Cutting Carbon with Giant Mechanical Trees: Direct Air Capture

direct air capture is scale, not new technologies. The technologies for pulling c O two straight out of the air are largely proven, but need larger demonstration products to start to bring down the cost of capture, which right now is estimated at an eye watering six hundred dollars per

ton c O two. This week on the show, David steps in to tell us about direct air capture and how it works, the economics and how they compared to capturing c O two from point sources like power plants and industrial facilities, and the three hundred billion dollars already going into a handful of demonstration projects. Our discussion is based on report titled material Tech Highlight Direct Air Capture. BEENOF users can get this report on banf dot com,

the Benf mobile app, and the Bloomberg terminal. As a reminder, Beanof does not provide investment or strategy advice and you can hear the full disclaimer at the end of the show. I'm Mark Taylor and you're listening to Switch Don Benif podcast. David, welcome, Thank you. Can you just start it off really basic

and tell us what direct air capture is. So director cuture is a conventional carbon capture technology, but instead of capturing the carbon from a point source to general gas processing plan or a power plan, it cuptures the uto from the atmosphere. So it's basically a removal technology. So basically it's a thigulous a mechanical tree. It is. It is actually a mechanical tree, but using more an industrial approach. So yeah, similar to a three removal technology with the

main goal of taking C two out of the atmosphere. Okay, cool, So can you tell us what it looks like? Is it the size of a tree or is the size of refrigerator? The size of a house? What are we talking here? Yeah, so the size really depends on how much you two we are capturing per year. But actually we estimated that a conventional director capture plan for capturing one million sounds of C two per year that would

require around two square kilometers maximum. When we compare that to a first station, which requires around eight hundred square kilometers that's conventional first station, and also bio energy with CCS requires around three hundred, so we can see that director capital is much lower land requirements. So there were pretty much in a in a better position compared to

other room full technologies. Okay, So the idea is that I do not want to deride you know, planting trees, but like you can get more c O two sucked out of the atmosphere her unit of area than you could with a tree. Is that the idea absolutely absolutely much more, much more for a given land, you can capture much mercy two. We have director capture planted following other removal technologies as we said, our first station or

bio energy with CCS. Okay, So, I mean I think I know the answer to this, but like, can you tell us why this is popular? I mean, just for those who haven't heard of it, maybe it's getting a lot of attend to right now in the news and as an option for more reducing CEO two. And I guess that's the answer. Is there anything else that that comes to mind? It's popular mainly because companies are looking

for removal technologies. Right, So it is pretty much known that we will need some kind of removal technologies in the future to actually get to one point five. So companies are looking to direct air capture in order to remove their emissions. And also we are in a point in where companies such as Microsoft not only want to offset their current emissions but also the tons of SEO two that they emitted in the past. So you can only do that through removal technologies, and there is where

directed capture can also play a big role. And also it is true that there are other industries that are really hard to the carbonize, such as cement or still and there we will need some kind of removal technologies to offset the last remaining emissions that we will have in the future because some of the CEO two emissions, well a lot of CEO two emissions from cement production is actually process emissions that comes from the rock itself,

right exactly, exactly, Okay, okay, cool? Just to clarify, you know, can you just clarify for people one point five degrees in order to get to a worlding where the warming gets to one point five and not warmer, it is pretty sure and that we will need some kind of remote technology, so we'll need trace of for a station bio or two with CCS minoritization an the director capture in order to take out emissions that are already in

the atmosphere. So we need to take out tones of c or two from the atmosphere because carbon dioxide is the main greenhouse. Cassett causes global warming. So now that we've established that, you know, it can be a really great you know way to pulse CEO two out of the air. Can you tell us a bit about how that, how it does that? How does it pull CO two

out of the air? Director cup There is pretty much normal CCUS plan, but in set of character in CU two from a point source it takes out from the atmosphere right, so that there are main difference there such as for example, in a director capture plan we need the super large contactor a rise with funds that draw CU two into the collectors right, and there is where

all the chemical process happens. But just for for us to understand when we talk about the director culture plan is pretty much similar to conventional c c US facility that is located in a power plant for example, and this technology has been around four decades, right, But the

main difference is the cost. So the cost in the points is much lower than taking CU two out of the atmosphere, and that is basically because the concentration of C two in the atmosphere is much lower four hundred parts permilion when we compare that to point sources where the concentration is super high. It depends on the point source,

of course. But then if we get to the low hanging fruit fertilizer plants, ethanol plants there, the cost of culturing is pretty much very cheap compared to two current US the direct air cauntor that we estimate to be around six hundred dollars per ton. But again there are different technologies there, and the proposed that they're used for

is also different. We need to deploy conventional CCUS plans in those assets that we really wanted to carbonize and then use direct air caunitor for this really hard to carbonizing industries on to offset the last remaining emissions, taking advantage of high cost but super high modularity, easy to deploy technology, But how does it work? Like so specifically, can you tell us about you know in the note that you wrote there are basically two main methods of

capturing c U two. Is that correct? That's correct? Yeah, that's correct. Can you describe those? There are two different technologies that are used nowadays, one that is absorption and the other that this absorption that this would be difficult to pronounce, but the main difference in these technologies is how the chemistry works there. So absorption is a volume phenomenon, while adsorption is a surface phenomenon. So in absorption, the C two gets dissolved in the solvent, while in adsorption,

being the two are touched in the surface. We need more surface for for the same volume of CU two to get captured at the end. Okay, so let's let's let's break that down really quick. So adsorption solid sponge, let's let's think of it, correct, and absorption dissolved liquid. Does that work? Yeah, that's how it works? Okay, cool? And so those are two main methods of doing it. So can you describe some of the advantages and disadvantages

of each type of technology? The main difference is the temperator that the plan needs in order to regenerate the sorvent. So when we talk about liquid solvents, the temperator that is needed is around nine hundred degrees celsius. And on the other hand, for solid absorption, the temperator that is needed is around a hundred degrees celsius. So the difference there is much lower. And that's why in a liquid solvent plan that i'm plats are much higher. Wheels need

much higher thermal energy to regenerate the sorbent. Okay, so just to clarify, regenerate the solvent means you fill up the filter or the the sorbent and then you need to get the CEO two out so you can use the filter or the sponge or the liquid again. Right to me, it sounds like a no brainer. What am I missing that you know you have the nine hundred c regeneration temperature. That sounds like a deal breaker to me, and you would go with the one that has a

lower temperature. Why is their choice? Like? What makes this liquid sorvent good? That's a really good point, and there are many things that affect the overall cost. But when we compare solid absorption to liquid absorption, it's not only the temperator that makes a difference, but also the materials that we are using on the sorbent that is being used. So the serving is a big part of the gass.

And of course companies that are working with solvents use different type of sorbents and companies that are working in absorption or to use different types of materials on servants. So there's a key difference there in the materials that are used to power on, to captor to tow the end.

Forgive me from my terminology, but I keep coming back to the sponge and the liquid, right, But so you could you could say that the sponge is more expensive two produce and consume, I guess, and the liquid is cheaper, but the regeneration is more expensive. Is that right? Exactly? That's the difference that we are seeing companies doing, and that's that's what the industry is doing at the moment.

You also, there is a lot of demonstration in order to try to reduce the total cost the industritionarily stage, so it needs to get two economies of scale, get the specialized supply chain, demonstrate new servants. But that you're right, You're right, that's the main technology technology differences. Okay, okay,

I think we got it roughly. Now, can you tell us what the costs are you know, can you give us a ballpark estimate of how expensive this st first to do, just to give a starting point, current cost of Hunter are around six hundred dollars per ton of C two, so very very expensive when we compare it out to other remote technologies. But then again, as we were saying, the technologies in super early stages, companies are finalizing their pilot plants and trying to scale their technology.

So the cost is six hundred now, but it kind of declined, and it really decline. US technology scales more planted commission on build economies of a scalar, realized industries get specialized supply chains. And also these companies learn from operating these facilities, right, so they can reduce the cost

of operating and the opex overall would be reduced. And we thought the industry beliefs that we can get to point of around two hundred and fifty dollars per ton of cutuo pupture by twenty thirty and then around a hundred dollars per ton of C two by twenty fifty. Right, so current studies that are released by the company's working in director counter estimate taught in and of a kind cost, we could get two points around a hundred dollars per ton of C two counterct man. Okay, this is fascinating.

So we're gonna we're gonna go on a journey here of talking about this cost and what it actually means. So in the US, you know, correct me if I'm wrong, but there's a tax credit I believe called forty five Q where a company can get a tax credit for injecting CEO two into the ground of what is it now, forty five dollars a ton? I want to you actually get fifty if you started on thirty five. You're using

foreign hans recovery. Okay, cool, So we're hearing that that is, you know, at least bordering on commercially viable at this point, is that right? That's therrect So point source. You get to a point where the cost of cultury is lower than fifty, then yeah, you can make it a business case out of eats. Okay. So we're at six dollars a ton, now three hundred dollars a ton in ten years, eight years, and then the end of a kind at a hundred okay, So even that doesn't quite compete with

what you're telling me. Right now for point source capture. But what I would take from that is that this is you know, personal opinion. I guess that it just doesn't matter, right because my assumption here is that direct or capture we will mostly be important for companies that want to offset emissions and this might be the only option they have to do it. I don't know, is

that right? That's right? Just when comparing a conventional CCUS plan, if we are actually covering of the CEO two that is released in these point source plants, it's a power plant for example, there is the other attemplature scent, these tem per cent of emissions also need to be offset at some point, right, so when we deploy all the technologies, there would be emissions that we need to be removed.

And that's for a direct our company role. And also you're absolutely right when we compare it costs of point source to direct air capture, it is through the director clupure is much more expensive. But we are seeing pathways where director capture come be valuable for companies to follow instead of paying the taxes super high current taxes expected

for example in Canada or Norway. Cool okay, So it sounds like an option of several over time, and it sounds like it also could be kind of like equated to the last mile for deliveries, right like your last ton of c O two to squeeze out in your in your offsets exactly exactly. So how much is this actually being used? We know it's early stage, but just how early stage? Right now? How many tons of c O two are currently being removed from the atmosphere via

direct air capture? Estimates say that a bit more than six thousand tons of two can be captured per year using direct air capture facilities already commission so that's super low. That's very early stage. But we are seeing how the industry is making progress. Companies are expected to commission larger scale plans, so we're really seeing a change there. For example, there will be a plan to will big emission this year that we'll have a capacity of four thousand tons

of C two rights. So if we compare that to the overall deployed capocity, that's already a significant a bondsman, so there is significant progress there. What it is through that we are in early stages of development of the technologies. Pilot plants have been built on the largest scale plants or plan to be built in the near future. Okay, so just to recap super early stage, super expensive, but could play a really important role in in taking C

or two out of the air in the future. When we come back, we're going to talk about those pilot projects, what's being done, who are the main players, and how they're hoping to scale. Stay with us, so let's talk about who's doing what can you tell us who the

main players are in direct air capture? There are mainly three big players in the direct hair cutter space and taking all their fundings together to put that into perspective, they have raced more than three hundred millions right, and these three main players are first Carbon Engineering, second climb Works and third Global Thermostat are the all US companies. Global Thermal Stati is the US company, Current Engineering is from Canada and Climworks is actually Swiss company. And what

are they doing? So? What technology has they chosen? What is their status report? So Current Engineering is following the liquid absorption technology that we were talking about before, and climb Works and Global Thermal stack the solid absorption pathway and they also have pretty much different plans to scale their technology to put that into a current view of

the industry. Climb Works is the company that we commissioned the four thousand tons per year facility this year, but then Carbon Engineering plans to commission a one million tons per year facility by four that's two hundred fifty times larger than the current largest back facility that will be commissioned by Client Works. So there is massive progress in

the industry there, Uh, skeptical. So I don't know for those listening, Like I think I mentioned this several times before, but I used to be a CCS or carbon capture and storage analysts ten years ago, and there's all these announcements about projects, you know, big projects that were coming online, and you know, big pilots as well. You know, company would say we're gonna build three of these, We're gonna build four of these, and I would always just say, well,

show me one. And that resulted in us putting together this thing we called the race to first, you know, who was going to actually build the first commercial scale UM or large scale CCS project and we would track and detail the progress of each project. So can you tell me? You know, there's a big difference between a company saying they're going to get a pilot project or a commercial scale demo done and actually doing it. So can you tell us about how far along they are

or is that known or not? Yeah? So, for example, for the facility that Climbers will build this year is pretty much in super advanced stage, so alright, alright, cool, only finished in Iceland, so that's looking great. Of course, looking at twenty twenty four, which is the year when Current Engineering expects the commission there one million ton per year facility, it's more uncertain there. But it is true that these companies are bagged by super large oil corporations.

For example, oxy is partnering with Curbon Engineering, right Excellent is going with global thermal style, so there is really bugged there on now, Director Canter lives like the main part of the carbonization solutions for large oil corporations. Okay, let's come back to that, but let's talk about the pilot's really quick and fine. I'm sold. It sounds it sounds promising. So the one clear question in my mind is is okay, so why Iceland right for a for

a demo for direct air capture. The good thing about the facility that climb Rooks is building in Iceland is that it is taking advantage that is located next to a thermal power plan, So basically it's taking the heats and electricity produced by the gil tormal plan to power the process. So all the energy requirements are coming from

the gil term power plant. Plus, Plant Works is also partnering with card Fix, which is a company that mineralizes the U two, So in this facility, the c O two is basically mineralized on a story in the long term. So there's two advantages that are the first that the facility is located to thermal power plant and the second is that the C two is stored through minoralization. Okay, I'm just gonna nerd out for a second that that's

really cool. So, like everybody listening, I'm sorry, I used to be a geothermal analyst who ten years ago, and I've been to this plant, the Hellociety plant in Iceland, and and if anybody's interested, they have a really cool visitor center you can go check it out, you know, and have a look. But what's really cool is that this project kind of a I don't know if it's

a dark secret, but whatever. A thing about geothermal is that there's there's c O two in the ground and sometimes when you pull up the water while c O two is going to come out too. And so one of the justifications I think for this plant was that it can help capture some of the CEO two that's admitted by the geothermal activity or the geothermal production and therefore making this plant even more environmentally friendly, which is

really cool. And Iceland has a unique well unique chemistry that can fix the CEO two in the rocks below, unlike you know, other locations where it would just be stored, so it'll instantly mineralized. And it's really just a pretty cool thing. I question the you know, the ability to scale this out much much further in Iceland, you know, being so so small, but it's a super interesting choice for a pilot project. It is to scale this up to tons per year. Oh wow, Okay, that's really cool.

That's really cool, and that seems to be the challenge, right. So from your note you said that the technology has basically proven, but the challenge is scaling it up, is that right? And getting the cost down. Can you talk about what companies are doing to try to jump this hurdle of of scale up. Companies are following different approaches, right, So for example, climb Works is the company that has commissioned more plants, but they are all super small scale.

But then taking advantage of ducts moderority, climb Works is following different paths there. So for example, they are doing a project in Norway to produce liquid fields. So taking the sitoo that has been captured and partnering with Sunfire and others, they are planning to produce liquid fields. Then they are building the facility in Iceland which is actually storing through minioralization the sudwo that has been captured, then

moving on to blow a thermostat. They are providing the sutwo for carbonated rings and then moving on to oxy. What oxy is sorry one oxygen current engineering moving onto carbon engineering. What current Engineering is doing at the moment is partnering with oxy to provide them with you two that will be used for enhanter recovery operations. So there are really different approaches there, all of them taking advantage

of the moderity that director capture provides. So I was they about this morning right that when you talked about the well the enhancesful recovery. You know you're capturing steal two to pull up more oil. That sounds like a you know, kind of a paradox, I guess. And then I think in the note you also mentioned that to get the heat required to regenerate the liquid sorbi, and

they were burning natural gas. Right. To me, the comparison that I made in my head was that, Okay, that's like getting an electric vehicle but charging it with a diesel generator in your back garden. So it's kind of like, you know, mixing your your goals here. I think I came to terms with it that it helps these companies get to scale and come down the cost curve. Right, It's a means to an end. Is that how you're seeing it as well? Exactly? I think that's how we

have to see at this point. You're you're absolutely right, just burning natural gas. I mean what comment engineering sting is the missions that are released from burning the natural gas are also captured, right, So look looking at the whole solution. It is actually the one million twentyes C two that is being removed from the atmosphere, right, and then there is the C two that is also a capture that comes from burning the natural gas. And you're right,

I would say that foreign haunter recovery purposes. This is helpful now to help it to a scale drive town cost, but in the longer term we will need director capture for a propose that the main goal is to remove emissions from the atmosphere, not to keep pumping more oil cool Okay, that makes sense. And so who who are the main drivers behind this? Like right, so it's a there's startups, you know that they're that are involved in doing it, But who are the drivers that are saying

they want to buy it? You know that they want to that are interested in besides those that are looking to use the downstream CU two. There is the big thing the offset offsetting there, right, So we are seeing companies that are really interested in directory capture because of the offsetting potential. So companies that not only want to remove the missions that they are currently releasing in a per year basis, but also they want to remove emission is that they've released in the past, such as the

case of Microsoft for example. So Microsoft Microsoft is investing in client works as part of the twenty thirty portfolio for removal technologies. So there is really the focus of companies that really want to offset their emissions in a easy to monitor way and verifiable way that are looking into director capture. That's cool. Are we seeing others besides Microsoft that they're jumping in this early and there are other other there online web pages that are partnering with

climb Works on current engineering as well. So there are there are companies that are interested in these director capital approaches, but the biggest announcement probably was the one from Microsoft towards climb Works. Okay, so a couple more questions. Let's talk about what the future looks like if this goes right, It would seem to me that you would want to put these facilities in places that are really close to

storage locations. Is that right? Is that what we're starting to see, you know, besides enhancebul recovery, you put it in places where you can inject this year two? Is that correct? That that's correct? For example, in the facility that climb Works is building next to the to the storage site, but also the one that they are building for equid fields production next to the facility that will produce the liquid fields, so we don't have the transport

cost there, right, Okay? Cool? And so like we can start to predict like where these facilities might be. And and it sounds from what you're saying, they could be modular too, so they could just make them bigger and bigger and bigger as you go. Is that right, that's right, that's right then that that's what we're seeing from companies. So all these companies, they say that their technology is very very modular, so scaling their facilities is relatively easy.

Scaling their capacity is easy because they just need to build more modulus and place then next to each other. So you could basically deploy your director PUD director capital plan where you want and also scale as you want

as well. And I guess on one more thing on location, where's China and all this At the moment, there are no really big main players working on director capital in China, but of course that the focus that they industry with Leo Cats, and I'm sure that this will be the point that we will hear a lot talk about in the future. That's one way you could come down the cars curve, right, is that China jumps in and starts

building building these things like crazy. Absolutely. Absolutely. The main thing there as well is just taking taking advantage of the incentives available. Right. The companies don't see incentives in China, then they go to the US, for example, to take advantage of the forty five Q which is what we mentioned or the low current field standard to produce lou good fields for example. Is there government support anywhere besides

the forty five tax credit? When CCS was making a lot of headlines, you know, a decade ago, there was billions in government support for pilot projects. Is that looking

to be the case here as well? There has been government funding in the UK for example, in the US as well for the deployment of director capital technologies raised Also of these hundred million you have fun or challenge that Ellen Mask has done, which is kind of massive as well, But these companies have raised significant funding, right so what they need at the moment is a large

amount of money talking the order billions to scale their technology. Okay, so it doesn't seem like there's a huge money from government's going into pilots or demo projects. But can you also describe this. Is it a prize from from Elan Mask or what is that? That is actually a price from Milan Mask that was announced this year, but that's

for different remobile technologies. But it will be very cool in order to see the role that direct hair capitual places there, because other removable technologies can play role through ocean in oritization, etcetera. So it's not only focused on direct hair capitual, but it will be cool to see the role THATTTAG place given how much focused on how much attention the industry currently has one final question, so what is the what is the next step in our

research in this in this area? Are we gonna keep going with direct air capture? Is there? Do you have a pipeline research that your questions you want to look at or what what are we seeing? I personally think that the next thing to look at is to see the progress that these companies are doing in their announcements, so really seeing whether this plant are being commissioned, construction

has it started. How the utilization market evolves as well, right, so climb walks for example, that is doing the fields facility. How all these markets that are focused in utilization and that can bring new revenue streams evolved, So that's a big part. And also making progress on driving down the cost learning from operating the facilities driving down capex as well. So the focus is really understanding how we can drive down cost and then understanding the role that the instigization

market will have in the overall deployment of Director Cutter. David, thanks for joining. Thank you Mark. This week's show was produced by Ava gonzalezi Isla and edited by Rex Horner of Grace Took Media. Bloomberginniac is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment advice, investment recommendation,

or recommendation as to human investment or other strategy. Bloomberg Aniac should not be considered as information sufficient upon which it makes an investment decision. Neither Bloomberg Finance Lp nor any of its affiliates makes any representation or warranty unders the accuracy or completess of the information contained in this recording at any liability as a result of this recording that expresses