[#22] Putting "Save the Planet" into your job description

Most people understand the catastrophic implications of climate risk. Many want to do something about it. Some ask how to jump into climate work - like at ArcTern Ventures : invest in cutting edge climate-tech! My reply: where you sit is likely as good a spot as any to get something done. Climate-tech is a shiny pixel in a very large picture that distracts from other kinds of innovation, across many disciplines, that substantially move the needle on emissions. You’re already on the climate team, you just don’t know it yet.

Next-generation nuclear! Aviation fuel from captured CO2! Solid-state batteries! New catalysts to capture carbon from the air! For decades, the idea we’ll be rescued by some new technology underwrote each kick of the climate can down the road. For some it’s explicit. Climate denialists, like the Fraser Institute, hedge an uninformed insouciance with begrudging approval to throw pennies at basic R&D. For others, it’s implied. Silicon Valley’s techno-optimistic exhortations of a painless transition to unlimited green growth are well-meaning, but off the mark.

I invest in climate tech. Of course I believe that work important: absent entrepreneurial creativity of bold start-ups to challenge the status quo, energy incumbents slumber. The new technological pathways to a zero-carbon future that we and our peers help build are necessary - but not near sufficient. Imagine the perfect climate magic bullet – cheap, safe cold fusion in a glass of water, say. Barriers to rapid and large-scale deployment remain, no matter how cool the magic bean. A decade before it’s de-risked for project finance. Decades more pass before it displaces existing energy assets, from coal and gas plants (with physical, contracted and political grid connections) to the millions of gas boilers in homes.

Technology is a tiny piece of a complex social puzzle. Recent wins on climate – solar energy, EVs, batteries, off-shore wind – were largely delivered thanks to financial, industrial and regulatory innovation. Think Chinese state-backed solar production first goosed by European policy-driven demand, Tesla Mega-factories supplied by Panasonic’s decades-long investment and marine engineering firms battling salt water waves in the North Sea. Now add Wall Street’s financialization of commodified energy systems. These scale of these wins were triggered by innovations that accelerate adoption of largely existent technologies.

Innovation comes in many forms: regulatory, financial, legal, political - even dialectic novelty as we think of new ways to convince others to act on an existential threat they feel is unrelated to their own day jobs. Job descriptions don’t generally have ‘save the planet’ in them. But most could.

My good friend Dan Rames worked for years to de-carbon CAPREIT, Inc. 's real estate portfolio. The dominos started to fall with three innovations: KROME , a small Montreal-based engineering firm, brought novel engineering and data techniques to the calcified HVAC industry; Dan convinced his CFO and board energy costs were of strategic (vs tactical) importance so as to access longer term capital (vs operating) budgets, and; financial analysts began to argue low-carbon/energy buildings were better long term assets. Sure, there are shiny new heat pumps. And smarter building controls. But absent fresh engineering techniques to lower costs, creative arguments to access capital budgets and novel approaches to reward the behaviour in capital markets - profitable efficiency projects languish. Dan’s a climate hawk, and he’s nowhere near ArcTern.

The last place you’d expect to find ‘save the planet’ is in a banker’s job description. Surely, these hard-hearted pragmatic souls are exempt from fluffy virtue signalling. Not quite. Thanks to innovations in the arcane details of financial reporting, banks now have a carbon balance sheet. All those buildings they underwrite with mortgages? To the extent the building is backed by debt, those emissions sit with the bank.

Now layer on a simple financial tool: building owners with a credible net-zero plan get a slightly lower mortgage rate. Which coincides with reduced risk from increased asset value. And by the way, Krome’s data analysis shows when buildings are up for asset renewal, so do the work when it’s cheap. If those sang-froid bankers need to pass on the contingent liability of a lowered rate, policy support can put it on the books of the Canada Growth Fund. Together, these innovations could – over a single decade – de-carbon every large building in the country.

But tech … ok, Morgan Solar Inc. invented super-cool building-integrated solar blinds and optics. Dozens of patents, developed over a decade managing the path of photons in thin materials. But only when a bright spark at Cisco decided to own the Power-over-Ethernet market and needed an energy source could it quickly scale across office towers. Then someone at Brookfield figured out how to aggregate benefits – thermal management of the building envelope, aesthetics, in-situ energy production – across stakeholders. Morgan’s invention is one step in a long chain of innovation to deliver meaningful emissions reductions.

One of the hardest sectors for new technology to penetrate is infrastructure. But when innovation daisy-chains across sectors some amazing stuff happens. Venture firms tend to shy away from ‘big-tech’ for three related reasons: scaleup risk, bankability and high capex. ArcTern has long had a view on how to mitigate these risks, we call it ‘systemic innovation’. Well-understood materials or components, from long-standing supply chains, are put together in new ways to produce a novel result. Innovation exists only at the systems, or aggregate, level. Demonstration of a core techno-economic thesis is possible with the modest levels of capital available to a venture firm.

Then it’s the turn of the EPC[1], corporate and financial sectors to innovate. EPC firms can generally predict the performance of a larger system if components are well understood and have long operating histories. By turning their attention to systemic innovations, those same insights substantially de-risk a new industry by establishing credible operating performance bounds. Insurance companies can then back operating performance of a new project. These layers of assurance enable utilities and customers to sign offtake agreements, which in turn lowers barriers to bankability. While financial partners back the first commercial project, that upstart energy company builds a substantial pipeline of opportunities in parallel.

None of this is as easy as it sounds. But it’s happening.

Anyone who reads anything I write knows about Hydrostor . Their advanced compressed air energy storage (A-CAES) systems are massive GW-scale batteries built from air, rock, and water[2]. Each part of that system – mined cavern, compressors, expanders, heat exchangers - are some of the world’s best-understood techniques and equipment. Hydrostor’s partners - EPC, insurance, utility and financial – each innovated their way to the dance. It’s taken time. But they’ve all done it. Most important: that collective innovation enables Hydrostor to scale deployment by orders of magnitude in less than a decade. Our pipeline is already measured in the tens of gigawatts.

Woodland Biofuels Inc. is next as they build the world’s first deeply carbon-negative renewable natural gas (rNG) and hydrogen facility in Louisiana. Like Hydrostor, their partners develop a chain of mutually supportive innovation: sustainable forestry practices, offtake agreements that value carbon negative molecular attributes, a network of CO2 pipes and Class VI wells, insurance wrap and a creative capital stack. Woodland invented their process more than fifteen years ago. It takes a network of innovation to move from invention to commercial operations.

Saving the planet doesn’t seem to be in anyone’s job description. But look more closely and it’s in them all. Including yours!

[1]: Engineering, Procurement and Construction - big engineering firms that build big stuff.

[2]: For those who don’t know how it works: Mine a deep cavern. Fill it with water. To store energy, compress ambient air to push the water to a surface pond. The remaining water column keeps the cavern air at constant pressure (hydrostatically compensated). To get energy back, re-fill the cavern with water. The escaping air spins a turbine. Extract, store and replace heat (adiabatic) to make it efficient.