Interview & Dialogue Session:
Scaling Solutions for Industrial Decarbonisation

Interview

Steve Kelly (00:00):

We use a technology that was developed by a Canadian company, Carbon Engineering. And our parent company, Oxy, became an investor in Carbon Engineering and then subsequently acquired it. So it's now an in-house technology. This is a liquid sorbent technology. It's been in development — really, for this is like a 15, 16 year journey—Carbon Engineering was established in 2009.

Steve Kelly (00:39):

They built a pilot plant in 2015, and then an innovation center in 2021. And then in 2022, we took FID on the first commercial scale plant, which is in West Texas. It's called STRATOS, and it's a commercial scale. By commercial scale, I mean 500,000 tonnes a year of CO₂ directly from the atmosphere.

Steve Kelly (01:04):

So this is a big scale up in DAC technology worldwide. Status, we have completed construction on the first phase of this. So we have a central processing facility that is capable of 500,000 tonnes. And we have the front-end part of it has been split into two trains of 250,000 tonnes. And that first train of 250,000 tonnes is going through the commissioning process right now.

Steve Kelly (01:33):

And the reason we split the trains in two was because we knew that there were technological improvements that we could make, but we weren't in time to incorporate into the initial build. So the second stage, the second phase of development that the 250,000 tonnes that's under construction now incorporates those improvements. As an example, there are 30% fewer air contactors.

Steve Kelly (01:58):

And a much-simplified pellet reactor design. And so what the technology is, is it's, as I say, it's a liquid sorbent process. It uses potassium hydroxide circulated through air contactors. And that alkaline potassium hydroxide reacts with the acidic CO₂ in the atmosphere and forms a carbonate. And then we concentrate that, we put it into a calciner, in calcium carbonate form, into a calciner where we heat it up, it decomposes and releases pure CO₂, which we can then compress and inject into geologic formations.

Steve Kelly (02:35):

So that's the process.

Steve Kelly (02:44):

So hard-to-abate sectors—in fact, really all sectors—have decarbonization plans where they're going to address their emission footprint. And there are many, many things that they can and need to do in order to reduce emissions within their operations. But all businesses, all sectors ultimately will have some residual emissions that can't be abated directly.

Steve Kelly (03:09):

Hard-to-abate sectors, that threshold is much higher. There's a much bigger portion of their emissions are going to be too expensive to implement technologies to eliminate those emissions. And that's where Direct Air Capture CDR credits can come in and we remove the CO₂ from the atmosphere for them. And even at today's price point, which is early in development, even at today's price point, it's more cost effective to use CDR credits than the cost of abatement.

Steve Kelly (03:41):

An example of that would be in the aviation sector, which is a really classic hard-to-abate sector, obviously. And so one of the sort of IATA roadmap for decarbonization of aviation includes a combination of things like operational efficiency, better engines, some hydrogen aircraft and then a big wedge for Sustainable Aviation Fuel. And then something like 500 million tonnes of removals to take away the residual emissions.

Steve Kelly (04:13):

So when you think about Sustainable Aviation Fuel—in fact, and there are SAF mandates in place in a number of parts of the world, including the UK—the price point again for these CDR credits is very competitive with typical costs for SAF. So, and then the other thing I would say about how hard-to-abate sectors can incorporate CDR credits into their decarbonization plans is really start at a point that is affordable today at a low level of CDR credits and then build it up gradually over time to the kind of volume that they're going to need at the point in time when they expect to be at net zero.

Steve Kelly (05:04):

Well, it's a really good opportunity to meet people from all across the sectors involved in climate, technology and decarbonization generally. And so this is an event that pulls in people from multiple sectors. So it's good to hear perspectives from all these different parts of the industry and government , people from financial institutions, technology firms and then the suppliers, the climate technology suppliers like ourselves and in other spaces.

Steve Kelly (05:43):

And it's really interesting to hear those other perspectives, so that we can help continue to mature our thinking in the way our technology can be applied to help reach the goals that we all want to get to.

Moderator Introduction

Mark Barton (05:58):

Time for another dialogue. We're keeping them going now. We're focusing on scaling industrial decarbonization with the President of our forum partner 1PointFive, Steve Kelly, the Chief Executive of Mission Possible Partnership, Faustine DeLaSalle, and their moderator, Nancy Gillis, Lead of Innovation and Strategy at Scope 3 Peer Group. Big round of applause.

Nancy Gillis (06:44):

Great. So we've just had a great conversation about AI. We're going to go back to a conversation that we had earlier, and we're going to bring some of these two conversations that we just participated in together. And that is to talk about what is the role of decarbonization, how can we scale it, especially industrial decarbonization, and does AI actually have a role in that scaling of industrial decarbonization question?

Nancy Gillis (07:10):

Now, first off, as it was mentioned, I'm Nancy Gillis. I am a person who's been in the space of decarbonization of supply chains, be it industrial supply chains, most recently, for the majority of my career. And I have focused on that decarbonization in a way that many of you will find is rather unsexy: procurement. This is now where you in the audience go “Woo hoo!

Nancy Gillis (07:40):

Procurement! Oh, yeah!” Okay. But it is increasingly a recognized lever of influence because procurement is actually how we address supply chain, right? It is a choice that we make in who we supply from. It's how we buy from them, what are the terms that we do. And it's really that way of power that we can see decarbonization where scope 3 happen.

Nancy Gillis (08:08):

I've had the honor and privilege of working at a time when decarbonization was still the mandate of C-suite, when everybody said, “we need the C-suite to buy in.” And that was when I led the First Movers Coalition at the World Economic Forum. And we do. We do have C-suite buy in. So I left. Because what did we need next?

Nancy Gillis (08:31):

We started to have to operationalize this. We needed not just one company, right? We needed several companies, and we needed the companies that were across the value chain. And as we've already heard in our conversations today, pulling together representatives of a value chain—that's hard, right? We thought just pulling together companies in one sector. How about the whole value chain?

Nancy Gillis (08:56):

So I went to something called the World Business Council for Sustainable Development, or WBCSD. And here, if you're able to say that acronym three times in rapid order without messing it out, they will send you a t-shirt. Tell them I said so. But what WBCSD does, unique to any other organization, amongst many things, including of course, GHG protocol, PACT for some of you who've been exchanging data on product level amongst your own sector—if you don't know about PACT, you should—what they're known for is radical value chain collaboration, the ability to actually bring the correct people together around the table to resolve the challenges that industrial decarbonization have.

Nancy Gillis (09:47):

But then again, if you heard my introduction, I've left. Why? Because we're now at something that I started this conversation with. We had a unique junction in which it really is coming down to the brass tacks. It's coming down to action. And what that action that we're seeing is necessary is bringing practitioners in the area of scope 3, which is why I now work for the Scope 3 Peer Group practitioners.

Nancy Gillis (10:16):

And notice I say practitioners, not companies, practitioners, both on the side of supply chain procurement and sustainability, because we really need to at minimum have those three functions within an organization working together to start that decarbonization, right? You need to be engaging with your suppliers. That's your sourcing, your supply chain teams. You need to be engaging with them in a way that's contractually relevant.

Nancy Gillis (10:46):

Right. So I need a contract. Who here is an innovator who can take a promise to the bank to get money? Contracts are important. And then of course you need to have the sustainability experts, and increasingly have been siloed, we're now seeing one of the trends where they're coming together. And the Scope 3 Peer Group is the place to do it.

Nancy Gillis (11:07):

So it's been an honor to see the changes that we need to have happen, bringing us to further decarbonization of scope 3 or of our supply chains, and increasingly, our value chains. But we're not where we need to be. So I'm super excited to have two representatives on this panel who will—and I did get some advance notice—one, give some actual good news. Who here needs some decarbonization good news?

Nancy Gillis (11:40):

If that's all you take away, is that this is the one that gave you the good news. And we also have, along with the good news, we have a speaker who's going to talk about that it's really happening. But both that good news and the reality check of it's actually happening is tempered with “but we still need to do more.”

Nancy Gillis (12:00):

And so from that perspective, I'm supposed to now ask you, there's a “slido” that you're supposed to then take a picture of. And if it's been up and it gives you “What do you think are some of the challenges still associated with scaling decarbonization solutions?” Is it the money? Is it that we now live in an inexplicable geopolitical reality?

Nancy Gillis (12:27):

The customers still aren't there yet, so we have built it, but they're not coming? Is it there's just so much going on, there's bigger issues?

Mission Possible Partnership

Nancy Gillis (12:38):

What of these, would you say? And with that, as you're focusing on that, let me first bring in our first speaker, the now—she's under pressure—good news speaker of the day. Faustine, you're coming from Mission Possible Partnership and you've done something comparable in that you've tracked what's necessary to really bring industrial decarbonization, the hard-to-abate sectors, that decarbonization to the forefront.

Nancy Gillis (13:05):

You've got an update for us. So can you talk first about what you've been mapping and then the good news, please?

Faustine Delasalle (13:11):

So the Mission Possible Partnership is an organization that focuses on advancing clean industry across the globe. So we work in sectors that may not be sexy to everyone. Not as sexy as AI. Steel, cement, chemicals, fuels production. And we're trying to get a first wave of commercial scale, clean industrial projects to final investment decision. And we're tracking those projects.

Faustine Delasalle (13:36):

We are tracking the global pipeline, we published last week, the third edition of our global project tracker. And the good news is we have recorded more than 820 projects in that pipeline. So clean industry is no longer a pipe dream. It's no longer just a plan on a page. It's projects we can point to on a map. And that's the fundamental good news of the past few years.

Faustine Delasalle (14:05):

Now, when you look—

Nancy Gillis (14:05):

Can I put this in context? because you first, last year when we talked, you were like, “it's 700.” And everybody was like “hmmm, how are we going to do that?” So you've exceeded.

Faustine Delasalle (14:16):

Now, let me nuance that.

Nancy Gillis (14:19):

I should have just left her with the good news, right?

Faustine Delasalle (14:21):

I’m bearer of good news but not such good news, right? So the good news is that there's plenty of projects in the pipeline. The other good news is that there's close to 70 of those plants that are already operating, primarily in the aluminum and sustainable aviation fuel sector. There's also 65 of those plants across a whole range of sectors that have reached final investment decision, are starting to be built and will be operating in the next few years.

Faustine Delasalle (14:45):

But then we still have about 700 clean industrial plants that haven't reached final investment decision yet. So the good news is they exist. They are mature enough that companies are speaking about those publicly, that they've been publicly announced. We can point them on the map. We have initial estimates of the production capacity linked to those projects, the amount of investment linked to those projects, and there's a 1.6 trillion investment opportunity in that pipeline waiting to be financed and unlocked.

Faustine Delasalle (15:18):

But we still need to create the market conditions for those projects to be bankable enough to reach final investment decision and start getting constructed. So that's something we can come back to later. It's how do we make that happen? But the good news is there is that those projects are in the pipeline. Now it's a matter of mobilizing around them.

Nancy Gillis (15:37):

So we still have some good news, still to deliver on that promise. And one of the other good news is not only we've got the pipeline, but we also have an example. If you can talk a little bit about what your organization does, and why you are on the good news side of the equation.

1PointFive

Steve Kelly (15:53):

Thanks, Nancy. Yeah. So 1PointFive is a Direct Air Capture plant developer. So we take, we remove CO₂ directly from the atmosphere to help—particularly hard-to-abate sectors—to decarbonize through dealing with the residual emissions. We use a technology developed by a Canadian company, Carbon Engineering. It's a liquid sorbent technology, and it's been in development

Steve Kelly (16:19):

This is a long story that's been going on for 15, 16 years. They were established in 2009, pilot plant in 2015, pilot Scale Innovation Center 2021. And then in 2022, we took FID on our first commercial scale plant. It's in West Texas. So this is a 500,000 tonne per year Direct Air Capture plant.

Steve Kelly (16:45):

Now that steps up the scale that Direct Air Capture is available at very considerably. It's often thought of as a technology that's a future technology, that it's going to be coming along sometime and in the future, but not something that's available today. But that plant, we began construction in 2022. We've split it into two phases.

Steve Kelly (17:09):

For reasons that I’ll come on to in a second. That first phase of 250,000 tonnes is in commissioning right now and will be commercially operational during the second half of this year. We have a strong pipeline of customers that are procuring CDR credits. So we're 65, 70% sold out for the first five years of operation.

Steve Kelly (17:35):

We have more customers in the pipeline. There's good policy support in the US, with the 45Q tax credit that helps considerably. And we've got plans to expand. We have a mega site in South Texas where we intend to develop 30 million tonnes a year of CO₂ Direct Air Capture on a site where we also have the rights to sequester the CO₂ in the underlying aquifer with a capacity of up to three gigatonnes of CO₂.

Steve Kelly (18:13):

So the availability of these credits is here, it’s now. Those customers that are procuring those credits represent a very broad range of industries and sectors. Some of the ones that you expect: Amazon, Microsoft, etc.

Nancy Gillis (18:33):

Deep pockets.

Steve Kelly (18:34):

Deep, deep pocketed organizations—

Nancy Gillis (18:35):

Is that all you have?

Steve Kelly (18:36):

But also, but also we have direct-to-aviation sector. So we have All Nippon Airways, is one of our buyers. British Airways have procured credits through Cur8, and then we also have—Airbus was actually our, they were our first deal that we made. And in fact, when we took FID on the plant, was pretty much the only deal that we had on the table.

Steve Kelly (19:05):

So it was a pretty bold step by our parent company to put the funding into this plant at that stage. We also have some really interesting, sort of product linkage of CDRs. We recently announced a deal with Liverpool Football Club, for example. So they—

Nancy Gillis (19:29):

We need to, we are here in London. Do we get any applause for that?

Steve Kelly (19:36):

Their vision is to, they’re decarbonizing the merchandise that they’re selling to their supporter base. They’ve launched the first product, which is a commemorative shirt for the 2005 Champions League victory. And they disclose everything that they do on that journey to get to the lowest possible carbon footprint for that shirt.

Steve Kelly (19:56):

And then they take care of the residual emissions with CDRs procured from us. And it's actually only, it adds less than a dollar to the cost of the shirt. So it's very doable. It's something that others could be looking at and doing as well.

Nancy Gillis (20:16):

So we have what amounts to two success stories, but we're here because there's recognition that for whatever benefits we're able to celebrate, which we should and remind ourselves to do so, there is still a significant challenge that faces us. And I know that we talked a bit before we came on. Faustina, I’d like to ask, you do have good news.

Financing Decarbonization

Nancy Gillis (20:37):

You do have a pipeline. There is positive to take from that, but there's still considerable challenge. We just did the “slido” that said, you know, what does the audience think? And you'll see that the audience thinks that access to finance is really—is it is it the money? What's the challenge for industrial to really scale that timeline that we need to?

Faustine Delasalle (21:02):

So, I'm a pretty basic girl. The way I'm thinking about it is when there's money to be made, money flows, generally. So if money doesn't flow, it's not a financing issue. It's a bankability issue. And so what we've been doing at MPP is really work through what can improve the bankability of clean industrial projects that today in sectors like steel, cement, if you produce green steel, it's going to be a bit more expensive than steel produced out of fossil fuels today.

Faustine Delasalle (21:38):

So how do you close that gap in a way that actually incentivizes companies, big companies, small companies, incumbents as well as new entrants, to invest in what are major industrial assets with a 30-year lifetime, representing billions in investment? Despite the fact that there's still a green premium. And what we need to do that is to have demand for those clean commodities ready to pay a premium for those clean commodities.

Faustine Delasalle (22:10):

And we've had multiple initiatives developed over the years to mobilize voluntary demand. You've been closely associated to those, and those have been tremendous to underpin the first couple of projects in each sector. But we are hitting a ceiling of that voluntary demand. So we're getting to the point where if we want more clean demand, demand for green steel, demand for sustainable aviation fuels, demand for green maritime fuels, we need regulation to kick in, to create markets through mandates for clean commodities whose cost will come down over time.

Faustine Delasalle (22:50):

But the cost will only come down over time if we scale them up. So to break through that chicken and egg issue, regulation is really critical—regulation that creates demands. And we've seen that work in the sustainable aviation fuel space. I mentioned earlier, one of the two sectors where we already have a critical mass of plants operating today is sustainable aviation fuels.

Faustine Delasalle (23:12):

Why? Because we have blending mandates in a number of geographies that have created the demand pool that enables investors to then go ahead with those major investments in SAF plants. So we need these same type of mechanisms across more sectors, like construction, automotive sector, that are big buyers of materials, big buyers of chemicals, big buyers of fuels.

Faustine Delasalle (23:35):

And there's good news. The IMO just set up, or is about to agree on new regulations that would unlock potentially the market for the maritime fuels. So we're getting there but still through too slow process. And it's something that needs to be done on a country-by-country basis. So it's hard, nitty gritty work.

Nancy Gillis (23:56):

So it's—and you're right, I've been active and it's been a pleasure working with Mission Possible Partnership. You've been such leaders. And in fact, I made reference to the First Movers Coalition, that's led by the World Economic Forum, and MPP actually was the genesis for that. And the focus of that program is demand creation.

Nancy Gillis (24:16):

And you're right, that demand creation, the CEOs who come in and say, “I will do this,” many of them have stepped up. And you can understand in today's geopolitical realities that others are still continuing, but may not be stepping up and being so obvious about it. But you're right, we just don't have enough of them coming together quickly enough for where we're at.

Nancy Gillis (24:40):

So we're going to need mandate some and we're going to need to do some policies. But Steve, you've got, you've got clients, you've got sports clubs. I mean, come on, what else does one need? Voluntary is working for you.

Steve Kelly (24:52):

I would just echo, though, what Faustina is saying. Voluntary has helped us get started, and we're very grateful to our client base, who've got us past this first plant. But there's no question that in order to be able to scale this technology, we need to transition to compliance markets. We need that. The level playing field that is created by that for all of those sectors for whom it will be a more costly endeavor to do this.

Steve Kelly (25:20):

It's really important for them that their competitors are also under the same requirements. And so, you know, all of those potential—SAF mandates is a great example of how to do this. And in fact, we've got some ideas around how as well, how to, to link, to bring carbon removals into SAF policy as well, because ultimately, actually to really grow SF to the point where it meets the sort of objectives, is going to need to grow the power-to-liquid sector of SAF.

Steve Kelly (25:57):

And for that you need a sustainable source of carbon. And that's something else that Direct Air Capture can contribute to. So it's in the interests of the SAF industry to grow the removals industry alongside it, and then ETS integration and other mechanisms like that.

Nancy Gillis (26:14):

Well, so you've heard it here. You've got good news. We've got pipeline. We've got some advancement. For those of you who haven't been tracking the global tracker of the Mission Possible Partnership, I strongly advise that you go online and engage in that. I think you've just put your new news out about where those actual facilities are. So you've got specific information. And then, Steve, it was a great conversation to have here, to see some success happening, but to have both of you really drill down on the continuing importance of governments, policy and in particular, regulatory mandates.

Nancy Gillis (26:47):

So good news tempered with what we need governments to do. And with that, I want to thank both of you. I hope you've all enjoyed this conversation. It's been a pleasure to be here with you. Thank you so much.