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Oil and gas ESG and LanzaTech's Freya Burton
149 Plays2 years ago
In this episode Anthony, Karthik, and Mike tackle the role of oil and gas companies in the sustainable transition, and the impact of ESG finance. Then, they are joined by LanzaTech's Chief Sustainability Officer Freya Burton to learn about LanzaTech's innovation journey and what the future holds for climate tech.
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Transcript
Introduction and Spelling Error Discussion
00:00:00
Speaker
I copied that directly from Mike's description. So is it possible that I can blame Mike for this? This is very important. This is very important. If not probable. No, Mike spelled it right.
Innovation in Oil and Gas
00:00:26
Speaker
Hello and welcome to Innovation Matters. It's the only podcast about sustainable innovation, which is the thing that oil and gas companies do every day. I'm joined as always by my hosts, Mike. Hey, all. How's it going? And Karthik. Hey, what's up?
Saudi Aramco and ESG Credibility
00:00:47
Speaker
What's up is that in recent news, the CEO of Saudi Ramco, noted oil and gas company, has joined the board of BlackRock, noted proponent of finance ESG. Saudi Ramco, I think last year, maybe two years ago, their CEO, NASA,
00:01:12
Speaker
When they committed to essentially achieving net zero, which they did, they committed to achieving net zero in 2050 for all their operations.
00:01:27
Speaker
which notably doesn't include the oil that they drill out of the ground, which is significant as the world's largest oil and gas company. And the CEO had this to say, which is basically he was like, it is the responsibility of governments, stakeholders, corporations, and the energy sector to reduce emissions. So basically like it's everyone else's responsibility to decarbonize. We're just going to keep pumping oil. And if we don't emit any carbon while that oil is getting pumped,
00:01:56
Speaker
But then everything else is everyone else's problem. And now this guy is on the board of BlackRock, the world's largest, one of the world's largest private funds. And Larry Fink has been a very notable and very high profile proponent of ESG. Right. And he's gotten flack for that, which I think is part of the reason for the movie. This is also just trying to show we still care about oil and gas companies.
00:02:23
Speaker
Yeah, I think Malavin made this point, but no one who is upset with him about the ESG
Financial Engineering and ESG Scores
00:02:30
Speaker
stuff that he has been doing is going to look at, you know, Saudi Ramco CEO being on the board and be like, yeah, actually, everything's cool now. They're still going to hate Larry Fink, except that now everyone else hates him, too. I mean, I don't know. This is just another for me, another check in the column of
00:02:52
Speaker
finance ESG is fake and totally worthless. And there was also the other thing that got me thinking about this too, is there was another even more sort of egregious story about finance ESG being fake, which is through a clever little bit of financial engineering, creating some of these like special purpose vehicles or holding companies that were actually basically just funding the Aramco oil pipelines company.
00:03:22
Speaker
Um, but they managed to get the funding vehicles themselves, you know, with to get a very high ESG score and get included in some of these ESG funds. So you could invest in this. Yeah. ESG thing. And you're basically all of the money was going to Saudi Ramco. The idea was they were, they separated the company that held the rights or the licenses to use the pipelines or the leases that own the pipelines. Basically they had a company that was purely.
00:03:48
Speaker
ownership of financial instruments, right, related to the pipelines. And then that company, that is a very low carbon footprint, actually, because it's just an office with some papers in a box. And they're able to turn around and sell, I think, loans from that company as an ESG vehicle because the actual company itself had very low, very low impact, which is, of course, you know, totally ridiculous because that money ultimately just ends up supporting the operations of Saudi Ramco.
Greenwashing Controversy
00:04:19
Speaker
Yeah. So finance ESG is, is pretty fake. Uh, we don't need to beat that horse. Maybe any, any more than we already have. But listeners, if you have any questions, write in and we will explain to you why it's fake. Otherwise we will move on. But you want to talk about green town, right? Well, it was, yeah, because this, this did also come up a little bit closer to home and the sustainable innovation world. A few, a few weeks ago where Saudi Aramco also became a partner at green town labs.
00:04:49
Speaker
which is, you know, really, you know, it's a technology incubator in Cambridge, Massachusetts focused on clean tech, climate tech innovations, which Full Disclosure Lux is also a partner of. And it's an organization we think really think really highly of. There's a lot of really interesting, innovative startup companies that are there. There's a lot of big, innovative companies that are that are other partners at Green Town Labs.
00:05:18
Speaker
there as well. But this became controversial because when Aramco became a partner, people said, oh, this is greenwashing. This is just laundering Aramco's reputation. And I thought that was a little unfair because, you know, ultimately, Green Town, it's a real innovation organization, right? It's not a it's not a PR thing like
00:05:44
Speaker
put out a press release, like we did some beach cleanup to fix plastic waste or something like that. They are really- Just one beach cleanup, bro. Just one more. That's all we need. Yeah, but here they're doing and supporting real innovations and I think, and really innovative startups. And I'm sure there's some reputational benefit to Aramco from joining this, but
00:06:14
Speaker
It's not a very PR-focused thing. It's kind of hard for me to believe that that's really the main reason that they're participating in Green Town Labs. I think the reason that Green Town does have some language in there when they've discussed this is saying that we only choose to work with organizations that have a credible net zero
00:06:39
Speaker
path and as you pointed out credible net zero commitments and as you pointed out a RAMCO does have a net zero commitment but it's really only scope one or scope one and two it doesn't affect you know address the oil emissions which is of course the emissions from the actual use of the oil they're pulling out which of course is by far the hardest the biggest impact they have.
00:07:01
Speaker
So I think, you know, Green Town did put itself in a little bit in the position of making it look like by accepting Aramco's money and participation basically that they, it made it look like they were endorsing their, their, their climate plans.
Oil Companies in Renewable Energy
00:07:21
Speaker
It's interesting, what is the role of oil and gas companies in the energy transition? Because certainly you see some of these, especially some like BP and Shell, that they're really investing a lot in solar and wind and distribution and charging stations and all this sort of stuff. And there's definitely a case to be made where these, one, as we've pointed out in some of the Lux work, oil and gas companies do need a plan for the energy transition and shifting
00:07:50
Speaker
more into owning renewables and things like that is one viable strategy, one potential strategy anyway that they can have, which might work for many of these companies. And these companies do have, they're gonna be throwing off a lot of cash and profits from their existing operations for sort of the foreseeable future. They do have experience doing these sort of large projects. It is easy to imagine.
00:08:17
Speaker
a viable role for some of these companies in participating in the energy transition.
00:08:23
Speaker
Yeah, I think you hit on an important point, which is that they have a lot of money, and we do need that money. And they also have expertise. I think the expertise is really an important element, especially when it comes to certain kinds of technologies where drilling is maybe a necessity. But I just think in general, if you look at the capacity to build large scale infrastructure, it really has shifted into private hands over the last
00:08:48
Speaker
you know, 100 years or so since some of the big works projects in America as an example, you know, even since like the Marshall Plan, post-World War II, now most of that capacity is not in the hands of state actors. It's really in private actors.
00:09:03
Speaker
some of the biggest private actors who have that capacity are oil and gas companies. But I don't necessarily think that we need to continue to maintain the ownership structure or the general sort of like we were talking about this a little bit before the recording started but
00:09:20
Speaker
energy transition, we want to complete that as quickly as possible, but we don't necessarily have to have an organization named Exxon Mobil or Saudi Ramco be part of that or be part of that in the future. It's not necessarily to lock that. They're just going to go from making oil to making electrons, and that's just the future. Because these organizations have long histories. You can argue that they've done a lot of damage via these emissions or via plenty of their other practices. It's not obvious that
00:09:50
Speaker
they as organizations or their shareholders as a group of people need to continue to benefit from the transition forever. But I do think we need our money. That is obvious to me.
Future Oil Demand and Sustainability
00:10:04
Speaker
Yeah, I mean, from an overall sort of goals and, you know,
00:10:09
Speaker
Saving the species and climate justice and all that it doesn't it doesn't matter per se, you know if an organization named ExxonMobil continues to to exist or you know whether or not current shareholders of ExxonMobil or or Ramco or whomever get it gets screwed over but it does matter from a climate justice standpoint well matters for matters for some people that is you know, it's
00:10:32
Speaker
what happens with them is not per se a goal as far as, or an objective as far as helping us to keep warming to one and a half degrees centigrade or whatever. And I think, yeah, you have to think about what's gonna help make that transition happen the most effectively. And to the, I don't think those companies are going to be
00:10:58
Speaker
really, you don't necessarily have to go out of your way to be solicitous of trying to keep those companies around and involved, but to the extent that they can be, I think that may just be the shortest and most effective path if the government regulations and financial structures and all of that can set up the incentives for these companies to focus more on their business and helping to grow renewable energy.
00:11:22
Speaker
that could be helpful. I wouldn't count on that as being the main thing that's going to save us, but it'll be part of the move. I mean, oil and gas is not going to go away from the energy transition even at net zero, is it? I mean, it's not going to so happen that we're going to have zero oil production ever, even in a net zero scenario. I'm sure there will be demand for oil in different sectors. So unfortunately, we're never going to run away from oil, right?
00:11:50
Speaker
I mean, if you look at all the summer sports that's been happening, you'll see incidents of just oil and just top oil. I think they're the ones who just keep interrupting sports events coming in. So we are not going to stop oil, right? It's still going to be there. I know Aramco is doing a lot of sustainability initiatives in Formula One, which is a sport I found before.
Aramco's Strategy and Low-Cost Production
00:12:12
Speaker
So, you know, with E10 fuels and... Those are things we need to just stop doing. I think Formula One is another one.
00:12:19
Speaker
Well, at Aramco, part of their strategy is, and I think this is kind of interesting too, is that they, I mean, basically, from just a business strategy standpoint, their goal is to be the last oil company standing because they have basically the cheapest to produce oil. And they would argue from a sustainability standpoint, they have the lowest carbon to produce oil. They do actually have the most sustainable oil. This is sort of undeniable. Which is actually true.
00:12:45
Speaker
So yeah, to the extent that we are going to use some oil and for plastics or for various, you know, more niche uses, even after the energy transition, it probably does make sense for it to be Saudi oil.
Transitioning to Net Zero
00:12:59
Speaker
Karthik, how do you think these companies should be involved? Should they be funding the startups? I mean, should they be? How?
00:13:06
Speaker
You know, I think the issue, right, is that you run the risk of perpetuating or benefiting the people who have substantially contributed to climate change. So how would you sort of square that circle? I mean, there are multiple options, right? One of our esteemed colleagues, Runeer, wrote a great report for Lux clients who are listening to this podcast to have a look at on what are the strategies for oil and gas companies to pivot as they transition to net zero.
00:13:36
Speaker
One of them is to be a utility, for example, which is where you make electrons, you own solar and wind assets. I think the utility space is not the way to go. I think it's already way too crowded with too many people. I remember Fart and Fall, which was also a subject in our previous podcast episode for different reasons. They decided to give out PlayStations so that they could get customers to subscribe to their utilities program. So essentially they're going to supply
00:14:04
Speaker
you know, electricity to these guys. And if you subscribe or become a customer, you get like a PlayStation or something. So I really don't, I mean, that didn't get them anywhere, even though, you know, PlayStation suffered supply chain issues, which is also another topic for another day. So I should just give out PlayStations. That'll be a more effective greenwashing than working with retail labs or being part of Formula One. But yes. So I think the best possible way for them would be maybe my
00:14:33
Speaker
can share his thoughts as well, it would be to sort of become a pseudo chemicals company or be in that upstream side of producing chemicals. So oils and then you use renewable electricity that they purchase to maybe produce other sustainable fuels or as feedstock. I'm not the chemicals expert, but Mike.
Enhanced Geothermal Systems
00:14:54
Speaker
Yeah, I mean, I think for a company like Aramco, chemicals is definitely going to be, and they've invested a lot in crudy chemicals as well. So that, which, you know, is a technology that can help to convert a much larger percentage of a given barrel of oil into chemicals instead of into fuels. And that's definitely, I think, going to continue to be a big part of their future also. But one of the other things that, yeah,
00:15:21
Speaker
On to our next segment. Yeah, the other things they could do. Yeah, that oil and gas companies can do, right, is get into, that very directly repurposes some of their expertise is getting into geothermal energy. We had some interesting news on that this week with some test results from Fervo Energy, a company that has a novel approach to geothermal that they think can make it a lot more efficient and accessible.
00:15:49
Speaker
Karthik, you're really the expert in this area, so I was curious to get your thoughts on it. Yeah, so to give some context to our listeners as well, Fervo essentially completed what they call a groundbreaking test. I mean, they did drill the ground, so it's literally groundbreaking. So yeah, they completed a 30-day test, which is claimed to be an industry standard, so any new geothermal well that is to be
00:16:16
Speaker
let's say, is allotted or is allotted to produce electricity needs to go through this 30 day test, where they essentially assess the entire geothermal well for instabilities. Now, these instabilities could be reverse flows or reductions in pressure during flow, any losses in temperature. So is the entire system working fine? And is it stable? And so they completed this 30 day test. They claimed this is the first time that
00:16:43
Speaker
horizontal well pair as wide as they have constructed has been implemented in a geothermal well. So off the top of my head, I think the number is about 3900 feet. And they, I think, also produced heat at about 191 degrees Celsius. They said that they have also implemented a US Department of Energy seismic activity mitigation plan or some sort of standard there as well.
00:17:13
Speaker
And they essentially, you know, face no issues with inducing seismic activity. Is this a big deal? Like for someone who knows basically nothing about geothermal, not that there'd be anyone like this, like that on this podcast. Yeah. Is this a big deal? So personally, I would say no. Um, so to again, give some context to listeners, uh, and enhance your thermal system, essentially.
00:17:36
Speaker
is a mad made geothermal system. So let us say you have geothermal resources in a particular location, but you cannot access them because either the rock's not too hot at the depth you're interested in, or it's just not permeable enough. So you can't access it directly. So you end up fracturing this rock by injecting pressurized water. So you let the cracks propagate, let them go deeper, and then you access the heat that you need. And then you extract them out from another well on the other side.
00:18:06
Speaker
Now, this is something that's already been demonstrated before in closed loop systems. For example, ever technologies is another company from the United States that's done this. I know that green fire energy is another company that's looked into enhanced geothermal systems with supercritical carbon dioxide cycles as well. So calling this the first time ever for me seems a bit too much because it's been done before.
00:18:30
Speaker
Maybe the parameters of the test were different. So technically it was the first time such a test was conducted. But at the end of the day, if you have to implement and enhance geothermal system, it comes down to two things. The first one is costs, which is completely under the control of the company. The second one is seismic activity, which they have to be really conservative about because you don't want to be the company to induce an earthquake that becomes part of the news and then geothermal, which is already pretty expensive.
00:19:00
Speaker
to deploy already relies on a lot of government support to sort of get this, not in my backyard mindset, sort of what we see in nuclear, kick in, and then people go, we don't want geothermal anymore. But costs will be the differentiator.
Geothermal Energy Development Potential
00:19:15
Speaker
So the costs are the differentiator, and is that a place where the oil and gas companies can actually make a big difference? They are the world leaders in drilling holes in the ground, right? Exactly.
00:19:27
Speaker
It's more of the upstream geothermal side where oil and gas companies can actually leverage their expertise. In exploration, determining the best sites and then using their off-the-shelf drilling technologies to access those sites. I think it would be a great way for them to pivot as well. I know that a few oil and gas companies have talked about injecting brine back into the ground, which can again be reused.
00:19:51
Speaker
Yeah, I mean, essentially the elevator pitch for Fervo is we're going to take the techniques that have been developed to frack for natural gas, and we're going to apply those to geothermal. Maybe that's a bit of an oversimplification, but that's kind of the gist of the idea. And I think as far as it goes, it seems like that makes sense, even if from Karthik what you're saying, it's not quite as novel, maybe. Are there some other people that are doing similar things at the least?
00:20:19
Speaker
I think it's just more a question, and I think obviously it's something that could fit well for oil and gas companies. To me, it's just more of a question of kind of given the resources, given the location, given the costs and the geology, right? How much can this really scale, even in an optimistic scenario, what sort of portion of our energy could realistically come from geothermal, even in a country like, say, the US, which I think is relatively favorable for it?
00:20:47
Speaker
We'll leave it there. We have a really fantastic interview coming up in the second section. We've got Freya Burton. She's the chief sustainability officer from Lanza Tech. Lanza Tech is another one of these companies that's tackling hard to abate sectors, steel, I think in particular. But ultimately, if you are an oil and gas company, I think you've got to be looking at companies like Lanza Tech as part of the transition because they're the ones
00:21:15
Speaker
really ultimately creating the new carbon feedstocks for the future. So let's go to our interview. Good morning, good afternoon, good evening to all our listeners.
Introduction to LanzaTech and Freya Burton
00:21:35
Speaker
This is the Innovation Matters podcast from Lux Research. I'm Karthik Subramanian and I'm joined today by Mike Holman.
00:21:44
Speaker
who's also from Lux Research and Freya Burton from LanzaTech. Good afternoon to everyone. I guess you're joining from the UK, right, Freya? I am yesterday afternoon from me and I think early morning from Mike. Very early morning from Mike, right? Not too early, but yes. Thanks for joining us, Freya. And you say you're the Chief Sustainability Officer at LanzaTech, which I think a lot of our listeners probably already know is the
00:22:13
Speaker
a leading company in carbon utilization. It's producing ethanol and other downstream products from carbon containing waste gases using synthetic biology type of process. And it's been, I think, one of the most successful companies in that space on already operating, I think it's five commercial scale facilities globally. So, great to get your perspective on sustainable innovation and
00:22:40
Speaker
and what's been successful for AlonzaTech. So thanks for joining us. No, it's great to be here. Thanks for having me. And to that point, you joined AlonzaTech back in 2007. So you've seen a lot of this journey from the very earliest stages to the kind of early commercial scale that you're at now. And from what you've seen, what do you think have been the factors that have been most critical to your success there?
00:23:09
Speaker
So, you know, it's interesting because I've been on this journey for such a long time. And I always joke that, you know, Lanzatec is no longer a startup. We're kind of a middle-aged startup. But then I worry how that reflects on me. But it's been a really interesting journey because, you know, back in the day it was, you know, we were making ethanol
00:23:30
Speaker
for road transport primarily. And Lanzatec was born out of a desire to make fuels that did not impact land, food, used a feedstock that was readily available, point source, low cost, and so on. But it was at a time when it was the clean tech
00:23:50
Speaker
you know, 1.0, it was not a great time, you know, and if you said you were making biofuels at the time, people didn't want to be near you.
LanzaTech's Expansion to China
00:23:59
Speaker
So it was, it was a little tricky, you know, to get going with that. And then also to say, well, we're making it out of pollution, and people would kind of laugh you out of the room.
00:24:11
Speaker
Um, so we, you know, we started out, you know, when I joined, there were like four of us, I'm a biologist and I was in the lab and we were having to make us, you know, make this concept of carbon utilization heard, you know, people were not talking about it. And this industry was really just super nascent and it's kind of, it's growing up now. And, and we have a lot more, you know, language around carbon, a lot more visibility about CCU, CCUS.
00:24:40
Speaker
But at the time, nobody knew what we were doing. And quite frankly, they thought we were crazy. So it was a pretty tough time to try and seek funding to grow a company and so on. And as you know, we started life in New Zealand, which was a fantastic place to start the company. And we were so lucky that we had really insightful investors, and I should say very patient investors.
00:25:08
Speaker
who jumped on board, you know, as kind of carbon champions who saw the potential for carbon utilization all those years ago. And then, you know, really what happened was we looked globally. So we didn't say we're going to make one product in one location with one feedstock. We said, let's go to where the carbon is. We went to China in 2009. We got strategic investors.
00:25:36
Speaker
We spread out. It was a big part of our growth. And that's, I guess you've gave four of your largest, I think, currently running facilities are in China, right? So we have three operating and one about to start up in China. And at the time, many years ago, people were like, why are you going to China? And we said, well, they make a lot of steel. They have a lot of emissions that we can use.
00:26:04
Speaker
And they get things done pretty quickly. When they have a target, and we know they have targets, they will achieve those targets. So we broke ground in 2015, our plant in China, and now we have three operating facilities. So in a relatively short space of time for first of a kind technology to build, and the first one started in 2018,
00:26:34
Speaker
And then the next two post COVID, I mean, it was incredible at the speed of what, what you can get done. Yeah, it's, it's, it's pretty remarkable. And I was curious, I mean, as I actually went back and we, we profiled on the tech for the first time here at Lux back in, in 2011.
Sustainable Fuels and Aviation
00:26:52
Speaker
And so I was going back and looking at some of the old profiles. And it's interesting, it hasn't, you know, there's probably been more, I think, consistency in the strategy and approach and mission than you sometimes see with companies that have, you know, startups that have survived for this long. But I'm sure there have been some big changes. What do you think is the biggest pivot that LanzaTech has made to make you successful along the way?
00:27:23
Speaker
Yeah. I mean, that's a good question. You know, we, we started out thinking about fuels, you know, but, but we quickly realized, you know, you need carbon in so many places and that chemicals was a natural evolution for us. And we never, we never wanted to go for like niche chemicals, you know, just that and pivot away from volumes of fuels. We really want to focus on hard to abate sectors. So we, we looked at aviation fuel. So, you know, 2010, Jennifer Holmgren joined us.
00:27:52
Speaker
as our CEO and really from that point on, and she's affectionately known as a sort of godmother of SAF, Sustainable Aviation Fuel, because she really worked on a lot of those original technologies for the development of SAF. And she naturally saw the ability of applying our process to take waste-based feedstocks as quite frankly, a very sensible option
00:28:20
Speaker
to build up those supplies of sustainable aviation fuel we need. And so that was a big turning point going into the sustainable aviation fuels market. The chemical side kind of happened really organically. Once you're making ethanol for fuels, you can use ethanol and ethanol derivatives for other things. And the beauty of our system using biology is it can do a lot. It's super flexible.
00:28:47
Speaker
of course, I'm a biologist, I would say that. But that, you know, what we see is we have our what we call our microbe. And today it can make ethanol, but you could kind of remove the ethanol producing gene and, and that switches on a gene that makes another chemical that today might come from fossil. So that was a natural extension for us. So the chemical side and the aviation were, you know, really big moments in our, in our sort of growth journey.
LanzaJet Spinout and Aviation Industry Challenges
00:29:18
Speaker
And of course with aviation, now you have Lancerjet, which I would sort of say is a subsidiary of Lancertech. It's an independent company, but we spun it out, of course, at the best possible time to spin out an aviation fuel company, 2020. So again, people thought we were crazy. No planes in the air at the time, but an absolute desire by airlines to
00:29:49
Speaker
find sources of fuel. And so for us, we had developed that platform to make SAF over a 10 year period, really, with the support from the US Department of Energy and one of their national labs, Pacific Northwest National Lab, to develop this way of converting ethanol to jet fuel.
00:30:10
Speaker
But we didn't have all the expertise to take that to scale. So we had to spin out a whole new company, Lanza Jet, very imaginative, to scale that up. And that's what they're doing today, which is pretty cool. Yeah. And it's interesting you also mentioned COVID because, so I am in the Netherlands for all the listeners who don't know where I am stationed.
Sustainable Aviation Fuel and Policy Impact
00:30:31
Speaker
But India is my first home and Netherlands is sort of my second home. And you mentioned COVID and it was really hard to go back home.
00:30:37
Speaker
And of course, with sustainable aviation fuel, the thing I see is that sustainable aviation fuel does not have the same energy density maybe as the conventional fuels that we use today, even though you get the bonus of no carbon emissions or reduced carbon emissions. My question to you would be, what do you see in terms of distances and in terms of traveling with SAF? And more so, what do you think
00:31:05
Speaker
an aircraft developer like Airbus, whom you do have a partnership with, have to do and modify in their aircrafts to incorporate SAF? Yeah, so Airbus lands jet and I know it gets confusing. But look, all the big aircraft manufacturers Boeing, Airbus, they're all looking at, you know, SAF is going to be part of the solution.
00:31:33
Speaker
And quite honestly, there needs to be multiple solutions. We need to look at hydrogen, we need to look at electric planes, but largely SAF is going to play a really significant role because you can get the energy you need for long distance flight. You're not going to get that from batteries. I mean, you can't even take off the batteries so big, so you need to have SAF. And it's a drop-in. And the key for all of this, for the energy transition, is make it happen fast.
00:32:03
Speaker
And to make it happen fast, it has to drop into existing infrastructure. And so staff will be a really big part of that, you know, that solution. Where are we at today? We are not anywhere close enough. You know, it's under 1% of what we need in the next sort of 10 years, the world of 23. Yeah, about 10 years, which is pretty scary when we think about what we need. But the technology is there.
00:32:33
Speaker
The feed stocks are there. What's missing is the right market and the right legislative landscape, because these are first of a kind technologies. They need financial support. You're comparing sap to fossil, which has had almost 100 years of baked in incentives and getting down the cost curve. It's not a really fair comparison, but it is what it is. And so we need sort of
00:33:03
Speaker
framework's in place to support supply of SAF. The US does a good job here with the Inflation Reduction Act and the SAF blenders tax credit. Europe, the UK, they're a bit more stick versus carrot, so it doesn't make it as attractive an environment for new technology developers. Yeah, that's one of the, I mean, maybe zooming out a little bit from SAF, the
00:33:31
Speaker
You know, the policy landscape, it's been, I think, one of the biggest changes and stories that we've been following in sustainable innovation over the last couple of years. Things like the Inflation Reduction Act have really shifted the landscape for a lot of different technologies and markets. And obviously, with the SAF credit and things like that, that's impacted Landsajat and Landsatec as well.
00:33:58
Speaker
How do you see that sustaining or evolving? How do you expect the policy landscape to be changing or how would you like it to change maybe to continue to support the sort of decarbonization over the years to come here?
Regulatory Challenges for Sustainable Technologies
00:34:15
Speaker
I mean, I think there's a number of factors. The first is getting those first plants built, and there needs to be some kind of price stability mechanism just because these are first of a kind plants. They're expensive. They need some help.
00:34:27
Speaker
just to kind of get going. But once they, you know, they start getting down the cost curve, and you can get the volumes out, you're creating the market, you know, it should be a kind of stage gate, price stability mechanism, we don't want to bake this in, although in the fossil sector, they've had baked in things. Again, it's tricky. You know, I think, you know, what we really need is my observation of
00:34:55
Speaker
policies today for new technologies that are trying to change the status quo, whether it's in chemicals, in Saff, in road transport. These technologies have to jump through way more hoops than anybody else. Examples would be regulations around hydrogen and hydrogen use in Europe for the
00:35:17
Speaker
what we call renewable fuels of non-biological origin, ones that are using CO2 and hydrogen, really complex rules that make it very difficult for new technologies to develop. We produce fuels that are called recycled carbon fuels because we are recycling carbon that would otherwise go into the atmosphere. It's an opt-in fuel in Europe, so we have to go cap in hand to every member state to say, will you allow us to contribute? We have very complex methodology
00:35:47
Speaker
assessments to work out your life cycle of the fuel. Meanwhile, all these new technologies are bending over backwards to be super transparent and show the reductions and the holistic benefits. Who keeps selling fuels and going? It's all the fossil industry. It feels like legislation is preventing us from meeting our targets on a global scale because
00:36:16
Speaker
As I said, 1%, less than 1% of SAF that we need is being made today. We need to ask ourselves why. It's not because there isn't feedstock. It's not because there is an investment, you know, and it's not because there isn't technology. It's because of this very difficult framework for actually getting it built. Yeah. Well, I mean, the cost is still something of a, it's still a factor also, right? There is there. The cost is absolutely a factor, but it's a factor because you don't have this
00:36:45
Speaker
you know, this bridging thing to get the first ones built. You could get the scale. And then you could go down the cost curve. So, you know, and you had the, you know, head of Boeing say, it's never going to be cost competitive. Well, maybe not, but but you do need to start taking in the externalities of the fossil fuels that we're burning. You know, I mean, just look at the news today is this climate related disasters everywhere, floods from India, the West Coast, the East Coast, extreme heat in Europe,
00:37:15
Speaker
You kind of think, how much more can the Earth tell us that we need to make a change? But nothing is really changing. I mean, there might be some more reports written which tell us, yeah, there's a problem instead of just getting it done. Yeah. Coming back to SAF itself, maybe also tying in with the policy side. Now that the IRA has come out, I expect similar policies to come out in other regions of the world. I know Europe has already come up with its
00:37:42
Speaker
Ari Power EU fit for 55 and those sort of deals. How do you see these policies impact the timeline for SAF or by when do you see SAF become like the norm in aviation? Well, I mean, it comes down to all these lovely reports and policies and desires of governments. We have targets for 2030. We're not going to meet them.
00:38:10
Speaker
you know, as a, as a globe, it is, you know, and I think I was talking with someone recently who was doing a calculation of how many plants need to be built over the next, it's like a thousand plants every year for the next 10 years, not just South, but in, you know, for the energy transit, it's just not possible. Why? And we need to ask ourselves why? Because, you know, we're not letting the market decide we're putting in all these incredibly complex rules, because we're terrified of what happened in clean tech 1.0.
00:38:40
Speaker
essentially. We don't want to open Pandora's box to a new technology because we don't know what will happen. Instead of saying, let's just build stuff and assess and you can have a threshold or be very transparent with what you're making and go from there. I think the other issue is beyond staff looking at chemicals and road, all the certification bodies
00:39:07
Speaker
that exist. So every new technology and new product has to go and be certified to sell into a certain market. And you feel like we would just get along a lot quicker if we could all just say, this is what it's made from. This is the LCA. Do you want to buy it? Do you not want to buy it? Do you want to start making a dent on your emissions? I think we're just adding layers of complexity. Now, saying that, we work with third parties. We work with certification bodies.
00:39:36
Speaker
because that's what we have to do. But does it make it more complex? Yes, it does. And so I worry that we will not get to where we need to be. And we're doing a lot as LanzaTech and LanzaJet. And it's a close-knit community of staff producers. We all work quite closely together. And we're all trying. I mean, these are very committed people and companies.
00:40:03
Speaker
But it's a very tough gig, to be honest. Well, one of the things, speaking about collaborations, one of the things that the LanzaTech has done along the way is work with a lot of large established companies, whether it's the companies whose emissions you're using or other equity partners, other development partners.
Partnerships and Communication for Innovation
00:40:26
Speaker
And that's what
00:40:27
Speaker
a lot of our clients at Lux are from these sort of large multinationals that are interested in working with emerging innovative companies like Landsatak. What is it that you found makes for the most successful partnerships as you've grown? Yeah. I mean, we are so lucky in the partners that we're working with from some of the largest companies in the world, the largest players in the steel and energy sectors. And we're working with traditional energy companies as well.
00:40:58
Speaker
communication, you know, 100%, you know, we have to have these very open channels of communication, we're working on new technology, there needs to be a lot of transparency, especially when we're working with big energy companies, and, and, and also consumer brand companies, which we're working increasingly with today, producing materials for their, their things like textiles and, and
00:41:25
Speaker
consumables, because they need to not be accused of greenwashing, they need to be very transparent in what they're doing. And we've been lucky that we've had companies that have really, you know, taken a leap. We used to joke, you know, nobody wants to be first with us, they all want to be first to be second. And we've been lucky that we've had, you know, companies like Shao Gang and Indian Oil and Arcelor Mittal, who've all come forward and
00:41:54
Speaker
and built plants with our technology as the first in their sector. And at every stage, they've been super aligned on our values, communicating, asking each other the difficult questions to get these things built. And that's been really important. And for us, as I said earlier, it's about a global reach. You need a lot of friends to make this happen.
00:42:22
Speaker
and we're lucky in that we've gone across the globe and across sectors to find like-minded people and companies. Yeah, absolutely.
Freya Burton's Personal Interests
00:42:34
Speaker
Maybe a bit of a wild card question to wrap up. One of the things I noticed on your CV from I'm assuming school days was the Cambridge Blind Wine Tasting Society. I'm not sure if that has anything to do with you being in the ethanol business now. But do you have any favorite regions or recommendations for the Innovation Matters audience? Well, you know, I would be remiss if I didn't talk up New Zealand as the birthplace of Nancy Tech and obviously, you know,
00:43:04
Speaker
birthplace of gas fermentation, but obviously tremendous wines in New Zealand. So, you know, traditional fermentation and the wines that are there. So I would say definitely checking out some of the fabulous wines in New Zealand, in particular, Martenborough, some good Pinot Noir there if you like that. Excellent. We'll check that out and we'll keep
00:43:28
Speaker
Keep following the progress at Aplon's attack. But thanks so much, Freya, for joining us and for the conversation here. And we'll be in touch. And thanks to you. Thanks to all of you for joining us on Innovation Matters. Innovation Matters is a production of Lux Research. For more, visit www.luxresearchinc.com.