44:56
We were the first institutional investor in Open AI.
44:58
So I like to say we think both are trillion dollar companies.
45:02
Just the timing might be a little bit apart in terms of when they get there.
45:06
Both are high impact and that's why we invest in climate.
45:09
So OpenAI was the other one.
45:11
Commonwealth Fusion Systems.
45:12
It's a nuclear fusion company.
45:14
They're the leading technology provider for nuclear fusion.
45:18
Well, on their way to get to Q greater than one, which proves
45:22
nuclear fusion is feasible, economical.
45:25
It's funny, nuclear fusion is one of those what's probably
45:28
classic Silicon Valley style stuff because it sounds amazing.
45:32
It sounds science fiction.
45:33
Is it yet proven you're going to tell me that?
45:36
Yes it is.
45:36
Is it in the last 20 years you've seen it, but that's the kind of things
45:40
you might be thinking of investing in.
45:42
This is an amazing idea.
45:43
If we could make it work.
45:45
Started on 2018, but the reality is
45:48
people have been working on nuclear fusion for the last 30, 40 years.
45:52
The key unlock that happened once CFS started
45:55
working on is, was their focus on a high-power magnet.
46:00
And once you get a much higher power magnet, you can actually reduce the system
46:03
nuclear fusion much smaller.
46:05
And that makes it economical.
46:06
So the big difference between nuclear fusion 30, 40 years ago versus
46:11
now is the entrepreneurial Silicon Valley mentality to commercialise a product.
46:16
We're still sitting in the labs and just selling the science piece
46:19
without thinking about the engineering piece.
46:21
And that's what has happened in the last eight, ten years in a very big way.
46:26
Are there any other technologies that really, really grabbed you?
46:29
Kind of emotional result one this is just amazing.
46:32
Got to be part of this.
46:33
Geothermal is another one.
46:35
It's just amazing because if you look at it, nuclear fusion
46:38
and geothermal are the only 24-7 base load power capable systems.
46:44
Solar batteries are
46:45
great, but you're never going to be 24-7 base load power consistently.
46:49
So that's why these are the two things that attracted the most attention for us.
46:52
So we invested in CFS long ago.
46:54
We've also been big investors in super hot rock, geothermal.
46:57
We do think geothermal, super hot geothermal will be commercial
47:02
earlier than nuclear fusion, but both have a role to play in
47:05
making sure you can get to less than five cents a kilowatt hour 24-7 base load power
47:10
perfectly timed for all the things that we need for AI and data centres.
47:14
Silicon Valley investors are probably used to.
47:17
And you'll correct me, I'm sure putting money into great sounding
47:21
new tech, knowing it's not going to have a return on investment straight away.
47:26
At some point you want your money back with interest.
47:29
How do you decide that?
47:30
Because a lot of things we talking about here, the First Movers Coalition
47:34
things you can see it would be a good idea
47:36
to make aviation fuel out of recycled carbon,
47:42
but it's a cost 2 or 3 times as much as the aviation fuel right now.
47:48
How do you get your head around that and decide,
47:50
oh, I'm ready to put my money, my company's money into this?
47:54
Yeah.
47:54
You put a couple.
47:55
Of filters like the first filter.
47:57
This is this
47:58
going to be the highest impact technology that'll change the world.
48:01
And we said there are only dozen
48:03
technologies, a dozen entrepreneurs that we will care about.
48:06
We won't care about all the 50 other ideas that come up in climate
48:09
that doesn't ideas.
48:10
Few of them are, in fact very relevant to what FMC is doing.
48:14
Right?
48:14
But if I look at baseload power, it's geothermal and fusion and everything.
48:18
A lot of things that FMC's doing cement, steel, green hydrogen,
48:22
carbon capture, SAF, shipping
48:25
fuel, all of them are kind of big impact.
48:28
Some of them are 4 to 6% of emissions.
48:31
So once you set your true north on the biggest impact technologies,
48:35
then you go one level deeper and say, what's the best
48:38
technology I can invest in do within that sector?
48:41
But the measure of technology is not just phenomenal science,
48:45
phenomenal engineering, highly disruptive IP and all that stuff.
48:48
The biggest focus we have is what we call the Chindia price,
48:52
which is a nice way to express cost.
48:54
Entitlement is what we care about.
48:56
At the end of the day, most of it is commodity.
48:58
Nobody is going to pay a huge premium just because it's green,
49:02
and because we have been doing this for 20 years in the last five, eight,
49:06
5 to 6 years.
49:07
During the hype of climate 2.0, none of our investment memos captured
49:12
anything about IRA, green premium tax credits, all of that,
49:18
and intentionally so what we spent a lot of time on was on technoeconomics.
49:23
What does it cost from a capex and opex perspective?
49:27
How do I actually get this to be cheaper than commodity fossil fuels?
49:32
And that sort of kind of true, not in terms
49:34
of how we were measuring where we need to invest in
49:36
lots of examples, the way we have done steel investments,
49:40
cement investments with all heavily based
49:42
on looking at an architecture that will actually give you a lower cost
49:46
than actually how fossil fuels are done today.
49:50
That's so interesting because I think seeing from outside
49:53
has green technologies be seen as it's a way of achieving
49:58
environmental sustainability, decarbonisation.
50:01
What you're saying is, yeah, it is open to that,
50:03
but you're going to do it cheaper than if the current status quo
50:07
to get your head around it being cheaper, if not today, then in five years.
50:12
You give us an example of that. Yeah.
50:14
So when we started looking at steel, we said that going back to the filter,
50:17
this is too, too important not to invest.
50:19
So we then we looked at all the innovative ideas that were coming up
50:23
in the steel industry.
50:24
There were very interesting ideas using molten electrolysis
50:27
that are interesting ideas and using electrochemistry to disrupt steel.
50:31
There were ideas on doing hydrogen with solid state DRI, all of that stuff.
50:35
But the biggest issue phenomenal entrepreneur,
50:37
great ideas, you know, very passionate about solving the problem.
50:40
But this was like
50:42
shooting a house fly with a cannon, right?
50:45
It was too expensive to go after a commodity industry problem.
50:49
So we ended up not investing in many of those approaches
50:51
for those precise reasons.
50:53
Then we saw a company called Hertha, which is actually here.
50:56
Part of the WEF and Laureen, the CEO is here,
50:59
they were actually having a capex architecture
51:04
that's lower equipment, less number of equipment
51:07
than today's coke plants using blast furnace and basic oxygen furnace.
51:11
So we really liked the architecture
51:13
because that had the potential to be both low capex and low opex.
51:16
And they had a single step process to make steel
51:19
that was disruptive, because suddenly you can take that approach to fine
51:23
tune your product, either from high purity iron for making critical materials
51:27
like magnets or commodity steel or electrical steel for transformers.
51:32
So that was very interesting for us to invest into being big fans.
51:35
The other key aspect is we look for
51:38
how do you direct the most critical part of your technology with minimal dollars.
51:42
So with just $15 million,
51:44
they were able to get to one tonne per day, 300 tonnes per year, kind of a plant.
51:48
Whereas most other approaches, because of this cost issue,
51:51
have raised $200, 300 million and nowhere close to one tonne per day.
51:55
That's the mentality, and that's the output you get
51:57
if you focus on cost as a single kind of biggest metric that you want to get to,
52:01
and that's on the steel side of things.
52:04
If I take the example on hydrogen, it's it went through
52:06
a hype cycle, went down for a bunch of reasons.
52:10
The reason being most people came out of the electrolyzer world.
52:14
They were a seven, eight, $9 per kilogramme.
52:17
And even with the IRA, the Biden administration's was providing
52:21
$3 per kilogramme.
52:22
They still wouldn't get to be a cost competitive solution.
52:25
When we looked at all of those approaches,
52:26
we talked to all the PEM companies, alkaline electrolyzer companies.
52:30
Instead, we bet on a company called Verdagy
52:32
because they didn't start as an electrolyzer company.
52:34
They were focused on a chloralkali solution that was going
52:37
after ethylene dichloride to manufacture PVC.
52:41
And guess what?
52:42
If you're going after a commodity chemical like EDC, you have figured out
52:45
a system that's even much lower cost than what hydrogen needs to be.
52:49
They had a large area, high current density, all kinds of very interesting
52:52
technology innovation
52:53
at the system level that convinced us this is the right architecture.
52:57
You need to pick to go after $3 per kilogramme and five years later
53:02
today they are actually at $3 per kilogramme without any kind of IRA
53:05
green premium needed.
53:07
And they built a Gigafactory
53:08
that gets them to $2 per kilogramme in the next two, two and a half years.
53:11
What were they making? You said, what was the chemical?
53:13
They were making ethylene dichloride for making PVC pipes, and therefore
53:19
they had to come up with a system architecture that's really, really cheap.
53:23
And now we were able to repurpose it for hydrogen.
53:25
Now they built a gigafactory
53:27
with, you know, the COO comes from VP of manufacturing at Tesla.
53:31
So really engineering mentality in terms of scale up and everything else,
53:34
there is a strong demand for countries like India to go after hydrogen
53:39
simply because natural gas is very expensive there.
53:41
Unlike U.S., they're not able to produce natural gas internally.
53:45
So the grey hydrogen that they get is very expensive.
53:48
So if we can get to green hydrogen, that isn't the $3 $2 per kilogramme.
53:52
That's a phenomenal market for countries like India.
53:54
So these guys are capitalising on that.
53:56
And they're cheaper than Chinese electrolyzers, which doesn't happen often.
54:00
So that's where I mean by even when we do the seed investment,
54:03
we spend a lot of time on the techno-economics.
54:05
If you don't get that right, nothing else matters.
54:08
If we go with what you're saying here, all these problems will fix themselves.
54:12
By pure capitalism.
54:14
You've got smart investors with enough money to take the risk
54:17
in projects that they've worked out, are going to work out at some point.
54:21
So what are the barriers, then, that need to be overcome
54:25
to scale up some of these brilliant technologies?
54:29
I think regulatory makes a difference in terms of
54:31
but you can't build a company assuming the regulatory support will be there.
54:35
You have to build a company assuming you can get to the cost points
54:37
and take the regulatory support as a nice to have.
54:41
As an icing on the cake, the green hydrogen companies example,
54:44
if you're getting to $3 per kilogramme, it's a cost basis.
54:46
If you get a $3 per kilogramme subsidy, then you have a phenomenal margin
54:50
on the company.
54:50
So it's good to hope for some of those regulatory support
54:54
to pull it through the market.
54:56
But you don't want to build a company
54:57
based on that other one is certainly around the off-take agreements,
55:01
which is where I think FMC could make a big difference
55:04
in terms of driving a precise a good market signal
55:07
that if you meet the cost objectives, do you want to adopt this solution?
55:11
So I look at climate as really a not a David versus Goliath story.
55:15
It's a David and Goliath story.
55:16
Some of the large companies need to partner with the startups
55:20
because that's their paths to having a very competitive solution,
55:23
particularly, you know,
55:25
when a lot of these geopolitical stuff is happening in the world,
55:28
it's very important for the Western world to build a competitive advantage.
55:31
Otherwise we will lose every industry like what we have lost in the past.
55:35
I'll give you just my own example. I was in Bell Labs.
55:37
I've been in semiconductor industry. I've been in solar and batteries.
55:39
I've been in four industries where the innovation
55:41
actually happened in the Western world,
55:43
and the actual manufacturing and scale-up is happening in China.
55:46
We cannot afford to lose that both from a geopolitical perspective as well
55:51
as, you know, building competency in these countries to actually have
55:56
manufacturing jobs like real wealth creation, all of that stuff.
55:59
So we need to be supporting the cement, the steel, the, you know, geothermal,
56:03
the fusion, all these industries.
56:05
This is really a source of, you know, wealth for,
56:07
for these Western countries not to lose out on.
56:10
Yeah.
56:10
I mean, we were speaking to
56:12
Jennifer Holmgren of LanzaTech and that's a company that you invest in.
56:17
And most of that
56:18
work so far is in a steelworks in China.
56:22
I mean, it's a US company.
56:23
Yeah, it is a US company.
56:25
But when everything fell between the climate cleantech 1.0
56:28
and climate 2.0, this was a very creative way
56:31
of developing the technology and commercialising the whole piece of it
56:36
in China by partnering with the steel companies there. Now,
56:40
LanzaTech has an ownership in the China industry, but what it has also helped
56:44
is show the world that ethanol that you produce using Lanza
56:47
technology can be highly, highly profitable.
56:49
Now, as a next step, the company is really about taking that ethanol
56:53
to make SAF, which is what they built in the Georgia
56:56
Atlanta facility through LanzaJet, which LanzaTech owns, 47% of it.
57:01
So it helped us commercialise that piece of manufacturing as well.
57:06
Now the world knows that you can actually produce SAF,
57:08
and this is the most scalable approach to producing SAF.
57:12
Because we did that partnership with the steel industry.
57:15
We started China.
57:16
But LanzaTech has built that in Europe as well with ArcelorMittal.
57:19
And, you know, you would have heard that from Jennifer as well.
57:21
Why did you start?
57:23
Of course, she mentioned sustainable aviation fuel.
57:26
So what is it then?
57:27
What does Europe need to do?
57:30
Or indeed the United States to encourage
57:33
the growth of these kinds of industries here?
57:36
I think the policy signals are very important to continue to say
57:39
this is critical, whether it is for geopolitical, energy security, even in US.
57:45
If you look at it, I can call it geothermal
57:47
or I can call it as 24-7 baseload power for AI data centres,
57:52
or I can call it as drill baby, drill, right.
57:54
It doesn't matter what you call it.
57:56
At the end of the day,
57:57
this is really leveraging the oil and gas capability with the geothermal capability
58:01
that is exists to provide clean power for AI and data centre world
58:06
to really give the power security that's needed.
58:09
Because as you think about AI,
58:12
the country that has the best language model may not be the winner.
58:16
The winner will be somebody who has right access to compute and energy.
58:21
And that's going to be very, very critical to be successful.
58:24
And there are not too many solutions out there.
58:26
So we need to be supporting these companies to make them successful.
58:29
Okay, imagine I'm a Silicon Valley billionaire,
58:33
but I've
58:33
yet to invest in any sustainable technology.
58:37
What what's your tip?
58:38
Where should I put my hundreds of millions of dollars?
58:41
All my millions of dollars? Whatever.
58:44
I think critical minerals is a big one.
58:47
Right.
58:47
So we've been
58:47
investing in a few things in the area, and we'll continue to invest more.
58:51
But there is an interesting intersection of AI
58:55
where you can actually discover these minerals much faster
58:58
as a greenfield opportunity or a brownfield opportunity,
59:01
or actually use AI to actually deploy that within mining
59:06
to make digging out the minerals much faster, much cheaper.
59:10
That's a big opportunity.
59:11
And we are very bullish on that sector.
59:13
Rajesh Swaminathan of Kostla Ventures that investing in fusion
59:17
cement, steel, geothermal, he's doing it because he sees long term
59:24
that they're early investors in some of these things.
59:26
They're going to make their money back.
59:27
Absolutely.
59:28
And so, you know, talk to Rajesh about green premium.
59:31
And I can tell you that he's going to tell you we don't want any green premium.
59:35
We actually want significant returns on investment.
59:38
We don't want subsidies.
59:39
We've heard him loud and clear.
59:41
He's not looking into a world whereby those technologies are funded by
59:45
by subsidies.
59:48
We want those technologies to be succeeding
59:51
on their own by their own merit.
59:52
And that's what they're looking at.
59:54
We come to an end of time here.
59:56
Noam, what's the next milestone for FMC?
59:59
We'll be in New York, for New York Climate Week and we'll have actually
1:00:04
a session discussing specifically, you guessed it, the Green Premium.
1:00:08
And we've called it Beyond the Green Premium at our own
1:00:11
World Economic Forum, Sustainable Development Impact Meetings.
1:00:14
So stay tuned for more. Great.
1:00:16
The Sustainable Development Impact Measures.
1:00:17
There'll be lots of on that across the World Economic Forum's website.
1:00:23
And you find more on the First Movers Coalition on our website.
1:00:26
I'll put links in the show notes.
1:00:27
Noam, thanks very much for joining us on Radio Davos.
1:00:29
Thank you so much.
1:00:31
Radio Davos is one of the three weekly podcast from the World Economic Forum.
1:00:34
Find them all at wef.ch/podcasts.
1:00:37
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also on the YouTube channel @wef/podcasts.
1:00:44
This episode was written,
1:00:45
hosted and edited by me, Robin Pomeroy with studio production by Taz Kelleher.
1:00:49
Radio Davos will be back next week, but for now, thanks to you for listening
1:00:53
and goodbye.