Using nature to heal nature: one company’s journey to commercialize bacteria that can recycle carbon dioxide.

Carbon recycling takes our polluting carbon dioxide and carbon monoxide and, with the help of bacteria, turns them into ethanol. This can replace oil as the basis for carbon-based chemicals industries (e.g., fertilizers, plastics, clothing, health and beauty products, etc.), as well as offering sustainable fuel and animal feed.

Jennifer Holmgren, CEO of LanzaTech, joins Azeem Azhar to share her vision of the future where greenhouse gases provide a core contribution to our sustainable life.

Jennifer and Azeem dig deep into the science of fermentation and how to manage, at scale, the bacteria that are at the heart of their process. They also discuss:

AZEEM AZHAR: Hi, there I’m Azeem Azhar and this is the Exponential View podcast. As regular listeners will know, I make a habit of speaking with those at the forefront of technical innovation, those who enable transformative change by combining a radical vision with a technical expertise to turn that dream into reality. Few people embody that conviction and experience so completely as today’s guest, Dr. Jennifer Holmgren. Jennifer is an industrial chemist who even twenty years ago was advocating for the development of biofuels and chemicals in the face of considerable skepticism. Today, she leads a veteran startup, if there is such a thing in this field. LanzaTech harnesses bacteria to recycle out polluting greenhouse gases into the basic chemical building blocks of our modern industrial life, as they put it, “to use nature to heal nature without a fossil fuel sight.” Dr. Jennifer Holmgren, it’s wonderful to have you here.

DR. JENNIFER HOLMGREN: It’s my real pleasure. Thanks for having me, Azeem.

AZEEM AZHAR: Now, you are a chemist by training who has been fascinated by this question of how you turn waste into something useful. Can you just help me understand what was it about that problem that piqued your interest?

DR. JENNIFER HOLMGREN: I’ve been really interested in how to make all the things we normally make from petroleum and from fossil resources out of all of the waste carbon that’s already sitting above ground. That’s really the issue, right, is we keep digging more carbon out of the ground. And so the real question is all the carbon that’s waste, that’s already above ground, can we use that to make all the things we need? That’s actually what’s fascinated me. How do we use a different resource than fossil carbon?

AZEEM AZHAR: So, essentially, it’s a sort of recycling challenge, right? And the things that domestic homes do, we get our passata in the glass bottle, and after we’ve used it, we wash it out and we use it to hold our integrates, right, for the coming weeks. We find a new use, so we put it into the municipal recycling bins and some magical process turns it into fabric cover for something. But it’s more complicated with the kind of waste that you are looking at. Why is that?

DR. JENNIFER HOLMGREN: I wouldn’t say it’s more complicated in that it’s just chemistry and biology. So we have an organism that likes to eat waste and we’ve optimized it so that it can make the products we want. It’s not magical. It’s a natural organism and we have helped it do what it really wants to do.

AZEEM AZHAR: I guess the question is if it’s simple, why are we waiting till 2022 or beyond to do it?

DR. JENNIFER HOLMGREN: Okay, now you’re going to make me say, it’s more complicated. Everything is complicated until you’ve done it, that’s my view. So, now it’s simple. So, there was a time when nobody had tried this, right? And so of course at that time, it seems like an impossible thing to do. Can you actually get a bacteria to eat a gas? Can you get that gas to the bacteria? Stop and think about it for a second. If you want to ferment sugar, sugar soluble in water, and so the bacteria and the sugar are floating around. They find each other, it gets converted. In our case, these gases are not soluble in water. So we didn’t just have to develop the bacteria, we had to develop the reactor to make sure that the gases got to the bacteria so it could eat it. But each of these things is not complicated. It’s possible to do, you just have to make a decision that there’s a reason to do it. And the decision has to be based on the need. And I think maybe the need to get away from fossil carbon wasn’t obvious twenty years ago, was it? I think it’s a change in perspective that drives you wanting to change it.

AZEEM AZHAR: And your business LanzaTech is focused on exactly that problem. And it’s fascinating. You talk about twenty years because LanzaTech is a startup on one hand, but on the other hand, it’s approaching two decades in age. It’s a very different story, isn’t it?

DR. JENNIFER HOLMGREN: And I guess we’re a startup if you think about the fact that we’re still dependent on raising cash, right? That we’re still pre-revenue or at least pre being cash neutral or cash flow positive, but we’re not a startup in the number of years. But I want to talk about that for a second, because I think it depends on what sector you’re in. In the new process industry sector. If you want to really scale and get to commercial, and you’re doing something completely new, by the time you’ve gone from the lab to a pilot, to a demo, to a commercial, you are lucky if you can do that in fifteen years, right? And you have to take all those steps. Sometimes if you’re buying a big compressor, it takes twelve months to get a big compressor. It’s like ordering a plane, right? It doesn’t just get built and delivered. They’re not sitting on a shelf. It takes a lot of time and it does take more money at every stage. We call getting to the first commercial scale crossing the valley of death, because it just takes that much time, that much effort, that much equipment, that much capital.

AZEEM AZHAR: So, over the seventeen years, well, that takes us back to 2005. That was actually well before CleanTech One, when venture capitalists stood up and said, “This is going to be a trillion dollar opportunity.” And there was the really famous 2012, ’13 CleanTech bust where virtually everyone went to the wall and investors lost their shirts and firms shut down. Yours was an exception. What happened? How did you get through that?

DR. JENNIFER HOLMGREN: Well, we got through it with patient investors, right? People who had invested in software came to invest in these process technologies and they had the view that in two years you would have a product that you were selling. And that’s just not how it works in the process industry. I think patience, working through each of the steps, going fast but going slow. You know what I mean? You have to balance that. And one of our investors is Vinod Khosla as an example. He’s patient, he’s supportive, and he kept pushing us to go as fast as we could without being stupid and skipping steps.

AZEEM AZHAR: I just want to dig in a little bit to what that environment was like, 2012, ’13, ’14 as the funding disappeared. And one reason I think it’s relevant is that we’re coming through to another funding winter, right? That would be really helpful to share your experiences as a sort of leader of an organization that has this sort of deep science through a sort of shocking funding downturn.

DR. JENNIFER HOLMGREN: So, one of the things we did, right, we got to raise cash after the implosion, right? So of course, nobody wanted to touch anything that looked like an alternate fuel, but we were very fortunate that we had the support of the original investors, but also we went and looked for strategic investors. People who really didn’t care about how long to exit, but cared much more about, “Okay, if you are successful, you’re going to change my business. And I want a seat at the table.” And so, we ended up having a lot of strategic investors join us. And that’s what you’ll see from our investor list. The number of strategics versus the number of venture capital is quite, quite different. That actually, even though we did it at a need, ended up being a good thing, because what strategic investors often bring is perspective that you don’t have. If you have an investor from refining, you’re better able to integrate into a refinery, right? And you don’t have to learn all of that yourself, you bring somebody with knowledge. And whenever somebody invests in you, they have a stake in your success. So, they’re very willing to throw resources to help you understand how to work with them, how to integrate into their facilities, how to leverage all of their other knowledge. So, that’s one lesson. But I think this new clean tech wave is already learning from the first one. For example, Gates has Breakthrough Energy venture, right? And that fund is not a ten year fund. It’s a twenty year fund. So they realize it’s going to take twenty years to get some of these technologies to scale.

AZEEM AZHAR: And typically, just as a clarification, right, the typical venture fund is a 10 year duration fund, maybe with a two year or three year extension attached to it. And your point is that’s not long enough for a process technology.

DR. JENNIFER HOLMGREN: That’s right. It’s actually quite interesting. I don’t know if you’ve looked at the Gates ecosystem that he’s created, he also has a fund that is Breakthrough Energy catalyst, and that’s actually based more on philanthropy, is not a venture fund. And they’re there to help fund a green premium. And they’re collaborating with governments because they also realized that the first commercial, de-risking that, requires companies like us to be able to get a loan, to build a plant that’s going to be 50 to a hundred million dollars, right? Our interest rates are massive, right, because of the risk profile of the company and the risk profile of the new technology, right? And so people are learning that if they’re going to scale technologies like ours, they need to figure out how to finance them so that they can actually build hard assets. They need to figure out how to wait for the developments to actually go through a natural course. And I’m not saying go slow, okay? I absolutely don’t believe that. I think we need to go fast and make fast decisions, but there’s a natural order to things, right?

AZEEM AZHAR: Let’s step back and understand what LanzaTech really does. I mean, we’re recording this in summer and it’s similar to the drink of the summer, which is beer, right? So, we get some kind of carbon molecule, we put it in a tank, we throw in a microorganism and it produces this product that gets sold in cans, right, to accompany the barbecue. So that’s roughly what LanzaTech does, but tell us what it really does.

DR. JENNIFER HOLMGREN: Yeah. Yeah. Well, it does fermentation, which is exactly what you talked about, except it does it without the sugar and instead of yeast, it uses bacteria. So, what we do is we have a bacteria that eats gases, okay? It eats hydrogen, carbon monoxide, and carbon dioxide. So, instead of using sugar as food, it uses those gases as food. Now what’s important about that that is really massively different as well, is that you are used to making beer in a big vat, right? You just put in a big vat, you go away and come back three months later, or however long later, and you’ve got your beer. So, in our process, our bacteria makes ethanol from these gases in seconds, literally seconds. And so what we’ve done is we’ve developed a continuous bioreactor, gas in, product out.

AZEEM AZHAR: Right, so it’s not a batch mode because typically when you think about fermentation, you have these vats and someone in a white coat goes and stirs them every couple of days and eventually your product comes out. But yours is literally like a production line.

DR. JENNIFER HOLMGREN: Exactly. And so it looks more like a refinery, which means the throughput, the amount of product that we can make as a function of time in a specific sized reactor is much, much greater, right? You go in, you go out and you’re constantly doing that. And so that is a key difference because to me that makes this able to scale to the point of today’s fossil industry, in a slightly different way but that’s what we want to get to.

AZEEM AZHAR: But where do those gases coming from? I mean, we’ve obviously got atmospheric CO2, but it’s still kind of hard and expensive to get that CO2 out of the atmosphere. But what are the other sources of CO2 or carbon monoxide or hydrogen that you can make use of today?

DR. JENNIFER HOLMGREN: So, what we do is we work, for example, with a steel mill. They have 40 to 60% carbon monoxide. And of course that carbon monoxide cannot be emitted. It’s toxic, right? And so the carbon monoxide is usually burned, combusted to CO2 and that’s what gets emitted. So, carbon monoxide is essentially a precursor to CO2. So what we do is we capture that. We just compress that into our bioreactor and we prevent it from being emitted as CO2. And the bacteria loves carbon monoxide. If you give it carbon monoxide, it will convert it to ethanol. It doesn’t need anything else.

AZEEM AZHAR: Effectively, the process within your system has bacteria in water and carbon monoxide sort of bubbled through it for the reaction to happen.

DR. JENNIFER HOLMGREN: That’s right. And that’s the same thing as beer. The yeast is sitting in water, right? So it’s exactly the same thing. And then, because the bacteria’s alive, it needs vitamins and minerals just like you and I do. And so what we’ve done is we feed the bacteria this media recipe. And over time, what we’ve done is we’ve optimized it so in this continuous process, we use the minimum amount of vitamins and minerals to make it cost effective and we recycle the water. And that’s really important because in a continuous process, as opposed to a batch process, if you don’t recycle the water, you use a lot of water. The last thing you want to do is save your greenhouse gases while using a ton of water, right? You’ve got to fix those two things.

AZEEM AZHAR: And so, you have some mechanism to separate out the ethanol from the water, maybe just based on their density or something like that?

DR. JENNIFER HOLMGREN: Yep. We use distillation and it’s set up in a way that allows us to do water recycle and remove the ethanol and then take the ethanol and convert it to other stuff. And we also recover the bacteria. So, because the bacteria’s alive and reproducing, 10% of the carbon that goes into the system actually gets converted to just biomass. So, we recover some of the biomass and we dry it and it’s 90% protein. So, we sell it as animal food.

AZEEM AZHAR: If you do it through distillation, which means, I guess, you’re heating this up to evaporate off the ethanol, doesn’t that kill the bacteria when you get up to seventy or eighty centigrade?

DR. JENNIFER HOLMGREN: The bacteria has already been separated before we make it hot. So in the water recycling process, we separate the bacteria or we dump it back into the bioreactor. And then meanwhile, we take whatever’s left of the broth over to distillation. Yeah, yeah, yeah.

AZEEM AZHAR: Ethanol in itself is sort of a useful material, but the world that we live in that has all of these sort of hydrocarbon based products is much more than ethanol. There’s all the plastics, the polyethylenes, and the fibers. And there are feedstocks for other processes that are needed. And of course there are the fuels for aircraft and so on. S,o what else can the bacteria make? Is it the same bacteria that you use to do other things or do you take the ethanol and then sell that on someone who turns it in something more useful?

DR. JENNIFER HOLMGREN: So, we do two different things. So, we have bacteria that make other chemicals like acetone and isopropanol. And those are not commercial yet, but they’ll be commercial in a year’s time. We actually like to say we want to create a chocolate box of bacteria choices, so you can choose what bacteria, what chocolate you want to have today. So, are you going to make acetone or are you going to make isopropanol or are you going to make ethanol? So, you get to choose depending upon whatever is most valuable in the market. That’s the future we’re trying to create, but let’s talk about ethanol. So, you talked about polyester, right? Polyester starts life as ethylene. Ethylene is just ethanol without the water, right? Without the hydroxide holding onto it, right? So, the way to think about it is we think of ethanol not to blend with gasoline, but as an intermediate. You have all this carbon and all this energy distributed, you got an industrial gas over here and I can make 30 million gallons of ethanol. I’ve got municipal solid waste over there and I can make another 30 million gallons of ethanol. I can take all that ethanol now that’s carrying the waste carbon and energy, take that to a center location and convert it to polyester. I can take the ethanol to ethylene and then it’s exactly like the ethylene you make from cracked natural gas. It’s exactly the same. And you can make everything from it. And that’s what we keep saying, right? Why not make our polyester from that ethanol? Why not make everything from that ethanol? That’s what we’re trying to do.

AZEEM AZHAR: And one of the major areas that you have been working on has been sustainable aviation fuel. And I guess the idea there is that if you make your fuel through a LanzaTech process, you have a subsidiary LanzaJet process, that carbon dioxide that goes into it has already been accounted for. So, when it gets burned in the engines of the plane, the CO2 that comes out had already been accounted for and at some point could be reclaimed and put through that process again so it becomes a circular. Is it the same sort of process that we’re discussing now or do you take the ethanol and then you convert it into your jet fuel? Help me understand that component.

DR. JENNIFER HOLMGREN: You have to convert the ethanol to jet fuel. So our bacteria only makes the ethanol. And so then we use conventional thermocatalysis. We developed the process using refinery process tools to go from ethanol to sustainable aviation fuel. That is a hydrocarbon. You really got to fly on hydrocarbons because the energy density of an alcohol is too low.

AZEEM AZHAR: It’s a beautiful idea. And it’s a great design, right? We’re kind of using waste with well established, well understood processes. You apply some new science and some old technologies and some fancy machine learning and you produce these products and theoretically that kind of carbon cycle is closed and it’s wonderful. I suppose there are lots of kind of questions one has to ask, right? How big can these processes actually get? I mean, we are talking about billions of tons of CO2 being pumped into the atmosphere every month. And presumably we’re at the start of this journey, right? What does it take for us to get from where we are to where we might need to go to? Can we do this profitably? Can we account for it in dollar terms, but also in CO2 terms? And what are the sort of energy requirements for this entire process? That for me is a bit that I’m most excited about, right? Because if we can crack that, then we’re on a path to really sort of significant impact.

DR. JENNIFER HOLMGREN: Yeah. First of all, you’re right. The problem we have is massive, right? We use a hundred million barrels day of petroleum equivalent, okay? A hundred million barrels. And 30% of a barrel ends up going into stuff. Most people only think about fuels and power, but the reality is a lot of it goes to making the clothes you wear and the foam for your sofa. So it’s a massive problem, but I think we have to step out of the box, that we have to make it bigger. Petroleum is the densest liquid known to man. You can take it from wherever you get it and take it to a central location and build this 200, 300,000 barrel a day production facility, which we call a refinery. You are not going to move waste around. You’re not going to move municipal solid waste or steal no gas. And so your economies of scale are not going to come from building a really big one. Your economies of scale are going to come from building hundreds of identical, smaller ones that maybe make a hundred million gallons here, a hundred million gallons there, but it’s almost like making toys. You regarding your scale comes from replicating and making billions of the same part. And that is where automation will help, right? Because if you’re can have this distributed production system, you can’t have it all manned. And so, to me, if we’re going to create a different economy, we’ve got to step from the box that says, “We got to do it exactly like a refinery,” okay? I object absolutely to the notion that we’re going to get there from here if we think that way.

AZEEM AZHAR: Each refinery is a project. It’s sort of big bespoke, lump here. And what you are saying is we’re going to create a product that is consistent plug and play. Now that has a few advantages in my book. So one advantage, and I’d be curious if this actually is true for your technology, is the idea of the learning curve. The idea that with a doubling of cumulative production, you will get efficiencies in your engineering that will reduce costs and that’s why the cost of LED lighting has come down, so the photovoltaic. That’s why semiconductors have got cheaper and cheaper for the last sixty years. It’s Wright’s law. So, in the kind of technologies that you are using, do you see those sorts of learning effects or are the cost improvements really a function of just scaling and building more of them?

DR. JENNIFER HOLMGREN: So, you get both, right? So you build more of them and then of course you get cheaper at manufacturing them, right? But the other is we’re at the beginning of our learning curve, right? We just introduced this technology at commercial scale. The more we build, the more efficient we’re going to learn how to make them, right? And so we’re going to get both of those learnings and you get that exponential growth that really helps you to take it down the cost curve, both by replicating and by continually improving.

AZEEM AZHAR: So, I’m curious about whether in your modeling, you have worked out roughly what that learning rate is, right? What do you think it’s going to be at the doubling of cumulative production of these units? Would it be a sort of 10% wind turbine level, a 20% solar photovoltaic level, even higher than that?

DR. JENNIFER HOLMGREN: I think we’re going to end up being 10, 20, 30% initially. And then maybe in 10 years time, we’ll get to 10% better every single time. But the other thing we’ll do is we’ll get faster. There’s a lot of ways to get down the curve, but the most important thing to me is get off the curve that tells you we have to replicate our current system. We will not scale in the same way petroleum has scaled. We cannot. And we shouldn’t ask ourselves to.

AZEEM AZHAR: So, when you say a plant that is sort of standardized and kind of smaller than a typical refinery, how big is it? What does it look like? Is it contained and roughly what do you want it to cost?

DR. JENNIFER HOLMGREN: Yeah, so our plants in China, imagine a hundred meters by hundred meters, right?

AZEEM AZHAR: Okay, decent size.

DR. JENNIFER HOLMGREN: Yeah. Yeah, yeah. It is. And then imagine a bioreactor that’s probably like a four floor building. That’s how big they are, okay?

DR. JENNIFER HOLMGREN: Yeah, they’re quite big. So a refinery has a bunch of modules. This would be the equivalent of one module. So, imagine being at 20,000 barrels as kind of the size, and what you’ll do is you’ll have multiple modules of bioreactors. You’re not going to build one massive bioreactor, you’ll have rows of bioreactors. And then the distillation tower will be a big distillation tower. The compressors will be big, but you’ll just have modules of reactors.

AZEEM AZHAR: So, if we play those numbers out, a couple of hundred thousand ar day, you suggested, so that would be five plants would do a million, you’d need 150 plants to capture the full 30 million of barrels that go into making stuff for the sake of argument. What’s the implication if they are smaller than traditional refineries? Or who the customers could be, who could afford to build one of these and who would operate them?

DR. JENNIFER HOLMGREN: So, first of all, they’re not cheap. So, the first plant in China is about $50 million. So, just like in a refinery unit operation, they’re expensive, but let’s imagine that we put one in a rural area in India that uses waste biomass, right, that is collected in a local region. And then the biomass is brought in, it’s gasified. So imagine this integrated system. So, the farmer works with somebody that allows them to collect the waste biomass, it’s gasified, gives me feed stock for my microbe, so the carbon monoxide and hydrogen of the gas. There is a solid carbon that comes down the bottom, okay? That is actually put back in the soil. You actually are now fertilizing where you took all of this carbon off and then you make ethanol. So, here you’re going to be in a rural community. You’re not going to have a bunch of engineers necessarily running this plant. This plant will be automated and connected back to a central computer and it will be process controlled. So, there will be operators there, but there will be a computer somewhere else that is analyzing the data and controlling this remotely. We’re not doing that today, but that is the intention. And there will, of course be workers there working with the media, working with the biomass, working with all of these things, but the actual process control will actually be done at an integrated location.

AZEEM AZHAR: So, what are the net carbon benefits here from the technology? I mean, I was reading from one of your reports that if you look at sustainable aviation fuel, you reduce the carbon footprint of a sort of given output of energy by something in the order of 75, 80%, right? So, it’s quite a large improvement, but I guess our assumption at that point is that we are not using renewable power to run this process, right? And this should change once you can get your energy from renewables, but how would you pitch those sort of carbon benefits? What do the numbers actually look like now and in the near future?

DR. JENNIFER HOLMGREN: So, we typically, depending on what ethanol we use as feedstock, we’ll get a 60 to 70% carbon reduction in our sustainable aviation fuel. And like you said, as the carbon intensity of the grid gets better, that number will go up to 80 to 90%. We’ve done some work with carbon engineering, looking at direct air capture and integrating it to our technology. If you have enough green electricity, you can imagine directly capturing the CO2, you can imagine using electricity to make green hydrogen, and both of these things feed our microbes and we make products. So, you could eventually get to carbon negative, or at least net carbon neutral, right? Because the CO2 will always go out the end of the back of the plane, right? If you’re making a hydrocarbon, you’re burning a hydrocarbon, you cannot get away from that. So, you’ve got to capture the CO2 back. Green electrons are game changing. It’s not about power. It’s about being able to do a lot of other things like run process technology with green electrons, directly capture CO2, make green hydrogen, all of these things will be possible as we take that grid greener. That’s how we get to net zero on fuels.

AZEEM AZHAR: I look at this really, really simplistically, which is that a lot of what we have to deal with is the challenge of the second law of thermodynamics, right? We have to reverse this increasing entropy. We have to reorder molecules. We have to break certain bonds and create new ones. And all of that takes energy. And if we can get that energy renewably, it is almost magic, right? It’s almost magic. And then this for me is this idea of electrifying everything. It’s not about putting lithium iron batteries in planes, although you might want to do that for certain types of vehicles. It’s about, “Can we bring the energy to where it’s needed completely renewably with sort of zero carbon, whether that comes from geothermal or hydroelectric or solar or nuclear fusion?” That is the sort of route forward. I was a bit worried when something looks as sort of promising as all of that, is that really possible? Or is that something that where we’ll find ourselves tripping over ourselves?

DR. JENNIFER HOLMGREN: It is possible, but we need to remember how much steel we have to put in the ground to be able to do the things we’re imagining. And so, to me, the rate at which we can build the green grid and the facilities that then use the green grid, that is really the bottleneck. And the problem with climate change frankly is the rate. We’re losing on the rate side. And so to my mind, it requires two things. One is to go really, really fast and to learn for us to do things much more quickly. But the other thing it requires, it needs a massive mental shift. We just have got to stop thinking that we’re going to rebuild our world, our carbon economy by doing everything exactly the same way we did it before. And until we convince ourselves of that, then this dream that you and I are having right now cannot become reality.

AZEEM AZHAR: Our assumption has been that you need to spend a billion, $2 billion, building a combined cycle, gas turbine, power plant. You need to put it by a coast or a river. You then have to pipe high voltage electricity, 400 miles to wherever it’s needed. And these technologies that are decentralizeable in the sense of you are quite big facilities, but decentralized solar and so on do change architecturally what we can build. Are the energy demands of your process something that could be powered by a renewable system close to the plant, whether it’s turbines or solar panels? Or are they a bit more demanding than that?

DR. JENNIFER HOLMGREN: You could absolutely power them that way. It really depends on how much CO2 we want to convert and how much hydrogen we want to use at that site. And do we want to capture the carbon directly from there or from a flue stack, right? Each of these steps takes additional energy, but it is absolutely doable. Look at how much power Nevada gets from the concentrated solar power plant that it has there. So it’s not all going to be wind. It’s not going to be solar. It’s not going to be geothermal. It’s whatever is appropriate in that jurisdiction. And it’s the same thing as the feedstocks I use, right? In India, I’m going to use waste biomass, right? In Iowa, I’m going to use waste biomass. But in Tokyo, I’m going to use municipal solid waste. And that’s how we have to think is what is the right resource for that location? And one size does not at all, but there can be enough energy if we think about it right. And this is why distribution also matters, right? Because you and I both know how much energy do we lose trying to massively move these electrons around. It’s insane.

AZEEM AZHAR: One thing that I found interesting in talking to entrepreneurs like yourself is how I’m seeing the lens of modularity and productization be applied to these problems. A few weeks ago, I spoke to somebody who’s using an electrochemical process to produce hydrogen from water. And again, he’s saying, “Well, we’ve got a modular productized system compared to these bespoke systems that were built previously, and that will allow us to drive down costs. And that means that more businesses can invest in building these products.” I’ve spoken to people in building small, modular nuclear reactors, and it’s the same process. These things are barge sized, right? They’re bigger than containers and it’s the same process, right?

AZEEM AZHAR: You’re not talking about something that power an entire city. You’re talking about something that can be localized and safe and deliver into a particular use. But the thing that I wonder about is back to this idea of mental models. So, it’s not just existing industry and the executives in those industries who think in the big, old terms, it’s also sort of regulatory frames and how do the sort of government and bureaucracy look at this question? What are the shifts that are needed in that domain to get to this new way of thinking?

DR. JENNIFER HOLMGREN: You have hit what I consider the biggest hurdle. Legislation is often not technology neutral. And so if you do something disruptive, you cannot have a seat at the table. In the United States, the Renewable Fuel Standard, if I don’t make my ethanol from corn or from waste biomass, I don’t qualify for the same credits. And so you start to look at wiser legislation like Low-Carbon Fuel Standard. All it cares about is outcome, how much carbon reduction do you get that I can quantify and then give you credit for? So often legislation does not allow you to go fast because it’s not technology neutral. I really believe that to really get technology introduced quickly, you are going to have to remove the barriers that stand in your way through legislation. And I think one of the worst things that we do now is we let the perfect be the enemy of the good in legislation. Some of these biofuels are worse than fossil, petroleum derived similar products. Okay, I’m willing to grant you that. I am not willing to grant you that you would’ve figured that out on a piece of paper before you introduce the first biofuels. And so we get so nervous about not introducing the right solution that we let the incumbent fossil industry continue to do what it’s doing and then the new ideas are just hitting their heads against the wall constantly, trying to figure out how they can fit without being blocked out of the game.

AZEEM AZHAR: There is a mode where you are saying, “I need to experiment with this in order to understand whether it’s going to work. And I need a bit of regulatory space to do that. And I need a chance to course correct.” And there are some examples in other industries, right? So, in financial services, in the UK and in Singapore, the regulator has a thing called a sandbox where you can play around as an entrepreneur with a new idea under a bit more regulatory scrutiny. But I just wonder about these bigger, more complex things where you are building plants and so on and so forth. What do you think that regulatory interplay should look like? What’s a design for that?

DR. JENNIFER HOLMGREN: I think one approach is the incentives always need to be technology neutral. And then you need to have licenses for building 1, 2, 3, 4, 5 units of a new approach, right? Call them commercial demonstration. So, you’ve built your pilot, you built your demo. You’re going to build your first commercial. Say, “I’m going to give you three licenses. You can build it in three locations and then you’re going to build them, you’re going to run them and we’re going to see how they do. And we’re going to learn from that.” So, your regulator hasn’t opened some floodgate to some terrible technology that’s going to destroy the world. All the regulator has done is said, “I’m going to let you build three of these and we’re going to understand them and get our heads wrapped around them and then you’re going to be able to tell me how you’re going to make them better, and we’re going to work together to solve the problem.” This is magical thinking I know. The technology’s not magical, but the ability to work with government in a way that works.

AZEEM AZHAR: You and LanzaTech have experience of doing this in a number of different countries, jurisdictions. Who’s doing it well? And what can we learn from them?

DR. JENNIFER HOLMGREN: In China, the concept of a license to do a commercial demo exists. So you can build one, you can build two and then it can get into the mainstream. And so you can really understand the unintended consequences, you can understand how it works, how it fits into the ecosystem, and what type of improvement it can really have, right? I can forecast what my life cycle is based on a model but once I built one, I know exactly how much energy I’m using, how much water I’m using. And so you’ve got to build them. So, I think China does this rapid prototyping at the process scale quite well. The US, I believe, does investment in new technology really well at the department of energy level, for example. They help with even demonstration scale and Europe, I think does really well this push to focus on greenhouse gases and carbon. So, there’s a lot of technology there that’s being implemented based on that. And then India is just focused on independence. How do we use local resources? So everybody’s got a bit of the puzzle that fits their ecosystem.

AZEEM AZHAR: One thing you didn’t mention was carbon pricing and the extent to which that would accelerate some of the things that you and I discussed.

DR. JENNIFER HOLMGREN: Yeah. It’s funny, ten years ago, I would’ve told you we don’t need it and that we’re going to figure this all out. I couldn’t have been more wrong. We are not going to drive to new technologies, which are more expensive and they have to be. We’re competing with a hundred year old industry, right? And so getting down the cost curve cannot happen overnight. I believe the only way to make it work is carbon pricing. We charge people to haul their trash away at home. We need charge people for the carbon they’re dumping into the atmosphere.

AZEEM AZHAR: I always think the carbon pricing question is one that should be sellable to people on different parts of the political spectrum, because on the sort of left or more progressive end, it aligns with the sort of sustainability drive straight away. On the right of the spectrum. It adheres to the principle of polluter pays and polluter pays is a very, very simple, easy to understand even contractually enforceable mechanism that is non-political. You broke it, you fix it, right? That’s a model. So I have been surprised at how much resistance there has been to carbon prices. I think recently we saw the American Petroleum Institute last year, sort of suggest that this wouldn’t be a bad thing. This might be something that we need to bring in.

DR. JENNIFER HOLMGREN: I don’t know the reason for that to be frank because the concept of polluter pays is real. We pay people to haul away our trash and nobody objects. Has anybody said, “I am not paying for that?” But it’s part of a benefit that’s expected by your neighbors and yourself, by the city and everybody pays it. That’s the tax. Okay. Face it, that’s the tax.

AZEEM AZHAR: Take us forward ten or twenty years, you’ve been successful in your plan. Other parts of this new carbon system that are required have emerged and developed well. We’ve got different types of solar power and wind power in other places. We’ve got some direct air capture working cost effectively and at some scale we can produce hydrogen cheaply through electrolysis in different ways. What does the world look like then? What is LanzaTech producing? How does it feel different for businesses and for industry?

DR. JENNIFER HOLMGREN: So, first of all, I think fifteen years from now, I hope that LanzaTech isn’t the only company converting gases, and certainly not the only company converting waste or at least on a massive scale. So, that’s the first thing I want to see because we aren’t going to solve this problem by ourselves. My top priority is becoming a role model to show the world that waste feedstocks are a resource and that we can create what we call a post-pollution world. So, that’s the first thing. The second thing is I want to show the economics of distributed production. I think ten years from now, we will get into cookie cutter mode and we’ll be able to show that we can build a hundred of these at the same time for a cost per gallon of product that everybody can get excited about, that is competitive with what you would call petroleum derived product volume derived products today. And then the other thing I want to show is that a chemical plant can produce products just in time as needed in a local jurisdiction. So, again, part of the distributed model, but extended, not just to something like ethanol, but to a broad slate of chemicals. So, basically you start to say, “What do you want to make today?” And that’s what you make from a waste feedstock at your location and use and then you don’t have this massive movement of chemicals across the world. Those are the three things I imagine fifteen years from now.

AZEEM AZHAR: We could see perhaps fewer tankers across our seas moving LNG and petroleum. We could see municipalities actually producing industrial inputs at their waste reclamation centers. And those could be then be fed into factories or 3D printing farms that are actually local within municipality as well.

DR. JENNIFER HOLMGREN: You got it. Local resources, local products, not just farm grown, everything being made where you need it.

AZEEM AZHAR: That’s a compelling vision. Jennifer, thank you so much for sharing it with us and taking the time today.

DR. JENNIFER HOLMGREN: It’s such a pleasure to talk to you. This was a lot of fun, actually.

AZEEM AZHAR: Well, I hope you found this conversation as inspiring as I did. If you’re curious to dig in deeper into this emerging green economy, I urge you to explore our back catalog of conversations, especially those with Goldman Sachs’s Michele DellaVigna on the transition to a net zero economy and Ramez Naam on the transition to a net zero grid. Those are just two examples of many discussions that explore this unique time in our history from many different angles. I also write a popular newsletter, Exponential View. To become a member with 20% off your annual subscription price, go to www.exponentialview.co/listener. Today’s episode was produced by Marija Gavrilov, Fred Casella and researched by Chantal Smith. Our editor is Bojan Sabioncello, and this podcast is a production of E to the Pi i Plus One, Limited.