Part 4: Resource efficiency aligned policy (REAP) rewards to developing a foundation to facilitate the production of millions of modular direct air capture units by mid-century
Creating a brand new industry is inherently difficult. We need to instill a supply-side infrastructure to make this task as easy as possible in order to achieve gigatonne scale modular DAC
Often when people consider direct air capture (DAC) technology, they envisage large-scale facilities costing hundreds of millions of dollars - an oil industry executive once said as much to me. While that may eventually be the case, to achieve such scale will ultimately require huge investment in new manufacturing and supply-chain capacity, particularly for DAC technology of the modular variety. While part one and two of this series focused on the respective overarching challenge at hand scaling-up modular DAC and potential technical paths forward for the technology, part three focused on the demand-side dynamics to scaling up modular DAC to a climate consequential scale. This piece flips that market approach to considering supply-side fundamentals and potential avenues to developing an efficient and optimal supply-side environment to scaling-up modular DAC deployment.
“The efficient and continuous improvement of resource utilisation, encompassing energy, financial capital, material, and human resources will be critical to enable the rapid scale-up of DAC technology and reap the associated climate stabilisation rewards. Resilience and efficiency aligned policies (REAP) around supply chains are seeing renewed interest, not least due to the vulnerabilities exposed by the COVID-19 pandemic.”
We live in a world bound by constraints, both with respect to resources but more saliently, time. The broadly accepted position in the climate science is that emission reductions are no longer sufficient to avert climate catastrophe, and we need to simultaneously establish solutions to remove carbon from the atmosphere, on the order of 10 billion tonnes of CO2 removal capacity per year by 2050. Given our present situation, we need to build solid foundations with which to achieve multiple million unit scale - 20 million for 50 tonne units to achieve gigatonne scale - in just a couple of decades time, from a manufacturing capacity in the mere hundreds today.
With that, we must not develop supply-chains like that of yesteryear. The current concentration of capital - physical resources, financial and human capital, have contributed to the frail position of present day globalised supply-chains and manufacturing capacity in a hunt for cost optimisation in absence of other considerations (environmental implications, security of supplies, social welfare in deindustrialised areas). This has all come to the fore and been exposed in full-view by the current covid-19 pandemic and the great scramble for vital medical supplies (personal protective equipment, face masks, ventilators) and export bans on inputs vital for vaccine production. ‘Supply-chain strategic reviews’ are the hottest game in town in many countries around the world, and a reconfiguration of globalised to regionalised supply-chains, at significant expense, is almost certainly forthcoming.
Supply-chains around modular DAC technology are, in principle, starting from a relatively good position - largely due to the fact that they don’t even exist. The most important aspects of a modular DAC system: a large fan to push air through, a sorbent to capture the CO2 in the air, a heat source, and a box to keep it all in are, on the whole, mature components. The most important piece of the modular DAC supply-chain puzzle is likely to be the sorbent, whose technology is particularly nascent and eventual production must increase by orders of magnitude for a DAC industry operating at a gigatonne scale. The foundations for sorbent production however are promising, especially from the perspective of developing robust regionalised supply chains and DAC factories, or dactories. The synthesis of advanced sorbents is particularly suited to chemical companies - the largest of which are BASF (Germany), Dow Chemicals (USA) and Sinopec (China); which can form the foundations of a resilient yet efficient DAC module supply chain and fabrication industry.
“The emergence of specialised semiconductor fabrication facilities enabled the division and specialisation of skills and supply chains which can be replicated in the DAC industry.”
While by no means a similar technologies, the modular DAC industry can do far worse than adopting some of the practices of other modular technologies which have seen steep reductions in cost over the years. The cost observations in the semiconductor industry have been due to multiple factors, including economies-of-manufacturing-scale, specialisation of expertise and production, and a highly competitive environment leading to continuous improvement and rewards to innovation. The DAC industry will require all of these attributes, ideally starting with the development of a dedicated dactory with which to fabricate DAC modules and begin the ‘learning-by-doing’ process which is vital to technologies moving down the cost-curve.
Again taking inspiration from the semiconductor industry, at increasing scales and likely diminishing learning-rates, a high rate of innovation can be sustained by increased specialisation in the DAC industry with which to eek out greater returns to R&D, productivity and process efficiencies. For example, specialist sorbent research organisations developing high performance DAC sorbents for chemical companies to produce and use in standardised DAC modules developed by a specialist dactory, which are then procured by DAC-to-sequestration project developers and operators. Such intentioned specialisation and division of skills will potentially reduce barriers to entry and encourage competition, offering additional incentive for incumbents to continually invest in R&D and advance the state of the technology both for private gain and for the state of the climate. This is the theory anyway, but only time will tell as to what extent this will play out in reality.
Side note: if a fleet and on-demand based road transportation system emerges in the near future as envisaged by most automakers and ride hailing companies, the volume of passenger vehicles purchased every year will plummet, leaving a dearth of redundant automaking facilities. One could easily see former automotive factories being reconfigured and retooled into dactories.
“Foundations can be further developed by highly resource-efficient and innovative financing mechanisms, blending public R&D funding with private capital, and future procurement of air captured CO2. NASA's pioneering Commercial Crew Program, initiated in 2010 and leading to the first crewed space operation by a private company (SpaceX) just a decade later, offers a valuable case study into cost-effective blended-finance routes for the mass scale-up of DAC deployment.”
This is partially a mechanism to address the ‘chicken and egg’ conundrum as discussed previously, however it can also play a significant role catalysing a comprehensive and efficient supply-chain environment. NASA’s Commercial Crew Program presented a first of its kind delivery model, blending public sector capital with private sector approaches to innovation through progressive, multi-year milestone payments before final delivery a decade later. Such a model is highly applicable for circumstances where the ultimate objective is known, numerous risks are involved, and where progress can be measured and rewarded over time before achieving the ultimate goal. It’s pretty clear that such criteria is met by the state of direct air capture technology today, and that a structured, multi-year public funding program could be a highly effective and efficient means by which to achieve the ‘end game’ of modular DAC at scale, at a competitive cost. As articulated in my article:
“A program, like that adopted by NASA or the XPRIZE competitions could catalyse the mobilisation of private capital, the acceleration of innovation, and a wartime-like scale-up of dactories, kickstarting the development of a climate consequential global DAC industry.”
As discussed in part three of this series, the demand dynamics at play in the nascent DAC industry cannot be addressed in isolation of supply-side considerations. Learning from the evolution of other modular technologies, DAC should adopt similar supply-chain, specialisation and production models to accelerate and ultimately facilitate the supply-side of the DAC market. Where coupled with a multi-year public funding model, this would no doubt catalyse the emergence of supply-chains for the efficient development and deployment of DAC technology, especially where complemented with public funding to procure DAC-derived carbon removal.
More so than any other carbon removal solution, modular DAC technology will be dependent on the development of an efficient and productive supply-chain environment. It is incumbent on DAC industry participants to put in the effort to enable it to accelerate rather than constrain and hinder the ultimate development of the DAC industry at scale.
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