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Biomass

Interview With Peter Reinhardt, CEO & Co-Founder Of Charm, A Carbon Removal Company

Charm recently announced the significant delivery of 5,000 tons of carbon removals, so we spoke to their co-founder.

Charm recently announced the significant delivery of 5,000 tons of carbon removals, so we spoke to their co-founder.

When did you found Charm as a company, and what’s the story behind it, and what was the initial inspiration? 

Peter Reinhardt

There were four co-founders: Shaun, Kelly, Kevin, and myself. My own initial inspiration was trying to purchase offsets for my software company Segment and realizing after our first purchase that the nature-based offsets that we had purchased really weren’t doing anything. 70% was being lost to marketing agencies in the US. The remainder was setting aside some forest in Indonesia, but it seemed pretty clear that there were no protections around the forest next door getting cut down or it burning up in fires that ravage Indonesia, etc. So, the inspiration for me was that, wow, the existing offsets are not really that great, how can we permanently remove carbon from the atmosphere? and looking for a profitable business model to do that.

The four of us set out on that journey in 2018: Shaun Meehan, Kelly Hering, Kevin Meissner and I. We initially were looking at biomass gasification as a really promising pathway, where we would take biomass and convert it into syngas that could be used for chemical plants as a renewable feedstock.

And then almost two years ago, my co-founder Shaun, who’s our Chief Scientist, had two really big breakthroughs. One was that the biomass was much easier to transport if you first converted it into bio-oil at the source. And then the second was that we could pump that bio-oil underground as a form of permanent carbon removal. Things took off from there.

And do you still remember how many tons you tried to buy back then in 2016?

At Segment we tried to purchase about a thousand tons of offsets in 2016.

In a way the founding began in 2018, with a breakthrough in 2020? 

Yes, it started for me with offset purchases in 2016 and then 2017, a year of research, pre-founding, and then starting in 2018, we tried to build some machines, 2019 building more machines, and then at the end of 2019, Shaun had these two huge breakthroughs. Things really accelerated in 2020 as we started building towards bio oil sequestration as a really promising carbon removal pathway.

And if you could go back to the founding, is there anything you would do differently today? Any suggestions to other new carbon or climate tech founders beginning now, or lessons learned? 

I think the biggest realization is that there are actually just very, very, very few people working in this space. And so the distance to the frontier is very short. So, for example, the direct air capture summit hosted by Climeworks was just about a month ago in Zurich, and basically everyone in the carbon removal space was there. Stripe hosted a dinner the night before the conference, and the entire community was present. But the community fit around two dinner tables. It’s just shocking how few companies are working on building hardware to actually remove the carbon from the atmosphere.

And so I think there is this assumption that has taken hold, that fixing climate change is someone else’s problem to actually solve, that we should protest for someone else to fix the problem. In a recent interview Greta Thunberg said something to the effect of, “it’s not my job to build the solution, it’s my job to protest for the solution.” And that political pressure is important, but ultimately we also need people to go and work on the hardware.

People overestimate how many people are working on the hardware, and overestimate how long it takes to get into it. I think people can get to the frontier here very, very quickly, if they put their mind to it.

Very interesting observation. And if you had to explain Charm and the service you offer to our readers, how would you describe it, and who is the target audience for it right now? 

Today we sell carbon removals to companies and individuals. For the most part, people purchase nature-based or traditional offsets. But the latest research out of Berkeley, Stanford, Oxford, and CarbonPlan is that 85% of those offsets are not additional. So, in other words, buying those offsets does nothing. Up to 82% of them suffer from really significant leakage, so even if you do reduce emissions in one place, the emissions still happen somewhere else. For example, you protect this patch of forest here but this other patch gets cut down instead because people still need wood.

Even worse, the permanence of these traditional offsets is only 10 or 20 years. And so, while the price of these traditional offsets appears very low when you buy them, say $20 a ton, that’s not actually the real cost to actually permanently remove that ton of carbon, it’s actually up closer to $1,000 a ton, after you actually account for all the additionality, leakage, and permanence issues.

Of course, everyone thinks that they’ve done their diligence and are buying the few $20 offsets that are high quality, no one thinks they’re buying the duds, but the reality is that most of them, 97% of them are doing nothing.

So what we do is we offer companies a permanent, highly measurable, highly additional, no leakage, carbon removal. We sell these super high quality carbon removal offsets at $600 a ton today, so it looks expensive, but it’s probably actually cheaper in reality. And then we have a cost curve over the long run that should get us down to close to $50 a ton.

And you said the breakthrough for Charm was in having the realization that the oil can be transported and pumped underground a lot more easily. Can you say how much that does in terms of energy needed and price advantage?

If you look at biomass, the cost of biomass on the field is about $15 a ton. But if you buy it at the edge of the field, after it’s been cut, raked, baled, wrapped, and moved to the edge of the field, it’s $65 a ton. And if you try to buy that biomass down the road, it’s a whopping $120 a ton. It’s a huge price difference because most of the cost of the biomass is actually transport and manipulation of the biomass.

The key with our mobile bio-oil fleet approach is that you can eventually do the conversion to a pumpable, dense fluid as close as possible, starting at the field edge and maybe someday actually on the field, which means that you cut out all that transport cost, because the thing that you’re transporting now is five to ten times denser on an energy or carbon basis. So rather than being able to only transport biomass 50 kilometers economically, you can transport it 500 kilometers or 1,000 kilometers economically.

It totally changes the cost structure and the dynamics when you can convert it into a pumpable, easily transportable dense fluid. Hence, a fleet of mobile pyrolyzers.

In the future, would you be able to drive over the field with the pyrolyzer and convert it to bio-oil at the same time?

That’s exactly our goal.

That’s a bit like Command & Conquer harvesters — if you look at Charm now, where do you hope Charm is in three and five years?

In three to five years, hopefully we are massively scaling up our pyrolyzer fleet and starting to really draw down carbon out of the atmosphere. We don’t have projections for exact size then, but there’s a lot of capacity building to do, this is a really big problem. To give a sense of scale, the current emissions problem is about 50 billion tons a year of CO2. The US emits somewhere around 5-6 billion tons a year of that. The United States has about one billion tons a year of biomass, so our potential scale in the United States is about a billion tons a year. That much volume of bio-oil, if it was to be moved through a rail car fleet, would require the entire rail car fleet of the United States, 365 days a year, 24/7 to move enough bio-oil to get to a gigaton a year of impact. The potential scale, but also the necessary scale, is just a lot of hardware in a very, very large fleet. And I hope that we are moving aggressively along that curve in three to five years.

Image courtesy Charm

That sounds like it might be a good time to buy railroad stocks again. 

I don’t know if we’ll actually move things by rail, but yeah I suppose so.

And I think you mentioned that you’d like to achieve a gigaton as quickly as possible. Is that sort of a real milestone or is that not that important?

That’s a real milestone, a gigaton. We’re not anywhere close, you know, we just crossed 5,000 tons removed this past month, so it’s a long, long scaling curve to get there. But that’s a real milestone. For whatever reason, a gigaton a year is kind of the benchmark for a real meaningful impact on carbon removal.

The latest IPCC report this year suggests that we need somewhere between 5 and 20 gigatons a year of carbon removal, depending on how quickly we start reducing our emissions. And at global scale, Charm could potentially satisfy 10 to 20 gigatons of that. But a gigaton a year is a meaningful chunk and that’s why it often gets talked about as a milestone.

How do you think of the balance of investments into reduction and removal? Do you have any opinion on this? 

Reductions are critically important and critically urgent. Reductions will also be cheaper than removals. So we should prioritize reductions first and foremost, I think that is absolutely the right thing to do. But there are areas where it’s hard or expensive or where we just won’t get it done in time, and that is the role that carbon removals can play. But we need a huge focus on reductions and we need to drive that ASAP.

If you weren’t the CEO of Charm, is there anything else you would do? What would you do personally, what would you focus on?

I think there are other huge opportunities in climate and energy to have an impact on decarbonization and driving these results. Other areas that I find really interesting are geothermal energy, fusion energy, I also am an aerospace nerd and really enthusiastic follower of SpaceX and Rocket Lab and so on. So I think asteroid mining is going to be very interesting.

If you look at the cost of Charm, is the key something that is not a secret but that’s very unorthodox, very creative, that not a lot of people think about? Or is it all built into the scale of the solution, where the cost advantages come from?

Most of the cost is dominated by the equipment that does the conversion of biomass to bio-oil. That is by far the dominant cost today. Today our pyrolyzers are built by extremely talented mechanical engineers in San Francisco, by hand. These are like artisanal pyrolyzers. They’ll last for somewhere between 6 and 12 months, probably. And they’re built with venture capital. So we’ve combined the most expensive capital with the most expensive manufacturing costs in the most expensive city, with the shortest possible lifetime. And it’s a v1 design, so it’s just deeply unoptimized from a design perspective.

So, all four of those dimensions can shift dramatically. Shift to proper manufacturing, in a lower cost location, with a reasonable lifetime 10x as long, funded by low-cost debt… all of those effects compound and bring the cost of the pyrolyzer in terms of per ton of CO2 down by an enormous factor. That drives the cost curve.

And do you have an opinion on if you would use all these pyrolyzers for yourself, or also sell some to other people which might be interested in buying them in some form?

We will design, build, own, and operate vertically. We won’t be selling pyrolyzers.

Since you are deep in the topic, what do you think are the most overlooked opportunities or not talked about enough opportunities in clean tech and climate?

I actually think most of them are talked about, but very few people are actually working on them.

Okay, so a lot of talk but working on them could be increased?

People seem to often think that oh, I’m just a journalist or I’m just a software person or I’m just a businessperson. And that identity doesn’t give you agency to build a fusion plant, doesn’t give you agency to go build a geothermal well, doesn’t give you agency to go figure out direct air capture or any of the other kinds of hardware. And as a result, people stop themselves from finding a pathway to work on it. And so you have a lot of people talking about it and not enough people building hardware.

Very true. I have to be counted in the ones that are talking about it.

I’ll give you an example, a very concrete example. We just announced our 5,000 ton carbon removal delivery on Thursday this past week. There is only one other company, and I’m super proud of them, that has delivered, and that’s Climeworks, and that’s amazing. Climeworks has actually delivered carbon out of the atmosphere, to the tune of hundreds of tons, which is amazing. I’m super proud of their work and accomplishments in Iceland. But that’s the entire list of permanent carbon removal deliveries. Two companies.

How many articles have been written about direct air capture – many, many, many – we have to be super proud of Climeworks and I’m certainly super proud of Charm that actual tonnage has actually been delivered. But that should be a little bit of a shock I think, that only two companies have in aggregate delivered a few thousand tons. That is concerning. We need more hard-money carbon removal purchases, we need more government support for all forms of carbon removal, and we need more people working on all kinds of hardware.

And if you could enact some policy in the US or globally, what would it be?

The most important for us – this is a very wonky example – but the two most important changes for Charm are to improve the tech neutrality of the 45Q carbon removal tax credit in the United States. And to bring more tech neutrality to the low carbon fuel standard in California.

Both of these regulations give credit to pumping CO2 underground, which is amazing. Unfortunately, through no-one’s fault, these rules only recognize pumping the molecule CO2 underground, and, quite reasonably, didn’t anticipate that there would be other compounds that embody CO₂ that could be pumped underground, like bio-oil. Or other slurries of solid carbon, etc. So modification to make those two regulations more technology neutral and sort of open them up to other carbon removers, would have a really accelerative impact, I think, on the carbon removal space. And so those are things that we’re actively pushing for.

It would have to allow for the portion of CO2 that’s embodied in the material that’s pumped down?

That’s right, and all of these laws already have the concept of life cycle analysis because if you burn a bunch of energy to capture the CO₂ out of the atmosphere and then pump it underground, you still need to do a life cycle analysis to understand your net CO₂ impact. This concept of a life cycle analysis is necessary everywhere.

Since we are speaking about policy — jobs are always very popular in terms of policy, so do you think this whole opportunity in negative emissions can employ tens of thousands or hundreds of thousands of people?

Yes. So if you look at carbon removal, we need to again remove somewhere around the order of 5 to 20 gigatons per year. Say that the carbon removal industry broadly is able to hit a $50 per ton price point as the industry comes down the cost curve. That means in order to hit the IPCC target there’s going to be a global carbon removal industry on the order of $250B to $1T per year. Which means it’s as big as the oil and gas industry but running in reverse. That is an enormous, enormous employment opportunity and in most cases, it is a lot of the same people who know how to operate wells and know how to operate large plants and equipment and build all that stuff.

So, it’s a huge employment opportunity, and we’re even starting to see some of these effects. We went down for our first injection in Oklahoma in January, and when we were chatting with the guys in the railyard there, this is like a pretty conservative part of the country, we were a little uncomfortable at first since we’re all about climate change prevention, but we shared with them that they were helping put carbon back underground, and they were delighted. They were delighted to be participating in what they felt was the future economy. We were really surprised by that actually, and it was really awesome. And then they asked us for Charm stickers for their hard hats, and so they now work every day in the railyard with Charm stickers on their hard hats, because they’re excited about that future. It’s an amazing team down there and we’re grateful to work with them.

To me, the message is jobs are being gained in a new industry. And at Charm, what do you think are the major challenges now and in the coming year, if you had to name some?

We’re talking about scaling up extremely quickly. The IPCC targets need us to get to hundreds of megatons by 2030 as an industry, and to gigatons by 2040, and 5 to 20 gigatons by 2050. So in a period of 30 years, we need to entirely recreate an industry the size of the oil and gas industry. So when you talk about scaling quickly, it’s just an enormous amount of operational scaleup, and enormous amount of change and company growth. That’s the core challenge, is scaling rapidly enough to have the impact necessary.

The way that manifests over the next couple of years is in building fleet capacity, pyrolyzer fleet capacity, and transitioning from operating first of kind pyrolyzers to operating building manufacturing and so on. So that’s the immediate challenge, is building pyrolyzer capacity.

That’s already quite a lot of challenges. How difficult was it to put together your investment round and how did you experience the funding environment for this tech?

I’d say the funding environment has changed a lot since founding. In 2018, we were definitely odd ducks and there were not very many investors set up or excited about this. In 2019, that started to shift, climate tech became “in” again, and then in 2020, we had the distraction of COVID-19, but generally there was a lot of money flowing into climate. Investment hit a new all-time high last year of %50 billion or something flowing into climate tech. It’s a very different funding environment now. I’d say it was very challenging in 2018, and I’d say it’s a pretty hot investment market now in 2021.

If I gather correctly, you sound like you think that it’s going to stay like this or become even hotter?

Certainly the problem itself is getting more urgent and to some extent bigger, the more that we emit. So, the market trend is towards needing climate tech to be bigger and get there faster, which are things that investors tend to like. So I think from that perspective, the market is probably going to get hotter. It may have ups and downs, but over the next decade, it almost certainly needs to get hotter if this problem is going to get solved.

Do you have any favorite cleantech or climate tech companies and organizations that maybe are not as famous — or maybe are very famous — that inspire you personally?

Sunrun is an awesome one. They are a solar deployment company that was founded on a financial structuring insight, where they found that they could, through some cleverness, sell tax equity and recycle corporate equity into debt financing and so on. This let them reduce the capital cost to deploy solar panels on roofs, and as a result they could deploy faster and earlier than anyone else. So that kind of financial engineering as a way to accelerate the market is very interesting.

I’m also inspired by a more recent company, Solugen. They are building chemical manufacturing. It’s very impressive how they’ve built things extremely profitably and scaled up extremely quickly. Definitely inspired by their work.

 
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Written By

I'm investing in positive companies and am passionate about climate action and long-term human challenges. Early partner at BEAM (United People of Climate Action) and CleanTechnica (#1 cleantech-focused new & analysis website in the world), among others.

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