The Great Simplification with Nate Hagens - Sebastian Heitmann: "Gigacorns"

Episode Date: September 28, 2022

On this episode, venture capitalist and entrepreneur Sebastian Heitmann discusses his work in tech innovation towards more sustainable futures. Technology will inherently be a part of any human future - the question is what will this technology be? Sebastian's work focuses on finding what is termed 'Gigacorns' - scalable inventions for low(er) carbon futures. If successful, this could result in large scale reductions in the CO2 emissions for global society. About Sebastian Heitmann Sebastian Heitmann is a partner at Extantia Capital, a platform to invest in breakthrough technology solutions that address climate crisis mitigation and adaptation. The €300M platform includes Extantia Flagship, backing scalable deep decarbonisation companies, Extantia Allstars, partnering with mission-aligned climate tech venture capital fund managers, and Extantia Ignite, a sustainability hub advancing knowledge and competence in climate innovation and ESG practices. Sebastian is an entrepreneur and has worked in a range of different industries, from sports to community building to software. He received his education from the Harvard Business School and now lives in Berlin, Germany. For Show Notes and Transcript visit: https://www.thegreatsimplification.com/episode/38-sebastian-Heitmann

You're listening to The Great Simplification with Nate Higgins. That's me. On this show, we try to explore and simplify what's happening with energy, the economy, the environment, and our society. Together with scientists, experts, and leaders, this show is about understanding the bird's eye view of how everything fits together, where we go from here and what we can do about it as a society and as individuals. This week we welcome Sebastian Heitman from Berlin, Germany to the podcast. Sebastian is a venture capitalist focusing on tech inventions that, if successful, could result in large-scale reductions in the CO2 emissions for global society. Sebastian and I talk about some of those ideas, in particular, the challenges and opportunities with deep geothermal technology. But we also unpack the energy situation unfolding in his country and the broader backdrop we find ourselves in with respect to energy, technology, and growth.

This was a very informative conversation. Please welcome Sebastian Heitman. Gooden Abin, Sebastian. Gooden, Nate. For 25 years, I've been saying, goodnabin, because my dad had one semester of German in college, and I've, I've learned like 20 German words, but they're all wrong. So thank you for correcting me in our email thread that it's Abend. You know, Guten Abed is the slang version of it.

So it's totally fine. Oh, is it? Okay. I didn't know that. Yeah, yeah. It'll fly by. People will understand you. So great to see you last month.

We spent three or four hours talking about some of the things we're going to talk about today. and that probably could have gone 10 hours. So briefly, if you could just introduce yourself, what is your main work, what is your worldview given that we're alive in the early 21st century? And can you share your path of how you landed here working on the things you are? Pleasure. Yeah. First of all, thanks for having me.

I remember our conversation very vividly and it left a lot of thoughts in my mind. And I guess this is how we connected and we've exchanged the materials. I mean, time it's very interesting. It's stuff actually that, yeah, it's very close to what I do. So I'm Sebastian. I'm a co-founder of Extensia Capital. We are a climate first venture of basically investing into decarbonization. To get here was not a very straight journey.

And I always say the last thing I wanted to do in my life was create a financial product. But here we go. I ended up doing one. My original background is economist. and I've worked in software as an entrepreneur and I've also worked in other fields. But I've had since a long time sort of a keen interest in the energy space. And I've also been investing into the space for quite a while. Quite a while is like goes back to like 2006 roughly.

When some of you might remember there was a big solar boom. All of a sudden we thought that solar becomes scalable, solar will become affordable. and a lot of the solar companies popped out and IPOed and in the US as well as in Germany until we all learned that yes, solar scales, but not in the Western Hemisphere and mostly in China. And all these companies ended up going bust because the value ad wasn't as significant. And we simply ended up being a commodity as it is today. So those with the early days that sort of sparked my interest. And ever since I've remained interest in the topic.

And following 2015 Paris climate agreement, I thought, hey, look at this. We finally have a very interesting macroeconomic model that should bring out innovation in climate. And started to look for some companies that I thought would be winners in a very different technology, not just one. Picked some companies, invested some own money as well. And so there was a high level of conveyor. that this will be something. We're now in the year of 2016, 17, 18, roughly.

But the conviction was soon met by frustration, by frustration that there actually isn't much capital for innovators in this space. At least wasn't back then. So the mix of conviction, frustration led to the fact, okay, something's going to do something about it. We can't just all sit and complain. The things we can do on an individual level have very minuscule effects. So let's see if we can change something.

And the one thing that we saw that we could change lacking a better idea, I always say, to actually be a founder of myself in the space. I created with the two other partners, you're in Carlos Kunze and Yairm. We created Extancia as a European focus venture firm focusing on decarbonization. We set out initially with one pilot fund, which we have done investing by now and investing now out of fund number two, sort of which is. a larger 10 plus 2 fund. So that was the journey.

In the meantime, now sort of the wave has broken. It's now called climate tech, no longer clean tech. It's a bit broader as well. And we see still early, but we still, we see some capital flowing into the space. And kind of this was probably our hope that pioneering in this space, we pave the way to mobilize institutional or private capital into climate because we thought this is the only way we'll stand a chance of making a significant dent. So that's sort of the journey.

In your materials, you mentioned the word gigacorn. Can you explain what you mean by that? Yeah. Obviously, we asked ourselves, what is significant reduction in CO2? And we broke it down to CO2. We know that there's more just CO2 to the world. But it's a significant measure that most people can relate to today. And trying to make it also simple for potential investors.

We try to be fairly transparent and measurable. That's where we're breaking it down to CO2 mostly. So gigacorn is just a term that signifies two things. A, the climate can be, I mean, we need scale. And gigacorns for us are companies that are solving a gigatons, CO2 problem. So we emit roughly 50-something gigatons of CO2 per year. So any space that contributes at least one giga ton is worth investing in as an industry, as a sector, as a subsector or whatever. And we then go, went on, okay, we can't assume that one company would have 100% market share in.

So, but 10% market share is a realistic goal for a company solving a gigaton problem. So that's our scale that we say minimum threshold is 100 megatons of CO2. That's a lot. Yeah. This is equals the emission of many smaller. European countries like Switzerland or something. It's a lot. How many gigatons does the whole world use now, emit?

50 something depends on whose measurement you want to trust. 51, 55 depends, some different numbers, but I think roughly 50, increasing year by year as well. We're not there yet where we decrease. So, yeah, we're currently about 50. The U.S. is roughly three, you know, to put that into perspective. So even out of U.S. emissions, it's still a significant share, yeah, where you can say, does this move the needle? Yeah.

And yes, I mean, we're not investing into one company. We're investing into a portfolio of 30 companies. If each of them would be to 100 megatone, we would equalize the U.S. emissions. And a lot of the companies that we invest in have much, much larger potential there. There can, some of them can do several gigatons of potentially CO2 reduction. We can talk about that a bit later in more detail. but what type of technologies are most promising. But this is a general thesis on scale.

So we need scale. And the other part is all about speed. We call this concept a time value of carbon lending it from a classic economic principle. And our thesis goes that a ton abated or removed today is a lot worth, has a lot higher value than if this happens in the year 2040 or 50. So this leads you straight away into investing into near-term gains or near-term effects, which leads you straight away also to investing mostly into some type of assets or existing infrastructure that don't require long build-up, something where you can change something that's already existing and decarbonize it.

Most of the time, if you're looking into building up entire new industry, or entire new skill sets, it tends to take a lot more time. Classic example would be fusion reactors, I think very efficient, but it just takes a very long time to build up. And from a climate perspective, too late, I think we should still work on it. It's an important topic for the future in general, but we don't have time to see a first reactor come online in the year 2040 or 30, whenever it is, for one to come online.

This does not provide enough speed. You're talking about nuclear fusion. Yeah, nuclear fusion. For example, there's many other technologies too, but it's one that most of us would agree is not going to be available in the next two years or next five, 10 years. At scale. I mean, you might see first sort of smaller reactors coming out and test reactors, but where we say we can actually produce gigawatts of energy with nuclear fusion.

I think it's still a while away. So that's the gigapart. Yeah, that's the gigapart. The corn part is the pure logic behind it. Unicorns are, you know, a common term. And we say any company that's able to reduce 100 megatons of CO2, just by the logic of the carbon price alone, but also by any other logics that we'll see in the market of dynamics is going to be extremely valuable company. Or you could say the reduction potential, the CO2 reduction potential of a company serves as a pretty good proxy for future valuations. And that's why we say these companies will be extremely valuable.

That's why we always say also climate can be really good business. It doesn't have to be only for philanthropy or concerned environmentalist or something. We see a trillion dollar opportunity most likely to be significantly larger than the digitalization that we've experienced over the last two, three decades. And companies that were companies such as Apple or Amazon came out of, there's a very good likelihood that we'll see a lot of those companies coming out of climate that significantly it will see extremely valuable companies. So it doesn't have to be, not at all.

We actually see that there is a definitely economic opportunity as well. But unicorns are also make-believe. Good question. Yeah, absolutely. I mean, they often make-believe. And also you see sometimes so-called climate tech companies who are not fulfilling the promise. That's always out there. Tesla is an example, extremely high value for sure, a pioneer.

and a great company in paving away to electrification of transportation. But itself, the company's footprint will not be very large. You could probably attribute some significant enabling factors to them, but the CO2 reduction is not the main driver of value here. So that's to show an example that often comes up. So yeah, they make believe in order to, this was very important for us when we started out. We wanted to make sure that what we do actually has significant impact and that we avoid greenwashing. We're fully aware that the road to hell is paved with great intentions.

And we did a lot of work on ensuring that at least we avoided as good as we can using the science that we know today. We've hired Professor Pomponi, who's an international renowned experts in so-called life cycle assessments, completely new methodology that suits a venture firm. Currently, LCA's are mostly using lag data. So what we have to project a lot into the future as we sort of looked at future technology. So we have a methodology. It's called Epic, which we share openly. You can download it on our website, the full methodology on how we see, how we try to predict impact in the future and make sure that we do something that has a significant impact.

You'll be surprised how many, especially in the beginning, how many deals that we thought. thought would be amazing for climate, ended up being killed. Because when you do the math, you find out actually the impact is a lot smaller than you and you thought it would be. We also initially thought there might be more digital solutions, for example, that would really help us to decarbonize. The simple truth is hardware is polluting the planet. And that's where we need to fix it.

As unsexy as it's often as for markets, this is what it is. Stu2 is a molecule. You can't blockchain it away. So we'll have to find ways to deal with it in old engineering and chemical and physics-based solutions. So we're going to get to that. And we're going to get to a couple of the more interesting projects you're involved in. But let's start kind of where we left off when we met in Berlin. And kind of what's your worldview?

Just take off your pedigree of your history and your current job. How do you see the world in our society right now with respect to our economy and energy and climate and population and growth and everything? That's a big, big question. Obviously, I think it's obvious that we're in a time where strong shifts are occurring. We've been in a fairly sort of comfortable zone for the last 60, 70 years since the end of World War II, more or less. We've seen a steady period of peace, at least for the majority of the planet. We've seen a steady rise in wealth and income and lifting people out of poverty for the last many years. And now all of a sudden things are changing again.

We're looking at a darker picture. We're looking at a potentially long-term change. Yeah, not just be a short-term downturn and we might see a long-term change. This is a lot to do with what we, I think, both commonly believe, yeah, that we're waking up from a grand bonanza and are facing a major hangover, yeah. That we've overconsumed for many decades. We've created quite the mess in our fiesta. And now it's time to see that we've are, we've hit and overstepped many planetary boundaries. We are close to reaching many tipping points.

And this is a realization we have long tried to ignore. Science has been telling us for a very long time. And if we would have acted when we were told, we would have potentially be today in a very different situation. But we didn't. We tend to like to ignore it. And now we're not just because of climate, also politically and security-wise in a completely different world. All of a sudden, threats from the past are coming back. out. And these political struggles that we're seeing right now and the situation here in Europe

has a lot to do with energy. And the end of the day, it's about resources, it's about power. And those two are exactly connected as well. So, yeah, we are in times of significant change, significant shifts. We'll see where it takes us. I can't predict the future also. But for sure, there's a lot more uncertainty than there's been before. So when we met six weeks ago, we remarked that even with everything going on with Ukraine and Russia and the European energy situation, that it seemed like people in Berlin, people in Germany were still startingly energy blind that they really hadn't set in. Has that changed in the last six weeks? We're recording this on September 15th. Are people coming to understand this?

I think slowly. Slowly, majority, because most of us are currently receiving letters from your local utility company, showing us that for sure, let's assume we have a supply this winter, it will be becoming extremely expensive. And the news are full of whatever bakeries and other business owners that say, oh, we can no longer afford to bake our bread because it's insanely expensive. our gas builds went from whatever like 10x to to heat the ovens. So these are effects.

And of course, on the other end, you also have now in the news that companies are starting to lay off because of energy costs being simply too high. So I think this is something that has changed in last six weeks. We met in a slightly rainy but still a summary day. Now it's starting to get colder. People are starting to heat. I was actually this morning I was reading an interview with the head of the German. energy network agency saying that he was actually surprised to see that the households now in the first couple of days of sort of slightly cooler temperatures have demanded significantly more energy

than he would have expected. So there's still some energy blindness as it seems or I don't know whose it is, is it the state owners or the private individual houses, but I guess we will all feel in our pockets this year that it'll be just an extremely expensive winter. And there's also the question will we see. actual situations of scarcity, where there will not be enough supply. I think nobody can predict this because it depends on a lot of factors, including the weather and also the weather, not only in Germany, but also the neighbor states.

And they potentially can supply, but it depends on their own sort of consumption. There's a lot of factors coming into play that we can't fully predict today. But it's totally on the map that we might see actually situations where we, selectively have to shut off certain regions from gas supply. Electricity seems a bit more stable. Although that also depends again. In Europe, we're a connected grid. It depends to a good extent on the situation in France.

Will it rain? Will the nuclear power stations come back on? There's some uncertainty still left. But yeah, I think slowly starting people are starting to realize. It's actually real and it's actually very uncomfortable. So I have a lot of questions on this, Sebastian. But before I forget, you mentioned the baker is starting to get worried because it costs 10 times more to heat the oven. I'm not really a bread person, but when I was in Berlin, I had the best pastries and bread in my life.

And the person there, my friend who took me there said it's because the way they mill the flour, they grind it smaller or something. But like the breakfast pastry there, you cannot buy that in the United States. United States anywhere. It was unbelievable. Just FYI. You're probably used to it or something. Do you know what I'm talking about? Yeah. Yeah. There's a huge culture. There's a huge culture around bread here. Obviously, this is a bread country for sure. Okay. Yeah. And it's also one of the basic nutrition for pretty much anyone over here. Yeah. And this now, you know, we will see bread prices. There's possibility that there will rise to like 10 euros, a bread. So whatever, $11 for bread. It's insane.

So in the UK and in other countries, they have, they're introducing energy caps that households have to pay a lot for energy, but it's capped. And above the cap, the government will pay for above that. Is that also happening in Germany or not? Not yet. I think it's going to come because I think otherwise will be overloading the system pretty madly. They recently announced a 65 billion Recovery Act, but that's sort of.

more of a one-time payment towards your energy bills or something and not for every household. Sort of it's for students and elderly and some others. There's a bit of a different system like the very underprivileged or very low-income households, they anyhow have subsidies for the energy bills even today. So that's just going to anyhow land on the pockets of the state, everybody living on social welfare or some type of subsidies. They typically have some type of scheme already in place. But a lot of even middle income families will face a tough time.

All of a sudden, you're seeing a thousand bucks more per month going towards energy. It's going to be significant. It's not just a few, you know, 10 to 50 bucks. It's going to be, it could be significant. It all depends how the gas price evolves. And of course, the markets could also turn completely different. Once we see that there is a chance that we make the winter, that it actually, that solutions are coming in place, the markets might completely relate.

lacks as well, you know. God knows. I mean, the the storages are quite well filled, better than they predicted. And also, I think the imports from neighbors such as Norway and the Netherlands are also working better than they expected. So maybe the market's turned completely. As of last week, obviously, the imports of Russian gas are substantially down, but the imports of overall gas are only down like 5% or something like that. Exactly, exactly. Yeah. Russian gas at the moment, I think, zero. We haven't had any imports. for the last a couple of days. Yeah.

So broadly, do you think this is what's happening now is kind of an indictment of the energy wind strategy pursued by Germany over the last 15, 20 years? Or what are your thoughts on that? Unfortunately, yes, it is. I mean, and this is the term that you sort of brought to me and I've been using it actually myself quite a bit. You know, we, energy has, we've been definitely blind to,

certain aspects of energy over here. Although that also, to be fair, a lot of people warned us that this, so-called energy transition that we were planning here has significant dangerous. And I think the guiding principle behind our energy transition has been ecologically motivated. And we're seeing now that we should have considered economic and security factors a lot more. Countries like the US have a very clear strategic agenda when it comes to energy. The U.S. has invested a significant amount of subsidies or also private capital over the past decades become completely energy independent.

Through shell gas but also traditional oil and gas and renewables. 85% not 100, but 85% energy independent. Yeah, to a large degree in energy independent. Yeah, exactly. So that's, this is strategic. Even our neighbors, to be honest, have had this on their agenda much more. Countries like the UK have had laws for maximum imports for many years. That we cannot import more than whatever 30 or 40, whatever the number is, but percent of our energy, the rest we need to source locally.

So that's strategic thinking, which we lack completely. On top of it, coming sort of, so that sort of ecologic. Priority came in combination with a liberalized energy market led to the market looking for the cheapest solution to find an alternative to the economic, the ecologically no longer wanted solutions, which were primarily coal and nuclear. But both are have important baseload properties. So we ended up building a lot of wind and solar. We, the so-called renewable energy act that was came, well, whatever, 90s, and end of 90s, the beginning of 2000s by the, by sort of a red, green coalition back then is the second largest economic undertaking this country has done since the other one would be the German reunification. So very large economic undertaking. And we, yeah, build out a lot of intermittent sources.

but that also meant in turn that the base load moved more and more towards gas. And this gas, the only way to source such gas at a decent cost is from our neighbor Russia. They for sure have the largest reserves on the planet. The pipelines were partially there. We were quite easy to build short. And that was the simple solution the market went for. The liberal market looks for the best solution. And we kind of, I've been criticizing it for a while, sort of polemically saying that behind every windmill there's a gas turbine.

But that's kind of, that picture is not too far off reality. And yeah, this is, I think we were warned, also by the U.S. by the way. I mean, your previous government was putting sanctions on Germany for, I mean, we're an ally. And they're putting sanctions on us for Nord Stream 2. but still we decided to put the majority of our energy imports into the mercy of a non-ally, which kind of is bizarre, to be honest. I mean, it sounds not very thought through. I mean, you have an ally on one side or several, and then you decide to put the fate of your

country into the hands of a non-ally who has a pretty shady track record. And you could almost say, I was actually, I'm pretty sure that this was, long-term planned from Russians the whole sort of conflict there. And they're using energy clearly as a weapon. There's no doubt about it that energy is a weapon and that Germany or the whole Western Europe is a clear target of this weapon. This is what you and I talked about when we had dinner is that if 20 years ago people were less energy blind and they looked at energy as the fundamental building block of our economic engines instead of dollars and technological combinations, maybe these decisions wouldn't have been

made. So I think what's happening with Ukraine and Russia and Germany is a big biophysical wake-up call for people to see that we need energy at every part of our economies to create, invent, maintain, run, deliver, dispose of. There's nothing that happens without energy. And so I wonder, And here's the other thought I had, Sebastian. I think the German spirit of doing the right thing ecologically is where my heart and spirit is at. But I think given what the world faces, I fear that the right thing ecologically is going to lose out in the short term to the urgent thing economically. So I ask you getting back to your work. Yeah.

Yeah. Yeah. I mean, just getting back to your work for a second, what do you think about the world now moving towards energy security as what they optimize as opposed to low carbon as what they optimize? I mean, currently all the measures that we can see are from a climate perspective a disaster, yeah? I mean, keeping nuclear power running, I wouldn't label as a disaster. That's actually a smart thing to do. It's already sunk cost kind of and sunk carbon as well. You know, you've built it all. It's there.

You should utilize it. Building new, as I mentioned earlier on, I think it's too late. It would take too long time. But the consequence, of course, we are firing up coal again. What else can we do? In the end of the day, you said it or you hinted to it, We talked about that six weeks ago quite a bit that what people have not understand fully, not full enough, is that our growth and our wealth depends to a very large degree on the amount of carbon we consume through energy. Energy is 75% of our carbon budget and that's what the problem is.

And what we try to do with our firm to come to the solutions part now is to do exactly this. we want to unlink or uncouple carbon and growth. That we come to a green growth. Because that's actually the only way forward. I mean, if we don't find that way, then we have to go a completely different way. And you've also been sort of showing how that way could look like. But that's a completely different way. This is a way in which our society fundamentally will change.

If we want to have any chance of continuing growing as a and, And this is not so much about only growth in the Western world where we already have a very comfortable life. It's also about growth in other areas of the globe where people are living and are still very different circumstances and rightfully so demand that they also have access to energy and access to resources. If we don't find that solution, we will also see the socioeconomic, like very complicated situations. We are also in Germany. we were worried about a migration crisis in 2015 with the war in Syria, that will look like small to compare what could come. I agree.

I'm very skeptical, highly, highly skeptical of a green growth outcome. And yet, I sympathize with people advocating for green growth because many of them understand that the alternative, which is negative growth and the social. and economic and political and geopolitical response to that is very dangerous. So I sympathize with we have to somehow figure out a way forward without. I mean, the way I refer to it is we have to bend, not break, because break would be bad. So I'm going to talk to you a little bit of some of the technologies you have in mind. But let's just keep on the German situation while you live there.

So I'm sure you're aware the last few days. It's been discussed that your largest energy company, Uniper, might be nationalized by the government. Given the centrality of energy to our economies, I've long thought that the eventual path was we're going to have to nationalize energy companies because they're so central to how things work. Do you have any opinions on that on what's going on? It is an interesting question. Of course, I'm generally a person who prefers capitalistic structures, but energy is a person. specific sector where it's hard to draw the line with energy. You know, it's not just energy.

And there's energy comes in so many forms and shapes and so many things are directly related to energy. And so where do you draw this line? It's just a supply of energy. But generally, energy is something extremely strategic, yeah, for sure. And it actually has always been as well strategic. I mean, of course, how do we create energy? A lot of us from natural resources, which belong to the people and not necessarily to

a single corporation or person. I'm generally a friend of the system like that, some country. like Norway run where you know, you get dividends from the energy that's been sold to the countries. The energy belongs in many ways to the people. And therefore, yeah, there might be a point for looking at least this more strategically. I think the way we're trying to do this at the moment is, yes, they're privatized companies. But also they work in highly regulated space.

You know, they can't just do whatever they want. The space is already extremely regulated. And they're sort of fairly small boundaries or actually very high protection walls. the other way around, to be honest, from creating too much competition in the market. That goes also a bit too far, I guess, into the design of the market, but it's not a market where you can just do whatever you want. There's a lot of requirements that you have to meet. And I'm not sure if the nationalization is then the only way my experience with nationalized companies also isn't great. Typically, they're highly inefficient and also proud to corruption

and co. So I'm not sure that this is the way forward, but open for discussion. Generally, I'm with you energy is extremely strategic. But, you know, the U.S. is actually an example as well, you know, with enough subsidies for fracking, you've been able to create largely energy independence.

So it's also a way to... Short-term independence, because that fracking is depleting at 80% in the 18 months sort of thing. Yeah. No, it's extremely short-term. It's only bridge technology too, but I think that's even that's realized. I mean, the actually just recently the Inflation Reduction Act that you have put together in the U.S.

It's pretty impressive to be on a piece of legislation for renewables now. So it depends on who's governing as well in Washington or also on the state levels. But there is, I mean, in general, I feel there's a very strategic thinking about energy in the U.S. And this is still a wake-up call it, definitely for Germany, but. also true really for the most of Europe. I mean, this goes further. I mean, we would try to now become a hydrogen economy, because again, for ecological reasons, hydrogen.

But it's also clear that Europe will never be able to produce its own hydrogen. We simply don't have enough energy to do this, green energy. So we will always depend on imports. I think Germany estimates that at a best case scenario with current sort of planning, we would have to still import 70% of a hydrogen. It's kind of the same mistake. You might be not might be Russia, but still, yeah. I'll say the quiet part out loud, my friend.

The biggest gigacorn is, is using less, using less resources and less indirectly and directly less carbon. But of course, we can't vote for such an outcome and it will never happen voluntarily. Do you have any thoughts on that? No. For sure. I mean, if we would be able, I mean, there's many. angles to that as well. You know, where do you really start?

But for sure, I mean, the ultimate problem is over consumption. I think that's fully with you. And if we are able to consume less, that would help a lot. The issue is we are growing population, you know, and not a decreasing population. We're strongly growing population. So that's something we should really start digging into the fact that your education comes in. You know, we are now a CO2 play fund, but we are fully consent and fully see.

that's not the only solution just decarbonizing. We also need to work holistically on the problem and holistically has many factors. We're not blind in just the carbon direction. We do understand, but now we're an investment fund and we need to speak some of the language of the markets a bit. And let's say education is not necessarily something that suits itself well for a capitalistic system right now investing into this. But however it needs to be done, of course, I think it's clear that educated women,

women get significantly less children as uneducated women. And that's, for example, one charity I support, and I think they're doing great works called Educating Girls. And they're working exactly on that in India specifically, but also elsewhere, I think, to expanding, but working on giving education to females. And it's amazing the impact they're able to achieve with little tools. It, of course, requires a lot of local community work. But it's in the end of simple work.

It's going to the family, speaking about the importance of sending their daughters to school, paying the farmers for letting them go to school. And the effect is amazing. And once, it's also interesting, once you break that cycle, once you send one generation to school, the likelihood that the next generation will also be educated is significantly higher. So it's basically you break the cycle once and you break it for good. So, yeah, there's many angles to it. That's for sure topic we need to deal with. And the overpopulation is mostly a topic in developing countries. I think in the Europe and the U.S., it's anyhow we're not growing by birth rates,

but mostly by immigration at the moment. I think whatever in Germany, the birth rate is 1.3 or something like this per couple. So it's quite negative. But one American consumes the same as like 10 or 15 Filipinos, though. So there's two population problems. There's a population of people and population of refrigerators and cars and everything else. Of course. Now, that's also, there might be things that we simply will do less in the future.

The hard part is, of course, sort of going to sort of half-earther movement. I mean, there's so many problems with that on a level where decisions become almost theological and at least morally very complicated. I wouldn't know how to really do this. This feels a bit like being in a Batman. What is it Batman? Yeah, a Batman movie, right? What are they trying to? Yeah, I mean, everything is morally complicated.

If you understand what's going on on the planet, everything is morally complicated because there are no easy answers. So let's get back to your work and your focus. So you want to develop low-carbon technologies that replace or invest. new ones that allow us to get our same brain services of our lives using technology and materials and stuff, but using far less carbon than we currently do. So you understand that we can't decouple GDP from energy, or not by much anyways, but we could decouple energy from carbon energy. Yes? Absolutely. Absolutely. And in this,

This is, I mean, we are on this track already. We are building out renewable energies. We've invested, I think, roughly $3 trillion as a planet into the build out of wind and solar over the last many decades. That's a significant amount of money for not that great of an outcome so far. I think we have 5% roughly globally of wind and solar supplied. But still, I mean, we are inventing in this space. And what we think is we should simply look at the areas with most potential in general.

I mean, we have certain finite resources on the planet, finite resources of coal-a-fossil fuels and uranium, basically. Those are finite resources. And we have a whole bunch of renewable resources, sun being one, wind being one, waves, tidal, geothermal, biomass, and a few others, yeah, of minor concern. But I think those are the ones we need to look at and need to understand, is there more potential in these? Now, then we're currently developing. And of course, in wind and solar, we are on a good track. The problem with wind and solar is that there actually are not an energy transition, but an addition. So we're adding electrons to the grid, but they're not transitioning us away from the other ones,

because the other ones are the ones supplying the baseload, which we now, through thanks to Germany, maybe understand finally how important it is. Thanks for learning a lesson. But this is the issue. This is an energy addition. We need a transition. We need to find an energy source that has the similar or same properties than we have from our finite resources. There are. Hydro is an example. For example, today, clearly. Hydro is widely used, but also

pretty much at the end of its capacity. Hydro has been used already. There will be modern hydro that has certain benefits, some pumped hydro. So there are certainly some potential also there's still there. And I'd say if somebody can find a way how to very efficiently use slow-moving water, be it rivers, be ocean currents and so on, there would be huge potential hydro. There would be terawatts of hydro in that energy source. But currently technically we're not able to, but that's an again, that's potential. That's what we should look into. Do we find ways how to enable hydro, for example?

And same counts for all the other renewable energy sources. Biomass. Can we be more efficient harvesting our biomass? Or geothermal is one that we're also quite keen on. because that's obviously has the biggest potential. I mean, we're sitting on the giant battery. It's called Earth. We have some type of nuclear reaction at the core of Earth.

So it's also a renewable source of energy. It's not that we depleted and then sort of plant cools out. It's actually continuously renewing its heat. And that is just a gigantic amount of heat below our feet. I mean, here we go to cosmic scales now for billions of years. I think there's a study showing that 0% of geothermal energy would power humanity for 2 million years. 0.1%. So that's the amount of energy we have.

Their studies done actually by some U.S. folks at Cornell University, quantifying this energy resource below our feet, and the numbers are just purely gigantic in terms of exa-joules. So that's again, this is now I'm talking, there's potential. The question is now, how do we make use of this potential? And by the way, uranium, just to at least be fair to it, There is also, I think there could be other generations of nuclear, generation three, four, five, whatever, which would make a very efficient use of uranium and therefore expand the lifetime of this finite resource to a very, very long time.

And I think that's the argument that a lot of sort of pro-nuclear people argue, let us use this uranium to transition us to nuclear fusion. I'm not fully against this. My only problem again with that is time, time to impact for nuclear is way to slow. But potential, there's potential, and that's what we're looking at. As a venture capitalists, we're looking at potential. We see a lot of potential geothermal. We see a lot of potential in biomass. We do see potential hydro as well.

So those are the areas we're looking at and see what can be technologically enabled. If we get more efficient in biomass, if we add more energy to the system that's a low, but that's low carbon variety. Ultimately, that has to be coupled with a new governance or a new cultural aspiration other than what we currently have because our current system is optimizing monetary profits that doesn't have any scale or destination other than to grow. So if we were to use our materials more efficiently, there's a rebound effect that the money that we save here will just be spent on some other things that have.

indirect carbon on them at the store. So I just want to set that aside to see if you agree or disagree with that before we get into the technical possibilities. I do agree. We need to find, I mean, humans have always been, and there's a law, forgot the name of the law, but. Javen's paradox? Exactly. That's a challenge paradox. That's exactly what it is. I mean, the more energy you give the system, the more it will consume. And even meaning that if you would give it unlimited energy, it would also be consuming unlimited energy. So I guess you're also familiar with Kardashian scale on civilizations. That's sort of course, sort of on a grand scheme of things comes into mind.

We are still a stage one civilization. We are probably at the brink of becoming a stage two because we also now are slightly being forced to become a stage two. What is stage two? Stage two is a society that's able to harvest energy from the galaxy, let's say, yeah, beyond. And sort of solar would be one, yeah, that we're able to harvest from our galaxy. It's actually from our solar system, I think the entire galaxy, that's a stage three then, yeah. But from our, from our sort of close solar system, we're able to harvest energy. Well, we've been using energy from the sun for a long time, but you mean something more than that?

Yeah, energy independent as well. We're completely energy independent. Yeah, we're, that would be stage two. Stage one is still dependent on finite resources, but stage two is completely energy independent. And you think we're approaching that point, possibly? Not yet. I mean, for sure, not yet. I think the initial, I mean, there's, you can read articles and articles about that.

Estimations are widely different, but some people who say we're sort of on track to reach it in the next 100 to 200 years. Also long term. Some people say it's probably a couple thousand years away. I think stage three is believed to be like extremely far away millions of years, yeah. So, yeah. At the moment we're stage one for the foreseeable future for our lives will remain stage one. Yeah. So and we have a problem.

We have a problem with climate change that we need to solve before we become stage two. We need to be very clear about this. We cannot think in cosmic scales here. Climate change and the destruction of our natural habitat is something that we cannot think in these sort of long-term scales, which is actually, by the way, sometimes I am put off by these people who are trying to push all the problems into the really, really long-term. That's not the lecture that we have that we have right now. I agree with you.

I'm glad you said that because there's been a lot of that in the news, Nick Bostrum and McCaskill, others lately. Exactly. To me, all that stuff is ecocidal because our challenge is right now. We're headed for an Earth Trek future and we need to save the biosphere and have some sort of runway to get society through the next 30 years. Okay. With that very long introduction, one of the things that you and I spoke a lot about in Germany

that I would like you to unpack a little bit is you, and not only you, I've met many other people that are very excited about the possibility not only of geothermal, but of deep geothermal. Can you describe what that is and how it might work and how that might be a game changer and and go from there. Absolutely. As mentioned earlier on, the Earth, it's the largest battery that we currently sit on. There is estimations from this about US only now that the US has a potential of so-called crystalline hard rock geothermal, which is geothermal sitting in fairly deep, let's say,

anywhere between 3 and 10 kilometers, depends on where you are. of I think numbers roughly 13 million exa-joules. There's an insane amount of energy. This is more than all other sources that we know today, wind, solar, uranium, coal and everything combined. By far more. So that's, again, a very large potential. Let me stop you right there,

because is that the same analogy to measuring that there is uranium in seawater, which is true. There is uranium in seawater. There's also gold in seawater. But it takes a lot of energy and materials to get that out. So is that a fair analogy or the technology would be more targeted in this case? That's sort of what we've sort of looked at. And we actually find, of course, it requires technological shifts.

But the big butt, you know, when we started wind and solar, there was actually very little existing technology that we could use. There was very little industry experience that we could use. And still we've been able to scale it extremely well. and now see a really interesting cost curve on those technologies. The interesting part about geothermal, the question about geothermal is the only question is how to get deep. How do you access this depth and energy this depth? And this is all about technologies for drilling.

So we happen to have, and most of it is actually centered out in Houston, the US, right? Again, a global drilling industry that has been drilling roughly, well, has a capacity of somewhere around 100,000 wells per year that are, that are being drilled. And they've been extremely efficient with bringing down costs for all of these technologies over the last many decades. Previously, a well in Texas somewhere would require a couple hundred people and a few months of work. Today, it's done in 10 days with four people. And you see the extreme cost curve coming down once people are starting to take it seriously. and they typically take it seriously when it's an economic great opportunity. So that is so that's very different to all the other energy sources.

So we have actually a massive industry, which has a lot of experience. And I'd say actually probably 80 to 90 percent of the tools already that are required to utilize this energy resource. Plus sort of they have know-how, they have assets. They have skilled labor too. So this is actually poised to scale in an extremely interesting way. And that's different to all other energy sources, which are, which, which cannot scale as fast as they could potentially scale. So that's for me one of the key points where we believe it can really have a major breakthrough.

Of course, like I said, we need new technology. It's also quite simple. I mean, today, this global drilling industry is searching pretty much for hydrocarbons. Hydrocarbons are found in so-called sediment rocks. The one thing you do not find in crystalline hard rocks is oil or gas. or any sorts of hydrocarbons. So there was never a need to develop a tool that would actually satisfy this need.

There was some geothermal always, but the geothermal also so far has been only used in sediment rocks. We don't drill geothermal and hard drugs, again, because there's no tools for it. So we use geothermal today wherever it's easily available at low depths. So next to a volcano, next to a fault. San Francisco, San Andreas fault, the gaziers,

the largest geothermal areas in the world. You know, several hundred megawatts coming out of there powering the city of San Francisco. And how deep, how deep do they have to drill for that? Not deep at all. Not too deep. No, no, because it's a very active, tectonically active area. And what about Iceland? Iceland is the El Dorado of Geothermal Energy. It's a country that uses a significant part of its energy mixes geothermal. The other part is hydro. So they're a completely energy independent country using no fossils of flying. resources of any kind. And they also still have a lot more potential with geothermal.

They can build this out. It's a tiny nation. But it's an interesting country to visit, to be honest, because you see how a society can look that lives in energy abundance. They live in energy abundance. When you come to Iceland, they ask you, can you bring me a project that consumes energy? I have a lot of energy. Why don't you have an idea?

We know investors and other stuff like e-fuels and they think, can we build an e-fuels factory here? Now, we have heat. We have plenty of power. That's what you guys need as input. Interestingly enough, for e-fuels, we also need carbon. What the society there does not have is carbon. They have other than cars, they have basically no carbon consumption.

Interesting enough, and then cars are also electrifying also there. So soon there will be a society without any carbon. The airport is still one of the main consumers of carbon. But yeah, it's interesting that they're pretty much a carbon-free society. So the problem for building an e-fuel plant there is how to hell to get the car. carbon, where to get the carbon from. And the answer would be dark air capturing in this particular case, but that's the technology, which is also still quite in its infancy. So, but yeah, it'll, it's interesting, see how that works. So what's the main difference between geothermal, as we know

what today, and it's in many places around the world, as you mentioned, and deep geothermal? Well, the name implies it. It's depth. And, and, but the other part is that it's, how deep? So between three and 10 kilometers is a realistic assumption. It's, it's, depends on really where you are. And in certain parts of the globe, you will hit the hard rock after three kilometers, in other places like Turkey or Finland, even earlier. And in other places, you could be drilling through sediment rock for five, six, seven kilometers. I think Canada has some areas where it's really deep sediments. It really depends. But in the end of the day, the earth has so-called temperature gradients all over the place, and they're at the very from place to

place. Iceland has a temperature gradient of roughly 120, meaning that for each kilometer you go, it gets 120 degrees warmer. Most of the U.S. is probably in the 30s to 50s. That's a sort of a normal temperature gradient, except for the hot zones like sandres fault or some other areas, where it's warmer. Semite, I think, is one. So then we have a higher gradient. So that depends. So in certain areas, I think the entire west of the U.S. is pretty interesting for geothermal. the ease is quite a bit cooler. It means you have to go deeper. At some stage, you will always hit the temperature.

There's no area in the world where you will not get to the temperature you need. And that's the issue. Today, geothermal is pretty much in most areas. The high heat above 250 degrees is typically too deep. So we're using it for fairly shallow uses and hence also quite mostly for heating, less for electricity production. So what are the main technological? pathways for a potential breakthrough for deep geothermal up to 10 kilometers, like you said, through igneous and metamorphic rock.

What are the big pathways and challenges technologically? Technological challenges are mostly in drilling. The drilling equipment, the current PVC drill bits that we use are not made for drilling efficiently in hard rock. That's simply not made for it. So the technologies are being researched today, there's different approaches. We're investors in one of those, but they're either plasma-based or millimeter wave-based. So anything that's worked with an extreme amount of heat that eventually disintegrates the rock or weakens the rock and allows you to therefore drill efficiently.

The millimeter waves actually sort of kind of vaporize the rock, and you sort of suck up dust more or less. those type of technologies that allow you to drill linear. Today's drilling cost is exponential. The deeper you go, the more expensive it gets. And once you hit hard rock, it gets insanely exponential. Your drill bits sometime, what does it mean exponential? It simply means your drill bit lasts nothing. The amount of energy you put up at top by the time it goes down there, it's almost

nothing left. And you're drilling is extremely slow, meaning, and you have to constantly change the bits, which requires you to do so-called tripping. You need to take out all the pipes, put them all back in again, take them out, put a new bit in, take it down again. This takes a long time and also consumes a lot of resources. And that's where the exponentiality comes from. That sometimes a bit in hard rock can last only for a couple of meters

before you have to exchange it again. And that at four or five kilometer depth is extremely slow. We have drilled very deep. We have drilled several projects, which are extremely deep and also reach, I think, 12 kilometers the deepest in Russia, Cola super deep. But those were not drilled for energy reasons. They were drilled for scientific purposes.

And they also didn't have economic or time as a measure in there. This was completely different research. So that's something we need to find drilling technologies that allow us to a drill efficient hardrock and basically B drill close to linear. that we have a very predictive cost in our geothermal projects. But it's not the only thing that's not drilling. It's also you then need to make sure that you have efficient heat transfer. You need to build systems that allow the fluid that you pump with.

And eventually it works like a big heating, a big heater, right? You basically take a cold fluid. It goes through a radiator and comes up as a warm fluid, more or less to simplify it. You put fluid all the way down up to 10 kilometers and it comes up another drilled whole as heat? Exactly. That's how it works. You typically have a geothermal. You have so-called injections and production wells.

You have typically it's a so-called triplet you drill. So two injection wells and one production well. And the injection well puts in cold fluid typically water. And it comes up as warm water or ideally as supercritical

water. Supercritical is the fourth state that water can take. And that's a very specific state, very interesting. So harder than steam? Yeah, a lot harder, but also under pressure. It only works in a combination of steam and pressure. Supercritical. We have at 374 degrees Celsius and 200 bars of pressure.

And this is for water now. For other fluids, it's different. I think, for example, CO2 becomes super critical at somewhere in the low 30s, 30 Celsius. So you can also put in other fluids. But let's say we use water. that's how it gets super critical. The beauty about supercritical, why is it important? Why does it matter?

Because it's able to transport roughly 10 times the amount of energy, then non-supercritical water can transport, meaning it gets extremely efficient to produce energy with supercritical conditions. But in order to become supercritical, you need to make sure that the fluid you pump down there also heats up. So there's work to be done on the well itself to make sure that you have an efficient heat exchange below the ground. So it's one part of the dry.

drilling, the other part of the heat exchange that we need to solve? Well, I'm probably not the best person to grill you on this because I'm not an engineer and I don't understand all this. So I'm just going to ask you naive, like general citizen questions about this process. But you're going to drill an injection well for water and then you or some other substance and then you have a producing well where the super critical heat comes. How do you get the water from the injection well to the producing well? And if you're so many kilometers under the earth, doesn't it just dissipate down there?

Or how does it get from one place to the next? Actually, once you are in these crystalline hard rocks, you're pretty much in a stable formation of rock. It's one single type of rock. And it actually also doesn't have a lot of cracks around it. There's not much instability in this type of rock. If you have these cracks and instabilities in the sediment rocks, that's what you typically do to do in geothermal today. that's the part you case. You have some type of cementing or put down a pipe or something.

Once you're in hard rock, you, TBD, to be honest, we'll see after the first projects if you need to pipe it or not, but it's likely that you don't. The way to do it is you actually have to build some type of heat exchange mechanism. There's different technologies without going to too much detail, but there's so-called closed-loop technologies and there's so-called open-loop technologies. There are different approaches. All of them might work, ensuring that we have an efficient heat transfer from the rock to the fluid.

Basically, a lot of technology from fracking can be applied here. That's how fracking in many ways works. But wouldn't fractures that deep just automatically be closed tight because of the pressure at that level? You would think so, but not necessarily. No, I mean, you have to work on it. Also, what they do today in fracking, they are using some type of ceramics to keep these fractures open.

But again, this is pretty much technology that we derive from today's processes. There is not much new innovation needed. The difference, I mean, it depends again. You can also depend on which technology you're looking at. But the fracking is one technology. Other companies actually sort of do a closed-loop system, basically laying pipes down there, which are superconductive pipes. So there is, it depends which technological approach you will use.

But all of these technologies actually are derived from fracking today. And when we met, you told me that there's the fracking, the drilling, the millimeter wave or the plasma, etc. But there's also, you said, they're applying proprietary things from the nuclear safety industry to protect the equipment at such heat and pressure, yes. That's one of the engineering challenges that needs to be solved. I mean, these sub-drueling technologies often require electronics for censoring, which means you need to take electronics downhaul. And electronics, obviously, when it gets very hard, need to be shielded. And there is basically military or nuclear technologies that are able to withhold these type of four,

500 degrees temperatures. It's not completely unheard of. But that's something that oil and gas, for example, that's a typical challenge you haven't had so far. They never went so hot. So here we cannot rely on today's technology. Same with the drillheads. We need different type of drill heads.

But on the shielding electronics from heats, we will, there's work to be done on that front. But again, there's something with diligence, of course, when we looked at the technologies and We spoke to experts in other industries that are dealing with these type of conditions. That's mostly military and nuclear or actually also fusion reactors. So there is material science available today or there are materials in the market today that are able to handle this. They haven't been tested yet for this type of purpose. But that's something that's a challenge that we need to solve. But again, an engineering challenge, not a scientific challenge.

So today, the US Department of Energy released a plan to lower geothermal costs with big R&D and subservice research, etc. I'll send you the link. I saw it. I saw it. Oh, you saw it. Okay. So all of a sudden I'm hearing about this everywhere. How many firms are working on this and what is the next milestone in seeing if this is going

to actually work or not? How many companies are working on? There's a few. Not a crazy amount. But there will be globally, I don't know, like 20, 30 geothermal tech companies actually innovating in the space on different angles of it. There's, for example, I just mentioned it, there's companies working specifically on the electronics issues. There's a Houston-based company doing that. There's companies that work specifically on the drilling challenge.

In the U.S., there's a company called Quays and Europe. There's a company called GA drilling. There are companies like also U.S. I mean, most of my US, to be honest, like Sage or Greenfire or geothermal solutions that are all working with some elements of solving this problem. Ever is another one out of Canada, which is quite advanced. Ferbo is a bit of a different game, but also working on enhancing geothermal has just also been able to attract a large amount of investment, which was sort of a little bit in the news for geothermal companies. That's a large amount of investment.

And three years ago, would have been unthinkable. but they did a hundred something million round just the other day. So there's companies working on it. There's capital flowing into it. That's the most important question. Is it a capital flowing into it? Is somebody funding this? And that's the interesting part now that certainly Houston is waking up.

And certainly Houston is trying to take this, is now starting to take the series and is starting to invest into as well. All of the major Houston players have a pretty much clear geothermal agenda today. So what's the next milestone that will know whether this is, going to work, might work, not going to work, etc. Are there pilots that are happening now that we can expect results from, or is it all still in the R&D stage, or where are we at? Depends on again, I mean, as I just said, there's like 20 or 30 companies and they're all in different stages, of course. Faber, the one I just mentioned is definitely in a piloting stage.

And their EGS systems also will enable a very large amount of geothermal already. they're definitely in a stage where they're becoming commercial projects now. Others, I think Sage was just doing some field tests. It depends on what technology. Some are earlier, some are later. But yeah, they're in all stages. And some are definitely have near-term applications where we say in the next 12 to 18 months, we'll be seeing first commercial projects coming out of it.

And some things like the millimeter wave technology probably has a few more years of work to be done before it can be commercialized. But like I mentioned earlier, we're a climate investor. We don't invest in stuff that comes alive in a year 2040. So all of the things we look at and all the geothermal generally, all of the companies we see is stuff that by the end of the decade are in implementation motors for all of these technologies. Otherwise, it has no climate impact.

Let's for the moment assume that deep geothermal works to some small, small, to intermediate extent at a minimum. What problems does that solve for us and how? Our global economic system. First of all, it's a real energy transition. I mentioned earlier on. This is actually a way by and you can actually even go in and retrofit existing fossil fire, mainly coal plants.

They use the same turbine eventually steam turbine. You could go in and so-called retrofit a cold fired power plant and you could Drill a well next to it and simply exchange the way the heat is being created in this power plant. That's a real transition, where we say, okay, we can take offline coal and replace it with geothermal. Now it's not an addition. It's a real transition. And of course, then once you've done that, and there's also the case for heat to be made, this is for electricity, of course. And for sure the first case will be in heat, where we use district heating systems, which are available, which will plenty off all over the world.

Also, actually, by the way, district cooling systems, which are also becoming a thing now, specifically in sort of hotter regions, and replace the current fossil heat source with geothermal heat source. For that, you don't even have to go that deep. We don't need 400 degrees in a district heating node. 150 is totally sufficient. So that's where you can very simply use existing resources, heating grid, and replace this with a geothermal resource. And this already exists, by the way, today. I mean, for example, the city of Munich in Germany is completely geothermal heated with the district heating system. They have low resources and sort of where they can easily tap into some geothermal and they've been using it for decades.

So this is not a crazy future. The question is just, why can't I do this in Chicago today? Because I simply haven't found a way to, I'm not a Munich. I need to drill deeper. I can't access that heat yet. So what I'm saying is there's a lot of infrastructure that can be utilized and can be leveraged in order to sort of roll it out. So that's where it will take us. And it said it's a real transition of existing hydrocarbon-based energy.

So the other point you mentioned is if this works, you could pretty much drill anywhere in Kenya, in Indonesia, in Japan, you know, in Syria, in Russia, in the United States. States and Europe. So there is sort of a global South has access to affordable energy in this way that currently they don't. There's that side of the story, yes? Absolutely. It's a, we call it a very democratic, fair distributed energy. Everybody has more or less the same access, specifically when we talk about sort of having linear cost and drilling, when drilling is no longer a prohibition, cost prohibition for realizing a project, yes, then it's fairly distributed. Everybody has access to it. That is pretty much similar price because the cost difference will be marginal.

It doesn't matter if you go eight or ten kilometers. It's not going to be a make or break. But we don't have any idea about the cost yet because there's not even viable pilots or do we have some ideas. Obviously, you wouldn't be investing in it if you didn't think it was too. Exactly. No, no, we clearly do. we can understand the basic economics of it today already.

I mean, we know the inputs. We know what these inputs cost. All of these drilling technologies today are sort of called contactless drilling technologies, meaning they actually have nowhere and tear on the equipment itself, because they're not in direct contact with the rock at all. So they're spitting some type of flame or wave or whatever the technology is out. Actually, there's no friction with the rock, right? So therefore we can very easily understand what the inputs are.

So we have to, we have costs on, on obviously creating the tools. We have costs of powering these tools, but that's actually, they don't require a lot of energy. It's typically mobile 500 kilowatt generator can drill a well for 10 kilometers. So the energy consumption for drilling is, is neglectable. And then you have costs for removing the fluids and the muds, yeah, which are pumps essentially that you need to install. And there are certain costs for that involved as well. But it's not that it sounds like it's 10 kilometers is so crazy and long, but it'll, it'll, it'll take it any of these technologies are being developed today it'll take roughly 10 days 15 days

and drills such a well you know it's it's not that it's a major undertaking and the cost of this will be in the two digit millions it's not going to for each of for each well now then of course you have the subsurface cost then you have on surface cost and that depends on my feeding into an existing node for district heating am i doing a green field operation building a new power station that can completely vary, right, depending on what you're doing on surface. So let me understand this. Just from a, let's assume the technology works. And I've looked at enough alternative energy things in the last 20 years to know that

there are always complex things that we don't imagine ahead of time. But for now, I'm just going to assume that this is going to work. Doesn't this also, especially if it's inexpensive, allow us. to create low-carbon precursors to what we've previously used fossil hydrocarbons for plastics, petrochemicals, all those things, because we could use the excess energy and apply it via hydrolysis or other things to create lots of chemical precursors, yes? Yeah, absolutely. I mean, we are already investors in technologies for this. the existing technologies as one of the companies we invested in is called a naratech

that basically recreates on surface of Fishertropst synthesis which means creating out of hydrogen and carbon hydrocarbons but instead of sinking slowly to the ground with heat and pressure create hydrocarbons because it's the same thing it happened naturally a little deeper yeah they are able to do this on surface in a containerized solution reactor and this is an old process Fisalotropso was invented in the name you can hear it is very German, was invented by in the German Caesarian Times, so a long time ago in the beginning of the 20th century. So the technology is not new. It's been employed as well in the oil and gas industry for a long time, typically very large-scale

projects. But anyway, so there is technology and with that you create hydrocarbons and you can create any hydrocarbon from it. You can create a fuel. and they're working right now on jet fuels because that's sort of a logical market, but you can also create waxes. I think as a matter of today, I saw the news early on. They put online today a plant in Hamburg, which is creating waxes, specialized waxes, but carbon-free. I mean, not carbon-free.

They have carbon, obviously, but circular carbon only, right? So they're using, in this case, they're using CO2 from a chimney and hydrogen greenhead. So we have the technology to create low-carbon. hydrocarbons, as it were right now. Circular hydrocarbons, I would call them. Circular hydrocarbons, right. The reason we don't do it, and we don't do it at scale, is because our real hydrocarbons that we're extracting from the ground are much cheaper

than the, you know, multi-step process to create the circular hydrocarbons. But if we either had a society that had a different pricing system, or we had depleted hydrocarbons that we didn't have as much accurate, access to, then all of a sudden these higher cost circular hydrocarbons would make more sense for society. Society might be smaller, might be less complex, but the technology exists to create all these things that we use today without accessing the bounty that we've got from the carbon pulse so far.

Yes? Yes. The technology exists already today. And the reason why it's economically complex still today is because the inputs are complex to get by. We need to get carbon in a circular manner, meaning we have to take it from a chimney or from air capturing, which is extremely expensive still. And we need to have green hydrogen.

It only matters with green hydrogen. With gray hydrogen, there's no point doing it, right? So green hydrogen is also scars to come by. Can you explain to our listeners what is green hydrogen? Green hydrogen is referred to hydrogen that comes from a renewable. will source. Hydrogen is generally created with electricity, electrolysis. We split in water H2O into O and H2. Oxygen, we typically use it where we can or it just goes in the atmosphere. And the H2 we try to separate and then use for whatever industrial process. And that's how we create

hydrogen today. The input for this electrolysis is energy, electricity, essentially. And of course, If the source of this electricity is fossil, then it's not, doesn't really make sense to create. That's what we do today. I mean, most of the hydrogen we use today is so-called gray hydrogen used from fossil. There's all different shades of hydrogen nowadays, turquoise and whatever, where there's sort of intermediate solutions. Green hydrogen is, A, quite scarce. There's not that many projects able to produce green hydrogen and be quite a few times more expensive up to an order of magnitude more expensive than gray hydrogen today.

But yeah, from gray hydrogen, it wouldn't have a circular effect. It's a, it's even negative. You are hydrogen in generally is a negative energy source of a for each jewel of hydrogen I'm producing. I actually need to put whatever 1.1 joules of any other energy source into it. And hydrogen also often is confused. People think it's an energy source. It's not.

It's just a carrier, right? Of energy. So we create hydrogen as a carrier. Yeah, and there's an energy penalty from doing that. But if you had lots of very inexpensive energy, like example, getting the heat from under the earth at a low cost, then you could do that. Right.

So what is the main advantage? It's something we didn't touch about, Nate, also yet, and the cost of it as well. I mean, cost is a very important factor. And wherever we look into investing into something, we want to make sure that the potential for the company is there to what we call the green premium. gets reduced or well it's got to come below the fossil price eventually anything that will be at

fossil prices or above fossil prices is subsidies business forever and unlikely to really scale so unlikely to become a gigacorn because the scale is so so huge so any technology that we look at at must have the potential to become below significantly below the price of the fossil version for geothermal there is a very clear pathway to that happening you know Geothermal is already in some part of the world significantly below. Iceland, we just mentioned earlier on. And supercritical geothermal would take it to the extreme. It would be extremely price competitive.

So other than the potential cost savings, which is pretty compelling on its own, if that manifests, what are the other main advantages of deep geothermal relative to like solar and wind, for example? usual ones it's a fact that it's so-called base load it's 24-7 there is no night for geothermal and no windless time for geothermal so it works 24-7 it's a very dense energy source as well the amount of square meters you need to extract it compared to solar which needs a lot of space is minimal yeah the wells that you drill are whatever nine inch or something or 10 inch like fairly small and provide quite a lot of power so So it's extremely dense.

Nuclear is also extremely dense, to be fair, but so is geothermal. It's stable. It's also so-called distributed. You can have it in many different places. You don't have to have central, large-scale plants that produce it. You can have a lot of small distributed plants. Today, I would add another point to it. It's a very secure form of energy.

It cannot be easily taken out by a bomb or something else like it. Our nuclear power stations are, as we learn right now in Russia, targets in a war. It's basically not possible or more, I think more interesting was the vulnerability of the Saudi infrastructure. We saw these couple cheap drones that destroyed a refinery in Saudi Arabia a few years ago. That's a really vulnerable structure. Obviously, very low-cost tools can create large damage and supply problems. So that's also an element that today I would add to the mix. It's a very secure infrastructure.

So, Sebastian, you're the first person advocating a particular technology or investing in a particular technology that I've had on this show. It's not that I am advocating deep geothermal or that even I'm a believer in it. I'm trying to be agnostic on what I want to see happening. And I'm trying to describe what is happening. And in your description of what deep geothermal could do for us, I think it highlights kind of our opportunities and constraints. And additionally, I kind of like you as a human being and you're very smart and articulate. So I'm keen to learn about this.

So just as an aside, I'm not like advocating this, but it just seems like this potential could be the next can to kick, you know, technologically. I don't know if it's going to work or not. But if it does work, what new problems would it create? I assume you've thought about that. We have thought about that. It's also a question that comes quite often when we speak to politicians or others about it. So what other problems can we create?

Honestly, it's a bit of the staggering part. We haven't found any major problems. I mean, the issue of sort of earthquakes or instabilities comes up quite often, but actually when you look at a little bit too deeper, you find that that's a minor issue. Earthquakes happen today in geothermal areas, mainly because we drill in generally tectonically active areas, volcano's faults and so on, that are instable already before we drill in there and drilling enhances this instability. when we are looking into deep geothermal and to new drilling technologies, we no longer need to drill in tectonically sensitive areas. We would actually drill in the middle of the plate. And hence, you significantly reduce those type of risks.

Other question that is being asked quite often, don't we cool off the earth? Are we going to deplete that resource as well? Here, the answer is also, I mentioned earlier, it's a largest battery. It's gigantic. It's continuously renewable. It's a renewable source of energy. So that risk is also not. given. So those are the two main concerns that we are hearing quite often and we think they're

quite well mitigated with the current technologies. From an ecological perspective, though, climate change is not our problem. It's a symptom of overshoot as a species. So this will not solve overshoot, but I don't know what will. And this seems to be the way that clever hominids will try to kick the can again. And I can see some benefits from it, but I can also see that if this were to work globally, it would fuel another round of human consumption and other species and other non-climate limiters

and the planetary boundaries would potentially suffer. Potentially, yes. I mean, that's for sure that that's a certain, on a meta level, same would happen to fusion to nuclear or whatever. whenever we sort of start supplying a lot of energy, there's also maybe on the contrary side believe that if we are able to provide energy and energy brings prosperity, prosperity brings education, you know, we might also solve the problem another way.

You know, smarter people will take care more of their habitat and understand the global issues better. I mean, this is where I'm trying to be a facilitator here in that people say, oh, we have to solve everything with this one thing. But I think there are multiple things that need to be solved. We talked about it early. There needs to be better governance, better education, a change in consciousness of who we are, where we came from, what we're doing, how to use energy to get healthy, better lives

that aren't addicted and polarized and entitled. But that's not your job. Your job is to look at the technologies of what might happen. And, you know, so I wish you well on this. I mean, Nate, this was the really interesting part of meeting you and having the conversation with you, that you obviously having this all-encompassing view and you're taking care of the big picture. And it's really important that we do not take the big picture out of sight. Like I mentioned, we cannot have a tunnel view on certain only one technology. There is no silver bullet.

We can be very clear about this. And we need to do a lot of things in parallel. And this is just one step of decarbonizing. And decarbonizing one of our largest problems. And by the way, we're not only doing geothermal in our fund as well. We also believe in other technologies. Like I mentioned, hydro is interesting. We're looking at many hydro cases.

We are investors in biomass as well. So biomass has more potential than we currently see. So there is not just one solution. And again, the climate is a large puzzle and not all pieces of the same size. But in order to finish the puzzle or to get a chance of doing something, we need to find all the pieces and put them together. So it's really not about the silver bullet or anything like that. And I mentioned early on biodiversity is something we have touched on, but biodiversity is insanely important. And it's not measured only at least in CO2 and education.

I think we mentioned that early on as well. But you mentioned also governance. I mean, there's a lot of things that we need to process in time. And I'm glad that somebody's out there thinking about it because, as you said, we're not proposing that we have the ultimate solution. we're adding one piece to the puzzle, technology to decarbonize. If you don't mind, I will close with some questions that I ask all my guests a little bit more on the personal nature. So do you have suggestions on how people living in advanced economies, perhaps in Germany, can take all this on board and prepare themselves in their communities and their cities for kind of this economic energy transition that I call the great. simplification. How do we meet the future halfway? Do you have any ideas on what to recommend

to people? Good question. And not an easy one. I mean, first of all, I think, again, from energy blind, become energy aware, become aware that it's a scarce resource, become aware that it's not just a given thing and that there's a huge cost to it as well, an external cost. So I think that's something everybody in his personal mindset can do. It costs you nothing. Actually, I would recommend the videos on your website, to be honest, to watch them. They're very easy to understand. And then everybody can invest those 20 minutes or something to understand the problem. So that's the really one thing.

And then if we are living in a democracy, then of course, that's the power you have. You have a power to vote for the people to make changes and use that power. Go vote and vote for people who you believe at least represent the best interest. So, and of course, you also have a choice with your, if you have any capital, you have a choice with your capital. How do you allocate your capital? Where do you allocate your capital? Make sure it has some type of long-term use and sometimes is part of the solution and not part of the problem. So that's actually for those who have significant capital and often it's a combination too.

You think I don't have any capital, but you're probably going to be part of some pension fund that has a lot of capital. So you can also use your influence there. Maybe as an individual staff, but you can get organized. And we've seen many great initiatives how simple citizens took actions on exactly those type of institutional players. So there is ways to take action, political action, capital action, and on your own awareness. And once you start becoming aware, you will also start rethinking many things that you do. And what about recommendations for young. people, young humans who are becoming aware of climate change during their lives and that were

midway through the carbon pulse and some of these biophysical constraints. You were a few minutes late for this call because you were reading a story to your four-year-old daughter. What do we tell our teenage, college age or younger kids about the future that's going to be different than the last 50 years? I mean, first of all, what I would recommend everybody to do is also to understand the problem to work on solution for the problem. And part of the solutions are, I mean, in order to become part of the solution, it's good to understand your science. So if you can go in that direction and be part of the solution, understanding the science,

study the right type of subjects. So interesting. Not everybody has to become a scientist either, but you can also become a teacher, frankly. It's also extremely important or like an educator. in any sense. But yeah, create awareness and try to be part of the solution. I mean,

you can, so many, you can also become a content producer and create awareness. So there's, there's many ways for young people to, to engage in this. That's the thing that makes me slightly hopeful and also now in a capitalistic world.

Or what I often get asked. So why, why is climate change now an issue? We know on this for 30 years. Why is it actually becoming now actionable? Why are people investing into this now? The simple answer here is the people who are now, Now the asset managers and the decision makers and policy makers are of a generation that

has actually grown up with the problem, you know, and then slowly starts to understand it. And the previous generation kind of denied it a little bit. Now this generation, it's now as allocating the assets, making the policies. They've grown up with sort of an annual COP conferences starting in Rio, 92 or something, and sort of heard that climate change is a fact. We had to take 20 years to start. the people denying it. That's kind of over now. Most people understand that it's actually real.

And now we start seeing people allocating assets in this direction. It's partially that. And it's partially we see what's happening in Pakistan and in Europe and in Australia. And these things are kind of hard to deny. Yeah. Yeah. There's all exactly. We're starting to see effects much early than we thought we would as well. But yeah, we also starting to see real effects that are undeniable. Yeah. So what do you care most about in the world, Sebastian. Of course, I mean, care about, you know, what I would really like to achieve is to leave the next generation a place, which is not a lot worse than what we found it.

And that's a hard thing at the moment. It doesn't look good. It doesn't look good from our wealth perspective, from our environmental perspective, from our political perspective. It seems we are on a way to leave a mess behind. So if I can play a role in slightly improving a situation a little bit, that would satisfy my sort of personal side of it quite well. So we've talked about climate and CO2, but of all the issues in the world, what are you personally most concerned about in the next 10 years or so? Yeah, that we reach tipping points, that we can no longer, they're just not reversible tipping points.

And at that stage, we will have to move from mitigation to serious adaptation. Yeah. And in contrast, are there things that you've experienced or things that you're seeing that give you a lot of hope about the next 10 years? And what would those be? Clearly, I'm in this privileged position right now that every day I'm being confronted with solutions. I have a wealth of people that come to us every day with great solutions and great ideas and minds thinking about it. And this completely makes me hopeful. otherwise it couldn't be doing the job.

I mean, it's quite frankly, you have to be slightly looking through the world with an optimistic lens in order to appreciate the innovativeness of the people. And it is amazing. People are super inventive and not all of them will pan out all of these ideas. But, you know, we also just need to be realistic. We will need to see a ton of companies fail in the space too in order to make sure that a few good survive. So from that point of view, of course, I'm very privileged to. see a lot of people, very smart people, working on solutions. And we are now technology investors, but we see also so many non-tech solutions on a daily

basis we're confronted with that are also fantastic. And so, yeah, the human ingenuity is something beautiful. And that's what makes us stand out of species. So in contrast to an investor perspective, this final question might be a lot. little bit odd, but if you, Sebastian, were benevolent dictator and there was no personal recourse to your actions, what one thing would you do or implement to improve human and planetary futures? One thing, yeah. Or two things or three.

Yeah. One thing is hard to grasp. It would be really on a dictatorship. I would probably actually go for education, ensuring that everybody on this planet goes to school. Okay. The processing power that can come from there is amazing. And that we teach ecology in the school.

Obviously, I should have qualified that. Yeah, not just to any school, clearly. Yes, obviously it goes where we teach a school where we teach ecology and ethics and other important subjects. But yes, of course. But even like basic education goes a long way already. Of course, we will have our, in the Westernized world, we'll go further maybe. but basic school in certain areas would really help.

And I guess if we could force that to happen, we would solve a lot of these overshoot problems that are, you mentioned earlier on it's a symptom. If we can change the root problem, you know, the symptoms will also get less. That's why I think probably the main leverage is on education. There's also very complicated, but, you know, I'm a dictator now and I'm just going to tell everybody to do it. This has been great. Thank you for taking you had a full day at work and then you took,

care, your daughter, and now it's past 10 o'clock German time. And thank you. This has been a wide-ranging, informative conversation. I am sure that we will stay in touch. And to be continued, are there any other closing thoughts, advice, wisdom for people listening today? No, I'd like to thank you for the very sort of comprehensive way that you put together the stuff that you do and bringing the message across, thinking with this sort of holistic lens. keep on doing that. And I hope that people start listening more and more. I think you have some audience already, but more and more to you. And let's stay in touch and discuss the progress. We're still at the beginning.

Thank you, Sebastian. Gooden aband, my friend. Gooden abend. If you enjoyed or learned from this episode of The Great Simplification, please subscribe to us on your favorite podcast platform and visit the great simplification.com. for more information on future releases.