How Walt created theme parks may offer insight for solar innovaton
Physicist Richard Feynman's prediction of molecular factories could be an important element in the battle to prevent climate change
What happens when you combine the musings of physicist Richard Feynman, carbon nanotube technology, and a seed accelerator looking for the next big deal? How about a company that creates a technology to recycle the waste CO2 produced by your automobile as it cruises down the road at 65 miles an hour?
Science fiction you say? Not quite, because such a technology is actually under development, and it is based upon the three ingredients described above. The company is called Prometheus, named after the Greek Titan who defied the gods, stole fire and gave it to humanity. It's the brainchild of serial entrepreneur Rob McGinnis, and it's received backing from Y Combinator, the highly successful seed accelerator based in Silicon Valley.
Capturing carbon dioxide directly from the air is one of the strategies to solve the greenhouse gas problem. McGinnis is developing a device to convert captured air directly into fuel. He has a working prototype, but it only can recycle a small amount of carbon dioxide and create a small amount of fuel. Expecting significant progress over the next few years, McGinnis hopes to create fuel that could be sold for about $ 3.00/gallon.
The effort is clearly a long shot, but imagine if McGinnis and his company actually succeed at capturing all of the waste CO2 byproduct of the fuel burning process and convert it back into usable fuel? Our greenhouse gas problem would look entirely different! That doesn't mean an end to renewables such as solar, wind, and hydropower. Instead, carbon capture is merely one of the portfolio of strategies needed to solve the climate change problem. That's because even if we stopped spewing CO2 and other greenhouse gases into the atmosphere worldwide today, we need to do something about all of the residual gases we've already emitted, and which scientists predict will cause us great future harm.
So far as I know, everyone associated with Rob McGinnis in this carbon capture endeavor thinks this is a long shot, likely of the 500 to 1 or 1000 to 1 variety. However, every big technological advance at some point is described as such. The better question to ask is, why should anyone believe that McGinnis has ANY CHANCE of being successful? I think there are three reasons.
Reason #1: Nanotechnology
Various companies are now attempting to do "direct carbon capture", either converting them into solids or injecting the gas into some type of underground storage. McGinnis is using a different strategy involving carbon nanotubes.
There's a good chance you've heard about nanotechnology. While nanotechnology was an unrealized idea at the time, world renown physicist Richard Feynman gave a famous lecture in 1959 to the American Physical Society about the potential of manufacturing on a nano scale. Feynman described the idea of doing manufacturing products at a scale thousands of times smaller than what was possible at the time, literally to the level of atoms. Of course, the idea of manufacturing on such a tiny scale was seemingly science fiction, and might have been dismissed as such, except for the fact that it was Richard Feynmann making the prediction.
It WAS science fiction, until it wasn't, when a series of pioneering breakthroughs occurred in the 1990's and early 2000's. One such breakthrough was carbon nanotubes. Feynman's ideas have now become a reality, opening up the potential for incredible transformation at a molecular scale.
Why not then apply Feynman's idea of molecular manufacturing to the problem of removing all those nasty greenhouse gases from the air?
Reason #2: The Track Record of Rob McGinnis
Which brings us to Rob McGinnis. McGinnis himself is a great study in transformation. He obtained a Bachelor's degree in theatre from Yale University. While most of his classmates likely headed down I-95 to the bright lights of Broadway, McGinnis decided to hang around New Haven and get a PhD in Environmental Engineering. Not exactly your typical educational progression, but McGinnis isn't your typical guy.
Most likely, while his fellow PhD's generally headed off to work in academia and research institutes, McGinnis ended up starting a company called Oasys. Those undergraduate acting skills probably came in handy, as McGinnis was able to raise $ 20 million in venture capital to fund the company's technology called Forward Osmosis (FO). This is a technology to clean up dirty water. Oasys focused on applying its Forward Osmosis technology to the problem of cleaning up wastewater generated at power plants and oil drilling.
Having successfully launched Oasys Water, McGinnis then went on to form a second company called MatterShift in New York. MatterShift developed a technology to produce carbon nanotubes at scale. In effect, the company found a way to take the carbon nanotube membranes from the university lab and apply them at industrial scale.
MatterShift's carbon nanotube membranes represent a practical application of Feynman's idea of the molecular factory. Membranes have long been used to filter substances. Creating a membrane using carbon nanotubes (CNT's) opens the potential for the kind of things Feynman envisioned in his 1959 lecture. In this case, the nanotube membranes would be used in things such as seawater desalinization. As noted on MatterShift's website, "Each nanotube acts as a conveyor belt that performs functions on molecules as they pass through, single file, analogous to how factories function at the macro scale." It further pointed out, "Three significant advances made this breakthrough possible. First, there has been a 100-fold reduction in the cost of carbon nanotubes in the last 10 years, with a corresponding increase in their quality. Second, is the growing understanding of how matter behaves in nano-confined environments like the interior of sub-nm CNTs, in which molecules move single file at high rates and act differently than they do in bulk fluids. And third, has been the increase in funding for tough tech startups, which enabled Mattershift to spend 5 years of intense R&D developing its technology."
If the molecular factory could do things such as remove pollutants and salt from dirty seawater, why not apply the same concept to removing "dirty" CO2 from the air? Thus, the idea for Prometheus, and the McGinnis device to turn CO2 into usable fuel.
Thus, a potential technology to revolutionize the greenhouse gas problem. How, then, to turn it into a real business? Enter Y Combinator.
Reason #3: Y Combinator
Y Combinator is a seed fund that invests in promising entrepreneurs and their companies. It may be the most famous of all such funds, having since 2005 invested in more than 1000 startups. "Seed stage" companies typically are pre-revenue, though not always. They often have already received what's called "friends and family" funding, meaning that the founder(s) has/have gotten initial capital from parents, Uncle Louie, or a generous and highly optimistic friend. Occasionally, such companies are merely at the "cocktail napkin" stage, though usually well beyond that.
As the name suggests, a "seed stage" fund invests in companies at the "seed stage." In any event, a "prospect" for Y Combinator has definitely moved beyond the "cocktail napkin" stage for the idea. After a rigorous screening process, it chooses a group of entrepreneurs and provides training. It invests $ 150,000 in each "graduate" company and then provides ongoing help to them, typically in the form of: 1) introducing the company to prospective customers; 2) providing ongoing mentorship; and 3) helping line up future financing.
Y Combinator is certainly not unique in this, it's just that they've been VERY successful. How successful? While lots of "graduate" companies have flamed out, reportedly, the combined value of their "graduate" companies that have succeeded is over $ 65 billion! Their "graduates" include AirBNB, Dropbox, and Reddit.
It's one thing to invest in a new lodging concept such as AirBNB but an entirely different thing to invest in a technological "moonshot" such as removing waste CO2 from the air. After all, a company such as AirBNB pioneered a new version of a very old idea: hospitality and lodging. Not that AirBNB wasn't a huge risk, but investing in true "moonshot" technologies is incredibly tougher. Notwithstanding that, Y Combinator says it is investing in some companies trying to solve the greenhouse gas problem.
Y Combinator is certainly following a fundamental principle of early stage investing: create a portfolio, don't attempt to put all your money with one company. The fact that the company has invested in more than a 1000 startups attests to the fact this concept is well understood. However, trying to invest in this area is pretty challenging because there just aren't very many companies pursuing carbon capture. Maybe that will change over the next few years.
Will Rob McGinnis achieve his goal of carbon capture and recycling in his VW Golf? Can he scale it? Can he make his new company, Prometheus, not only successful, but a huge success for Y Combinator? Unknown at this point. However, all of the right ingredients seem to be there: 1) carbon nanotube technology is proven, it just needs to be applied to the CO2 removal problem successfully; 2) Rob McGinnis has demonstrated the ability to start and build companies; 3) there's a huge addressable market if a viable solution can be found; and 4) Y Combinator certainly can help coach McGinnis and his team as well as anyone can.
Though Google is an exception, nearly every successful startup "pivots" along the way from the original idea of the founder. Most likely, McGinnis a Prometheus will do the same. The "pivot", however, may be an even better idea than McGinnis's planned carbon capture device.
As previously profiled in "Unexpected Perspective", there are other carbon capture technologies under development. Nine out of ten will likely fail. However, as with all angel investing, success depends upon finding the one in ten that provides a 10+X return.
Richard Feynman foresaw the future when he gave his famous 1959 speech about "molecular factories." Let's see how long it takes to create the first successful molecular factory that "scrubs" carbon from the air.
Fusion power always seems to be "just around the corner". Some new strategies may finally make it a reality.
Want to solve the greenhouse gas problem and stop climate change dead in its tracks? Nature has shown us a terrific way to do it. It's just that we haven't figured out a practical way to copy the natural process. It's called fusion power. All you have to do is walk outdoors and feel the warmth of the Sun to experience it. Nuclear fusion is the way the Sun – as well as all the trillions of other stars in the Universe – generate clean energy with zero use of fossil fuels and zero greenhouse gases.
If fusion power can be commercialized, it will have two huge advantages over the three key "renewable" technologies – solar, wind, and hydropower – which are presently available: it will operate 24/7/365 without regard for the sun shining, the wind blowing, or a river running. Not only that, it will be theoretically available throughout the world, irrespective of geography or climate. We could switch all of our electricity generation, and eventually all of our vehicle power generation, to fusion. We'd still burn fossil fuel for airplanes, and we'd generate some greenhouse gases from other sources, but most likely, the world's trees could soak up the greenhouse gases we'd generate.
Fusion might be just about a perfect solution to the problem of climate change.
If we could just figure out a way to mimic the Sun and generate fusion power.
While scientists haven't yet actually created a viable fusion process, we actually may finally have the "recipe" for completing the task. The "recipe" is based upon one successfully used to commercialize three other technologies: nuclear power, spaceflight, and the electric automobile industry. Here's the three step recipe:
Step 1: get the government to invest heavily in basic scientific research
Step 2: spin off that government research into private enterprise
Step 3: get those private enterprises to create a commercial product.
This isn't some "pie in the sky" recipe, as we can turn to multiple real-life examples of its application. Let's consider three of them: 1) commercial nuclear power; 2) commercial spaceflight; and 3) electric powered vehicles.
Scientists have long known about nuclear fission – the method of splitting atoms to release energy. Theory was transformed into practice through the U.S. government's Manhattan Project. The government spent huge sums to turn basic scientific research into the atomic bombs that were detonated over Hiroshima and Nagasaki at the end of World War II.
There's no way nuclear power could have been developed without basic and applied research funded by the US government. The good news is that that research also resulted in a useful, and peaceful, application – electricity generated from nuclear fission. The research that produced those weapons created the way to generate environmentally clean power.
The technology underlying the atomic bombs was then adapted by industry to build nuclear power plants. Companies such as Westinghouse began building commercial nuclear power plants after World War II.
The same recipe was used for spaceflight. Governments did the basic research – again for military purposes – to launch rockets into space. Besides the military application, the technology was adapted to launch humans into space, as well as communications, weather, and GPS satellites. We've all benefitted immensely from this. That basic governmental effort has now resulted into the launch of private space companies such as SpaceX.
In the future, much of the job of building and launching rockets with satellites will fall to SpaceX and its commercial brethren. This is very good because these companies have demonstrated they can get the job done at a fraction of the cost of the government.
The third example of this is the electric vehicle industry. Basic research, much funded by the government, produced technology to create battery storage. Commercial companies such as Tesla have now adapted that technology to create the electric vehicle industry.
Which brings us to nuclear fusion. In contrast to splitting atoms, as done in nuclear bombs and power plants, nuclear fusion involves the release of energy through the fusion of atoms. As with the previous examples, governments have provided huge amounts of funding to try to figure out how to do fusion on a commercial basis. The technology keeps getting better over time, but it still takes more power to start a fusion reaction than is yielded from it, thus rendering it still uneconomic. The good news is that scientists are getting closer to breakeven.
Governments are still pouring tremendous resources into making fusion a viable process. Two of the best examples are the International Thermonuclear Experimental Reactor (ITER), still under construction near Toulouse, France, and the Joint European Torus (JET) being built in England.
All of this government-funded research into nuclear fusion has set the stage for a potential repeat of the "recipe" outlined above. Lots of this government research is now being spun off into private enterprises that hope to strike it rich by commercializing the government-funded fusion technology.
There are a bunch of companies now trying to commercialize fusion technology, but two of particular interest are Commonweath Fusion Systems in Cambridge, Massachusetts and General Fusion based just outside of Vancouver, British Columbia.
Both companies, along with some others, are taking a different approach to fusion than ITER and JET, the two government funded research enterprises mentioned earlier. While ITER and JET are mammoth undertakings, the commercial start ups are trying what could be called a "go small" strategy: much smaller fusion plants that will cost much less money.
Commonwealth Fusion Systems was founded by six researchers from MIT's Plasma Science and Fusion Center. The company's goal is to build an ARC reactor (short for affordable, robust, and compact). As reported by MIT, "Researchers [at the school] have designed a way to use high-temperature superconductors to produce powerful magnetic fields that provide superior confinement of the hot plasma — enabling a net energy fusion device at much smaller scale than did previous experiments. The MIT design uses established science for the plasma confinement, and thus puts fusion power plants within reach on a faster time-scale than previously thought possible."
So what makes Commonwealth Fusion's technologists think they can build a commercial fusion reactor that's just a fraction of the size and cost of the European governmental projects mentioned earlier? The key may be a new technology called REBCO, which stands for rare earth barium copper oxide technology. This is being incorporated into Commonwealth's reactor. Does it sound like "pie in the sky"? Maybe, but it's received major investments from ENI, a big European energy company, as well as numerous investment funds.
General Fusion, based near Vancouver, is applying a similar "go small" strategy. However, the company is taking an even more radical approach. To date, the standard approach to creating nuclear fusion has been to place a high energy plasma in what's called a torus, then utilize high powered magnets to induce fusion.
Commonwealth's system is a smaller scale version of this, just one with a different type of magnet. However, where Commonwealth has built its technology based upon an improved version of magnets, General Fusion is trying to dispense with magnets entirely. The company's technology – developed by Dr. Michel LaBerge and his colleagues – employs what's called the Magnetized Target Fusion System, which does not utilize either lasers or magnets but, instead, relies upon steam piston technology. According to the company, the "Magnetized Target Fusion system uses a sphere filled with molten lead-lithium that is pumped to form a vortex. A pulse of magnetically-confined plasma fuel is then injected into the vortex. Around the sphere, an array of pistons drive a pressure wave into the centre of the sphere, compressing the plasma to fusion conditions. This process is then repeated, while the heat from the reaction is captured in the liquid metal and used to generate electricity via a steam turbine."
General Fusion has also attracted outside investment capital, including funding from Jeff Bezos of Amazon.
Will either Commonwealth or General Fusion be successful? Very hard to tell at this point. To be clear, no one yet has demonstrated a viable way to generate "net" fusion, meaning more power generated than consumed to make the reaction possible. Nuclear fusion has been a "just around the corner" technology for many years. Fortunately, the "corner" really appears closer than ever. Experts report that fusion technology has made major advances in the past ten years. It's still, though, "just around the corner." While the technology has gotten better, the key change may be the adoption of the "recipe" outlined above: build upon the base of government funded research, then use the discipline of the market to create a commercially viable approach.
Even if ITER and JET, the two government-funded projects described above, are successful in producing "net positive" fusion power, there's no way fusion power could be commercially viable if it's necessary to have such large, costly facilities. It's one thing to spend such sums on research, but entirely different if one wants to commercialize it. Fusion power is really only viable if it can be commercialized. Thus, while ITER and JET are important for research purposes, the key is to get commercial results from the spin-out companies. In that regard, the commercial start ups are truly crucial.
Commonwealth and General Fusion both hope to get to "net positive" results by the early 2020's. It's now mid-2019, so if they're correct, that truly will be "just around the corner."
We've got at least three successful results from the "recipe" – commercial nuclear power, commercial spaceflight, and commercially viable electric vehicles. Hopefully, either or both Commonwealth and General Fusion, or one of their worthy commercial competitors, will crack the code of nuclear fusion. If and when that happens, the greenhouse gas debate will completely change!
If you want to know the true priorities, focus more on the budget than the press releases.
You've probably heard that how you spend and save your money speaks much more loudly than the words that come out of your mouth. I think you can say the same thing about current US President Donald Trump. Most everyone already knows that President Trump loves to make his opinions known. However, set aside the rhetorical bombast for a moment and look at how he and his Administration believe we should spend your tax dollars. While you may wish to judge what he says, and how he says it, possibly the more important thing to consider is how he wants to spend your money.
Republicans historically have the reputation for being fiscally prudent, or at least attempting to be on paper. Well, based upon the President' proposed budget, that went out the window! The overall budget proposal is $ 4.75 trillion, a record. Based upon expected tax receipts, if we spend that amount, we'll add about $ 1 trillion (with a "T") to the national debt. As a quick reminder, one trillion is equivalent to 1,000 billion. So much for traditional Republican fiscal rectitude!
You might think, if we're going to spend like there's no tomorrow – and spending a trillion dollars more than you will take in sounds very much like that to me – you'd think there'd be something for everybody. Well, there almost is.
Which gets to the second way the proposed budget speaks so loudly. While overall expending will continue to grow significantly, the Trump budget envisions cutting non-defense research and development by $ 10 billion. Defense research and development will grow nicely – from $ 55.8 billion to $ 59.5 billion – so if you're doing research and development for the military, you're probably going to be just fine, maybe even excited!
Unfortunately, your PhD brethren who do non-defense research may have a problem. The budget calls for a cut of 9% to funding for the National Science Foundation. For the Energy Department, the proposed cut is 17%. These pale in comparison with a proposed cut of 47% in research and development at the Environmental Protection Agency.
All of which means that President Trump not only says he doesn't believe in climate change, and doesn't seem to think alternative energy is very important, he backs his skepticism up by cutting the very research budgets that could best address climate change.
You may say, we've got bigger priorities. By his proposed budget, the President is saying that defense is one of them. Part of his budget is a healthy increase in defense spending, including research and development spending on the military and defense.
If the Federal government is going to spend money, one of the very best things it can do is to fund research and development, especially basic research. Like me, you may think the Federal government is already spending way too much money. While I think that's true, I make something of an exception for research and development. That's because it tends to provide tremendous benefits to society as a whole. As an example, we've all hugely benefitted from the research and development associated with the effort to land a man on the moon in the 1960's and 1970's. Not only that, but Federal spending on research and development brought us the Internet, as well as things such as magnetic resonance imaging (MRI) technology. It's highly likely you have benefitted from these. Marc Kastner, the Donner Professor of Physics at MIT and President of the Science Philanthropy Alliance, has noted, "With complete unpredictability, basic science research sometimes gives us a gift of new technology that changes the world."
Trump's proposed budget follows a trend that's gone on for quite a while. Back around 1968 the US spent about 10% of the Federal budget on basic research. Today it's only about 4%. Of course, the total budget has grown tremendously over the past 50 years, so we're still spending large amounts on research and development.
If research and development is valuable, how should we be spending the money? Obviously, on truly important things. The causes of climate change, as well as how to deal with it, certainly seem to me like subjects that deserve lots of research and development money. Trump has told us that he doesn't believe in climate change, and doesn't believe we need to worry about it. His budget makes the message very clear.
If like me you believe that spending research and development dollars on the causes of climate change, as well as ways to mitigate it, is important, it's some very discouraging news. The good news, however, is that this is merely a proposed budget. The 535 lawmakers in Congress actually decide what the budget will be.
While the proposed budget is quite disappointing, it's important to note that the members of Congress could make some very modest tweaks to this that could have huge impacts of climate change research and development. In fact, a group of 114 lawmakers is pushing to get more money for clean energy research and development.
Part of the proposal of these 114 lawmakers is to include $111 million in funding for Energy Innovation Hubs. The hubs were first created about five years ago during the Obama Administration. The idea is to encourage research that could then be spun off and licensed to for-profit enterprises.
Could the budget manage to handle this additional line item? To put this in perspective, imagine that the entire Federal budget was $ 1,000. If so, the funding for the Energy Innovation Hubs would be the grand total of 2.36 pennies! Just one of the Air Force's F-35 stealth jets costs $ 89.2 million, almost the entire proposed budget for the hubs.
The 114 lawmakers also want to fund the Joint Center for Energy Storage Research. Why is this so important? It's because grid storage is essential to making renewable energy the backbone of the electric grid. After all, solar only works while the sun is shining; sometimes the wind doesn't blow much, or at all; and sometimes, rivers slow to a veritable trickle, meaning that hydropower isn't always effective. Renewable energy is now highly cost competitive, but utilities around the world are still reticent to go "all in" on renewables because of the storage problem. If we're going to make a giant switch to renewable energy, we'll need to have a robust energy storage system.
Battery storage is getting much better, making electric vehicles quite economic. The same thing is starting to happen with grid storage, but a lot more work is needed. The Joint Center could play a very important role in energy storage.
Moore's Law has transformed the information technology industry. The fact that the number of transistors has more or less doubled every 18 to 24 months over the past 50 years has hugely transformed society. Imagine if research could create a veritable Moore's Law for energy storage? Imagine large scale storage of electric energy such that renewables could become the true backbone?
Ice hockey legend Wayne Gretzky famously said, "You miss 100% of the shots you don't take." To the extent we don't undertake lots of initiatives to improve energy storage, as well as other technologies to generate renewable energy, we'll never know what we might have achieved. Reducing or defunding these programs is equivalent to not taking Gretzky's additional shots.
It would be one thing if these programs were the equivalent of trying to finance World War 2, or landing a man on the moon, but they clearly are not. Yet while they do not share the funding demands of major wars (literal or figurative ones), they could create huge technological breakthroughs that would profoundly affect the world. After all, the Internet is the result of a US government research and development effort. So, of course, are weather satellites, GPS, and nuclear power plants. Relatively small portions of the Federal budget devoted to research and development have resulted in some incredible technology.
Of course, logical arguments sometimes fall on deaf ears. Even though such research and development funding makes a great deal of sense, it still may not get passed. So what happens then?
The good news is that even if the Trump Administration has its way and guts research and development related to climate change and clean energy, there are still ways to get lots of high quality research and development done. It just might have to get done a different way.
One alternative way is to get funding from major US foundations and endowments. For example, nine US universities have a combined endowment of over $ 215 billion. Then there are the Gates, Ford, and Getty Foundations, which collectively have over $ 60 billion. Interestingly, included in the list of the 20 largest endowments/foundations is the National Rural Utilities Cooperative. With nearly $ 20 billion, this is the sixth largest endowment/foundation in the country. Do you think rural utilities have an interest in climate change and renewables research? Absolutely!
If climate change is such a pressing problem – and in my mind, it definitely is – why can't we somehow get these twenty largest endowments collectively to create an endowment of $ 20 billion for climate change and renewable energy research? They could take that $ 20 billion and distribute $ 1 billion/year without invading principal. That $ 1 billion could more than fund the Energy Innovation Hubs and the Joint Center for Energy Storage Research. It would be an amount far larger than the Federal government has proposed spending, even during the Obama Administration. Now these endowments and foundations might be reticent to fund lots of basic research, but there's still plenty of need for applied research, especially the kind that could result in products and services to deal with the problem.
Please understand, I think the Federal budget should still include a bunch of funding for this type of research, but why not get a bunch from these endowments, too? Not only that, but if the Trump Administration somehow succeeds in reducing R&D for things such as climate change, why not turn to these major endowments as an alternative?
In fact, they should be considering these types of investments irrespective of what the Federal government does. That's because such funding, as suggested above, if properly spent, should produce a body of highly useful research that could become the basis for a lot of new products and services. These could then be licensed to for-profit enterprises. Most every one of these major endowments allocates money – often 5 to 10% of the endowment – to what are called "alternative investments". Research and development in alternative energy and climate change could become highly remunerative for these endowments. If these endowments collectively have over $ 200 billion, let's get them to put a significant chunk into R&D for climate change?
Even if they don't allocate a significant portion for basic research, their investment advisors should consider allocating a portion of the endowment to investments in alternative energy, much as entities such as Breakthrough Energy Ventures has done.
Which gets back to the idea of putting your money where your mouth is. You can't help but hear the message that there's a huge potential climate disaster looming. If you sincerely believe that, why wouldn't you want to put your money where your mouth is? The billionaires behind Breakthrough Energy Ventures, to their credit, are doing that. How about all these major endowments?
There are other sources of funding for alternative energy research and development. They need to be tapped, too.
No doubt, how one spends money speaks much more loudly than one's words and good intentions. By the budget it has produced, the Trump Administration has shown that it doesn't think much of climate change and alternative energy. Too bad for all of us. However, as I've noted here, Congress can still do something about this. Moreover, even if Congress does not, or somehow cannot, there are other potential sources.
There's a funding problem here, but also a huge new opportunity. Let's hope that funding sources other than the Federal government see the potential and act accordingly
Sometimes the solutions to critical problems are as seemingly small and insignificant as the nail in a horse's shoe. It just takes the right entrepreneur to identify the need and develop the right nail.
Sometimes the secret to success and failure is something as small and seemingly insignificant as the nail in a horse's shoe. It's been argued that King Richard III and his army were defeated in 1485 at the Battle of Bosworth because of a faulty horseshoe nail. That defeat had significant future consequences. One writer said,
"Amazing when you reflect on it. Without this victory for the Tudors, the whole of British history could have been different. No Henry VIII and the divorce laws, no Royal Navy, no Church of England, no Union with Scotland - all of these things perhaps turned on a horseshoe nail."
When successful entrepreneurs are asked, "what was the secret of your success?", one common answer they give is, "I saw something that everyone else either didn't think was important, or else they just missed." Sometimes that means finding the right nail for the horse's shoe. That's one of the reasons I think entrepreneurs are far more important than politicians in solving the greenhouse gas emission crisis we face. In this post I profile three companies with emerging technologies, exploiting an opportunity that most everyone else has missed. Each is it's own type of horseshoe nail. Each solution could play an important role in helping us solve the greenhouse gas problem.
Besides the fact that the three companies are all trying to solve an aspect of the climate change problem, they all have received investments from Breakthrough Energy Ventures. In recent posts I've profiled other companies that have received funding from Breakthrough, an investment fund that includes business superstars such as Bill Gates, Jeff Bezos of Amazon, and former New York Mayor Michael Bloomberg.
The first company profiled this week is named KoBold Metals. KoBold is attacking its own version of the nail in the horse's shoe: finding more cobalt. What does cobalt have to do with the nails in horse's shoes?
Cobalt, you may recall from chemistry class, is element 27 on the Periodic Table, first discovered by George Brandt in 1735. Cobalt is used in all kinds of applications including strengthening and improving the performance of cutting tools and dies. You'll find it in jet engines and gas turbine generators. It's used in all kinds of electroplating applications because of its appearance, hardness, and resistance to oxidation. Long before such high technology applications, cobalt was used for centuries to produce brilliant and permanent blue colors in porcelain, glass, pottery, tiles and enamels.
Why, then, would something with such broad applications be considered a form of "horseshoe nail"? The reason is because of batteries. Cobalt, along with lithium, is a key ingredient in battery storage, particularly the type used in electric vehicles. Electric vehicles of all sorts are a critical part of moving from a fossil fuel based economy, but all that incredible technology powering electric vehicles depends upon some cobalt. Unfortunately, a shortage is on the horizon.
Enter Kobold Metals. The company isn't just another mining venture. Instead, Kobold wants to employ Big Data and statistical modeling techniques to make it easier to obtain the cobalt we'll need for all those electric vehicles. Besides mere access, the company wants to increase "ethical sources of supply". You've heard of "blood diamonds"? There's a parallel with cobalt.
Malta, the second company in the Breakthrough Energy Ventures portfolio profiled in this post, is solving a different, but equally important, problem related to the delivery of renewable energy. The problem is the difficulty of storing electrical energy. Every electric utility that's ever existed has faced the problem of variation in demand. After all, the need for electricity varies by time of day and time of year. The traditional approach used by utilities is to have excess capacity in the form of power plants that are used only on a part time basis. Sometimes a plant will remain largely idle except for a few hours each day. It's a very inefficient solution.
Renewable energy adds an additional dimension to this problem. After all, the sun never shines at night, and oftentimes the wind doesn't blow. Even hydropower is variable. The problem already exists on a pretty significant scale in California, where 30% of solar power can't be used when it's generated.
The electric vehicles using the cobalt described earlier solve this problem using batteries. How about creating giant scale batteries to store renewable energy? That's what Malta is trying to do: create a giant scale storage system for the excess electric generated by renewables, to be used when it is needed.
Malta is using a tried and true strategy employed by entrepreneurs and inventors everywhere. Rather than build something entirely new, the company is trying to re-purpose tools and technologies used in other applications. As reported on the company's website: "The Malta system is made up largely of conventional components and abundant raw materials – steel, air, salt, and commodity liquids. The technology capitalizes on existing manufacturing and construction ecosystems in the power and oil and gas industries, making timelines to market impact short and low-risk while keeping costs low."
Malta's system works as follows. Excess electrical energy is gathered, then used to drive a heat pump. The heat pump converts electrical energy into thermal energy. The thermal energy is then stored in molten salt. When electricity is needed, the thermal energy in the molten salt is converted back into electrical energy and sent onto the electrical grid. As such, rather than store electricity in a typical battery, it's stored in molten salt. Malta's owners and investors believe this technology could become a key to making renewable energy the bedrock of the electric grid. In a sense, Malta's molten salts are like Kobold's cobalt – a horseshoe nail - overlooked in the big picture, but essential to success.
Motif, the third company in the Breakthrough Energy Ventures portfolio profiled here, solves another key problem that's often overlooked. While we tend to pay lots of attention to carbon dioxide that spews out of the stacks of coal-fired electric plants and automobile exhaust pipes, we tend to overlook all of the greenhouse gases that are a byproduct of our diets.
You're already very familiar with a certain annoying byproduct of human digestion. Try as you might, you can't get rid of it. What you likely haven't thought of is that livestock have the very same problem, even though so far as I know, it isn't a social embarrassment for livestock. In the greater scheme of things, for an individual cow it's simultaneously both as insignificant and significant as the nail is in the horse's shoe.
But here's where it gets significant. According to the UN's Food and Agricultural Organization, up to 18% of greenhouse gases come from livestock. By comparison, in the USA alone, 27% of total human greenhouse gas emissions come from electric plants. Lots of attention is focused on closing coal plants in particular. However, while we're focused on eliminating all these coal fired plants – some thing I think we should be – we're largely overlooking the fact that those coal emissions are being replaced by the emissions of huge numbers of livestock around the world.
In the USA, livestock generate about 16.5 metric tons of greenhouse gas/person/year while in the rest of the world, it's about 5 metric tons. As the rest of the world becomes increasingly wealthy, the demand for protein in the diet increases, thus mandating huge increases in livestock. It's not unreasonable to project that while we get rid of all the carbon dioxide from coal plants, we'll replace it with methane from you know what. What's really bad about that is that methane is a far more potent greenhouse gas than carbon dioxide, so we may be worse off!
I don't know about you, but I don't have any plans to reduce, much less eliminate, protein from my diet; and I prefer proteins in the form of meat, not beans. Most everyone I know feels the same. So we've all got an emerging livestock "problem". Enter Motif, which is developing a way to provide us the protein we need and crave without increasing the need for livestock.
Motif's solution is to produce some of that protein through fermentation. Fermentation? You can't be serious!
Serious they are, and it appears they've got a solution. The proteins being created through the fermentation process will end up in food that increasingly tastes just like the steak you know and love. Pretty amazing what food chemistry can accomplish!
No, connoisseurs of fine beef can still tell that these look alike meat products aren't the real thing, but it's getting increasingly difficult to tell the difference. Not only that, if you've never had much of the real thing, as lots of people in the developing world never have, you may never know the difference.
The goal isn't to get rid of the kind of steaks you'll get at Ruth's Chris Steakhouse, one any of its worthy competitors, it's to limit the need to add huge amounts of livestock around the world to meet the growing demand for protein.
This demonstrates a key problem with the general strategy to solve the greenhouse gas problem. There's lots of attention placed on curbing emissions in the USA, Europe, Japan, and China, but the real need is to find a way to prevent the growth of greenhouse gases in the rest of the world. The strategy Motif is taking addresses this problem, by providing a way to get lots of tasty protein for the hungy masses, but without all of the problems that go along with lots of livestock.
Will Kobold Metals, Malta, and Motif succeed? It's still an open question. The point to make, however, is that each represents a fundamentally better strategy in dealing with the global greenhouse gas problem than governmental solutions, because in each case an entrepreneur saw something that no government bureaucrat likely ever will. The best way to solve the problem is to create conditions where entrepreneurs can find those "horseshoe nails", create solutions that will both get rid of greenhouse gases, and make lots of money. Governments can't do these sorts of things; but even if they can, they tend to produce highly inefficient, ineffective solutions.
Cheer them all on. After all, in the not too distant future, you may recharge your electric-powered automobile overnight at supercheap electric rates made possible because your local power company generates electricity from renewables, then stores power using the Malta grid-scale energy system. KoBold has helped assure there's plenty of cobalt to make your car's battery store power like a champ. On your way to work you stop for breakfast at your favorite eatery. You'll enjoy something delicious, and you'll swear that it's really nice beef, even though it's really produced by Motif's fermentation process.
Even better, you and millions of others will breathe air that's free of all the excess carbon dioxide and other greenhouse gases we've been emitting for years. Take another bite and enjoy!
A Riddle Involving Tim Finchem, Hootie Johnson, and Donald Trump. Hint: it's about golf, but a lot more, too.
Here's a little riddle for you: what do William "Hootie" Johnson, Tim Finchem, and President Donald Trump have in common besides a love of golf?
You're certainly familiar with the US President, but are certainly forgiven if you don't recall Finchem and Johnson, so let me re-introduce them to you.
Tim Finchem is a lawyer who was the head of the Professional Golfers Association from 1994 to 2016. By all accounts I've seen, he did a very good job leading the organization. The one "asterisk" in an otherwise distinguished career involved a professional golfer named Casey Martin. About 20 years ago, Martin qualified to play on the Pro Tour. Nothing particularly noteworthy about that except that Martin has a serious disability – a birth defect called Klippel-Trenaunway Syndrome in his right leg - that makes it extremely difficult for him to walk. He plays outstanding golf, it's just that he needs a cart to get around 18 holes.
Finchem, in his role as PGA Commissioner, said Martin couldn't play on the tour, ostensibly because he couldn't walk the course like every other player. Finchem said, "First, The Tour should always have its own rules and regulations. Second, walking is an integral part of the game and shouldn't be lost." Needless to say, Finchem and the PGA Tour suffered withering criticism for its decision.
William "Hootie" Johnson likewise had a distinguished career. Like Finchem, he is best known for leading one of golf's greatest institutions. Johnson served as chairman of the Augusta National Golf Club in Augusta Georgia for many years. In case you're not familiar with it, Augusta National is the home of The Masters, one of the four most important tournaments in all of golf.
Since its founding in the 1930's by golf legend Bobby Jones, Augusta National has been one of the world's premier golf clubs. People throughout the world are forever beating down its doors to join the club. However, one could be a gazillionaire, and/or be highly recognized jut about anywhere else, but if not a male, ineligible to be a member of the Augusta National Golf Club.
In the early 2000's a woman named Martha Burk decided it was time to end the policy of "no females", so Burk sued Augusta National. By coincidence, as a child Martha Burk supposedly also went by the nickname "Hootie", so it became a case of "Hootie" versus "Hootie", even though it was not a familial dispute. Johnson defended Augusta National's policy against admitting women partly on the same grounds Finchem did with respect to Casey Martin: a private club/organization should be able to set its own rules. Johnson said, "Our membership is single gender just as many other organizations and clubs all across America. These would include junior Leagues, sororities, fraternities, Boy Scouts, Girl Scouts, and countless others. And we all have a moral and legal right to organize our clubs the way we wish."
You probably have also heard that President Trump loves golf. I don't know how good a golfer he is, but he certainly owns some beautiful golf courses.
So if it isn't just a love of golf, what then is the answer to the riddle? What else exactly do Tim Finchem, "Hootie" Johnson, and Donald Trump have in common? Not one, not two, not three, but four things: 1) being factually correct in their positions; 2) but in that correctness, being very small-minded; 3) over-focusing on their respective "bases", and 4) needing to re-frame the issue at hand to take advantage of a far greater opportunity, if only they could see it. Let me explain my thinking.
Part 1 of the Riddle's Answer: Being factually correct
Finchem, Johnson, and Trump were/are all correct about the rules/laws. In the case of both Finchem and Johnson, private organizations can and should be able to set their own rules. Finchem was right in pointing out that the PGA Tour had a hallowed rule saying that pro golfers need to walk the course, so if Casey Martin didn't walk, he was dis-qualified. Donald Trump is correct in pointing out that the government can and must set rules about who can enter and remain in the USA.
Part 2 of the Riddle's Answer: Being very small-minded, saying, "You're Not Welcome"
So the three are/were all factually correct in their positions. The problem is, each of them was/is being very small-minded. By not providing an accommodation to Casey Martin, and insisting that Martin walk the course like everyone else, Finchem sent a loud message to the world, one that wasn't very well received.
"Hootie" Johnson sent the very same message.
Donald Trump is doing the very same thing.
"You're not Welcome".
So why do I say that "You're Not Welcome" is a small-minded way to think? In the case of "Hootie" Johnson, it's pretty clear. After all, 51% of the population is female. As a leader in the world of golf, did he really want to send a message that half of the potential customers for golf are unwelcome? I doubt he really wanted to do that, but that's what he did. Think about how many bags of golf clubs, balls, and rounds of golf weren't purchased because half of the world was effectively told, you're not welcome?
Tim Finchem's "you're not welcome" to Casey Martin said in effect, the golf world doesn't care about those who are disabled. We're not making accommodations. If you're in public relations, imagine trying to spin that one? While the number of people who are disabled is certainly less than half the population, the number is not insignificant. Again, an awful lot of golf clubs, golf balls, and rounds of golf that might never have been purchased because of that.
Which brings us to Donald Trump. In effect, the Trump Administration has put out a "You're Not Welcome" to a lot of people seeking asylum from an awful situation in Central America. You recall those famous words of Emma Lazarus inscribed on a plaque at the foot of the Statue of Liberty:
"Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"
Is there now an asterisk by those words, one that says, "maybe, maybe not"?
In all three cases, by focusing so much on the "rules", each has created a "You're Not Welcome" message with unintended consequences.
Part 3 of the Riddle's Answer: Over-focusing on Your "Base"
In order to be effective, every leader needs to have a base of support. The problem is that if the leader over-focuses on that base, he/she may miss something really important.
Tim Finchem and Hootie Johnson both over-focused on their respective "bases". These were the people who felt the issue was about protecting the right of private organizations to set their own membership rules and, by the way, keep the rules the way they'd always been. For the PGA, it was that you just had to walk the golf course, and for Augusta National, it was that you had to be a male.
Donald Trump has had his version of the very same thing. He deserves credit for looking out of the interests of his "base". But leaders sometimes need to see beyond the perceived narrow interests of a "base". That's why we call them leaders. Unfortunately, like Finchem and Hootie Johnson, President Trump has over-focused on the needs/interests of the "base" and missed something important, which leads to the part four of the riddle's answer.
Part 4 of the Riddle's Answer: Needing to re-frame the issue in order to take advantage of an historic opportunity
By over-focusing on the perceived needs of the "base", each of these three has created unintended consequences out of his position. Finchem and Johnson created very negative perceptions of golf. Trump is giving the world the impression that the USA is now small minded, inward looking, and unwelcoming, even when it's pretty clear that he would be very happy to welcome immigrants to the USA who are of European ancestry, Christian, and well-educated (and, I guess, especially if they are Norwegian).
There is a way out for each of the three, and the answer is to "reframe the problem". Finchem and Johnson, I believe, should have asked the following question: how could we accommodate a new reality in golf (women and the disabled) while still being true to our traditions? Rather than fighting in the courts, and the court of public opinion, The PGA Tour could have embraced Casey Martin with open arms. After all, how Martin played a round a golf, not how he got around the golf course, is what really matters. Augusta National could have done the same with women. In fact, to the credit of the leaders of Augusta National, they've now done that. Not only that, they've now even held the very first golf event involving only women in the club's history.
Likewise, I believe the solution for Donald Trump is to reframe the immigration debate. The best place to start on that is to get a bi-partisan group in Congress to write and sponsor an immigration bill, then let Congress craft the legislation. That was actually done in 2013, before Trump became President. A so-called Gang of Eight, including both Democrats and Republicans, introduced a piece of legislation. The Senate actually passed the bill, garnering 68 votes out of 100, including 14 Republicans. President Obama would have signed it, IF the Republican-controlled House of Representatives had acted on the measure. Unfortunately, it never saw the light of day.
I'm not saying that that particular piece of legislation needs to be revived. What I'm saying is that some piece of legislation should, and it should be done on a bi-partisan basis. After all, the laws of the land are written by Congress, not be Presidential decree. There's no other way to get past the entrenched positions today on the issue. Re-frame the issue. The best way to do that is to demand that Democrats and Republicans create a new bi-partisan "Gang of Eight" that includes members of both the Senate AND House. In the meantime, each side should stop blaming the other.
The new "Gang of Eight" should begin by re-framing the issue. A simple way to think of this is to change the mindset from "Yes, but …" to "Yes, and …" Finchem, Johnson, and Trump have all engaged in "Yes, but …" thinking: they've based their arguments on a correct reading of rules and laws, but failed to think through the implications. Instead, they should consider "Yes, and …": yes, the rules and laws say one thing, but how can we incorporate a bigger, re-framed vision?
Let me share an example of an organization I'm connected with that has successfully gone through this process. The organization is Rotary International.
Founded in 1905 in Chicago, Rotary is the world's largest organization of business, professional and civic leaders. It has more than 1.2 million members and operates in nearly every country in the world. In the middle 1980's, Rotary began the effort to eradicate polio from the world. Since then, Rotary has been joined by the World Health Organization, Unicef, the Centers for Disease Control, and the Bill and Melinda Gates Foundation in the effort. The disease has nearly been eradicated.
From its founding in 1905 until the mid-1980's, Rotary was like the Augusta National Golf Club – a strictly male only institution. The US Supreme Court brought the organization kicking and screaming to admit women, much as the courts brought the PGA Tour kicking and screaming to accept Casey Martin.
The average Rotarian today will tell you, it was the best thing that ever happened to the organization. Rotary, and everyone in the world served by the organization, has been immensely enriched by the addition of women. It only happened because the organization went through its own reframing.
Casey Martin successfully sued the PGA Tour under the Americans With Disabilities Act and played on the Pro Tour for a few years. Later, he went on to become the head coach of the University of Oregon's men's golf team. Martha Burk and her allies finally prevailed, and Augusta National admitted its first women members in 2012 and, as noted earlier, the club has now hosted a women's golf event.
The outcome of the immigration debate in the USA? A riddle all its own. How can we welcome foreigners, even if they're not European, and not very wealthy, and not necessarily Christian, and do it according to the rule of law? There's an answer to the riddle, but only accessible if the key players would stop the blame game and name-calling game, take time to reframe the debate, and envision a future far better than one that rests solely on a narrow reading of the rules.
The best way to solve the climate change problem is what I'm calling the Shark Tank solution. Here are profiles of more companies pursuing this strategy.
Lots of people seem to think that if we just pass the right laws and regulations we can solve the climate change problem. If we're willing to give up our 21st century lifestyle, and all the conveniences that go with that, maybe so.
I don't know about you, but I don't want to do that. If you think very long about it, you probably don't want to either.
We do need to solve the problem of greenhouse gases, but if laws and regulations won't do it, what will?
As I have said before, the answer is what you might call "The Shark Tank Solution", named after the very popular TV show. The good news is, lots of very smart people are investing huge amounts of time and money to create the new technology we'll need. In my last post I profiled several such companies that are backed by Breakthrough Energy Ventures, a fund created by Bill Gates, Jeff Bezos, and a number of other highly successful technology entrepreneurs.
This week I'd like to profile three more companies in the Breakthrough portfolio. Each is pursuing a very different strategy.
It would be wonderful if there were some type of "magic bullet" solution to the problem of burning fossil fuels. A potential one of these solutions is being developed by Commonwealth Fusion Systems, the first company profiled in this post.
Nuclear energy can be generated in one of two ways. The traditional approach is called fission, where atoms are split apart to release energy. The nuclear power plant operated by your local utility, as well as hydrogen bombs, both operate based upon fissive splitting of atoms. Some people think we should have lots more fission-based nuclear power plants because they do produce lots of clean energy. They do produce lots of clean energy. The only problem is that fission-based nuclear power plants are incredibly expensive build, they generate lots of extremely hard to handle nuclear waste, and the waste can occasionally be used to build nuclear bombs. Other than that, splitting atoms is a great solution!
Alternatively, physicists tell us huge amounts of energy could be generated by a fusion reaction. All we have to do is look at our own Sun as Exhibit A for nuclear fusion. Instead of splitting atoms apart, in a fusion reactor atoms are fused together, resulting in a potentially huge release of energy. Scientists use a device called a tokamak, a donut-shaped container that has a vacuum, hot plasma, and a giant magnet. Tokamaks were first created by the Russians in the 1940's and 1950's.
The idea is to get the magnet in the tokamak to cause atoms in the hot plasma to fuse together. It takes a lot of energy to operate today's tokamaks. Right now, it still takes more energy to set up the reaction than is yielded by the reaction, making fusion impractical.
To get the tokamak to generate more energy than it uses, many researchers are looking for ways to increase the effectiveness of the magnets. Several years ago, researchers at the National High Magnetic Field Lab at Florida State University in Tallahassee made a magnet more effective by using what's called rare earth barium copper oxide (REBCO).
Commonwealth Fusion Systems is trying to improve upon the REBCO technology to create a tokamak that generates more energy than it uses. If it succeeds, the heart of the typical electric generation plant could change from a boiler to a tokamak. In theory, a fusion power system could generate huge amounts of energy at low cost without either nuclear waste, greenhouse gas emissions, or the risk of terrorists stealing material to create a nuclear weapon.
Commonwealth Fusion's quest for economic fusion power may be in vain, and fusion energy may remain elusive for many years, yet there's an immediate need to generate more clean energy. At present, the best ways to generate clean, renewable energy are solar, wind, and hydropower. There's a fourth way that doesn't get very much attention, unless you happen to live in a place such as Iceland. That fourth way is geothermal energy.
At the moment the US has about 3.7 gigawatts of geothermal energy, representing about 0.4% of total usage in the country. Experts say that the US has the potential to increase geothermal up to about 10%, and there's lots of potential for geothermal energy in other parts of the world. While that won't solve all of our clean energy problems, it could be an important component in a clean energy portfolio, both in the US and in foreign countries.
One company that wants to create the necessary technology to grow geothermal is called Fervo Energy, another company in the Breakthrough Energy Ventures portfolio.
So just what do you need to do to make geothermal a more attractive alternative? Fervo's team believes there should be a two part strategy. The first part is to expand production at existing geothermal sites in the US, then implement technology for new sites that presently aren't economic. The new technology Fervo is betting on is called mixed mechanism stimulation (MMS).
Fervo is led by Tim Latimer, an oil and gas drilling engineer from Texas, and Jack Norbeck, a PhD in geothermal engineering from Stanford. They're using a tried and true innovation strategy: bring ideas from another field and adapt them to a problem. In this case, Latimer and Norbeck believe they can take technology created for oil and gas fracking and apply it to geothermal. At first glance, that makes lots of sense. After all, the idea that powered oil and gas fracking was to go back and employ new drilling techniques to increase the yield from existing oil and gas reservoirs. The fracking strategy has utterly transformed the oil and gas business. Oil and gas fields long ago abandoned have been made economic again based upon the adoption of fracking technology.
Why not apply fracking techniques to increase geothermal yields, thus making uneconomic fields economic? Latimer and Norbeck are betting that mixed mechanism stimulation will do just that. The dream is to utilize mixed mechanism stimulation to make existing geothermal sites more valuable, as well as make previously uneconomic site worth utilizing.
Fusion power may still remain a dream, but clean renewable power from solar, wind, hydro and geothermal continue to grow. The dream, of course, is to eliminate all fossil fuel vehicles and electric power generation. Technology is now being developed to accomplish that, but there remains an important problem: how do you "load level" all this renewable power? After all, solar, wind, hydro, and geothermal all depend upon Nature. Unfortunately, sometimes the sun doesn't shine, the wind doesn't blow, the river dries up, and the geothermal is inconsistent.
The solution is some form of battery storage. Unfortunately, despite lots of new technology from companies such as Tesla, existing battery storage technology probably won't be adequate to meet future needs. Enter Form Energy, another company in Breakthrough Energy's portfolio.
Form Energy seeks nothing less than to reinvent battery storage. The company wants to create what's called a bi-directional power plant. Such a plant could store energy for fairly long periods of time, then distribute that power when needed. Such bi-directional plants would replace the power plants utilities presently have to handle peak load power requirements.
Form Energy is another example of a company taking technology developed at a university research lab and attempting to commercialize it. In this case, it's technology originally developed at the Massachusetts Institute of Technology by Professor Yet-Ming Chiang. Also on Form's team are Mateo Jaramillo, a key player in helping Tesla develop its battery storage technology, as well as Ted Wiley, Marco Ferrara, and Billy Woodford.
Form Energy's technology is interesting, but there's something else notable about the company. Usually when angel investors and venture capitalists put money in a development stage company such as Form, the company is relatively close to commercializing a technology. That isn't the case with Form. In fact, the company may not have a practical technology ready to deploy for at least a decade. Can you imagine Kevin O'Leary from Shark Tank saying that he'll invest money in a company, but not expect to get a possible payout for more than a decade? No way! That kind of timetable normally gets venture investors headed for the exit, but not in the the case of Form Energy. Investors in the company are definitely playing a long game. The moniker "patient capital" is truly well deserved here. Of course, the company in fact may never succeed in developing its bi-directional power plant.
One other very interesting thing about Form Energy is one of its "patient capital investors": Saudi Aramco, the world's largest oil company. Many will wonder, why is a company that is entirely built upon oil and gas interested in a technology that could replace fossil fuels?
In the long run, this is what's called a cannibalization strategy. In the short run, it doesn't seem to make sense, but in the long run it does. After all, Saudi Aramco drives the economy of Saudi Arabia. If today's worldwide oil and gas economy is replaced by renewables, the country will start to look the way it did 100 years ago at the time of T.E. Lawrence. Given the possibility of such an unappealing future, it actually makes lots of sense for big oil and gas companies to invest in technologies that could replace their current business. In fact, lots of companies like Saudi Aramco are making such investments.
Like many start up companies, Commonwealth Fusion, Fervo, and Form may all fail, ending up as mere footnotes in business history. However, other companies, and possibly other technologies, will be successful. They'll create the technologies that will make it ever more valuable to generate and store clean electric power. As I've said many times before, laws and regulations won't solve the greenhouse gas problem. New technology, properly deployed, will. We definitely need a Shark Tank style solution.
The highly popular TV show Shark Tank might provide useful insights on how to address the climate change problem
Turn on your television and watch a bunch of billionaires evaluate start up business ideas? Are you crazy?
I'm sure that's the reaction of a lot of TV executives when they were first pitched the idea for the reality TV show Shark Tank®.
Somebody really made a mistake! Contrary to conventional wisdom, Shark Tank®, now in its tenth season, has proven to be wildly popular with a large segment of TV viewers. It offers insight into how sophisticated investors evaluate business ideas that have moved beyond what's called the "friends and family funding" stage, where the company founder gets investment capital from her parents, or Uncle Louie, or her former boss and mentor. All of a sudden, ordinary people are getting a feel for "pre-money valuations", market segments, "scaling a business", and all the other things investors have to consider.
The investors on Shark Tank® ask all kinds of questions, but there is one type of question they never ask: what are the politics of the company founder? That's because they're interested in whether they can make money on the investment, not the political views of the company founder.
That same principle applies to another class of start up businesses. In this case, I'm talking about companies being started to develop technology to solve the problem of greenhouse gas emissions. There are a bunch of companies like that, and lots of sophisticated angel investors and venture capitalists are looking at them closely, just as Kevin O'Leary, Mark Cuban, and the other "Sharks" do on Shark Tank®.
Most angel investors and venture capitalists don't just make one investment. Instead, they try to assemble a portfolio of such investments. The Shark Tank® investors are each doing the same thing. To be successful, you normally need to make at least 15 to 25 different investments. Investors interested in Shark Tank® style investments in clean energy are doing the very same thing.
One such fund is called Breakthrough Energy Ventures. Breakthrough Energy doesn't have Kevin O'Leary or Mark Cuban, but it does have an all star list of investors, including Bill Gates, Jeff Bezos of Amazon, Marc Benioff of Salesforce.com, and John Doerr, the legendary venture capitalist from Kleiner, Perkins. Breakthrough has assembled a portfolio of 14 investments in emerging companies. Most likely, the fund will expand to include other companies with breakthrough technologies.
While the Shark Tank® investors look at businesses of all sorts, Breakthrough says it only wants to invest in companies that are developing solutions that could have a very large impact on greenhouse gas emissions. To be a candidate for investment, a company must have a technology with the potential to reduce at least one half gigaton of greenhouse gas emissions per year, meaning at least 500,000,000 pounds/year. To put that in perspective, total emissions of greenhouse gases each year worldwide are about 44 gigatons. In other words, to be considered for investment, a prospective company must convince Breakthrough that it could reduce 1.1% of worldwide greenhouse gases emissions in a given year! Of course, the prospective candidate also must show scientific feasibility for the technology, as well as a plan for scaling it.
The other thing that Breakthrough wants is technologies that cover areas not already being addressed, something the Shark Tank investors look for, too.
As mentioned above, Breakthrough Energy Ventures has made 14 investments. Let's take a look at two of those companies: Boston Metal and Carbon Cure. I'll profile some of the other companies in future posts. When it comes to greenhouse gases, most attention goes to emissions from coal fired electricity plants, or from the exhaust of your automobile. Boston Metal and Carbon Cure are focused on less obvious, but still very important, aspects of greenhouse gas emissions.
When you think of steel production, places like Pittsburgh, Birmingham, and Gary, Indiana come to mind – classic steel towns. Boston, Massachusetts doesn't normally come up in the conversation, but it may in the future. That's because Boston Metal, which is based in Massachusetts, has developed some amazing technology that could have a major impact in reducing greenhouse gas emissions from the steelmaking process.
During 2017 world steel production totaled 1,691 million tons. To produce a ton of steel, an average of 1.83 tons of CO2 are emitted into the air, about 3.1 million tons in total, representing about 7% to 9% of worldwide greenhouse gas emissions. Boston Metal has developed a technology that can produce steel with no CO2 emissions. The technology reportedly can also be used to produce rare earths – materials that are used in a wide variety of technology products – without using fluorides. Fluorides represent about two percent of worldwide greenhouse gases.
Boston Metal is a classic example of how innovation comes from outside an industry.
The company's key technology is called Molten Oxide Electrolysis. (MOE). The process is summarized in the following equation: Fe2O3 + electricity -> 2Fe + 3/2O2 . The MOE process produces steel without throwing off carbon dioxide as a byproduct.
Instead of being developed by any of the world's major steel producers, it came out of the research labs of the Massachusetts Institute of Technology (MIT). The MOE process was developed at MIT by Professor Antoine Allanore and is described in an article in Nature magazine. Allanore's technology was spun out into the newly formed Boston Metals.
Developing a revolutionary technology is one thing, but scaling it up is something quite different. To help with that, Boston Metal received additional funding from the Defense Logistics Agency of the US Department of Defense, as well as funding from the Department of Energy and the National Science Foundation.
Breakthrough Energy Ventures has now invested in the company to help it scale up the technology and commercialize it in a way that will be highly competitive with current steelmaking processes. Assuming it can do that, steel production around the world will be done without greenhouse gas emissions. Additionally, Boston Metal will provide a terrific financial return to its owners.
The second company in the Breakthrough Energy Ventures portfolio to profile is called Carbon Cure. As with Boston Metal, it represents a case of new technology being developed outside of the industry, in this case, from outside the cement industry. The company captures CO2 emitted at a process plant. That CO2 is then trucked to a cement plant where it is injected into a cement mix. When the CO2 is injected into a cement mix, it creates CaCO3, a mineral. Converting the waste CO2 gas into CaCO3 offers two benefits:
Carbon Cure has developed applications for ready mix, concrete masonry, and precast.
Innovative technologies often require significant capital expenditures to implement. The beauty of the Carbon Cure technology is that it can be retrofitted into existing cement plants, reportedly in one day and without any capital expenditures. Assuming that's in fact the case, it should permit very rapid adoption of the technology.
Carbon Cure wasn't developed by anyone in the cement industry. It came from a fellow named Rob Niven. Back in 2007 Rob was a recent graduate of McGill University in Montreal with a Masters degree in engineering. He developed the basic Carbon Cure technology.
Carbon Cure estimates that its technology, if adopted around the world, could reduce greenhouse gases by up the 15%! If even half way true, that could have a hugely positive impact. The company is one of ten finalists in the NRG Cosia X Prize competition. The winner of this will receive $ 20 million. Carbon Cure has also been cited as one of the top technologies by the Global CO2 Initiative.
Both Boston Metal and Carbon Cure could help significantly reduce greenhouse gas emissions worldwide. There, of course, is no assurance of this, just as the Shark Tank investors have no assurance about their deals. After all, many companies with outstanding technology fail to scale and become the successes envisioned by their founders. That's where the connection with Breakthrough Energy Ventures could help. Venture capitalists and angel investors don't simply provide capital to the companies in which they invest. You'll notice that the "Shark Tank"® sharks often tout how they could help the entrepreneur grow the business. They can provide managerial and technical resources, too. With the all star investor list that Breakthrough Energy Ventures has, both Boston Metal and Carbon Cure should be able to attract highly competent people.
These two companies, as well as the overall Breakthrough Energy Ventures portfolio, demonstrate two very important things often overlooked in the greenhouse gas debate. First, the key to solving the problem is not governmental regulation and taxation, the great fear of conservatives. If these companies succeed, it won't be because of the government. The only way the government plays a role is to the extent that it funds research, as it has done with Boston Metal. The very best role that government can play in helping the solve the greenhouse gas problem is by funding research and development.
Second, these companies show great financial potential, and an opportunity for their investors to reap huge rewards. Climate change skeptics love investments that reap huge rewards just as such as anyone else. The wisdom is exactly same as it is for companies seeking investments on Shark Tank®: the way to get their attention is by showing economic opportunity. Show the investors how you can make them a lot of money by solving a problem.
Will berating Kevin O'Leary, Mark Cuban, or any of the other Shark Tank investors get the company founder funded? I don't think so! Yet somehow the average person who believes climate change is a huge problem – and I include myself in that group – seems to think that if we yell loud enough, and berate climate change skeptics enough, we'll somehow shame them into changing their minds. Do you think Kevin O'Leary or Mark Cuban will put money in your company if you try to shame them?
I don't think so!
What will get the Shark Tank® investors to invest? Show them a realistic way to solve the problem, scale the business, and make the investors a lot of money. If the company founder on Shark Tank® is presenting a way to clean up the environment, the very same principle applies. Focus, on the economic potential of removing greenhouse gases from the atmosphere.
While the typical Shark Tank® entrepreneur is extremely unlikely to be developing the kind of technology that would appeal to Breakthrough Energy Ventures, there are still others out there who are. Fostering that, creating an environment that will produce the next Boston Metal, Carbon Cure, or other investment in Breakthrough Energy Ventures portfolio, is potentially the very best way both to get climate skeptics "on board", and to create the products that really will take care of greenhouse gases.
The idea of a carbon tax, largely given up for dead, seems to be coming back to life. Here are some thoughts on how to make it more effective.
It's amazing how sometimes an idea you're certain is never going to go anywhere, like the mythical phoenix, it suddenly rises from the ashes! That seems to be what is happening with the idea of imposing a carbon tax to deal with the problem of greenhouse-gas induced climate change.
Several years ago, even very strong supporters of such carbon taxes said there was no way one could be implemented. To borrow another metaphor, the idea was even described as "the third rail of politics", referring to what happens when someone touches the third rail on a subway line: electrocution and instant death. For politicians, just as trying to reduce Social Security is the political equivalent of "touching that third rail", so the idea of imposing a carbon tax would be the same.
Until it isn't. Things have changed. The phoenix is suddenly rising, and a carbon tax may now be a real possibility!
My reason for writing about this is to propose an idea that could make any carbon tax Congress passes more effective. My proposal: if we're going to impose a carbon tax, we should give carbon polluters a choice on how to pay the tax. Here's the choice:
Here's a simple example. Oil company X sells gasoline at retail that generates 1,000 tons of carbon dioxide. If the carbon tax is $ 50/ton, then company X has a $ 50,000 tax obligation. It could pay the $ 50,000 directly to the government. Alternatively, it could invest $ 50,000 in research to reduce the emission of carbon dioxide, or it could purchase $ 50,000 worth of carbon recycling from a company such as Carbon Engineering. The latter two investments each would generate a $ 50,000 carbon tax credit. The net result in each alternative is that the company X would pay $ 50,000.
The "carbon polluter" is going to be a business whose product caused
carbon dioxide or other greenhouse gas to be emitted into the atmosphere. If one of the carbon tax proposals is passed into law, every enterprise that adds greenhouse gases into the atmosphere wilI have to pay the tax. Much of the focus now is on what will happen to the money. The great fear of Republicans, and many others, is that the tax will simply be used to create more Big Government. To avoid that, plans such as the one advocated by former US Secretaries of State George Shultz and James Baker provide that all of the money is returned to citizens on a pro-rata basis. Such a solution would truly be "revenue-neutral". I think that's a great idea!
The other great challenge is to make sure the tax doesn't create a lot of economic disruption. To avoid that, major economists have suggested that any carbon tax start off at a low level, then gradually increase until the emissions goal is achieved. Starting at a low level should prevent economic disruption. Several plans under consideration do start with carbon taxes set in the $ 10 to $ 20/ton of CO2 range. The problem is how high to increase the taxes. The Baker-Shultz proposal envisions a relatively low top end – about $ 65/ton - whereas another plan, introduced by Representative Ted Deutch of Florida, called the Energy Innovation and Carbon Dividend Act, proposes a top tax of about $ 115/ton, a far higher number.
A $ 115/ton tax scares a lot of people, even if all of the tax money is sent back to consumers in the form of a dividend, like the Baker-Shultz proposal. No doubt, the revenue raised by such a tax would be tempting to divert to some other purpose. The Republicans have good reason to be concerned, even if they fully believe in the benefit of such a carbon tax (and many don't). No matter what level the carbon tax would be, it would generate billions and billions of dollars. With the US government presently running a trillion dollar deficit, that money will look awfully tempting!
Economists tell us that if we impose the carbon tax, it should spur innovation and substitution. The carbon tax will make fossil fuels just that much more expensive, so people will begin to "substitute" alternatives (think electric vehicles for transport and renewable energy for electricity), and investments will be made to look for new technology. After all, if the price of gas at the pump goes up 50 cents because of the carbon tax, people will think a lot more about buying hybrids or all-electric vehicles. Purchases of gas guzzlers will decrease, and the car that pulls up next to you will more likely be a Tesla or other all-electric.
A carbon tax is merely a means to an end: less greenhouse gas emitting fuels. There are only two broad ways to reduce greenhouse gases: either switch fuels or figure a way to "recycle" the CO2 we dump into the air.
Actually, there is another way – mandates by government – but a regulatory strategy tends to be very inefficient. Not only that, it's extremely unlikely to happen because of conservative opposition. Governmental regulators tend to be pretty lousy at making technology decisions anyway. Imagine what the device on which you're reading this had been mandated by some governmental agency. Pretty likely, it wouldn't be anywhere near as good as the one you presently have.
Thus, we're most likely to solve the greenhouse gas problem only by getting better technology – the kind that makes it cheaper to use renewable technology instead of fossil fuels, or by figuring out a way to recycle all that excess CO2 out of the atmosphere. The carbon tax only does that indirectly, and over the long run. The problem is that it may take us too long to do that, even if the carbon tax gets as high as $ 115/ton. To be effective, the carbon tax needs to spur technological change and/or encourage carbon recycling. Is there a more direct way to do those things, yet still do them in an economically sound way?
My idea does that in two ways. First, take a portion of the carbon tax and invest it directly in research to improve technology associated with climate change. The money could be collected by the government, then directed into appropriate research. Instead of that, why not give the carbon polluter a choice of paying a given sum either to the government, in the form of the carbon tax, or invest in climate change technology? The carbon polluter should be indifferent in terms of the dollar amount, but could benefit by directing some of the tax into research. Those research dollars could create the next big revolution in solar panel technology or battery storage, for example.
The other choice to give the carbon polluter is to direct a portion of the tax to purchase "carbon recycling". One of the emerging solutions to the climate problem is the removal of CO2 directly from the atmosphere, sometimes referred to as "negative emissions". The technology to do this is emerging. One company making headlines is called Carbon Engineering. The company, based in Canada, says it is nearly ready to build a plant capable of removing same amount of CO2 from the atmosphere as 40 million trees! It's gotten some major investment already from a number of very prominent investors.
A tree can remove anywhere from 13 to 48 pounds of carbon dioxide from the atmosphere each year. Assuming an average of those two numbers – about 30 pounds/year – then the proposed Carbon Engineering plant could remove 600,000 tons/year. One of the other companies developing a negative emissions product is called Climeworks.
Like any new business, Carbon Engineering has the problem not only of building the plant, they've got to get paying customers. If carbon polluters are permitted to redirect at least part of their carbon tax obligation to purchase the output of the Carbon Engineering plant, or competitors, then there could be a direct spur to the carbon recycling industry. It would have the intended effect of the tax – getting a substitute technology in place. The more interest there is in purchasing the product of "carbon recyclers", the more likely it is that this nascent industry will develop some strong companies. Of course, the government could invest money in negative emissions technology, but governments don't usually do a very good job of picking winners. Instead, the better solution is to let the marketplace decide. The best way to do that is to give CO2 polluters the opportunity to pick the winners.
Why would we want to give "carbon polluters" the choice of either paying the carbon tax or "investing" the tax money either in research or in carbon recycling? In the case of research, the carbon polluters may be in the best position to know what types of research could help their industry. As an example, why not let electric utilities invest in research to improve battery storage technology? Improving battery storage makes it easier for utilities to adopt renewable technology, for example. One of the great concerns electric utilities have had about renewables is maintaining stability in the power supply. Better battery storage will definitely help. The companies that end up paying the carbon tax are really in the best position to know what types of research could be most helpful to their respective industries.
The same is true for carbon recycling. Carbon polluters will likely look to the companies with the best technology to recycle each polluter's waste stream. After all, they've got a vested interest in seeing that carbon is successfully recycled for their waste products. The alternative is more regulation. A great example of this relates to coal. While lots of people would love to see the coal industry disappear, at least with respect to electric generation, that's unlikely to happen for a very long time, if ever. Carbon dioxide from coal burning will continue for a very long time, exacerbating the greenhouse gas problem. However, if effective carbon recycling becomes a reality, companies could continue to burn coal but with dramatically reduced carbon dioxide pollution. Anyone burning coal will want to direct carbon tax money into research to find a solution.
The carbon tax will result in ever higher prices for energy products that contain greenhouse gases. This will make alternative, non-CO2 emitting energy just that much more attractive. The higher the carbon taxes, the greater the incentive to switch. However, if all of the carbon tax is returned to consumers as a dividend, the necessary research into new technology, as well as the development of carbon recycling, could remain limited.
So how would this proposal work in practice? I envision the following. First, the new law would specify each year how much carbon polluters would pay in tax per ton of greenhouse gas emitted. Under my plan, carbon polluters could go ahead and pay their tax. Alternatively, they could invest in climate change research and/or purchase the "output" from negative emissions companies like Carbon Engineering. They would then claim a carbon tax credit for these investments. The net effect would be that all, or a portion, of their carbon tax payments would go to the intended targets of research or emissions recycling. The rest would go to the government, presumably to be remitted as dividends back to the public.
Even though some of the political calculus has changed, no politician is going to touch any third rail. For a number of reasons, the latest carbon tax proposals may have some real potential because they envision returning the carbon tax funds to the public. While that's good, the proposals neither directly encourage the essential research and development to create the necessary technology to solve the problem nor encourage the creation of a carbon recycling industry. The proposal outlined above will directly address those problems. Again, not a panacea for solving the problem, but excellent steps in the right direction.
Students around the world are exhorting their elders to do something about climate change. Have they got it right? Should we be listening more? Or have they identified the right problem, but the wrong solution?