The Exchanges

Q I have talked about a little bit that I think you have insight into that people don't often appreciate is, like, just the practical challenge of Aggregation and utilization of that resource. Like, talk me through, what does it take? Say you want it to do something. Forget what you're doing with it. Say you want to do something with it, um, at scale. Like, what does that actually entail?

A There is, again, some diversity depending on, on the residue, but if we stick with corn stover for a second and say you want to use the corn stover somewhere, um, Typically, you're not going to be able to use it on the field, right? Typically, if you're going to take some portion of it, whether that's 70% or 30%, depending on the sort of agricultural zone that you're in, uh, you know, you need to get it off the field. And so, there's actually a lot of steps to get the biomass off the field in a sort of usable format at a usable distance where typically people are building centralized plants. And so, you know, that actually dominates the cost of the biomass, which is, you know, something that we're trying to, we're trying to invert, invert this at Charm by eventually Operating on field to cut this all out. But, you know, you have, let's say you have a field, it's all laid flat. You know, a forage harvester came through and, and cut it all down. Now you need to first windrow it into a pile. Then you're going to bail it. Then once you have bales, you're going to have, ah, you know, you're going to bring a machine that's going to stack the bales and bring them over to the edge of the field where you put them in piles. And then you're going to need something like telehandler to load it onto a Load it onto a truck, and they need to drive the truck, and they need to unload the truck. …

AI assessment note: “windrow it into a pile. Then you're going to bail it.”

Q All right. Give me a tour of ag waste to start. Like, where is it? What is it? How much of it is there? Give me the, give me the The quick high level.

A Yeah, I think many people would maybe push back first on, on the word waste there. Uh, for the most part, when you have ag residues, it's mostly things that are unutilized or very underutilized. Uh, and so in some sense there's waste there, but, uh, really I would think of it as sort of extremely underutilized, uh, and has a lot of value maybe that is, is going to waste or getting lost. Um, but you know, there's, there's an enormous amount In, in the United States, which maybe is where we can focus for now, um, you know, just corn stover, for example, obviously concentrated in the mid, in the Midwest, and particularly the northern part of the Midwest. There's about 90, ninety-five million acres of corn grown in the US every year. There's order magnitude four dry tons of stover per year on each of those, uh, on each of those acres, and so, you know, you're, you're, Just on corn stover, you're looking at 400 megatons of, of ag residues that don't really get used. They just rot on the field and, and return to the atmosphere.

AI assessment note: “Just on corn stover, you're looking at 400 megatons of, of ag residues”

Q What is stover, actually? Like, on this corn stalk, what is the stover? And then, I think you just answered this question, but in a default scenario, corn is harvested, the stover just continues to sit on the field and eventually decomposes. That's what happens to it.

A That's right, and there's, there's some geographical diversity to that, so we can get further into the nuance here, but the stover itself is the stalks, the leaves, um, depending on the harvest method, you may actually have cobs in the mix too. Um, so it's, it's everything basically kind of minus the kernels, uh, because the kernels are really where the value lies, whether it's, you know, animal feedstock, or human consumption, or high fructose corn syrup, or ethanol. It's the, the kernels is really what we grow corn for today. Um, but the, the actual practices around what happens to that stove are very pretty wild, wildly. Um, there are a few places where it's used for cellulosic ethanol production, but it's really tiny, and it's never really taken off. And, you know, in, in, as you get sort of farther north, you can have very moist soils that hold a lot of water, and as you get farther north, those will sometimes stay frozen, you know, deep into the spring when they actually need to plant it. So, depending on the place, there can be quite different practices, actually, around whether, Uh, you know, you need to remove it so that you can actually plant in the spring and not be dealing with frozen soil. Or in other places where actually, say like the, the Great Plains and Western Kansas and, and Colorado, where you actually want to keep it on because it's more of it on because i…

AI assessment note: “the stover itself is the stalks, the leaves, um, depending on the harvest method”

Q things that blow up the economics of every other use of waste biomass, or I'm sorry, ag residue or whatever it is. Um, presumably you believe that to be the trade, the right trade to make, but how much of a trade off is it really? Like if you were doing pyrolysis at a 10 X scale relative to what you are doing it at, would it be notably cheaper?

A Uh, it can get notably cheaper up to a point. So, you know, like we today operate two ton per day systems. It is significantly cheaper to operate like a 20 ton per day system, right? You can, and that's what we're working towards. It's like you'll have the same, basically the same amount of labor operating something with 10 times the throughput, um, maybe 15 times the throughput, and you, you get a lot of leverage out of that. You start to see some diseconomies on top of that when you go beyond, we think, that sort of equipment, farm equipment form factor. When you start moving away from a mobile piece of equipment into a fixed facility, You do get some economies of the construction, but you actually take on a lot more risk in every facility that you build. You have all the balance of plant, you have permitting, you have, uh, just more risk because you're going to build many fewer of them, and each one is going to be uniquely sized. And so, there, there's actually a, I think there's a, there's a, You actually break the unit, the unit economics in some sense break and jump, uh, beyond that mobile form factor. Um, and that's part of our thesis is like, how much throughput can we jam into a large combine kind of form factor, uh, is, is what we're ultimately going to be shooting for. Uh, and we think that there's great economics and continuing to push that, push that throughput. Bu…

AI assessment note: “it can get notably cheaper up to a point. So, you know, like we today operate”

Q source from a wider Aperture geographically, and so you end up paying these transport costs and logistics costs that kind of kill you, or you do something at the edge, which I think is closer to what you're doing, because you then don't have to deal with the transport costs, but you trade off the economies of scale on the processing side. So how do you think about that balance?

A In some sense, this is the fundamental thesis of charm, which is, You can't bring biomass to market in its broadly heterogeneous, like, uh, highly distributed fluffy current existing capacity, right? You just can't do it. Um, it doesn't work. People have tried it so many times, and it just doesn't work. So the things that do work today are when people have large centralized sources of biomass. That could be rice holes coming out of a plant, or it could be sawdust coming out of a plant. Like, those are the places where it works. Um, and so, But that's a tiny fraction. It's a tiny, tiny fraction of the total biomass, and so to your point, if you want to get it to scale, you do have to be able to go out into the field and convert it into some kind of format that actually is more homogeneous and transportable. And so that is basically the thesis of, of, of charm, which is, can we take that material, and instead of, people have tried pelleting, people have tried, like, all these things, but the problem is, you, your density, your starting density is maybe, like, a hundred to 200 kilograms per meter cubed, and even if you get that up via pelleting to, like, four, 506 hundred, you're still, it's still really, really hard, and so our fundamental thesis is, can we go out into the field with pyrolysis equipment and consolidate that biomass by Removing a bunch of stuff that isn't useful, …

AI assessment note: “can we go out into the field with pyrolysis equipment and consolidate that biomass”

Q Is that a function of, like, the pyrolysis market is not enormous, and it's not, like, the most mature in the world? Like, is it just, in part, there has been room for innovation? Because it's not, like, totally optimized?

A Yeah, it's, it's also the case that there are some processes that benefit drastically from sort of a surface area to volume, uh, change, right? Like, uh, a lot of these world-scale chemical plants have, like, massive volumes inside their reactors, and so as they scale up, the sort of, like, metal cost, physical metal cost of the reactor vessel, uh, is declining because the surface area to volume ratio is, is, is, uh, declining. I think that there are some process, I think pyrolysis in some senses is, uh, less influenced by that because you're sort of putting heat in and taking heat out, and so you're, you almost have like a surface area to surface area scaling law, so maybe they also, that pyrolysis is somewhat unique relative to other chemical processes.

AI assessment note: “pyrolysis in some senses is, uh, less influenced by that because you're sort of putting heat in”

Q And, like, and, like, why? What are they, what are they driving toward? Is it net zero commitments that they're trying to meet? Is it, like, what's the underlying motivation for corporates, at least, do you think?

A I think our underlying motivation for corporates is impact, and they want to trust that that impact is actually happening in, like, a measurable way, and climate impact is great, but they also, if they can double dip simultaneously into having climate impact as well as health impact because there isn't particulate coming out of a wildfire, and into, you know, community impact because homes aren't getting burnt down, and into community impact because a well is getting cleaned up, and, like, it's not spewing radioactive brine at the surface anymore, or methane. Like, You know, it's just, it's just their, if their goal is, is, is having a positive impact with, with these kinds of purchases, that's like, that's a lot more, right? There's just more there on the bone. Um, as opposed to, you know, some, some other approaches often have trade-offs, uh, in this sense, whether that's like, you know, consuming a lot of power or, or other kinds of things, right? Where it's like, that can be less appealing.

AI assessment note: “I think our underlying motivation for corporates is impact, and they want to trust”