#2: Casey Handmer - Pulling Methane From Thin Air (Terraform Industries)

#2: Casey Handmer - Pulling Methane From Thin Air (Terraform Industries)

Hey everyone, I'm Christian and this is First Principles. Today we're talking with

Casey Handmer about the physics and economics of Terraform Industries,

a company that is pulling hydrocarbons from the sky. Casey's

first hydrocarbon is methane, which basically has two ingredients, carbon

and hydrogen. He can get the carbon directly out of the atmosphere from CO2,

and he can get the hydrogen directly out of water. So from

the raw ingredients of sunlight, air, and water, Casey

is creating natural gas. It might sound too unbelievable to

be true, but the chemistry is actually extremely straightforward. And I think that

you'll see in this episode that Casey is not some sort of crazy alchemist,

but rather just a really creative engineer. So let's hop into

it. This is Casey Hanmer with Terraform Industries here on

First Principles. Thank you for joining. And you want to just tell us

Yeah, thanks Christian. It's great to be here. I'm building Terraform

Industries. We're producing synthetic natural

Hell yeah. That is a very succinct, perfect intro.

So how did you learn how to do that? Like, I feel like, you know, engineers

tend to identify, or at least they make you in school, you

know, you're a mechanical engineer or electrical engineer or a computer scientist or

something, but your background is pretty interesting. Like you've been everything from a

a levitation engineer to working at NASA to now doing

what you're doing. So how do you identify as an engineer and how do you

Well, yeah, I think engineers are just people who make things. And about two years ago,

I came to the horrifying realization that synthetic fuels are something that we needed to

do urgently and that no one else is really doing it, at least not

the way that I thought was the correct approach. And so I set off to find

out what my mistakes were. And two years in, I think I've learned quite

Was the, was the original thing that you did, the paper, like, did you start by

thinking through it and sort of like written paper form of like, how

do I do all these steps? And will it actually like, does the engineering study close

So it kind of, I knew, I knew even 10 years ago that the key was something to do with energy, but

as these things go, you know, often by the time you get to the destination, it

seems much more obvious than it did along the way. And I guess the major intermediate step

was that I wrote a book about synthetic hydrocarbon. I wrote a chapter. about

synthetic hydrocarbon supply chain in a book about industrializing Mars, which

is, you know, one of my all-time best sellers. And that's a slight joke,

by the way. And then, you know, I kind of came to realize that, you know, kind of asked

backwards, that energy is the thing that underpins our civilization. We think

of ourselves as being in the Iron Age or something, maybe the Silicon Age, but really we're kind of in

the hydrocarbon age. Everything that we see, do, eat, you know, live

with, et cetera, depends on fossil fuels almost exclusively, well

in the majority. of our energy comes from fossil fuels. And so we need to

solve this problem. And then at the same time became aware that we were getting really,

really good at doing solar power and that solar power was getting cheap

enough that you could actually, instead of burning fuel to make electricity, you

could use electricity to make fuel and still not lose money.

And so that was kind of the germ of the idea. And obviously the precise

components or the precise details of the technical implementation still

had to be worked out. But I kind of started from that perspective and worked my way through

and spent probably about a year doing experiments in my garage and reading

and analyzing and trying to get a handle on some of the heuristics necessary

to design the process that would work in the real world. It's kind of like you

start with this infinite sea of possibilities and you have to build a couple of

bridges into the unknown so you can think sensibly about it and understand where you

You became aware that this was a very urgent problem, that something needed to happen immediately. What

Well, first of all, there's no other way of solving the climate problem, right? Maybe 10 or 15 years

ago, I was kind of disconsolate and disappointed, as many are, that our political system

had failed to solve global warming through Kyoto Protocols or

the Paris Accords or COP26 or whatever. And as

an 18-year-old, I thought, well, yeah, we should just stop using oil. And then gradually, over

time, I came to realize that just stopping using oil wasn't an option because you

know, the lives of most of the world's population depend on oil, and

that's not hyperbole. Like, if we tomorrow found that we could not use oil anymore,

within a year, a good fraction of us would be dead, and within 20 years,

almost all, as it stands today. And yet, we are in a situation where in 20 years'

time, we'd better damn well not be using any more oil, or we're going to bake our grandkids. So,

kind of in this impossible situation. But it's not just a political problem.

It doesn't matter if you live in a representative democracy like the United States or an autocracy

like China. There's no way for a political system to impose abrupt

cessation or even a meaningful reduction in the use of hydrocarbons because they

get voted out. They get voted out even in places that don't have elections. They

would get voted out as autocrats discover from time to time. It

can still happen to them. And so instead, the way out is, well,

you need to make more energy, you need to make it cleaner, and you need to make it cheaper. This

is not exactly revolutionary thinking. And certainly

we've seen enormous strides in the deployment of solar, wind, and batteries

over the last two years, really kind of hitting the mainstream. And that's basically just

that story. It's not driven by subsidies. It's the fact that this

is just cheaper and money has this way of finding the cheapest option

or the most productive option. But there's still kind of this missing piece, which is, sure, we can electrify

the obvious stuff. We can electrify our buildings gradually. We can electrify our cars.

I'm sitting in an electric car right now. The vast majority of the world's fossil

fuels are used on on extremely necessary industries

that have very low revenue per ton of CO2 produced. And you

can't just, you know, cough up a thousand bucks a ton to capture that CO2 and stuff it

underground when you're done. There's not enough money available to do that. There's not enough wealth in the entire

world. So you have to find some way of actually making

a substitute drop in hydrocarbon fuel that's cheaper than

drilling a hole in the ground. Unfortunately, this is not all that hard. It's certainly hard, but it's not

impossible because, you know, drilling holes in the ground is actually quite difficult. So

Absolutely. So what, what is it, what's so magical about hydrocarbons that,

that made us use them in the first place? Like maybe what, what is a hydrocarbon and

Yeah, well, you'll show us about first principles. So like from first principles, uh,

humanity drives energy by kind of allowing energy. So

it drives useful energy by allowing entropy flows to, to be tapped. Uh,

and it just so happens that the humanity lives on a world earth. where there's a

significant chemical imbalance between certain kinds of minerals that occur

in the ground and the atmosphere. Well, I mean, essentially entropy being stored

over hundreds of millions of years by plants. But in

more plain language, there's a shitload of oil and gas and coal underground. and

there's a lot of oxygen in the air. And if you bring the two together and warm them up a bit, they burn and

it creates heat. And with heat, you can do almost

anything. Our bodies create heat, but a couple of hundred watts to

keep us warm. And as we run around, but there's just not that much you

can usefully do with that much energy. And we

saw that in the limitations of pre-industrial societies and their persistent and

I think axiomatic inability to raise all but the tiniest fraction

of humans out of grinding poverty. And yet, once we started burning coal

and oil and gas, actually, it became pretty straightforward to

buy almost everyone a pretty good quality of life. And by pretty good quality of

life, I don't mean we're all flying private jets around, but I mean that most

of us have not experienced our children starving to death. That's certainly something that people

take for granted today, but was not the case 200 years

Absolutely. I mean, I definitely don't think people know that. Like, it's very

much the bad guy now, right? Like, the hydrocarbons are causing global warming.

It's true. Well, which is true. But from a first principles perspective,

it doesn't have to continue to be true. And that's kind of like the bet of a company

like yours is that there are ways to make these things that don't necessarily lead

to bad things. Like, hydrocarbons themselves are not evil. It's just that,

you know, when released in the ways that we have released them, they do

Yeah, of course. Well, to be clear, there will still be negative environmental

externalities associated with burning or making hydrocarbons synthetically,

even through our process, because it's positive some,

but it doesn't mean there's no negatives and no downsides. And

it's also the case that if CO2 in the atmosphere did not cause

global warming over a very long time scale. Actually, the extraction and burning of hydrocarbons,

provided that you are, you know, moderately sensible about environmental impacts, you

know, not poisoning groundwater too much, etc., etc., would actually be

seen as a universal moral good, just as putting cheap

food on the table of hundreds of millions of Americans is seen as

a universal moral good, or, you know, making the internet work better is

seen as a moral good. It just happens to be the case that Very,

very, very gradually over time, we've built up the CO2 in the atmosphere to

Can you tell us a little bit, just like what are the steps of the process that lead from

Yeah, of course. So, I mean, there's many ways of skinning this cat. Many

ways to start with essentially generic inputs and end up

with hydrocarbons or useful energy products at the end. In our case, step

one, from the first moment, we're trying to find a method that is the cheapest, simplest,

easiest, most scalable approach possible. And so that says,

well, you want to minimize as much as

possible any marginal requirements on the system. So you don't want to have to

be next to a cement plant or next to a coal plant or something. So

really what that means is we need to be able to get our water and

our CO2, which are our sources of hydrogen and carbon, out

of the air. And it just so happens that everywhere on earth there's enough

water and enough CO2, almost the same CO2 everywhere and enough water

everywhere, to do this process. And then the other missing ingredient

is energy, and you need just a crap ton of energy, just like

insane volumes of energy. Of course, we don't think about it this way, but the

energy content of hydrocarbons is incredibly high. Gasoline

is a similar energy content to pure lard or something

in terms of what we do, but also gasoline

is about a hundred times cheaper than food on a

per unit energy basis. So we think, well, we put 80 bucks of

fuel in the car this week and we put 80 bucks of food into our family today,

you know, like, gee, my family's hungry, but actually the car is consuming much, much

more energy than the family. It's just cheaper. All

right, so to get to the point, we have three

core subsystems as part of our process. There's

a system that captures CO2 from the air, so its job is to take CO2, which

is about 420 parts per million, and then concentrate that up

to about 95-98% purity, thereabouts. It

doesn't have to be perfect purity, but it does have to be like you know, at least Mars

atmosphere level of CO2. And then the

second part takes water and produces

hydrogen from the water using what's called electrolysis. So

it turns out if you put enough electrical current into water you can rip the

hydrogen off the oxygen pretty effectively. And

actually that's how hydrogen was made industrially until the 1950s

when steam methane reforming took over. And then the third

step is actually quite similar to steam methane reforming only it goes in the other direction. It's

a chemical reactor, it's not a nuclear reactor, it's a chemical reactor that takes in CO2 and

hydrogen. and produces methane and also some water as

a byproduct. And the really neat thing about that is that, first of all, this is synthetic

chemistry. This is old technology. It was discovered in 1896. It uses

a fairly standard catalyst. It's relatively well understood. Similar

chemical plants have been around for 100 years. And then the reaction products

are methane and water. So unlike natural gas, which comes out of the ground and

is often contaminated with CO2 and

hydrogen and helium, actually it's a major source of helium, which is not such

a big deal, but also a crap load of sulfur chemicals

and also light petroleum fluids and other things. We

don't have to worry about any of that. So we just condense out the water and

then maybe scrub out a bit of leftover hydrogen or something and we're good to go, which

is super cool. It really makes

our lives easier. Yeah, and then the

product out of the reactor is natural gas, which is, from

a chemical perspective, essentially indistinguishable from what comes out of your gas

supply in your house and you can use to cook your food

or heat your house or whatever. The only difference

is that because it came out of the air, there's a little bit of carbon-14 in

it. So, you know, like your olive oil or like your food. With

a sensitive enough mass spectrometry you could tell the difference, but other than that it's chemically

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other component of it, though, is that you do need energy to begin. Like, no energy is

free. You can't just conjure up this from the earth. So

Yeah, we get the energy from solar. So

essentially it's an energy product, and we want to be able to pass on

the cost, if you like. We'll pass through the cost or the value of that solar to our

customers as cleanly as possible, and that means aggressively

drive down all the other ancillary costs so that essentially the customer, when they buy

our natural gas, 80% of what they're paying for is just the

solar energy that came into the front end of the system. And

it just turns out that solar energy is the cheapest energy that humanity's ever had access

to. It's astonishingly cheap. To put this in perspective,

and again, this is something that most people don't fully realize or don't fully

appreciate. I earlier mentioned that megajoule

for megajoule or calorie for calorie, gasoline's about 100 times cheaper than

even cheap food. But it turns out that solar panels

and solar batteries and motors and whatnot are about 10,000 times more productive

energetically productive per unit area than agriculture. So when

we think of energy infrastructure, We

normally think of nuclear power plants and power lines and gas

turbines and stuff, but we don't normally think of the insane

industrialized agriculture that we do across the United States, particularly

in the Midwest, as energy infrastructure. But that's what it is, right? It's

a solar power plant in the form of corn and soy

that captures sunlight and converts it into useful chemical fuel.

And that chemical fuel, some of it goes into us, some of it goes into our animals, and some

of it goes into plastics and other industrial processes. But

that's essentially what it's doing. And over the course of a season of

growth, the plant successfully captures the

equivalent of a couple of millimeters of carbon out

of the atmosphere, which is quite impressive in the sense that it's

a living thing that grows from a seed. The seed

contains a little tiny packet of DNA that builds a self-replicating biochemical

robotic machinery, but on the other hand it does have

to spend an awful lot of the energy that it captures from the sun just staying alive and fighting

off pests and not getting too hot and not getting too cold, and actually

relatively little of it comes out in useful biomass for

us. So the long and the short of it is that if you,

let's say you Let's say that you

have a vision for a civilization where 99% of the

energy is in the form of electricity or gasoline or whatever, and 1% is

in the form of food. People

can consume 100 times more energy than they personally eat, which

is a pretty good quality of life. the

total amount of land that you need to devote to solar versus

to agriculture is not 100 to 1, it's actually 100 to 1 in the other direction. It

depends on your climate, right? It depends exactly on where you are, but roughly 10 to 1 or 100 to

1 in the other direction. So actually still, most of your land is growing

food and growing plants, and some small fraction of your land, usually it

doesn't even have to be like It can be arable land, it can be desert and

brown fields or swamp or whatever. You can throw some solar panels

out there and with very, very minimal attention and maintenance, they

will pump out more energy in a day than the plants pump out in an entire season, which

is super cool. If this was not the case, humanity

would be screwed. If this is not the case, even if it was cheap enough, humanity would

not have enough land to put out enough solar power to give us the

quality of life that the market demands. And that, you know, politicians

by hook or by crook will not be able to take away from us and probably wouldn't

It is. It seriously is. I mean, I think that, um, I

think, yeah, people definitely don't understand that. I think that, um, one of the things that

comes across, so if you, if you go to your white paper, like if you read the Terraform white paper and

you see like at the end of the paper or whatever, it says, you know, what

we want to do is effectively just convert an amazing amount of

land. Like we need to, I forget the exact number, but like how much more solar do

you want to make? Like some absurdly high number of, uh, or

like absurdly high, uh, increase in the amount of solar that the world

Well, I mean, in terms of like the amount of solar that the world is capturing, most

of it will still be in plants, right? Most of us will still be in agriculture by area.

We're basically, we're prepared to scale up to 400 terawatts.

Now 400 terawatts is enough enough

energy that we'd be able to provide U.S. levels of oil and

gas supply at U.S. current prices, or better, to every

man, woman, and child on Earth, which is probably four

times more energy than humanity as

a whole could ever possibly hope to enjoy just from fossil extraction. That

just isn't enough. Even with the fracking boom in

the United States, there's just not enough oil and gas underground to give the

relatively undeveloped billions in Africa and South and East Asia and

South America, the same level of energy consumption, same quality of

life that we enjoy here in America. But let's say we can obviously do that through

synthetics and so on. So there's about 400 million of our machines

for 400 terawatts is about 2 billion acres of land, which sounds

like a lot, but overall it's roughly equivalent

to the total amount of land that is currently under cities or under roads across

the world. So that tells you that you could probably do a good quarter

to a third of that just from rooftop solar if you really wanted to. It

probably makes more sense to do it in the outlying areas of cities and towns, but

it's much, much more labor intensive to grow plants and the economic productivity is

much, much lower than solar. Again,

people don't fully understand this, but essentially the answer's there. The

only complication of using solar power is that it's not there at nighttime, which

is one of the reasons why we're seeing such explosive growth in batteries, in

the battery industry. But it's also, if

you're able to build your

capital equipment for your if you're

an industrial process, cheaply enough, then it doesn't matter.

You can get by on 25% utilization. Like I'm sitting in my car right now,

which was probably the most expensive thing I've ever bought, and

I'd be lucky to use this 5% of the time, and yet I still regard it as a

good deal, a good addition to my life. So you

don't actually need to have 100% utilization of your capital equipment, provided that

it's cheap enough that it's not really affecting the bottom line, it's not really affecting the price that

Okay, there are all these different parts. One of those huge parts of the process is creating

all this solar. But what you want to do

with that solar is not just directly turn it into energy. You want to turn it

into energy that is then turned into other energy in the form of hydrocarbons and

then have people use it. So my real question is, why

not just use it as solar power? Why do we have to go through this intermediate step of

Yeah, it's not either or. I mean, like, obviously we're continuing to

develop, and by we I mean humanity, is continuing to develop solar

and wind and batteries, but mostly solar and batteries now, at a

fabulous rate, and that will continue to basically grow at

whatever the bottleneck is right now, it's grid distribution capacity, but in the

future, the new future I suspect will be battery availability, to

provide people's primary electricity needs. And also, I

would expect to see an ongoing transition away from hydrocarbons towards

electricity for applications where that makes economic sense, which includes mostly

cooling, computation, energy generation, obviously,

like electricity generation, and ground transportation. But

at the same time, hydrocarbons remain an enormously

important energy source and also chemical source for

major industries. Chemical industry is one of the obvious ones, obviously. Aviation,

shipping, And

then a bunch of other different things. So I think it would be wise to expect that

we will see pretty steep growth in electricity consumption

and production, and that will not translate to

steep decline in hydrocarbon consumption. I

think you could definitely say for sure that hydrocarbon consumption for

ground transportation will probably enter a decline

sometime this decade, from which it will not recover. But overall, hydrocarbon

consumption for aviation will continue to rise, and I hope it will rise steeply. Not

just because I'm talking my book and my business will be selling sustainable aviation

fuel, but also if you think of... hydrocarbon

consumption per capita, aviation is one of the most intense uses we do with

it, and so you're like, well, clearly we should just ban aviation. Or we say, actually,

as a function of its utility, a gallon of hydrocarbons

burnt in service of aviation is almost certainly more more

productive or has better outcomes in your life, provided

that your basic needs are being met, than a gallon

of aviation fuel, sorry, a gallon of fuel being used to have you

sit in traffic or something like that. And as someone who is

lucky enough to fly home to Australia, you know, semi-frequently, I

think this is a privilege that we should strive to

extend to as many people as you possibly can. I think that a

good future for humanity is a future where people can fly Not

just the richest 10 million people on Earth, but essentially anyone can fly anywhere

on Earth multiple times per year, multiple times per life, and

a good many of them at supersonic speeds, which is also extremely

fuel consumption heavy. But yeah,

we'll never get there on fossils. We'll never get there on fossil fuel. There's

just not enough of it. Aviation right now

is about 2% of global fossil fuel consumption. So

maybe we can get to 10x that, so we get to 100 million

people flying routinely. But we'll never get to 8 billion on

Yeah. Okay, let's shift gears a tiny bit and talk

a little bit more about the business side of things. Basically,

how is this possible to do? Sounds great, let's do it, go

build all your solar, but at the end of the day, if it's not producing more dollars at the end

of the machine than it took to create the machine, then we couldn't scale it up that high

at all. They can't scale at all, yeah. Capitalism will

punch you in the face. That's right. I

think the thing that's interesting is that this has just become

possible, it seems, from me. Do tell me if that's wrong, but it seems to

me that solar just got cheap enough. The IRA,

that just made it possible. The revenue was that much higher from

this sort of thing. It doesn't seem like it's been possible for very long.

The IRA will accelerate us for about eight years, which actually

makes a big difference. So an extra decade of emissions right now is about 500 gigatons

of CO2, which is about

2,000 gigatons of excess CO2 in the atmosphere right now. So another

500 on top of that is not great. So the IRA is definitely pulling

in the right direction. And actually, I should say, for

the historically curious in your audience, the

synthetic fuels have been produced at pretty large

scale for almost 100 years, mostly derived

from coal. So you can take

coal and convert it into gasoline. But essentially, as

I said, the chemistry that we're using was invented in 1896, so

it's been possible to capture CO2 and

to make hydrogen and turn it into synthetic fuel at scale since then. But

the limiting factor is the availability of cheap electricity

on the input side, and solar has only gotten cheap enough to make that worthwhile

in the last couple of years, and I think increasingly

so in the next couple of years. Two

years ago, I was like, well, solar right now is not really

cheap enough for us to compete without any subsidies worldwide. There's

a few places on the Earth where fuel is so expensive that we could make go

of it. But actually, the important thing

to realize is that solar is coming down in cost 10% or 15% per year. And

at that rate, you can miss on cost by quite

a bit this year and in five years' time. Nothing to worry about. And

then, of course, that cost decline is driven by increased demand and

a learning rate feedback process. like

large-scale hydrocarbon synthesis hits prime

time, that will increase demand by about a factor of 10. So

the cost declines of anything will accelerate at that point, which is, you

know, it's feedback, right? This is capitalism doing what capitalism does

best. Without cheap solar, you know,

basically solving the climate problem is impossible. With it,

it is inevitable. You know, like that's the key

That's awesome. So what, what is it that has caused the, the

solar or the cost of solar energy to come down so much? I mean, it's, you said,

I mean, you hit it at it, but I'd love to chat about a little bit more, which is, it's not

like we've invented new chemistry or it was like a

new way to make like photovoltaics. That's like suddenly 10 X

cheaper, like 10 X more efficient. Like we're actually, what, what, what

efficiency are you assuming? Maybe like 20% or something efficient on a solar cell?

I don't actually care that much. Um, cause I buy it by the megawatt. Um,

yeah. So, The land is not the expensive part. Even

though we're using a lot of land and even though if I want to buy my neighbor's

house, it's going to cost a million dollars. That's

just because a lot of humans around and because most humans live

in cities, we think that the world's covered in humans. It's not. It's just most

humans live in cities. And in LA, you don't

have to drive very far and you're like, not only is no one here, no one has ever been

here. pre-Clovis people

coming across 14,000 years ago, it is unlikely that a human has

ever set foot in this particular patch of desolate, miserable

desert. And that's

why there's plenty of land. This kind of

applies across the board, and we're familiar with this in the context of Moore's Law, with

transistors and things like that, but actually any manufactured product, which is

to say any product that's produced in a factory, this relationship

was discovered in the Second World War. But essentially over time, as production increases,

the price tends to come down. So if you plot the

logarithm of of the cumulative production on one axis and

the price on the other axis, then they'll tend to follow a straight line,

and the steepness of that line will vary depending on what sort of product it is. Typically,

the more complex products will decline less quickly, and

then the simpler ones will decline more quickly. But for solar, it's actually relatively

simple to make it, and the

learning rate for solar is probably around 35%, which is to say

every time that we've doubled production, the cost comes down by 30% or 35%. And

right now, we're doubling production roughly every two years. which

again is like a number that's hard to get your head around but you know in

2022 humanity deployed about 250 gigawatts of solar power worldwide

which is equivalent to one megawatt every two minutes and last year we deployed

about 450, 450 gigawatts which is almost twice as much. A

little bit of that is like you know things

getting back up to speed after COVID and so on but like if

I had to bet I would say that you know 2030 we

will have another year in which the relative increase is more than that

relative increase. You know, I just think that we're getting really good at this

now. So last year is about one every one minute, one megawatt every

one minute. So yeah, so as the production increases, as

demand increases, the

cost comes down. When the cost comes down, demand increases. Now, it

does not guarantee that that your price will therefore go

to zero over a long enough time period, right? It may be the case that the

price comes down, but not by enough to induce enough

additional demand to cause the price to continue to come down. But

it could converge. But in the case of solar, it is definitely not converging. And

despite what everyone has been saying about, oh, solar demand will definitely converge this year,

I think that it will probably not converge for probably another 15 or

20 years at this rate, which is both terrifying and very exciting because

If we miss by an order of magnitude, then we'll end up paving the entire world with solar panels, which would

be pretty cool, but also like, hmm, is

this really what we wanted to do? So it'll

be interesting to see. I think at that point, it's very hard to predict exactly

what will occur. It is highly likely, for example, by that point, that a

lot of the most power-intensive applications will be not done on the surface of

Yeah. So we hinted at it before, but you want to

say a little bit more just about like what the IRA is and what it did, like

how it, you said that it accelerated the advent

How? Well, so the Inflation Reduction Act contains

within it, you know, thousands of different incentives

that are mostly intended to

help American manufacturers reshore production after

three or four decades of neglect. And

I won't get into the kind of finer geopolitical aspects of this right here, but one

of the little tiny dusty corners of the IRA contained essentially

incentives or production tax credits for green

hydrogen, for green electricity, and for carbon

capture, essentially. And it

just so happens that the business that I started is

involved in all three of those in a way that It's already

extremely economically productive, and so the Inflation Reduction Act credits, which

are intended to improve economic productivity, really give

us a huge kick in the ass on that front. In

particular, the 45V production tax credit for green hydrogen,

which is worth up to $3 per kilogram of hydrogen. Conventional

wisdom would have it that green hydrogen costs between $5 and $6 a kilogram,

so $3 a kilogram kind of lessens the blow a bit, whereas

steam-methane-reformed hydrogen can be as cheap as $1 a kilogram. So it's

still hard to compete on that basis, but conventional

wisdom does not take into account the fact that cheap

solar has come along. Yeah. And, and so we basically said,

well, what would an electrolyzer look like if, uh,

if it was powered by cheap solar instead of if it was powered by like hydro or

nuclear power or something, it's actually quite different. Um,

and I have a blog post on this. People may be interested to call it like green hydrogen for

$1 a kilogram. Um, which really

delves into the details of how you go about doing it.

And essentially you cannot, you cannot, you cannot achieve economic

like relevancy, unless you're about $1 a kilogram or less. And

you cannot get to $1 a kilogram or less unless your power is cheaper than $20 a

megawatt hour, ideally even cheaper than that. And

there's basically no way of getting to that cost unless you're using solar without batteries. And

so if using solar without batteries, you have to have an electrolyzer that's

happy with 25% utilization, which means not only does it have to be super cheap

to build, so that the utilization fraction is okay,

amortization is okay. It also has to be happy to ramp up and ramp down without

too much silliness. And there's plenty of ways that

electrolyzers can get very silly. So that

basically takes you in a completely different direction than the last 50 years of academic research and industrial

development on electrolyzers. which me

and the team essentially correctly intuited about two years ago and

since successfully built prototypes of electrolyzers that

follow these new design principles and that will very shortly allow us

to demonstrate a green hydrogen production that is competitive with

steam methane reforming. even without subsidies. Now, you throw on top the

$3 kilogram green hydrogen subsidy and it probably roughly

triples our revenue, which makes up

for an awful lot of, let's say, execution missteps, which are almost guaranteed

Basically, it allows us to recover from accidents more quickly, or mistakes more quickly, which

Love it. So that's actually, I mean, that was one of the things that struck me when I was reading

those white papers was like, I love that you started, I think

it was that one, the one with the section that's like, here are things that are very counterintuitive,

but I will prove, they'll become obvious by the end of this paper. And

one of those was that low efficiency is actually okay. Like you don't need to

have super efficient solar cell, or like solar in general. Can

you talk about that? Like why do people normally want high

efficiency? Why is it so counterintuitive that low efficiency is

So traditionally we've converted heat into electricity by boiling water

and turning a turbine, and as a result electricity has been quite a

bit more expensive per unit energy than heat. And

electricity is also usually seen as a more useful form of energy,

more versatile form of energy. Obviously, they kind

of are turning on its head right now. And so when you look at our system,

we have many factors of production, many things that contribute cost to

our system. And one of those is labor, materials,

land, et cetera, and also electricity. And of all those different things, they're all

getting more expensive over time, as is the way of the world, except for electricity, which is

getting cheaper. And so if you say, well, how do we capture the upside of cheap electricity?

Well, you don't want to invest a whole bunch of money into trying to save electricity, right?

You want to actually invest your time and effort into

productively trading electrical efficiency to reduce your costs across the other axes. And

in addition, if you have a lower efficiency system with lower capex, that

basically means you're more exposed to the cost of electricity, which is good if the price

of electricity is coming down. And it also means that when the price

of electricity continues to reduce, we can pass those savings on to our customers because

we're sensitive to those costs. If you take the

other leg of the optimization and say, well, electricity

is incredibly versatile and useful and expensive, and we

think that the cost for electricity for the foreseeable future is nuclear, which

is probably 400 bucks a megawatt hour, then there's

no way in hell you can get anywhere near a dollar a kilogram for green hydrogen so we're just

going to have to eat that loss and we want to minimize that loss and we plan on operating this electrolyzer for

30 or 40 years 100% of the time so you know we can afford to

build an electrolyzer that that will operate you know at constant utilization

forever so we only have to turn it on once uh it will never have to like ramp

up and ramp down um and you know we can afford to

put you know a thousand bucks a kilowatt of high efficiency tweaks and

unobtainium in there because over 40 years we'll get that money back out, which

is fine if you're building a rig to sit on a laboratory

desk or something like that. But we're about how business

is trying to build something that's more economically attractive than

oil wells, drilling for oil, which means we need an ROI

measured in a couple of years at most. yeah

and so that basically means we can't we can't afford to amortize over 20 or 30 years we

have to get the money out really quickly so it has to be really cheap so again it's like you know

we sometimes talk about multiple lakes or multiple different solutions and it just turns out

that there's like two different stable attractors in this space and really the the

stable attractor of like cheap and cheerful has not really been explored uh

Yeah. So that's one third

of the solution is the electrolyzer. Is it similar

with the direct air capture? Is it similar with the reactor itself? Have

you done other things with those two that people would similarly think

is kind of counterintuitive or different than people would normally make those

Yeah, across the board. So again, if you're in this kind of energy

scarcity mindset, you will try and build a director capture system that

uses a CO2 solvent material that has a

very, very low energy of transition energy. Essentially the energy required

to switch it from CO2 absorbing to CO2 releasing state. And

this is the correct approach to take if you're in a situation where you don't have very much

power. commercially

available direct air capture machines are used in spacecraft and

on submarines and sometimes in scuba diving

equipment or medical equipment or

so on. And these systems generally do not have cost constraints, at least

not meaningful ones, but they often have really stringent mass constraints, which we

don't care about really because it's just sitting on the ground. And they often have

volume constraints. I mean, submarines have volume constraints, but we don't care about that either, because we're

literally putting this out in the middle of the most useless, worthless

land ever known. What we have is a

capex constraint. We don't really have an energy constraint either. So this is

not a meaningful one. We've built our DAC system to be very, very

energy hungry, and it's going to struggle to hit 20% of our total energy consumption, because

the electrolyzer just is so power hungry. So

it's very hard to do damage next to that electrolyzer on

the energy budget. So we basically decided, well, what if

we optimize our solvent material not for something that is incredibly

expensive but doesn't use too much energy, but something that actually uses as much energy as it needs, but

it's really, really cheap. And that pushed us in the direction of of

what's called the calcite lime cycle, which uses the same chemistry as cement. And

then that solvent material is typically less than 100 bucks a ton, maybe

as cheap as 10 bucks a ton if you're in the right place, which is

great because at global scale we need a few hundred million tons of it. And

so if I have to buy a few hundred million tons of limestone

for, I don't know, a billion dollars, I think that's affordable on

the global scale of the hydrocarbon industry, which is on the order of seven

or eight trillion dollars a year. I like to say just over the course of one hour meeting, you

and I, the oil and gas industry will have turned over a billion dollars, which

is kind of cool. Whereas if

you kind of go up market on direct

air capture solvents, you can go to zeolites or

amines or metal organic frameworks, and some metal

organic frameworks cost you $50,000 a gram. So if you're saying, okay,

well now I need I need 100 million tons of this stuff. It's going to cost you

$5 trillion or something. I'm sorry, $5,000 trillion, which

What's even the next word after trillion? Quadrillion? Quadrillion.

Yeah, yeah. Five times 10 to the 18 dollars. We

should talk about log dollars. Yeah, exactly. Which

is a lot of money, right? It's really hard to think

about a business model that can scale if you have materials

like that in it. As much as possible, we're trying to use materials

and processes where the supply chain is essentially unlimited. So

for example, 100 million tons of limestone sounds like

a lot, but humanity already consumes about 5 billion tons per year just making cement. And

obviously, we won't be consuming 100 million tons a year, we'll

be consuming a couple hundred million tons over 20 years. So

it barely even makes a dent in

Yeah, yeah. Can you say a little bit more about how the director capture

actually works? There's two steps. There's capture and then release, basically.

Yeah. There's also a secret, more complex third step. So

it's basically a cycle, right? You can think of a calcium metal atom

that's cycling through the system. It gets recycled over and over again. And

actually, it has a friend. It has an oxygen atom as its friend, which

sits with calcium oxide, which kind of goes around in a circle. And

calcium oxide is better known as lime. It's actually

the lime that's in corn chips when it's got a hint of lime. It's

a little bit of calcium oxide left over from the nixtamalization process, which releases

thiamine, which is an amino acid from the

corn, so you can digest it. But if you don't have that, then you'll actually get pellagra, which

is a vitamin deficiency. Sorry, it's an amino

acid? I don't know. Ask a biochemist. But

there's basically a little bit of calcium oxide

left over, and actually there's some in bagels as well. So it

turns out you can capture carbon with bagels. It's also the main ingredient in

cement and in whitewash, as in Huck

Finn painting the fence with whitewash. So this chemical,

calcium oxide, you can mix it with water to make what's called slaked

lime, which is calcium hydroxide. And calcium hydroxide

is a material that has an incredible affinity for carbon

dioxide. So you can basically make flakes. We

start off with calcium oxide, we mix it with water, turning to calcium hydroxide, then

we make flakes with it using a glorified pasta roller. Turns out the Italians

hundreds of years ago figured out how to deal with like sticky powders. And

so make flakes out of it, which is just

kind of got the right geometric properties for something that has to absorb CO2 over

Yeah, it's got surface area and it's also got enough weight that it won't blow away. So like a

powder will just kind of drift away in the wind. You

put these flakes into a sorption bed, you blow air through them, and

actually the density of CO2 in the calcium hydroxide, once

it's saturated, is about a

million times higher than the density of CO2 in air. So you need roughly, like volume

per volume, you need roughly a million times more air than you need rocks. So

like calcium hydroxide flakes, which is, I call them rocks, but it is rocks, it's

a mineral. So you kind of have this bed that sits there for

like two days as you blow air through it at a fabulous pace. And after two days,

it's like a thin layer, a two inch layer of calcium hydroxide flakes

is mostly saturated with CO2. And then you dump that out and

put it into a kiln, which heats it up to

almost a thousand degrees Celsius. And that process, which is called calcination,

breaks the calcium carbonate back down into

calcium oxide and the CO2 comes out as gas. And actually the calcium

hydroxide is also pretty hygroscopic, so it absorbs a bunch of water

from the air as well, so it releases that water and we capture that

as well. Or we can capture it if we need water. And

yeah, so the CHG comes out through a pipe because it's gas, calcium hydroxide goes

out through kind of a drainage port

because it's still a solid, and then it goes back into the

mixer and turns back into calcium hydroxide. So it's kind of this three-step process

of like solvent, regeneration, absorbing

That's good. I love that both of, in

two of the steps of your process, your wasteful byproduct is water. It's

very, typically you would think... Yeah.

Is that true? Because the other one, yeah, for the reactor, it's also water that comes

Water comes out of the reactor as well. Yeah, essentially all

the oxygen that's in the CO2 gets turned into water. And

then all the oxygen that's in the water, in the electrolyzer, gets turned into gaseous

oxygen and gets vented. So, like, our major waste product is actually oxygen. Like

trees. We just dig it, just like assholes, just releasing oxygen into

the air. How dare you. Yeah, and actually, in

some ways, actually it's kind

of an interesting thing like chemically speaking when you when you eat food the chemical reaction

that your body is using to convert that food into energy that your cells

use to make you walk around and think think interesting thoughts is it's

the same chemical reaction as if you just set the food on fire right you're you're

basically oxidizing the food and extracting energy obviously the

oxidization process in your body is occurring in water

rather than in air, but the amount of energy released is the same. And

it turns out that our process is actually creating a

hydrocarbon methane, essentially taking

CO2 out of the air and fixing it as a, in this

case it's still a gas, but we could turn it into a liquid if we wanted to. And it's

basically the same process by which plants take

CO2 and water, which is ultimately from the air as well, out

of the air and turn it into carbohydrate, not hydrocarbons, carbohydrate.

It's got some oxygen in there as well, to

make sugars and then make cellulose and grow. Then

of course we use sugars and stuff to grow as well. Our

process is more like the burning the sandwich. It's a bit more crude. It

involves temperatures and chemistries that plants could

not survive, which is one of the reasons why we're able to do it with such high

What I'm hearing is bagels and sandwiches are key parts of the process. Both of them can

They fuel the engineer, and then the engineer builds the machine, and then the machine, yeah. There you go.

Do you want to tell us a little bit just about, is it sabatier? Yeah,

Sabatier, he was a French high school physics teacher who

dabbled in chemistry and discovered this process, essentially

using bike parts, like bike pump parts, because back in those days, bikes were

the latest thing. and published it, and

then ultimately won the Nobel Prize for work related to this, which was using

metal ions to catalyze high-temperature, high-pressure synthetic chemistry

reactions. One of which he did not discover, but was discovered shortly

thereafter, was the Haber-Bosch reaction, which is used to fix nitrogen and

make fertilizer, which supports roughly half the world's population today.

Yay. Synthetic chemistry. Yay. Interwar German

chemical work. Don't, don't think too much about 1914 to 1945. Yeah,

nothing happened. Um, it's actually, uh, I

will say there's a fascinating book on that called the alchemy of air that, that gives a much

better historical context. And actually when I was in Germany a few months ago, I

was, I was lucky enough to go and visit the plant at Leuna near Leipzig where all

this stuff was first done. It's a, it's incredible place. A

field of dreams really for what we're trying to do here. Um, Yeah,

like how they did it. They didn't have stainless steel back then. I have no idea how they did it. Anyway, we

have a master car and even then it's still really hard. Yeah, so

the reactor is super cool. Sabatier reactor,

Paul Sabatier, he had four daughters, but I don't know if he has any living descendants.

What can I help, what can I tell you about the... How can I help you with

your Sabadier? No, I mean just... So we talked about

with the other parts of the, the other like kind of major parts of the process that there

were trade-offs that normally people wouldn't make, but you

guys decided were possible. Is it, is this just kind of like a more vanilla Sabadier

I would say our Sabadier Reactor is not particularly special. It's,

we're basically just trying to do it the cheap way, right? it

becomes quite a bit more expensive to operate it, much more than about 100 psi.

So we operate at 100 psi, even though that decreases our throughput, like

conversion efficiency. But then we just have multiple stages to

essentially take the water out and it shifts the reaction equilibrium further in

the direction of the products. We're also lucky in that our customer doesn't

require 99.9999999% purity. Because

natural gas is natural gas, right? It's full of all kinds of crap, so as long as we can

hit that fairly lax purity cutoff, we're good

to go. I

think we're just building the Gen 4 reactor right now, so we've

obviously learned quite a bit along the way. But yeah, it's going well. And

it's like the spooky part, right? The other two parts I was able to prototype in

my garage, but the reactor I was like, better hire a professional and

then build that. It's

alchemy, right? You're taking matter and you're transmuting it into other forms

of matter, right? It's just like, it's deeply weird, right?

It's like, atoms are not really very tangible, right? They're kind

of abstract. But then you build this machine and you

put in hydrogen and Actually, hydrogen means makes water in

Ancient Creek, kind of gives the story away. But you put hydrogen and CO2 in, and

CO2 is the oxidizer, which feels really fucked up. And then out

of the condenser out comes a bunch of water, and you're like, oh,

that's weird. Something magical is happening in there. And something which I will add, we

still don't understand, like the process by which the

Sabatier reaction is catalyzed. We kind of have a

It's so cool. It's amazing that we've captured it without really fully understanding it,

You mentioned Gen 4. You mentioned that you have the Gen 4 reactor.

You've been doing a lot of R&D, basically, to like build up each of these

steps, multiple versions, you know, trying to create ultimately one

final end. Electrolyze is fine on Gen 9. Gen 9, nice. Yeah.

Yeah, there you go. That's right. So what is

the path to like getting a, you know, actually tapping it?

Like, what do you call it? I don't know, hooking up to the pipeline or something? Like,

Yeah. Well, the next major milestone for us is the end-to-end demo. So

that's currently scheduled for the end of February, which is coming up pretty soon. So

if my team is listening to this, you should go back to work. But yeah,

basically the various pieces are coming together now, which is fun. This

will be the first time we've taken these three subsystems, which kind of work

independently, and then stick them together, which is definitely going to be a bit of a headache. we've

thought quite carefully about how we're going to do that. So it shouldn't be too much of

a headache. And so that's kind of a key milestone

for us. It's a bit like a static fire for a rocket or something. You're taking all the different systems, you

plug them all together. We put electricity in at one end and

natural gas comes out the other end. We take the natural gas, we hand it off to our customer,

SoCoGas, and they will write us a check for probably five

cents for that volume of gas. But you've shown that that

you've shown that this is a process that can make money, or that produces money. You

haven't necessarily shown that you make more money than you put in, which

is necessary to put yourself inside the tent of capitalism. Right now, we're still

on the outside, knocking on the door. Can we come in? From

the end-to-end demo, or after the end-to-end demo,

the value prop is much more legible. The

unknowns are essentially much more comprehensible to outsiders. It

basically becomes a question of execution and scaling up

and signing key partnerships. you're

getting to major revenue and then profitability as quickly as possible. And

we're certainly in a tearing hurry to do that. This is not kind of a slow

burn, it'll take us another 10 years to get to a usable prototype kind

of situation. This is a really

a lot of brain sweat to think about how we can suck weeks out of the schedule over the

course of the next 10 years or 20 years, because every week

Totally. How does

the handoff happen? Do you actually tap into some pipe or something? Do

How does the offloading actually happen? Basically, we

think that over the next few years, we'll be deploying alongside existing gas production

wells. in areas in California where

they're already producing gas from holes in the ground, those wells are in

decline. And so there's actually spare capacity

in the injection systems that take that gas and then purify it

and then shoot it into major transmission pipelines. And so

we will deploy in those areas. And then as those wells continue to

decline, we will ramp up production and just basically piggyback on

those injection systems. And that's probably how it will work in the United States

at scale, which is roughly 500 to 1.5 500 megawatt

to 1.5 gigawatt in size solar installations with between

500 and 1,500 terraformers converting natural gas in the field

and then gathering it together in a centralized purification

and pressurization injection hub that then

will go into pipelines. And then as far as the

pipeline operator or the consumer is concerned, no change will occur except over time

the gas will become a little bit cheaper. And

I think that's the way to go, right? The supply side is the way to solve this

problem. The demand side is like, well, we would like you to desire nice

things less. OK, good luck with that. On the supply side, you're

like, oh, we've figured out a technology which can produce more gas

more cheaply with less environmental impact. And incidentally, it's also carbon

neutral, which is kind of the nice to have on

Yeah, definitely. So natural gas is just low-hanging fruit for us,

but ultimately we're there to serve the market for synthetic hydrocarbons. And

sometimes when I'm feeling cheeky, I say there's actually a lot of research being done right now on

essentially taking the same inputs, CO2 and hydrogen, and making all kinds

of other chemicals, including formate and proteins,

fats, and starches. So it may be the case actually that in 50 years' time

it will not be the case that it's just like 1% solar and 99% agriculture, but actually a lot of

the agricultural land will be We'll

be allowed to rewild, and we'll be able to produce the

vast majority of humanity's caloric intake, including animal feed, premium

synthetic foods, etc., using a solar PV-based process, which

will be easily 100 times more productive. probably

more like 1,000 to 10,000 times more productive per unit area of land, which both

means we can increase food supply, reduce cost, reduce

climatic risk, reduce ecological impact, improve quality, and

then also vastly increase the supply of food available even

in places that we would conventionally regard as unfarmable or

inhospitable. So if your vision for humanity includes

a trillion humans on the Earth. There's no way we can get there with agriculture as we know it today, but

we could certainly get there with a solar synthetic supply

Love it. That's a perfect way to end. Any final thoughts? Any places

you would want to send people, things you want them, maybe check out that book,

Alchemy of Air, yeah, yeah. Well, I mean, if you're super smart and you want to

work with me, that's great. And if you're super smart and you don't want to

work with me, you should start a company and compete. We

look forward to the battle. But yeah, actually,

this kind of cheap solar is poised to revolutionize about

half a dozen to a dozen different industries. And I know a few startups

in these areas, but they would all appreciate the help. So look

around at the local incredibly power-intensive industries. Think carefully

about how you would run them off intermittent but incredibly cheap electricity, and

then go and do it. And the sooner we do this,

Episode Video

Creators and Guests

Christian Keil
Christian Keil
Host of First Principles | Chief of Staff @ Astranis
Casey Handmer, PhD
Casey Handmer, PhD
Physicist, Immigrant, Pilot, Dad. Former Caltech, Hyperloop, NASA JPL. Founder @terraformindies