Syntholene Energy Corp. (formerly Synergetics) has agreed to enter into a reverse securities exchange with GK Resources Ltd., a company listed on the Toronto stock exchange (TSXV: NIKL.H). Read more at the link.
XPRIZE announced its carbon removal winners on Earth Day and Planetary Technologies, a Nucleation Capital portfolio venture, won a $1 million XFactor award for it mCDR technology.
Published by Valerie Gardner in Carbon emissions, Carbon markets, Carbon negative, Climate change, Energy transition, NEWS, Portfolio Venture, Solving climate
Nucleation announces its investment in Twelve's Series C through its Fund I.
Twelve's tagline, "a world made from air," seems quite incredible at face value. The average person may not realize that gaseous components of air, like CO2 and H2O molecules, contain the ingredients required for hydrocarbons, namely carbon and hydrogen. Twelve, however, has managed to develop some special technology that finally makes it possible to take CO2 and H2O, run them through an efficient electrolysis process, and get CO and H, which can be blended to create synthetic hydrocarbons that are exact substitutes for kerosene and naptha, which until now, have been produced from oil that has been extracted from the ground.
We all know that burning oil, coal or gas and releasing CO2 emissions is what is causing our atmosphere to warm. With every gallon of gasoline burned, we're releasing 2.7 times that volumetric amount in pollution, most of which converts to gas that is invisible to the eye but which traps solar radiation and warms up in the atmosphere.
Twelve's technology, however, utilizes CO2 that is "captured" rather than released into the atmosphere, and it blends that with hydrogen extracted from water using an electrochemical process powered by clean energy, to create a carbon-neutral high-octane fuel that is chemical identical to kerosene, also called Jet A. Twelve's sustainable aviation fuel (SAF), which it calls E-Jet, can be substituted as a way to enable the aviation industry to achieve carbon-neutrality between now and 2050.
The key for Twelve, which uses a "power-to-liquid" pathway to create its carbon-neutral E-Jet, is to be able to power this production without releasing more carbon dioxide in the process. To do so, Twelve needs to have access to abundant, always-on, affordable and clean energy. Which explains why Twelve opted to build its first production plant not in California, where the power mix is primarily natural gas, but in Washington State, where Twelve can get access to hydropower.
With that source of energy, Twelve's fuel, once deliveries begin later this year, can help reduce aviation emissions by as much as 90%. In the future, Twelve's growing E-Jet production business will benefit from being able to cost-reduce by being sited near sources of supply for its E-Jet, captured CO2 and airports where its customers refuel. We suspect that, in the future, being able to site a small advanced nuclear power plant near where Twelve's factories want to be, could give them yet another competitive advantage.
Meanwhile, the airline industry's projected demand for SAF far exceeds all known production from all sources, so in the short term, Twelve is able to sell its E-Jet fuel at a premium, while also qualifying for a myriad of local, state and federal incentives aimed at helping businesses like Twelve scale up production capabilities in combination with non-dilutive grants and sales of Scope 3 carbon credits.
Twelve's current Series C financing is providing it with the capital it needs to finish manufacturing its initial stock of reactors and complete the construction of its first commercial-scale fuel production plant in Washington State, where Twelve has a firm contract for hydropower sufficient to meet its production needs for now. Twelve is on track to begin this production and begin delivering initial quantities of E-Jet to Alaska Airlines for use on its flights later this year.
Nucleation is thrilled to have co-invested in Twelve's Series C round together with DCVC, Capricorn (Jeff Skoll), TPG (private equity), Pulse Fund and join many other investors, which include Microsoft, Shopify, Alaska Airlines and the US Air Force. In 2023, Twelve was name one of the Climate Tech Companies to Watch by the MIT Technology Review and was featured in this Bloomberg Green article, Microsoft-Backed Clean Jet Fuel Startup Fires Up New CO2 Converter, a Bloomberg Originals Episode: Dusk or Dawn and other press.
In addition to SAFs, Twelve's reactors can produce a range of carbon-neutral synthetic hydrocarbons, especially e-naphtha, that can be sold into other markets as clean ingredients to enable consumer product companies to make a wide array of carbon-neutral manufactured plastics items, reducing their carbon footprint by over 90%. Twelve has already successfully tested their use through partnerships with Mercedes-Benz (for use in car parts), Procter and Gamble (ingredients for Tide) and Pangaia (for the world's first CO2-made sunglass lenses, in a production run that sold out in under two hours).
Soon after we invested, Twelve was in London to jointly announce a 10+ year, 1 billion liter off-take agreement with the International Airlines Group (IAG), the world's largest publicly traded airline group, which was immediately recognized as the "SAF deal of the year." Twelve's deliveries under that contract will help decarbonize five European airlines, which include British Airways, Iberia and Aer Lingus, potentially as soon as 2025. This delivery contract is a testament both to the level of demand and to customer confidence in Twelve and its final product. It also signals that funding development of future decarbonization technologies can fundamentally transform our energy future and begin to reduce our reliance on fossil fuels.
[Note: Investor access to Twelve is currently available through Nucleation's syndicate SPV. If you join our syndicate, we will forward the deal details to you.]
Published by Valerie Gardner in Air pollution, Carbon emissions, Carbon markets, Carbon negative, Carbon utilization, Climate change, Corporate decarbonization, Fossil fuels, Investor activity, NEWS, Public companies, US technological leadership
By Valerie Gardner, Managing Partner
ESG investing is the largest and most profound global trend happening in the capital markets. Its popularity points to the global recognition that investors should and do have an important role to play in helping to solve environmental, social and other issues that have put the planet on a bad trajectory. In fact, no business can survive without investor support so businesses do care to meet investors' demands. Yet, as structured, ESG is not working to fulfill investors' true underlying needs or produce measurable objectives. The good news: there is an easy fix, when we start with "C," assessing climate impacts.
Like many things today, an initiative based upon a meaningful and important purpose, has become mired in controversy. Like the Socially Responsible Investing (SRI) movement that preceded it, ESG (an acronym for rating and selecting companies based upon their environmental, social and governance performance) has emerged to enable investors to focus their investments on companies that are taking care to behave more morally and responsibly vis-a-vis the environment, their employees, their shareholders, their suppliers, their communities and the climate. Many of these types of good corporate behaviors previously went unreported. What's become clear to investors is that short-term profiteering by managers may appear to be beneficial for shareholders but often may not be. It can conflict with what we know are looming issues which need action. Thus, sometimes taking a longer-term view and making corresponding sacrifices or investments that actually reduce overall risks can vastly improve longer-term enterprise value.
ESG has emerged to identify, elevate and reward companies which invest in doing what is right, even if such actions reduce returns in the short-term. It is intended to broaden the metrics on which corporations report information, so investors can make better informed decisions and invest in companies taking ethical actions, treating employees, suppliers and their communities fairly and protecting the environment—much of which costs more but which can reduce risks and other future costs, including litigation, public opposition or climate impacts.
While collecting data to make this type of assessment might seem uncontroversial, traditionally company management was required to focus on meeting only one goal: maximizing shareholder value. Because actions that affect long term enterprise value are often difficult to quantify, management reports have traditionally focused on easier t omeasure financial metrics like Price/Earnings ratios and quarterly profit trends. Deviating from the objective of maximizing per share profits could and often did result in shareholder lawsuits, if management took even smart and common sense approaches which reflected a community value, but which did not clearly improve shareholder value.
Fortunately, in 2019, under the leadership of Jamie Dimon, the Business Roundtable officially changed their statement of purpose and so businesses now broadly recognize that they are also accountable to their employees, suppliers and communities — constituents whose needs and actions can also impact the bottom line — but there is no consensus as to exactly how much or how little is enough and companies employ widely diverging approaches. ESG is now a way that investors can better discern the differences and reward companies that are acting responsibly on environmental, social and governance issues. Unfortunately, it is not working very well.
What ESG Currently Is
The Harvard Law School Forum on Corporate Governance published an article entitled ESG Ratings: A Compass without Direction which aptly summarizes the main issues with ESG as it currently is. The authors describe their findings as follows: "We find that while ESG ratings providers may convey important insights into the nonfinancial impact of companies, significant shortcomings exist in their objectives, methodologies, and incentives which detract from the informativeness of their assessments."
Critically, there's a significant dichotomy between what people commonly think ESG is supposed to indicate and what it actually indicates. Most people believe that an ESG score reflects a company's positive impact on the environment and stakeholders beyond its shareholders, such as employees, customers, suppliers, and local communities as well as the environment—a type of "Doing Good" metric which would tend to produce more shareholder value in the long run. In actuality, most ESG raters are assessing a company for the existence or absence of risk factors that could impact the future value of the company, such as the risk of discrimination in hiring or the risk of climate change on the supply chain. This is more of a "Risk Reduction" approach to data collection.
From an investment manager point of view, any time you can get meaningful information about a company's actions and potential future value, you are generally willing to pay for that—especially when your clients are clamoring for more sustainable investment options and are willing to pay more. Thus, there are now a plethora of third-party ESG rating services working to provide ESG data for a fee and a very large majority of impact-focused investment professionals are using these services to provide more options for clients. But, sadly, the entire space, which is still in its infancy, is chaotic and incoherent.
Studies show very low correlations across ESG ratings providers in total scores as well as across the three distinct components of "E," "S," and "G." Not only isn't there agreement about what an ESG score reflects, there is no standardization in the types of data collected or used and no consistency to the methodologies of collecting, assessing or prioritizing within or across categories. Thus, not only are ESG ratings badly correlated with environmental and social outcomes, the relationship between ESG ratings and financial performance is also uncertain. Those investing in ESG-type funds will typically pay more in fees for having accessed ESG data but they will generally get just equivalent or worse performance.
High and rising demand for ESG information has caused ESG-type rating services and funds to become profit centers, even as the quality, consistency and efficacy of the ratings has failed to provide meaningful results. At the moment, in addition to all of the inherent confusion as to what data matters, how to collect it, how to assess it and then how combine it with many other data points into a meaningful score, there is also the problem of greenwashing. Greenwashing is the deliberate efforts by some companies to game the system and try to obtain better ratings and scores than they probably deserve.
Which points to a growing problem in the ESG space. Companies control what data they will share with which rating groups, creating an inherent ability for companies to influence their scores by refusing to give their data to groups that don't rate them highly. This has rendered the existing ESG industry scores almost meaningless, since many of these raters are dependent upon the good will with the companies they are rating to get the data they need.
There is no better example how badly ESG is doing for guiding investors to more ethical and sustainable companies than when the S&P Sustainability Index did its rebalancing in May 2022. At that juncture, the S&P ESG team ejected Tesla (the largest EV car maker and one of the most successful climate companies on the planet) from the Index but welcomed ExxonMobil (a renowned climate villain), prompting Elon Musk to call the S&P Sustainability Index a "scam."
This decision caused a broader uproar within the sector and forced Senior Director and Head of ESG Indices Margaret Dorn to publish an explanation. Not only was this shift a climate and ESG travesty but, in fact, the S&P's "delicate balancing act" revealed that ESG raters and ratings are meaningless for a whole host of reasons, predominantly because there is just too much data, too much manipulation, and not enough understanding of what really matters. ESG raters appear to be so lost in the trees, they have effectively lost sight of the forest, namely the critical issue that matters the most to investors: climate change.
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What ESG Isn't
Investors are looking to ESG ratings to enable them to invest in companies that are doing better on a wide range of areas but, most critically, are environmentally responsible, especially around reducing carbon emissions. For many, this means working to provide solutions along the lines outlined by the United Nationa's Sustainable Development Goals. ESG investors care to invest in companies which improve global sustainability and solve climate change.
There are plenty of dire human, environmental and governance problems—you could name dozens—but none that threaten to seriously and even permanently disrupt the planet, human society and economic order as much climate change, the forced heating of our climate caused by burning fossil fuels. This crisis dwarfs everything.
So, while it may be troubling that there are reports of a toxic "bro" culture at Tesla, every single day, Tesla ships electric vehicles that enable people to stop purchasing and burning fossil fuels, which is the primary driver of climate change. In stark contrast, every single day ExxonMobil strives to greenwash their aspiration to keep selling more and more fossil fuels for as long as they possibly can—threatening not just human survival but that of all species and potentially our well-functioning societies, which could effectively wipe out the concept of wealth as we know it.
Shockingly, ESG as it is currently designed doesn't enable either the experts or investors to clearly assess companies on the single most important metric of sustainable performance—whether the company contributes to climate change or if they provide solutions to climate change. The average ESG investor, however, thinks that this is primarily what ESG does. Clearly, if ExxonMobil is rated highly but Tesla is not, ESG is not just meaningless, it is actually misleading for the average impact investor.
Fortunately, in order to fix this problem, ESG doesn't need to change that much, it just needs to make a small, relatively easy modification, which will then substantially improve its effectiveness and performance and begin to have a truly beneficial impact on humanity's ability to invest "sustainability." I propose a very basic approach for doing that below.
ESG Can Easily Be Fixed: Start all ratings with a "C" assessment
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As those concerned about what's happening with our climate saw, 2023 experienced a succession of seven record-shattering and "gobsmackingly bananas" (in the words of two climate scientists) hottest months on record. Not surprisingly, 2023 was also a record-breaker for climate disasters in the U.S. and around the globe, which have cost humanity billions annually. The bill for extreme climate disasters in the U.S. since 1980 now totals over $2 trillion and growing. Hundreds of millions of people are already being affected and/or displaced by the extreme weather events resulting from burning fossil fuels and allowing the CO2 pollution to escape into the atmosphere. These climate events are impacting the global economy, national security, geopolitics, businesses and politics in a range of ways but especially by increasing over systems risk.
(Click to enlarge)
Not surprisingly, at COP 28 in December, 198 nations gathered in the United Arab Emirates and finally agreed that we need to "transition away from fossil fuels." Though fossil fuel exporting nations like the UAE, Saudi Arabia, Russia and Iraq fought hard against adopting the specific words "phasing out fossil fuels," this is a pointless distinction, since it is abundantly clear that humanity needs to stop using fossil fuels as fast as humanly possible, whether transitioned or phased out. The climate is so bad, even Middle Eastern countries, whose primary source of revenue is fossil fuels, finally acknowledged what we've known for a very long time: only by eliminating the use of fossil fuels will we start to turn the tide against our worsening climate change and the dire ecologic and economic crisis that it threatens.
Against this backdrop and in light of the fact that ESG analyses and ratings are clearly still in "beta," we believe that ESG raters could make a very minor modification and start to have a much more significant impact. Simply by commencing vetting with one very simple sorting action, they would improve the coherence of ESG ratings by a lot. Prior to applying the rankings from hundreds of data points amassed regarding a plethora of corporate actions, ESG needs to divvy up the universe of companies into three distinct buckets: Climate Villains, Climate Neutral companies and Climate Heroes. This is a very easy distinction to make. Climate villains are those that are actively extracting, refining or selling virgin fossil fuel products or related services. Climate neutral companies are those that doing other business and are merely energy customers. Climate heroes are those companies which are actively developing and/or delivering key solutions to climate change (unrelated to ongoing fossil fuels operations), like low-carbon and carbon-free energy such as nuclear power, hydropower, wind, solar, geothermal and wave power; providing electrification support, such as with electric vehicles, heat pumps, charging stations and energy efficiency; and lastly carbon management, including carbon capture, carbon utilization and carbon sequestration (so long as unrelated to fossil fuel operations).
Once this vetting process has been done, then all of the current ESG metrics can then be assessed for more comparative performance relative to a company's other environmental, social and governance risks. But the top line assessment will easily enable every ESG-rated fund to exclude all Climate Villains. ESG funds will then be able to select their choices of best-performing companies from the other two categories for a mix of risk and return characteristics and use whatever type of analyses they wish. Investors will then have a very clear sense of what the composition of the fund is, across these three categories. Companies whose business is actively extracting, refining, distributing or selling fossil fuel products or services that cause climate change will likely still be included in standard, non-ESG funds, of course, but even these funds would easily be assessed for their climate impacts. Such funds could also be assessed for their ESG conformance, relative to other similar funds. But with this big bucket approach, no company or fund would be able to manipulate their "S" or "G" ratings in such a way as to feign that they are environmentally sustainable or acting responsibly relative to climate risk or sustainable development goals, when they are not, which is what impact investors mostly care about.
Summary
Despite inconsistencies in and controversy over ESG, we believe that demand for ESG research and investment vehicles remains strong largely because of concerns about climate change. Investors demand greater clarity about which businesses have more sustainable and ethical business approaches and want to own those and not companies shirking their responsibilities to future generations. Although ESG is in a nascent and chaotic state and not currently delivering the data ESG investors really need, a simple modification will be enough to ensure that more investor capital is directed into sustainable ventures.
Here's how we think it can work.
Prior to running the current slate of ESG assessments, each company should be given a climate score: "C Minus" is given to "Climate Villains," companies whose products and services are contributing to climate change, namely the fossil fuel extraction, refinement, distribution and sales companies that are responsible for contributing millions of tons of carbon emissions. Companies that not involved with climate-impacting businesses (such as those in healthcare, education, textiles, manufacturing, etc.) would be deemed "Climate Neutral" and get a straight "C" since their business is not directly causing climate change other than through their energy usages (or idiosyncratic emissions). Lastly, the final category are the Climate Heroes who get rated "C+" as they are actively working to solve humanity's need for clean energy and/or carbon services, which seek to restore the natural carbon balance in the atmosphere.
Once these very broad but clear buckets are determined, ESG ratings can be applied to provide more nuanced distinctions between the companies in each of the three buckets, based upon their treatment of employees, governance policies, whether or not they take care of their toxic emissions or waste products, whether they protect water sheds or try to use clean energy for their operations, etc. In this way, Tesla will be in the C+ bucket with other climate heroes and rated in comparison to other electric car companies but will never be in the same climate bucket as disgraced Climate Villain, ExxonMobil, which must try to out-maneuver other fossil fuels purveyors stuck in the C- bucket.
If this simple change were implemented, ESG funds could showcase their percentage of holdings that are C+ versus C, and ESG would finally become a highly effective tool for enabling investors to invest towards increasing the sustainability of our planet.
References
Columbia University, Climate Science & Solutions, Groundhog Day. Another Gobsmackingly Bananas Month. What's Up?, by James Hansen, Makiko Sato, Pushker Kharecha, January 4, 2023, the title is taken from a tweet by Zeke Hausfather.
NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2023). DOI: 10.25921/stkw-7w73.
Fortune, Musk claims S&P ‘lost their integrity’ after Tesla gets booted from sustainability index while Exxon is included, by Christiaan Hetzner, May 18, 2022.
New York TImes, Sustainability Index Drops Tesla, Prompting Insult from Musk, By Jack Ewing and Stephen Gandel, May 18, 2022.
4. The (Re)Balancing Act of the S&P 500 ESG Index, by Margaret Dorn, Senior Director, Head of ESG Indices, North America, S&P Dow Jones Indices, May 17, 2022.
5. Harvard Law School Forum on Corporate Governance, ESG Ratings: A Compass without Direction, by Brian Tayan, a researcher with the Corporate Governance Research Initiative at Stanford Graduate School of Business, David Larcker, Professor of Accounting at Stanford Graduate School of Business; Edward Watts, Assistant Professor of Accounting at Yale School of Management; and Lukasz Pomorski, Lecturer at Yale School of Management, August 24, 2022.
Published by Valerie Gardner in Advanced Nuclear, Carbon emissions, Carbon markets, Carbon negative, Climate change, Climate innovation fund, Climate mayhem, Climate policy, Energy abundance, Future of Energy, Investor activity, Macro Energy Systems, NEWS, Reduced ecosystem impacts, Solving climate
Heirloom Carbon Technologies has opened the first commercial carbon capture plant in the U.S. This key moment presages the start of what is widely expected to be an important new industry whose entire purpose is preventing the carbon emissions released by burning fossil fuels from destroying life on our planet.
Brad Plumer, writing in the New York Times, provides the details of this very small demonstration plant built in Tracy, California. It's an open air structure, with 40-foot racks holding hundreds of trays, each sprinkled with calcium oxide powder that turns into limestone when it binds with airborne carbon dioxide. This is a natural process that Heirloom is working to speed up.
Once the carbon dioxide is "captured" through the creation of the limestone, the company expects to heat up the limestone in a kiln at 1,650 degrees Fahrenheit, which then releases the carbon dioxide, where it then gets pumpted in a storage tank, leaving the calcium oxide to be returned and reused on another set of trays.
The carbon dioxide (called CO2) is expected to be transferred again to be permanently stored. For now, Heirloom is looking at the large concrete marketplace and working with CarbonCure, a company that was launched to mix CO2 into concrete to make concrete stronger by having it turn into limestone again where it will be permanently stored and reduce the carbon footprint of concrete (which ordinarily releases a lot of carbon emissions through its normal creation and use throughout the building industry).
Providing CO2 to CarbonCure has a value for sure but for now, that value is far below the costs of capturing the carbon. Let's look at what these economics are now. The Tracy facility will be able to absorb 1,000 tons of CO2 per year. At the estimated $50/tonne "social cost" of carbon, the Heirloom facility would earn $50,000 per year. Although Heirloom hasn't released info on its specific costs, those funding breakthrough carbon capture activity, such as Frontier (which includes Stripe, Alphabet, Shopify, Meta and McKinsey Sustainability), are typically paying between $500 and $2,500 per ton to accelerate innovation and market development. These high prices are intended to generate sufficient revenue for these early-stage ventures to actually cover their costs. At $1000/ton, Heirloom could earn $1,000,000 per year. However, Plumer estimates that Heirloom's actually costs may be in the range of $600 per ton or higher.
Fortunately for Heirloom and other ventures working in this space, there are a lot of large corporations willing to spend millions to pay for "carbon removal credits" in what has been a voluntary carbon market to effectively be able to claim that they are reducing their carbon footprints. These corporations see reputational benefits from those outlays, even if they do not result in even meaningful actual carbon reductions at this stage. The Biden Administration is also getting into the act and awarded $1.2 billion to help Heirloom
Many people still don't know much about carbon capture and storage, or what has been called "Carbon Capture, Utilization and Sequestration" (CCUS). There are a multitude of approaches being taken to capture carbon and, as a result, a plethora of acronyms have emerged. The approach used by Heirloom is now called Direct Air Capture (DAC) and specifically involve capturing CO2 out of the air but other approaches are simply called Carbon Dioxide Removal (CDR) and utilize a range of methods to bind that CO2 in a semi-permanent or permanent way, such as through marine-based CDR or natural processes such increasing the CO2 content in soils or accelerating the use of CO2 by plants, such as by growing crops or trees with the intention of having them capture the CO2.
Utilization of CO2 involves finding valuable ways to use that CO2 or just the carbon (C) from captured CO2. Ventures working on the utilization part of this process pose the prospects of having profitable business models. Nucleation Capital, as a climate-focused venture fund, recognizes that CCUS is a growth industry that is anticipated to become a large consumer of energy. We are following the activity in this nascent space and we are investing in some of the most promising approaches, especially where that approach has strong profit and growth prospects or where it intersects with the need for abundant clean energy. While knowing all the acronyms isn't critical, there are a few key things to know about CCUS in general.
Key Facts to Know about CO2 and Carbon Capture, Utilization & Sequestration
- While CO2 itself is natural and not toxic (except in high doses), the enormous amount that we have polluted our atmosphere with by burning fossil fuels for energy is causing our climate to warm up at a very fast rate. We need CCUS in order to lessen and possibly reverse the rate of warming, so we can restore a healthy climate.
- All technological approaches to capturing carbon back out of the air or water are expensive and early stage. So are the approaches to carbon utilization and sequestration (i.e. methods to utilize and/or store the carbon so it doesn't get released back into the atmosphere).
- To stop making our climate crisis worse, we have to stop burning fossil fuels, as our highest priority mitigation effort. While some might think that capturing the carbon emitted from burning fossil fuels right at the point source may warrant continuing to burn fossil fuels, that will not enable us to use carbon capture to restore the damage already done, which is the primary rationale for CCUS.
- Even if we stopped burning fossil fuels today, the amount of damage the long-lived CO2 pollution is causing the world will continue to heat the planet for decades or centuries. The only way to prevent that is by removing this excess CO2 pollution.
- Today, there are only a handful of dedicated carbon capture plants in existence globally but, to prevent serious damage to earth ecosystems, we will need to scale up these plants in record time to be able to reverse most of the emissions produced by the fossil fuel industry in its entire history. We will also need to scale utilization and sequestration capabilities.
- The cost of cleaning up all of the emissions caused by our past use of fossil fuels will be enormous and we haven't come to any agreement as to who bears that burden. Some of that cost can be mitigated with valuable commercial utilization technologies.
- Powering CCUS plants will require massive amounts of low-carbon clean energy because it makes no sense to emit carbon in the process of capturing carbon. The best and least-cost approach will likely involve using the coming generation of small modular reactors to generate 24x7 power in remote areas.
- The cost of clean energy used to capture and sequester carbon will be a significant factor in the total cost of that activity but powering CCUS can help SMRs scale up, which will help reduce the manufacturing costs.
- There is no scenario in which the cost of burning fossil fuels and capturing all the CO2 from that activity and permanently storing it will cost less than replacing the fossil fuels with renewables or nuclear and avoiding the release of new emissions in the first place.
- Fossil fuel companies are already lobbying to earn carbon credits by pairing carbon capture with the extraction and burning of fossil fuels. This is why some environmentalists, like Al Gore, oppose providing funding for CCUS to oil and gas companies, even though the most cost-effective CO2 capture is done at or close to the fossil fuel smokestack source point.
Read more in the New York Times, "In a U.S. First, a Commercial Plant Starts Pulling Carbon From the Air," by Brad Plumer, November 9, 2023.
Learn more about Frontier a consortium that is providing advance market commitments (AMC) that aim to accelerate the development of carbon removal technologies, without picking winning technologies at the start of the innovation cycle. The goal is to send a strong demand signal to researchers, entrepreneurs, and investors that there is a growing market for these technologies.
The 2021 Bipartisan Infrastructure Law included $3.5 billion to fund the construction of four commercial-scale direct air capture plants. In August, the Biden Adminstration announced $1.2 billion in awards for the first two, one to be built by Battelle in Louisiana and the other to be built by Occidental Petroleum, in Texas, through a 50-50 cost share.
Published by Nucleation Capital in Advanced Nuclear, Carbon emissions, Carbon markets, Carbon negative, Climate change, Climate policy, Construction costs, Government support, History Timeline, History-making, Investor activity, LINKS, Private companies, Solving climate, US competitiveness, US technological leadership
anksgiving isn't typically a time for making investment decisions . . . but it should be.
Americans give thanks in many ways, notably through the national holiday we call "Thanksgiving." We celebrate the abundance of the land we inherited centuries ago by feasting on turkey and other delicious indigenous foods, which sustained our existence as pilgrims. The holiday of Thanksgiving has survived generations of tumult, crisis and even war relatively unchanged. But we've arrived at a point at which we must recognize that humanity's current path—dumping fossil fuel waste into the atmosphere that is rapidly heating our climate—is disrupting those same ecosystems which have long supported us. Thus, it might be time to consider celebrating Thanksgiving both by honoring the bounties of nature that we have enjoyed and by working to save the ecosystems that have always supported human life and reverse the damage that we are doing by investing in climate solutions.
Given how large the climate problem is, the personal actions we might take, such as turning down the heat or even buying an electric car, will not make sufficient difference. Sadly, scientists tell us that the whole world must reduce emissions by a matter of gigatons in rapid fashion and we are running out of time to act, so our modest personal actions won't make enough difference. We must seek to find things that we can do which provide greater leverage. It turns out, investing in innovation is one of the ways that small individual actions can accumulate to make a big difference.
Why innovation? We know that climate change is caused by humanity's use of fossil fuels. While we want to stop burning of coal, oil, petroleum and natural gas, at the same time, no one wants to have to go without reliable sources of electricity, heat or transportation. Thus, the dilemma we face is that clean renewables like wind and solar don't provide a direct, reliable replacement for the widely available sources of fossil fuel energy.
What we need are better clean energy alternatives. We are forced to burn these dirty, carbon-emitting fuels to have comfortable, warm, well-furnished homes and functioning societies because we don't have better options available. We don't want intermittent lights, intermittent refridgeration, intermittent heart monitors or even intermittent Youtube videos. This is what makes addressing climate change so challenging for Americans: we're not willing to go cold turkey on the quality of life that we have enjoyed as a result of the abundance of fossil fuels. This is why we desperately need better options!
Investing in innovative ventures can accelerate their success in commercializing better energy alternatives. We have very few clean energy options and they all have significant downsides—such as intermittency—and there simply is nothing that is a runaway winner in terms of competing with natural gas or petroleum fuels. Which is why it is time for investors to step up and invest in those ventures innovating to create these improved technologies. These may be risky investments but if they can produce a broader set of clean energy options that enable us to maintain our lifestyles while reducing emissions, they will be very successful investments.
This is what Nucleation Capital is doing. Providing an investment vehicle that allows more investors to invest in some of the most exciting, most competitive clean energy alternatives coming out of the advanced nuclear sector. For many, investing in solar or wind power is appealing because they think "renewable" energy is what's needed. In fact, wind and solar power will always be intermittent—and that will never compete directly with fossil fuels. What's needed to replace fossil fuels is clean, reliable, dense energy and many energy experts see next-gen nuclear as our best option.
Nuclear energy may not yet be as popular as renewables but what's popular doesn't necessarily translate into great investment returns. Even winning consensus investments don't beat winning contrarian investments. Which is why, for those looking for impactful investments that are off the beaten path and which, by their nature, can produce extraordinary returns, nothing can beat nuclear energy innovation, which we believe will be the black swan of clean energy.
The advanced nuclear sector is the most under-appreciated clean energy sector that is innovating as fast as conceivably possible. This sector, more than any other, holds out tremendous promise for a technological solution to our climate dilemma, yet these innovators need access to more capital. Next-generation nuclear innovators are solving safety, scalability, cost, construction time and all the other issues we have long associated with traditional nuclear and making it into the energy source of our future. They are, for example, developing reactor designs that won't require water cooling or siting next to bodies of water. Innovators are also working to solve other problems that have held back the growth of nuclear, namely closing the fuel cyle and providing safe, permanent waste storage, among other things.
So, if you'd like to do more than just give thanks with your turkey, consider allocating some of your discretionary investment capital to a fund investing in the innovations that would allow us to end our dependence on fossil fuels. We expect that, over the next decade, the nations of the world will begin deploying any number of advanced designs to power cities, factories, campuses, ships, industry and homes without emissions, thereby maintaining energy security and grid reliability without needing fossil fuels. We'll even use nuclear to generate synthetic hydrocarbons (for where liquid fuels are still needed) and power carbon drawdown so can begin to reverse global warming.
Yes, investing in advanced nuclear is high risk. Yet it only poses the risk of losing your money (so allocate accordingly). Not solving climate change, however, risks losing everything we hold dear. Our propery, our children, our traditions. Which is why more investors are considering allocating a portion of their investible capital to investments that can meaningfully reduce demand for fossil fuels. Whether they can invest a lot or little doesn't matter so much: they will still get the satisfaction of knowing that they are using their money to make a difference in the final years that we have to rescue our future.
* The "Th" image above is the period table symbol for the element Thorium, and comes curtesy of the Thorium Energy Alliance, which advocates for the use of thorium along with uranium as a fuel for nuclear energy.
Published by Valerie Gardner in Advanced Nuclear, Asset manager support, Brilliant thinkers, Carbon emissions, Carbon negative, Climate change, Climate innovation fund, Climate mayhem, Climate policy, Construction costs, Corporate purpose, Energy abundance, Environmental support for nuclear, Extreme weather, Fund sustainability, Future of Energy, International support for nuclear, Investor activity, Land Use by Energy, NEWS, Nuclear competitiveness, Nuclear financing, Nuclear innovation, Nuclear R&D, Nuclear-inclusive energy policy, Philanthropic support for nuclear, Politicians supporting nuclear, Pro-nuclear campaign, Scientific debate, Solving climate, Solving nuclear waste, US competitiveness, Venture capital support for nuclear, Zero emission energy
Until recently, nuclear innovation was not something an ordinary investor could invest in, even if you wanted to. For most of nuclear energy's history, most all design, development and testing was done through the National Labs with government funding and large corporations adapted those designs for the utilities. President Jimmy Carter defunded nuclear energy research and development and privatized that activity. By that time, however, a lot of work had been done to test a wide range of alternative approaches to generating electricity from fission and this work helps set the stage for today's innovations.
On December 20, 1951, the Experimental Breeder Reactor (EBR-I) made history, generating electricity from fission and proving the thesis that fissile material could be used for peaceful purposes. The National Labs worked on some 52 different designs and configurations over about fifty years. The second Experimental Breeder Reactor, the EBR-II, a liquid metal-cooled fast reactor, ran for more than thirty years between 1961 and 1994.
Eventually, the pressurized Light Water Reactor (LWR), which was preferred and purchased by the Navy, became the utility industry's reactor of choice. Over the course of three decades, the U.S. built approximately 110 LWRs. Then, in the mid-1990s, President Jimmy Carter ended federal funding for nuclear research within the labs and, like space exploration, further nuclear energy development was privatized.
Fortunately, innovation in nuclear energy didn't stop entirely. Quite a number of innovative engineering teams sought to move fission and fusion nuclear energy forward through private ventures. In 2016, when Third Way hosted the First Annual Advanced Nuclear Summit and Showcase, there were about four dozen ventures that attended. Since then, the field has continued to grow, with many of these ventures raising capital privately to fund their ongoing work. Today there are about 250 ventures or initiatives working to develop new energy generation approaches, spanning fission, fusion, subcritical reactors and a burgeoning area of Low Energy Nuclear Reactors (LENR) which, given the climate crisis are needed more urgently than ever to replace fossil fuels.
Interest in bringing atomic energy into the 21st Century is stronger than it's ever been. Congress has been strongly supportive of advanced nuclear, passing the Nuclear Energy Innovation and Capabilities Act (NEICA) in 2018, the Nuclear Energy Innovation and Modernization Act (NEIMA) in 2019, both signed by President Trump, and portions of the Nuclear Energy Leadership Act (NELA) and the Nuclear Energy Research and Development Act (NERDA) as part of the Energy Act of 2020, signed by President Biden. All of these major pieces of legislation seek to support the emergence of next generation technologies through a variety of mechanisms, including providing a growing amount of non-dilutive funding to help these ventures get their innovations certified and to market. Nevertheless, most all of the ventures developing solutions must still raise private funds in order to succeed.
Many ventures have had success attracting venture capital at various stages. Recently, Commonwealth Fusion announced a $1.8 Billion fundraise, which they hope will enable them to prove their approach to producing electricity from fusion, something that has never yet been achieved. From the list of well-known funders, it's clear there are a growing number of venture firms and wealthy individuals paying more attention to this area. This is good for the sector and for those institutions and individuals who can afford to play at the high-ticket level of traditional venture capital firms. But there hasn't been a way for the majority of accredited investors to invest in advanced nuclear.
Unfortunately, committing million dollar sums to a single deal or even a venture fund is out of reach for all but a few extraordinarily wealthy individuals in the top 1% of investors. That is until now. In the last few years, venture capital is been disrupted by tech innovations funded by venture firms (see how Venture Capitals are eating their own dogfood.) Specifically, investment platforms have been developed that profoundly automate most all of what historically has made venture capital very expensive. The AngelList rolling fund, which enables investors to participate in ventures funds through a low-cost subscription, has delivered exactly the kind of disruption that brings increased democratization to venture capital.
AngelList is not the only group pioneering new structures. For the first time in history, a range of crowdfunding, angel investment communities and online venture platforms now make it possible for investors at many levels to access a very rich variety of venture deals through both funds and SPV syndications and participate at far lower and more affordable capital levels, not just in advanced nuclear but across nearly every sector where innovation is happening.
Nevertheless, at every level, venture investing remains a high risk/high return asset class. Before one invests in a private angel deal (typically an earlier-stage funding round) or in later-stage venture rounds, such as a Series A or Series B fundings, one needs to assess one's own appetite for risk and interest in doing some homework to vet the opportunity, called "due diligence." Investing in private equity can boost returns but, at the same time, it often takes work and mature judgment to reduce mistakes, because an investor cannot easily sell their equity, once cash has been exchanged. One has to plan to hold on to the equity while it remains illiquid, even when it is clear that the venture is failing. This can result in the total loss of one's capital. The SEC, in fact, deems venture investing too risky for any but sophisticated investors, or those deemed "accredited investors." These are people or firms with sufficient assets that they are deemed capable both of assessing their investment risks but also being able to afford to lose their capital, without serious impacts, should their investment fail.
Online platforms further open up the possibility for a much more diverse range of fund sponsors and managers with unique types of expertise to create specialized investment vehicles in areas previously overlooked by the large pool of generalist venture funds. Which is great news for innovations happening in many sectors, including advanced nuclear, since highly technical sectors can be very challenging for generalists. This has enabled many new funds, like Nucleation Capital, to develop unique investment theses and connect with the growing numbers of accredited interested in investing in this area. Investors who are deemed accredited are finally able to access private equity at capital levels that work for them.
With the climate crisis driving demand for new types of safe, affordable clean energy, this is an exciting and historic moment of convergence. Not only is there a growing swell of next generation nuclear ventures seeking to create technologies to address the world's urgent demand for clean energy and carbon management, they are raising capital right when access to private equity has finally become affordable to millions more investors, some of whom are motivated to invest their values.
As new and unfamiliar as it is, there are growing numbers of investors looking to diversify their portfolios with angel and venture investments. Hopefully, they will take the time learn more about what venture capital is and select their investments wisely. Fortunately, the use of venture platforms are providing both guidance and deal flows, which enables new investors to achieve a level of diversification which, just as with public market portfolios, has been shown to improve returns for angel investors and venture capitalists alike. Diversification is particularly important in venture, however, since the goal of venture investors is to invest a wide enough range of ventures that the few that do succeed more than compensate for those that don't.
For further reading about venture capital, here are some additional articles that provide more background but there are plenty more.
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- Understanding Traditional Venture Capital, part of FundersClub's VC 101 series
- How Venture Capital Works by NerdWallet, Dec. 6, 2021
- AngelList Pioneers Rolling VC Funds in Pivot to SaaS, by TechCrunch
- The Rolling Fund vs. the Syndicate Explained, by Groundbreaker.
Published by Valerie Gardner in Advanced Nuclear, Asset manager support, Brilliant thinkers, Carbon emissions, Carbon negative, Climate change, Climate innovation fund, Climate policy, Energy abundance, Environmental support for nuclear, Extreme weather, Fund sustainability, Future of Energy, Investor activity, Land Use by Energy, NEWS, Nuclear competitiveness, Nuclear financing, Nuclear innovation, Nuclear R&D, Nuclear-inclusive energy policy, Solving climate, Solving nuclear waste, US competitiveness, Venture capital support for nuclear, Zero emission energy
Boris Johnson, the UK Prime Minister, penned an oped in the Financial Times calling for a 12 billion-pount, 10-point plan to effect Britain's green recovery. Johnson wants to create 250,000 new jobs and turn the UK into the world's number one centre for green technology and finance. It is worth quoting the first three points of his plan verbatim.
"One — we will make the UK the Saudi Arabia of wind with enough offshore capacity to power every home by 2030. Two — we will turn water into energy with up to 500 million pounds of investment in hydrogen. Three — we will take forward our plans for new nuclear power, from large scale to small and advanced modular reactors."
Britain, which hosts the COP26 global climate change summit in Scotland in 2021 and has committed to a net zero carbon economy by 2050, seeks to use its commitment to tackling climate change to help build a strong partnership with U.S. President-elect Joe Biden. Johnson even uses the phrase "build back better," to show that he's in synch with Biden, who has used those words for his transition plannning site.
According to Fortune, the most radical policy is the phasing out diesel and gas car sales by 2030, 10 years earlier than previously scheduled, and head of France and Spain, which have 2040 target dates. Interestingly, the Greenpeace U.K. head of politics, Rebecca Newsom, welcomed the "landmark announcement" signalling the end for polluting cars and vans, as "a historic turning point" in addressing climate change. "Although there are some significant question marks and gaps, overall this is a big step forard for tackling the climate emergency," Newsom said.
Read more in the FT: "Boris Johnson: Now is the time to plan Britain's green recovery"and Fortune's "Facing an epic recession, Britain unveils its 'green industrial revolution' to jumpstart economy, create jobs."
Published by Nucleation Capital in Advanced Nuclear, Brilliant thinkers, Capital reallocation, Carbon emissions, Carbon negative, Climate change, Climate innovation fund, Climate policy, Government support, LINKS, Nuclear financing, Nuclear innovation, Nuclear R&D, Politicians supporting nuclear, UK Climate Policy
A draft of the Democratic Party's policy platform backs aggressive climate change proposals to reach net-zero emissions as quickly as possible using a technology-neutral approach that values "existing and advanced nuclear" alongside other methods.
The draft language specifically says: “recognizing the urgent need to decarbonize the power sector, our technology-neutral approach is inclusive of all zero-carbon technologies, including hydroelectric power, geothermal, existing and advanced nuclear, and carbon capture and storage.” Methods include challenging "the best and brightest scientists, innovators, and entrepreneurs in the world to pursue breakthrough opportunities in . . . direct air capture and net-negative emissions technologies. We will advance innovative technologies that create cost-effective pathways for industries to decarbonize, including carbon capture and sequestration that permanently stores greenhouse gases . . ."
Read more analysis of the platform by Timothy Cama at E&E News: "DNC draft Climate platform more progressive than 2016."
Published by Nucleation Capital in Carbon negative, Climate change, Climate innovation fund, Climate policy, Future of Energy, History Timeline, History-making, LINKS
Apple announced plans to make its entire business carbon neutral within the next 10 years. The roadmap to sustainability is part of the company’s annual Environmental Progress Report. Reducing every device it sells to zero climate impact means that the company will, at a minimum need to reduce emissions from production by 75%. The remainder will be focused on efforts to help remove carbon from the atmosphere.
See TechCrunch: "Apple says its supply chains and products will be carbon neutral by 2030."
Published by Nucleation Capital in Carbon emissions, Carbon negative, Climate change, Corporate decarbonization, LINKS, Public companies, Reduced ecosystem impacts
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