Decarbonizing Cement with alcemy’s Software
Leopold Spenner is CEO and Co-founder of alcemy, which is accelerating the decarbonization of cement and concrete via software.
Concrete is one of the most abundant manmade materials on earth, and it's exceedingly hard to decarbonize. Most of its emissions footprint comes from the production of cement, the materials that provide concrete with its strength. By most estimates, cement is responsible for upwards of 8% of global emissions. Cement production generates emissions in two major ways. One is from a chemical reaction during the cracking of limestone that's used to produce cement. And the other is from the extreme heat that this process requires.
Many cement plants around the world have begun employing carbon capture technologies on premises to get to net-zero. Beyond that, there are companies working to lower cement emissions by changing the ingredients mix or by trying to take away the need for extreme heat. It's a hard problem, but alcemy introduces another possible solution: efficiency. Their software helps cement and ready-made concrete producers to create product more efficiently, which should result in less waste and in less limestone that needs to be heated and cracked. Enjoy the show!
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Episode recorded on July 27, 2023 (Published on August 3, 2023)
In this episode, we cover:
[2:07] Leo's background and how he got involved in decarbonizing cement
[5:57] Innovation in the cement and concrete industry
[10:39] The production challenges of cement and concrete
[13:34] An overview of limestone
[16:28] The 28-day quality sampling process for cement and concrete
[18:58] Emissions reductions potential for both
[21:24] alcemy's predictive analytics software
[23:35] How the company's tech improves quality, cost, and emissions reductions
[25:09] alcemy's results to date
[26:03] How the company helps to create concrete mixes
[29:30] The scaling hurdle of integrating with legacy software systems
[33:55] The role of clinker efficiency and what it entails
[37:02] alcemy's traction to date and funding milestones
[38:12] Who Leo wants to hear from and what's next for alcemy
[41:20] How the market is evolving around lower carbon cement, including the carbon market
Episodes mentioned:
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Cody Simms (00:00):
Today's guest on the My Climate Journey Startup Series is Leopold Spenner, CEO and co-founder of alcemy. alcemy is accelerating the decarbonization of cement and concrete via software. As we've covered on the pod previously, concrete is one of the most abundant manmade materials on earth, and it's exceedingly hard to decarbonize. Most of its emissions footprint comes from the production of cement, the materials that provide concrete with its strength. By most estimates, cement is responsible for upwards of 8% of global emissions. Cement production generates emissions in two major ways. One is from a chemical reaction during the cracking of limestone that's used to produce cement. And the other is from the extreme heat that this process requires.
(00:51):
Many cement plants around the world have begun employing carbon capture technologies on premises to get to net-zero. Beyond that, there are companies working to lower cement emissions by changing the ingredients mix or by trying to take away the need for extreme heat. It's a hard problem. alcemy introduces another possible solution, efficiency. Their software helps cement and ready-made concrete producers to create product more efficiently, which should result in less waste and in less limestone that needs to be heated and cracked. But I'm already sharing too much. Let's hear it directly from Leo, whose family has been in the industry for generations. But first ...
Cody Simms (01:36):
I'm Cody Simms.
Yin Lu (01:37):
I'm Yin Lu.
Jason Jacobs (01:38):
And I'm Jason Jacobs, and welcome to My Climate Journey.
Yin Lu (01:45):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:50):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. Leo, welcome to the show.
Leopold Spenner (02:05):
Thanks a lot, Cody.
Cody Simms (02:07):
So Leo, decarbonizing cement, in my opinion, maybe the single hardest challenge in all of climate tech, all of climate change. You are working in the forefront of this movement. How did you get started? What caused you to lean in here?
Leopold Spenner (02:25):
Oh, that's a tough question. For me, it was kind of, I don't want to say coincidence how it happened, but it was during the course of my engineering studies, it became my dream to found a company. At the end of the studies, I discovered a program here in Berlin, Entrepreneur First, where you could meet a founder, co-founder, and that's where I met my co-founder. And he was heavily interested in control theory and reinforcement learning and data-driven control. And when we combined that with my uniqueness, that I come from a cement family and care a lot about cement and concrete, and we combined control theory and cement production and concrete production, we quickly came to realize that in this intersection we could have a big impact on decarbonizing cement. And that's kind of how it all started.
Cody Simms (03:10):
So unpack you coming from a cement family. Tell us more about that.
Leopold Spenner (03:14):
Well, my great-grandfather started a cement producing company in the German cement valley. It used to be in the 1960s, the largest area of cement production in the world, just because our limestone has the perfect composition to make cement. He was an employee at another cement producer and then had the chance to buy a small cement plant, and that was 96 years ago. And he built that up, my grandfather took over, my father took over. He's currently in his best age running the business, and I grew up basically with both my mom being a chemist and my father being an economist, running that. And I just worked lots of summer holidays, spring holidays in the plant in different parts, from the cleaning group, to the laboratory group, what they let young internship people do. Basically every lunch we heard my parents speak about cement and concrete related things.
(04:06):
When I was 15, the European Union introduced the Emission Trading System, the ETS, that put a price on carbon. And my mom was the one who had to report the carbon emissions to the European Union, which is a hugely painful process. So that's kind of what it means to grow up in that setting.
Cody Simms (04:23):
And I saw you studied industrial engineering, both undergrad and masters. Was there an expectation at some point that you were going to take over the cement business?
Leopold Spenner (04:33):
I don't want to say expectation, but of course people keep asking me about it. And since I'm the only child, it was definitely always a question I was confronted with. That's also why directly after high school, I went half a year to a cement plant that is now one of alcemy's customers in Bavaria, just to check it out, learn more about it, also see cement production at another family. Yeah, was always a question.
Cody Simms (04:57):
But you decided to go the software route instead?
Leopold Spenner (05:00):
Yeah, I mean, that's true. It's by now a large company. It has over 500 employees. It's the fifth-largest producer in Germany. It's by now making cement, it's making concrete, it's making precast elements, making lots of stuff. And my father, when I was at high school, at university, was super young. So it was always clear that I would start my own career and then later down the line, see if I qualify for taking over the family company and if it makes sense for my career to take over the family company.
(05:28):
And I have a personality that I really like to do my own things and to go my own way. And that was one of the other elements of my first response that during the course of my masters, it became my dream to found my own company. And now I'm on this way and it's up to now, very successful and I have a much larger impact on decarbonizing and bringing this industry forward than I could ever have in the family business. So I'm super proud and my father is still in his best age, so let's see where we'll all go, but all options are still possible.
Cody Simms (05:57):
I'd love to hear about how you have seen and witnessed innovation happening in the cement and concrete industry. Now there's a huge movement toward how do we decarbonize this industry, how do we change it. Maybe for the last 10 or 15 years, what have been the big focus areas in the sector? And then we're going to spend the rest of the whole episode talking about how software is changing it and how decarbonization is happening. But I'm really curious, it's an industry that's been around for a long time, has it changed much in the last 15, 20 years, or is it just starting to undergo transition now?
Leopold Spenner (06:31):
Yeah, I would say the low hanging fruits have been tackled just because everyone knows that carbon pricing will come. And just because typically, at least at this stage, emitting more carbon means either burning more fuels or having a higher clinker production volume. Clinker is the burned limestone that's actually causing the CO2. And both of these components are expensive, so somehow it goes hand in hand as well to cut CO2 and to cut costs. And so the two lowest hanging fruits were one, what you used to burn and to fire the kiln to 1,450 degrees, it's typically coal. And a lot of coal and cement producers have tried moving away from coal to secondary fuels, which means plastic waste, but also sewage sludge, which is renewable, which has taken up CO2. So if you burn it, you don't have to count it.
(07:24):
And if you look at concrete or cement CO2 footprint, then two-thirds is coming from the limestone itself, from the calcination process. Which is why people say it's the hardest industry to decarbonize because you just can't change the fuel and it's going to be gone. But the other third is from the fuel. And so this third has been under attack in the last 15, 20 years. And also my family and other producers here in Germany just have moved to currently, I believe the industry averages around 80% of the fuel is now secondary fuel, i.e, waste or sewage sludge. So that has made some impact. And the other lever that was being pulled was to, in the cement itself, reduce the clinker content and increase the content of the so-called supplementary cementitious materials, which are basically byproducts from other industries or just basically mineral powders that you can substitute the grinded cement with without losing too much of its strength properties.
(08:19):
And basically here, or in many countries in the world, the steel industry emits something that's called slag, which is basically a byproduct of the steel furnace powder that has seen so huge energy that this powder is very reactive. And the other one is coming from coal-fired power plants, the so-called fly ash, to ashes basically. And because they are waste material, used to be very cheap, used to carry no carbon footprint because in the steel production process, they would account the carbon to the steel and not to the slag. So this was very attractive for cement producers to cut costs and cut carbon, to replace some of the clinker with these supplementary cementitious materials that were waste product from other industries.
Cody Simms (09:01):
Interesting. So I'm hearing you say most of the innovation that has come to the industry in the last decade or two has really been in sort of the circular economy. It's taking either waste materials from the production process and bringing them back in, or it's sourcing other waste materials as potential heat sources to replace coal. We've been hearing now for a decade or two that software is eating the world. Has software made a big dent thus far into cement production?
Leopold Spenner (09:30):
No, neither in cement nor concrete. I mean, there have been platforms where people try to trade cement and concrete, those have failed miserably. There is a software to kind of track deliveries and so forth that's being used to some degree, but it's not really making a dent to how the way cement and concrete is produced. I mean, obviously in the control room you have software or you have screens where you can see all the control valves and where you can basically control the production, that, of course, but I would not say that software has made a dent.
Cody Simms (10:02):
And I would guess most of that software at this point is custom-built on a per plant basis or otherwise running on relatively old operating system structures.
Leopold Spenner (10:12):
Exactly the latter running on old operating system, old, old software from Siemens and the likes, always running on premise. That's the kind of software environment we have in cement and concrete.
Cody Simms (10:23):
So you saw this opportunity. You talked about a little bit of software attempts on the business side of selling via marketplaces or on the kind of operational management side, but very little on the production side thus far. Take us through your journey from, you said in Entrepreneur First, you met your co-founder and the two of you came up with this concept for how you could make a difference. What did that look like as that matured and evolved? What was the first problem you set out to solve?
Leopold Spenner (10:51):
Yeah, I mean, the first problem basically comes from my own experience growing up in cement and concrete, that it's, and most people find this very weird, it's hard to measure the resulting quality of both cement, which is this gray powder that carries the strength potential, and later concrete, which is basically the mixture of sand, water, gravel and cement to make it strong. And measuring the quality of this is really, really hard because the testing takes 28 days, I can explain you why in a second, and you don't have time to keep your cement in your plant for 28 days. So you're shipping it to your customers without knowing how it's going to turn out. This wouldn't be much of a problem if the quality would always stay the same. However, we are making this from natural ingredients, limestone, where no cubic yard of limestone looks alike. So chemistry mineralogy constantly changes.
(11:47):
So shipping out the products kind of in the dark is a challenge we are always faced with as cement and concrete producers. Of course, we don't like to talk about it because no one wants to say they're sending out something where they're not 100% sure about the quality. And of course, we have our ways dealing with it, which is putting extra margins of safety basically in our processes and our recipes. And this is basically a problem I was aware of. Not only is it the extra safety margin and not fully efficient mix designs, it's also a lot of operational overhead and complexity for the people in the plant that have to cope with the changing ingredients. Because people think you once find a recipe, a mix design, and you keep producing it for two weeks or forever, but that's not the case.
(12:36):
In a cement or in a concrete plant, the mix design constantly has to be adjusted, sometimes even every 50 minutes, because the ingredients have changed. And all of this has to be done without being able to measure the quality right away. So it's a really hard process, needs a lot of expertise, it needs a lot of secondary tests and a lot of gut feel. And really there is a lot of, the mixing operators and the quality staff that actually determine these little adjustments along the way, they are so important, they, they're the most important or one of the most important links in the cement and concrete plant, and without them it wouldn't work. And these people are very, very rare and are not abundantly available. And this was kind of the starting point for alcemy, because we had a data set and because I was supervising a master's thesis that allowed us to predict the outcome of this test that takes 28 days, based off data we could gather in real time in the production process.
Cody Simms (13:34):
And just taking a step back on that, you mentioned the inconsistency of limestone. Limestone, as I understand it scientifically, is essentially the byproduct of the earth's long carbon cycle. It is rock typically that is under the ocean that has already absorbed a lot of carbon. Where it's harvested today is former undersea beds that have now risen to land level, is that accurate?
Leopold Spenner (13:57):
That's 100% accurate.
Cody Simms (13:59):
So it's a mix of shells.
Leopold Spenner (14:02):
Yeah, shells, if you go in a quarry, you will find little animals basically engraved in stones. And basically the majority of the earth surface is limestone. So it's abundantly available. And only because of that it can be the ingredient for concrete, which is the second most used resource after water. The quantities are so gigantic that we have to take what we find in earth crust to even get to these quantities.
Cody Simms (14:29):
For listeners who want to dive in more on sort of earth's rock changes over time, we've done an episode about a year ago on enhanced rock weathering with a few CEOs of enhanced rock weathering companies, where we talk all about the long carbon cycle. So go back and look in the archives for that one, everybody. So Leo, you mentioned then that your technology is helping to understand on a per batch basis maybe inconsistencies that are happening in the stone and changes in essentially the ingredient mix that need to happen as the concrete is being produced. How is that typically done today? You said it was highly skilled individuals and this is their job to sample and make changes in real time, did I hear you correctly there?
Leopold Spenner (15:16):
You heard me absolutely correctly. You described it perfectly. It looks a bit different in cement. Our software is applied at cement plants and at ready-mix concrete plants.
Cody Simms (15:27):
Sorry, I tend to use them interchangeably, which is an error. So cement is the creation of the paste, and then concrete is the application of gravel and water to the paste to create the end process and end material, yes?
Leopold Spenner (15:41):
To be very precise, cement is not the paste, but only a powder, only a gray powder, basically limestone burned at a high temperature, ground finely, potentially mixed with some of these supplementary cementitious materials, for example, waste materials. And then you have a gray powder, and this gray powder alone is doing nothing. And in the concrete batching plant, that's where you add the water and water plus the powder, that gives the paste and the paste is kind of the glue that will stick together the stones and the sand and the gravel. And then basically you add all at once, sand, water, gravel cement in the batching plant.
Cody Simms (16:18):
Got it. And so in the creation of the cement itself is where you have to do this 28 day sampling cycle, yes? What does that typically look like? And you mentioned it can't even happen all at the plant.
Leopold Spenner (16:32):
Funnily enough, this test that takes 28 days happens in the cement plant because you kind of want to get a feeling, let's say for the strength potential found inside this powder once you add it with water. So that's where you do this test. But in concrete, when you do the real deal with the actual water and the actual gravel and sand, you do it again because it's obviously a little bit different of a mixture. So this sampling and waiting 28 days happens both in the cement and in the concrete plant. So our software, we have basically two pieces of software, one for the cement plant to do the predictions in cement, and one in the ready-mix concrete plant to do the predictions in the concrete.
Cody Simms (17:09):
Fantastic. And what does the process look like today for the human who is doing this?
Leopold Spenner (17:14):
Yeah. So that's what I was trying to come from, it's a tiny bit different obviously, in the cement plant than in the ready-mix concrete plant. So in the cement plant, you try two things. You try to measure the chemistry and the mineralogy of all the ingredients and also of the resulting cement and apply your experience how different chemicals, minerals will play out in the quality properties later. Most importantly, what we're talking about here is the compressive strength after 28 days, the cement powder, it's basically the compressor strength potential found in this powder. So this is one thing you do and the other thing you do, you don't only do the test and basically what is the test, form a cube and crush it and measure how much force goes in the cube until it breaks. The other thing they do, they make some cubes that they crush already after one day and after two days to get a first indication where the strength is going to go.
(18:04):
And so that's what the humans do, they look at the early strength tests of the previous days, they look at the chemicals, mineral compositions of the materials in the plant and try to get an estimation. And that is what they use to steer their production process. In cement, the most important thing is how finely you grind the cement. The finer you grind it, the more strength potential it's going to get, or you can modify the mix design. So that's basically how they do it in the cement plant. And in the concrete plant it's even more manual, basically they have a camera where the finished mixed concrete is flowing out and they look at the camera image to infer basically how much water it has, how liquid it is, because this then determines how much compressive strength the concrete is going to have. Simply speaking, the more water it has, the more you dilute the mixture, the less strong it's going to be in the end. So this is basically how the concrete operator does it today.
Cody Simms (18:58):
So from an emissions reduction potential, it sounds like there's likely more emissions reduction capacity on the cement production side, whereas on the concrete side, it would be more about water savings and sort of sustainability. Is that a correct assumption?
Leopold Spenner (19:15):
Well, that's a complex question because in the end, in concrete your most important ingredient is cement. And when you're capable of mixing a concrete with less cement, then you're saving basically in the concrete plant. But the place where the CO2 is emitted into the air, that's the cement plant, which is why carbon capture is gaining lots of traction because that would solve all problems at once for the cement producer and nothing else in the supply chain would have to change. But there are multiple approaches, both in cement and in concrete, capable of reducing the carbon footprint in the end. You're probably right, there are 2,900 cement plants in the world and 200,000 concrete plants. So if we find a simple solution in the cement plants, it's probably going to scale faster and easier.
Cody Simms (20:00):
Yeah. But I guess to your point, on the concrete side, if you can help concrete producers use less cement, by definition you are reducing demand for a material that is heavily emittive, right?
Leopold Spenner (20:13):
Exactly. So in the end, it doesn't matter, it's the same effect. Our approach that our technology facilitates is to basically get the same concrete properties but with less cement, by basically concentrating up the concrete mix design using less water to get more out of the cement, get more strength out of less. And for us, it doesn't really matter if this is done in the concrete plant where less cement is being used, or if people are already in the cement plant. I mean, you can't just replace cement by nothing, you will always have to replace it with some other powders, these supplementary cementitious materials that we talked about. And for us, it doesn't really matter if people replace cement with supplementary cementitious materials in the concrete plant or in the cement plant, the result is the same. Less clinker will be produced or less cement will be produced at the cement level, some plants can shut down and that reduces the overall carbon footprint.
Cody Simms (21:06):
And if I understood, your technology is pure software, so you're not putting sensors in things and whatnot?
Leopold Spenner (21:12):
No, we are actually deploying sensors, especially for our concrete product in the concrete trucks, there we're actually deploying sensors to be able to make the predictions even better.
Cody Simms (21:21):
Oh, the trucks that go down the road spinning?
Leopold Spenner (21:23):
Yeah.
Cody Simms (21:24):
Yeah. Okay, got it. So on the cement side, you're taking the measurements that these humans are doing and then you're taking those inputs and running predictive analytics on what the strength might look like and thus helping to inform if they need to make changes to the recipes along the way. Is that correct?
Leopold Spenner (21:41):
That's fully correct. We take all the chemical and mineralogical data points analysis from the materials that are flowing in the cement plant. We're adding the manually performed results of the strength tests as our labels. And then we predict from the mineralogic chemical properties of the materials, we predict the quality outcome, the strength, and then we do that during live production. And if the prediction says during live production's getting too strong or it's getting too weak, we calculate a set point for the grinding fineness and for the mix design, pass that forward to the control room, either to the operator, so they input it manually or in some plants, directly back to the plant control system. And then it gets executed. And then half an hour later we get the next chemical mineralogical information from the material, we do the prediction again, we have a new set point, we feed it back to the plant.
(22:32):
So it's basically a constant control loop that always makes sure that we produce right to target. And that's why Robert and his background in control theory was so fascinated about that. Basically we're steering these huge cement plants in real time to produce perfectly on target.
Cody Simms (22:50):
And historically these operators are doing the math themselves to try to understand what mix changes they should be making as they go?
Leopold Spenner (22:58):
In the cement plant, it's actually big laboratory teams that are highly trained PhDs and material scientists that try to make these changes. However, of course they're not working on the weekends, for example, so they can't always do it. And as I said, it's a huge manual overhead, it's lots of work to constantly crunch these numbers. So yeah, the benefit of our system, the direct benefit is just, it's a much simpler, fully automated process, no one has to worry, the quality is much more precise. And as you will probably later learn this, high precision is very important for these CO2 reduced cements and concrete.
Cody Simms (23:35):
Is the reason that they're buying today mostly cost savings and that they're able to use less material? Is it better quality so they're able to ensure they're delivering quality cements to the concrete plants? Or is it emissions or is it a little bit of all of the above?
Leopold Spenner (23:51):
It's all the three. It's exactly those three. Quality, improving quality, because that's what customers really care for. If you don't have a proper quality, you won't get the market price. So being able to deliver better quality gives better prices, you can charge more for your cement. It's cost saving because when I produce more precisely, I need less of a overhead, a safety margin, which means grinding finer typically. So I can grind less fine, save energy. And it is emissions because if I produce these cements that have much less of the clinker, they are much more sensible, so the quality needs to be even better. So if I want to produce them and sell them, I need to be even better quality wise. So it's all three of them.
Cody Simms (24:33):
Do the plants require any process change to adopt you?
Leopold Spenner (24:37):
That's the beauty of it, not much. The only process change is that today they get pieces of paper, the operators, with mix design changes and fineness changes, and now they have it on our web app digitally, always up to date or even fed directly into the plant control system. So it's basically the only change, otherwise it's just a relief of manual work.
Cody Simms (25:00):
Any results yet on the cement side on improved efficiency? I don't know if you can back into an emissions number, but anything you can share would be awesome.
Leopold Spenner (25:09):
Yeah, sure. I mean, that's the first product we've built because we kind of naturally followed it along the value chain. We're deployed in over 10 plants and at every plant we were able to save 300, 400, 500,000 euros annually, which is a lot of money for a cement producer. And on average, we cut the quality fluctuations by 40%. You just measure the standard deviation of the test results and they are cut by 40% through the system. And we've never had a customer leave us. We have this annual software as a service fee, and all of our customers have, after the first year in their first plant, rolled us out into more plants. So on average, they double the amount of revenue they do with us year by year through the system.
Cody Simms (25:54):
Well, congrats. And are you charging as an enterprise SaaS model, they're paying for monthly access to the software?
Leopold Spenner (26:01):
Yearly access to the software, correct.
Cody Simms (26:03):
Yearly access. Great. And then let's move into the concrete side. So now you've helped the cement manufacturer create the cements. It's now moving to these concrete plants of which there are many, many more of them around the world. You're helping to create the actual mix of concretes. What does that look like for alcemy?
Leopold Spenner (26:22):
Yeah, in concrete, the biggest challenge are again, the input materials that fluctuate heavily here. Now we're talking about the aggregate and the sand. They're basically coming from sandpits, aggregate quarries, their moisture content, their grain size distribution very heavily, especially because in western countries, sand has become scarce. Not sand has become scarce, but the permits to dig out sand have become scarce, which means you typically have multiple suppliers that have completely different sand and aggregates, and you try to make concrete out of that. And really the hard part is to figure out how much water actually to add. I mean, your mix design says 180 liters, but you have no clue how much water is actually in the sand itself because it's always wet. You have no clue how much water the sand is going to suck up and take out of the system. So this is basically the most important parameter, how much water to put in.
(27:18):
Then there's a very important chemical, the admixture, the so-called plasticizer that makes sure I can use a little less water and still have a nice flow of concrete, and fine-tuning the water and plasticizer additions is extremely hard. And there's only one person running such a concrete plant, the so-called mixing operator, and as I said, they have to look at the camera image and figure out how to fine tune and how much water and plasticizer to add. And what we're doing there is basically we're having an API to the plant control systems, and as I said, we're equipping the trucks with sensors. And what we really are interested in is the consistency of the concrete. And we get it because when the concrete is mixed in the plant in a mixer, it's pretty hard for the mixer to stir. And the stiffer the concrete, the harder it is to stir.
(28:09):
This means the more power consumption is on the motor. And the very same we do at the rotating trucks, we measure the oil pressure of the oil motor that's rotating the drum and stiffer the concrete, the higher the oil pressure. And that's the data we get to make predictions about the consistency about the amount of water present in the concrete so that the operators can perfectly batch and always be on target and do this in an automated way.
Cody Simms (28:36):
Wow. And you mentioned building these sensors onboard. Is this part of your product suite today or is this part that you're planning to roll out in the future?
Leopold Spenner (28:45):
I mean, it's not completely self-developed hardware. We're mostly taking off the shelf sensors, just that we carefully select which ones. We have partnered with a telemetry provider, that also some alcemy software code running on the telemetry box that is in the truck. But other than that, it's off the shelf components and we just help our customers retrofit as efficiently as possible so they don't have to worry about it. So there's a software as a service and a hardware as a service offering in concrete, so that's basically how it works.
Cody Simms (29:16):
And it sounds like you guys need to be good at integrating with all of these old legacy software systems that are managing the control operations of the plant, which isn't, I guess, the sexiest thing to be good at, but it's incredibly valuable, right?
Leopold Spenner (29:30):
That's exactly true. If people ask me what's our biggest scaling hurdles, exactly that, integrating with the legacy systems of our customers. And we've gone beyond and over with our efforts to become more scalable there. We have a team called solutions engineering that's only responsible for getting data out of these plants into our system, building APIs, doing this as scalable as possible. We have a customer success team that is extremely important to guide our customers in the early days of using the system and also spotting errors in the data. So that's extremely important for us.
Yin Lu (30:05):
Hey everyone, I'm Yin, a partner at MCJ Collective, here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change.
(30:32):
Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made, as well as ongoing events and programming, like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (31:06):
For anyone listening, I have come across multiple climate tech startups in multiple industry sectors, and that skillset of being able to go work on an old Windows 95 machine or something, and be able to actually integrate data off of it into a modern software platform feels like it is a problem that spans so many industries and sectors in climate change. How do you find talent that wants to go work on these problems, which frankly, again, they're not necessarily applying the most cutting edge modern computer science to be able to do this? I'm interested what that process looks like to find the right people to help you build these solutions.
Leopold Spenner (31:46):
Yeah, I mean, funnily enough, especially in engineering, it's much simpler than we were afraid it would be because it's tangible and the impact you can have as a single software developer is huge. The improvement of this old legacy software to ours is so crazy that when we give our software to our users, even though we have never optimized for the UI or the UX, they are like, "Wow." And you can really drive to the plants, see the software in action. And I mean, what we didn't cover yet is that cement and concrete software, they're all there to enable this low clinker cement and concrete that in the end reduces 50% and more the CO2 footprint of concrete. And that is being shipped and poured, for example, here in Berlin in the highest office building. And our employees are passing this every morning and seeing the concrete trucks with our system and seeing that there is concrete going into that building with 50% lower CO2 footprint.
(32:45):
And we're just a super small team. And this is basically, from my experience, why for software engineers, and this is cool because it's real, it's tangible and you can have a huge impact. I mean, we crunched the numbers just to make a joke out of it. After three years, we helped our customers save more CO2 than Tesla after 10 years, around 80,000 tons. And the impact in our industry with 8% of worldwide carbon emissions, just so big, and that's frankly why the people joined us. I have to admit that especially in customer success, which is I would even say our most important business function, this is the hardest to find good talent because there we need a skillset that both spans deep cement and concrete expertise so we can actually interact with our customers in a respected manner across complex data and complex problems. But they also need to go very deep in machine learning and in our software, and they also need to build good relationships with our customers.
(33:45):
So that's the hardest, but most of our employees are software engineers. That was actually okay, and we have a amazing team, so very proud of that.
Cody Simms (33:55):
Oh, that's so awesome to hear. You mentioned the ultimate goal for these companies is to use lower clinker cement. What does that entail generally?
Leopold Spenner (34:06):
Very simply, that entails, I said in the beginning it can happen in the cement or in the concrete plant, but let's take the simple way for clinker substitution to happen in cement. It entails making a cement, so this powder with less of the burned limestone, with less of the clinker, which is the CO2 intensive ingredient and more of the supplementary cementitious materials. This typically means that the cement has less strength potential because clinker is always super high strength potential, in the supplementary materials are some waste, so it typically means the cement gets weaker. And this means then in the ready-mix concrete plant, this has to be compensated somehow. And the most efficient way to compensate it is by using less water, concentrating up the mixture, and even though the cement is less strong, make exactly the same concrete out of it. And this super simple principle in itself reduces 50, 60, 70% of the emissions of the resulting concrete, which is huge. It's really, really huge.
(35:06):
And the only problem with this approach is that this concrete, when you take the water out, as I told you, with all the fluctuating ingredients, becomes much more sensible. And suddenly you really need very precise production processes in order for this concrete to work, otherwise it reaches tipping points where it de-mixes, for example, where just the water content is so off that it will de-mix and you basically have to throw everything away. So that's the big challenge when I go this path of clinker efficiency, which basically means less clinker, more supplementary cementitious materials, same concrete, concrete becomes much more sensible, and also the cement as an input needs to be much more precise for all of this to work. And that's why it's a very painful path of decarbonization. It requires to reach really high degrees of quality that today no one has. But all other ways to decarbonize concrete are also very painful or expensive, and we believe this way is always going to be the cheapest because it's essentially just doing the same but being more frugal with the clinker. So be more careful with the clinker.
Cody Simms (36:17):
I've essentially thought of the pathways to decarbonize cement very bluntly on two main pathways. One is new ways of producing. So we've had on the podcast before a company like Sublime that is using electrochemistry instead of heat to try to crack the lime and actually create the cement. And then the alternate is basically new mixology, new ingredients going in. You're opening my eyes to a third path, which is just increasing efficiency, is what I'm hearing from you.
Leopold Spenner (36:46):
Exactly. It's almost boring, but it's actually incredible. That's why we're called alcemy, because the alchemists tried to make gold out of lead. And that's essentially what we're trying to do here, make much more out of the same.
Cody Simms (36:59):
What can you share in terms of traction to date?
Leopold Spenner (37:02):
We're live in over 10 cement plants, over 20 ready-mix concrete plants. We're making revenues that qualified us for a series A funding round. And most importantly, this cement and the result in concrete with 50% less carbon emissions is being used at mass scale already here in Germany, which is of course making us the most proud. And five of our customers are launching this concrete with 50% less CO2 emissions all across Germany. We have many real estate projects interested in that. As I said, Berlin's highest skyscraper was built out of that concrete last August. So yeah, there's both traction in terms of software adoption and revenues, but for us even more importantly, low carbon concrete being shipped and poured and landing in important construction projects.
Cody Simms (37:50):
And your series A that you mentioned, you announced last fall, it was a 10 million euro round led by Galvanize.
Leopold Spenner (37:57):
Correct.
Cody Simms (37:58):
Well, congratulations on that. And what are the big needs you have right now, whether it's on talent, whether it's on business developments? For those listening who are interested to help out, what kinds of inputs are you most excited to hear from right now?
Leopold Spenner (38:12):
Most excited further strengthen our machine learning and our predictions and our product because making predictions and the control loop and optimizations based off customer data is just very, very hard. And there are a lot of improvements we're working on, including new sets of data, other ways to better clean data, find outliers, drift detection. So super exciting technical topics. Take the truck data for example, we get to work with this data coming from trucks, trying to interpret it in the best way. So that's one side of the equation to make our predictions better, our system more robust. And the other side of the equation where we're really heavily investing in and trying to professionalize is all that solution engineering and customer success work. So really deploying as fast as possible, getting the data out of the plants in the best quality, with as little manual work as possible, onboarding our customers as quickly as possible.
(39:11):
All of them in the beginning heavily mistrust the system and any data-driven predictions. So it's always in the early days of using alcemy, a few of these, "Oh, I don't believe this prediction, I absolutely don't believe it." And 28 days later, "Oh, it was true." We always need a few of these moments to have our customers gain trust in the system and automating that, speeding that up, and also guiding our customers towards clinker reduction in the end and clinical efficiency and launching these cements and having the safety and security to launch new products with lower carbon footprint. Those are the two areas where we hire the most people and where most of our focus is on.
Cody Simms (39:53):
And what's next for you all? What are the big things you need to tackle over the next year or two?
Leopold Spenner (39:59):
I mean, one big thing that's super exciting is that currently in our concrete system, the control loop is not fully closed yet, so we basically stop with making the predictions and showing them everywhere, but we have not implemented the full control loop, and we're thinking about potentially even a little device that will add water and plasticizer into these mixing trucks. So that's a super exciting technical development, probably more in the course of the next two to three years, but this is definitely one important product component that is next.
(40:28):
Then, which is exciting me, is a huge wave of construction projects in Germany. I believe we have at least 10, 15 large construction projects in the pipeline where we convinced the building owner to use this 50% CO2 reduced concrete from our customers, because so far it has been two large buildings where this concrete was being used and now 10, 15, and really hoping to get this onto the mass market. That's a next step coming up where we're very excited about. And yeah, basically professionalizing growing our team. For the first time ever, we have a small sales team, we have finance team, we have a people and culture team and larger office here in Berlin. So all these things that go along with building a mature company, trying to make a business out of this as well. Those are the things coming up in the next couple of years.
Cody Simms (41:20):
And I'm curious how the market is evolving around you. So you've mentioned a few times your end product is 50% lower emissions than the traditional product. Is that something that the users of the product that the companies you're helping to make are able to take any kind of carbon credit for? Are they able to reduce their own carbon accounting as a result of it? Do you see a carbon market evolving around this? Are there tax incentives or whatnot starting to show up for using lower carbon cement? Anything more you can share about how the market evolves around this product?
Leopold Spenner (41:54):
So in Europe we have this cap and trade system for CO2, where cement producers are part of. What does this mean? Every ton of CO2 that I emit in a cement plant, I have to buy a certificate from the European Union. So that is already the carbon market, it's already present since I was 15. And that means when I as a cement and concrete producer manage to make my concrete in the end with less cement and less clinker, I need to buy less of these certificates. And they are now at a price of 100 euros. That's exactly the price of one ton of cement and one ton of cement almost contains one ton of CO2. So you can see there is a huge impact of that.
(42:33):
And that luckily means for our construction companies that they can get a concrete that has less carbon and basically costs less, at least has less CO2 emissions and has lower production costs. Obviously the producers, our customers try to capitalize and keep the price as it is and get that price delta, but that means our customers can decarbonize and save costs at the same time, especially heavily here in Europe where we have the CO2 pricing, but also in other countries because SCMs are always cheaper than clinker. So this is kind of a self-fulfilling prophecy that will happen anyways as long as we can somehow get the plants onto a new precision level in their production processes.
Cody Simms (43:17):
Wow, fantastic. Makes rightful sense then that you're very focused on the German market to start, not only because you live there, but because the unit economics are very friendly toward producers wanting to leverage the reductions that you can deliver to them.
Leopold Spenner (43:31):
Exactly.
Cody Simms (43:32):
And is there a measurement technology that needs to be required in order to qualify for purchasing fewer of the cap and trade credits?
Leopold Spenner (43:40):
Yes, that's what my mom had to set up 15 years ago. Basically, an employee from the European Union comes to your plant for two weeks and is looking at all the measurement devices in the stack that measure the CO2, but also sanity checking this with the mass balances and all the materials you've purchased and the quantities of limestone you've dug out of the quarry. It's a huge process, but it's very accurate.
Cody Simms (44:05):
Amazing. And so then ultimately the ready-made concrete producer already knows what they're buying from a cement perspective, so thus can determine how their mix also has a potential lower CO2 output?
Leopold Spenner (44:17):
Exactly. All the CO2 calculations are super easy in our industry because over 90% of the carbon footprint of the resulting concrete just comes from this clinker CO2 that we can calculate very simply. And also it's a very simple, you can say that one ton of clinker contains 0.8 tons of CO2, more or less in most countries. So with this formula, it's super easy to calculate by how much your CO2 footprint goes down when you use less cement or cement with less clinker. That's all super simple to calculate, and our software does that as well.
Cody Simms (44:49):
And then presumably on the ready-made side, because you're actually helping them to recommend the ingredient mix.
Leopold Spenner (44:55):
We know exactly what's in there. We know exactly what's in there, and our customers see that as an added value because we can pass these actually verified values to the construction companies, to the building owners so they can properly document it. It's not mandatory yet, but it will probably become so, so that's an important component.
Cody Simms (45:13):
Well, Leo, I want to thank Beatrix von Schroder at AENU, which is a climate tech investment fund that participated in that series A round we talked about, she introduced the two of us together. I want to thank you for coming on the show and sharing all about what you're building and helping me and hopefully many listeners understand that there is yet another way to tackle the carbon problem when it comes to cement and concrete, and that alcemy is on the cutting edge of delivering that from an efficiency perspective. So thank you, Leo.
Leopold Spenner (45:43):
You're very welcome. Thanks for fascinating your listeners about cement and concrete decarbonization, that's what we need.
Jason Jacobs (45:50):
Thanks again for joining us on the My Climate Journey Podcast.
Cody Simms (45:54):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (46:03):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter at mcjpod.
Yin Lu (46:17):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (46:26):
Thanks, and see you next episode.
