Report: Direct Air Capture Is Expensive. Is It Worth the Cost?
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Direct air capture (or DAC) technology – which removes CO2 directly from the atmosphere – has quickly become a cornerstone in plans to combat climate change. While DAC has widespread support from corporations and policymakers, it is still a nascent industry, and significant innovation is needed before DAC can substantially impact global emissions. A new report from Boulder-based cleantech venture capital and research firm Saoradh Enterprise Partners (SEP) analyzes the DAC market and identifies the most investable companies.
In 2021, global anthropogenic CO2 emissions hit almost 59 billion metric tons (or gigatons). As world powers struggle to commit to reducing emissions — most recently at the COP27 climate talks in Egypt — policymakers, corporations, and influential investors are increasingly focused on removing emissions directly from the atmosphere instead. There is a growing portfolio of technologies for carbon removal, but direct air capture (or DAC) is undoubtedly receiving the most investor attention. DAC is a very new technology with a challenging job — take ambient air and filter out the roughly 412 parts per million of CO2. Unsurprisingly, there are significant challenges ahead for DAC to make a dent in the billions of tons of CO2 emitted each year.
The Current & Future Market
19 DAC plants are operating worldwide, all less than ten years old. Cumulatively, these plants capture about 8,000 to 10,000 metric tons of CO2 annually. Recall that total CO2 emissions last year were about 59 billion gigatons. Growth forecasts are optimistic, however: the International Energy Agency (IEA) puts DAC capacity at 60 million metric tons of CO2 per year by 2030, and the Energy Transitions Committee (ETC) projects a capacity of 3.1 billion mt/yr by 2050. Many DAC projects are in development, including a Texas plant backed by Occidental that is expected to capture 500,000 mt/yr starting in 2024 (with the capability to scale to 1 million mt/yr).
This rapid scale-up may be within reach because investment in DAC companies is growing at an unprecedented rate. Investment reached almost $1 billion in the first half of 2022 alone, compared to just over $100 million in all of 2021.
Because the DAC market is so young, its current value is unclear. However, estimates point to a potential value of over $100 billion by 2030. For comparison, most forecasts put the overall carbon capture, utilization, and storage (CCUS) market value at around $800 billion in 2030.
Favorable policies are also driving the DAC market, such as the recent amendments to the 45Q tax credit in the US Inflation Reduction Act and the billions of funding created by the Bipartisan Infrastructure Bill.
The High Cost of Direct Air Capture
Direct air capture systems work by binding CO2 to either a sorbent (solid) or solvent (liquid) material. The sorbents and solvents used today aren’t optimized for DAC because they were initially developed for other industries, and few tools exist to determine the best materials.* This is emblematic of the DAC industry’s issues with efficiency, resource use, and operating costs.
DAC is a costly method to capture CO2. Currently, cost estimates range from $200 to $1,000 per metric ton of CO2 captured. DAC is hugely expensive because it is energy and sometimes water intensive. The energy demand to capture three to five gigatons of CO2 in 2050 will be 9,000 to 15,000 terawatt-hours (TWh). For context, the entire world currently uses 27,000 TWh per year.
Solvent systems require massive amounts of water: one to seven mt of water for every mt of CO2 captured. However, sorbent systems may produce water. Researchers found that scaling up carbon capture (including DAC and other technologies) could double humanity’s water usage. For these reasons, SEP’s report analyzes industrial carbon capture and other alternative approaches to DAC, as well as the innovations that can reduce DAC’s resource demands and improve efficiency.
*Note: One notable group working to develop screening tools for this purpose is the PrISMa project at Heriot Watt University in the UK.
Interesting Companies
SEP identified 63 notable companies in this space. The scope of this search included R&D, strategic management, solvent and sorbent innovation, modular DAC systems, supercritical CO2 technology, DAC components, and CO2 production and transportation. SEP found 19 of these companies to be especially interesting to potential investors. Most are working on sorbent systems. The complete database of companies is available upon purchase of the report.
PURCHASE THE REPORT
The Direct Air Capture Topic Report is 244 pages and includes:
A global database of notable companies (with a US focus).
Two hours of individualized support from the SEP team.
Find more details, including an executive summary, and purchase the report on the SEP Marketplace.
ABOUT TOPIC REPORTS
Topic reports explore cleantech investment spaces with the aim to calibrate investors, uncover opportunities, and identify possible solutions to Solving Climate+ by 2050. SEP produces topic reports twice per quarter to gather data and insights important to evaluating key cleantech investment spaces as part of our Innovation Flow Reporting (IFR) service. Recent and upcoming reports include BattRe (lithium-ion battery recycling), Biochar, Bioplastics, Clean Food, Concrete and Cement, Desalination, Direct Air Capture, Nitrous Oxide, and Refrigerants.
ABOUT INNOVATION FLOW REPORTING
SEP’s Innovation Flow Reporting (IFR) service is designed to illuminate innovation hubs and identify and capture the best cleantech commercialization opportunities for SEP and our corporate clients. More than just market research, Innovation Flow Reporting delivers actionable information. IFR uncovers new cleantech opportunities for corporate venture capital offices, innovation programs, product development teams, and R&D departments. We know it works because we use it to drive our investing.
ABOUT SAORADH ENTERPRISE PARTNERS
Saoradh Enterprise Partners (SEP) is a cleantech venture capital and research firm based in Boulder, Colorado. SEP partners with innovators, entrepreneurs, and corporations to find solutions at the magical intersection of science (what’s possible), finance (what’s bankable), industry (what’s needed), and planet (what matters). Learn more at www.saoradh.com.