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Examining the strategies and deployments around decarbonisation in hard to abate sectors, we speak with CEOs, heads of corporate strategy, CTOs, Innovation/R&D, project directors & heads of carbon management from around the world. Hosted by Alex Cameron of the Decarbonization Leaders Network and Decarb Connect & produced by Janno Media.
Host: Alex Cameron, Founder & CEO, Industrial Connect Group Ltd
Guest: Grant Budge, CEO, PeroCycle
(Introductory music plays)
Grant Budge: I think Europe has spent between something like 8 to 10 billion in developing those types of projects. And so far, what's it delivered? I mean, I'm not sure if there's any $CO_2$ that's currently being abated down that path.
Alex Cameron: Welcome to the Decarb Connect Podcast. I'm Alex Cameron, and some of you will know me as the founder of Decarb Connect, others know me just from this podcast. And today, I am very pleased to be joined by Grant Budge, who is CEO of PeroCycle. And we have an interesting conversational plan for today, which is we're going to be looking at the kind of intersection of capital, industrial $CO_2$, what it takes to actually lower the carbon intensity of heavy industry, but—and here's the but—we're also going to have a look at some of the, arguably, misplaced investments that have been made over the last, I guess, 8 to 10 years and explore some of Grant's thoughts on that and also, of course, where PeroCycle fits into that picture. So Grant, welcome to the podcast. Perhaps you could kick us off with a bit of a view on what's brought you to this moment in time, both personally, professionally, PeroCycle? Tell us a bit about yourself.
Grant Budge: Well, first, thank you for—yeah, my background, I'm originally an engineer out of Imperial College. I spent some time in the mining industry and then the steel industry. And it was probably about in the mid-noughties, I left the steel industry because I had an opportunity to lead a large-scale CCS project here in the UK. So it was an integrated gasification combined cycle project with full-chain CCS, working with people like National Grid and Statoil. And that was my first kind of foray into decarbonization of any kind and all things environmental. And I think it stuck. And from then on, I've always just wanted to pursue something that had more of an impact away from me, so an impact on society or an impact on the environment. So I've led things other—I've led other initiatives around decarbonization, and I've also worked in the mental health space briefly. And then I came across PeroCycle last year. And very interesting technology. And I think the thing that got me is, having been around in this space for like 20 years, I've seen a lot of ways to not do something. And I've sort of seen a lot of reasons why things aren't getting across the line, why we're not making the impact we need to be making. And when I started to look at PeroCycle, I saw an opportunity that takes away a lot of those challenges. Doesn't take away that early-stage tech challenge, but it takes a lot away those economical and commercial challenges that invariably come with these types of approaches.
Alex Cameron: Well, I think that's a great lens then, all of that experience is a great lens through which to look at this, this issue of sort of, you know, a decade of investment, what's come of it and where we need to go next. I think, yeah, worth noting there are a lot of people working on projects around industrial $CO_2$ who don't remember CCS version one. Clearly you do, and I think that's also valuable because, you know, that had its own hype, that had its own strong investment cycle, but you've also seen where it didn't end up panning out so well. So all of that we can tap into in this conversation.
So let us start with, yeah, the uncomfortable question if you like, which is these big deep techs, such as CCS, hydrogen, and others, absorbed an awful lot of capital over a decade or more. When you think about the capital decisions, the policy decisions, the industrial decisions, like, where do you think decision-making was right and just the nature of early development, where did it go wrong? And I suppose, could we look at that from both the government, the corporates, and the investors?
Grant Budge: Yeah, sure. It's probably the easier way to start on this is if I go back to that very first experience I had working, you know, on CCS version one as you put it here in the UK, you know, where it was very much focused on power. You had an environment where policy was getting very much driven by large balance sheets. You know, there's always—I feel there's always been a mentality over the past few years that it is the large corporates with the balance sheets that will help us deploy. Yeah, because they can provide that, you know, capital. And I think you could probably pick up a newspaper every single day and find an article that says why they don't do that. I probably should say these are my views.
Alex Cameron: Quickly, quickly, add in that.
Grant Budge: Yeah, yeah. Get the caveat in. See, I think that has been one of the problems. It certainly was one of the problems, you know, back in the noughties when we were looking at CCS here in the UK. I think there's also, you know, I think there's a comfort thing about doing something like CCS because it's an add-on. You don't have to change much. So I think that got a lot of traction and momentum rather than thinking about the complexities of having to change core processes. And when it comes to hydrogen, I think it's a scale thing. It's one of those—it's one of those decarbonization vectors that people can see could be introduced across a multitude of areas. And by default, that seemed like a nice, nice to have. So you start putting those two things together, and you start building this narrative that politicians then buy into, mostly driven, I would say a lot of time, by the large corporate, and ultimately investors make decisions on where they can see policy and where they can see backing. So I, you know, to me, to a greater extent, the problem's been less on the investment side, but more how, how we've established to begin with which direction we want to go and what technologies we wanted to chase.
Alex Cameron: So is that, is that, if you think about that sort of decisions being made, I get your point that it's, it's less about the investment decisions, probably more about the policy and the industrial decisions. Do you think it was just the nature of this being, certainly to begin with, early, early-stage tech? Was it absence of the right kind of data? Or I don't know, what, what do you think the root of that was?
Grant Budge: I think data has a play, a part to play in this. In any investment decision, particularly when it's early stage or, you know, a new market, data is key if you want to make good decisions. And in absence of it, people tend to get a lot more conservative in their decision-making. You know, they're fearful of investing in something that could become a redundant asset in five years' time. You know, so there is a natural cautiousness, you know, for industrials or indeed any emitter who want to step forward and say, okay, I'm going to make a decision. But I think if there is an opportunity to improve accessibility of good, credible information, it can help all parties. It can help businesses make a decision, it can help policy regulators make decisions and put the right structures in place to promote certain pathways, and inherently that would be benefiting, benefiting the investors.
Alex Cameron: Okay, so that, that's where we've been, that was the kind of situation with some of the past investments. And, well, I guess a good, a good sort of point right now would be where does PeroCycle fit into this and then where do we need to move to?
Grant Budge: So, yeah. Probably have to explain a bit about what PeroCycle does. So we have a patented solution that came out of the University of Birmingham. It's effectively a thermochemical reactor with a proprietary catalyst inside of it. And what we can do is at a relatively low cost convert carbon dioxide into carbon monoxide. And the reason that's interesting in a lot of industrial applications is carbon monoxide is a raw material for chemicals production. It ultimately is a raw—a manufactured raw material in a blast furnace for reduction. So it allows us to create this on-site closed solution. So a lot of the issues people talk about with hydrogen and CCS where you've got lots of high-cost off-site infrastructure, you take that away. So that's where we are. That's how we kind of fit.
Alex Cameron: And when we were doing the prep call for this, I mean this isn't directly linked, I think, to the business model of PeroCycle, but part of what you were proposing or thinking about is this idea of an international database, which then—this is what's going to link, I think, for the listeners, the work you're doing at PeroCycle, but also this kind of viewpoint, vantage point that you have from what didn't work in CCS 1.0 and some of those other earlier-stage experiences. So talk to me about this international database. What's the goal of it? What would be the benefit of it?
Grant Budge: So for me, the goal is transparency. I mean, first and foremost, I guess I come from a biased perspective, you know? I sit here working with my colleagues at PeroCycle and we have a technology that, you know, has an opportunity to deliver carbon reduction on a number of applications without the need for a carbon price. But I'm a TRL 5 technology. So how do I walk in rooms and explain to that people, and how do I get them to believe me? And, you know, one of the answers is, okay, you can go out, you can be validated by a consultant, they can do a technical review of you. Well, they can do. My challenge back on that is, in my life, generally, whenever I pay for somebody to do something, whether it's a lawyer or an accountant, invariably they'll come up with a solution which is aligned to what I'm wanting them to do. So I think there needs to be something that's independent, which is why this, this idea for a global database, you know, came about. Something that could be sponsored and administered by not-for-profit organizations that work in the environmental space but have the gravitas and the credibility to do sort of a—even a basic validation, verification exercise of different technologies, you know?
And the benefits from that: one, if I'm an industrial company looking to find technology suitable for my process, I have a reliable source I can go to and get an understanding of what the starting point might be and what the economics of that might be before wasting too much money on, you know, on design or engineering. In terms of policy and regulation, again, governments then have a resource they can go to, which effectively gives them clear guidance and focus, and we don't have this issue where we buy into particular technologies for a decade and throw a lot of money at them and then realize how expensive they're going to be.
Alex Cameron: Well, can we, can we apply it to that, you know, the experience you had back in the noughties? You know, if something like this had existed then, what do you think it would have changed or what would have changed about the way that that technology was funded or deployed, or the kind of project that it went into? What's your view on the kind of impact it could have had?
Grant Budge: I think from, you know, for me, particularly in my career and the things I've been involved in, it probably wouldn't have had a huge amount of impact. I mean, doing CCS on fossil-fuel-based power generation is inherently cost-additive anyway. You know, and it was more a case of who was going to fund that than anything else, and instead, we went down the renewables side. But if you look at since then, certainly, you know, when CCU technologies starting getting to develop, there's an area that could have been benefited from this if this existed a decade ago, you know? Because they don't necessarily have the huge scale impact that people perceive hydrogen and CCS will have, but they do have a very robust, necessarily, potentially low-cost impact on a site-by-site basis.
You know, and if you—and your point about earlier on, I think about the money that has been vested in things like hydrogen and CCS, you know, we spent somewhere between, I think Europe has spent between 8 to 10 billion in developing those types of projects. And so far, what's it delivered? I mean, I'm not sure if there's any $CO_2$ currently being abated down that path. Whereas you just went on an average CCU type price in terms of costs of carbon abated, you'd probably have somewhere between 3 to 6 million tons per annum, I would have thought, being taken out of society. So, so I think it could have—it would have helped a lot back then and still can help today.
Alex Cameron: And you did allude there to the kind of organizations that could put something like this together. Why do you think it's not yet in existence? Like, you know, we have organizations, whether it's non-profits or whether it's the IEA or whoever, what's, you know, what do you think is getting in the way of something like this actually being set up and delivered now?
Grant Budge: I think there's a couple of things. Um, first one is who pays for it. So yes, the not-for-profits are great, but they need to have somebody funding it in some way, and I've—I've posed a solution for that, which effectively is a self-financing route, you know, where people that want to get validated and verified pay a fee to have that done, and then people who want to access that data pay a subscription fee so they can access it. So that's one piece of the puzzle, and I think that's probably the least challenging piece. More challenging is, you know, if you look at the different technologies, it's splitting the markets up and the sectors up into logical structures of how you then adopt that and apply that and the nuances you might have to, you know, overcome in terms of the different assessment criteria that might exist in different types of applications. And the challenge with that is usually if you stick 10 people in a room, they'll come up with something that is over-designed rather than what I'm saying is it needs to be something that just is—is sufficient to validate and verify where a technology is at, but delivers robust key metrics. Yeah, it doesn't have to cover every base, just has to give enough to say, yes, these guys, you know, for argument's sake—uh, we can, PeroCycle, mitigate carbon on a DRI plant at a cost of minus 50 dollars per ton, for example, you know, and have somebody, you know, say, yes, that is credible based on their heat and mass balance, based on where they're at in terms of their technology development.
Alex Cameron: I suppose the temptation is, or might be, for people to take it down to the nth level of comparison between technologies, which, which then makes it a, you know—
Grant Budge: It makes them unwieldy.
Alex Cameron: Yeah, exactly.
Grant Budge: Yes, that's the challenge. But I think, you know, certainly from the parties I've been talking to, and I've been, you know, talking to institutions in North America as well as the EU, they've started to see the sense in it. They've seen the gap. They see that this doesn't exist. You know, because the first thing you get is, oh well, there's this database and there's that database. But they don't do what this is trying to be designed to do, and I think this can add value above. So I'm starting to get traction there, and we'll see.
Alex Cameron: Yeah, feel like there's an interesting angle there, particularly in the US with some more of the philanthropic funds as well as family offices that are turning their attention to more of the systemic drivers that they could play a role in. So who knows, fingers crossed. Maybe you can get some taking up from some of those groups sometime soon. But interesting, interesting idea. Let's, let's now bring it back to PeroCycle though. Tell us a bit about—you have talked a little bit about the system, but what, what is really the kind of secret source and where do you create value versus, or compared to, other organizations?
Grant Budge: Okay, so I think part of the answer to that question is probably talking through the journey that myself and Harckal Dal, my CTO, have had over the past 12 months. So when we came in, we considered ourselves a TRL 4 technology, so technology readiness level 4, and we had a techno-economic assessment that said we could deliver carbon abatement somewhere between 50 to 60 dollars per ton. So kind of in the mix with a lot of other technologies out there. We then went away and started looking at, okay, well, yeah, there's the the normal, here's a catalyst, how do we improve the catalyst, how do we get better performance out of that? We've done that. And we have—we have doubled the performance of it in terms of its conversion capability, and we've actually even got to a point whereby we can double it again consistently. So we've done things like that.
But then the other bit of it is we've been very creative about how we integrate with plants, or at least we think we've been creative. So we've been very focused at on finding the optimum point, whether it's gas separation, whether it's heat integration, however it's done. It's finding about finding an optimum rather than finding the perfect solution. Every time you go to the highest purity, costs just go north. So we've looked at how can you do this without going to the nth degree. And the outcome of that is, you know, we've taken the solution from, as I say, that plus 50 to 60 dollars per ton of $CO_2$ abated through to something that now on a blast furnace, uh, we're looking at minus 20 dollars per ton, and on a DRI plant, we're looking at, you know, somewhere between minus 50 to minus 80 dollars per ton. Put the caveats in again: it depends where you are. That's based on European natural gas prices, European energy prices. Um, from an energy perspective, we've done an assessment across the globe, and we think about 85% of where steel mills are operating we could deliver a negative cost. We haven't done the same on the natural gas side of yet, but we will do at some point.
Alex Cameron: So you are, you are at this kind of, well, yeah, really interesting, promising, challenging stage, TRL 4 to 5. And those are some big claims, right, about the, the negative cost impact. So what needs to work for that to hold at scale? Or rather, what could break it as you go to scale? Because that's, I mean, isn't that the big question for all tech developers at your stage of development?
Grant Budge: Definitely. So if we look at an installation that we would usually do, then two things will—could break it: it's the capital costs and probably for us, it's the development pathway for our catalyst, what does that look like? From the capital side of it, we're working with—we have strategic partnerships in place with an international engineering consultancy, so we're getting good access to support on from the design and for cost estimation piece. Um, we're also close to having a strategic partnership in place with an international industrial gas separation technology company. Now, one of our—our standard installations as we would call it, about 50% of our cost is associated to that, that industrial gas separation equipment and operation. So, but because they have over 400 operating assets, we have line of sight now on really credible capital and operating information against it. So all the time we're trying to build up a risk mitigation approach to this, so when we get to the commercial side of it, um, and do our first of a kind, it's less of a perceived jump in people's minds and, you know, we've taken them on that journey all the way through.
Alex Cameron: So, examples right now then? Are there any ones that you can talk about publicly or are we still at the waiting for an MOU to be signed or, you know, what, what stage are you at in terms of either corporates or capital partners?
Grant Budge: Well, in terms of the engineering consultancy, that's a company called IO Consultancy—or IO Consulting, sorry. Um, yeah, and they're—a European head office, um, but they do have operations internationally and done a lot of work in the CCUS space, so, you know, they're well aligned to what we're trying to do, they understand what we're trying to do. Can't talk about the industrial gas separation technology company...