10 years ago, Tesla announced its plan to radically transform the automotive market by building electric vehicles that were more attractive than conventional combustion-powered cars. While Tesla wasn't the first company to propose such a bold vision, they set out to achieve their goals in an unconventional manner: by producing a high-end performance vehicle as their first foray into the market. Conventional wisdom at the time held that such a plan might succeed at converting some of the Porsche-driving crowd over to electric vehicles, but that it wouldn't help the billions of other drivers around the world that were unable to afford such luxury cars. Tesla saw it differently. As summarized in the company's “Secret Tesla Motors Master Plan,” Tesla planned to use the revenue and experience from niche, high-priced initial markets to build successively more affordable mass-market cars. Amazingly, that plan seems to be working.
The case study and business strategy of Tesla is highly relevant for another emerging technology with a bold vision, but facing major commercialization challenges: Direct Air Capture (DAC). DAC technology is basically an industrial sized air filter that can extract CO2 from air and concentrate it to the higher purity needed for utilization or permanent disposal. The reason many see DAC as so important is that, even if Tesla takes over the world and makes all of our energy from renewable sources, we still will have to deal with excess carbon dioxide (CO2) in the air from past industrial activity to prevent climate change. While DAC can provide a promising technological fix to answer this challenge, it has been largely neglected in climate change discussions to date -- cast off as too expensive and something with only niche potential, much like the electric vehicles of only a few decades ago.
So what might a "Secret Master Plan" for DAC to gain market traction and global attention look like?
If we want to get good at extracting CO2 in order to sequester billions of tons of past, present, and future emissions, it will be critical to find attractive first markets. For DAC, this is challenging, but not impossible. The biggest challenge for DAC is it's price premium against competing technologies -- much like electric vehicles had to compete against low-cost gasoline alternatives. Estimates for first-of-a-kind DAC costs are all well over $100/ton CO2, which is considerably higher than existing carbon markets and the cost of current low-cost CO2 capture processes from natural sources and/or fuel/chemical manufacturing. Fortunately, CO2 collected from DAC systems can be used to make a number of valuable, and even sexy, products today for which customers are willing to pay a premium.
So which of these early markets might give DAC developers a chance to cross the commercialization valley of death, while building the policy support it will need to thrive in the future?
- Extracting CO2 from buildings: Recent studies have shown that excess indoor CO2 reduces cognitive function. Systems that can solve this pain point can integrate with new technologies that can monitor CO2 concentrations (see FutureAir) and turn on as needed and even provide an on-demand source of CO2. Skytree is the only DAC start-up that is currently exploring this option. The largest benefit for this application is that by placing DAC units on site, there are no direct competitors (e.g. from flue gas like in other applications).
- Greenhouses with a passive DAC system: Greenhouses are a lucrative market for providing CO2, because operators pay between $100-200/ton CO2 to enhance plant growth. Because greenhouses do not require pure CO2, companies like Infinitree can take advantage of a passive approach to DAC that uses evaporation to upgrade CO2 to concentrations needed at a much smaller cost-premium. In addition, because DAC systems can be sited directly on site, they can eliminate the costly transportation step often associated with CO2 capture from other industrial sources. Long term cost reductions aside, it also is conceivable that there are customer segments willing to pay extra for “DAC enhanced” food, just as there is a customer segment willing to pay a premium for organically or locally grown food.
- Carbon neutral liquid fuels: dispatchable energy for a variable load. Some DAC companies, such as Carbon Engineering, are focused on making synthetic liquid hydrocarbons as their first market. These fuels can decarbonize the transport sector and be used for long-term carbon neutral energy storage. While large quantities of less expensive waste CO2 could also be available for making liquid fuels coming from power plants, by extracting CO2 from the atmosphere, renewably-powered DAC has a clear competitive advantage on the life cycle CO2 balance in niche markets willing to pay for low-carbon fuels. In addition, the modular and dispatchable nature of DAC systems can complement intermittent renewable energy infrastructure nicely.
- Remote and distributed niche markets. While both Climeworks and Global Thermostat also aspire to make liquid fuels and feed CO2 to greenhouses, their modularity and active processes also allow them to satisfy remote and niche demands for CO2. This includes delivering CO2 for beverage carbonation, water purification or to algae farms (for use in fuel, feed, and chemical applications). Global Thermostat uniquely can capture CO2 from both air and from power plants.
Towards a DAC commercialization master plan
The jury is out whether any of the aforementioned companies have a plan that can achieve the escape velocity needed to move DAC from niche markets into mainstream applications. But if a DAC company did have a "secret master plan," I think it might read something like:
- Find one air-to-end-use for CO2 -- and prove that DAC is a viable business, even if only in niche markets. This step must involve public demonstration and market pull -- transparency is key for showing DAC has an economic, environmental, and social value. DAC companies will need to figure out how to publish credible techno-economic assessments of their technology to prove it works, despite the (understandably) secretive nature of start-ups wishing to protect intellectual property...
- Work with customers and governments who want to see more of it. Like any new climate solution technology, DAC needs policy and regulatory support. Tesla, after all, got a $465M loan from Uncle Sam back in 2008, and has benefited from consumer tax rebates for electric vehicles at the Federal and state level. Finding champions in government and industry will be critical for DAC to grow into new markets and come down the cost curve.
- As DAC becomes cheaper, seek out more mainstream consumer markets, and build on DAC's unique environmental strengths to command a premium from customers. This can help reward the early adopters and inspire new DAC supporters.
- Act collectively to push for policies that make DAC as a negative emission technology more and more competitive over time as part of the suite of technologies needed to close the carbon cycle.
Christophe Jospe spends his time building networks to enable collective action and amplifying attention and capital to the most promising solutions that can capture, use, and sequester carbon dioxide. Click here to subscribe to his monthly newsletter.