Does the carbon removal tech you’re developing have a shot at being cost-competitive in the real world? How might you reduce the cost of a given CDR technology? And how do you convince government funders or investors that your carbon removal idea is viable?
A techno-economic assessment or TEA answers these questions.
So, what is involved in conducting a techno-economic assessment? And how might it help a startup improve the economic performance of its climate tech and maximize its impact?
Grant Faber is Founder and President of Carbon-Based Consulting, a firm that offers techno-economic assessments, early-stage emissions accounting, and market research for startups, investors, and environmental nonprofits in the CDR and CCUS space.
On this bonus episode of Reversing Climate Change, Grant joins Ross, Siobhan, and Asa to explain why an understanding of economics is crucial in carbon removal and how a TEA helps us determine the cost per tonne of carbon removal.
Grant walks us through the concept of learning rates, discussing why different technologies have different learning rates, and how founders might apply these principles to reduce costs.
Listen in for insight on the potentially arbitrary nature of life cycle assessments and learn how Grant can help your organization accelerate the commercialization of carbon removal technology.
More from the show
Ad-free episodes and other benefits come with a paid subscription.
Carbon Removal Newsroom, the news show that ran alongside this one, is over. Its episodes are still up, on the feed Climate Workers Anonymous now uses.
Carbon Removal Memes is still going.
Resources
Global CO2 Initiative TEA Guidelines
‘Factors Affecting the Cost of Airplanes’ in the Journal of Aeronautical Sciences
‘Evaluating the Causes of Cost Reduction in Photovoltaic Modules’ in Energy Policy
Full Transcript
Alexsandra Guerra: You’re listening to the Reversing Climate Change podcast by the team at Nori, the carbon removal marketplace. This is a show about the innovators and entrepreneurs developing solutions to climate change.
Ross Kenyon: Hello and welcome to the Reversing Climate Change podcast with Nori. I’m Ross Kenyon. I’m one of the co-founders of Nori and the creative editor there. You’re making me laugh. What are you doing over there?
Siobhan Montoya-Lavender: Like a motorcycle just zoomed by right as you started. I was like rushing to mute.
Ross Kenyon: I didn’t hear any of it, so you must have been very, very quick.
Siobhan Montoya-Lavender: It was a very loud motorcycle.
Ross Kenyon: Siobhan Montoya-Lavender, co-founder of Thanks a Ton, motorcycle enthusiast of Kornavaka. Asa Kamer, producer of Carbon Removal Newsroom. Hey, Asa. Hey, Ross.
Asa Kamer: Hey, Ross.
Ross Kenyon: Hey, hey, we have an air miner with us today that we’ve been interacting textually for a long time. It’s nice to get a chance to hang out in person. Grant Faber, founder of Carbon Based Consulting. Hey, Grant. Hello. Hey, thanks for having me. Yeah. Happy to have you. You’ve been just a long-term staple of air miners. Like almost once I get down to like John, well, obviously Tito and Jason, but then John is in my memory, these people here also, but then you’re pretty close to the top of old school air miners.
Is that even a true impression or do I just make that up?
Grant Faber: Yeah, I think that’s the case. I think I joined Airminers back like spring or summer of 2019. So it’s already been a few years here, which is sometimes when I think about that, it’s hard to believe. But I’ve been with the community for a while. I actually helped Tito and Jason with like This early air miner survey, which kind of led into the first conference, it kind of teed up for it. I mean, COVID also kind of influenced that first 2020 conference, but yeah, and that just all started from one post and look where we are today with all the events and such.
So yeah, I definitely love the community.
Siobhan Montoya-Lavender: Well, you’re a foundational member, I would certainly say. Grant is involved in everything. So I know Grant’s Because we worked on the conference together, but I also know Grant because we’re in the environmental justice working group together. And then I feel like any kind of relevant thread that’s getting a lot of traction on the Airminer’s Slack channel is like, I’m usually following it because of whatever Grant’s saying.
Ross Kenyon: That’s a lot of pressure, but thank you. Will he live up to it? You be the judge, tweet angry things at Grant. What’s your Twitter handle, Grant? Oh, I’m not on Twitter. So I can avoid angry tweets. I also, I’m the same way too. I don’t want to get sucked into these. Like I have things to do. It’s like going to distract me and make me feel bad. If it’s going to distract me, it should at least make me feel good at the end of it. Right? Angering people online.
Grant Faber: Definitely. That’s why I’m on LinkedIn because it’s so positive all the time. Yeah. More professional. At least, yeah. Things, people I follow. It’s pretty, positive business culture. So.
Ross Kenyon: LinkedIn is positive. It definitely crosses into... It’s either toxic positivity or weird oversharing and nothing in between, I feel like. I do see that, yeah.
Siobhan Montoya-Lavender: That’s true of a lot of social networks. I don’t know which social network has really hit gold with the right level of sarcasm and positivity and mental health. No, that doesn’t exist.
Ross Kenyon: Man, there was like five seconds where Instagram was just people posting pictures of their family and dogs and mountains. And then it became just as political and just as like kind of intense as every other space. But can’t we have one space where we just look at dogs? Is there not a space in the world for just one platform without politics in this way? Answer, there is not.
Asa Kamer: They don’t make money if we’re not all angry and upset at each other. That’s what the blue bucks are.
Ross Kenyon: That’s probably what it is. I think it literally is. Yeah.
Asa Kamer: Opening up a big tangent, right, to start it off.
Ross Kenyon: What’s wrong with social media? Techno-economic analysis of social media. Go.
Grant Faber: Well, I think what Ace is saying is, yeah, it has a big role. I mean, yeah, they do try to gamify the platforms to try to milk us for as many ad dollars as they can. But hey, there’s maybe a business opportunity for a dog and cat focused social media network where every post is monetized and tied to a carbon removal offset. So, hey, you never know. There you go.
Ross Kenyon: There we go. Anyway, you guys wanted to have Grant on. This is the kind of money printing idea session I was hoping for. Grant, I associate you so heavily with techno-economic analysis. If you’re listening and you heard the strange cadence of my voice, it’s probably because I’m alluding to that is the thing that you do broadly, right? What is it? And what should people know about it if this is just a nonsense soup of words?
Grant Faber: Yeah, definitely. So, yeah, yeah, I usually say techno-economic assessment or TEA. It goes by many names, though. You might hear technical cost modeling or- Oh, Ron, you’re saying analysis? Should it be assessment? It kind of varies. I mean, there’s this debate with like LCA and lifecycle assessment. A lot of people call it lifecycle analysis. Sometimes it’s like a regional thing. In some ways, it doesn’t really matter. But I often follow these guidelines from the Global CO2 Initiative where I used to work. And they’re always saying lifecycle and techno-economic assessment. So that’s just always what I tend toward to reduce lexical confusion.
But it’s all good. Anyway, the methodology TEA, so I’ve been working on that for a few years. And so I started at the Global CO2 Initiative, developing guidelines for techno-economic assessment, specifically of carbon capture and utilization. And like I was saying, there’s these different names for TEA. And many people have probably done, who are in this space, especially where founders have probably done TEA to some extent. At its most basic level, you might think of looking at The different factors that go into a given process, assigning cost factors to those, and more or less trying to find like a per unit cost of a particular process.
Sometimes it might look like calculating operating expenses and capital expenditures. You can get pretty deep into it. It’s supposed to be more tied to the technical aspects of the process versus being something more downstream, like a full-fledged financial model or a project finance model or anything like that. And so you might see... You know, an invention coming out of an academic lab or something, and they’re trying to, maybe they’re making a low carbon chemical, or even some kind of new carbon removal pathway, they might be interested in doing TEA to figure out, okay, does this even have a chance at being...
Cost competitive in the real world. Is there even a chance that the unit economics could work out or are they five orders of magnitude too large? And so that’s kind of one aspect. There’s many goals of TEA in addition to that. So you might also think about just identifying general cost drivers and coming up with different methods to reduce the cost of a technology. You might think about meeting requirements. Increasingly, funders, whether it’s government funders or investors, are requiring both TEA and some kind of environmental or lifecycle assessment in order to qualify for that funding.
It starts a broader dialogue about cost within your company and gets people who may otherwise be very technically minded thinking about cost and what it might take to get something to work in the marketplace. So yeah, that’s kind of a high-level background on it.
Siobhan Montoya-Lavender: Man, I’m so glad you work on this so that I don’t have to find some stuff. But I’m curious. There’s lots of things that I want to be not an expert in, but knowledgeable about.
Ross Kenyon: Unit economics a lot. Sounds smart or what?
Siobhan Montoya-Lavender: I just want... I remember this... I think I mentioned this. Marcus extorted a keynote for the Air Miners event. And he said... One piece of advice I would give to you is learn something about economics. Like if you’re a scientist, if you’re background, if you’re a CDR nerd, like know something about economics. And I was like, oh shit, I should know something about economics, man. And since then, I’ve been like slowly trying to like, just be better about not putting up that wall of like, I don’t want to, I don’t want to learn this.
I’m just going to put up a wall when I hear this stuff. And instead think, okay, what are the pieces I can glean that How can I better understand this space? Because it is so crucial for CDR. When you’re talking about the explosion of an industry, like we need this industry to scale really rapidly. And so economics is a crucial factor there.
Ross Kenyon: Where should someone start, Grant? Sounds like you probably have training in economics in addition to some scientific disciplines. Maybe you could help guide Siobhan on the air here. How should she learn about economics?
Grant Faber: Yeah, definitely. So actually to kind of help the community with this, in my old job at the Global CO2 Initiative at the University of Michigan, one of the big projects I engaged in was building this website called Assess CCUS that has a bunch of free resources. Yeah. Yeah. Yeah. Equivalent in a Word doc explaining like the detailed process of how one might go through one of these assessments. And then they also linked to the full guidelines from the Global CO2 Initiative, which are hundreds of pages, which explain like a standardized methodology to go through these things.
And on this website is There are templates and calculators where you can kind of tinker around with these things and start to familiarize yourself with how they might look for, you know, a new kind of technical process at like a different level. You could think too often what these models are really trying to do is to take the material, energy, labor, and equipment costs of a given process, and then just synthesize those and figure out how much that process might cost, both now and in the future, if you’re able to project forward, which is part of that method and maybe something we could talk about today in terms of cost reduction.
But in some ways, you could think about it as just... Maybe like an analogy with your own household expenses, you know, we buy different raw material inputs like food to keep ourselves going and we have to pay our energy bills and we buy certain like equipment as in like furniture and televisions to, you know, stock our home and maintenance. Maybe we pay a repair person to come in and fix something. So we have like these labor expenses and all those together are like, you know, our budget that kind of allows us to subsist.
And really the TEA is just like that, but, you know, with the direct air capture machine.
Ross Kenyon: I’m laughing because I’m thinking, I know Siobhan’s a big office fan. It’s like when Michael asked about the budget surplus, it’s like your mommy and daddy give you $10 for a lemonade stand.
Siobhan Montoya-Lavender: It’s like, explain this to me like I was a high schooler. Okay. Explain this to me like I was in second grade.
Ross Kenyon: Did you ever do any, usually people start with microeconomics. Did you ever do any of that, Siobhan? Or is it pretty blue skies for you?
Siobhan Montoya-Lavender: In undergrad, I took econ class. I took environmental econ, where at the time, this was about 2009, 2008, 2009. One of the things that forever stood out to me was the pricing on human life, which at the time was around a million dollars. I don’t know what it is today. There’s inflation.
Ross Kenyon: There’s also the devaluation of human life. Maybe it doesn’t work.
Siobhan Montoya-Lavender: It all gets mixed up. But yeah, no, I did that and I did environmental law, but mostly I just did kind of more environmental science and policy. Asa, I feel like you had a question. You’re going to come off mute there.
Asa Kamer: Well, I was just wondering if this work you do, Grant, does it include the, I don’t know if you’d call this, but like the carbon accounting, figuring out how carbon negative the project is, like all in, including the CO2 emitted to build the facility and the energy costs and everything. Is that part of what you do?
Grant Faber: Yeah, so that is part of what I do. That strictly, though, is not within just a TEA because the TEA is usually looking at just, you know, like its name implies, the technical and economic aspects of a process. The carbon accounting, that would be, you know, more under the Umbrella of life cycle assessment. And so there’s life cycle assessment where you look at the entire life of a product, all of its stages, and you look at all the environmental impacts, or as many as you possibly can anyway, ranging from emissions to water use to land use, eutrophication, acidification, et cetera.
So there’s that. And then sort of the greenhouse gas accounting and carbon accounting is like a subset of that. And so those things actually, interestingly, can these metrics that you might get can be paired. And so if you’ve ever seen like a levelized cost per ton of CO2 abated a metric like that, you would calculate that by doing a TEA, figuring out, Okay, let’s say we have this low carbon diesel or something. What’s the difference in the unit cost of the low carbon diesel to conventional diesel? And then you would do a similar kind of assessment, but for greenhouse gas emissions over some scope.
And then you would say, okay, Here’s the difference in emissions. And then you can combine those indicators and just divide the differences by one another to figure out, OK, what’s kind of the cost per ton of CO2 that we’re reducing here? And that is a really useful metric for comparing technologies against other possibly very different technologies in terms of their decarbon or their like economic effectiveness of their decarbonization potential.
Asa Kamer: This might be a like super basic question, but when I’ve talked to people who don’t know about carbon removal, what you off air called carbon removal models, I hope I’m okay to use that phrase. We can edit it out if, but I loved it. I think that one of the first questions that comes up is like, well, is it even possible to know if it removes more CO2 than it costs to run it? And I understand why people have that cynicism after a lot of, you know, there’s been a lot of greenwashing and there’s been a lot of sort of Techno optimism around things like CCS, which hasn’t necessarily panned out.
And so maybe there’s like a bit of skepticism that like this machine is just going to work. And I’ve also seen like some critics of CDR kind of have a bit of a, you know, imply like, oh, will we ever, will we ever really know? So I guess like, is it from your point of view, if you like, we could just talk about DAC or just like engineered solutions in general, because I wouldn’t think that’s a different category than ecosystem stuff, but. Is it possible? I mean, with what we know now, is it possible to say, give like a certain project?
Like, is it possible to know if it’s carbon negative or not?
Ross Kenyon: Oh, my God. How do you draw boundaries on these things? What’s in scope?
Siobhan Montoya-Lavender: What’s out of scope? I feel like that’s the hardest thing when doing an LCA is just determining like, what’s in scope? Where do you stop? Because you can really go down the rabbit’s hole with an LCA.
Ross Kenyon: We made that meme, right? Of the me inventing scope 14 emissions.
Siobhan Montoya-Lavender: That’s right.
Ross Kenyon: Yeah. Go ahead, Grant. You just got a juicy question pitched to you.
Grant Faber: I want to hear what you have to say. Oh, definitely. Yeah. So when you first started asking your question, I started thinking a little bit about like the history of life cycle assessment a little bit and how One of its big, I mean, it was in use before this, but it really was helpful in arguing for solar PV, actually, maybe in the 90s or so, because, you know, obviously solar doesn’t have these operational emissions or operational emissions are much, much smaller relative to some alternative fossil based electricity generation pathway. But, you know, people started saying, well, what about the silicon that, you know, gets mined for these?
What about the glass? What about the steel? What about the concrete foundations? I bet you didn’t think about that. And the truth was, you know, a lot of people maybe didn’t think about that. But what life cycle assessment allowed for was a way to actually quantitatively look at every step from raw materials extraction all the way to the end of life of the solar panel and say, OK, you know, here here’s every flow. You know, you can actually do a whole heat and mass balance of this whole process and see here’s all the material and energy coming into this process.
Here’s all the material coming out, energy coming out, the waste that’s generated. And then you can use scientific data on the environmental impacts of all those things and then multiply it all and add it all together and get a sense of what’s this total impact on the environment from this process. So really, when you apply that to CDR, It’s no different than applying it to, you know, solar PV or even all these other things that LCA has been applied to over the years, like ethanol or, you know, different food packaging or different food items or really anything.
It kind of is the basis for. And so I would say we can know with a probably pretty high degree of confidence that a certain process is carbon negative. We can look at its upstream and all the inputs going into that process and say, okay, it requires X amount of steel, Y amount of concrete, Z amount of sorbent. And there’s definitely data gaps. There’s definitely uncertainty. But even sometimes if that uncertainty is extremely large, you might use so little of a given input for how much carbon you might be injecting and permanently storing underground, that even with massive uncertainty, you still know with a pretty...
A high degree of confidence that something is carbon negative. Now, of course, there can be other environmental and social trade-offs, and that’s something we can get into talking about. It’s not always easy to manage all those trade-offs, but I would say it’s certainly possible to have a pretty good idea. Nice. Very cool.
Ross Kenyon: I always want to be such an absolutist on the boundaries, though, because there is some arbitrariness just inherent to drawing boundaries. You have to decide what is outside of the system. And we did a show on LCAs years and years ago. And I ended up bringing up, there’s an essay, Grant, maybe you’ve read it. Have you ever read iPencil? I don’t think so. It’s sort of a classic of free market microeconomics. People love to bring it up. But the conceit of it is that no one knows how to make a pencil.
All of the trades that go from lumber to graphite to the eraser, the rubber. And then once you get into the secondary effects of producing the machines, That made that material and then all the food that goes into supporting all the laborers and all of their housing. Basically, every act of consumption is consuming the entire world economy that is so interconnected that there essentially is no boundary. The entire planet makes a pencil. And I broadly buy that case, which makes me a terrible LCA person because I don’t think I could do without feeling arbitrary.
But maybe you’ve solved it. Maybe you’re OK with the level of arbitrariness. Maybe it’s negligible, which sounds like kind of maybe where you’re going with that.
Grant Faber: Yeah. You know, I’ve had that thought as well. And so when I was in grad school, I actually brought this issue up to my advisors who were very deep in the LCA world. And I was having like a moment of panic. I was like, but everything’s connected. And what about the machines to make the machines, make the machines. And it’s like, we could go all the way back to like a truly in hand axes, you know, millions of years ago, like carving the first, you know, skins to make textiles or whatever.
Like you could go back a long ways and yeah. How do you meaningfully do anything? You know, but their response was sort of, well, it’s kind of negligible or it’s just kind of like not relevant. And of course, maybe they were biased. Maybe they were saying these things because they’ve invested their whole lives in this methodology and their whole, you know, scholarly professions in this and published so many papers and couldn’t possibly just say, oh, wait, that’s a good point. Like, It’s all nonsense or whatever, but I think there is something there where it’s like, okay, we know that burning coal is a problem, is one of the big contributors to emissions or raising cattle or these things.
And so what do we need to do to do less of those things? And it seems like, okay, well, if we can do something that just uses less energy for the same function that, well, then we need less coal or if we have excess solar PV that we can, you know, Electricity, we can put that to different kinds of products that maybe wouldn’t have had that energy otherwise. Or, oh, if we use less coal and steel making or something like that and have some alternative method, that’s just one fewer source of emissions.
And I think, you know, when you really dig into it, it’s pretty reasonable to tie these things like, okay, if you took every American household and just swapped out, you know, the incandescent bulbs with LED bulbs, then every year so much less energy would be used that would just take this giant strain off and we’d have to burn less coal, you know, and let fewer resources. And that would just save emissions. And so, yeah, I think maybe... In that comparative sense, it can be valuable and useful. Like it’s probably better to use less energy than to use more.
And it’s probably better, you know, correspondingly to emit less carbon than more. So there’s that, you know, there definitely are rebound effects of like, well, what about all the money that gets saved from less energy consumption? Because what if you save money on not having to buy as much energy because you’re using an LED light instead of an incandescent? But what if you spend that excess money on taking a vacation that you wouldn’t otherwise have taken and now you burn all these emissions?
Siobhan Montoya-Lavender: Whoa, you’re blowing my mind right now.
Grant Faber: Yeah. And that’s a problem, which is kind of tricky, but there is a whole field of consequential, the skull emoji there. But yeah, it’s difficult. There is a field of consequential life cycle assessment that tries to take these marginal impacts into consideration and tries to account for these rebound effects. Your car has higher miles per gallon, maybe you’ll drive more and burn more fuel. Well, that defeats the purpose, but it rarely offsets the total benefit, which is helpful.
Ross Kenyon: It’s basically just like a demand curve, though, at the end of the day, right? It’s like the price goes down, you consume more of something.
Grant Faber: Pretty much. Yeah, a lot of these consequential models might use those kinds of economic models to determine that kind of stuff, where, yeah, if the price of something is changing, you know, this also contributes to a bit of leakage that we might see in the carbon removal world as well, where Oh, maybe, you know, we pay this one provider to not cut down their forest when they would have otherwise, you know, regardless of one’s views on the forestry offsets. But what if that raises the global price of timber and convinces someone on the margin, you know, across the world to get into the timber market and deforest their land when they wouldn’t have otherwise?
Well, that’s leakage, you know, and it’s definitely something you want to take into account as best you can.
Ross Kenyon: So best not to get involved in it, Siobhan, is what he’s trying to say.
Siobhan Montoya-Lavender: Is that the lesson learned here? No, that can’t be. That can’t be. Something else that I want you to walk me through a little bit, because I’m just going to use this recording session as my own educational tool, is you used the example of photovoltaics before, but you’ve also used the example of photovoltaics in terms of learning rates. And I’d be curious for you to dig into that a little bit more and like using the example of photovoltaics and kind of what we’ve learned from that and how could we apply that to carbon removal technology to these burgeoning technologies that we’re trying to understand really well, really quickly.
So can you explain everybody what what a learning rate is?
Grant Faber: Yeah, definitely. So learning rates have been kind of popularized by various scholars over the years, people like Jessica Transick and Greg Nemet, among many others. And there’s a lot of scholarly work on these. It’s really just a lot of fascination because they tie in so closely with With like technological industrial progress, but kind of the initial learning rate, and I promise I won’t start here and then say everything that happens in between, but there was a paper, I think from 1936, from a scholar with the last name of Wright, unrelated to the Wright brothers, but it was on the cost of airplanes.
And it was talking about the factors that affect the cost of airplanes. And the scholar noticed that if the capacity for producing airplanes increased, that there was kind of a pretty consistent decrease in the unit cost of those airplanes. And that was one of the first, not necessarily the first, Very popular and notable identifications of this phenomenon of learning rates, where when you produce more of something and increase its capacity, that the cost goes down. And this kind of fits into a broader typology. There’s many different ways to decrease the cost of a technology, either intentionally or even sort of unintentionally.
But one of the big ones is this learning by doing, which kind of captures this learning that happens over time. Literally just doing something over and over and over and over again, you’ll figure out better ways to do it. And those ways will inevitably kind of bring the cost down. So this is often quantitatively described with a learning rate, which is the percentage cost reduction of a particular metric for each doubling of global cumulative capacity of that. So the classic case of solar is the cost per kilowatt of solar has gone down On average, there’s different calculations, different estimates out there, but kind of like 20% with each doubling of the total global capacity of solar.
And there’s different reasons. Some of these reasons are intertwined with changing silicon costs and other changing feedstock costs. Some are intertwined with economies of scale of these huge gigawatt factories, largely in China, that are pushing out all these panels or all these individual wafers and finding better ways to manufacture them. It’s tied to research breakthroughs, but there is this other aspect of learning that there’s different theories about why that happens. Oh, yes. So 20%. So yeah, the cost per kilowatt has gone down about 20% with each doubling of that. And we maybe could expect similar kinds of learning rates for particular technology categories within CDR.
Okay.
Siobhan Montoya-Lavender: It’s like if we were to look at, let’s look at like in-situ mineralization, for example. Okay. Because I feel like we always use DAC as an example, so I’m not going to softball you with DAC. Let’s do in-situ mineralization. So I guess the other side of DAC, really. How much of the learning rate is determined by R&D versus determined by additional funding versus like, how are we expediting that learning rate?
Grant Faber: Yeah, definitely. So... So yeah, there’s actually been some scholarly work on this, on actually trying to create these quantitative models to tease out contributions from different types of learning. So I think the paper it’s by, it’s from the Jessica Transick lab. And I think it’s called like evaluating the causes of cost reduction for solar PV or something like that. We can link to it. I can send along a link afterward, but they actually create a model within that study that can sort of tease these things out. I kind of view, you know, cost reduction is this typology from all these papers I’ve reviewed on the subject.
In this typology, it has both exogenous and endogenous factors. So endogenous factors would be things external to the particular technology under consideration, but might be inputs to those. So for the in-situ minimalization, maybe it’s the cost of fresh water or the brine or whatever they’re mixing with the CO2 to inject underground. Maybe it’s the cost of steel that they’re building the equipment with. It’s the cost of compressors or something. Anything that is not core to that technology that’s kind of outside That makes their job easier. Those are kind of these exogenous factors.
But then there’s this whole world of these endogenous factors. And so one is just economies of scale. And so if you operate at a larger and larger scale, you can take advantage of equipment scaling, which is very common in the chemical engineering world. Like equipment capacity is going to scale much more quickly than the cost of that equipment. So you can take advantage of that. Managerial cost distribution, bulk purchasing, those kinds of things that you get from just operating your technology at a larger scale. And so, yeah, that would be applied to the...
And so for them, maybe it’s identifying, I mean, this Maybe slightly exogenous too, but identifying different areas where it might be more stable to inject the CO2 or some kind of new method or some new additive to whatever they’re injecting underground. That they might discover through research. And then there’s these, in the typology, there’s these three categories of learning by deployment. And so there’s learning by doing, learning by using, and learning by interacting. And so each of those has this one whole explanation. But yeah, simply that would be, okay, CarbFix is going to do this over and over and over and over again.
Each time they do it, maybe they discover a faster way to set up the facility, which reduces construction labor costs. And really, at different stages of a technology’s life, these can all have different impacts. So in the beginning, maybe you need to do a lot of research to get something To an MVP or something, but naturally you’re going to be limited in scale if you’re operating in the lab, but once you get to industrial production, then maybe you’re going to squeeze out the final cost reduction from finally scaling up the technology.
Sometimes it depends on the type of technology. Some things are maybe more modular and so thus can take better advantage of learning by doing, but they can’t take advantage of the economies of scale as much because maybe you’re adding modules, but each module has the same cost. And so if you double the size of the plant, well, it’s just two times the modules and each module has a constant cost. And so you don’t get those economies of scale. Now you can get them if you’re producing those modules and you scale up the plant that’s producing those.
Siobhan Montoya-Lavender: And that’s a separate conversation, but- Do project developers have to go in thinking about this ahead of time? Do they have to go in and decide like, I’m going to try and establish like how fast I can improve my project? What’s my learning rate on this by testing it? Or does it just kind of happen naturally? Is this an organic process or how much consciousness needs to go into establishing a learning rate and then improving it?
Grant Faber: I think it’s a very organic process that has just kind of naturally unfolded really since the beginning of You know, millions of years ago when we were inventing those Hachulian Oldowan hand axes and choppers and so forth, there’s trial and error, figuring out what works, what doesn’t work, and just kind of continuing and diffusing those things that do work. And yeah, I don’t think there’s necessarily a huge self-awareness of this. Definitely a lot of the scholarly work that’s gone on on the topic of technology learning. And yeah, I’m happy to send along questions.
To anyone, a lot of different papers that I’ve collected over the years on the subject. A lot of the scholarly work has been done in the past 10 years, maybe 20, even though I mentioned before, there was that one paper from the 30s covering it, but really it didn’t pick up for a while. My hope is that, and I think a lot of people who study this, their hope is that by having more awareness of these methods for improving technology and reducing its costs, that we’ll better be able to take advantage of them.
And so that it’s definitely something I’m going to prioritize in my consultancy too, is when I’m working with a founder, really trying to encourage them to think about, okay, here’s these different categories of cost reduction. How can you try to maximize these? It’s definitely something you can see in a TEA approach. You know, when you’re doing it and you have sublinear scaling factors for equipment costs or something like that, it’s like, okay, this is economies of scale in motion. When you’re talking to different suppliers and bulk purchases, you know, come up, volume discounts, it’s like that’s economies of scale, you know, manifested.
And so, yeah, I’m hopeful. I think a lot of people are hopeful that the more knowledge we have about it, the more aware we are, the more we’ll be able to use these to our advantage and squeeze out even more cost reduction from what we’re trying to do.
Ross Kenyon: Is there any part of the carbon removal ecosystem that has matured to the point that there are diseconomies of scale or not yet?
Grant Faber: That’s a good question. I would probably say not. There’s nothing that comes to mind immediately. When I think of diseconomies of scale, the example I always think of is like for Ford, you know, it’s cheaper for them to make, you know, a million cars than 500, but it would get real expensive if they tried to make 500 billion cars. Because yeah, you just run into these I feel like that’s not a fair example, but it’s kind of a silly one. Okay, continue though. Yeah, it’s just an extreme one to really think through that.
I’m trying to think, I don’t really think, yeah, anything’s like that big enough yet where it’s running into something like that. Like people have probably gone down dead ends in terms of research and development, but that’s kind of a different problem.
Siobhan Montoya-Lavender: In terms of economies of scale, what do you think the likelihood of reaching that kind of 10 giga 10 that we’re always talking about in the CDR community is? By 2050, what are the chances, what kind of learning rate would we need to get to a 10 gigaton per year carbon removal budget by 2050?
Grant Faber: Yeah. So the learning rate is a little more for cost than for deployment necessarily. And I think a lot of people view these things as tied where it’s like, oh, if we could get to $50 a ton and we wanted to do the 10 gigatons, then that’s Okay. My mind, of course, just blanked out at $500 billion, but like, yeah, you know, and then people might say, well, that’s going to be such a negligible aspect of global GDP. Of course, we’re going to, or gross world product, of course, we’re going to pay for it.
But I think that’s making a lot of assumptions there. And I think And this was discussed, I think, a bit in our air miners thread as well, that at a certain point, especially when we talk about these massive scales, things become maybe a little less about cost and a little more just about, you know, do we have the resources to put toward these things? And then there’s this question of, you know, given all of society’s needs, what’s the likelihood that we’re going to devote the necessary material inputs and energetic inputs and labor and just attention to this stuff?
With that said, though, I think that’s where the benefits of this portfolio approach can come into play, where it’s like, okay, well, we have many different approaches to carbon removal. They have different extent of carbon storage. They have different cost profiles. Some will work better in different geographies. You can’t do ocean alkalinity enhancement in Kansas. And so it’s like, because of that kind of stuff, there might just be things that are More suited to different areas. And that may be collectively through all the different CDR approaches, you know, all across the world that will all kind of collectively be able to work up to that goal.
You know, I’m definitely hopeful and optimistic. I will say something about learning rates is they’ve been sort of grossly underestimated throughout history. There’s this kind of this new paper came out from Dwayne Farmer, who does a lot of work on this, and some of his colleagues showing how like, and then there’s one graph in this paper, and I can send a link along to that as well, where they show like IEA projections for solar so many years ago. And it’s like they kept thinking it was going to plateau, and then they updated it and thought it was going to plateau at a higher level.
And then they thought it was going to plateau at a higher level. And it’s just been virtually a straight line going off of just more and more and more solar. So I think And of course, that’s solar and everybody always is appealing to solar. But the idea is that sometimes new technologies, especially in our current exponential age, can be greatly underestimated and can grow a lot more quickly than many people might think. And I think Because there’s so much excitement and enthusiasm for CDR generally, and there’s so many people working on it and so much capital flowing into the space and now political attention on it, it should give us hope that things can scale very quickly.
But yeah, I think it’s at that scale becomes about resources and resources. Yeah, the likelihood that society will devote the resources necessary to reach that level, which I’m hopeful for. I’m sort of optimistic. Well, it’ll be at least at the gigaton scale. But from there, it’s maybe a little hard to say.
Ross Kenyon: Are there good reasons to think that the trajectory of carbon removal or direct air capture will mirror that of solar? I’m sure. I mean, I find it to be a very convenient story to tell, and I so hope that it’s true or even better than that. But it does get trotted out quite a lot. Things also develop at different rates, too. It’s not like technology has a teleological process that it must follow to develop, and it will reach this kind of cost curve. I think I’m being a little unfair to make a point, but tell me, am I correct in my intuition here, or how would you change how I characterize it?
Grant Faber: Oh, you’re totally right. Different technologies have different learning rates. A lot of the literature covers this. Famously, everyone... There are a lot of people frequently follow up with, well, solar had this 20%, but nuclear, oh, nuclear, it has this negative learning rate. And there’s a lot of different reasons why. One of the reasons is that so few comparatively nuclear plants have been deployed relative to solar wafers that have been created. And so they haven’t been able to take advantage of learning and there’s a whole other history as to why nuclear struggles.
And I think that’s why, you know, with the shift to small modular reactors, they’re hoping to take advantage of some of that learning with these new companies and maybe kind of change the story for nuclear a bit, which I definitely hope to see. I think a core issue that we face is that solar is partially so great because it produces energy, which people are willing to pay for. Whereas with CDR, as we all know, and I’m sure it’s been covered many times, the business model is a bit fraught because we’re depending on I mean, in a broad sense, it’s the opposite of emitting, where when we emit, we privatize a benefit and socialize a cost.
If you just set up a machine to do CDR, it’s the exact opposite. You’re privatizing this huge cost to do in this machine, but then you’re socializing this benefit of lower carbon to everybody in the world. And so then the question becomes, who’s willing to incur private costs for public benefits? Yeah. And yeah, like there’s the volunteer carbon market and offsets, but in some systemic sense, if you’re linking, emitting one ton here to sucking another ton out over here, then kind of that system is really just carbon neutral in a sense.
And it’s not providing this carbon negativity or carbon removal. Looking for, of course, it helps build up the ecosystem and helps us get down the cost curve in these things. And yeah, that’s definitely maybe going to be helpful for like cleaning up the residual emissions, you know, this so-called hard to abate final four gigatons. And maybe we can lean into VCMs for that, or hopefully, you know, it’ll be possibly regulated at some point. But beyond that, it starts to become like, wow, we really need a government or a philanthropist to kind of cover the Remainder here.
And yeah, I know this is maybe sort of veering from your original question, but I think it’s part of the trouble and why we may see certain scaling issues, because right now it’s a seller’s market, but when CDR Because, you know, kind of equalizes and there’s like just as many sellers as there are buyers, you know, we’re going to see more competition. And then it might be sort of like, okay, well, what’s the business model from here unless we have some kind of large scale government procurement?
Ross Kenyon: I haven’t heard someone bring up free I’m stealing that phrasing grant. That was really helpful.
Siobhan Montoya-Lavender: Grant, I feel like there are dozens of CDR startups who would want to snatch you up and bring you onto their team. Why did you start a consultancy?
Grant Faber: Really, I did it just so I could help as many people as possible. One of my favorite things that I was doing over the past couple of years while I was in my previous positions was just posting in Air Miners and just talking with different people and having all these meetings and Really just trying to help drive things forward because I think it’s so important. And, you know, I got to this point where it’s like, you know, also, or I sort of realized, oh, you know, once I sort of build the models for the startup, once they have the cost model and the emissions model and they know how to use it, The marginal benefit of my services or my time there decreases a bit because they already have the model.
And then it’s like, okay, I can do refinements and stuff, but it’s not necessarily a full-time job. So it’s sort of almost no surprise for TEA because there’s many LCA consultancies out there that partner with companies and do full LCAs of their services. But when the assessment’s done and they have the results, the consultancy can move on to help the next person, the next person, the next person. So in some ways, it’s not so different for TEA. Where I can partner with them, do the assessment, help them get up to speed, and then move on to the next company.
Because really, everyone needs this help, but there’s also a severe shortage of people with this skill set. Increasingly, people are learning it. It’s a global CO2 initiative. We tried when I was there and they’re still trying to do workforce development to train more students and graduate students and those types of people with these skills to come into the field and putting resources out there so people can teach themselves. But there’s way more people who need these services than those who can provide them. And yeah, that paired with the short term nature of some of the work, it’s just like, OK, I just got to do my own thing.
Now and just help as many people as I possibly can. So yeah, that was kind of the theory going into it.
Ross Kenyon: And is it going well to say with whom you’re working on? I’m sorry, Shiv.
Siobhan Montoya-Lavender: No, I have the exact same question.
Grant Faber: Okay. Well, I just officially launched last week and I’ve gotten like a lot of different requests. I’ve had like maybe 20 initial meetings already set up in the first like two weeks. That’s amazing. Which is like, Yeah, it was unbelievable, really. I mean, I knew like, okay, people want these services or whatever. And of course, not all the meetings will necessarily translate into hardcore work that gets done. And some are just relationship building or just helping people, giving a little bit of feedback or advice or whatever. But yeah, no, I already have one committed client.
I’m already working on their project. And yeah, I’m really just hoping to help as many people as possible because it’s my favorite thing to do in air minors for free. And it’s like, okay, if I can make a Career out of this. Let’s do it full-time. I mean, what better thing is there?
Siobhan Montoya-Lavender: I’m glad I snuck in under the radar then because I feel like I’ve gotten so much free help from Grant over the last two years. And truly, I think a lot of people in their reminders community have. I think you’re quick to say, yeah, I’ll review that document for you or I’ll share this data with you so that it helps you out. So thank you for all the free help I’ve gotten in the past. And I’ll be more conscious of your time going forward.
Grant Faber: It’s all good. I’m still going to help some people for free. But yeah, once it turns into like a whole like build the TA for us, it’s like, well, it’s my job.
Ross Kenyon: If someone wanted to try desperately to hire you and push out the other people in front of them in line, how do they do that? How do you want people to engage with you? Where can they go?
Grant Faber: Oh, I just have my website. Are you asking like generally, like literally if someone wants to be first and push the other people out?
Ross Kenyon: It’s called being banterous or chummy. And it works sometimes, but maybe in this case, it did not. I can be clear. Tell people where they can find your website and blah, blah, blah. And links in the show notes.
Grant Faber: Oh, yeah. CarbonBasedConsulting.com. Snatched up the good URL. And yeah, I’m on LinkedIn too. And I have a Calendly link there where people can schedule a consultation and also find me on Air Miners.
Ross Kenyon: Are people making that carbon-based versus carbon cringe kind of comparison with you or no? Not yet. So I guess you’re...
Siobhan Montoya-Lavender: Wait, what’s the carbon-based versus carbon cringe comparison?
Ross Kenyon: It’s like the Gen Z antonym, right? That something is either based or it’s cringe.
Siobhan Montoya-Lavender: I’m learning something new now.
Ross Kenyon: Generational. Yeah. Don’t worry. I’m not like a first order native to that. I got brought into it by... Being an old man near it.
Grant Faber: So don’t feel bad. I’m glad you noticed that, though, because that, yeah, when I was picking a name, it’s like carbon-based, like carbon-based life forms is sort of what I was going for. And then I was also thinking, oh, obviously it’s carbon-centric consulting because I do the environmental stuff. But I also had that thought of like carbon-based, like the opposite of cringe. So thank you for picking up on that.
Ross Kenyon: Yeah, I think I saw Jack Andreessen, maybe someone else making memes about that. They beat us to it. They beat us to it. It’s okay. You can do another one. And he doesn’t own carbon-based or carbon cringe. Let’s be clear, Jack, if you’re listening. Okay. Well, thanks for being here, Grant. That was a lot of fun. For sure.
Grant Faber: Yeah. Thanks for giving me a platform to spew my views.
Ross Kenyon: I feel like you were very measured and interesting. It was not vitriolic or propagandistic in any way that I could detect. Is it just really good propaganda? Is that what happened?
Siobhan Montoya-Lavender: You can find more of his views on Airminers, people. If you’re not already active, go follow what he’s talking about. Alas, you cannot find him on Twitter. You’re going to have to hire him.
Ross Kenyon: Shiv, Asa, thanks for being here too.
Siobhan Montoya-Lavender: Always a pleasure.
Ross Kenyon: Thank you all very much. Yeah, our pleasure to have you. And if you liked listening to this, please give us a great rating or review on Apple Podcasts and Spotify. Thanks for listening. Send this to a friend who needs to learn what TEA is. And thank you so much for listening. Thank you so much for listening. If you could please subscribe and give us a great rating and review on Apple Podcasts or a rating on Spotify, that’d be much appreciated. It helps us get our content out to more people. You can sign up for our newsletter at nori.
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