Carbon Product Innovation October 5, 2017 - C O N F I D E N T I A L -
INTRODUCTION Slowing the rate of new CO 2 emissions is no longer sufficient to combat climate change; the state of climate change demands a further reduction in atmospheric CO 2 levels using market-based solutions 2 - C O N F I D E N T I A L -
ATMOSPHERIC CARBON IS STILL INCREASING Despite the continued focus on reducing incremental emissions, the collective “industrial legacy” of carbon continues to be ignored Atmospheric CO 2 Levels Industrial Legacy Today: 404 PPM 400 350 “INDUSTRIAL LEGACY” CO 2 PPM (Parts Per Million) CO 2 104 PPM “Pre-Industrial” Level ∼ 800 GT 300 + 1 PPM / Year ∼ 7 GT / Year 250 -800 -700 -600 -500 -400 -300 -200 -100 0 NET IMBALANCE CO 2 Thousands of Years Before Today Release +468 GT / Year Human impact, microbial respiration, plant respiration Intake - 461 GT / Year Plants / biomass , Oceans, Soil / land 3 - C O N F I D E N T I A L -
CREATING SEVERE LONG-TERM IMPACTS Without significant CO 2 reduction, severe negative impacts from rising average temperatures and increasing climate volatility are guaranteed Temp Δ r elative to +0 ° C +1 ° C +2 ° C +3 ° C +4 ° C +5 ° C +6 ° C pre-industrial levels Global GDP -$20T -$44T -$72T Falling crop yields in many areas, particularly developing regions Food Water Small glaciers disappear 1.0-3.2B people impacted with increased water stress Coast Increased damage from storms $50-100B US property under water -30% coastal wetlands Ecosystems Extensive damage to coral reefs 20-30% species face extinction Global extinctions Extreme Rising intensity of storms, forest fires, droughts, flooding, heatwaves Weather Events 4 - C O N F I D E N T I A L -
OPTIONS TO COMBAT CLIMATE CHANGE Carbon-to-Value technology is the only economically viable option within the necessary timeframe at the required scale “Adapt” Reduce Emissions Remove CO 2 from Atmosphere Electricity Renewable Energy Land Geo- Technology (30%) Management Engineering Transportation Electric Vehicles (26%) Carbon-to- Value Industry Energy Efficiency, CCS (21%) Severe Marginal, Long Long Unpredictable Necessary 5 - C O N F I D E N T I A L -
SOLUTION: CONVERT CO 2 INTO PRODUCTS CAPTURE CONVERT COMMERCIALIZE CO 2 CO 2 CO 2 Direct from the Into “Carbon Negative” Price Competitive Air Materials Products 6 - C O N F I D E N T I A L -
HOW IT WORKS DIRECT AIR CAPTURE ELECTROLYSIS NATURAL GAS RENEWABLE ENERGY OR CO 2 + (H 2 or CH 4 ) + e - CARBON CONCRETE TIRES STEEL INDUSTRIAL FUELS ELECTRONICS FIBER CHEMICALS 7 - C O N F I D E N T I A L -
CARBON FEEDS LARGE GLOBAL MARKETS Carbon is an important feedstock into materials ($650B), chemicals ($500B) and fuels ($2T), representing 18.8 GT / year sequestration potential Sequestration Carbon Uses Potential Very Long Steel Materials Concrete $650B Fillers Sequestration Duration Coatings - 18.8 GT / Year Plastics Chemicals CO₂ Industrial Chemicals $500B Fertilizers Carbonates Diesel Fuels Ethanol $2,000B Methanol Short 8 - C O N F I D E N T I A L -
EXAMPLE: SOLID CARBON MATERIALS For example, solid carbon materials markets are global, massive and leveraged to urbanization trends Carbon Direct CO 2 Solid Carbon Materials End Markets Market Size 1 Impact 2 Tire Filler $19.0 B .07 GT Carbon Black Other Fillers & Reinforcements $6.0 B .02 GT Coatings, Inks $2.0 B .01 GT Metal Replacement $250.0 B 7.7 GT Nanotubes, fibers, graphene, structured Concrete Replacement $243.0 B 11.0 GT materials Carbon Fiber $2.6 B .003 GT Resin Reinforcement $16.0 B .05 GT Electronics, Energy Storage >$80.0 B .006 GT Biotech, Optics, Fabric, Other <.01 GT $600-700 B 18.8 GT 1. Based on incumbent/end product market price, weight and loading ratio of carbon in product 2. Direct sequestration in end product based on carbon loading plus effect of avoidance of incumbent product manufacturing 9 - C O N F I D E N T I A L -
“CARBON NEGATIVE” INFLECTION POINT Renewable electricity sources <$40/MWh (solar is <$30/MWh in many US markets) enables materials to be both “carbon negative” and price competitive Unsubsidized Cost of Energy Comparison (US) $80 GAS COAL $70 SOLAR UTILITY-SCALE SOLAR $60 $50 $/MWh $40 $30 $20 $10 $0 2015 2020 2025 2030 2035 2040 Carbon Negative Carbon Neutral Source: EIA, BNEF, Lazard Estimates 10 - C O N F I D E N T I A L -
TECHNOLOGY IS VIABLE Several carbon-to-value technologies are available and ready to scale Type Stage Technology & Development Management Team, Capital Need Capture Seed / CO₂ from ambient air Strong mgmt. team, Bill Gates is lead backer • • Growth Demonstration unit operating Needs $20M anchor for $75M project round • • Capture Seed / CO₂ from ambient air, flue gas Mgmt. team lacks commercial & dev’t capability • • Growth Lower cost than CEI at scale $20M invested, Edgar Bronfman is lead backer • • Capture Seed / CO₂ from ambient air, distributed application Based in Zurich • • Growth Finalists in Virgin Earth Challenge Funded by Swiss Institute of Technology • • Conversion Growth / Low cost net-negative CO 2 technology Strong technical team, lacks mgmt. and • • Project Converts CO 2 to carbon black, graphene, commercial/financial capability • nanotubes Exxon considering licensing partnership • Application Growth / Cellular graphene, diversified applications Strong technical and management team • • Project incl. ultra-high strength composites Needs $10M in growth capital to scale • Pilot manufacturing plant operating manufacturing, develop stage II applications • Application Seed / Solid Carbon to Batteries Strong technical team, weak mgmt. team • • Growth 5x performance of Tesla battery Needs $3M to complete commercial prototype of • • 10 kWh battery, $5M to scale Application Growth / Solid carbon to diversified applications Strong technical and management team • • Project (electronics, carbon black, wearables) Needs $15M in growth capital to scale platform • 11 - C O N F I D E N T I A L -
THE OPPORTUNITY TO BE FIRST To date, less than $100M has been invested in the emerging carbon-to-value sector Technology Investment Emissions Source Zero Carbon Products ‘00–17 Power Plants Hydro, Solar / Wind + Batteries $35B+ Transportation Electric Vehicles $12B+ “Industry” Materials, Chemicals, Fuels <$100M Source: CB Insights 12 - C O N F I D E N T I A L -
INDUSTRY “INTEGRATOR” IS NEEDED Siloed carbon-to-value technology development must be transformed into a cohesive, well-capitalized commercial industry ACTIVITIES PEOPLE Project Development Private equity investors (Energy/renewables) Technology Integration Engineers & business development executives Regulatory Evaluation Policy experts Application Analysis Industry analysts Technology Investment Venture capital investors (Early-stage) 13 - C O N F I D E N T I A L -
PRIOR EXPERIENCE: SOLAR RESERVE Problem / Opportunity ► Large US-based industrial took control of CSP technology via acquisition of rocket engine business ► $100M of R&D from DoE, major US utility and several other federal agencies ► In order to move technology into commercial phase, a commercial scale facility needed to be developed, financed and constructed ► Senior management of industrial (1) was unwilling to take necessary balance sheet risk (project guarantees), (2) lacked the in-house project development skills (site development and contracting) and (3) did not understand project finance ► As a result, the technology languished inside the subsidiary for 8 years Summary McDermott / Green Role Vertical: Renewable Power ► Negotiated worldwide, exclusive license for 20 years (plus 10 year extension) to use and Technology: Concentrated solar thermal sell molten salt storage equipment manufactured by UTC with molten salt storage ► Spun-out engineering team and other team members Stage: Development ► Located and hired additional senior management to lead development and financing of first project Locations: Worldwide ► Raised additional $140M of corporate and project equity Scale: 100 – 400 MW (reference Investment Status / Results plant) Date of Investment: January 2008 ► Negotiated worldwide, exclusive license for 20 years (plus 10 years) ► Formed Solar Reserve, LLC to transfer technology outside of UTC Capital Committed/ $53 million / $53 million ► Funded first $8M Invested: ► 110MW Crescent Dunes ($1.2 billion cost) operational Ownership %: 36% (fully diluted) ► SolarReserve is world’s largest CSP company with storage ► Development and operating assets in US, South Africa, Chile, China and AU 14 - C O N F I D E N T I A L -
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