Cryogenics and Carbon Capture with Chart Industries

In the sixth episode of the Energy Transition Podcast Series, Chart Industries CEO, Jill Evanko, along with Earthly Labs and Sustainable Energy Solutions(SES) Founder/CEOs Amy George and Andy Baxter, join Energy Oilfield Services & Equipment Analyst Marc Bianchi to discuss how Chart’s suite of cryogenic equipment and services complement a growing portfolio of clean offerings, with a focus on carbon capture, utilization, and storage. Listen to the podcast

Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Marc Bianchi:

Hi everyone. Marc Bianchi from the Cowen energy team on this installment of the Cowen Energy Transition Podcast. I’m joined by Chart Industries. Chart has a lot of different ways to participate in energy, transition and sustainability. Be it through natural gas, LNG, hydrogen or water to name a few. Today, we’re going to focus on carbon capture. Joining me from Chart, our CEO, Jill Evanko, as well as Andy Baxter, founder and CEO of SES, and Amy George, founder and CEO of Earthly Labs.

Marc Bianchi:

Both of these companies Chart has acquired in the past couple years and contribute to Chart’s growing portfolio of energy, transition, and sustainability offerings. So with that, thanks everyone. Before we get into the discussion, maybe we can just go around the table here and have everybody quickly introduce themselves and talk about how you got to where you are today. So Jill, you want to start it off?

Jill Evanko:

Great to be here, Marc. Thanks for having us. And I’m Jill Evanko, CEO, president of Chart industries. Where our focus is on cryogenics, which go into a variety of different applications. So looking forward to the conversation, Andy.

Andrew Baxter:

Yeah. Thanks Marc. It’s great to be here with Jill and Amy and you. I, as you mentioned, started Sustainable Energy Solutions back in 2008. And we started working with Chart in 2012 as really the leader in some of the cryogenic equipment that goes into our system. And just a little over a year ago officially became part of Chart.

Amy George:

Hi, I’m Amy George, founder and CEO of Earthly Labs. We’re thrilled to be part of the Chart family of companies, helping to power the nexus of clean. I founded Earthly Labs in 2016 as part of the Carbon XPRIZE to address the challenge of climate change. With the vision to capture and avoid CO2 from small scale emission sources. We’re thrilled to expand on our vision to tackle the needs of many industries and people around the world with Charts help.

Marc Bianchi:

Awesome. So just jumping in Jill, let’s start with Chart at a high level. So since taking over as CEO a few years ago, you’ve done a whole lot of acquisitions investments, you’ve signed MOUs. All of this positioned the company to capture more of the energy transition value pie. So for people that may not be familiar, can you just give us a little background on the company? What are cryogenics? How do you participate in that part of the market and why is that a good platform to build all these energy transition offerings off of? And then along with that longer term, what’s the vision here? How much of this pie do you want to capture and what are maybe some other areas that aren’t fully out today that you could see building out over time?

Jill Evanko:

Our expertise at Chart is our design engineering and manufacturing of cryogenic process technologies and equipment. So what’s pretty amazing about cryogenics is that they work with a variety of different molecules and handle these for many applications. We have engineering and manufacturing locations in 28 different geographies around the world with over 50% of our team and our revenues outside of North America. So within the value chain of any given molecule, we provide process and equipment to customers that produce and own the molecule. We provide storage and transport equipment to those same customers that produce and own as well as move the molecule to the end use state, which is the third bucket in the value chain.

Jill Evanko:

So that’s a great way to think also about the energy transition and the move towards sustainability and ESG. There are many different molecules involved and we’re able to help with them all with our core equipment. And then what we saw was that for example, a heat exchanger can be used in LNG or hydrogen liquefaction or helium or in carbon capture. So utilizing our core competencies of cryogenics and applying to a variety of different end applications in markets actually keeps us focused on our core competency. While taking advantage of the different solutions for the nexus of clean living or referred to. Which is clean power, clean water, clean food, and clean industrials.

Jill Evanko:

So I talk about the nexus of clean because we believe many of the applications and processes in our portfolio can be leveraged to work together as a movement towards sustainability continues. You’ll hear today in this discussion with respect to our food and beverage customers that are looking at using our carbon capture solutions or our CO2 tank customers that are in the cement industry as an example that are looking to the SES solution for carbon capture. So each of the applications in our business around technology for CCUS also go hand in hand with our water treatment offering. So the list goes on.

Jill Evanko:

These are just a few examples. We’re very pleased with where the portfolio sits today, after the organic additions to it over the last couple of years. And so our vision is to look at innovative solutions and first to market options for the specialty areas of the business. Things like we introduced last week, a containerized water treatment option for the front end of hydrogen electrolysis as an example. And ultimately be the leader in capturing our enormous addressable market in these areas this decade. And that addressable market between now and 2030 for our specialty applications is over 30 billion dollars.

Marc Bianchi:

Awesome. Well, so we’re going to talk about carbon capture, but before we do that, let’s just talk about the CO2 market today because that CO2 use and CO2 just as a molecule is a product that’s used. Can you talk about what that business looks like today for Chart and how if at all CO2 is different from the other gases that your equipment touches?

Jill Evanko:

So the interesting part of how we went from our traditional CO2 offerings to adding carbon capture capabilities was the natural synergy of our CO2 equipment to the users of CO2 and their need for access to it. From a commercial perspective, it was really a natural fit. And then from building out our ESG portfolio, it also fit really well. So the traditional applications for the equipment that we supply into CO2 are for example, Carbo-Max tanks, which are for micro brewing or food freezing, are larger tanks for concrete curing, for which CO2 reduces time and expense on the concrete pouring side. CO2 tanks for dry ice storage. We have a Carbo-Max 750, which is for enhanced cannabis growth that utilizes CO2.

Jill Evanko:

And probably the one that I think is the most fun is the decaffeination of coffee. So super critical CO2 is used to decaf coffee. If you look at how is it different? How is CO2 different? It’s really in the properties of the molecule, different than other industrial gas products, such as nitrogen and argon. It’s stored under pressure as a liquid, but used as either a gas or solid in a number of different application areas. Think about it as liquid CO2 can’t exist at atmospheric pressure.

Jill Evanko:

It’s a unique property where it’s pressure is below approximately 74 psig. It actually goes directly from liquid to solid. In the solid state of CO2, which people generally know it as dry ice, has numerous industrial applications. CO2 is also non-reactive with other materials, will not support combustion and is heavier than air. So you see the qualities of it as a molecule, which fits all of these applications that I refer to.

Marc Bianchi:

Mm-hmm (affirmative). Okay, great. So before we talk to Amy and Andy, can you just introduce SES and Earthly for the listeners? How do they fit in with Chart from a high level? How material is the business today and where do you see that going?

Jill Evanko:

So Amy and Andy are each going to give an overview of their businesses. So I won’t go in a lot of detail on this, but from Earthly Labs, which we acquired in December of 2021, that’s our small scale carbon capture solution. And you hear us talk about it for agriculture, food and bev, amongst other end markets. Earthly Labs’ application is commercialized right now. The demand for this application is phenomenal in the current state where we sit today. And that’s really driven by the fact that the CO2 users view this as an easily installed option in a variety of different locations. It’s small enough that it can fit where it needs to fit, within a craft brewery, as an example. And it also has a very near term payback period from an economic perspective.

Jill Evanko:

Our SES or Sustainable Energy Solutions, cryogenic carbon capture technology, which we purchased in December of 2020, is one that as you heard from Andy, we’ve worked with, for over a decade. It’s targeted to the larger application side, and we’re seeing good traction in feed or engineering work in particular with industrial customers that have large existing plants or existing applications or assets that they need to address their CO2 emissions. I will share that SES received the Department of Energy Award from the USDOE last quarter, with their process at Central Plains Cement Company’s plant in Missouri. And the project will scale our CCC system to a capacity of 30 tons of CO2 per day. So that’s a really strong step forward in getting the recognition from the USDOE.

Jill Evanko:

Additionally, just to brag a little bit on Andy and SES, researchers from MIT and Exxon also analyze the competitiveness of several types of carbon capture and storage technologies in an economic model. And the specific model here was around the manufacturing of cement. Which accounts for approximately 7% of annual CO2 emissions. The SES CCC was determined to be the most competitive technology. And in that analysis, it was determined that the cost for cement and capture CO2 using our SES CCC technology is only 24% higher than producing cement with no CO2 capture.

Jill Evanko:

And that doesn’t account for an any value of the CO2 that has been captured. In other technologies, the additional cost range from 38% to 134% higher than just running the plant by itself. So we love these markets. We think that they’re actually in very early days and looking to commercialize more on the larger scale and see that footprint of opportunity expand for both SES and taking the Earthly Labs offering into the international markets.

Marc Bianchi:

Great, great. That’s a good overview to kick it off. Amy, let’s talk about Earthly. My really simplistic, late person understanding of all of this, right, is that if we’re making alcohol, there’s fermentation involved, fermentation creates CO2, and then if we’re going to have beer or something like that, you need fizz and that’s a product of CO2 that we’re using. So instead of emitting CO2 and buying CO2 from someone else, you’re putting a whole closed loop process together. So I don’t know if that’s a reasonable way to describe it. Maybe you’d correct that some way, but just add to that if you could and help us understand the business a little more.

Amy George:

Absolutely, Marc. You did a great job of describing it perfectly. We do focus to broaden the footprint, small scale emission sources. We’ve developed technology that allows us a very small footprint where when you think about carbon capturing the abstract. To date most of it has been really large scale point sources. And we’ve focused on affordability of the technology and ease of use. Most of our customers, aren’t chemical engineers. And so what that means is we’ve got to leverage automation and software to make it both easy to use and maintain and sustain that value proposition that we provide. As you pointed out our first featured market has been in the beverage sector, specifically in craft beer.

Amy George:

We have expanded that to include wineries and distilleries in the larger beverage market and cideries and [inaudible 00:12:49] and other beverage spaces. But also fermentation in the bio pharm is an area of growth for us. We are the leader in the world at this scale, with more solutions than anybody else. And we continue to look for ways to… Chart has done, make our technology molecule agnostic, or to at least leverage a core platform where you could add modules to open yourself up to new markets. What’s exciting about being part of Chart and SES, we think SES has an amazing platform. And so we together are imagining how we integrate what’s great about both platforms to allow us to tackle the in between.

Amy George:

But we do have a vision as you described of this circular CO2 marketplace, which today may be in the billions that is forecasted to be in the trillions. That will require us to both track the molecule on the software side, monitor it, report it, and ultimately convert it, sell it or recycle it to keep it out of the atmosphere. And we think there’s a great opportunity for Chart to monetize that data layer for the benefit of our customers and also for the planet.

Marc Bianchi:

Excellent. Well, there’s an upfront cause. There’s a cost to run your equipment, I suppose. But that’s offsetting a purchase cost that you would otherwise have if you had to go buy CO2 from the marketplace. So there’s a payback period element here.

Amy George:

Yeah.

Marc Bianchi:

Could you just explain what those payback periods look like? Is there any kind of cost reduction roadmap that would play into that as we think about the opportunity over time? Just talk to us about some of the costs, if you could.

Amy George:

Yeah, absolutely. So we picked the craft beer market because as you described, there is an easy, a close loop opportunity from a waste reduction and also a quick payback period. So as we imagine, climate tech has to start somewhere to find folks where there’s easy market drivers, helps adoption. In the case of our customers, most of them realize a payback in two to three years timeframe. That’s at the aggregate. There’s a big swing in the cost of CO2. So in a given market, it might be 38 cents, in more rural or far away places it might be as much as $2. And in a post COVID world, the prices have been extremely volatile under force measure, or most of them. And also the surcharges for that product have gone up.

Amy George:

And so that has taken that two to three year average down. Some of our customers, depending on where they are on that curve could be under a year. And we saw a lot of folks who couldn’t get CO2. So shortages have happened because plants have turned down. Either it didn’t make sense for them if they were connected to traditional energy to keep running. So the actual volume of CO2 in the commercial sense has gone away. And we see that with the energy transition continue to play out. And so just last week I was talking to a customer. And if they didn’t have the CO2 recovery system, they wouldn’t meet their revenue targets for production. So it’s an insurance policy that pays for itself in a matter of months.

Amy George:

So we’re helping people achieve their revenue goals. So, that’s one way we think about value. The thing we haven’t yet captured is the potential future around carbon credits or trading or tax incentives. We have seen just since I launched the company, the targets of the 45Q regime we’re at 500,000 metric tons, and now we’re in the tens of thousands. So we expect that continue to drop and folks who are making these investments be rewarded for it. And again, we have the software layer and reporting tools to help them take advantage of that world.

Marc Bianchi:

Right. Yeah. Verifying is going to be a really important part of all this. I guess, you mentioned some prices before, and because I’m not in the marketplace for CO2 all the time. What units are we talking about there?

Amy George:

The prices I was talking about is pennies per pound of CO2.

Marc Bianchi:

Okay.

Amy George:

So those are US CO2 prices. Again, we see pricing different structures, of course, all over the world, but most of our customer are looking at pennies per pound. In addition to the CO2 price, they also have delivery fees and CO2 storage fees. What’s also great about Chart in the cryo-leasing program is our ability to take this big CAPEX expense and convert it to a monthly lease, either direct through Chart or through their partners. And in doing so in many cases we could offset their cash flow position so that they’re actually spending less, but getting their own CO2 in more pure form at a reduced cost.

Marc Bianchi:

So you mentioned branching into now wine, and then there’s a cannabis angle. Maybe talk a little bit more about that. But then I think you also mentioned, I don’t know if you said bioenergy, or if there’s a bio-fuels angle that you could be addressing over time. Just maybe talk about the applicability there.

Amy George:

Yeah, absolutely. We do have cannabis applications presently. We have partners on the brink side that have, or sell excess CO2 to cannabis growers who use CO2 to stimulate the growing cycle and yields for their plants. We’ve also had demand for broadly agricultural products that use CO2. So we continue to look for those CO2 exchange partners and activating that marketplace as well as, how we can capture excess CO2 at the extraction phase of where there is a lot of loss in that super critical phase of super pure CO2. So those are two ways that we see in the short term. Long term, looking at how we help recover the CO2 in the greenhouse itself. On the biofuel side and bio based product, we do see pharma as an immediate opportunity.

Amy George:

It’s very similar to what we’re doing in brewing, but it’s a whole different marketplace. And have interest there as well as dry ice, again, similar. They have loss in producing dry ice that if we can help them recover, that gives them more product to help distribute vaccines as well as meet the needs of the marketplace for dry ice. Specific to energy, that is our third wave, if you will, vision at Earthly Labs.

Amy George:

What’s super exciting in working with SES is they have an amazing platform for less pure CO2. So coming out of combustion, and Andy will talk to you about that, but there is a gray area. So we have been approached to address the CO2 slip streams that come off of some of the energy sources that are more pure. And we’re excited again to leverage the tech and knowledge out of SES and our working active leader to address that opportunity both in the US and in Europe.

Marc Bianchi:

Great. Well, maybe that’s a good segue to ask Andy, if you could talk to us a little bit about SES. Maybe give us a 101 on cryogenic carbon capture. How’s that different from more conventional types of capture? Which I think of things like aiming. So that’s sort of being the conventional, but maybe you would describe it a little bit differently. And are there certain applications that a cryogenic capture might be better suited for versus more conventional methods?

Andrew Baxter:

Thanks Marc. It seems like carbon capture, the definition of that and what it’s describing expands all the time and changes quite a bit. So maybe I’ll start off trying to define what I’m going to be discussing here, which will be post combustion, cryogenic carbon capture. And as you said, traditionally, the current technology for that is a means or solid sorbents or what has been traditionally used in most of the demonstrations that have been done to date. Those technologies use a chemical reaction to capture CO2. So they use either a solid or a liquid based chemical that can absorb CO2 and then they heat it up or something to de-absorb the CO2 as a gas. Cryogenic carbon capture in the post combustion sense that I’m talking about here.

Andrew Baxter:

The difference is that we separate the CO2 in a very different way. It’s not a chemical reaction. And in a lot of ways, it’s a much simpler concept to understand. Everybody knows if you cool something down enough, it will freeze. And all we do basically is cool down the gas that would normally be coming out of a stack at a power plant or a cement plant or other industrial facility, to the point where the CO2 freezes and forms a solid or forms dry ice, essentially.

Andrew Baxter:

And then we can separate that solid from the other gases, which are nitrogen, oxygen, basically air that just came into the plant at the front end for the combustion. And those can be released to atmosphere. And then we can just warm up that solid CO2 under pressure, turning it directly into a high purity liquid stream that’s ready for transportation and use.

Marc Bianchi:

Does the flue gas need any treatment prior to the

[inaudible 00:23:10]

process or are you just taking it right out of the stack into your equipment?

Andrew Baxter:

So the applications that we work on are not very homogeneous. There’s a lot of difference from a different industrial plant to a power plant, depending on what’s being burned and what’s already there as far as treatment goes. But our process handles contaminants in the gas pretty robustly. So under a typical scenario, we don’t need to do additional treatment before we go into our system. In certain scenarios, there may be some treatment required, but our standard design doesn’t require any additional treatment. Which is different than current technologies that are more sensitive to things like sulfur and nitrogen compounds that are in the gas.

Marc Bianchi:

Mm-hmm (affirmative). Okay. And so you’ve got these pilots and you’re working towards commercialization, I guess. Talk to us about the pilots you have. Where are you in progress there? What are next steps? And then also why those pilots? Why not some other application? There’s hundreds of applications that the world is looking at for carbon capture. Why are you picking these to demonstrate and commercialize?

Andrew Baxter:

So some of the great benefits of our technology are that it’s a lower cost, lower energy technology and an easier retrofit technology to existing systems than immune systems or other more mature technologies that are out there today. And so that allows us to do what Amy’s trying to do, but more on a wholesale basis, a little bit larger scale which is, look at for what we call small commercial markets, where we can produce CO2 today at a specification and a purity where it’s ready for transportation and use and can be sold into existing markets where that CO2 has value. And so the pilots that we have going that are publicly announced, Jill mentioned, there’s one that we’re doing at a cement plant in Missouri with Eagle materials.

Andrew Baxter:

And we have a few others going on at some industrial sites in Florida, some international projects at refineries. And in each case, these customers came to us with challenges that they have and solutions they needed for ESG goals or for actually CO2 supply that they were looking for. And so we really appreciate the relationship we have there with them.

Andrew Baxter:

From our perspective, what we are looking for is strategically important markets, where we can build a project today that’s commercially viable. Looking at CO2 pricing in the local markets and also incentives for CO2 capture. But also these projects are the tip of the spear for getting into long term strategically important markets like industrial cement power generation. And so that intersection of our long term strategic goals and current commercial opportunity is what we’re looking for in these pilots.

Marc Bianchi:

What does a competitive landscape look like for cryogenic capture? I’m aware of Air Liquide, for instance, has CryoCAP. I don’t know if that’s trying to solve the same problem or do the same thing as what you have. Maybe it’s quite a bit different. But just talk to us about who else is doing this and how your offering might be different.

Andrew Baxter:

Sure. Yeah. Starting with CryoCAP, the one you brought up specifically. It’s a great technology. It’s been around for quite a while. Mostly focused on removing CO2 from hydrogen streams, traditionally high pressure hydrogen streams with relatively high CO2 content. And the cryogenic part of CryoCAP is in the CO2 purification step. So it’s a little different than what I just described earlier, where we are separating the CO2 by cooling the gas down to the point where the CO2 freezes and we separate it. What CryoCAP does essentially, and again, hopefully this is clear to everybody, but I’m not a representative of Air Liquide or CryoCAP. So you can follow up with them on this.

Andrew Baxter:

But what they’re doing essentially from a cryogenic standpoint is the purification of the CO2. So taking an already pretty pure stream of CO2, getting it a little bit pure and getting it into a liquid form. When they’re doing post combustion or flue gas treating, they’re still looking at really high, relatively high CO2 concentrations, but they typically couple their technology with a different technology, like a pressure swing absorption technology to do the initial CO2 separation. Which is really what we’re doing on the cryogenic side. And then they go into their cryogenic distillation system. So the cryogenics are more on the CO2 purification side and that’s very different than what we’re doing.

Andrew Baxter:

From our perspective, in terms of cooling the gas down to the point where we can freeze the CO2 and separate it, there are some other companies and other people who have pursued things similar in a thermodynamic sense. Some of those in the past have been Alstom, which is part of GE now, and ATK the rocket company. And in most cases or in every case, the real challenge to do this in the right way is to get the heat integration right. So people do the thermodynamics and say, “Okay, I can see where this could make sense,” but you have to be able to recover as much energy as you can in this process in order to really make it energy efficient.

Andrew Baxter:

And that’s where working with Chart is terrific, because Chart really is the world leader in heat integration and heat recovery in processes like this. And the other trick is we’re forming solids in our process and handling those solids has been a major hurdle for some of these other technologies to be able to operate in a reliable way. And we’ve got actually 65 patents now filed in the space, but a lot of those cover that solids handling in a reliable way. And so we feel pretty comfortable saying that in terms of this post combustion, cryogenic carbon capture space, the way I described it, we’re the leaders currently. And there’s some other interesting maybe next generation ideas that are out there, but we continue to innovate and move things forward.

Marc Bianchi:

Awesome. Well, that was really helpful. I didn’t appreciate a lot of those aspects of the technology. Maybe if you could talk to the extent you’re able to about the cost structure. If we think about it on a cost per ton of capture, what does that look like today? Do you have a target and what’s needed to get to the target? Where is the cost out coming from in the process?

Andrew Baxter:

Yeah. So on a cost per ton basis both your capital costs and your operating costs are going to vary quite a bit, depending on the application and the scale. But speaking of full industrial scale applications, current technologies are usually estimated to be somewhere between $50 and $110 per ton of CO2 captured. and-

Marc Bianchi:

And this is conventional. This is like everything that’s happening in the world today. Not you’re working on necessarily, you’re just describing the market.

Andrew Baxter:

Correct. Yeah. So our target is about half that. So it’d be between $25 and $50 per ton is about where our target is for these large scale implementations of carbon capture. So that would be on anything from a natural gas combined cycle power plant to a natural gas boiler, a coal-fired power plant or a cement plant. And that’s roughly the order of the CO2 concentration in the gases as well. And so, as you work your way from the lower CO2 concentration in a natural gas turbine type application to a higher CO2 concentration, all the way up to a cement plant, your operating costs for all technologies, including ours will decrease.

Marc Bianchi:

So, okay. Scale is a huge driver of it. Beyond scale, what would be the next two or three items that are going to drive cost out for you? If you talking about electrolyzers and things like that for green hydrogen, it’s learning rates and just producing more and more of these things, you get better at your process. Maybe that’s an example. I don’t know if what you would say are the number two, or number three things.

Andrew Baxter:

Sure. Yeah. CO2 concentration in the gas you’re treating is important. Scale is important. Another important aspect to cost driving is the CO2 purity and pressure that you need for the end use of the CO2. And so there, we’re pretty uniquely suited to deliver a high purity, high pressure CO2 that’s ready for pretty much any use. Within our own technology there certainly is a lot of room for working through the learning curve and working with vendors to decrease costs over time. As Jill mentioned, this is an industry that’s just taking off and our technology’s getting off the ground right now as well. And so there are some areas where we can certainly save on capital costs as we expand and scale the technology.

Marc Bianchi:

Great. Well, maybe Jill, we’re talking about SES and Earthly today, Chart also has an investment in Svante. Maybe you could just talk through what that technology’s all about. Why it makes sense for Chart and what the outlook is.

Jill Evanko:

Yes. So we believe there’s room in the market for multiple technologies. Always a proponent of the right application for the right solution and technology. We also believe there’ll be further innovation as you just heard in evolution in the carbon capture technology world. Obvious, our view as Earthly Labs and SES are good jumping off points for cryogenic carbon capture. And we’re in the process of organically making these more efficient and adding innovations.

Jill Evanko:

Svante therefore fits really well with us in that they do have a low CAPEX solution. And as Andy described, we have a very high purity solution. So we do work together with them on actual projects, as well as on looking to innovate the two together or pieces and parts of the two together. One other thing I’d mentioned is that Chart equipment, including [inaudible 00:34:15], cold boxes, SMR systems, tanks, and list goes on, can be used in both SES and Svante applications. So there’s a pull through from a commercial perspective as well.

Marc Bianchi:

Okay, great. Well maybe talking about the carbon capture strategy more broadly for Chart. So, there’s other aspects of the more market that, what we’ve talked about so far, you’re not necessarily addressing. So if I think about transportation and storage in particular, are those parts of the market that Chart could be getting involved in? There’s companies that are offering carbon capture as a service. Is that something that you’d be considering, or is it really just going to be offering equipment, servicing equipment? Maybe you’re doing some leasing of equipment, but it still really revolves around the equipment side of the business than necessarily carbon capture as a service or owning storage or doing some of these other things.

Jill Evanko:

So in our water treatment business, we took the model of treatment as a service in play. And that’s been pretty successful. As you heard, we’re technology agnostic related to our equipment. So we always looked for the equipment sale and leverage all the technologies that are out there in particular our air coolers being used across the board in CCUS applications. So we’ll continue to take advantage of the equipment play as the primary approach here, but we will expand in…

Jill Evanko:

Think about the world, as we have been in water and for what are customers really looking for, we will not own the CO2. So you’ll never see us actually getting into owning or selling the molecule itself, but things like offering leasing options, the treatment as a service option, Earthly Labs, online app that tracks and connects CO2 credits and customers, buyers. All of these are areas that we’re looking to further develop.

Marc Bianchi:

Mm-hmm (affirmative). Okay. Something that always comes up with talking about the build out of CO2 or CCS, and the opportunity for market is there’s a bit of a chicken and egg. Right? Where you have potentially somebody that wants to do a lot of capture, but there’s nowhere to put the storage. Or you can’t pursue these projects unless you have storage, but you’re not going to go build a storage project unless you’ve got certainty of people that need to store their carbon.

Marc Bianchi:

So there’s a chicken and egg. There’s some solutions. North Sea has a bunch of hubs that they’re doing. Exxon and [inaudible 00:36:59] are talking about doing it on the US Gulf coast. Do you see that as a gating factor? And how realistic is it that we start to see some major hubs? And does that open the floodgates in the US? Can we do that without government support? Just maybe talk to us about how you’re seeing that whole part of the market.

Jill Evanko:

So there’s definitely an element of government support and it’s varied, obviously, depending on the countries, where the country strategies are. In particular in the US, our belief is that having a standardized 45Q as an example at the right level, we’ll kickstart some of these projects that are trying to get there economically.

Jill Evanko:

We also though believe that there’s certainly an element of being self-sustaining as an industry, and that has to happen over time. So the view is that some of these major projects are waiting on further government support or funding. And ultimately the industry, once that gets going, has to address the cost challenges that you’ve heard Andy talk about already on this call. But we do think a standard 45Q number across the board in the US would help.

Marc Bianchi:

And what number? Just because [crosstalk 00:38:23] we’ve got right… There’s potential upgrade to this in the next iteration of Build Back Better, which-

Jill Evanko:

Absolutely. And I’m going to let Andy apply on it, because he deals with his customers on a day by day basis. There’s a certain spectrum, right? Everybody wants to go really high and my view is a little bit tempered from there just so that it doesn’t generate the wrong behavior. But Andy, why don’t you give your number?

Andrew Baxter:

Yeah. So government regulation on intended consequences are things that go hand in hand sometimes. Right? And so I think Jill’s really wise there. So what I think is a reasonable approach would be to take into account the cost and value of CO2 that you’re capturing from different sources. So it’s very different to take an already pure CO2 stream and compress it and put it in a pipeline as opposed to taking something that has maybe 3% CO2 in it and separate that CO2 out and put it in the pipeline.

Andrew Baxter:

And so the numbers that have been tossed around range from where we’re at today. Which is $35 to $50 per ton, all the way up to over a hundred dollars per ton. And I think that those higher numbers would be reasonable for some of the higher cost and lower value areas that we need to decarbonize. But I’d like to see something that takes into account the difference in the value and the cost from those different sources.

Marc Bianchi:

Yeah. That makes a lot of sense. Is there discuss around that you’re aware of as some of these proposals are coming together?

Andrew Baxter:

There is actually the executive branch and the Biden administration gave some comment along those lines during the Build Back Better discussions and negotiations where some of these 45Q expansions discussions are happening. And so I’m hopeful that that will be taken into account because what we don’t want to see is a regulation put in place that doesn’t spend taxpayer dollars wisely and doesn’t accomplish what we want. Right?

Marc Bianchi:

Yeah. Well maybe to wrap up the discussion on Chart and carbon capture, Jill, can you put it all together for us? We talked earlier a little bit about some terms, but where does a broader carbon capture opportunity end up for Chart? What’s the next three or four years look like? And does whatever that looks like, is it much different once we get past 25 and into 2030 and beyond?

Jill Evanko:

It’s our belief that in order to achieve the carbon emission reduction targets for 2030 and beyond 2050, that both the public and the private sector have announced carbon capture has to be part of the solution and it needs to happen very quickly. It should have already been happening quickly over the past few years. And we’ve seen some fits and starts to this as an industry yet from our perspective, the movement forward with moving from engineering and demonstrations projects to scale will happen in the next three years. And I think that’s a 2023, you start to see some of these projects move on from a Chart perspective. And then it meaningfully grows as we get to the middle of this decade. So much more of a hockey stick growth lever as we look ahead.

Jill Evanko:

We’ve sized the opportunity, what we think is reasonable in the next 10 years. And that’s really based on these projects getting larger as well as more of them. And this is a European as well as a North American approach. And as we’ve seen the Middle East is also a key area in key geography that these applications can be used in. So more opportunity ahead. And a little bit of patience we’ve had to have over the last couple of years, but we were able to pull in the right technologies and commercially be ready for what we believe is going to be a really exciting time this decade.

Marc Bianchi:

Yeah. It Certainly seems like there’s a lot of opportunity. So maybe on that, looking out a few years, one thing that everybody is asking, everybody that comes on to provide some kind of a prediction. And this is not something we’re going to hold you accountable for. It’s not meant to put you on the spot so much, but just more so several years out provide something that’s thought provoking that might not be on the radar for investors. So with that, who wants to go first?

Andrew Baxter:

Yeah. So I think we all know that the world we’re in today is different than the one that we’re going to be in, in the future. But one of my favorite quotes is from Dennis Gabor, who was a Nobel Laureate in physics. He said that futures cannot be predicted, but they can be invented. So, my prediction is that collectively, we’re probably wrong at least in specific terms about what the future’s going to look like, but that the path to get to where we know we need to go is going to be paved by the innovations that we’re working on today.

Amy George:

Yeah. I can add to that insight. We see the notion of distributed carbon capture, the networks that we’re building as core to the future. And that network effect is one that Chart can uniquely take advantage of because of their role in distribution and their existing partnerships in the supply chain of CO2. I think one area of exciting innovation is around conversion technology. How do we take that molecule, make something else and do it in an easy way and then increase the value of that molecule both on the environmental side.

Amy George:

So thinking of it with the constraint of greenhouse gas, energy use as Andy pointed out, as well as the economic value. And then the third thing is just the rate of adoption, I think will probably surprise us. We’ve seen it just since COP 26, leaders jumping out there with bold plans and ambitions that have nothing to do with regulatory requirements or incentives at a pace that in my 30 years in the space of sustainability is unprecedented. So it’s exciting and it will drive innovation.

Marc Bianchi:

Great. Great. Jill.

Jill Evanko:

I’ll wrap it up with, my total addressable market is going to go up meaningfully by 2025. So stand by for that.

Marc Bianchi:

Nice, nice. We’ll all be looking forward to that. Andy Amy, Jill, thank you so much. Really, really enjoyed the discussion and look forward to catching up again soon.

Jill Evanko:

Thanks Marc. Appreciate you.

Amy George:

Thank you Marc.

Andrew Baxter:

Thank you.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

---