Newlight Technologies and AirCarbon: Plastic from Air
Socially responsible investments are a hot topic right now with the amount of money invested in such strategies increasing from $13.3 trillion in 2012 to $21.4 trillion in 2014. This is a good thing. If anything, it shows that investors are focusing less on the almighty dollar and more on trying to leave the world a better place when we inevitably leave it for future generations to enjoy. While climate warming is a controversial topic, an undisputed fact is that there are limited hydrocarbon gas liquids (HGL) available for us to consume in the future. One byproduct of HGL is plastic, and one company called Newlight Technologies wants to change this dependency by producing plastic out of thin air. Almost.
Founded in 2003, Irvine California startup Newlight Technologies has taken in just $9.2 million in funding to develop their carbon capture technology that combines air with methane emissions to produce a plastic material called AirCarbon. This material is approximately 40% oxygen from air and 60% carbon and hydrogen from air-bound methane emissions generated from farms, water treatment plants, landfills, and energy facilities. While the technology itself is not new, what makes it commercially viable for Newlight Technologies is their proprietary biocatalyst used in the process. After 10 years of research, the company has produced a biocatalyst that is 9 times more effective meaning that the end product is able to out-compete oil-based plastics, such as polypropylene and polyethylene, on price. So not only does this make you feel good because you’re essentially removing pollution from the air, it is also cheaper. So how is this possible?
Previous greenhouse gas-to-polymer processes required 1 pound of biocatalayst to produce 1 pound of plastic. Based on the amount of biocatalyst needed to produce the plastic, the cost would be 3 times higher than oil-based plastics. With the new biocatalyst developed by Newlight Technologies, 1 pound of biocatalyst will produce 9 pounds of plastic. At this level of efficiency, the plastic produced from greenhouse gases is actually cheaper to produce than oil-based plastics. Once synthesized, AirCarbon is processed into a pellet, which is then melted and formed into shapes of “carbon-negative” plastic which are currently used by companies like Dell and The Body Shop for “carbon negative” packaging. In August 2013, the AirCarbon production process achieved commercial scale with the successful commissioning of a four-story, multi-acre AirCarbon production operation in California.
Perhaps the most compelling proof of just how commercially viable AirCarbon is came when Vinmar, a major player in the global petrochemicals industry, announced that they would purchase 1 billion pounds of plastic from AirCarbon over the next 20 years with the option to expand to 19 billion pounds. Sound like a lot right? It’s not really. The global production of plastic in 2014 was around 311 million metric tons. 19 billion pounds of plastic is only 8.6 million tons of plastic or just 2.7% of 2014 global production to be produced over a 20-year time frame. What is interesting though is that Vinmar appears to be buying all of Newlight’s production as implied by the following statement:
The Vinmar contract provides for the sale of 100% of AirCarbon PHA from Newlight’s planned 50 million pound per year production facility for 20 years. The contract will also cover 100% of the output from a 300 million pound per year AirCarbon production facility and a 600 million pound per year AirCarbon production facility for a total of up to 19 billion pounds over 20 years.
So what about the sharp drop in oil we’ve seen lately? Is AirCarbon still cheaper to produce than oil-based plastics? The below chart shows just how dramatically the price of oil has dropped in the past 3 years or so:
The red circle in the above chart shows the point in time when AirCarbon first entered commercial production. The blue circle shows the point in time when Vinmar agreed to initially purchase 1 billion pounds of AirCarbon plastics over the next 20 years. It seems that Vinmar would have had plenty of time to back out of the deal if it wasn’t economically viable following the sharp drop in oil prices at the end of 2014.
If AirCarbon is that much cheaper than oil-based plastics, they should be able to scale their platform indefinitely as they haven’t even come close to putting a dent in global plastics production. More deals announced after the price of oil has crashed would be a positive sign for Newlight’s technology, as would a return to the oil prices we saw a few years ago.
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