RBC has invested significantly in the energy transition over the last several years, an undertaking that involves bankers from around the world dedicated to this effort. This commitment means keeping a close eye on the most promising companies – leaders and future leaders in this space.
In addition to presenting companies, a panel of greenfield project developers and a keynote speaker broadened the energy transition discussion, highlighting the challenges and benefits that lay ahead on the road to reducing greenhouse gas emissions (GHGs) to net zero.
Low-cost clean hydrogen
Ekona Power’s technology decarbonizes hydrogen production in the energy sector and heavy industry. The company was started more than five years ago by veterans from the clean energy fuel cell industry who wanted to help solve the challenge of removing greenhouse gas emissions without adding costs to operations. Ekona designed a reactor that is not electricity intensive and can be deployed anywhere with natural gas infrastructure pipelines. A Series A round of funding secured in 2022 continues to fund its unique system through to commercialization.
“It's always about cost. How can we drive cost parity with existing dirty hydrogen while reducing those GHGs?” Gary Schubak, VP of Business Development and Government Relations, told symposium attendees.
“You give people an alternative…that's clean, that's the same cost, they'll always take it. But if you ask them to pay extra they might not, and so our technology is all about scale and cost.”
The company developed a non-catalytic methane pyrolysis platform, a technology that uses extremely high heat to decompose materials and decarbonize gas. Schubak says it is an alternative to carbon capture sequestration (CCS), with decarbonization occuring before the combustion event instead of after. One of the notable features of Ekona’s xCaliberTM reactor is that, unlike many other hydrogen production technologies that use water, their system does not use any – it produces water instead. While it still emits carbon dioxide (CO2), the company says emissions are 90 percent less than more conventional technologies, with most coming out as solid carbon. Another feature is that the system uses existing energy infrastructure, allowing for rapid deployment. By 2024, Ekona expects to deploy a one ton-per-day field unit in Alberta.
“We’ve been able to build good partnerships in those areas with our investors, with our funding partners, and that’s really been at the heart of our success,” Schubak said.
Sustainable aviation fuel
World Energy began as a road transportation business for renewable fuels some 25 years ago, and has since grown and evolved into the first producer of sustainable aviation fuel in North America. It is also one of the leading project developers on the East Coast of Canada, planning one of the first North American green ammonia export projects, anticipated to reach FID in the coming months.
World Energy, whose solutions also include renewable diesel and renewable naphtha, is currently investing in manufacturing and technology that will facilitate its goal of supplying one billion gallons of sustainable aviation fuel by 2030. The company’s California facility near Los Angeles International Airport is on track to hit 275 million gallons of physical products by the end of 2025, as hundreds of contractors work on the plant’s expansion.
Air transportation currently contributes about two percent of the planet’s carbon emissions – a figure that is expected to climb to 25 percent by 2050, Scott Lewis, President of WE SupplyZero (a subsidiary of World Energy), told attendees. The industry is decades away from developing an alternative fuel source for air transportation, an increasingly important mode of mass transit, but it is also currently one of the most challenging industries to decarbonize.
Lewis said a conversation with the CEO of Lufthansa put the problem in context: “Once we have identified the technology that’s going to be commercially available, it takes us 30 years to turn over our inventory because we buy planes to have a 30 year life,” Lewis recounted.
“You're looking at a 60-year window before we actually have a change. And we've got a huge amount of carbon that is being emitted between those two periods.”
Given these forecasts and challenges, there is enormous appetite for sustainable aviation fuel. There are only a handful of these plants in operation, however, and only about 30 to 40 million gallons are being produced worldwide, with carbon credits currently one of the ways to bridge the existing gap, Lewis said.
Turning steel mill emissions to Gucci perfume
The newly listed LanzaTech is a carbon recycling technology company, which takes manufacturing pollution and converts them into sustainable new products. Launched nearly two decades ago, the company saw the first commercial scale deployment of its carbon recycling technology in 2018 at a steel mill in China, following years of research and development. The facility converts emissions from the mill into ethanol. To date, more than 42 million gallons of ethanol have been produced at the first facility in China, the equivalent of preventing 210,000 tons of CO2 from being emitted into the atmosphere, the company said. Two more commercial deployments have been added since and another three commercial deployments are coming online in 2023, including the first in Europe and India.
“This is the tip of the iceberg of a very robust pipeline that we have…We’ve driven in strong revenue growth year over year,” Chief Financial Officer Geoff Trukenbrod said at the symposium, pointing to the steady pipeline of plants that are coming online in the coming years.
LanzaTech’s technology uses a proprietary biocatalyst or microbe that consumes carbon from carbon rich gases and produces ethanol. In addition to carbon-rich industrial off-gases, almost any type of solid can be used once gasified, including biomass, plastics, unsorted municipal solid waste, forestry residues, and tires, all areas that LanzaTech is actively working on. But the company views ethanol only as an intermediate product; ethanol can be converted to ethylene, considered one of the most important chemicals in the world and a fundamental building block in plastics that is used in an enormous variety of everyday products from textiles to medical devices to insulation. It has already partnered with companies that specialize in that conversion process.
Examples of how the ethanol produced by LanzaTech’s technology is used include Unilever detergents, Gucci fragrance, and athletic wear from H&M and Lululemon. Its spin-off company, LanzaJet, uses waste-based ethanol to produce sustainable aviation fuel.
LanzaTech’s business model extends beyond the one-time revenues associated with setting up the facility, including engineering services and sales of key equipment componentry; Trukenbrod says there is a long tail, recurring high-margin revenue stream that includes royalties on the sale of the products, supplying the biocatalysts for the facility, and analytics monitoring software.
A dynamic and changing landscape
TC Energy is one of the leading energy infrastructure companies in North America operating natural gas pipelines, liquid pipelines, and energy, supplying more than a quarter of the natural gas used everyday across the continent. As an established energy firm, finding the most effective solutions to reduce its carbon emissions to net zero by 2050 presents an enormous challenge. Roland Muwanga, Vice President of the company’s Energy Transition - Technical and Operations Strategy, discussed TC Energy’s approach and view, walking investors through the scale of the different challenges, some of the costs, and solutions that can help the business reach its emissions targets in the coming years.
He highlighted the benefits and drawbacks of three different technologies: direct air capture (DAC) technology, which pulls CO2 directly from the atmosphere; carbon capture, utilization, and storage (CCUS), which captures the emissions produced by an industrial process and re-uses it by converting it into other products; and hydrogen pyrolysis.
“It’s a very dynamic landscape and everywhere you look, something else is moving and changing how you are looking at what you previously believed,” said Muwanga, recognizing that some of the technologies and innovations being explored still require a great deal of research. He stressed the importance for investors to fund the broader ecosystem in order to enable, accelerate, and optimize these new technologies.
“It's this entire ecosystem that's going to need to materialize for these technologies to come to fruition and to the scale that we're talking about here.”
$100 trillion challenge – and opportunity
The world collectively generates roughly 50 gigatons of greenhouse gas emissions each year – 40 percent higher than three decades earlier. To achieve net zero in the next 30 to 40 years, an estimated $100 trillion worth of investment into new infrastructure will be needed, according to Boston Consulting Group. While this presents an enormous investment opportunity, the challenges to go from raw acreage and a vision, to building complex infrastructure projects are also tremendous.
For most developers, finding that first $10 to $30 million in funding is often the biggest hurdle; getting the timing right for when to seek investors – and from the right investors – can make or break a project, according to a panel of development executives.
Zach Steele, Americas Co-President at Fusion Fuel/Elemental Energy, Bob Delamar, Co-Founder of Kanata Clean Power & Climate Technologies, and Stephen Mason, Head of Reconciliation Energy Transition Inc, shared their insights into some of the challenges and opportunities around greenfield projects, discussing how to finance the project step by step, the role of government, the differences between Canada and the U.S., as well as Indigenous participation in these development plans and deals.
Advancing energy transition projects in Canada can appear daunting against the “tsunami of cash” available in the U.S. through the Inflation Reduction Act, which includes nearly US$400 billion in tax breaks and spending on clean energy. But projects can live or die on non-financial metrics, symposium executives said, and there are many factors that make Canada uniquely attractive, including its roster of talent and Indigenous partnerships.
The innovation and environmental solutions presented by companies like Ekona Power, World Energy, and Lanzatech are just a sample of the vast opportunities available to investors looking to participate in the $100 trillion energy transition.
