The Exchanges

Q All right. So let's dig in then on where there is a lack of clarity in the regulation. So what is the actual question? What's the key question at hand and what needs to be decided?

A This is an excellent question. The key question is, what qualifies as renewable hydrogen? And this is not as simple as it sounds. It is not just a question of simply, um, it is not as simple as determining its carbon content, because then the next question that follows is, how do we determine that carbon content? Furthermore, there, there is also optionality Usually, usually when using renewable energy, there's also optionality in terms of, am I going to be using renewable energy for the electrification, which is often more efficient, or will I be using this electricity to make hydrogen, which is typically as efficient? Um, so in other words, if you're diverting clean electrons from direct electrification, you might be actually getting less bang for your buck in terms of emissions abatement. So there are three Things that are, that have been proposed in what's called the Delegated Act, which is an amendment to the Renewable Energy Directive II, and this Delegated Act specifically applies to hydrogen, and the three criterion are one, additionality, which means that every single unit of electricity that's been, that's going to go towards hydrogen production should be from newly built renewable assets. So that's the first criterion. Criterion number two is temporal correlation, which specifies that hydrogen can only be produced within, within a specific timeframe of the production…

AI assessment note: “The key question is, what qualifies as renewable hydrogen?”

Q is true of additionality too, it seems like there's been a movement in Europe where I think initially the, it seemed like the direction, uh, was heading toward more robust, more stringent guidelines, but then the, the energy crisis and the need for expediency has been sort of pushing in the other direction, and so there's been some movement back toward perhaps less stringent guidelines. Am I interpreting that right?

A I'm not, I'm not actually sure that I wouldn't pin it on the energy crisis. If anything, I would pin this, uh, on the IRA derailing, um, derailing European regulatory efforts. And the reason for this is that in the euphoria, um, on, on your side of the pond, Shail, um, upon the IRA's passing, um, that euphoria was seized upon by lobbyists in, in Europe to, to scare policymakers into essentially saying, look, all this, all this hydrogen, The economy that, that we, that we are, um, that, that we are aiming for this leadership that we have today, suddenly it will, all this industry will shift to America because there are far better conditions, far more relaxed rules for producing hydrogen in the US. But I don't think that's necessarily true because, uh, because the rules for producing, uh, for, for claiming these tax credits, production tax credits in the US have not been fully defined, uh, if I understand that correctly. And then number two, um, the difference between Even yearly and hourly temporal correlation, the difference in, in the levelized cost of hydrogen and how that impacts the price of hydrogen is not that much. There has been recently, very recently in September, an excellent paper from the European University Institute and the Florence School of Regulation, which demonstrated that the price difference is to the tune of 10%. That's not really enough to make a whole I…

AI assessment note: “I wouldn't pin it on the energy crisis. If anything, I would pin this... on the IRA”

Q So how much energy are we talking about? Of all of the energy that we use, like, how much of that is going toward moving water, cleaning water, doing something to water?

A If you look at the United States as an example, we use about a hundred quads of energy, a hundred quadrillion BTU of energy. BTU is a British thermal unit of energy. About 13% of that energy is for water and steam. So it's not zero, but it's not half. It's a sixth or something like that, a seventh. And a third of that, like Four percent of national energy consumption is just water heating in our homes, in our businesses, just to get water to a comfortable temperature for our long hot showers or for washing dishes and clothes, and that's a lot of energy. That four percent of national energy consumption in water heating is bigger than what Switzerland and Sweden use for all purposes combined in a year. So just imagine, like, two rich countries are using less energy Combined over a year than we use just for water heating. So that's one example. And that's really the direct use of energy for water, including the treatment and the chilling and everything else. That's also including the steam for industry, but it is not including the energy going to make steam in the power sector, which is about a third or more of our energy consumption. It's like a third of our energy consumption in the United States just goes to boil water to make steam in power plants.

AI assessment note: “About 13% of that energy is for water and steam.”

Q I mean, we're going to come back to all the risks and what we're seeing in the news right now, because we're currently in a kind of a global drought that is exposing a bunch of these challenges, but since you allude to that one in particular, can you be more specific? Like, what's actually happening Uh, where do we have rivers causing barges not be able to deliver coal?

A Well, it seems like we have drought everywhere, just everywhere, but right now in Germany and with the Rhine, and also in China, we have rivers so low that barges either can't carry a full load of coal, or they can't carry coal at all. Like, just there's not enough water for the ships to move. And these coal plants in the old days maybe stored 60 days worth of coal on site. These days they store like 15 to 30 days. And so they don't have a lot of backup, but the rivers stay low for months at a time, which is starting to happen. And so today it feels like Germany and China is where the news is, but that happened in the Mississippi River in the United States not that long ago either. So we have plenty of examples from around the world on that.

AI assessment note: “right now in Germany and with the Rhine, and also in China”

Q All right, so I just want to double click on that for 1:02. You're saying that the amount of water that we withdraw and use to cool power plants exceeds the amount of water that we use, for example, to drink and shower and all this other stuff?

A By far. Yeah, the amount of water we withdraw to drink and shower is a few percent. It's not a big deal at all. The biggest users are really power plants and agriculture, at least in terms of withdrawals, the amount of water we withdraw. Now, the difference is, for the water we drink, we've consumed it, like, we use it and it goes somewhere else, and in agriculture, it consumes the water. With the power sector, it mostly does not consume the water. It takes the water from the lake or river, it uses it to cool the power plant, and then mostly returns the water. Now, if it's a cooling tower, it actually evaporates the water, goes to the atmosphere, it comes down as rain a few states over or in a different country, depending on where you are. But that power plant usage of water for cooling exceeds the amount of water withdrawn every day, For agriculture. And then municipalities are third on the list. Those are the cities that water we use for drinking and washing. If you look at consumption, how much water is consumed, agriculture is the biggest consumer, and then cities, then the power sector. So you kind of have to look at it based on how much water is used versus how much is actually consumed.

AI assessment note: “By far. Yeah, the amount of water we withdraw to drink and shower is a few percent.”

Q we'll talk about electric aircraft and we'll talk about hydrogen powered aircraft and we'll see where we land at the tail end of that. Ooh, this is a lot of flight metaphors that I don't mean to be using. Um, Okay. Let's, let's start with electric aircraft. Where are we? Like what's getting developed right now? What are we seeing in the works as far as pure battery electric aviation?

A So, uh, in terms of battery electric aviation, we have about two or three companies that are really, uh, on the forefront of this, uh, and they're developing different sizes of aircraft. Uh, so the first is aviation, which is developing, uh, the Alice, uh, that's the name of their aircraft. And it's a nine seater airplane that can, that they say can travel about 850 nautical miles. Ah, without accounting for reserves. Slightly bigger than that is Hart Aerospace, which is a nineteen-seater aircraft, and they're claiming 400 kilometers, including reserves. Uh, and then at the highest level, there is Wright Electric, and they're trying to build a hundred-seater aircraft, uh, but they're, they're also developing newer battery technology, so it's unclear what kind of ranges they're expecting to see with those.

AI assessment note: “we have about two or three companies that are really, uh, on the forefront”

Q companies start with shorter range, uh, aircraft that maybe don't meet the existing duty cycles of most aircraft of that size, but there's enough of a market there for the puddle jumpers, or as you've called them, fjord jumpers, uh, to get into the market that way. And then they slowly ride the, or quickly ride the Battery energy density curve upward into longer and longer range aircraft over time?

A There is actually a significant market for that because Airlines have, in the past few decades, shut off shorter routes because these really small commuter aircraft were really uneconomical and inefficient to operate, and so the operating costs got so large that the ticket prices became unaffordable. With these smaller electric aircraft, you have a much lower operating cost, and so the economics of these shorter routes actually starts making sense again, and that is why Um, you might be able to have these small airplanes enter at much lower ranges, but as you end up, as these battery technologies improve, you can replace the battery and get longer ranges on the same airframe, which is kind of an interesting concept and something that is being suggested by, uh, hard aerospace and aviation and the like.

AI assessment note: “There is actually a significant market for that because Airlines have, in the past”

Q So to the extent that we see activity in hydrogen, uh, aircraft development, what's the balance right now between fuel cell and combustion?

A So again, because of these differences in the amount of power that can be provided by these, uh, different propulsion technologies, the fuel cell aircraft is sort of limited to short, smaller turboprop engines that can carry at most probably 60 or 70 passengers. And when you're using gaseous hydrogen, you're getting ranges of about 600 kilometers, uh, whereas if you're talking about liquid hydrogen combustion, which is on the other end of that, you can fly, like, a 168 passengers almost 200 miles, or 3400 kilometers. Like, these are significantly larger, uh, ranges that can be expected from hydrogen combustion. Just because you can Produce a lot higher power in a gas turbine engine than in a fuel cell. Um, and correspondingly, these companies are, there's different people that are working on these, uh, aircraft, right? In, on the fuel cell side, you have smaller startups that are working on that, like Zeroavia or Universal Hydrogen. Um, these are companies that are able to be viable because the capital investment required for developing a smaller aircraft of like the Is a lot less compared to the capital investment required to build an A-three-twenty sized, uh, aircraft. Now these are, on that scale, there are only Airbus and Boeing that operate. It is essentially a duopoly when you're talking about flights, uh, aircraft that can carry more than a 150 passengers.

AI assessment note: “In, on the fuel cell side, you have smaller startups that are working on that”

Q let's move on from pure electric then and talk about another zero emissions aircraft trend that we've been starting to see, which is hydrogen powered aircraft. So there's two categories here, um, that we should talk about separately. There is using hydrogen in a fuel cell to power the aircraft, and then there's combusting hydrogen directly. Can you just talk at the high level about the trade-offs between those two?

A Yeah, so when you're talking about fuel cells, these These are more efficient than when you're combusting hydrogen. You're using, sort of, uh, chemistry to convert that hydrogen into water and, uh, get electricity out of it. The other advantage of using fuel cells is that it is, uh, it is really zero emission. Like the only emission is water vapor, which yes, uh, is a greenhouse gas and can cause warming, but at the sort of altitudes that these aircraft would operate at, uh, that is less of a concern. When you're combusting hydrogen, however, you get water vapor, but you also get, uh, nitrous oxides, the NOx emissions, uh, from the combustion process itself. So there is, um, so it isn't necessarily zero emission. But on the flip side, when you have a gas turbine that is powered by hydrogen, that can provide a lot higher power than a fuel cell can. Um, fuel cells right now are in the range of 203 hundred kilowatts, um, whereas when you're talking about the power required to Run a single-aisle aircraft, like the A-three-twenty, we're talking in the megawatts, in tens of megawatts, 20, 30 megawatts, uh, required for that to generate the thrust to be able to fly that aircraft. So fuel cells are significantly smaller in terms of power output than, um, combustion, and that's really where the, uh, the advantage of hydrogen combustion lies.

AI assessment note: “So fuel cells are significantly smaller in terms of power output than, um, combustion”

Q capped out by manufacturers. They are today. When you hit a certain number of vehicles, they last longer. However, in order to qualify, there's a bunch of rules. So maybe give a quick overview of like what the, how those tax credits are structured. And let's talk a little bit about like, what is it going to mean in terms of how, and if people can take advantage of them?

A Yeah, so your listeners probably know that right now there is a federal tax credit of 7500 dollars for the purchase of an electric vehicle or a plug-in hybrid with a large enough battery. And that is capped, as you said, um, at I think 200,000, uh, vehicles sold per manufacturer. And so Tesla has already blown through that cap. Ford has as well. Toyota and Hyundai and GM are very close to it. Um, Nissan maybe already passed it. So, you know, one by one, these manufacturers are running out of tax credit. And, um, you know, the current policy is that that's it. There's no more tax credit for EVs. So what does this bill do? Well, first of all, let's put aside the personal vehicle tax credit and look on the business side of things, because here the bill provides a 30% investment tax credit for purchase of clean vehicles. That includes electric and fuel cell vehicles in, uh, by any business. So any depreciable property gets a 30% investment tax credit for the purchase of an electric A electric vehicle or a fuel cell vehicle up to 40,000 dollars for medium and heavy duty vehicles and up to 7500 dollars for light autos and trucks. So if you're Amazon and you're thinking about electrifying your delivery fleet or your, um, Enterprise or Avis and you're thinking about buying EVs for your rental fleet, they all just got way cheaper. And those are not at all tied to domestic content requir…

AI assessment note: “So what does this bill do? Well, first of all, let's put aside”

Q in carbon capture being the decarbonization solution as opposed to fuel switching. And then it also separates out direct air capture and gives it a much larger tax credit of 180 dollars a ton as compared to, what is it, 85 dollars a ton for, for point source. So what does all of your analysis suggest that this does for the world of, of carbon capture, sequestration, utilization, et cetera?

A Yeah, I mean, at a high level, what I think that does is it makes carbon capture a truly viable economic option for the first time outside of areas with very pure CO₂ streams. So if you look at the 50 dollar a ton credit and the kinds of investments that are going forward under the current 50 dollar a ton tax credit, For carbon capture, it's, you know, ethanol, uh, fermentary, you know, fermenting and gas processing units, ammonia facilities, things with very pure CO₂ streams. If the alum cycle, you know, works, uh, as planned, you know, it'll also potentially work at 50 dollars a ton. But that's sort of it. So if you look across heavy industries, the most emitting industries like cement, steel blast furnaces, um, and, um, Uh, and chemicals refineries and, you know, petrochemical refineries. None of those really pencil out at 50 dollars a ton. They do, in many locations, at 85 dollars a ton. Not everywhere. Not every facility is laid out for this. Not every facility, you know, will this be the best option? Some will want to electrify or fuel switch or do other things. But in many locations across the country that are proximate to a good CO₂ storage basin or a pipeline, this will be an economic option to retrofit heavy industry with carbon capture. And so analysis from, uh, Rhodium Group estimated that the 85 dollar a ton, uh, 45 Q credit would spur on the order of a hundred and…

AI assessment note: “makes carbon capture a truly viable economic option for the first time”

Q I guess, let me, I mean, fine. Um, What do you think are the most important, most impactful provisions we haven't talked about?

A Well, let's talk about buildings, um, which is the other, you know, major emitting sector that we haven't touched on. And, and here there's, you know, that's the, the smallest of the emissions reductions that we see across the sectors between now and, and, and, and, and, and it's also the one that took a pretty big hit from the house bill. To the Senate bill in terms of the, the, you know, trimming down of a number of grant and rebate programs that were designed to facilitate building electrification. But there's still, again, everything gets cheaper. There's still tax credits in here for, uh, households and, you know, uh, individuals to purchase, um, heat pump water heaters, heat pump heaters, uh, heating and cooling systems, upgrade circuit breakers to, to handle the higher electric loads, uh, Do home energy audits, you know, install energy efficient, uh, windows and insulation. All of that, uh, is there's a tax credit that is increased. From 10% to 30% and extended through 2032. There are annual caps on how much you can claim from that. Um, so it's 1800 dollars per year, uh, for most things, although that goes up to 2000 dollars for a heat pump or heat pump water heater, uh, or a biomass boiler, if you want to do that. Um, uh, and then there's a similar commercial tax deduction, not credit for efficient building upgrades in commercial buildings. Um, and then for low income a…

AI assessment note: “Well, let's talk about buildings, um, which is the other, you know, major emitting sector”

Q The one category of uses for this biomass that we have not talked about is turning it into plastic or other consumer goods, but I think particularly bioplastic because that's been, there's been a bunch of attention paid to that space of late. What do you make of that pathway?

A Um, again, reasonable people can disagree. Let me give you my take. First of all, again, if you can do it, you should. That's good. We should be thinking about price. We should be thinking about life cycle, full life cycle, not just carbon, but other environmental impacts. You got to think about all that stuff. But, uh, in full transparency, one of our companies, Solugen, an investment we made at Carbon Direct, does exactly that. They turn biomass into all kinds of chemicals and products, including plastics. So that's great. And if you can use that to displace, ah, a fossil feedstock, then in fact you're doing something positive for climate. It is also the case that the total mass of plastics produced every year is about one billion tons. So the entire plastics market is barely climate relevant. So if you're thinking about something that can deliver a big climate solution, bioplastics isn't it. You cannot balance the atmosphere's needs on making yoga pants and hoodies. You know, it's just not going to work that way, but that's okay. It is positive, not just for climate, if you can do that a little bit, it is also positive to get people in the game. If people want to start virtue signaling by buying plastic bottles made out of recycled plastic, or out of bioplastics made from the air, Do you see, in general, in

AI assessment note: “if you're thinking about something that can deliver a big climate solution, bioplastics isn't it.”

Q Very excited to have you and to talk about alternative protein with you. Okay, so let's start high level. Can you kind of orient us on the state of alternative protein today and how that's changed over the past, I don't know, five, 10 years?

A Yeah, so we've definitely seen an inflection point, and I, I feel like five, six years ago is when that really started to take off. Um, that's when I think, you know, probably sort of average consumer might have noticed the rollout of products like the Beyond Meat Burger and Impossible Burger that really sort of marked, um, the, the emergence of what we call sort of next-gen alternative protein or plant-based meat products. So not the sort of old school, uh, veggie dogs or, or, you know, black bean burgers of yore where, where, you know, they weren't fooling anyone into thinking they were meat, but really companies that are trying to truly mimic the full sensory experience of meat products, and, and the same thing is happening in the dairy sector. So this is a field that's still relatively small when you look at, um, share of market relative to conventional meat, um, Right now in the U.S., which is where we have the best, uh, the best market share data, plant-based meats are at somewhere around 1.5% of the total meat market, but plant-based milks are closer to 16 or so percent of the total fluid milk market. Slightly different numbers, of course, for things like cheese and, and, uh, cream cheese and things like that.

AI assessment note: “we've definitely seen an inflection point, and I, I feel like five, six years ago”

Q and what their strengths and weaknesses are. But let's first maybe just talk a little bit about what's driving this. Obviously there's some combination of factors that are creating all this demand right now, some portion of just consumer demand, there's climate change concerns, there's a push from the industry. So There's food security issues most recently. Like, what's your sense of the factors that are driving this inflection point?

A Yeah, so I think there's a number of factors. So in terms of the motivations, I think the strongest ones on sort of a global good level are certainly the climate and environmental benefits. Um, we're looking at basically 20% of contribution to global greenhouse gases coming from the livestock sector. Um, and that's, that's, of course, something that's worth Worth paying attention to. Um, there's also really, uh, substantial public health benefits associated with moving away from animal agriculture. Um, a recent UN environment report titled The Next Pandemic, or Preventing the Next Pandemic, identified, uh, intensive livestock agriculture and growing demand for animal protein as two of the seven biggest drivers for Risks of zoonotic diseases, um, which of course are, are viruses or, or other infections that emerge in animals and then make their way into human populations, um, which I think of course is more top of mind for all of us now than ever. Um, and then I think there's a lot to be said, uh, from a strict kind of market efficiency and, and resiliency, um, and food security perspective. We saw a lot of the The slaughterhouse shutdowns during COVID that really demonstrated how vulnerable these traditional animal agriculture supply chains are to those types of disruptions. And so there's, there's a huge economic advantage and market advantage to folks moving towards alternati…

AI assessment note: “I think there's a number of factors. So in terms of the motivations”

Q Right, so I guess you're saying there's more work to be done and much more improvement to be had, but I guess again my question is, why not just do that? Is the, is the idea that there is some limitation we're going to face in scaling up and improving plant-based Proteins such that we need to spend more time on things like fermentation and, and cultivated meat.

A Yeah, so it's, it's kind of a mix of, we don't quite know where the ceiling is. We don't know, you know, to what extent across every product category. Could plant-based products truly fool even the most discriminating consumer? Um, you know, cultivated meat, the, the advantage there is that it is essentially identical to animal muscle tissue, so those cells are producing The exact same suite of proteins, the exact same suite of lipids. Um, you can't get any closer to the real thing. It, it is the real thing. Um, and so we don't quite know what that ceiling looks like for plant-based. Um, in the fermentation realm, um, a lot of the advantages are really from this sort of enabling capacity, right? So producing some of these, these so-called superstar ingredients, um, like that, that heme protein, or there's other companies, Making specific dairy proteins, for example, casein proteins or whey proteins that just have really innate, um, high value functionality that's hard to find in the plant kingdom. Not to say it's not out there, but we haven't necessarily found proteins yet that perform quite as well in some of those applications. Um, so these are kind of hacks to get us closer to true sensory mimicry or Um, even surpassing the sensory quality of, of conventional meat products. Um, and then there's sort of the consumer element as well. You know, if you poll consumers and say, ar…

AI assessment note: “it's kind of a mix of, we don't quite know where the ceiling is.”

Q in the steady march toward alternative proteins. Maybe most notably, uh, places like Burger King, McDonald's starting to carry alternative proteins. That feels like it's all in the past couple of years, really, right? So it started to pick up maybe five years ago, but, but really, we seem to be hitting this kind of inflection point in the curve of Just in the last couple of years, it seems.

A Yes. And another really big trend that's been happening, again, I'd say probably last three-ish years, is the big major meat companies jumping into this space. And, and not sort of with curiosity or trepidation, but, um, launching their own plant-based meat brands under, under their flagship brands or creating new product lines, um, investing in or wholesale acquiring some of these plant-based meat companies. Making investments into the cultivated meat space as well, including just last year, a really huge hundred million dollar investment from, uh, JBS, the world's largest meat company, into a cultivated meat company from Spain to acquire it. And launch an innovation facility. So I know we'll get into sort of, you know, everything that's under the umbrella of alternative proteins, not just plant-based, but cultivated and fermentation. Um, but we're really starting to see that traction in terms of who's paying attention to this field. It's not just little startups and, and folks kind of tinkering anymore. There's, there's really big player involvement now.

AI assessment note: “Yes. And another really big trend that's been happening, again, I'd say probably last three-ish years”

Q time. And then I think we want to spend some time on the kind of potential mid and long-term effects that this might have. How might this reshape the global energy ecosystem? How might it change the pace of decarbonization? That kind of thing. So let's start with, you know, rewind a couple of months. What was Russia's role in global energy markets? How important was it and to whom?

A So Russia was a, is and was a hugely important part of the global energy market. They're one of the top exporters of oil and natural gas in the world, and particularly for Europe, which is, um, more dependent on Russia than any other source for their imports of energy. Uh, European Union's, 27 members get about a quarter of their oil from Russia, and about 40% of all natural gas consumed in the EU is imported from Russia as well. Most of that via pipelines that come, uh, you know, westward from Russia and other former Soviet, uh, republics, including via transit through Ukraine, uh, which is host to, um, some major pipelines that, um, are built to move gas from Russia through Uh, to Europe. Um, they also supply a substantial amount of coal, uh, about forty million metric tons of coal to, uh, Europe each year as well. Um, so it's not just oil and gas, they're also a coal exporter. Um, and so, you know, Europe has, has been heavily, uh, integrated with Russia, uh, for its energy needs, um, and was actually, you know, strengthening those, uh, ties before, um, uh, Putin's invasion of Ukraine.

AI assessment note: “European Union's, 27 members get about a quarter of their oil from Russia”

Q for clean feedstock, which is using CO₂ as the input. This is in the emergent and somewhat sexy category of carbon utilization, uh, and, you know, there's a whole universe of using captured CO₂, be it point source captured CO₂ or direct air capture CO₂, To then produce some useful product or good. Plastics being one example of that. How do you think about the opportunity for COT utilization here?

A Yeah, so I would like to start with a disclaimer, which is that, ah, we make a lot of plastics, but the mass of plastics that we make is very, very small compared to the mass of CO₂ that we make. So people should not be thinking about plastics as a, like, as a sink of CO₂ that they can basically, like, that can soak up CO₂ from other sectors at significant scale. We are emitting CO two into the atmosphere at the scale of tens of billions of tons per year. We are making plastics at the scale of hundreds of millions of tons per year. So there's two orders of magnitude in between those two. And so when we talk about carbon utilization here, don't think of it as like, this is a sink for CO two. Think of it as this is an opportunity for like a truly circular carbon economy that We, you know, that everything that goes out gets sucked back in, and we can have these products, but without creating damage from the production of these products, uh, to the climate. So then, so that, that disclaimer made. Let's talk about what we mean here. So, and, uh, so basically, the idea is you can take, uh, CO₂ and H₂O, and you can electrolyze both of them. You can use clean electricity to cut them in half and get your carbon and your hydrogen from those two inputs, and then synthesize those into all of the chemicals that we're talking about, um, ethylene, propylene, and others. There was a really gre…

AI assessment note: “Think of it as this is an opportunity for like a truly circular carbon economy”

Q that most listeners to this podcast are somewhat familiar with the hydrogen world, but probably not so familiar unless they have dedicated time to methane pyrolysis with carbon black. Uh, and Jigar, I know this is a soapbox You want to jump on as well. Tell a little bit more about what do we use carbon black for today? And what is the incumbent production method that this is displacing?

A Yeah, I mean, you know, I don't know that I was the world's expert in carbon black either when I came into the job here at the loan programs office, but, you know, having gone deep down the rabbit hole, I mean, 60% of carbon black is, uh, used in tires, the other 40% is used in plastics and, you know, mechanical rubber, you know, sort of goods. Um, but the way that you produce it now is you basically partially combust, uh, You know, things like coal or, or tar, basically. And, you know, you sort of capture that soot, and that's carbon black, right? And there's 15 major plants in the United States. All of them are under EPA, Department of Justice consent decrees. As of 2013, none of them had had Sox and Nox scrubbers on them, so the people who lived in those communities nearby were breathing in some of the most polluted air in the country, mostly in Louisiana and Texas. And, um, you know, I think some of the carbon black producers are actually still weighing whether they want to comply with those requirements or whether they're just going to shut down their facilities because it's too expensive to put in scrubbers. Um, and so, but they're essential, right? I mean, even an electric car, even in a Tesla, you got tires. And so, you know, like by driving a car, you're participating in, you know, one of these remarkably dirty industrial processes.

AI assessment note: “60% of carbon black is, uh, used in tires, the other 40%”

Q intensive climate tech. But I want to start with each of yours or the backstories, uh, that led to the The meet cute, so to speak, that took us to where we are today. Uh, so Rob, let's start with you. Um, describe Monolith. What is the technology you're pursuing? What's the purpose of it? And then, uh, tell us just a little bit of the background of the company.

A Yeah, sure. Well, thanks so much for having me and happy 2022. So Monolith, uh, we have a technology called methane pyrolysis, and it's one of those really big primary technologies. Uh, what we do is we, we take natural gas or methane, And we heat it up using electricity. And methane's got this really cool thermodynamic property. If you heat methane up to 16, 1700 degrees Celsius, it actually splits into solid carbon and hydrogen. It's just like a fundamental property of methane. And so what that does for you is two things. One, you've just made hydrogen without producing any CO₂. And then second, if you do it just right, you can get this solid carbon product that's got a bunch of utility And thus a bunch of value. And so we've been working on this process for close to a decade now. It's been a long journey that started in the wake of Cleantech, one point O's, uh, demise. And, uh, we started in 2012, uh, have raised a lot of equity over the years and have taken technology that was almost there and got it to full commercial scale. And so, of course, the promise here, right, is you can clean up some really hard to otherwise clean up industries on the solid carbon side, and we can talk more about that in the carbon black part of it. But you also make hydrogen without making CO₂, which is going to be super critical for a bunch of those other hard to decarbonize sectors like ammonia…

AI assessment note: “we have a technology called methane pyrolysis, and it's one of those really big primary technologies.”

Q you know, hopefully over the next few years, some big milestones are achieved. These metrics that we're using, uh, are going to start to get a little bit confusing. They've already started to confuse me, so we'll come back to that. But okay, so that's, that's Tokamak. Um, let's talk about some other Approaches. You mentioned, I think, inertial confinement before. Can you describe that one and how it's different?

A Yes. So inertial confinement is, is probably the, the furthest, uh, you know, in the span of different fusion concepts. In inertial confinement, what you're trying to do is compress a very small amount of fusion fuel to, to a very small size at very high density. And you're not really trying to hold it there at all. You're just compressing it to high density, and then it's gonna disassemble on its own, right? And the goal is that just in the time that it takes to disassemble, you're able to get enough fusion burn to exceed the energy that you took to assemble that in the first place. And, ah, the most mature way to do that is using lasers to compress that fuel. So laser-driven inertial confinement fusion.

AI assessment note: “In inertial confinement, what you're trying to do is compress a very small amount”

Q everybody is trying to build toward. Nobody's achieved it yet, unless I'm wrong. It's, it's yet to be seen in the world, but Is widely appreciated to represent a watershed moment for fusion. I want to talk about what it actually means, the various shades of it, and then we'll talk a little bit about what has to come after that. But let's start with what is scientific breakeven, actually?

A Yeah, so scientific breakeven, you can define it as the energy produced by the fusion, uh, Uh, divided by the energy you delivered to the fusion fuel. So, uh, maybe it's easier just to talk about an example, like a tokamak. Okay, so you have your donut-shaped plasma fuel, and you are applying some kind of heating, whether it's electromagnetic waves or a high-energy beam of, of neutral particles, neutral beam injection, they call it. And so, it's the, it's the power of those heating systems. For example, you can be creating 10 megawatts of fusion power at any instant of time, But yet you're applying 15 megawatts of heating power. So that ratio is what we generally call scientific, uh, the scientific gain, right? And if, when they become equal, that's a scientific breakeven. In inertial fusion, it would be the laser energy that you're shining on your capsule.

AI assessment note: “scientific breakeven, you can define it as the energy produced by the fusion”

Q So presumably getting to Q equals whatever we need is not in and of itself going to be sufficient to build economic fusion reactors that work. What are some of the other technical challenges that we'll face in beyond the energy gain in actually building these systems?

A Yeah, so there's three main areas, I would say. One is, of course, extending the, the duration of the operation, right? You, you get, even if you get high Q for a split second, that's not very useful. So you have to extend that out to, uh, operating at high average power, right? For, for months at a time or longer. So that's one challenge. Um, and then two other challenges are, The, what we call the first wall, the first wall sees this tremendous energy and particle flux coming from the fusion core, and so you need kind of an integrated way to deal with that heat exhaust, uh, and also the materials properties that will, um, allow for the, uh, handling that heat exhaust. And then the final thing is the fuel cycle. So especially with deuterium-tritium fusion, You have to breed the tritium, and you have to extract that tritium and put it back in the system. Um, there's something called a tritium breeding blanket. And so the blanket technology and all of the tritium processing has to be handled at a scale that we haven't done yet. So that's the, that's the final challenge.

AI assessment note: “there's three main areas, I would say. One is, of course, extending the, the duration”

Q Okay, so in the 19 sixties, so 60 years ago, we reached ten million degrees, heating up the plasma to ten million degrees in a tokamak reactor, which we'll come back to what that means. Uh, what's happened since then?

A Yeah, so once, uh, the ten million degrees is a, is a very important symbolic achievement, because it means you, you've kind of passed that first major milestone of getting a stable plasma that can hold the heat in, and once you do that, then it's, it starts to become, you, you need to ramp it up, right? You need to heat it more, continue to improve the heat confinement, and so there was very rapid progress after that in terms of the, the density and the temperature and the confinement time. So from the Seventies until the nineties, 20 years, uh, that triple product metric increased by five orders of magnitude, and people like to compare that with Moore's law as an example, right? That the rate of increase was similar to that of Moore's law, and that brought us to the cusp of what we call scientific break even in the mid nineties of the tokamak. So meaning that the fusion energy produced Was about, ah, almost equal to the energy that you delivered to the fuel.

AI assessment note: “that triple product metric increased by five orders of magnitude”

Q feedstock, um, but the capital cost of building these systems has turned out to be a lot higher than we expected, at least historically, and so the economics of operating these things Has been challenged, not to mention their profile, which is baseload and not very flexible. So what do we know about kind of the economic drivers of a nuclear fusion power plant at the end of the day?

A Yeah, great question. And in fact, ARPA-E has, um, funded, uh, some costing efforts in, in recent years, you know, based on earlier methodologies. And there's, there's some commonalities with, with, Uh, nuclear advanced reactors. It is dominated by capital cost. In fact, the particular ARPA-E funded study showed that maybe 65% of the LCOE might, might be coming from capital cost. But it's the balance of plan. It's the, it's the buildings. It's the infrastructure, right? So, so even though you can optimize your fusion core and get to high gain, honestly, at the end of the day, those things are a smaller driver of the ultimate total cost. And so some of the lessons being learned in, uh, from advanced reactor development, um, I think will apply to fusion. So reducing construction time, um, maybe some modular construction, um, reducing operation and maintenance costs and things like that. Those in the end will have bigger drivers, uh, on the economics for fusion as well.

AI assessment note: “ARPA-E funded study showed that maybe 65% of the LCOE might be coming from capital cost”

Q Yeah. Okay. Wow. All right. So, 20 years. Um, paint me the really quick picture in your perspective of how we got here. Like, why did we land in this place where, where there is this absolutely enormous upwelling of opposition?

A Yeah. So, it's, it's interesting because, you know, we've, I mean, you know, we've been building data centers at, at some scale for 20 years in this country. Even a few years ago, you know, you were getting the red carpet rolled out for you when you'd go meet with Communities and cities, and we've somehow, in a relatively short time, gone from, you know, red carpet to pitchforks, you know, and it, it, and it wasn't, there wasn't even, like, a whole break in between, uh, you know, it was really fast, and so I, I think there's a number of things going on. I mean, one, of course, like, what we're building today is much bigger, you know, in one fell swoop than what we built 15 years ago. Now, if you look at places like Quincy, Washington, for instance, Microsoft probably has close to a gigawatt of data centers in Quincy Washington. I don't know the exact number, but it's, it's gotta be sort of in that ballpark, but it's happened over a period. I think they built that first data center in 2007, right? So almost 20 years, you know, they've gone to a gigawatt and there was a fantastic story just in the last week about Quincy Washington building a fifteen million dollar aquatic center and they have a hundred and fifty million dollar state of the art school and their unemployment rate has gone from like 29% to six percent. You know, so they've, they've been able over a period of 20 year…

AI assessment note: “what we're building today is much bigger, you know, in one fell swoop”

Q Right. Okay, so for all those reasons, we have so, so much diesel being used to generate power. Let's talk about why that's a problem. What's bad about diesel generators?

A Well, I think the challenge is most obvious when you look at who these days uses diesel generators at the most enormous scale, and that's where the problems are most acute, and that is particularly with data centers. And so data centers, typically almost all of them, will have a giant fleet of diesel generators backing up a majority or even a hundred percent of the load. They even have extra generators behind that to back the generators themselves for extra redundancy to ensure their five nines reliability. So you have these enormous data center fleets. Of course, many data centers are built close to urban corridors, like Northern Virginia in particular, is where we've seen a lot of the most acute challenges with the diesel generator fleets there. And what you see when you read the news publications is incredible community opposition to the diesel generators. Even though these are not typically running most of the year, they might only run a hundred hours for a Per year for maintenance and emergency operations. The reality is when they do run, they are number one, incredibly noisy, and the vibrations basically can shake up the whole community. And then on top of that, it's really the air emissions, specifically the NOx emissions that come out of the generators that are incredibly polluting. They have substantial local health impacts, you know, millions or tens of million dollar…

AI assessment note: “incredibly noisy, and the vibrations basically can shake up the whole community. And then... air emissions”

Q Okay, so, diesel generators, they're everywhere. They suck. We haven't had a great replacement. Let's talk about aluminum as fuel. Um, talk to me about, first of all, just give the fundamentals here. Like, why could aluminum be a fuel? Why can a metal be a fuel?

A Yeah, it's a very non-obvious concept. Most people have never heard of metal fuels or aluminum as a source of energy, but in fact is a remarkably efficient way to think about storing And transporting and delivering electricity at enormous scale, independent of the electric grid. And so how it works is, when you think about how aluminum exists in the Earth's crust, it in fact is found in bauxite, which is an ore that contains aluminum bonded with oxygen. That's its natural state in the Earth. And then what we do when we think about producing aluminum as a metal for structural applications, beverage cans, cars, and things like this, Is that you take that mining ore, you dissolve it down with sodium hydroxide, and then you get out aluminum hydroxide in a pure form as a chemical. That's then dried out into aluminum oxide, and then the key process, aluminum smelting, is splitting apart aluminum from oxygen by using electricity to drive an electrochemical process. Uh, and that form of electrolysis splits that bond, and then you get molten aluminum that then gets cast out and produced into whatever products you need. And then, typically at that point, we forget about the energy side of the equation. You just have this great metal. It's structural. It's stable. It doesn't corrode. It's great for all sorts of uses, and sort of that's the end of the story. But, you know, the reality is, …

AI assessment note: “that aluminum, in fact, has all that embodied energy held inside”

Q We'll come back to the Voyager Generator in 1:02. I realize one thing we didn't actually make a clear point of, I think, in talking about aluminum as fuel is its energy density. I mean, you said it sort of got all this embodied energy, chemical energy from the aluminum smelting. Just how, how dense is it?

A Yeah, so aluminum has a whole bunch of great properties as a fuel. Most critically, I would say, is the energy density, and you want to compare it to diesel, which is sort of the gold standard in terms of fossil fuel energy density. I mean, diesel is far more energy dense than natural gas, for example. Um, in fact, is, uh, from a volume basis, about twice as energy dense as diesel on an as-converted basis. So come at the amount of electricity you're getting out per, you know, liter per gallon of fuel. And then even on a weight basis, you are a little bit better than diesel in terms of energy per weight. Um, so, uh, moderately to significantly better than diesel and dramatically better than every other solution out there. And then you combine this with the fact that it is a safe solid aluminum, of course. It doesn't burn. It doesn't rust or corrode. Basically, you can stockpile this for years on end and not lose any of the material to oxidation or side reactions. Um, and because it's such a safe, simple, stable solid, it transports extremely efficiently through existing logistics chains. Uh, whether it's bulk carriers, the way that we move ores or grains or coal around the world, some of the lowest cost logistics options globally are available to aluminum as well. You can put it on rail cars. You can put it on trucks. You don't need any special training or permitting to haul thi…

AI assessment note: “from a volume basis, about twice as energy dense as diesel”