CARBON ENGINEERING: A DIRECT AIR CO₂ CAPTURE START-UP

The production of CO₂ from man-made sources is becoming a global concern^1,2,3. Without capturing CO₂ emissions at their source (CCS, Carbon Capture and Storage), scenarios suggest it may be impossible to reduce CO₂ emissions fast enough to keep global warming well below 2C⁴.

The scale of CCS required is substantial. Many scenarios suggest that around 10 billion tons CO₂ must be captured per year by 2050. If a typical average sized CCS facility might remove 1 million tons of CO₂ per year,⁴ then one average CCS facility would need to be built every day until 2050 to capture 10 billion tons per year. Estimates of the investment required to capture 10 billion tons per year range from $2-7 trillion⁵.

Direct capture of CO₂ from air (DAC) is a technology option that has some advantages. It can accommodate non-industrial sources (automobiles and heavy vehicles). Further, the capture plant can be located anywhere, perhaps near an end user, whereas industrial capture technology must be located at the source of the emissions⁶. However, direct air capture attempts to recover CO₂ from a very dilute gas stream, requiring more energy to make the separation.

Carbon Engineering. Carbon Engineering was a start-up employing direct air capture technology. The company was the brainchild of founder David Keith, now a Harvard physicist. It grew from research conducted on carbon management technologies by his research groups at the University of Calgary and Carnegie Mellon University. In 2009, it had enough laboratory data to suggest that its technology was ready to enter the Valley of Death that difficult stage in the commercial development during which technologies migrate from the lab to the market. Angel investors Bill Gates and Norman Murray Edwards, a Canadian oil sands financier and a co-owner of the Calgary Flames hockey team⁷, bankrolled the establishment of Carbon Engineering in 2009.

During its development, the firm received non-dilutive grant support from several Canadian government entities. By 2018, it had published many details of its process technology in Joule, a high-profile scholarly journal focused upon energy⁸. The authors explained that their process design choices were driven by a goal of reducing development risk and the capital cost of early plants, rather than by minimizing energy use or ultimate levelized cost. The authors also claimed that no prior paper provided a design and engineering cost basis for a complete DAC system for which all major components are (1) drawn from well-established commercial engineering heritage, or (2) described in sufficient detail to allow assessment by third parties. This includes the process parameters for each unit, material and heat balances, and process economics.

CEs process engineering benefited from close collaboration with industry experts. For example, CEs contactor was based on commercial cooling-tower technology, thus the design had benefited from close collaboration with SPX Cooling Technologies (SPX), a leading vendor. The pellet reactor idea originated in a paper that suggested use of a Crystalactor25 developed for wastewater treatment by Royal Haskoning DHV (RHDHV), and the process of calcination of CaCO₃ to produce CO₂ was developed in collaboration with Technips Dorr-Oliver Fluosolids Systems Division

The CE site also boasted coverage in the following media outlets⁹.

More recently, in March 2019, the firm announced it had closed another equity financing round and raised US $68 million¹⁰. Through this round, it added Thomvest Asset Management, chaired by Canadian billionaire Peter Thomson, as well as several Silicon Valley venture capital funds to its shareholder list. It also received a $25 million investment from the Canadian governments Strategic Innovation Fund to scale its innovations.

The latest funds will allow Carbon Engineering to bring its technology, which has been pilot tested in Squamish, to market at a commercial scale. The company also attracted minority equity investments from the oil industry in 2019¹¹. Both Chevron and Occidental have each taken seats on Carbon Engineerings board. Occidental wants to use the technology to find a sustainable supply of carbon dioxide that it can use to inject in its oil fields to increase pressure and extract more oil while also sequestering the carbon¹². Chevron, on the other hand, is looking to use CO₂ to produce low-carbon transportation fuels.

In 2020, Oxy Low Carbon Ventures, LLC, a subsidiary of Occidental, and Rusheen Capital Management, a private equity firm, formed a development company, 1PointFive, to finance and deploy Carbon Engineerings large-scale Direct Air Capture (DAC) technology¹³. 1PointFive and Carbon Engineering have signed a licensing agreement enabling the commercial development of the worlds largest DAC facility, a first step toward their aspiration to deliver this technology on an industrial scale throughout the United States. The Carbon Engineering business model is to license our technology to developers around the world to enable rapid and widespread global deployment of DAC technology, said Steve Oldham, Carbon Engineerings CEO¹³.

Question 41.5 pts

Your book also mentions that strategic alliances can be a type of social capital that could be important to young and small firms. Why do you think the strategic alliances pertaining to the firms process technology were important?

Question 4

A)The firm obtained equity investments from each of its partners.

B)The firm accessed valuable experience (e.g., lab units, deployed equipment)

C)The firm entered the construction industry as a result of its interactions with these key players

D)The firm established a network of equipment vendors who could eventually finance their expansion.