Clear skies: Direct air capture and Canada's advantage

Clear skies: Direct air capture and Canada’s advantage

00:00:00:00 – 00:00:24:01

John Stackhouse

Hi, it’s John here. Today I’m in Innisfail, Alberta, about an hour’s north of Calgary, just south of Red Deer, where the world is turning its attention to something called direct air capture. And behind me are half a dozen science experiments from around the world that are trying to show just how much carbon can be captured from the atmosphere by giant fans.

00:00:24:03 – 00:00:45:18

John Stackhouse

And at the center of this race is a Canadian company called Deep Sky. It’s built this site and is selling credits to finance this frontier technology, and the race for those credits is suddenly heating up. Today we’ll hear a lot more about direct air capture and Deep Sky, as well as the Canadian advantage from deep Sky CEO Alex Petre.

00:00:46:00 – 00:00:47:15

John Stackhouse

Alex, welcome to Disruptors.

00:00:47:16 – 00:00:48:22

Alex Petre

Thank you so much for having me John.

00:00:48:23 – 00:01:00:08

John Stackhouse

I want to start Alex with a bit of insight on you and your journey. You’re now CEO of Deep Sky. I don’t think you exactly trained for that going back through your resume. How did you end up here?

00:01:00:10 – 00:01:26:22

Alex Petre

I think if you look through a lot of my career, you’ll see that I like hard problems. I like a fair bit of risk, and I really like to throw myself into things. So I started my career actually in energy, then really pushed through for banking and the financial sector. And in my last adventure, I was actually the micromobility queen of North America while deploying scooters and e-bikes all over North America.

00:01:27:04 – 00:01:48:21

Alex Petre

But fundamentally, for me, I think it’s about working on the thing that depresses you the most when you open the newspaper. And so, on a personal level, the fact that we have so much impact from climate change these days, we have beautiful Canadian summers that we can’t enjoy as much because the wildfire smoke is getting to us, or winters that are full of avalanches.

00:01:48:21 – 00:02:03:01

Alex Petre

So skiing is not as safe anymore, actually, really, really upsets me. So I wanted to get to the root cause of the problem, and that is that we have too much CO2 in the atmosphere right now. So we really need to figure out a way to get it down and at scale and quickly.

00:02:03:02 – 00:02:15:10

John Stackhouse

So let’s get into direct air capture, which is what you’re pursuing. I’ve often thought of it as a giant vacuum cleaner, sucking carbon out of the atmosphere and then getting it into the ground. Is it that simple?

00:02:15:12 – 00:02:42:02

Alex Petre

And the easiest way to understand the process is you actually have really, really big fans that put a large quantity of air in contact with a sorbent. The best way to think about that sorbent is a sponge. The sponge then becomes absolutely saturated with CO2, so it can’t actually take any more in. And at that point in time you apply a process to it which actually separates the CO2 gas from the sponge.

00:02:42:06 – 00:03:02:17

Alex Petre

The sponge can keep going, which is the beauty of director capture. It is a cyclical process and you can keep at it. And what you get as an output is actually CO2 gas. Now, the great thing about doing this in Canada is that we have a workforce which is extremely specialized and very well trained in gas processing, because guess what?

00:03:02:18 – 00:03:25:13

Alex Petre

Our oil and gas industry has been doing this for dozens of years. And so we were really, really excited to actually build here because once you actually get that CO2 gas, there’s no better workforce that is trained to take that and then put it under ground for permanent storage. And, you know, as Canadians, we never really brag, but this is one of the things that we actually should brag about.

00:03:25:14 – 00:03:32:11

Alex Petre

We figure out how to safely monitor and store CO2 underground to permanently put it away.

00:03:32:12 – 00:03:50:18

John Stackhouse

That’s a great description of direct air capture. A lot of people may, though, still be thinking of CCUS. carbon capture, utilization, and storage. They’ve heard about Pathways as a big as a big opportunity also here in Alberta. How is direct air capture different from CCUS?

00:03:50:20 – 00:04:18:00

Alex Petre

So projects like Pathways and the traditional term of CCUS, a lot of the times will actually refer to what is point source capture. So point source capture is basically a technology that is fundamentally a filter you actually apply at the smokestack or the haystack of any industrial facility. So what that does is it captures the CO2 before it mixes into ambient air.

00:04:18:01 – 00:04:32:17

Alex Petre

Even if tomorrow we apply point source solutions on every single smokestack that it can be applicable to, we still need director capture to clean up the residual emissions.

00:04:32:19 – 00:04:50:07

John Stackhouse

And something I didn’t appreciate Alex, until I came here to Innisfail, is that there are multiple technologies here in your yard from around the world. Why are organizations from Airbus to a British firm coming here to do that instead of doing it in their own backyard?

00:04:50:09 – 00:05:10:15

Alex Petre

If you take a look at any other new technology and how it actually scaled over time. What you’re going to see is there’s always a duality. You have a technology developer and then you have a project developer. And if you look at the director capture space, what we kind of had until a few years ago is only technology developers.

00:05:10:16 – 00:05:37:05

Alex Petre

And so Deep Sky was really able to look across the entire supply chain and say, what is missing is a project developer. So we are in a very unique category of one where we are a carbon removal project developer, and what we focus on is actually creating the infrastructure that allows these technologies to actually scale, which is really, really important because now hardware is very much in focus again.

00:05:37:08 – 00:05:56:10

John Stackhouse

So you’ve hit the the nail on the head with that word scale. Because even these facilities, which are impressive, are capturing drops in the ocean when it comes to carbon. None of us are going to scale without better economics, but it’s still only in the thousands. And you need to get to the millions. How are you going to do it?

00:05:56:13 – 00:06:18:01

Alex Petre

Well, it’s not going to be easy, so I can tell you that, John. But what we have here is actually an incredible learning opportunity. When you’re learning from one deployment of one technology. You’re learning rate is limited by the fact that you’re just learning from one data set, from operating one technology. We’re actually learning from multiple at the exact same time.

00:06:18:05 – 00:06:38:11

Alex Petre

So the way I like to think about it is this facility we are at here today is really about compressing the time that it would normally take for the natural market forces to actually get to the standard design of what director capture should be, because this needs to be commercial for it to actually reach the scale we need.

00:06:38:12 – 00:06:59:07

John Stackhouse

So one of the things I find interesting here, Alex, is this is not a science park. This is a commercial park. You’re being paid to deliver exactly an output. Whichever of these technologies can deliver the best product for you is going to win. And you’ll use more of that. So there’s some internal competition here, which is what markets do.

00:06:59:09 – 00:07:26:07

Alex Petre

What markets do. Exactly. And I think what’s what’s been really interesting is unless we actually bring that execution muscle and that commercial focus to this industry, we might we might not necessarily see the best result. You know, I’m not here to make friends. I’m here to figure out a way to remove CO2 from the air at scale. And I think it’s that kind of attitude that’s really important if we actually want to get it done.

00:07:26:09 – 00:07:40:21

John Stackhouse

There’s been debate about direct air capture for for some years, but people like Bill Gates and Breakthrough Energy have long believed there is something here. What are you seeing that maybe even they didn’t see five years ago?

00:07:40:22 – 00:08:13:14

Alex Petre

I think there’s two things. This is one of the very few facilities that is actually operational and has produced credits, which is really important. As of June, we produced the first credits for director capture anywhere in North America. So I think that’s number one. Number two, I think relates to the fact that the size of the problem, which means the amount of CO2 we actually have to extract from the atmosphere, is so large that we need to be able to have an extremely scalable solution.

00:08:13:15 – 00:08:33:08

Alex Petre

And if you look across the entire pathway of possible ways to remove CO2 from the atmosphere, direct air capture is the only one that is truly just an engineering problem. And guess what? Humanity, despite all of our bad traits, sometimes, is actually really good at pulling together whenever we have an engineering problem.

00:08:33:10 – 00:08:44:15

John Stackhouse

What do you say to people who raise an eyebrow and say, this is just giving people an excuse to keep emitting because they’re going to pay someone to take their carbon out of the atmosphere?

00:08:44:17 – 00:09:13:12

Alex Petre

I think it’s really important to be pragmatic. I think that it’s absolutely fair to challenge those who continue emissions, and those who maybe have plans to increase their emissions. I 100% support that. But at the same time, we also have to be aware of the fact that we’re not all going to stop flying tomorrow, driving cars, buying groceries, and doing a lot of things that fundamentally are driven by fossil fuels.

00:09:13:13 – 00:09:22:20

Alex Petre

But unless we focus on both reducing emissions and decarbonizing one way or another, we’re going to run out of time.

00:09:22:22 – 00:09:40:04

John Stackhouse

I think I’m getting the picture that you’re aiming to build the first commercial scale operation, the first commercial scale carbon farm or whatever you want to call it. But we’ll need hundreds, maybe thousands, thousands of those. How soon can you do that?

00:09:40:06 – 00:10:07:13

Alex Petre

We we have actually developed three different sites throughout Canada. And this is what’s really exciting about deep Sky. We can actually work across Canada. And our first site is here, but we also are working on developing sites across Manitoba and Quebec, which is really exciting. From our perspective, we are very close. So we actually hope to FID. So that’s actually make a decision on the beginning of construction for the project late 2027.

00:10:07:16 – 00:10:14:08

John Stackhouse

What is going through your mind in terms of the hurdles or challenges to get from here to to there?

00:10:14:11 – 00:10:38:14

Alex Petre

I would love to move much faster because I think the world really needs this, and I think we for a long time have stopped doing good in the name of doing perfect. And I think that has been an enemy to progress. And so I think what scares me is that I’m not doing it quickly enough, and that we as deep sky, are not scaling up as quickly as we should.

00:10:38:15 – 00:10:48:09

John Stackhouse

But from a capital perspective, what’s the pitch to investors for something that’s probably not going to deliver a return in the in the near term?

00:10:48:11 – 00:11:15:17

Alex Petre

The pitch for investors is actually pretty simple. Canada is the very best jurisdiction to build right now. There is a direct air capture CCUS, so carbon capture utilization storage ITC investment tax credit. What that means is if you deploy director capture facilities in Canada, there is a tried and tested program. And so lots of people that we talk to, for example, I’ll just pick Japan.

00:11:15:18 – 00:11:38:08

Alex Petre

We do a lot of business with Japanese partners, but let’s be honest, they have very little land available to do this themselves. And they also lack storage capability. However, what they do have is really good engineering, really good well casing providers, really good supply chain. And so it’s a really symbiotic relationship when we actually work on carbon removal.

00:11:38:10 – 00:11:49:13

Alex Petre

Because as an investor I can actually have synergies between what I produce at home, but also investing in a jurisdiction that takes this really, really seriously.

00:11:49:15 – 00:12:01:02

John Stackhouse

Direct air capture is one of the technologies that’s being caught up in the geotech race. Give us a sense of what’s happening on the global chessboard of of DAC technology.

00:12:01:07 – 00:12:25:13

Alex Petre

There is a lot happening in China. I think where Canada can fundamentally lead is actually in carbon capture and permanent storage. And I’ll tell you why. The product that gets created through that process, which is a carbon credit, is in very hot demand by countries that have really big decarbonization targets, but no ability to store themselves. So Switzerland is one of these countries.

00:12:25:13 – 00:12:46:09

John Stackhouse

So countries like Switzerland, Japan would pay Canada effectively to capture the carbon from the atmosphere because it doesn’t matter what. There’s no geography in the atmosphere. It’s one atmosphere for the planet, no borders up there. And then store it in the in the Earth here. Clearly, the federal government supports what you’re doing, but may need to do more, especially on.

00:12:46:10 – 00:13:16:13

John Stackhouse

And here we’ll get very arcane on what’s called article 6.2 of the the Paris Accords on climate, which effectively allows nations to recognize the trade of credits. But nation states Canada and Japan, Canada and Switzerland need to have that mechanism. That’s right. How far off are we from that so that other countries around the world can call you up and say, hey, Alex, I want to actually buy a million credits from you when you have that commercial scale to to execute on it.

00:13:16:15 – 00:13:43:04

Alex Petre

It’s been a really interesting engagement with the federal government and several ministries throughout, notably environment and climate change, but natural resources as well, and finance. And I think what’s really exciting is that Canada sees the opportunity at hand. So I think it’s really about keeping that momentum and showing that ambition of Canada to actually export something that is a) very valuable, but b) digital.

00:13:43:06 – 00:13:54:02

Alex Petre

So we don’t actually need to build additional infrastructure to export it, which in today’s day and age is actually a really meaningful way to diversify our exports.

00:13:54:04 – 00:14:15:16

John Stackhouse

This is actually a really good example of the value of trust. And the world has fragmented too much. So we’re going to see more bilateral engagements around the world. And it will be countries that trust each other on, on something like a carbon credit, because you need to trust the other country to prove it and to prove that they’re not going to double count it or do something sneaky with you.

00:14:15:17 – 00:14:41:15

John Stackhouse

So Canada’s value in the world as a trusted partner actually plays a critical role, not just in trade and other engagements, but in our climate relationship with an economic value, as you’re showing here. But something important for Canadians to understand, and this is around double counting, is that if you’re capturing carbon here and putting it in the ground and Japan is paying you for that, Canada doesn’t get it, doesn’t get to count it as well.

00:14:41:20 – 00:14:48:11

John Stackhouse

But we’ll have to find other ways to reduce our emissions, both physically and also the accounting of those emissions.

00:14:48:12 – 00:15:01:08

Alex Petre

We need to make sure that anything that is produced in Canada for Canada’s goals is very well accounted for. But we also have the ability to produce for export in this particular industry.

00:15:01:09 – 00:15:26:06

John Stackhouse

And this is an export industry that you’re almost creating. I don’t want to say from scratch because others have have been here before, but it’s very, very nascent. As you help us think about what’s possible over the next few years, what should Canadians come to grips with in terms of what we need to do collectively to become that direct air capture leader in the in the world?

00:15:26:08 – 00:15:45:10

Alex Petre

I first want to acknowledge the fact that Canada has already done a lot, because I think that’s really, really important. We talked a lot about our natural advantages and we really want the geological lottery, but we also actually match that with the fiscal regime that supports it. And now with real political momentum to actually make this into an industry.

00:15:45:12 – 00:16:19:21

Alex Petre

So I personally think from now on. It’s a little bit up to us. And when I say us, I mean the private sector. I think we need to work really hard. I think we need to be really, really ambitious and also really, really focused. And so I think for once, there is no whining and just rolling up sleeves and getting to work. As a citizen, as anyone kind of focused on this, I would say learn about director capture, come work with us, come work in the supply chain that we’re building here for direct air capture, because guess what?

00:16:19:22 – 00:16:34:17

Alex Petre

It can actually create lots of jobs for us. And if you’ve drilled wells all your life. Guess what? You can also drill wells for CO2 storage, not just for resource extraction. I think we have the perfect conditions for it, and it would be a shame not to use the opportunity.

00:16:34:18 – 00:16:43:22

John Stackhouse

Perfect conditions. Love that set up. Five years from now, we won’t be sitting next to a five acre site. Presumably we’ll be sitting next to something much bigger. What’s your vision?

00:16:43:23 – 00:17:05:03

Alex Petre

Yeah, I want to ensure that in the next five years we have at least three large scale commercial facilities operational throughout Canada. I think this is a pan-Canadian story. I think it’s really exciting that Alberta created the opportunities early for us to start here. And so I think this can be something really, really big for Canada ultimately.

00:17:05:06 – 00:17:08:02

John Stackhouse

What a great message. Alex, thank you for being on Disruptors.

00:17:08:03 – 00:17:09:14

Alex Petre

Thank you so much for having me.

00:17:09:16 – 00:17:31:02

John Stackhouse

Direct air capture is no longer a science project. It is now part of that geo tech race that we’re talking about this season on disruptors. And the countries that get there first are also going to have a geopolitical advantage, not just in the challenge of climate change, but in the race to develop new technologies that will help shape the economy of the 2030s.

00:17:31:04 – 00:17:38:23

John Stackhouse

I’m John Stackhouse and this is Disruptors, an RBC production. Thanks for watching.

00:17:39:01 – 00:18:09:10

Alanna Whitten

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00:18:09:12 – 00:18:27:00

Alanna Whitten

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