A Plan B for Air Quality
By Brentan Alexander, Chief Science Officer & Chief Commercial Officer
News broke recently that the U.S. Environmental Protection Agency and Department of Transportation would jointly be moving to revoke the waiver that California has used to set stricter auto emissions than the U.S. government. The only shock was that the action had taken so long to materialize. Long a leader in environmental protection, California put rules and procedures in place to manage air pollution before the Feds caught up with the Clean Air Act of 1970. California was awarded for its foresight: the bill enshrined a pathway for California to maintain continued dominion over its air through a waiver process. The Trump administration's decision to rescind that special position was the least surprising development in the long running feud between Trump and the Golden State. As the news exploded across the newswire and prompted to-be-expected reactions from both sides in the twitterverse, I felt a smirk come across my face... Trump may be claiming victory (possibly prematurely!), but California has the upper hand in this war.
The stricter auto emissions standards currently under attack are just one quiver in use by California and its allies in the fight to reduce carbon emissions. Another tool in the arsenal, the Low Carbon Fuel Standard (LCFS), is proving to be equally powerful and, more importantly, durable. But for all the attention that our national media is heaping on the auto-emissions waiver, few are aware of the LCFS program or the work it is doing to enable a cleaner future.
LCFS is a state-run program enacted in 2006 under Governor Schwarzenegger through AB32 that is administered by the California Air Resources Board. Adopted in 2009 and implemented in 2011, the regulations underpinning LCFS require the producers of refined road-ready fuels to reduce the “carbon intensity” of their fuels, with ratcheting targets that continually require further reductions year-over-year. Using a scientifically-derived and technology-neutral process, the LCFS program awards credits to fuel producers who make liquid fuels that produce less CO2 (or CO2-equivalents) over their lifecycle, as compared to conventional methods. These fuels, which are less carbon intensive, lower the total CO2 emitted by the transportation sector when blended into the fuel stock. Fuel producers can reach their mandated carbon-intensity through new technologies and processes, or by buying LCFS credits from third-parties with more efficient processes in place.
The beauty of the LCFS regime is that it does not pick winners or losers. Unlike the investment and production tax credits that have helped wind and solar run down the cost curve and compete without subsidy, the LCFS program is not technology specific. Any method that produces a cleaner gallon of fuel (so long as it’s sold in California) or that sequesters CO2 is eligible for credits under the program. May the best technological solution win!
Can you make a biofuel from plants or plant wastes? You qualify for credits since a portion of the carbon is non-fossil. Can you pull CO2 out of the air and bury it underground? That process is carbon negative and you qualify for LCFS credits, as well. Did you build a solar farm that will be used to power EVs? Congrats, have some credits. As the carbon-intensity target under LCFS rules gets stricter over time, producers must create even more climate-friendly fuels or buy still more credits to compensate for their conventional fossil products, which increases the demand for cleaner solutions and supports the price of the credit.
So, how is this program working? LCFS is the major driver of revenue for several innovative, first-of-a-kind facilities being built around the United States right now. Without this subsidy, these projects would not be economically viable; as with wind and solar, the LCFS program is helping these technologies get to market, and their success at scale will help reduce prices and further enhance the economics of alternative fuel sources. Meanwhile, investors are stepping up to support these projects, assuming the risk that future LCFS prices will remain stable and attractive. Their confidence is well-founded: generators of LCFS credits today are banking a portion of their credits for future years, betting that future prices will be higher than today and justifying a ‘hold’ approach on the asset. Billions of dollars of credits now sit unused in savings, waiting for a future where their value is even greater. Other regions have taken notice of this success, and proposals to replicate California’s system are gaining traction in the Pacific Northwest and Canada. The demand for credits is expected to grow substantially over the next decade as more states come online with their own programs.
The great irony for the Trump administration, and all those fighting against California’s clean-air waiver, is that if they “succeed” and auto fuel-economy stagnates, the resulting increased demand for liquid fuels will further enhance the value of the LCFS credit. This provides more financial incentive for new technologies and developers to enter the space and reduce the carbon footprint of transportation fuels. Perhaps this is not the shortest route to decarbonizing the transportation sector, but it’s not a bad Plan B. When it comes to the future of carbon, California is playing for keeps.
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No, we’re not running out of Helium
By Brentan Alexander, CSO & COO
I’m often frustrated when reading science coverage in the national press. There are often a number of inaccuracies and misleading narratives that are routinely embedded in the stories that seem to get picked up by a wide variety of outlets. Seeking a catchy headline or narrative, the articles often distort the science and draw erroneous conclusions (which makes me wonder, are all the articles in these papers where I have less insight and background as poorly researched?). The latest piece to draw my ire?
From Forbes: Humanity Is Thoughtlessly Wasting An Essential, Non-Renewable Resource: Helium
Reading the article, you are led to believe a few things: We waste a huge amount of helium every year, that party balloons and other extravagances are the primary culprit, that once lost to the atmosphere the helium is gone forever because *SPACE*, and that we are running out of helium which will shutdown portions of medicine and science.
WELL….NO.
Let’s start from the top. Do we waste helium? This really depends on what one means by ‘wasting’, but in a simple sense, yes…nearly all the helium we use is done in a one-time fashion that is then released to the atmosphere. Balloons are obvious, but use of helium in MRIs and superconducting magnets also allows for the escape of the helium. The article fails to explain WHY we do this though….and to me it’s pretty obvious. Helium is cheap! Capturing and recycling that helium from MRI machines and other uses just doesn’t make financial sense (or hasn’t in the past)…its cheaper to just let it go and go buy more. That balance may be changing, which is, quite simply, economics at work. We waste because we can.
OK you say, but we are still losing vast quantities of helium from balloons! We can’t possibly recycle that. The article notes that filling party balloons is the single most common use of helium, and quickly works to ruin our fun. What the article fails to note is that by volume party balloons are basically a rounding error in overall helium use. No less of an authority then the National Research Council makes this point. Right there in chapter 6 of this report is an investigation of helium uses. Party balloons? They are less than 40 MMscf a year, or less than 2% of usage in the U.S. Balloons aren’t our problem, so keep on partying .
But even that is a bad idea, you say, because that helium, once released, will just escape our earth and end up…in SPACE! This is my favorite part of this story, and why I think it keeps popping up in the popular press (seriously, just google ‘helium shortage’ and you’ll find dozens of articles over the last decade like this Forbes article). It’s just such a good visual, all that wasted helium drifting up, up, and away, never to be heard from again.
I call BS. Let’s run some numbers. First, helium loss from the upper reaches of our atmosphere is a real phenomenon, with the solar wind blowing the stuff away (we lose hydrogen that way too). How much do we lose? About 50g per second. That is less than 3% of our consumption rate (see my math here). So we are adding helium to our atmosphere far faster than it is being lost to space. It’s not being lost forever, it’s just being mixed in to our air. And what to the argument that the increase in helium in our atmosphere will increase the loss to space? Not much to that really…our annual consumption is just 0.00001% of the volume of He in the atmosphere today!
Which gets to the last argument this article makes: we’re running out of Helium. Nope. Take the number above and invert it….in our atmosphere alone we have something like 6–8 million years of supply at current consumption rates. And that ignores all the helium still in the ground.
SO YOU’RE SAYING THERE ISN’T A PROBLEM?
Not quite…we do have periodic helium shortages (there have been 3 in the last 15 years). But this is fundamentally a supply/demand issue (and public policy too…the sale of the U.S. Helium Reserve, which previously was a government program to maintain helium supply, is also messing with the market) that comes back to price. There is plenty of helium in the world: whether you want to build more infrastructure to grab it from more natural gas wells (our current helium source) where it is otherwise released, or whether you want to build a plant to separate it from the air (unlikely to be very competitive against natural gas separation for a very long time) is simply a question of how much you’re willing to pay to get at it.
This indeed has profound impacts on science and medicine. That MRI test may get more expensive, and those superconducting magnets will cost a lot more to cool. And that collection of colorful paw patrol adverts floating over the picnic table at your next family BBQ may cost you a few more bucks as well. But they will all still be filled with helium.
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Bioproducts are Seeing Major Tailwinds in Renewable Tech
By Tom Dickson and Brentan Alexander
Has Silicon Valley forgotten about cleantech after failures in solar, wind and batteries? Not quite! Several new and exciting renewable technologies are coming to market. Read Tom Dickson and Brentan Alexander’s TechCrunch article on Bioproducts re Seeing Major Tailwinds in Renewable Tech. Yes, companies are learning are how to turn trash into cash.
Here’s an excerpt via TechCrunch:
Today, entrepreneurs are approaching the space head-on, and there are dozens of cutting-edge companies coming to market and breaking through with major projects and customers. Companies in the space can be divided between the developers like Fulcrum BioEnergy, Red Rock Biofuels, RES Polyflow and Envia, and the technology providers, such as TCG, TRI, Velocys and many others.
These companies are targeting a variety of waste types, including household garbage (plastics and organics), as well as agricultural waste (like wood) and livestock waste (like manure). Waste is then converted into various products, including synthetic crude oil, natural gas, electricity, refined products (from diesel to high-value waxes) and specialty chemicals.
The Attributes that Define the Increasingly Critical Data-As-A Service Industry. Data is valuable but if it “don’t make dollars it don’t make sense.”
How to Avoid Looking like Theranos when Building Breakthrough Technology
Insurance solution provides performance coverage for the output of Fulcrum's garbage-to-fuels plant
By Dr. Brentan Alexander, Chief Science Officer, New Energy Risk
At New Energy Risk, we see many companies struggle to balance the competing needs of technology development and deployment. As with any industry, it’s a tug-of-war between the commercial imperative of demonstrating that all aspects of a technology are proven and the financial necessity of delivering product and building a revenue stream. By going to market too early, a company is likely to fail to find capital or customers. Going too late means having expended more time and money than necessary, and it’s possible the opportunity may have passed by.
Most companies have vastly different ideas for what they need to demonstrate, from a technology perspective, to reach their market. For hardware and industrial technology companies, there is little room for error because deploying at commercial scale requires raising significant capital to cover the large capex costs associated with the construction of manufacturing, processing, and energy facilities. Companies looking to self-develop projects generally need access to lower cost capital markets, primarily debt markets, to ensure project viability. Startups that sell their hardware need to scale beyond first-adopters and find big buyers with deep pockets. These markets are by definition risk-averse, with strict guidelines to ensure loans don’t go bad and capital expenditures aren’t squandered. So how much validation do new-to-the-world technologies need to convince hyper-skeptical banks and customers to lend or buy?
We’ve seen many entrepreneurs latch on to examples of irrational exuberance: with a good story and slick marketing, willing customers and investors can be found with little to no technology validation. In fact, our experience performing diligence on hundreds of capitally intensive technology companies shows the opposite: a business plan predicated on mythmaking and vaporware is a plan to fail. Technology should never appear to be a black box — financiers and customers do not want to bet on magic, despite the occasional counterexample. Rather, the path to capital involves leveraging technology testing in real-world conditions to demonstrate to others that the science and engineering are thoroughly understood and vetted.
In short: show it works in the real world and don’t fall for the Theranos trap!
Here are some of the most common mistakes in demonstrating a technology that we’ve seen erode the chances of securing financing or closing a sale:
Companies try to jump from the lab to commercial scale
Breakthrough technology companies make a mistake when they do not build pilot demonstration facilities or hardware with similar scale, features, and equipment as their end product. These companies will have a hard time convincing skeptical financiers that what they’re selling is going to work as described. In general, a per-unit scale-up of over 10x for key components of the technology will raise eyebrows and dampen enthusiasm. Exceptions can be made for proven kit from third parties, such as pumps and valving or standard operations like heat exchange. The expected duration of a test campaign is dependent on the technology and expected maintenance cycle: once-through systems or systems with independent unit operations will need less time on test than systems with recirculation loops or highly integrated systems. In general, anything less than a 100-hour test campaign is disqualifying, and more complex systems will need many times that to satisfactory demonstrate system reliability. The longer the anticipated system life or time between overhauls, the longer the test campaign to validate projected life.
Companies don’t test under real-world conditions
We also regularly see companies test their devices or facilities shielded from the real-world conditions that could significantly undercut performance of the technology. Using super-refined, ultra-pure feedstock for a new kind of biomass energy facility does not demonstrate a technology will work on the dirtier and less consistent biomass available for a commercial plant. Validating a predictive algorithm on the very data that was used to train the system, even if only a subset of the validation dataset was used in training, provides little guidance on whether the algorithm will perform on the wide variety of datasets likely to be encountered in the field. Running controlled charge/discharge tests on a battery in a specially conditioned laboratory does not validate that the battery will perform under variable loading conditions in the desert sun.
Controlled testing is useful to validate science, but real-world testing is a requirement to validate an engineered system. Take the kid gloves off, because no customer wants to be a guinea pig!
Companies declare victory too early
At any company, there is a lot of pressure to get a product out the door, into the field, and selling. The biggest believers in a new technology are also generally part of the company. This combination leads many entrepreneurs to optimistic conclusions about the status of their technology progression. In the world of breakthrough technology, this typically ends poorly. Premature declarations that an innovation is commercial-ready inevitably leads to fits and starts and brand damage that hurts long-term growth and threatens overall success. Early production units and field installs will experience unexpected troubles and failures, and companies that fail to message appropriately and do not prepare potential investors, partners, and customers for these growing pains will find their reputation damaged and expertise questioned. Moreover, large potential partners, including EPC contractors like AECOM, technology packagers like Siemens, manufacturers like Pegatron, and strategic partners like BASF, will see through the hype and avoid working with companies that do this in order to maintain their trusted status in the industry. Brand matters.
Companies skip 3rd party verification
Another unforced error in moving from testing to real-world deployment is a failure to utilize a reputable third-party expert, such as an independent engineer (IE) like Fluor, Black and Veatch, or Leidos, to validate technology readiness. Many startups attempt to skip this key step and instead rely solely on their internal work or cut-rate third-party reports from unknown sources to get to market faster, reduce consulting fees, and start generating revenue. When I see this strategy, it is an immediate red flag and dampens my enthusiasm to work with a client company. I have found that companies which lack reputable third-party validation generally are also lacking in key technology development milestones, including a lack of testing data, unreasonable scale-up expectations, poor QA/QC processes, or erroneous capex and opex assumptions. Our partners in industry have reported similar experiences. A company lacking an IE report from a reputable vendor is actually signaling to the market that it is not serious, thorough, or ready for primetime. Worse, a company sharing a poorly written report from a relatively obscure third-party will project a ruinous lack of expertise and know-how.
Trusted reports do cost real dollars, but they more than pay for themselves by cutting initial diligence time with new customers or financiers and validating technology readiness for potential partners through a recognized seal-of-approval. Most companies even learn a thing or two because the IEs have seen many failures and can identify and help mitigate potential faults and problems that could become expensive headaches later.
While it’s hard to determine the exact right time to move from technology development to deployment, avoiding the common pitfalls above will set any company apart from many competitors in the field. Although it may be appealing to take shortcuts around the time and capital needed to properly validate a breakthrough technology, most customers and investors are savvy enough to see through the charade.
After all, nobody is looking to work with the next Theranos.
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Advice for Innovators: Keep it Real
By Brentan Alexander, CSO & COO, New Energy Risk
The latest entry in my series on resolutions for technology innovators: test your tech in the real-world! Having spent a number of years in academic and early-stage R&D, I understand the desire to use highly controlled conditions and parameters when putting together testing programs. When you are working to understand fundamental aspects of your technology to allow for refinements and improvements, it is necessary to inject as few variables as possible in your testing program so that you can reliably link changes in performance to control parameters of interest.
However when moving out of the development stage and in to the commercialization of your new technology, this controlled approach to testing is insufficient. At New Energy Risk, I regularly review testing data from companies and innovators who misunderstand what types of data that I, and by extension the broader debt and growth capital investment market, want to see. You are trying to sell your equipment or build a project; having an understanding of the science underpinning your process is table-stakes. You better have that understanding, or you aren’t even making it through the door. What I (and other capital providers) want to see is that you can demonstrate the engineered system works as advertised.
SHOW ME THAT IT WORKS, NOT HOW IT WORKS
When we first meet, I will assume that the science that underpins your technology is well understood. Showing me the controlled experiments that elucidate the interplay between operating conditions and performance are necessary so I can validate that assumption, but they miss the point of what I’m really after: I want test data that demonstrates the ability of the technology to reliably operate over the full operational window for the expected life of the technology.
Using super-refined, ultra-pure feedstock for a new kind of biomass facility does not demonstrate that a technology will work on the dirtier and less consistent biomass available for a commercial plant. Validating a predictive algorithm on the very data that was used to train the system, even if only a subset of the validation dataset was used in training, provides little guidance on whether the algorithm will perform on the wide variety of datasets likely to be encountered in the field. Running controlled charge/discharge tests on a battery in a specially conditioned laboratory does not validate that the battery will perform under variable loading conditions in the desert sun.
TAKE OFF THE KID-GLOVES
If you’re working to shield your device or equipment from real-world conditions that could significantly undercut performance of the technology, then you probably aren’t ready for commercialization. Take the kid gloves off, because no customer wants to be a guinea pig, and nearly all of them will see a lack of real-world testing data as a lack of readiness and seriousness.
So how do you operate a demonstration test useful to the finance community? Stop trying to control things and let go of the handlebars. Send devices outside, give them to potential clients or partners, and let them control the asset. Is your technology sensitive to feedstock quality? Buy the low quality stuff for an extended test. Does temperature impact efficacy? Send one to the desert and another to Alaska. Vary loads, feedstock parameters, or any other controlling conditions throughout the test, or let nature randomize it for you.
Anything short of this, and you’ll find yourself with customers, partners, or capital providers asking for more validation before starting a relationship.
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