Will one winner take it all in Direct Air Capture?
Depending on your point of view, you might deem the race to pioneer Direct Air Capture (DAC) to be already won or not yet started. Today’s billion-dollar front-runners might argue they have built an unassailable lead and deserve us to double down on their approaches and avoid getting distracted. Others would say that upcoming innovative startups will soon surpass the incumbents, and we have a responsibility to make DAC more efficient before we make it bigger. Can both be right? Is there, or will there ever be, a “best way” to do DAC?
Carbon has powered our economy for the last 100 years. Today, each year we emit 40 billion tonnes of CO₂, which has led to severe environmental consequences, including climate change, ocean acidification, deforestation and soil erosion. Carbon dioxide removal (CDR) is going to play a vital part in our transition to net zero, especially in mitigating emissions from hard-to-decarbonize sectors. By 2050, we will need to remove ~10 billion tonnes of atmospheric CO₂ each year.
Direct Air Capture is one promising approach to CDR. According to the IEA, scaled DAC could remove upwards of 1 billion tonnes of CO₂ per year by 2050. However, considering DAC plants operational today only capture a mere 0.0001% of this, there’s a daunting scaling journey ahead.
DAC encompasses the suite of technologies that capture atmospheric CO₂ and condense it into a concentrated form of CO₂. It is attractive because in a market that is often challenged with measuring its impact, producing a near pure stream of CO₂ from the air is easy to verify. But it is also interesting because it is a tech-driven approach to CDR; like other decarbonisation technologies that has become less costly with time, DAC could see cost reductions from learning by-doing.
However, current DAC approaches need a lot of energy. Firstly, to concentrate CO₂ from 0.04% to a near pure stream, you need to push lots of air through the system - 1.3 million m³ of air per tonne of CO₂ to be precise. Secondly, the same properties that selectively bind very dilute CO₂ to sorbent materials make them reluctant to give it up without a lot of persuasion. Inevitably, this requires lots of energy and expensive infrastructure, making DAC one of the priciest and resource intensive ways to remove CO₂ permanently.
To put this in perspective, removing one billion tonnes of CO₂ with today’s DAC technologies would consume 60-88% of the world's current supply of wind and solar energy - around 7% of the world’s total electricity generation. Energy is a valuable resource and as responsible investors in CDR we do not want to encourage the adoption of DAC solutions that are wasteful. We also firmly believe that we should prioritise the use of energy to decarbonise over carbon removal. For DAC to become a crucial player in the transition to Net Zero, it has to prove itself as a valuable and efficient use of resources.
I had initially envisaged this blog as a dissection of DAC's energy consumption compared to other CDR and decarbonization technologies. However, while energy is a significant driver of DAC’s cost, there are many other factors such as energy source, materials consumption, capital intensity, and CO₂ storage infrastructure that require consideration, demanding a more nuanced evaluation. Within this blog, I aim to present a framework describing the high level factors we consider when assessing a DAC technology.
The Fundamentals of DAC
Counteract’s DAC taxonomy
Direct air capture typically includes three key processes: air movement, CO₂ capture by carbonation of the sorbent/solvent, and CO₂ release by sorbent/solvent regeneration. Only when DAC is coupled with permanent storage (eg. mineralised in concrete or injected underground) does it become a complete carbon removal solution.
Approaches to DAC are continually evolving, with new permutations making it increasingly difficult to construct a mutually exclusive and collectively exhaustive classification. However, we find the most helpful grouping tends to be by regeneration mechanism, since this tends to be the most energy intensive step. It is certainly not a perfect classification and some approaches will span groups or fall between them. Perhaps the most comprehensive classification we have seen was recently published by Heriot-Watt and RMI.
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High-temperature regeneration techniques typically use strong alkali to capture CO₂ and then employ calcination technology at up to 900ºC to release it, requiring a source of high-grade heat. Natural gas is the most common choice today due to its low cost and wide availability. This helps with rapid scaling but also risks perpetuating fossil fuel demand and connected emissions (e.g. from methane leaks). Alternatives could include electric furnaces, nuclear energy, or hydrogen, all of which come with some challenges. Carbon Engineering and Heirloom are leading examples of DAC companies using high-temperature regeneration.
Challenges: moral hazard and carbon intensity of fossil-fuel derived heat, energy/resource intensity of low-carbon heat.
Benefits: strong economies of scale, lower tech risk.
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In low temperature regenation solutions, CO₂ is typically captured through chemisorption using a CO2-loving sorbent (such as amines) and/or physisorption using physical lattices into which CO2 molecules fit readily (such as zeolites, metal organic frameworks). The sorbents have a weaker attraction to CO₂ than the strong alkalis used in high temp solutions and accordingly release CO₂ at temperatures of ~80-120ºC, often combined with a vacuum. This allows these approaches to leverage low-grade heat sources such as geothermal energy or waste heat, lowering their carbon intensity. Notable companies in this space include Climeworks, Carbon Capture Inc, and Noya.
Challenges: High costs of sorbents, economies of scale less clear
Benefits: Leverages low-grade heat sources
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These approaches replace temperature swing desorption with electrochemistry to attract / release CO₂. They operate mainly on electricity at ambient temperature and pressure. An electrochemical cell is typically used to generate an alkaline capture agent used to bind to fresh CO2, alongside an acid, used to outgas CO₂ from the capture material. This method often requires less total energy than temperature swing approaches and can be powered by renewable sources. These systems often have the capacity to load match by storing acids and bases when cheap green energy is available, allowing them to continue operating when it is not. Examples include Mission Zero and Carbon Atlantis.
Challenges: Complexity of electrochemical systems, challenges scaling efficiently
Benefits: Lower energy, tolerance to intermittency, flexible plant size
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These approaches use electrochemistry to both absorb and release CO₂. Air is passed through electrochemical cell stacks where membranes or redox active molecules are used to separate CO2.. This way the process is entirely powered by electricity and does not require heat. Repair and Verdox are examples of DAC employing electrochemical separation.
Challenges: Complex electrochemical cell design, CO₂ capture rate limited by mass transport across membrane, no inherent intermittency tolerance
Benefits: Low energy, highly modular design
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There are other DAC approaches that do not exactly fit in these groups. For example, some DAC technologies are leveraging pre-existing sources or alkalinity or acid to either capture or regenerate the CO₂. These approaches are often linear compared to the typical looping DAC system. Additionally, there are the Direct Ocean Capture (DOC) companies that capture CO₂ from the ocean, rather than the air. DOC encompasses a whole family of approaches, too many to cover comprehensively here (well categorised by NOAA). DOC faces different challenges to DAC, such as the requirement to pump and handle significant quantities of saltwater, potentially hazardous byproducts, and challenges with measuring CO₂ capture in an open system.
Evaluation Categories
We assess DAC companies by analysing their scalability and potential to succeed, considering factors like technology, energy and resource needs, commercialization strategies, and supply chain risks.
Below, we have evaluated the above DAC approaches based on the different categories.
Analysing and comparing DAC technologies is not straightforward. Numerous trade-offs exist, and each technology has been tailored for specific outcomes. To list a few…
Quick route to scale vs best/novel technology:
Securing initial project financing is a frequent challenge for DAC companies. Some prioritise off-the-shelf components with a reduced technology risk like calcination.This approach might facilitate quicker project financing and a faster move down the cost curve. However, they often have higher energy consumption and use more costly sources of heat. When DAC relies on natural gas, investors must assess the risk of inadvertently delaying decarbonisation as these technologies evolve.
Balancing CAPEX and OPEX
Optimising for low energy consumption, as seen with electrochemical approaches, might lead to higher capital costs because of the specialised components involved (membrane, electrodes, and catalysts) and added technology risk as new approaches are tested. Despite this, we believe the reduced energy needs of these approaches make them ones to watch, with early demonstrations from companies like RepAir showing great promise.
On the other hand, a CAPEX-light approach can provide advantages in managing energy costs. With cheaper capital assets, these methods could fund their own dedicated renewable energy supply. This might be particularly impactful in countries with significant renewable energy potential but high costs of capital, provided they can tolerate energy intermittency.
Finding the sweet spot
DAC solutions thrive when paired with low-cost, abundant renewable energy sources, such as geothermal power or waste industrial heat. In such cases, absolute energy consumption becomes less of an issue than the suitability of the energy source for the technology type. Meanwhile a short hop to a right-sized CO₂ utilisation or sequestration solution can help minimise cost and maximise efficiency end-to-end. Accordingly, those rare locations offering access to abundant clean energy coupled with CO₂ storage infrastructure are especially attractive.
Excitingly, in Kenya's Rift Valley, untapped geothermal potential and ideal geology for CO₂ storage are fostering collaborations between geothermal energy developers, DAC companies, and CO₂ storage firms like our portfolio company, Cella.This partnership is paving the way for the first DA C+ mineralization hub in the Global South, offering a new location for DAC innovation.
Ultimately it's all about context
In our view, there's no one-size-fits-all solution in DAC; it will be an industry defined by diverse technologies, tailored to individual projects. Much like the need for a range of CDR solutions, DAC configurations will vary based on geographical location, availability of low-cost, low-carbon energy, cost of capital, policy support, weather conditions, storage infrastructure, and more.
Counteract’s View
We look for breakthroughs that unlock resource efficiency.
In identifying investable DAC companies, our aim is to find foundational IP that unlock significant efficiency improvements. These could arise at the system level, such as smart setups that reduce energy needs, or through ingredients like new membranes and regeneration approaches.
Flexible systems with multiple revenue streams
The long term market for carbon removals is yet to take shape. But looking beyond catalytic voluntary purchases, it seems unlikely that many buyers will continue to offer very high prices for removing carbon by DAC when there are cheaper alternatives. (Nb. There are only 10 significant buyers of DAC today (>1000tCO2)). Systems with versatile revenue models, capacity to combine with point source capture, valuable byproducts such as hydrogen, or valuable co-benefits, will have a smoother scaling journey.
Building a Diverse Portfolio
Ultimately, we aim to create a diverse portfolio of DAC companies that acknowledges this complex landscape, balancing various trade-offs, adapting to different geographies, policy landscapes and diverse markets. We consistently prioritise efficiency, whether by reducing energy usage or innovating ways to employ waste or surplus resources
So rather than a single winner, we believe a globally scaled DAC industry will have a diverse array of technologies tailored to specific needs and contexts. We are seeking companies with a winning technology in a given set of conditions, with the potential to remove 0.5Gt CO₂e by 2050.
Check to see if you’re on the same page as us by matching the DAC technology with the context, or get in touch and challenge our thinking.
