¶ Intro / Opening
Latitude Media Podcast. tier of climate technology.
And so was there a moment where you were asking yourself, is this gonna happen or is this all gonna come crashing down?
Yes, but I think the question was, is this worth it?
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Is this worth the total? the team, is this worth the capital that we've raised? We look around and there aren't a lot of first of a kinds. There are very few climate tech companies who can say they're operating at commercial scale and that the customer is accepting the product and it's a lonely place to be the only one and not know what's on the other side in the thick thing.
In twenty twenty-three, Shreya Deve was in the middle of building a large filtration system. But not just any filter. This was a first-of-the-kind membrane designed to replace energy-intensive industrial evaporation at a paper mill. It was her company's first commercial project. and they were racing against multiple clocks, including the weather. Winter was coming.
We were building in Grand Prairie, Alberta. I think the average snow load is something like six or seven feet and you cannot break ground at any other month except for June to September, October.
uh because the ground's frozen and we knew that if we didn't break ground in June, then we were probably not going to be able to finish the project in the timeline that we needed to. And if we delayed the project, then we were going to need to raise more capital in order to manage our our burn to to complete the project.
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And as the complexity of the project grew and deadlines neared, Shreya faced a familiar feeling for many founders self doubt.
I think that there were moments where I wasn't I wasn't sure if we could get everybody on the same page in the time frame that we needed to.
I'm Lara Pierpoint and this is The Green Blueprint, a show about the architects of the clean energy economy. We've already invented most of the solutions needed to decarbonize the global economy, but many of those technologies are not yet commercial and need to get financed and built at scale. We don't have decades to get them commercialized, we have years. This week I spoke to Shreya.
The co-founder and CEO of Via Separations on the risk of going big. When the company faced two paths, scale up 10x or 100x, she made a decision to scale faster. And that put VIA in a race.
people talk about climate tech is hard. This is what tough tech is.
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¶ Reinventing Industrial Separations
Via Separations is named after the process the company is trying to reinvent.
Industrial separations are a process that exists throughout the manufacturing sector. So these make the raw materials that go into paper products, into plastics, into synthetic rubber, fertilizers. It's part of how we make the the goods that are frankly foundational to our society.
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Take a baby's diaper. Have you ever wondered how trees become the fluffy material that makes up your baby's underwear? Or even more importantly, have you ever wondered how much energy it takes to make one of those?
Industrial separation is part of the magic. Making diapers involves turning wood chips into a mix of water chemicals and biomass, which need to get separated in a series of various steps. The problem is that certain parts of that separation involve evaporation, which takes Takes a lot of energy.
So about 70% of the cost of producing a raw material or chemical is the separation step and largely because of the energy that it consumes. We've been separating chemical compounds from one another using evaporators and distillation columns. which use industrial heat or steam, typically from fossil fuels, in order to uh heat a mixture up. The analogy I use is it's like a pot of pasta.
Explain this pot of pasta. So let's say you have a mill that makes the fibers that go into diapers. First, the mill takes out the usable fibers from the wood with heat and chemicals. And that leaves a big pot of useful byproducts like biofuel and chemicals mixed with water. That goopy mix is the pot of pasta.
Today we boil off all the water to get to the pasta at the bottom of a pot instead of pouring it through a strainer.
So that sounds crazy because we all know that we don't actually make pasta that way, but this is essential to how industrial separations works today. For diapers, the remaining biomass needs to be separated into parts in order to make the process work. The chemicals need to be reused for the fiber removal process and the biofuel needs to be used to run the mill. But separating out all of that extra biomass into parts takes a lot of energy.
So instead of boiling off the liquid, via separations developed a graphene dioxide membrane, the pasta strainer that removes water and skips a lot of that carbon-intensive evaporation.
Which at the industrial scale is 90% lower energy, fully electrifiable, and more modular and therefore demand responsive.
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So a lot of industries, mining, pharmaceuticals, fertilizers, end up with mixes of valuable materials that they want to separate. Shrey and her team were looking for a way to extract them with a lot less energy. And that's what led them to develop a graphene dioxide membrane in the lab.
We came out of an academic lab at MIT with a concept and a very early lab stage proof of concept. We scaled that up to a place where we were in the form factor of what a commercial system would be like, but at a very much smaller scale and uh still still working in the lab. We did our first field tests in the peak of COVID in July of 2020 at the first paper mill that we had really tested at. And we learned a lot, a lot about this the pasta strainer or the membrane filter itself.
But we also learned a lot about the balance of system, the pumps and the pipes and the things that were going to be required to deliver the whole product.
¶ Deciding on 100x Scale
And this brings us to twenty twenty-three when Shreya had to make some hugely high-stakes decisions about proving commercial viability, including whether to scale 10x or 100x. Via spoke with several industrial plants that were very interested in retrofitting their separations processes to make them much more energy efficient. This included a paper mill run by International Paper, who happens to be a major manufacturer of wood pulp products.
I talked with Shere about finding her first customer, grappling with how fast to scale, and what she would have done differently.
We had the opportunity, we were looking at two different sites for this first of a kind plant. I'll call them A and and B, where we ultimately went with B. Uh A was easier to get to. We had a longer-standing relationship with that particular facility and the cast of characters. And B was far away and relatively new to us. And also incredibly enthusiastic and knowledgeable and a very well-run facility. And so those were the things that we ultimately decided on was the the individuals and the
sort of corporate shepherding of a new technology was was both very important to us, continues to be very important to us. I think An example here is when we were negotiating that contract, it was very explicit to all of us that this was a first commercial system, that this was the first that that we'd never done this before, that we'd never delivered a project before.
And uh some might look at that and say, Well, why are you admitting that? And the uh the the the way we looked at it as uh let's be honest and open and transparent from the get-go with the customer. So that when we hit a road bump, because we will, we are all in the same boat together.
All right. So you got your one pilot. You haven't sold anything just yet to these commercial off takers, but now you're ready. So what is the first set of decisions that you're aiming to make?
So we are thinking about do we scale up? How far do we scale up? Do we do the classic chemical engineering 10x or do we go to a full commercial plant? And we define commercial plants. as uh having a material bottom line impact to our customer. And so the big difference between 10x and 100x here was that 100x mattered to the customer and 10x was a step to getting to matter to the customer.
We thought a lot about the engineering risks, the scientific risk, the financial risk across those two options.
So take me into the board meeting. We were discussing these options. What are what are the arguments on both sides of the equation? Because this is such a huge challenge that so many startups are having when it comes to this question around what they do next.
For context, our commercial pilot system had two racks of six membrane modules and our f commercial first of a kind system has 600, over 600 membrane modules. But the modules themselves weren't 100x. They were about twice as large. And so there wasn't a 10x or 100x question on the membrane modules themselves.
There was absolutely a 10X or 100 X question on on the number of modules and then the the engineering around it, the pumps and the pipes and the foundation and the weatherization and the control system. Uh those things were were vastly different between the 10x and 100x.
So when we're thinking about uh in the boardroom, when we're thinking about things, we're thinking about okay, in the success scenario, we go straight to a hundred X, we start generating revenue, we've proven both the technology risk retiring and the and the model, the business model uh with which we're selling to the customer, or we hedge a little bit and take a ten X step on the way there. The
10x step though, easier engineering was going to take just as long as getting to a hundred X because our lead time was defined by system components. When you purchase an electrical box or purchase a pump or purchase a a component that has a long lead time, you can't deliver the whole system until after it comes. And so the lead time was the same for the 10X or the 100X because there are fixed costs.
that are there regardless of the scale of of the project. So for example, tie-ins for us are a fixed cost. Actually integrating into the customer that is there whether you're doing a 10X or a 100x. uh regardless of the size. And so those fixed costs matter a lot more for a smaller system than they do for a larger system.
¶ Financing and Building the Project
Let's also talk a little bit about the financial side of the equation, which as you know is near and dear to my heart. So you're here, you're ready to build a hundred X scale up factory. You've got a partner who's excited and willing to work with you. What were some of the alternatives that you considered around how to finance this commercial facility and where did you wind up?
Yep. So um how to pay for it was obviously very front of mind. We were uh at this position, so this would have been summer of 2022. We had raised our Series B the prior fall. So we had a bunch of cash in the bank, a lot of which was earmarked towards the first commercial project. But we did not want to use it all for the first of a kind plant.
And so I was kind of pounding the pavement talking to early of a kind funds. And what I learned was that the project finance that I had hypothesized was out there for for first of a kind systems was not. um that those were truly and and probably should be uh early of a kind. So maybe you're not meeting your full um full IRR expectations, but you're you're most of the way there. There's enough money to spread uh across the across the multiple parties.
Uh this project uh was not a good fit for that because we didn't have a full picture of the designs until we were we were very close to d delivering. Uh we didn't have the contract signed until two months before we broke ground. We did not have the finance cap capacity on our team to deliver project finance at the time. So there were there were there were a number of factors here.
And instead, we uh started to look at things that were a little bit more corporate focused. So things like equipment loans, things like venture debt. uh things like additional equity. Um and that's actually where we landed. So um one thing I should mention that I haven't mentioned is that uh a lot of our relationship with this customer with with international paper was thank
To a a grant that we won from Natural Resources Canada, which really catalyzed the whole project. And so when we're looking to to finance it, this was on the back of having won an award. that we were we were executing on and that we were delivering on, uh, but it wasn't enough to to deliver the whole project. Uh but it but it was very much a catalyst. And so uh some of the capital did come from grant, but the majority of the capital came from equipment loan and and equity dollars.
Okay. And can you say what the breakdown was specifically around the grant versus all those other pieces?
Yeah, the grant was a roughly ten ish percent, um, and then it was roughly a fifty-fifty split after that.
Okay.
So now you're getting into the moment where you're building this project. Uh who is your engineering procurement and construction firm? How are you thinking about the decision around what you own? and what you are contracting with others to provide when it comes to actually building and delivering the project.
Well, we decided to be our own general contractor so that we could stay very close to the engineering the EPC, the engineering, procurement and construction phases of the project. We did that for a couple of reasons. The first is because we wanted to be able to uh take those learnings for the future.
and be able to translate those into cost down, into optimization, into the the data gathering that that we were doing. And the second was because we um did not have a a partner who could do everything. There was no kind of one entity that both knew the facility and the customer and the ways that customer worked. as well as could deliver the things that our team needed them to do, as well as procure, for example, on the lead times that we required.
So we did not follow the traditional FEL process for this first of a kind system. We did much more of what's called a design build. And we did that intentionally for speed. We did that because uh as a venture-backed company, uh We have a burn. and delaying the construction of our project means that we're we we are burning regardless. And this a little bit goes back to the 10x or the 100x conversation. In order to deliver a project like this, you need a certain number of s of skill sets.
uh you can't necessarily contract all of those skill sets. And whether it's a 10X system that doesn't generate revenue or an 100X system that does generate revenue. we ne still needed to employ those people. And so your fixed costs are just very high. Um and as a result, we we looked to we looked to speed. We look we did things to bring our lead time for pumps in by eighteen weeks or twenty-four weeks.
Uh we did things that brought our delivery uh in b by releasing design packages on an as needed basis as opposed to all of them uh complete up upfront. Uh but that also comes with a downside. You know, that that does mean that you end up in a place where sometimes you have to do rework because you designed a package and then you learned something down the road and you've already done some of that that build. Uh and it also comes with the fact that because we did not work with one single EPC.
we didn't have um oh nor did we have the designs, we didn't have a firm fixed price contract. So we were working on a time and materials basis with a number of different partners, all who contributed very important things. to the project, which l also left us as the sort of general contractor exposed to cost over And so it was at the end of the day our responsibility to navigate everybody's interests to get to a completed project.
Um, when you talk about all that stuff ahead of time, it's a lot easier. When you're talking about it in the thick of things, it's a lot harder. And as you know, Lara, you know, I'll be honest, I I had some moments where I said, Are we going to finish this project? And uh and how am I going to align all the all the parties that we have here?
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¶ Overcoming Construction Challenges
This brings us to the moment of doubt that we heard at the top of the show. Headed into 2023, Via had the technology, the financing, the construction plan, but Shreya knew they had a very tight window to build literally just before the ground froze. And then the logistical challenges started.
So something we learned uh during the project was uh a lot about the the local labor market. So, you know, we talked about the location, how it was hard to get to and far away. But it is also on the edge of the Alberta oil sands and as a result Uh it's very rural and uh labor is uh more expensive than uh other projects that we were considering. Um we knew that, but we did not know to what extent.
extent until we were i in in process with the with the customer. So I think that was not an unknown unknown so much as a an area where the experience extent of the of the known was was not complete. There are things you have to think about, like bringing folks in from the nearest city a and and making it worthwhile for the welder to um come and be away from family and
d dil deliver qu good quality work, which means uh providing overtime, which is great for our timeline uh and less good for for our budget. These are the the very real aspects. of the project delivery process that we didn't have time to do as a venture backed company.
So people. So that was one thing. Um, the location, in addition to being a place that was snowy, was also far away. So that was another thing that created some challenges for you, right?
Yeah, so just like any any startup, our team uh wears a lot of hats and uh many people from our team have spent many, many hours both traveling to and from and also in the field at the at the site. It's far enough. that uh when you go you wanna be there for a little while, but that also means you're s you know, away from your family and away from your your routine and and and your day job because that doesn't necessarily go away either.
We knew this going in and we decided to take a bet on the team here, but I would be remiss if I didn't mention the toll it took on our team to to do all of that travel in the middle of winter. Winter means flight delays. That means that if we had folks on shifts and were relying on them to show up, then we needed to schedule a couple of days extra on either side. That was a big um a big feature of the project for our company.
And so was there a moment where you were asking yourself, is this gonna happen or is this all gonna come crashing down?
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Yes. But I think the question was, is this worth it? Is this worth the toll on the team? Is this worth the the capital that we've raised? I can unequivocally say right now, yes. Uh on the other side of it, I can unequivocally say that when it is successful and it is running and it is smooth and it is working and we have proved what we set out to prove, or at least the start of it, um, because time time does matter. But I will say that i there were there were moments where
We look around and there aren't a lot of first of a kinds. There are uh very few climate tech companies who who can say they're operating at commercial scale and that the customer is accepting the product. It's a lonely place to be the only one and not know what's on the other side in the in the thick of things.
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¶ Gaps in Climate Tech Financing
Among the things that is challenging in this space is the financial resources that are available. And you really spoke to this eloquently around realizing that project finance and first of a kind commercial climate technology installations are not necessarily compatible. I'll sort of
post that as maybe my dramatic understatement of the year. Um, what do you think is the right answer here? Because I think, you know, part of what we see is that venture is potentially one way to get these things done. It is a way that things are getting done.
But it was really challenging. It really does intertwine, you know, your success with the as a company with your success at the project. And it's expensive to raise venture money. So what do you think is Do you have a sense for what is the right mix or is there something else that's needed within the financial asset ecosystem that doesn't exist yet?
At the risk of putting the problem onto other folks. I I I don't think it exists yet. I I think that there is uh an in between project capital and and straight equity capital that that may have flavors of of catalytic f philanthropic ca capital. or other debt products like equipment loans that wrap into a more diversified risk, um, so that it's not coming from any one single place. Um, it's not
A new concept. Obviously, that happens uh in pro in project finance already, but I don't think that we have figured out. the right ratio of those types of capital that makes sense for everybody yet.
Yeah, I think that's a that's a really helpful comment. One of the things that's going around in my head is like I think we're gonna need some complex stacks of different kinds of capital to get these projects going forward. And the really big question is which of these become repeatable, particularly across technology spaces?
I think that's right. And I think what's also important is recognizing that every first of a kind, not every single one, but many first of a kinds look different from each other. Carbon capture offtakes look different from cement plant offtakes, look different from, you know, in our case, retrofit or or brownfield project off takes. And I don't know though I think we are getting there that we have the full vocabulary.
to speak about and then understand those various types of off takes. Um I could be wrong. I don't spend a lot of time in other people's off take agreements, but I I do think that that's an element here, which is we are starting to build The the vocabulary and the and the talking points, but we're not quite there yet because we've historically really only done solar and wind.
¶ Future Plans and Key Learnings
Okay, so you had talked Shreya about serving as your own EPC. What about in your next couple of projects? Is that something that you'll continue as a model or is there a point where you see bringing in someone else ultimately to serve as kind of your general contractor project manager?
There are there are pros to both. Um, when we are closer to the engineering, I think there is more opportunity to value engineer and to um uh make decisions that would otherwise be too too far, too much at arm's length. But there's a lot of value to wrapping the project with an EPC and with uh leveraging the experience and the skill set and the buying power uh that an EPC has.
In the near term, we are going to work with our customers to see which uh which model or where in on that spectrum is the best. for them. That will depend on location. That will depend on their relationships with EPCs. And it will also depend on how we are selling the project and and how quickly we are looking to deliver it. But we are we are very much um very much open uh to and expect to leverage EPCs.
What did you learn from all of this? What what is one thing, if you think about it, that you might have done differently?
One thing I would have done differently is uh recruited the the project delivery team sooner. I think I made some assumptions about what the company needed in the moment versus what the company needed a year or two years from that moment. and uh could have kind of foreseen some of the the project delivery um aspects that made some of the challenges harder on on the back end. I think if I would have would say one thing we did correctly was picking our partner.
And I think that the fact that when things were hard, we could feel confident that we were also sharing that as opposed to hiding that. And I think that that was a a big piece of value. And then I I gotta say that also on the positive side, my co founder and our CTO, Brent, is just a phenomenal source of truth, just a phenomenal beacon of why are we here? What are we doing? What are we delivering? And a a reminder that this was this was going to work. We just had to get it there.
And here we are sitting at uh more than two thousand hours of operating data with a zero percent yield loss. And he knew that and that I knew that. reflecting on it is is a is a really cool thing.
That's incredible. So what comes next? What are your next couple projects?
Yeah, so we're scaling. We are uh taking the data and uh and the lessons, but but also the data from this first of a kind project. We uh that is the biggest project we were will ever build. So we're building a couple more projects that have uh larger capacity, but are are lower in cost and footprint and and all those sorts of things because they aren't first of a kind.
We're engaging with EPCs to do that. We're following the traditional FEL process because we know enough to be able to do that now. Not not know enough that it's a good process, but we have enough data that we can design based on that process. And you'll see us at your neighborhood pulp mill in the near future.
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Shreya Deve is the co-founder and CEO of Via Separations. The Green Blueprint is produced by Latitude Media in partnership with Trellis Climate. The show is hosted by me, Lara Pierpoint. Our producers are Aaron Hardick and Daniel Woldorf. Ann Bailey is our senior editor. Sean Marquand is our technical director. Stephen Lacey is our executive editor. If you'd like to suggest topics or guests for the show, send an email to editorial at latitudemedia.com.
You can listen to the green blueprint at latitudemedia.com or subscribe wherever you get. And if you have fellow clean energy or climate tech travelers who would benefit from the insights in this show, send them a link. This is the Green Blueprints, a show about the architects of the clean energy economy.
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