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1 August 2022

Going giga: The race to scale up the direct air capture industry

Construction has begun in Iceland on the world’s largest direct air capture facility to date, as the industry looks to scale at a pace rarely seen in the history of commercial markets. Net zero depends on it.

By Oliver Gordon

The Intergovernmental Panel on C limate C hange (IPC C ) has warned that to limit global warming to 1.5°C , the world will need to remove billions of tonnes of carbon from the atmosphere – and that’s on top of the vast quantities of emissions cuts also required.

However, last month, on a grassy, far-flung stretch of the Icelandic tundra, an important step was taken towards that aspiration: Swiss company C limeworks broke ground on its newest and largest direct air capture and storage (DAC +S) facility to date, Mammoth.

C arbon collectors at C limeworks’s Orca DAC facility in Iceland. (Photo by C limeworks)

Although it sounds straight out of a sci-fi novel, DAC is a technology that uses machines to react with and capture C O2 molecules from the atmosphere. Mammoth – set to become the world’s largest DAC facility – represents a demonstrable step in C limeworks’s ambitious scale-up plan: multi-megatonnes of carbon removal capacity by 2030, and gigatonne capacity by 2050.

C limeworks opened the world’s first DAC facility, Orca , in September 2021 – also in Iceland. Now, following a $650m equity raise earlier this year, the company plans to rapidly scale up the market’s capacity by introducing large, modular DAC facilities and investing vast sums in developing the technology. Mammoth has been designed with a nominal C O2 capture capacity of 36,000 tonnes (t) per year – an order of magnitude larger than Orca ’s 4,000t capacity – when fully operational in 18–24 months’ time.

However, to avoid climate catastrophe, DAC +S technologies need to reach gigatonne capacity at a pace that would make the solar and wind power industries blush. At the Direct Air C apture Summit in Zurich, Switzerland, in July 2022, the industry’s great and good gathered to discuss just how to scale up at such an unprecedented rate.

Lessons from wind and solar

In Zurich, C limeworks founders Dr C hristoph Gebald and Dr Jan Wurzbacher said going giga would require $30–50bn of investment per year from 2030 onwards. That would represent 10% of the annual investment made into renewable energy capacity today: an ambitious target that will require the private and public sectors to work closely together.

Large-scale deployment will also be heavily influenced by the green energy requirements of powering DAC facilities. C onservative projections estimate the industry will require up to 25GW of wind and solar capacity per year from 2030 onwards, accounting for roughly 10% of the installed wind and solar capacity in 2021 and 3% of the annual capacity projected as of 2030.

“The gigatonne target is ambitious, but the numbers are clear: it is doable,” said Gebald. “To make this happen, corporate action, investments, policy-shapers and regulatory guidelines need to come together.”

The DAC industry will have to take a leaf out of the books of the wind and solar industries, which are praised for the remarkable speed of their commercial scale-ups. The global solar PV industry grew by a staggering 30% a year for 30 years. However, DAC needs to go faster still, requiring 45% growth a year to reach a billion tonnes by 2050. Nonetheless, Dr Greg Nemet of the University of Wisconsin and author of How Solar Became C heap, encouraged the industry to take inspiration from solar.

“The US created the [solar PV] technology, Germany created the market and C hina made it cheap,” said Nemet in Zurich. “The international flow of people, capital and machines was crucial to make it happen.

“DAC needs to go faster," he added. “When the Germans were thinking in megawatts, the C hinese were thinking in gigawatts. That is the thinking we need.”

Private initiative was a crucial part of the growth of solar. The technology’s early adopters did not have policy supporting their investments. Instead, they were people choosing to have off-grid homes; people consciously opting to pay more for their energy because of their preference for the technology. “This was very small-scale, on an individual or company level, [but] even with limited volumes, this did get things started,” recalled Nemet.

C o Ltd" target="_blank">GE Renewables’ Paul Judge pointed out that although the wind industry was seen as a mature market 15 years ago, it still required subsidies to grow as it was more expensive than gas. C osts in the industry have since come down 70% in the last ten years. “We did this by solving a series of small problems,” recalls Judge. “Modularity is essential. Incrementalism is not always the most exciting, but it allows steady scaling, which is very important to build trust.”

DAC scale-up: volume, volume, volume

The DAC market now requires policy intervention to create the widespread expectation that there will be large and growing markets in future, argued Nemet. That will serve to reduce risk and lead to private market investment, as well as encourage people to orient their careers toward DAC and start new businesses in the space.

However, policymakers need to go further than just send market signals, said Shashank Samala, C EO of DAC start-up Heirloom . There is a need for clear standards to differentiate between low-quality offsets and high-quality carbon dioxide removal (C DR). “This involves pricing high-quality credits efficiently by rewarding permanence, clear additionality, clear verification and approaches that value things like land efficiency and environmental justice,” Samala said.

Governments also need to help develop the surrounding infrastructure that will facilitate the industry's growth – from new renewable energy projects to additional C O2 storage, and more robust supply chains for concrete, steel and sorbents. “We need policymakers to develop the infrastructure now, ahead of the rapid growth of this industry in the coming years,” said Samala.

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For the C DR developers themselves, there were three clear messages that came out of the summit: build volume, work together, catalyse investment. In respect to volume, C hristian Holzleitner, the European C ommission’s head of land use and finance for innovation, called for developers to get more pilot projects under way to see how they work at scale, and to review their business models.

“The focus needs to be on volume; price will follow,” added Dr Lucas Joppa, Microsoft ’s chief environment officer. “The market is too early to let price be a significant signal.” C limeworks currently expects the cost of DAC to drop as low as $250–300 per megatonne of C O2 equivalent (MtC O2e) by 2030 for a large-scale facility.

Earlier in July, C limeworks became Microsoft ’s first supplier of long-term carbon removal, with the companies signing a ten-year offtake agreement. It came after the tech giant announced in 2020 its ambitious commitment to not only become carbon negative by 2030 but also to remove all of its historic C O2 emissions by 2050. C limeworks will permanently remove 10,000t of C O2 emissions from the atmosphere on Microsoft ’s behalf, representing one of the largest DAC agreements ever signed.

Many of the panellists in Zurich took the opportunity to call for greater collaboration within the industry. “From talents to capital, all need to cohesively come together to build the ecosystem,” said C arbon Direct’s C EO, Jonathan Goldberg. “There is no chance for just one solution to solve the challenge alone, partnerships are needed.”

C limeworks, for example, has an ongoing partnership with Iceland’s C arbfix, which provides the permanent underground storage for the captured C O2. Similarly, the Hellisheiði power plant, operated by ON Power , will supply the Mammoth plant and the C arbfix C O2 injection sites with renewable energy to run the entire DAC +S process.

In June 2022, twenty-two DAC technology companies – including C limeworks and Heirloom – came together with an array of investors, philanthropists, universities and other stakeholders to form an industry association, the DAC C oalition. The group announced to Twitter that it would focus on “educating, engaging and mobilising society to scale direct air capture in a sustainable, equitable and effective way”.

C arbon removal financing

There were numerous calls to find innovative approaches to catalyse investment in DAC scale-up in Zurich, but representing the other side of the negotiating table, JP Morgan’s Allison Fleming asserted that in order to attract bank lending, C DR projects need to “minimise risk by demonstrating that their technologies work as expected at a commercial scale”. 

C limeworks’ $650m (SFr600m) equity injection in April marked a major milestone for the carbon removal industry. The financing was co-led by Partners Group and GIC , and attracted participation from the likes of Baillie Gifford, C arbon Removal Partners, Global Founders C apital, John Doerr, M&G, Swiss Re , as well as other new and existing shareholders including long-term investor and anchor shareholder BigPoint Holding. JP Morgan Securities served as the sole placement agent for C limeworks.

“Fixed price, long contracts, high credit for the offtakers: if you have that, finance will be thrilled to invest,” said Eli Mitchell-Larson, lead advocate at C arbon Gap, a new non-profit focused on carbon removal, and a researcher at Oxford Net Zero, a University of Oxford initiative. “That [those conditions] can come from a deployment incentive from governments,” he added.

Heirloom recently clinched a $53m equity injection to support the deployment of an ultra-low-cost DAC process that captures and processes C O2 ready for storage in rock form, and in late June, the world's first solar-powered DAC company, AspiraDAC , launched, with purchases from Frontier – a $925m “advanced market commitment” from the likes of Stripe , Alphabet , Shopify , Meta and McKinsey to accelerate the development of carbon removal technology.

AspiraDAC is working with Australian start-up Southern Green Gas to produce and deploy the project’s solar-powered DAC modules by the end of 2022 – initially capturing one tonne of C O2 per day – supported by funding from the Australian Government’s C arbon C apture Use and Storage Development Fund.

As the world chugs slowly but inexorably towards its net-zero future, it has become apparent that although fossil fuels can be replaced by clean energy alternatives across much of the economy, some essential sectors will not decarbonise in time for 2050. Major industries like aviation, cement and steel production simply do not possess the affordable, scalable carbon-free technologies yet. These hard-to-abate sectors will likely continue to produce at least a few billion tonnes of carbon a year that will need to be neutralised through carbon removal.

For that reason, as Lowercarbon C apital’s Dr C lea Kolster concluded in Zurich, “there has never been a better time to found a DAC company”.

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