🌏 Blackrock’s $550M DAC bet #174

Happy Monday!

Today, we're going DAC to the future. Blackrock makes a half-a-bill bet on Oxy’s DAC plant, Stratos, in a bid to capitalize on IRA’s shiny new credits and put DAC on the fast track. In the same week, Heirloom took the trophy for unveiling the US’s first commercial DAC plant.

In other news, project cancellation woes abound with NuScale canceling its first-of-a-kind SMR project. Meanwhile, Michigan approves a bundle of clean energy bills, the UN irons out details for the "loss and damages" fund ahead of COP, and Flexport launches a book and claim model for SAFs.

In deals, major funding for transportation including $144M for Indian EVs, $33M for rare earth-free magnets, and $15M for battery recycling.

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Blackrock bets big on DAC

Direct Air Capture (DAC) took in a big breath of capital this week, with Blackrock injecting $550M into Oxy Petroleum’s first large-scale DAC plant, Stratos. The investment covers 40% of the Texas facility’s $1.3B project cost and is one of the largest DAC investments to date. The plant, which aims to capture 500,000 tCO2/year starting in 2025, will now be a joint venture between Blackrock and Oxy subsidiary 1PointFive.

To whom do we owe the credit?

DAC projects are starting to catch the eyes of investors thanks to incentive bumps like the 45Q credit in the US Inflation Reduction Act (see our breakdown of IRA incentives here). Oxy anticipates revenue of $580 to $810 a ton (tCO2), which includes a healthy $180/tCO2 boost from the IRA tax credit revamps:

DAC facilities are eligible for up to $130/tCO2 for captured CO2 used in EOR or utilized in industrial applications and $180/tCO2 for geologic sequestration
With transferability, developers can sell credits to third parties
With direct pay, tax credits can be sold back to the Treasury for cash instead of rebates
The removals threshold for tax credits dropped from 100,000 tCO2/yr to 1,000 tCO2/yr

The removals threshold doesn’t affect Stratos with its expected 500,000 tCO2/yr capture rate, but for startups like Heirloom, who just opened the first US DAC plant last week outside Temecula, California and has a maximum capture rate of 1,000 tCO2/yr, the new threshold is a gamechanger.

No (Oxy)dent

Blackrock’s interest in Oxy goes beyond tax credits. CEO Larry Fink often reiterates his belief that American energy companies will put DAC on the fast track. Tech-enabled credits continue to constitute a big chunk of an anticipated $1T voluntary carbon market, and Oxy is on a development frenzy. Just this year, Oxy:

Acquired DAC company Carbon Engineering for $1.1B
Received a $600M DAC Hub grant from DOE for another Texas facility
Announced their intent to build 135 more plants by 2035 and Oxy’s CEO Vicki Hollub says that number could reach as high as 1,000 through licensing deals

Underground, for good?

Oxy has signaled it will use much of its planned DAC for carbon neutral (not negative) EOR, where the CO2 emitted from the production and use of the recovered oil is offset by the CO2 injected into the oil reservoir. EOR pathways receive lower subsidies, but still benefit from low carbon fuel standard credit sales and bonus oil revenues.

Heirloom, on the other hand, plans to sequester all its carbon in materials and geologic formations.

Rising tax credit tides lift all ships, and we should expect to hear more announcements in the coming months. But whether all this DAC will be net climate positive (and carbon negative) remains to be seen.

Deals of the Week (11/6-11/12)

Late-Stage / Growth

🚗 Euler Motors, a New Delhi, India-based electric vehicle manufacturer, raised $144M in Series C funding from British International Investment, ADB Ventures, Athera Venture Partners, Green Frontier Capital, and other investors.

🚗 Niron Magnetics, a Minneapolis, MN-based rare earth-free magnets for EVs manufacturer, raised $33M in funding from GM Ventures, Stellantis Ventures, Shakopee Mdewakanton Sioux Community (SMSC), and the University of Minnesota (UMN).

Early-Stage

🔋 Princeton NuEnergy, a Bordentown, NJ-based lithium-ion battery recycling platform, raised $16M in Series A funding from Wistron Corporation, Honda, GS Futures, Traxys North America, Shell Ventures and other investors.

🏭 Brickeye, a Toronto, Canada-based digital IoT platform for construction sensors, raised $10M from BDC Capital GreenSky Ventures, Brightspark, EDC, and MaRS Investment Accelerator Fund.

🛵 Ridepanda, a San Francisco, CA-based online EV micro-mobility platform, raised $8M in Seed funding from Blackhorn Ventures, General Catalyst, Porsche Ventures, Proeza Ventures, Oyster Ventures, and other investors.

📦 RAIKU Packaging, a Tallinn, Estonia-based 100% compostable packaging solutions developer, raised $6M in Seed funding from private investors and Grant funding from the European Innovation Council.

👕 Octarine Bio, a Copenhagen, Denmark-based sustainable dyes manufacturer, raised $5M in Series A funding from Unconventional Ventures, Óskare Capital, The Footprint Firm, and DSM Venturing.

🥩 Dreamfarm, a Parma, Italy-based plant-based cheese developer, raised $5M in Pre-seed funding from angel investors.

💨 InPlanet, a Munich, Germany-based enhanced rock weathering developer, raised $5M in Seed funding from Carbon Removal Partners, FoodLabs, Mudcake, and Übermorgen Ventures.

🏭 SpinDrive, a Lappeenranta, Finland-based magnetic bearing systems manufacturer, raised $4M in Series A funding from Rhapsody Venture Partners, Innovestor, and Born2Grow.

🌱 Smalt, a Berlin, Germany-based green talent development platform, raised $4M in Pre-Seed funding from La Familigia, Owl Ventures, Axel Springer, and Porsche Ventures.

☀️ Coperniq, a San Francisco, CA-based solar installation project management platform, raised $4M in Seed funding from Initialized Capital and Y Combinator.

☀️ Ensol, a Paris, France-based household solar energy installations platform, raised $3M in Seed funding from Otium Capital.

🌱 Pioneer, a San Francisco, CA-based AI-powered climate grants discovery platform, raised $3M in Seed funding from Blue Bear Capital, Collaborative Fund, Soma Capital, Cool Climate Collective, and Kayan Ventures.

🛵 Clip, a Brooklyn, NY-based bike to e-bike conversion device developer, raised $3M in Seed funding from Motovolt Mobility Pvt. Ltd.

🌱 Phantm, a Richmond, Australia-based plastic reduction software platform, raised $2M in Seed funding from Blacknova VC, Salus Ventures, and CoVentures VC.

Other

🚚 WattEV, a Long Beach, CA-based heavy-duty freight electrification platform, raised an undisclosed amount in Debt and Equity funding from Apollo and Vitol.

New Funds

KKR, a New York, NY-based investment firm, raised $2.8B for their second global impact fund that invests in sustainability and social equity efforts.

Bison Ventures, a Seattle, WA-based investment firm, closed their $135M debut fund that invests in science-led and deeptech companies solving problems including climate and sustainability.

Supernova Invest and Crédit Agricole Group, both Paris, France-based investment firms, announced a first closing of $64M for their agritech fund.

Can’t get enough deals? See full listings and deal analytics on Sightline Climate

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In the News

The cancellations continue as NuScale announced it will no longer move forward with its first small modular nuclear reactor. Cost overruns and project delays led to several utilities dropping out of the offtake agreement, ultimately putting the project underwater.

In a ray of sunshine, US solar generation is expected to surpass hydropower for the first time in 2024. Solar is expected to generate over 318 billion KWh next year in the US.

The US Department of Energy continues the solar streak, putting $440 million in rooftop solar and batteries in Puerto Rico. The department selected Sunnova, Sunrun and other rooftop solar players to receive this funding and help install rooftop solar in low-income households.

In a flurry of US state level legislation, Michigan approved a bundle of clean energy bills, the centerpiece of which would require the state to generate all of its electricity from wind, solar, and other carbon-free sources by 2040. On the flipside, Texas voters approved a $10B energy fund to help improve grid reliability in severe weather, but incentivizes natural gas plants and not stationary storage for the dispatchable category.

The United Nations reached an agreement on the $500M "loss and damages" fund, meant for wealthy high emitting countries to compensate poor countries disproportionately impacted by climate disasters. The fund will launch in 2024 and be housed at the World Bank, however, tensions still simmer between donor and recipient countries. Poor countries argue the US has outsized influence over the fund as it appoints the presidents of the World Bank, and it is still unclear whether donor countries are under strict financial obligation to contribute to the fund.

Redwood Materials put out a call for more feedstock and expanded into accepting stationary storage supply. They have partnered with Kauai Island Utility Cooperative (KIUC) in Hawaii to recycle a 4 MWh stationary storage system as a continued proof-of-concept.

Flexport.org takes air freight emissions head-on with its Sustainable Aviation Fuel (SAF) program, giving businesses the power to reduce their carbon footprint. The program leverages a book and claim chain of custody model through which sustainability attributes are detached from physical products, letting customers buy into the environmental perks of SAF without being tied to the physical supply.

The European Union Climate Change Committee agreed on rules for including maritime shipping in the EU Emissions Trading Scheme (EU-ETS). Questions still remain on where taxation will occur, at fueling or departure, and what shares of emissions from a trip are covered by the EU Carbon Border Adjustment Mechanism (CBAM), or the EU-ETS. Currently the EU-ETS covers 45% of EU emissions, but with this and the introduction of CBAM this percentage will grow. [Deep dive into maritime decarbonization here].

Siemens Energy AG and France-based industrial gas supplier Air Liquide just cut the ribbon on its gigawatt-scale electrolyzer factory in the heart of Berlin, preparing to ramp-up production to 3 GW annually by 2025.

Google announced it will use its carbon intelligent computing platform to help maintain grid reliability in power crises. The company has used its carbon-intelligent computing platform to respond to energy crises around the world. The platform currently shifts energy use at its data centers to times when clean energy is more readily available.

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Opportunities & Events

🗓️️ Heat Pump Summit: Register to attend the Heat Pump Summit on Nov 13th to discuss market challenges within the heat pump and electrified buildings sector.

🗓️️ Government Incentives for Critical Mineral Innovation: Join Nomadic Venture Partners for a webinar including U.S. Department of Energy (DOE) and KPMG on Nov 14th to gain insights on government funding opportunities and tax incentives for critical mineral innovation.

🗓️️ Climate Symposium 2023: Attend the Climate Symposium, a student-fun conference hosted by the Energy & Environment, Food & Agriculture, and Sustainability Clubs of HBS from Nov 18th-19th.

🗓️ Australian Climate Tech Festival & Awards 2023: Join Sophie and 1,000 founders and investors in Australia for the annual Climate Tech Festival in Sydney on Nov 28th.

️🗓️ C2V Initiative Final Showcase: Register to Attend Carbon to Value Initiative’s Year 3 Final Showcase on Nov 30th to learn from 8 startups on their unique solutions for the carbontech industry.

💡 Industry Growth Forum: Apply by Dec 4th to present at the Industry Growth Forum, an event for climate tech entrepreneurs investors and experts of the industry.

💡 Scale for ClimateTech: Apply to Scale for ClimateTech by Dec 4th, to receive support commercializing your hardware climate tech product.