The Exchanges

Q involves Turning that cement into concrete. There have been a bunch of different ideas proposed for how we can decarbonize part or all of this, uh, this market. Let's run through a few of them, and then I think we'll, we'll spend a bunch of time talking about Sublime's approach, obviously. But, uh, at the high level, what do you think of as the, like, major categories of decarbonization possibilities?

A Yeah, the, the major categories are, um, post-combustion carbon capture, so you'll see this in all of the major cement companies, their pathways to net zero by twenty-fifty. Um, you'll also see alternative fuels, so burning things other, other than fossil fuel, be that tires or, or biomass. Um, you, you'll also see big cement companies using supplementary cementitious materials, So, like I said before, Portland cement has been used, especially in the US, as a one-size-fits-all cement, but there are a number of things that you can blend into cement that actually improve the performance and durability, um, and so you can tailor the, the percent of Portland cement you use for each application, and this is, this is done increasingly in Europe, where the cement is blended to, to meet specific, you know, performance or, um, CO two goals.

AI assessment note: “the major categories are, um, post-combustion carbon capture”

Q you. So different formulations of rock glue have different characteristics and, um, I'm interested to hear sort of like, what are the ones that you think of as, or maybe not you, what are the ones that, uh, architects and designers and engineers think of as being the most important? Like, if you're going to have a good quality cement, what are the things that you absolutely need to achieve?

A Yeah, of course, uh, all the properties are important, um, but the main ones are compressive strength, so you want, um, you want it to be strong, so cement is, is very strong in compressive strength, not so good in tensile strength, so you, you need about, You know, 30, 30 megapascals after 30 days. Um, there's also early, early, uh, age strength and, and quick set time. So set time is a little bit different from early strength in that you want your cement to gel and harden, and this means that the contractor can go home, uh, you know, and doesn't have to stand around a long shift shooing kids off from, you know, writing their names and in wet concrete. So, um, Um, what's interesting is that 90% of the cost, the total installed cost of concrete, is actually labor from the contractor. It's often unionized labor. And cement, being a commodity material, um, is so cheap. So Portland cement is around a 130 dollars a ton. So basically you're, the most important properties are the ones that minimize labor costs. So having that Early strength, early set time, proper flow out of the truck so that it doesn't require too much water. And then, of course, durability. So you don't want to, um, have cracking or corrosion or expansive reactions with, you know, um, different minerals in the soils. And so that's, that's very important too.

AI assessment note: “the main ones are compressive strength... there's also early, early, uh, age strength”

Q All right. So let's talk through the, the value chain then. Like who, who is doing what today in this massive cement and concrete industry?

A Yeah, it all starts at the Portland cement kiln. So Portland, uh, Portland cement companies are often very large, um, international companies. So there's a handful of, of colossal companies that own the majority of the, the Portland cement kilns all around the world. So They're often located near a limestone quarry, um, because cement's very bulky, and of course, you know, half the weight of the limestone gets lost to CO₂, so they're located next to a quarry, operate these big kilns, and then ship them, ship the final cement powder, um, to buy it by train or, or by boat to, to, uh, a port, and then that's used by ready-mix concrete. So in every city, um, and in every town, there's, there's a ready-mix concrete producer, um, Some of them are vertically integrated with these large cement companies, and some of them are, are mom and pop or, or family operations or independent companies, and they operate these, these spinning trucks that we see, um, and they, they sell to contractors who are told what to, what to buy from a structural engineer who specified, you know, a certain cement for a certain purpose, all designed by an architect, um, and then of course, Ultimately, everything is paid for by the building owner. So there's quite a, quite a long chain of, of, of value all throughout.

AI assessment note: “it all starts at the Portland cement kiln... used by ready-mix concrete”

Q Now you have to align everybody else, which means you have to get all the other parties that are somewhere along the way bought in on a different product. That's the key point, right? This is, you're, you're introducing something new. Now they don't have to pay any extra for it along the way necessarily, but they have to sign off on it. So what does that actually look like?

A It, it looks very complicated. Yeah, so you can, you know, agree to build a Microsoft campus, but then another part of the complexity is that Microsoft may build a campus. I mean, I know they're, they're hyperscaling data centers, but, you know, your average building owner only builds a building once in a while, and if it's a developer, they're, they often need to look for a tenant before they Build that building. So there's some timeline flow of when this, when this happens, and it's a, it's a massive project that's run by the general contractor. There's structural engineers that need to be involved. Thankfully, Sublime, you know, has this regulatory path through the performance-based standard for Portland cement, which is gaining adoption, especially with all these other, um, low-carbon cement materials that are also falling under the standard. So you need structural engineers. You need, um, you need You know, the developers, the general contractors, and most importantly, I think, is the, um, the concrete subcontractors. So the, the folks that literally spend all day finishing and placing concrete. And I've, I've had the distinct, um, privilege of, of watch, going to a job site and spending hours watching people place concrete. There is, there are men whose jobs it is to rake wet concrete, spread it, Vibrate it, take out all the bubbles, and, and, you know, go through varying…

AI assessment note: “You need structural engineers. You need, um, you need You know, the developers”

Q So presumably if you're going to introduce a larger book and claim system, like you need a central repository, you need a database, you need crediting and certification and so on. Are those things being developed in cement world yet, or is it still too early?

A They are. And so this MOU we have with Microsoft, we're going to do this between Sublime and Microsoft and agree on the Measurement and verification and the benchmarks, um, by which we measure the carbon avoidance that Sublime's product is, is, is, uh, attributable to, but there's also movement in the industry broadly, which I think is very important, um, mirroring what has been done with renewable energy credits and with the SAF, a sustainable aviation fuel book and claim system. So RMI, um, Rocky Mountain Institute, and GMA, the Green Materials Association, um, I know they're working closely, and they announced this, um, at a White House event for low carbon cement and concrete earlier this year. It, it, it's very interesting, very complex, and this type of thing isn't something that a startup could do, so I'm, I'm delighted that someone, some credible third parties are, are taking the torch and developing the systems and measurement, verification, and rules, um, By which, um, you know, we can all participate so that they can raise a large fund from Microsoft and others and have multiple startups participate. Um, it will be a lot of effort to create consensus from all of that because there's a lot of moving pieces and it's, it's, it's different from, it's very similar to electrons in some ways, very different in others because cement is, you know, electrons and SAF, like you …

AI assessment note: “They are. And so this MOU we have with Microsoft”

Q on the outside that it is to sell a new low carbon product. And that's a function of a bunch of things, including the value chain of the industry. So let's start here. Walk me through the value chain of cement. For a given cement pour, when there's going to end up being concrete placed somewhere in a building or sidewalk, whatever it is, who are all the players involved?

A Gosh, there's, there's a lot of players. Um, we sell cement to concrete ready mix producers. These are the people that mix the cement with sand, aggregate, and water in these spinning trucks that you see. So one million ton per year cement plant feeds about a hundred ready mix concrete plants. And the way the industry is set up today is those two are vertically integrated. So cement companies, Lafarge, Wholesome, CRH, et cetera, are, are, are, You know, they also own the, the ready mix plants. The ready mix then sells to a concrete subcontractor. It's the folks that, um, pour in place the cement, which is an art and a science in itself. That is, you know, passed on to the general contractor, um, and then, you know, the general contractor is, is, is sponsored by the developer, which may then sell to a building owner. So there's quite a chain of, of custody here, and, and it's interesting because, you Um, you know, margins are very thin in the construction industry, especially for, for contractors, and labor matters a lot, the cost of labor. So getting things done, you know, quickly and with as, as least the time as possible. So it's very difficult, to use an analogy that, um, my, my colleague, um, the Chief Commercial Officer at Zip Lime says, it's very difficult to push a rope, um, Um, which means to push a new product, which may have a green premium at first, through all of th…

AI assessment note: “We sell cement to concrete ready mix producers... concrete subcontractor... general contractor”

Q does anybody in this ecosystem, like the biggest players are the big cement companies, as you said, Wholesome and CRH and, and Heidelberg and others. Like, can they push new products through? Do they have a history of doing that? Maybe not for Any environmental reason, but for other reasons, like, or, or is it really just, you gotta go to every step individually for every single deployment or project?

A You need the pull and the push. So the person that really can make this unstuck is the, the owner of the purse strings, where this premium is small in the grand scheme of things, especially if they're counting carbon. So that pull from the building owner, which we've seen at Sublime through WS Development, who's developing the seaport area in Boston, as soon as they say, we want this, we'll pay for it, get it done, um, we'll pay you, just, you know, get it done. That makes Everything goes smoothly. Now the ready mix is willing to stock it, the developers place, the contractors place it, etc. But it also, the, the, the cement folks, the CRH and wholesomes, and the concrete contractors that they're vertically integrated with, they, concrete, um, plants, you know, concrete is a perishable product when, as soon as you mix water with it, It has 90 minutes until it sets and hardens, and you do not want it to harden in that truck, which is about a half million dollar truck. So they occupy some of the most central and desired plots of real estate in the hearts of cities so that they can get concrete through traffic to where it needs to be poured. So they're very space constrained, and every square foot of land is important to them. So if they have to dedicate a 50,000 dollar silo to a new product, They want to make sure there's enough demand for that product, that that silo is constant…

AI assessment note: “You need the pull and the push. So the person that really can make this”

Q others is that there is one, or I guess an amalgamation of, of very, very large dominant buyers, which is the government, right? Whether it's federal government or state government for roads and sidewalks and whatever. So what's happening there? Um, it's true in other sectors, government is a big buyer of other stuff too, but I think they are disproportionately large buyers of cement relative to many other Products.

A That's right. So the, the staggering fact is that the U.S. government buys half of the cement that's produced in the United States, and that's through the General Services Administration, which has three hundred million square feet of, um, floor space, so they're the biggest real estate portfolio in the nation. It's the Federal Highway, uh, Administration, it's the, the state DOTs, it's all of the public infrastructure, as well as the army. So, I don't think there is an industry where, you know, or perhaps maybe the defense industry. Defense, yeah. Where, like, you know, the government has this really big role, and so that, you know, where there's a chicken and egg problem, or a stalemate between supply and demand, this is where government can play a massive role in creating the demand signals that unstick This problem of green premium versus, versus volume, because as the volumes get bigger, the premium goes down. Um, so they have a, a huge role to play, and I, this is recognized, so, um, you know, the, the GSA has this Green Proving Grounds initiative to qualify low-carbon building materials. Um, Sublime is part of that. There are also grants, um, that are being administered through the DOT for For state DOTs to qualify low carbon building materials, it is, it is working, um, and there's also two state, uh, two bills, one passing through the House, one through the Senate, I b…

AI assessment note: “the U.S. government buys half of the cement that's produced in the United States”

Q cement or ordinary Portland cement is, I think most folks will know, like pretty ubiquitous. It's most of what we use today. Uh, it's not the only cement that is out there. There are others, but how did we end up Where we are today, where Portland cement is so widely adopted. Is it just the best cement in the world or is it some kind of relic of history?

A Yeah, there, there are many types of, of rock glue that we've been using over the past millennia as humans, and it all started, you know, thousands of years ago when people would burn, burn limestone to make lime, the calcium oxide, and then use that as a mortar, um, for, for, for brick making or for, for building pyramids, um, and, and ancient structures. So that, that was, you know, the first, um, Type of construction material was a lime clay mixture, um, and then the Romans, of course, pioneered a new type of cement, so they started, um, using volcanic ash, and they were blessed with, uh, large quantities of, of volcanic ash thanks to their geography, and that has turned out to be quite a fantastic cement, so their part, their cement was, you know, one part burnt limestone, lime, and one part volcanic ash, and it's proved to be incredibly Durable. Um, so, you know, the Romans came and went, and then, you know, following the Romans, um, cement was still made by burning, burning limestone and mixing it with clay, and then what happened about 200 years ago is someone discovered, almost quite by accident, that if you had a specific chemistry of rock, so if you had the right calcium to silica ratio in your input limestone that you were, you were burning, you And you heated it to an extra, extra hot temperature, so around 1500 degrees Celsius, you got what's now known as Portland …

AI assessment note: “what leads to Portland cement's, um, Very high early strength and early set time”

Q Okay, so part one of what Sublime is doing that's novel is you're replacing the kiln, which is the thing that you have to normally heat up to a thousand to 1500 degrees C. With an electrochemical reaction that occurs at room temperature. How do you think about the benefits of that relative to the traditional kiln?

A Yeah, so the, the benefit is that it's, it's lower in, in CO two. So obviously we're getting rid of that half of cement CO two mission that's from the fossil fuel. And also we can get rid of the, the other half of cement CO two mission, which is from the, the minerals or the limestone that's That's used, and what's cool about Sublime's process is that it's not a thermal decomposition of the calcium carbonate, so remember calcium carbonate decomposes in a kiln, and the CO₂ escapes as a gas, and then you have a solid calcium oxide, so Sublime goes about this in a different way, so we take a source of calcium, um, it could be calcium carbonate, it could be something else, and then instead of Thermally decomposing it, we put it through an electrochemical process that dissolves the calcium, so extracts the calcium as a liquid, um, and then precipitates it in a second step. So, um, this means that we can use calcium carbonate, in which case, when the calcium is extracted, we're left with pure, cold, compressed CO₂, so inherently captured CO₂ that's That's ready, um, to go into a pipeline or to be used in food grade applications, a very low cost of capture, less than 10 dollars a ton. Or we also have the option of using non-limestone minerals. So, um, you know, there's a long list of, of calcium bearing minerals. We could use, um, a number of natural minerals and, and waste materials,…

AI assessment note: “the benefit is that it's, it's lower in, in CO two.”

Q to how much concrete we use. If, if cement is only 10%, it's still the most Produced thing that we second most produced thing in the world. Um, all right, let's talk through the production process. So just walk me through kind of end to end today in the standard cement and concrete production process. What do we start with and how do we get to concrete at the end?

A Yeah, so cement is essentially a calcium silicate, so the way we make cement today, it's made in a long rotary kiln, so it's a big kiln that, that rotates at a five degree angle, so you put rocks on one end, and as the kin rotates and spins, the rocks sort of tumble towards the end of the kiln, which is very, very hot, and you get two chemical reactions, uh, most, basically two chemical reactions happening as the rocks Fall down this kiln and get made into cement. The first reaction, um, is the conversion of limestone, calcium carbonate, into calcium oxide. So calcium carbonate, the major component of cement, is, um, it's chemically inert, so calcium bound to CO₂, uh, can't react with anything. And then at around 1000 degrees Celsius, so about halfway down the kiln, um, the The calcium carbonate breaks up into CO₂, which escapes as a gas, and calcium oxide, which then goes on in a second step to react with the silicates to make Portland cement, which is the cement we largely use today.

AI assessment note: “the way we make cement today, it's made in a long rotary kiln”

Q other book and claim systems have been discussed. People are talking about it with sustainable aviation fuel, for example, where you're not always going to take physical delivery of the staff that you're buying. Do you think that book and claim is like the, is that the answer here? Is that what needs to happen? Um, and if so, what is the ecosystem that needs to be built around that?

A Yeah, it is, it is one of the things that need to happen. Of course, there's, there's no silver bullet that, that makes this easier, but But book and claim is one of the things that solve a lot of logistical problems. Um, it's very similar to renewable energy credits. Um, you know, cement is like electrons in the, in the way that, you know, electrons can't be generated in Boston and then sold to a software company on the, on the West Coast. You know, electrons enter the grid and are transmitted locally. So divorcing the physical electron from the environmental attribute and letting those get paid Um, separately allows all of the electrons to be used locally. So cement, very heavy, very cheap. It doesn't travel well unless you're shipping it by barge. It allows all that cement to be used locally for all the local silos to get filled, for all of the GCs to be accustomed to it, for, um, for, for that to be local, because not everybody is going to have the appetite for that premium at first, um, as these, um, large software companies that have Big profits. Low scope one and two emissions. They're not burning fossil fuels themselves. Large scope three emissions, and so they have, you know, they're taking a leadership role, which I think is very admirable, and in paying the green premium at first to allow this material to flow in the, in the natural ways that it does flow, so that th…

AI assessment note: “Yeah, it is, it is one of the things that need to happen.”

Q the key question, or a key question anyway, on Uh, Sublime's process then is sort of the energy intensity of it. Obviously, we're switching from what is currently relatively cheap fossil-fueled kiln heating to electricity, which is lower emissions, but, you know, currently more expensive. So it sort of all comes down to how much How much energy it requires to run the process? How do you think about that?

A Yeah, um, energy, energy is super important, and we think of all the different ways to decarbonize cement, be it, you know, electrifying parts of the kiln or, or moving to post-combustion carbon capture. All of those are energy adders onto the system and, you know, have the possibility of being cost adders as well, um, since electric heating is, is never as, as efficient as, as direct combustion heating. So, Um, Sublime's process has, produces a cement that has the same embodied energy as, as Portland cement today. Um, and we also have a pathway to further reducing the embodied energy as well, to making it, um, you know, a path to, to have as much embodied energy. And I, I think that's important because as we look, as we look over the millennia for, you know, how technologies evolve, it's, it's usually the, the lowest energy, most efficient process, um, ends up being the winner.

AI assessment note: “produces a cement that has the same embodied energy as, as Portland cement today”

Q Let's start with your state of the market view. Like, where do you think we are in terms of cement decarbonization today? What's happening out there in the industry?

A Oh, loaded question. It is, um, an interesting time in, in cement making. Um, you know, it's one of the world's largest industries by mass, one of the most carbon intensive at the same time. Just like, you know, oil, it's a, it's a material that we can't do without right now. So we can't, you know, necessarily pump the brakes, but we can turn the direction. And, you know, just the size and the momentum of this industry, it's often been described as a stoic industry. It doesn't turn on a dime. It's like the Titanic. And so I think we're seeing now is decisive, slow, but decisive movements. In this cement industry when it comes to decarbonization. So this is not something that is, you know, um, on the trajectory it was even six years ago when I started. Things, things are moving, um, on the regulatory side. We're seeing investments in startups. We're seeing deployment. We're seeing tremendous branding, but, but also people putting their money where their mouth is. Really, really interesting time, um, in cement.

AI assessment note: “we're seeing now is decisive, slow, but decisive movements”

Q lot of the economic growth in the world is in the global south, and thus a lot of the new cement demand is in the global south, and thus a lot of the cement production, new cement production is in the global south. Is there any difference in terms of the approach to, or I guess seriousness about decarbonization between what's happening in the developed world versus the developing world?

A Yeah, there's very interesting dynamics at play all over the world. Um, I guess I'll start in Europe, where, you know, they have this cap and treat system, the ETS, so there's carbon pricing being implemented, and there's free allocations of credits that are disappearing over the coming years. So, many of the largest cement producers, um, Wholesome, Heidelberg, CRH, and others are based in Europe. And so, They're moving quite quickly. They realize this is going to, these regulations are going to double the price of cement in Europe, whether you're going to be paying for post-combustion carbon capture, or you're simply going to be paying the carbon price. They're, they're finally getting hit in their pocketbooks when they don't want this, and they also, I think, recognize that post-combustion carbon capture is, you know, a temporary but not an ultimate solution. So that's Europe. Here in the U.S., There's a lot of demand for cement, so we are building here in the States. Um, we're also importing about 20% of the cement we use, so shipping it from overseas. Here in the Boston area, we get our cement from, from Quebec, and we get it from Europe as well. Um, Spain and Turkey and Greece, if you ever fly into Logan, you'll see these big cement terminals and massive barges where, you know, the flaps open, and you look into the bowels of this big barge with, you know, a bunch of powder…

AI assessment note: “I guess I'll start in Europe, where, you know, they have this cap”

Q That third one, supplementary cementitious materials. Um, I feel like that one actually is for, at least for, for outsiders, like a little more complicated to understand. So like, what are these SCMs and how much can you blend in and what, How big a difference does that make on, on the total life cycle emissions of, of cement if you are just using a little bit less Portland cement?

A Yeah, that's, that's a fantastic question. So the, the, what you're normally blending into Portland cement are silicates. So Portland cement, as I said before, is a tricalcium silicate, which means there's three calciums for one silicate, but the hardened form of Portland cement is, you know, the phase that gives it its strength is, uh, one, one calcium to one silicate to one water. So it's called CSH with a stoichiometry of approximately one to one to one. So when you hydrate Portland cement and add water to it, you have a lot more calcium floating around than you really need. And this, you know, doesn't do you any favors for a strength and durability standpoint. So folks add extra silicates to the cement, and that soaks up the extra calcium, and that improves the durability, improves the density, um, and also improves the performance in many ways. So there are a number of Different sources of silicates. Um, right now fly ash is very popular, so fly ash is an amorphous silicate, um, collected from coal-fired power plants, and of course, those are going away, and, uh, for a good reason, um, but it does mean that there's, um, a shortage of, of fly ash, a near-term shortage, and, you know, we're also increasingly using fly ash for, for sustainability reasons, although you could argue that, um, Perhaps it truly isn't a sustainable product since it has, uh, quite a bit of embodied,…

AI assessment note: “what you're normally blending into Portland cement are silicates.”