Oct 3, 2024 · 41m · catalyst
DAC’s bumpy road to commercial scale
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Catalyst, host Shail Khan interviews Climeworks CFO Andreas Apley to explore the operational, financial, and contractual realities of scaling direct air capture technology from early pilot facilities to bankable commercial infrastructure.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 30.3% of the talking time here. How this is scored →
Shayle as informed peer 5.6 Guest teaching 4.4 Guest disagreement 0.5 Shayle pushing back 0.6
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:20 Calling out DAC competitors for making false promises
Apley strongly cautions against early-stage startups that overpromise on rapid cost reductions and volume targets, warning it will cause the market to lose faith in DAC.
Hardest push from Shayle ▶ 39:34 Challenging the assumption of 2030 supply constraintsKann pushes back on Apley's thesis that DAC will be heavily supply constrained by 2030, questioning whether demand commitments are actually large enough to absorb gigaton-scale production.
Biggest teaching moment ▶ 13:00 Engineering realities of operating DAC in extreme Icelandic weatherApley details the harsh operating lessons at Orca, explaining why capturing 420 ppm CO2 in harsh environments requires 'building a tractor rather than a sports car' with strict downstream purity standards.
Shayle holds their own ▶ 28:40 Host highlights structural OPEX risks in unindexed long-term DAC dealsKann leverages his venture and energy markets expertise to explain why signing fixed-price long-term contracts without electricity price indexing or escalators will leave DAC developers underwater.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| The Shift to Phase Two of DAC Commercialization | 6 | 3 | 0 | 0 | Kann opens by establishing the thesis of climate tech moving from optimistic Phase One to challenging Phase Two execution, detailing Climeworks' history and fundraising specifics before inviting Apley to recap their corporate journey. | |
| Strategic Capital Stacks and Stepwise Scaling | 6 | 4 | 1 | 1 | Kann probes why Climeworks raised a massive corporate equity round instead of pursuing project finance; Apley explains that technological de-risking must happen in 5x-10x step-ups before facilities become bankable. | |
| Hard-Learned Operational Lessons from the Orca Plant | 4 | 7 | 0 | 0 | Apley delivers a masterclass on real-world engineering challenges at Orca, including extreme Icelandic weather, filter manufacturing tolerances, CO2 purity requirements, and immediate lifecycle emissions deductions. | |
| Mid-Episode Sponsor Break: Bloom Energy, Engie, and EnergyHub | 5 | 4 | 1 | 1 | Following the sponsor read, Kann presses on Orca's actual 2.5k-3k ton run rate versus nominal 4k ton capacity, highlighting the danger of industry overpromising to investors. | |
| The Expanding Buyer Pool for Carbon Dioxide Removal | 5 | 5 | 0 | 0 | Kann asks whether the buyer pool is solely Microsoft and a long tail; Apley explains how corporate buyers construct blended-durability portfolios while learning to procure high-quality removals. | |
| Structuring Bankable Long-Term Offtake Contracts | 6 | 4 | 1 | 1 | Kann queries how pricing is determined in the absence of a clearing market; Apley outlines the necessity of securing 10-15 year take-or-pay contracts to underpin project finance despite price undercutting from earlier-stage competitors. | |
| Mitigating Energy OPEX Risk with Price Indexation | 7 | 3 | 0 | 0 | Kann demonstrates strong financial acumen by highlighting the danger of fixed-price offtakes against rising electricity OPEX; Apley confirms Climeworks mandates energy price indexation in long-term agreements. | |
| Direct Corporate Sales Versus Market Intermediaries | 5 | 5 | 1 | 0 | Kann asks about the emerging ecosystem of carbon brokers and MRV providers; Apley clarifies that intermediaries cannot replace direct creditworthy corporate offtakes because brokers lack the balance sheets needed for post-2030 project finance. | |
| The Pathway to Non-Recourse Project Finance | 6 | 5 | 0 | 1 | Kann probes whether true non-recourse project finance is realistic for next-generation plants; Apley breaks down how EPC wraps on standard equipment and blended grants/equity can de-risk facilities for traditional lenders. | |
| Market Outlook, Compliance Frameworks, and 2030 Constraints | 6 | 4 | 1 | 2 | Kann challenges Apley's projection that the market will face severe supply constraints by 2030 given the current lack of demand commitments; Apley argues that corporate net-zero targets and compliance standards will trigger massive supply shortages. |
Statements from this episode (22)
Kann: Direct air capture is entering its phase two deployment era
“I think we're just starting to enter phase two when it comes to direct air capture. We have the very first few commercial plants coming online now or just having come online, and what the market at least hopes will be a massive wave of others coming behind.”
Kann: Climeworks' Orca was the world's first commercial DAC plant
“Climeworks operates Orca, the 4000 ton per year DAC plant that began operation in 2021, which was the first commercial DAC plant in the world.”
Climeworks' Orca DAC plant has a nominal capacity of 4,000 tons
“Orca has nominal capacity about 4000 tons. What do we mean with that? That means it's that's what the plant was designed to capture at maximum efficiency. So maximum run rate, et cetera. And there's some losses that go away from that.”
Climeworks raised a $650M Series F, a record for Switzerland
“On the backbone of operating Orca, and having that in the field, we then launched a new fundraise, our Series F already at the time, and that was sort of the first time when large institutional investors came into the cap table, and we managed to raise about s…”
Climeworks CFO: Jumping directly from pilot to profitable commercial scale fails
“We are of the fundamental opinion that it doesn't really work to you know, deploy in the lab or at very small scale at pilot scale, and then go from that straight to the size that is required for the plant to be profitable, because that's a huge technological …”
Climeworks pitched 10x scale and cost curve improvements to equity investors
“The key milestone was scaling that technology by a factor of about 10 improving on the cost curve deploying more on the offtake side, so really building the market for these project-financeable offtakes and also making an improvement on the technology.”
Apley: Pre-treating incoming air makes direct air capture completely uneconomical
“If you do direct air capture, that's the other nature is you have to deal with the weather, how it is, because it's quickly becoming completely uneconomical if you have to pre-treat any of your incoming feedstock, so to say, right? The air that comes in.”
Apley: Direct air capture must dump CO2 if purity standards fail
“The sensitivity of the sequestration on the purity of the CO two and your ability to deliver that purity, 24, seven with all the things that happen in this type of production environment, you have to deliver really, really pure CO two doesn't really matter on …”
Apley: Upfront lifecycle emissions accounting heavily reduces sellable early DAC volume
“The way that certifications work today is you deduct all of the life cycle emissions that exist for the construction of the plant as well as for the operation of the plant, the energy that you use, et cetera. And we could predict some of these, but others requ…”
Apley: Orca runs at 2,500 to 3,000 tons after 2.5 years
“We can reach now a performance of around two and a half thousand to 3000 tons of run rate. And that took us About two and a half years to get there.”
Climeworks CFO: DAC startups risk destroying industry trust through overpromising
“What we're worried about is what's going to happen if people are not transparent about the challenges is that, that people will lose face at some point, you know, when they say, well, this is just an industry that makes a lot of promises, but doesn't really ke…”
Climeworks plans a 250,000-ton DAC plant for its first US facility
“And the next one that we'll build is about 250,000 tons. So another sort of seven to eight X scale up that will be our first plant in the US.”
Climeworks: Orca and Mammoth DAC plants are completely sold out
“So Orca and Mammoth are luckily they're already completely sold out. For the life that we expect the plant to operate.”
Permanent CDR purchases grew from 100k tons in 2021 to 5.7M today
“At the time when we raised, when we last raised money, so sort of by the end of 20, 21, globally sold volumes were only about a 100,000 tons. And now we talk about, I think, 4.6 million tons last year and 5.7 million tons year to date already this year.”
Climeworks has signed direct air capture offtake contracts up to 15 years
“We've worked really hard over the last, I would say, four years to move the market to something that will actually work for project finance. In terms of offtake. So that means long duration contracts, right, over five years plus ideally 10 years or 15 years, l…”
Kann: DAC firms signing fixed-price long-term contracts will go underwater
“Because this is another thing that I don't see a lot of companies thinking about is they're trying to sign 10 or 20 year contracts, but they're making them fixed price. I think they end up underwater at some point if they do that.”
Apley: Climeworks uses indexed long-duration power contracts in Iceland
“For example, in Iceland, we have very, very long duration energy contracts with fixed pricing and a certain indexation. So we reflect that in the customer agreements.”
Apley: Very few carbon removal intermediaries can sign offtakes beyond 2030
“A lot of the intermediaries today in the market, they don't have the balance sheet of a Microsoft or JP Morgan. So, so not all of them are really credit worthy of worthy off takers over a period of 1015 years. And many of them come from an environment where th…”
Apley: Climeworks secured subsidized project debt for Orca DAC facility
“We actually already executed a project debt facility in one of our projects that was for Orca. And that was definitely very hard to get over the line. Also had to be subsidized because Orca isn't profitable at the size where it is.”
Apley: Proprietary technology is under 50% of Climeworks' project CapEx
“Our own tech is less than 50% of the CapEx that we need to deploy.”