Catalyst with Shayle Kann - Shayle’s “ask me anything” episode

Episode Date: May 12, 2022

We’re reversing roles today by taking listener questions for our host, Shayle Kann. He’s usually the one interviewing our guests, but he also has expertise (and maybe a few hot takes) to share. He leads a $350 million fund that invests in early-stage climate startups, so he spends most of his time trying to figure out which technologies and businesses will help us decarbonize as quickly as possible. GreenBiz senior energy analyst Sarah Golden joins the show to ask Shayle your questions and dissect the answers with him.  They cover: The causes of rising solar costs and other troubles in the solar industry  The biggest bottlenecks in climate tech The the startups that are trying to reduce the carbon intensity of fertilizing crops amid a global fertilizer crisis The overhyped hate for crypto mining  The race between synthetic fuels (aka synfuels) and biofuels What happens to the pace of deployment for Direct Air Capture if power grids are slower to decarbonize than expected? Plus: Shayle’s owl tattoo and the drinking game Shayle’s wife made up for whenever he begins listing things.  Catalyst is brought to you by Arcadia. Arcadia allows innovators, businesses and communities to break the fossil fuel monopoly through its technology platform, Arc. Join Arcadia’s mission and find out how you or your business can help turn a fully decarbonized grid into a reality at arcadia.com/catalyst. Catalyst is supported by Advanced Energy Economy. AEE is on the front lines of transforming policy that accelerates the move to 100 percent clean energy and electrified transportation in America. To learn how your business can play a key role in transforming policy and expanding markets, visit aee.net/join.

from the studios of PostScript Media and Canary Media. I'm Shail Khan, and this is Catalyst. This week, we dig into the mailbag, and I pretend to be an expert even more than usual. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices

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I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. I'm Shell Khan.

I'm a partner at the Venture Capital Firm Energy Impact Partners. Welcome. So this episode is a little bit different. As any regular listener will know, we have spent the past few weeks shamelessly asking for questions from all of you, the listeners, so that we could aggregate them and do a sort of mailbag episode where we take as many of your questions as possible, and I use it as an opportunity to rant about things that I think are interesting. So originally, I was just going to do this solo and talk at you. for 45 minutes or something like that.

But along came my friend Sarah Golden, who is sitting here with me. Sarah is a senior energy analyst at GreenBiz and also just a good friend of mine. And Sarah, I'm just going to read you the text, Sarah, that you sent me last week. It said, hi, I have a great idea for us. I like how this is an idea for us. Let me co-host your Catalyst Mailback episode and volley you questions. Here's my thinking, and then you put together a list of three reasons. You know I love a list.

Number one, I'm an excellent proxy for the audience. Number two, our rapport is renowned. We'll come back to that one. And number three, it'll be super fun. So you've promised a renowned rapport and a lot of fun. Do you feel like that you've set yourself up for something you can achieve here? Well, I figured that I have been inviting you to attend my events for a long time and, you know, been asking you to speak on different things that I do. And it was about time for me to invite myself to something you do.

So here we are. Yeah, that's great. You just keep doing all the invitations. You can invite me to things. You can invite you to things. That makes actually my life a lot easier. Well, thanks for coming on. I'm excited to have you here, and it feels much less awkward for me for you to ask questions rather than me to ask and answer them. Yeah, it's a pleasure to be here. And it's also, it's a role that I feel very comfortable in because I feel like I'm often asking you different questions about energy. And here I am being able to ask other people's questions about energy to you. That's actually, that's a good point. We have, you and I have an ongoing text thread wherein periodically you'll ask me, and sometimes I'll ask you some energy or climate-related thing, that is, the signal is an owl signal instead of a bad signal. And I actually don't remember where the owl came from, do you? I believe it's from your owl tattoo and your owl drawings around your house.

I do have an owl tattoo. Presumably that's it. But I don't remember how we translated the fact that I have an owl tattoo. tattoo into a text thread about climate stuff. But maybe that's a topic for another time. So let's do a version of that only instead of texting each other with reference to the tattoo that I have on my shoulder. Let's take some questions from the audience. So I'm going to hand it over to you from here. You've gotten a list. We got a ton of really great questions. You've aggregated them and put them in an order that you like. So take it away. Let's see how we do.

Yeah, and while I ask you a ton of energy-related questions, it was a lot of fun to go through these because there are some very smart people that were sending in questions, and I love the direction these are going. So we're going to start out with, I think, just some high-level climate tech questions that I think are very much within your safe zone. And so we're going to start with Matt Waller, handle at Watmaller 1. Any updates on whether solar costs will keep seeing big declines and where the biggest costs are, whether they're soft costs. and also whether it matters, i.e. is storage the only piece left for a complete and swift renewable takeover? Oh man, that's a big question. I actually think we're in an interesting moment now where there has been, for good reason, a presumption for the past number of years that solar costs are on this steady downward trajectory. And though I think it has generally

been true historically, it's definitely not true today. Solar costs actually have been increasing for a number of reasons, right? So we've seen the supply chain bottleneck that has plagued many industries, has done the same thing in solar, and so things like steel prices and aluminum prices, which go into solar projects, have gone up.

All the input costs, like everything that's causing inflation everywhere has affected solar. So prices were already going up and had basically stopped their decline. And then, in addition to that, now particularly in the U.S., we have the kind of specter

of this new trade dispute, which is already wreaking havoc in the solar industry, delaying projects, potentially raising their prices, and creating a ton of uncertainty. So I think we're actually like, though the long-term trajectory for solar, is probably still going to be cost declines, it's possible for the next couple of years at least,

we will see steady to increasing prices for solar projects or for electricity from solar, which is actually a little bit hard to reckon with and makes it challenging for all these other companies that are sort of bringing a business to market that is reliant on really cheap solar, it's not entirely clear that they're going to be able to see. Like, we, for example, at EIP,

we invest in a lot of things that are kind of the next wave of industrial electrification technology, and a lot of this stuff, you see their models that they build, and it's got in at some assumption around, well, we're sure we're going to be able to get one cent per kilowatt-hour electricity from solar. And, you know, that was always a heavy lift, I think particularly now even heavier.

So, yeah, I don't think there's any guarantee solar cost decline in the near term. In the longer term, I think they do continue to decline. There's no, none of this stuff is like, we're not hitting an asymptote quite yet on solar costs overall. And there's still room to run down. You know, in the U.S., soft costs remain the biggest area to run downward. If we can get some of the thornier problems around things like permitting and especially interconnection, solved. Interconnection cues are a problem for new solar development now. They are long. They're bottlenecked. So, I don't know. I think it's possible solar costs actually plateau for a while.

There's the second part of this question, which is whether it matters at this point, because we've seen such huge decreases in the cost of solar over the last 10 plus years. So at this point, what does it take for that swift renewable takeover? And is the falling cost of solar necessary? for that, or is it more important that these other components like storage fall in cost? I mean, I don't think it's very useful to, like, weigh the importance of one over the other, but I do think there's a degree to which it doesn't matter. Solar is cheap enough now that in most places, solar and wind, I should say, most places it is true today that if utility or somebody issues an open RFP and just says, I want the cheapest power I can get,

like, give me the cheapest kilowatt hours, the response are going to get that's cheapest is going to be from a solar or wind project. And that's still going to be true, even if solar costs don't decline a whole lot more. With that said, if you want to reach the full promise of renewables, which is going to be significant penetration on every grid in the world, 50% or more, on every grid in the world, plus using that electricity to decarbonize a bunch of other sectors via electrification, not to mention maybe using some of that electricity to do direct air capture and other things, then, yeah, I do think you need to see costs continue to decline. So I think, you know, will plateauing set aside the trade issue for a minute in solar,

if it's just we are where we were prior to this trade dispute and solar costs, we're kind of hitting a plateau or even increasing a little bit in the near term. I don't think that was going to have a big near-term trajectory or near-term impact on the sort of trajectory of climate change. But in the long term, if costs don't continue to decline, I think we will hit a plateau. So this next question, you hit on this a little bit a moment ago with interconnect cues. This question is from at F. Gonzalez-Rozas, and the question is, what are the most important bottlenecks to accelerate the energy transition that we are not paying enough attention to? Yeah, I think that a couple come to mind. Interconnection is definitely one of them in like a very immediate sense.

but land, I think, will become a big one. Kind of no matter how you slice it in terms of what the big swaths of greenhouse gas emissions mitigation solutions are going to be, they're going to be pretty land intensive. Solar and wind, obviously, are very land intensive. If you want to rely heavily on biomass for anything, be it, you know, aviation fuels or biomass energy or bex, which is biomass with carbon capture and sequestration, which plays a pretty prominent role in a lot of the the net zero scenario models that you see, all that stuff, land starts to become a bottleneck.

So I think that one doesn't get quite enough attention just yet. And then beyond that, I actually do, related to both land and interconnection, in the long term, my biggest fear is that we will hit an infrastructure bottleneck for decarbonization of a bunch of other sectors. So again, to the point of like, think of how much renewables we need to build today just to decarbonize the grid, and then add to that the fact that we need to electrify all light-duty passenger transportation,

and then add to that that we need to probably electrify a bunch of industrial sectors, maybe industrial heat, you know, some people want to electrify aviation and trucking, just add all that stuff up. And then the possibility that we're going to be doing electrochemical carbon removal, and just the magnitude of the amount of electrical infrastructure, generation, transmission, distribution that we need is kind of mind boggling. And that's going to become a bottleneck, no question. So I worry about that. You could say the same thing, by the way, if you think that biology is going to be the solution and not electrochemistry,

and we're going to use synthetic biology to produce fuels and some of these really big high-volume stuff, proteins, alternative proteins, we're already facing today a fairly substantial bioreactor capacity shortage in that market, which isn't going to get solved if we, you know, 1,000x the demand for bioreactors in the near term at scale. So I worry about some of the infrastructure ending up being the thing that stops us from moving faster. Do you think that in the last few years, well, let me tell you that I think in the last few years, we have been getting better about talking about some of these bottlenecks. I feel like, you know, 10 years to eight years ago, there was this contingent of clean energy folks that have been very raw, raw, forward with clean

energy. There aren't really any drawbacks. And in the last two years, as the market has matured a bit more, and we've seen some of these crunches, especially around supply chain and other disruptions, that it feels like we're having better conversations about this and that the industry doesn't necessarily see that as threatening. I mean, thinking about your episode last week about supply chains for minerals, for rare minerals, for batteries, it seems like we're having these conversations a little bit more. So are we getting better about talking about these bottlenecks, or are we just not fully recognized the ones that are coming down the pike? I feel like we wake up to the next big problem, like collectively a little bit later than we should. Why are we talking about that? Why is the

world talking about battery minerals right now because it is a current shortage. We are in a, you know, actual supply crunch right now. There were some people who are, and including Kurt from Kobold, who was on last week and a bunch of other people who are saying, this is going to become a bottleneck, you know, five or ten years ago. But the sort of public consciousness wakes up to it when it becomes an acute crisis. You can say the same thing right now for fertilizer, for example. And so I think we will, We collectively wake up to it a little bit too late, but there's always a small group of people who are sort of looking one step into the future and saying, well, if it is true that we are going to do X, then there are a bunch of knock-on effects of that, and we need to watch out for all those challenges that are going to arise. Okay, so you brought up fertilizer.

We got a few questions around the nexus of energy and food. So I'm going to jump to a question from at Kawasaki, Stephen, which is, given the war in Ukraine's impact on fertilizer food supply chain. Can you share more about innovation in the climate tech sustainable fertilizer space? Yeah, I mean, fertilizer is we're in a literal global crisis. It was even prior to Ukraine, we were in a pretty tough spot, right? The fertilizer prices are driven in large part by natural gas prices. And so natural gas prices, particularly in Europe, had already been up prior to Russia's invasion of Ukraine. You had already seen some of the biggest fertilizer manufacturers in the world, companies like CF industries,

shutting down Haberbosch plants, which is a big deal because there are only 300-some Haberbosch plants in the world. So all of the ammonia that we produce, basically today, comes from like 300-some facilities. So you shut a couple of them down. That immediately has fairly significant ramifications. So we were already seeing record high fertilizer prices. Then, of course, Russia invades Ukraine, and both Russia and Ukraine have a big role to play in the global fertilizer and sort of downstream of fertilizer market, as well. as obviously the impacts on natural gas from Russia directly. So it's become, this is another one where like we're in a really, really dangerous crisis right now.

And the global south is feeling it much more than we are, certainly, though we're seeing it in rising food prices already and will continue to. There has been a bunch of really cool innovation in reducing the need for nitrogen fertilizer or decarbonizing nitrogen fertilizer because, in addition to all the geopolitical impacts here, nitrogen fertilizers represents like six and a half percent of global greenhouse gas emissions, like one and a half percent from the production of it, and then another five percent or so from the application of it. So where we've seen innovation, at least that I think is interesting, on the fertilizer

production side, there's a couple of pathways. There's a few companies that are pursuing microbial approaches. Basically, you use a microbe to fix nitrogen to reduce the need for synthetic nitrogen. In other words, reduce the need for fertilizer that you can apply. Pivot Bio would be the biggest company in the space that's well known, but there's others like Kula Bio and Anuvia. And then there's some more novel approaches. One that we've invested in is nitricity, which is an alternative mechanism to produce nitrogen fertilizer using not natural gas, but just electricity, air, and water. It's a really, really cool technology.

And that has the promise both of delinking fertilizer production from natural gas, but also making it more distributed and localized so that we're not dealing with. these supply chain impacts when Russia invades Ukraine. There's no reason that that should inherently cause a food and fertilizer crisis here or in a bunch of other countries. In addition to that, so that's on the sort of fertilizer production side. There's also a lot in, you know, sort of regenerative agriculture generally, and some of that revolves around sort of ways that you can manage crops better such that you don't need to apply as much fertilize. anyway. So I think if you add all of that up, we've got some pathways to significantly reducing, oh, and I'm sorry, I missed one entire category, which is just green ammonia,

which doesn't inherently solve the sort of supply chain geopolitical stuff, but it basically means using green hydrogen to produce ammonia instead of natural gas derived or coal-derived, which is kind of what we do in China. So that's a climate benefit, but you know, you still have to figure out all the supply chain stuff. Anyway, so all of that is promising to me. The challenge is how fast can it ramp up? And, you know, it's one of these things that I think will help save the world in five or ten years, but probably isn't going to help solve the Ukraine crisis immediately.

So sticking in the world of crops for a moment, we have a question from at new underscore energy dude, which is, what are the likely implications of rising crops? commodity prices for biofuel productions and CCUS projects looking to sequester carbon dioxide from biofuel plants, CCUS being carbon capture utilization and storage. Oh, man, that's such a good question. And we've been spending a bunch of time looking at the world of biomass and it's kind of all the various pathways for it for decarbonization in the future. It's really complicated, right?

So you've got biomass is not monolithic. There's many different sources of biomass, and then there's many different uses for it. There's also biomass that is produced specifically for fuels. So this is the issue that we created with all of our ethanol subsidies. We grow a lot of corn, use it exclusively to produce ethanol. I think generally that is viewed as having been a bad idea from a climate perspective, at least. But then there's also a ton of waste biomass, be it from agriculture or forestry. and that stuff is going to decompose and go into the atmosphere and create CO2 emissions.

So there's a whole category of things you can do with waste biomass. Bex is one thing that I mentioned before that you can do with it. There's also other approaches like pyrolyzing it, turning it into biochar, which is a stable form of carbon. It can also be a soil amendment, so that can be permanent carbon removal. You can turn it into bio oil and inject it underground, which is what a company called Charm Industrial is doing. and you can do any of that with both the waste biomass and the purpose-built biomass. Some processes require different inputs. But broadly speaking, I think you have this problem of anything that uses biomass as it scales up at some point is going to compete with alternative uses for that biomass.

So if you're trying to source exclusively waste biomass, you need to be the best solution for whoever holds the keys to that waste biomass, be it a farmer or whoever's doing the forestry or whatever, such that they're going to sell to you or give to you their waste biomass because alternately they could do one of these other things with it, which means either you need to be the most lucrative solution for it or you need to have locked up the supply chain somehow. If you can't solve for one of those two things, then at some point as you scale, I think eventually you have to get into sort of purpose-built crop world. And that's where it's really thorny.

And you start to face all these questions around land use. And if you're really doing it at scale deforestation and all that kind of stuff. So it's really tricky. But at the same time, it's a huge part of the carbon cycle. And so you want to see innovation there. So what I will say, you know, been spending a bunch of time on it, would love anyone who has novel ideas around biomass or just like a really strong. view on how this is going to play out on both the supply and demand side of this universe would

love thoughts because I find it sort of overwhelmingly complicated. It's actually going to be a topic of a future episode, I think. What is a purpose-built crop world? I just mean where we purpose, where we grow, what we're doing right now with corn and ethanol, where we grow a crop that could other, it's land that could otherwise be used for another purpose, including producing food. And instead of doing that, because of the mechanism of the market or the subsidies provided, we turn it into fuel or something like fuel and don't necessarily reduce emissions in the process. Got it. Okay, so one more on biofuels. This is from at Tyler A. Cole, which is, after listening to the most recent episode on challenges of battery mineral supply chain, I'm even more bullish

on low-carbon liquid fuels. Do you have a thesis on the the role of advanced biofuels and synthetic fuels, which scales faster and lasts longer? Those are the right two questions, I think, at the end. So I think where there's clearly the best opportunity for liquid fuels in the long term, I think we don't end up using liquid fuels and light-duty passenger transportation, right? That all goes electric. I think there's sort of an open question around heavy-duty ground transportation, trucking, that could end up going, electric could end up being fuels where there's the

clearly the sort of best world is in long-haul aviation and shipping. Right. And there are some people will tell you that we're going to end up with hydrogen being the solution for both of those or a hydrogen carrier.

But I think that's where if you're looking for a big market potentially for either bio-waste fuels or synthetic fuels, which which typically we're talking about e-fuels, we mean, which is basically you take hydrogen and captured CO2 and you turn it into synthetic fuels.

It can be a drop-in. So the two questions were, which one scales faster and which one lasts longer, and I think the answer is different to those two. Bio-based fuels scale faster today, right? Because we know how to produce them at scale already. The inputs exist. There's a ton of manufacturing capacity ramping up right now,

and all the airlines, particularly, is actually happening more in aviation than in shipping at the moment. All the airlines are signing big agreements to start blending sustainable aviation fuels into their fuel mix, and it's almost exclusively bio-based fuels because that's what's available today.

However, in the long term, I think you face the problem that I was describing before, which is if you try to totally replace jet fuel, forget maritime for a minute, if you try to replace jet fuel entirely, with sustainable aviation fuels and they're all biobased,

then you just do the math on the amount of biomass that you're going to need to use and you're going to face some pretty big challenges. So in the long-term synthetic fuels look pretty interesting, it's more of a cost problem because as it stands today,

basically like both input costs, hydrogen and CO2, are too high, and then the process costs, turning those things into e-fuels are too high. So you've got to solve. all three of those things and scale up. But if you could do that, then in the long run, I think synthetic fuels may win out. You just mentioned sustainable aviation fuel SAFs, which is something I hear a ton about. At GreenBiz, we work with lots of different airlines and SAFs are a huge

part of their strategy for decarbonization. And I'm always curious about what the realistic potential of that is and what amount of aviation fuels could actually be displaced by SAFs. What's your view on that? It's one of these things where like it totally depends. I think it totally depends on your frame of reference. If you're asking relative to today, relative to how much sustainable aviation fuel do we produce today and what share of global jet fuel is comprised of sustainable aviation fuel,

it's orders of magnitude more. You know, there's huge room to run upward from where we are today. However, if you look at it from the other angle, which is we have 100% percent. of aviation fuel that needs to be solved for. What portion of 100% can we get to with sustainable aviation fuel? I don't have the number for you exactly because it's contingent on a bunch of these other sort of like upstream questions, I think.

But I don't think it's, I don't think it's 50% ultimately. So it's definitely not a solution that gets you all the way there. But it can be a solution that gets you from today where we're at effectively 0% to a decade from now where we are, I don't know, 10, 15%, something like that, which would be a ton, right? It's a huge, huge market. So one of the things that is clear is that there is, and I guess you're alluding to this, too, there is more demand than there is supply for sustainable aviation fuel at the moment. If we had 30 new SAF plants, they would be selling at full capacity.

So I do think that just in the interest of moving fast, it's worth pursuing. I just don't think it's going to be, I don't think we should. should do it at the expense of what might be longer-term solutions. Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched and being able to prove it, from the control room to the living room. Energy Hub's platform handles the full picture, from near real-time forecasting, locational dispatch, and the kind of rigorous verification that holds up when regulators, grid operators,

rid operators or leadership ask, did it deliver? Easy enrollment creates momentum, proven performance builds trust. That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at energy hub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factors, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets,

by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital on Spotify. Apple, or wherever you get your podcasts. Okay, next question from at Winston Reed. From an investment perspective, what are your thoughts on policy resilient climate tech

solutions, i.e. market driven, versus policy-dependent tech solutions in the current environment? Well, I don't know. I'm always thinking of it from an investor perspective. Obviously, all things equal, you want policy resilient solutions. like you don't want to be reliant on policy if you can avoid it. I think the interesting thing, there's sort of a couple categories that have emerged fairly recently that I think ultimately are policy dependent but may have a near-term world that

is policy resilient. So the obvious example of this is carbon removal where I think anybody who looks at this would admit that in the long term this market does not scale without substantial policy intervention. Like this has to become mandated in some fashion or another. Otherwise, there's no way we're going to get to gigatons of removal. But in the meantime, there's enough demand from the private sector that is policy resilient or not linked to policy that you can jumpstart the market.

So there's a lot of investment going into that. And I think the risk that those companies are taking is that the policy does eventually show up at large enough scale. Some people might tell you you don't need policy. I don't subscribe to that view. But generally speaking, I think things that are, you want things that have the ultimate pathway to become policy resilient, right? Like, someday this will just be better or someday this will just be cheaper. But you have to generally appreciate the new technologies take a while to get to that point.

So there is going to be a period during which you need to find somebody who's either willing to pay a premium or where policy can. and help support early deployment of these things. So I like things that are maybe near-term policy-dependent, long-term policy resilient. Yeah, one thing I've been watching that falls into that space, I think, is the government procurements. And last November, when the Biden administration signed a agreement with the European Union around using carbon as a metric for different procurements of different heavy materials, and right now there's a group at the DOE that's trying to figure what rules to fall.

follow. And it's one of those things that I think sort of flies below the radar in most policy circles yet seems really potentially influential of creating, jump-starting some green steel markets or green aluminum markets or other sectors that we really need to decarbonize. Have you been following that at all? And what do you think about procurements? Yeah, I think the government is a great government is a huge buyer of certain things, right? Like there's new mandates around government procurement of building materials, cement, that are. going to be a really big deal because the government buys a ton of that stuff, more than anybody else, in fact. So I think that is a big role the government can play as a first buyer, as a

relatively price-and-sensitive buyer. Obviously, the ability to use that procurement mechanism as a way to jump-start a market is sort of dependent on how the rules get structured around procurement and whether it, indeed, because it is sort of, generally speaking, notoriously difficult to sell to government, federal government in particular, and you can end up accidentally kind of entrenching incumbents even further because they're the ones who know how to navigate your complex procurement processes. So I think it's not a guarantee that just because the government says I'm going to buy more low-carbon cement that you're going to support all these novel technologies to produce low-carbon cement or whatever the alternative might be. But I think it's like a

valiant strategy for the government to take on. And it's a good role that the federal government can play just given that they they buy so much. Yeah, fair. Okay, next question from at O'Boyle MM. What are the unifying characteristics that put clean technologies on learning curves? What do wind, solar, electrolyzer, batteries have in common that other techs like nuclear and fossil plants don't? And which learning curves are heat pumps, SMRs being small modular reactors, and DAC, direct air capture, be on? Oh, that's a good question.

I'm probably not the world's greatest expert on this question, but I think the fundamental thing that drives these learning curves is sort of manufacturability. Like, can you scale up manufacturing of the thing by number, not just by scale? So in the context of solar and lithium ion batteries, right, we just start producing, and these are, they're modular. So your single solar unit is a module. They're literally modular in the case of solar, but the single solar. solar unit is a module and that is a manufacturing, it's a manufactured technology that you can

optimize your manufacturing around, that you can automate, that you can scale up and produce more and more and more of, and that's where you start to see the learning rates driving down cost, at least on the manufacturing side. And you can see that in a bunch of those other markets. It's same thing for lithium ion batteries, obviously benefiting from producing a ton of EV batteries now. I think that's where things like nuclear fission have struggled in the past. It's not really a manufactured technology. It's an engineered project. And it's tougher to get the kind of learning rates with stuff like that. So I think this is where, you know, things like direct air capture are promising because depending on the technology, you can easily imagine those being manufactured

at large scale. I think we will see absolutely are already seeing the same thing in electrolyzers today for green hydrogen production. I'm not, I don't know about SMRs, small modular reactors for nuclear. It's sort of seems to me to be a tweener where like it is more manufacturable than traditional really large scale fission reactors, but it's not quite to the level of, you know, produce a solar module over and over and over again. So I don't know on that one, to be honest. Yeah, yeah, me neither.

So the two categories that you just put to. were the engineering challenge versus the technical challenge? Were those the two buckets did you just add? It's like manufactured, scaled product versus engineered project. Does one ever become the other at a certain point of its life cycle? That's an interesting question. I don't know. I mean, I guess you could imagine you do enough of the projects and it becomes more, then you start to, I don't know, maybe the corollary here is some of the modular and prefab building stuff, which is like those were engineered projects building buildings. And now we're starting to do more and more of it by manufacturing big components of it and then shipping those out to the field.

And that's driving down costs. So I guess that's an example where something can turn from an engineered project to a manufactured product. Okay. Well, sticking with this direct air capture, we have a question from at ZD, which is a bright moon. What kind of variance in direct air capture outcomes do you expect to see either economic or impact if the transition to at least 80% renewable grid is slowed by five years or 10 years? Ooh, I love that question. So, okay, so just to repeat the question, basically, the question is if we take longer than we expect to decarbonize the grid, how big an impact will that have on the market for direct air capture? This is one of those interdependencies that I think is maybe not talked about quite enough.

In the case of direct air capture, I think the bigger risk is the cost of electricity than it is the carbon profile of electricity. I do think you'll get some, you know, you're always going to get some like life cycle complaints about what we're doing, we're using predominantly fossil-based electricity to remove CO2 from the atmosphere. air isn't that dumb. From what I've seen on LCA calculations, assuming energy efficiency of these direct air capture systems continue to improve, it still will be worth it just from a pure CO2 balance perspective. So I'm a little bit less concerned with, I'm very concerned about how quickly we decarbonize the grid, but I don't think that is necessarily going to be the driving determinant of direct air capture's success. However, Direct air capture is one of those things, as I described before, is, I mean, the main cost, right?

You have a CAPEX and you have the cost of electricity. That's basically it. The cost of electricity is dominant in these models, and every direct air capture company is trying to improve their energy efficiency over time and TBD, you know, how well they do that. But if, you know, the models are super sensitive to the cost of electricity. So if you have 10 cent per kilowatt-hour power, no direct-air capture system is going to be anywhere near. in the money, no matter what you define in the money as. If you have one cent per kilowatt hour power, then it looks really, really promising. So the cost of electricity to me is almost as much as the

direct air capture technology itself is going to be the thing that determines how quickly that can scale. Last week, your guest did not mince words of not thinking direct air capture was going to be a solution for climate change. What's your view on the potential of direct air capture? You know, I think I've read the IPCC reports like everybody else and recognize that there is no realistic pathway for us to get to 1.5 degrees Celsius of temperature rise or even really two degrees without substantial carbon removal. There's just no way we're going to do it. And substantial being gigatons. So, and, you know, within carbon removal, there are a bunch of different approaches, as we've talked about. But most of them are difficult to scale as well as you could scale a direct air capture system, just because you can literally put it anywhere. You're pulling ambient air and you are sequestering CO2, and then as long as you can store it somewhere permanent,

then it is permanent removals. So there is, you know, I think the first principles premise, which is why so many people are interested in direct air capture, is basically we need a lot of this. There's just no way we're going to solve this problem without a lot of it. With that said, I think that it is not going to be a smooth path from today to 10 gigatons in 2050 or whatever the number is going to be. This is, you know, a market that is extremely nascent with technologies that are mostly pretty unproven. They are expensive, like very expensive by any real normal standard today.

And they have a pathway to get cheaper. But even then, you know, we're trying to get to $100 a ton in the long term. $100 a ton is still not cheap from a societal perspective. you're trying to do it at scale. So I'm sort of somewhere in between. I'm excited by all of the activity in direct air capture, but I don't, you know, I think that there, some people sort of come fresh into the climate tech world and say, we need to focus exclusively on permanent carbon removals and focus on just scaling it up as much as we can. I think that's, you probably need to have a more holistic view of the whole solution set than that. Yeah, interesting.

I am by no means a technical expert, but one thing I try to never do is bet against engineers. And so I like to support all of these different people working on these different technologies, even if they seem a long way off right now. Engineers, I've found both love and hate direct air capture, depending on who you talk to. Because some of them think this is a waste of our resource. I think this is basically Kurt's point from last week, though he didn't get a chance to make it just yet. He maybe will on some future episode is like, we have limited research. resources as a world, there's a lot we need to do before we try to suck CO2 out of the atmosphere.

And, you know, even just from a pure, like, literal, like, engineering standpoint, it should be one of the last things that we do. And then there's other people who say direct air capture is a really elegant solution to this problem because we can make these machines and we can, and they will scale and we will hit a learning curve. And we can build them really big and they don't cause all these other reverberating impacts that many of these other solutions do. And so we should just build as many of them as we can. So I've met engineers on both sides. Sure. I guess it depends on how finite you think that brain power is. And I'm just saying, I want everybody to align around this challenge. Sure. Okay. Next question. From at Ben Inskeep,

how do we stop Bitcoin from erasing all the progress we are making to address climate and the electricity sector? I mean, I don't know. I don't think it, I think that's maybe a little bit stronger worded than I would word it. I don't think Bitcoin is threatening to erase all of our progress in the electricity sector. But I do think that to my point earlier, one of my biggest concerns is around how much new electricity load there is going to be for de-carbonization and how we are going to serve all that load, given that it needs to be clean electricity. And Bitcoin certainly does not help with that. Right. It is new. load that is not itself decarbonizing anything. I know there's a bunch of people who disagree

with that and think that like Bitcoin is the solution to decarbonization. I'm yet to see that, honestly. And particularly, you know, the economics of operating a Bitcoin mine are fairly rich and you're highly incentivized to run your system all the time. But that said, you do have a lot of new like Bitcoin mines going up, or just crypto mines going up in places like West Texas, there's really cheap wind. So we'll see how that all plays out. I think it's going to be like data centers, probably, ultimately,

which means, like, significant source of electricity load that from a climate perspective is neither good nor bad, basically. Maybe it just means you need a little bit more generation. Maybe some of it is flexible load, but I sort of remain a little bit skeptical that it's going to be super flexible load.

And instead it just ends up being another 2% of our electricity demand or something like that. So I don't, I don't know. I don't subscribe to the notion that it's going to ruin everything else that we're doing. What do you think about Bitcoin miners that are buying carbon offsets? I mean, what are they buying is the question, right? Carbon offsets are, there is no one thing that is a carbon offset. And there's huge difference between crappy carbon offsets and, permanent carbon removals that are verified and measurable and et cetera, et cetera.

So what I will say is I haven't seen many Bitcoin miners doing the latter just yet. So if you're just buying like cheap carbon credits off of a voluntary standard that are probably for like avoided deforestation and not verifiable or something like that, I don't think you get to claim much credit for that. Okay. So next question is from at Mike Munsell, which is this is going to sound like a softball, but I think there could be some help. helpful nuggets of wisdom in the answer. How do you prepare for an episode of Catalyst, particularly if it's a topic that's fairly new to you? It's going to be a sort of disappointing answer. I think I don't do a whole lot of preparation, to be honest. Usually we are picking topics for Catalysts that are things

that have been on my mind anyway, not necessarily that I'm an expert in, as evidenced by all these conversations, but things that like I've been reading about or talking to people about that are kind of in the ether that I really need to just like get a clear picture on the full story around. And so I usually have enough baseline knowledge that I kind of know what I need to get out of it. And I treat myself as a proxy for the audience as a result. So I typically will do a little bit of reading ahead of time and just sort of structure my thoughts on like, I think in narratives a lot. And so what is the kind of narrative that I need to get a clear handle on or get a cross in the podcast and I'll put together a quick sort of bullet point outline for myself. But honestly,

I'm doing most of it on the fly. So I don't know, maybe that comes across. But preparation is, I also just don't have a lot of time these days. So I do what I can. Well, I also think that you're selling a big part of that prep short, which is part of what makes the episode so great, is the quality of the guest. And I think you're talking to a lot of people and recognizing where there's interesting conversations to be had. So maybe if you're like obsessing about some topic and then reaching out to lots of people, are you talking to a lot of people before you're like, yes, this is the type of story I want to be telling or you're the right person that has the right depth of knowledge in order to be talking about this? Yeah, that makes it sound a little bit more

deliberate than it usually is. But, you know, my job is to try to get a handle on what I think are significant pathways to global decarbonization and then find amazing early stage entrepreneurial startups who we can invest in to try to solve those problems. And so in doing my day job, I'm, you know, as any investor is typically, I will spend periods of time digging really deep into individual areas, individual sectors, individual technologies. And I'm doing that all the time And that sort of builds this bank in the back of my head of like stuff that I think is interesting or important. And then I will pull something out of that bank typically and say, okay, it's time now. Like we got to talk about battery minerals.

I know Kurt. I know he knows this stuff way better than I do. And we'll be able to help me understand it. So let's talk to him. Yeah. One thing I know about you is that you do these deep dives. Like you get these sort of ideas stuck in your head and then you just keep looking into them and researching them. What's stuck in your head right now?

The biomass thing is stuck in my head because I still don't feel like I have it. Usually the things that get stuck in my head or something I think is important, but I do not feel like I have a handle on yet. And then once I feel like I can describe it succinctly, then I'm done with it. You know, I got it.

And biomass is one of these ones. I don't got it yet. So I'm going to spend the next couple of months probably periodically obsessing about it. Okay. Final question, which comes via producer Daniel Waldorf, who asks on behalf of a non-twitter friend, Sarah Lehan, the question is,

what sci-fi story is the most compelling depiction of the dangerous possibilities of our energy future? I don't have enough specific examples to give a good answer to that question. What I will say that I think is interesting about any futuristic movie that has any depiction of climate or energy, I feel like they come in two categories. There's either the apocalyptic,

day after tomorrow climate change has ruined the world every you know where we're living in hell because we didn't solve this problem and it's very prominent it's like the whole topic is how climate change ruined everything

or it is this sort of more idyllic version of the future but then it's just in the background and so the way that you see that is like some movies you'll just like pan over a landscape and there will be a bunch of wind farms or whatever it is it's never discussed right nobody ever because it's not that interesting to say we solved climate change and here's how we did it

but you know you'll just sort of like it's it's embedded in the ecosystem in the in the in the um landscape that we have a 100% clean energy future or whatever it's going to be but i don't know i don't have any specific examples that come to mind what can you think of anything i i can't really and i'm thinking of those like that um that blade runner opening scene where it's It's like panning over the dusty solar panels. And it's interesting to think about whether it's a rosy depiction or a negative depiction, there's going to be some kind of renewable energy present because that's going to be the energy of the future, whether we fix this thing or not.

It's also like, just from a purely cinematic perspective, it doesn't really, it's not really that, you know, it doesn't look that interesting to pan over a power plant. Whereas it's kind of interesting. You know, like you can visually, you can see something with solar or wind. This is why we don't show batteries in movies for the most part. Like, you're just looking at a box. Right. Yeah. There's also something about power plants where you assume people are operating them.

And with solar panels, you can kind of just have them in like, you know, some post-apocalyptic hellscape and they just are. Right. Yeah, exactly. Well, on that positive note, it is such a pleasure to get to be here on the pod with you and to be asking you all these amazing questions from folks. Thank you so much for doing this. This was much better than had I, tried to do it on my own. And I'll let the listeners decide whether our rapport is renowned, as you said, but I certainly enjoyed it. So thank you, you, and in those three bullet points, you said that you always liked a good list. Are you aware that your wife has invented a drinking game that is associated to when you list things off with numbers?

Oh, no. Has she? No, I was not aware of that. I can't pretend to be all. that surprised about it, but that's really funny. I think of it every time you start a list, a one, two, three. There are four reasons why that's a bad idea. Can you hear they are. That's, oh man, now I'm going to be self-conscious about it. All right, Sarah, thank you again. We will have you back at some point. Maybe we'll do this one more time. Love it. Thank you so much. Sarah Golden is a senior energy analyst at GreenBiz. She's also a good friend of mine. All right, y'all, how'd we do? Did we cover all the questions you had? Did we miss any?

We loved getting your feedback, so we want to continue to do that. We'll try to feature some of your best thoughts or questions or comments at the end of each episode. So continue to send them to us. Just use the hashtag Ask Catalyst on Twitter or on LinkedIn, and we'll keep getting to them as much as we can. For example, Tom Cheney, who's at Cheneyman on Twitter, writes, It is estimated that more than 360,000 metric tons of CO2 are released annually in the U.S. due to cremation of human remains.

Are any climate tech startups working on decarbonizing the dead? Any other thoughts? So, good question. Tom, I will get back to you on October 31st, but I would love to hear from any company who is decarbonizing the dead. This show is a co-production of Postcrip Media and Canary Media. You can find the show on Twitter at At Cattle. podcast pod. You can also find me, PostScript, and Canary there. If you like the show today, go over to Spotify or Apple Podcasts and leave us a rating and review or share the episode with a friend.

You can find links for this episode's topic and guest in the show notes at canarymedia.com. PostScript is, as always, supported by Prelude Ventures, the venture capital firm that partners with entrepreneurs to address climate change across a range of sectors, including advanced energy, food and ag, transportation and logistics, advanced materials in manufacturing, and advanced computing. The producers for this episode were Daniel Waldorf and PostScript Marketing Manager Anna Rader. Our executive producer is Stephen Lacey, mixing by Greg Vilfranc and Sean Marquand, theme song by Sean Marquand. I'm Shail Khan, and this is Catalyst.