U.S. DoE Standard and Accelerated Timelines In Its Regional DAC Hubs Program

Source: U.S. Department of Energy

Key Points: Announcements at the end of June highlight the varying technological readiness levels of Direct Air Capture (DAC). Frontier is supporting a diversity of nascent technologies, while Climeworks’ scaling effort is now underway. Meanwhile the U.S. DoE and Climeworks offer hints at potential “learning curve” benefits for capex over the next decade+.

Early stage DAC investments. Formed in April 2022, the Stripe-led Frontier fund raised $925 Million (MM) to be to Direct Air Capture (DAC). Frontier announced at the end of June that it is making early stage investments totaling $2.4MM in six DAC technology companies. Its investments are to take the form of Advanced Market Commitments (AMCs), i.e. it is committing to buy (initial) carbon removal from the companies; Frontier indicated it is paying $500 to $1,800 per ton of removal with this commitment (thus it is targeting to capture an implied +/-2,000 tons). Further, Frontier is offering $5.4MM in contingent payments to the six upon completion of certain milestones. Separately, Clean Energy Ventures announced a $3MM seed commitment to one of the six companies (Travertine), bringing announced potential funding to just under $11MM. In other words, the vast majority of the raised funds are to be spent, still through AMCs, only down the road to scale up construction of removal technologies once they have been validated.

Frontier’s DAC investments span several technologies. Frontier noted an encouraging diversity of prospective DAC technologies across 26 applications for funding. New technologies for the six selected companies include (1) new adsorbents for DAC systems (e.g.s include a AspiraDAC’s Metal-Organic Framework and Calcite-Origen’s slaked lime for calcination); (2) enhanced weathering techniques (e.g.s include Lithos’ basalt application to cropland and Travertine’s use of electrochemistry to produce sulfuric acid); and (3) synthetic biology (e.g. Living Carbon’s algae biopolymer).

Meanwhile also late last month, Climeworks breaks ground on a significant scaling up. The Frontier fundraise was the largest chunk of nearly $2B in carbon removal fund raises in April. Yet the second largest chunk, a $650MM raise for Climeworks, allows it to scale its existing technology. Related to the fundraise, Climeworks has broken ground on its Mammoth plant with capacity of 36,000 tons per year (tpy); intended startup is within 24 months. This follows the start up in September of last year of the company’s 4,000 tpy Orca plant.

U.S. Department of Energy initiated its $3.5 Billion Regional DAC Hubs program in May 2022. Funded under the Bipartisan Infrastructure Law, the program is authorized to spend the funds through 2026 to contribute to the development of four hubs with the capacity to capture (and sequester and/or utilize) at least 1MM tons each of CO2 per year. Costs are to be shared with the private sector, with the DoE picking up 80% in Phase 1 (feasibility) and 50% in Phases 2 and 3 (FEED through start of operation) (see Exhibit).

A vision to scale capex economies after 2030. Perhaps offering perspective relative to the implied cost of the DoE initiative, Climeworks, at its Direct Air Capture Summit at the end of June, estimated a need for $30-50B per year of capex, as well as customer (corporate) support in the form of long term offtake contracts, in order for the DAC industry to reach gigaton (i.e. one billion tons) annual scale capture by 2050. Acknowledging the math is very rough, if the DoE initiative points to capex of at least $1,750 per tpy of CO2 for the regional hubs ($7B+ divided by 4MM tpy), the Climeworks capex estimate suggests a learning curve benefit (after 2030) to potentially as low as $600 per tpy.