Forging Sustainable Steel with Electra

Sep 28

In this episode, Sandeep Nijhawan and Quoc Pham, founders of the startup Electra, talk to Cody about tackling the complex issue of steel decarbonization. Steel production is a formidable contributor to global emissions, accounting for nearly four gigatons annually, equivalent to approximately 8-10% of total global emissions. To put it in perspective, if steel were its own country, its annual emissions would rank third globally, following only China and the USA.

The conversation dives into the intricacies of current steel production, shedding light on how the US approach differs from much of the world. The US has a head start on the path toward steel decarbonization, featuring fewer coal-based blast furnaces and substantial installed electric arc furnace capacity. The episode also explores various pathways for steel decarbonization, including point-source carbon capture and hydrogen utilization, and introduces Electra's pioneering electrochemistry method.

Electra announced an $85 million funding round in Q4 2022, with participation from renowned climate tech investors and industry leaders, including Breakthrough Energy Ventures, Amazon, and many more. Sandeep and Quoc are tackling one of the hardest problems in climate change head on. Time will tell if it works, but they certainly aren't shying away from the challenge.

Get connected:
Sandeep Nijhawan LinkedIn
Quoc Pham LinkedIn
Cody Simms LinkedIn / X
MCJ Podcast / Collective

*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded on Sep 12, 2023 (Published on Sep 28, 2023)

In this episode, we cover:

[03:44]: Sandeep's background
[08:01]: Quoc's background
[15:38]: Overview of steel production and emissions
[22:20]: Overview of supply chain and integrated steelworks concept
[25:09]: Why the US is a leader in low carbon intensity steelmaking
[30:50]: Contrasting McKinsey's roadmap with Electra's approach
[34:22]: Environmental and safety risks of traditional iron tailings
[37:10]: Electra's unique approach to the steel decarbonization problem
[44:24]: How low-cost renewable electricity is crucial for Electra's solution
[46:26]: Challenges in electrifying ironmaking vs. copper and zinc
[48:39]: Hydrometallurgy for iron ore dissolution to minimize waste and extract value
[49:05]: Core principles: decarbonization, sustainability, and circularity
[55:59]: Electra's go-to-market strategy and commercial vision
[58:42]: The company’s capital stack evolution and local project financing
[01:02:51]: The importance of collaboration in this space
[01:04:41]: Invitation for listeners to join Electra's team

Cody Simms (00:00:00):
Today on My Climate Journey's Startup Series, we are talking about the decarbonization of steel with the founders of Electra, Sandeep Nijhawan and Quoc Pham. Steel is the backbone of modern life, and its production accounts for almost four gigatons of emissions annually or in the realm of eight to 10% of all annual global emissions.
(00:00:26):
If steel were a country, its annual emissions would be the third largest in the world, only behind China and the USA. Steel's emissions come in large part from the process of transitioning iron ore into steel ready iron. While some of it comes from the incredible amounts of heat needed for this, most of it comes from the chemical reactions inherent in this transition.
(00:00:53):
In my conversation with Sandeep and Quoc, we walk through how steel production works today and how it's already largely different in the USA than it is in much of the rest of the world. Turns out the US has a headstart on steel decarbonization with fewer coal-based blast furnaces and a significant installed capacity of electric arc furnaces.
(00:01:17):
We talk about some of the pathways that are being explored for steel decarbonization including point source, carbon capture and hydrogen. And lastly, we talk about Electra's electrochemistry approach, which seeks to produce steel ready iron using electrochemistry at temperatures that are roughly the same as a cup of coffee.
(00:01:37):
Electra announced an $85 million round of funding in Q4 2022 with participation from a who's who of climate tech investors and industrial leaders including Breakthrough Energy Ventures, Amazon, BHP Ventures, Temasek, S2G Ventures, Capricorn Investment Group, Lowercarbon Capital, Valor Equity Partners, and Baruch Future Ventures.
(00:02:05):
As you'll hear Sandeep and Quoc explain, this is no small bet. They're tackling one of the hardest problems in climate change head on. Time will tell if it works, but they certainly aren't shying away from the challenge, and I appreciate that they took the time to join us to help us all learn more about the problem of steel emissions and potential solutions. But before we start, I'm Cody Simms.
Yin Lu (00:02:30):
I'm Yin Lu.
Jason Jacobs (00:02:31):
And I'm Jason Jacobs. Welcome to My Climate Journey.
Yin Lu (00:02:38):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:02:43):
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.
(00:02:56):
Well, Sandeep and Quoc, welcome to the show.
Sandeep Nijhawan (00:02:59):
Glad to be here.
Cody Simms (00:03:00):
Thank you for joining us from Colorado to talk with us all about the production and creation of steel, which I think in 400 plus episodes of My Climate Journey, we have barely, barely touched, and yet it's a huge vector of emissions. And so very excited to learn from you today and learn about what work you are doing at Electra to help solve this problem.
Sandeep Nijhawan (00:03:26):
You said it right. I mean it's a very huge, impactful sector. I'm really glad to be here with you, Cody and with Quoc to understand where the industry is and the impact it has on climate change. Looking forward to this discussion.
Cody Simms (00:03:44):
Well, as we typically do, let's start out by first learning a little bit about each of you. You've been building this company for a couple years now, and it seems like maybe you worked together in a few past ventures from what I could glean off of your LinkedIn. But let's hear the story direct from each of you on how you met and how this project came to light.
Sandeep Nijhawan (00:04:04):
Sure. Really glad to be here with Quoc. Both of us has been in the journey since the beginning and before that, as you mentioned. Sort of that journey really begins from about 20 years ago where I was starting to get this bug in my stomach, which I'll say starting to being the entrepreneur and systematically transitioning my career away from where it started in the semiconductor industry, building devices and chips that are pretty much in every semiconducting device we have in the world today, towards one dimension, thinking about sustainability and how we can be better citizens on this planet. On the other dimension, moving away from corporate life into building things ground up, being the entrepreneur.
(00:05:00):
That convergence led me towards where I would say, over the period of seven to eight years to a realization, which is really the thesis of Electra. In 2014, it sort of I would say dawned upon me that renewables are here to stay. They will be the cleanest, greenest likely at that time looking at the cost projection, the lowest cost of energy that is available.
(00:05:32):
However, compared to let's say a base load would be, a green base load would be, however, one of the issues that source of energy has as you know, it's in its intermittency, meaning that solar and wind are available in certain parts of the day. And then of course there is a seasonality associated with that.
(00:05:53):
The question that I had was given this megatrend that is going to evolve and instead of starting thinking about another solar panel or another renewable energy development, the question was how can we use this renewable energy resource? The first foray into that was through a battery company. Within six months of starting that company, that's when I met actually Quoc and recruited him to be part of that journey where we were developing a battery solution for a grid scale application. The idea is take renewable energy and store it into a chemical energy and dispatch it when you need it.
(00:06:37):
Then also worked on shifting the renewable energy into hydrogen, so worked on green hydrogen as well. If you step back, Electra is really a continuation of that journey for both of us where we are essentially developing a new industrial process using that intermittent source of energy and at the same time decarbonizing one of the hardest to abate sector, i.e., the steelmaking today.
(00:07:08):
That really is the evolution in some sense around that thesis that we got to use this energy resource. If you look at today, it's very obvious that you look at how are we going to decarbonize automotive sector, well, that's electrification. The grid will decarbonize, and if we have electric vehicles on it that are using that green electricity, you decarbonize the automotive sector. In this case we are in steel. That underlying technology didn't exist at that time and the whole Electra, the vision was to go and develop that platform that would enable that.
Cody Simms (00:07:49):
It seems like your background is very heavy in the sort of battery chemistry space, which I'm assuming has helped inform the solution that Electra is bringing to market, but let's hear it from you.
Quoc Pham (00:08:01):
Yeah, thank you. Yeah, my background is in chemistry and material science. Actually I started out as a material scientist and I quickly realized that electricity is actually a way to do chemicals transformation that will not rely on fossil fuel. That's how when I had got that revelation, I taught myself electrochemistry. I didn't get that from school. I learned on the job by teaching myself electrochemistry. Since then I got the bug of electrochemistry because that seemed to be a very key technology for everything we talk about for electrification.
(00:08:41):
Then my journey started in the solid oxide fuel cells and then transitioning to flow batteries or grid scale energy storage. And then I joined Staq Energy, which is the company that Sandeep talked about. That's where I met Sandeep.
(00:08:56):
In 2020 I kind of have a midlife crisis when I started to take a pause and reflect on my career and what I want to do and what would be the next step. I start to realize that the fuel of batteries for energy storage and the fuel of hydrogen where you do water electrolysis, those fuel are getting quite crowded and actually it's become no longer less of a technology play but more a race to scale kind of play.
(00:09:31):
As a technologist, I say, that's probably not the best place for me to be in. I want to go somewhere I can make an impact very early on, but I was looking for what that is. That's where I ran into Sandeep again. We crossed path again. He just bought up, "Hey how about steal?" At first I thought about it. I said, "That's crazy. What do you mean?"
(00:09:54):
But then I gave it some time further. I say "Okay." I mean because I like crazy idea and I would like crazy challenge. So I knew this would be very difficult, very challenging. But that is a type of challenge that I'm looking forward to get excitement and a thrill in my next step in my career. That's why I'm here today.
Cody Simms (00:10:16):
Sandeep, where did the how about steel question come from in your mind? How did you get to the point of thinking this is what I want to think about next?
Sandeep Nijhawan (00:10:25):
It actually came out of a conversation when I stepped out from my previous roles. You take like, okay, same playbook I've done every time, let's take three to six months to just decompress and think about not just life but where do you want to work. In that journey I talked to a lot of people. It's just more of, hey, what's on your mind, what are the things that you are seeing? It's more of just like, yeah, I've been so focused on something over the last five, seven years and okay, I haven't had time to have those conversations.
(00:11:01):
I think in those conversations a professor made a comment to me actually that, "Hey, do you realize that the cost of electricity is becoming so low that I think in one day we should be able to define and make iron electrically? And steel is 98% iron." This is a passing comment, parts of the discussions happening just sitting. I'm about to leave and he just drops that in.
(00:11:30):
I go back on the airplane, and I'm like that's stuck in my head. I'm in my notebook doing this calculation of what is he talking about? Is he right? By the time I land back the Bay Area, this was the conversation in LA, it's a not long flight, I'm like, "I think he's right." That's really the genesis of that one.
(00:11:51):
The other piece, it was very clear to me having the background that I had in renewables and hydrogen and batteries that what Quoc talk about is like let's go find a solution where there is a big impact. If it was not going to be steel, I can give you in writing it was going to be on cement. If I wouldn't have thinked about cement, I would've picked ag as an area that we got to attack, which is there are lots of really hard-to-abate sectors where I don't think we have the solution in hand.
(00:12:25):
It was going to be one of those things, but the genesis of why steel sort of came through just a conversation which there's something to say about it because ability to find that and connect the dots to what we are doing is really what entrepreneurship is all about, as you know. You don't get to write a very well flushed out business plan that you've thought from point A to point B and then you execute. It's a series of connections and threads that you have to sort of build it ground up.
Cody Simms (00:13:03):
I'm hearing A, a desire to work on a big impactful problem in the decarbonization space generally, leveraging your background and experience in that space. And then B, a little bit of a "what if" hypothesis sort of chasing of hey maybe this idea around what steel might look like in the future as these other technologies mature around it could be an opportunity to pursue something.
(00:13:30):
But no specific background in the steel space, no specific even deep knowledge of the industry but rather harnessing these cross-functional sort of parallel experiences in a energy storage, in batteries, in hydrogen where you had some sense of how the rest of these other parts of the industry were evolving that could fit the narrative. I presume then a bunch of market research and understanding both in terms of market opportunity and on technology. Would that be the correct assumption on the next steps?
Sandeep Nijhawan (00:14:02):
Absolutely. The playbook that I deploy in thinking about startups is that you pick a problem, you don't pick a technology. This is not a technology that was invented somewhere that I decided to license or Quoc decided to sort of work in the background. We picked a problem.
(00:14:23):
In that problem you did the market analysis to define the problem, but what also needs to happen is you got to know where the puck is going versus where the puck is today. You have to create a market hypothesis of where we need to land and what the boundary conditions of a solution set if it existed could do to solve that pain point in the market. That is really the starting point on any problem we attack. We have been down on this journey multiple time.
(00:15:00):
And then we say okay, now the question is how. That's not an easy answer either. And so the master of this how on technology front, of course, is Quoc. I have worked with him for long, and I can tell you with lots of conviction that I've never seen a person break a problem down in a systematic way to find the solution. That really is another story around Electra, that Quoc was absolutely instrumental and once we said, "This is where we need to go," that he pieced this thing together from a technology perspective.
Cody Simms (00:15:38):
Well, let's go down each of those paths. Maybe first let's break down the market and understand what you learned about steel. And then let's maybe break down the how, which I presume will be largely stories coming from Quoc's side of things.
(00:15:51):
Starting with the market, the world produces an almost unfathomable amount of steel. It's something like nearly two billion metric tons of steel per year is the number that I dug up. How is it generally produced today? What does that process look like starting with iron ore and then becoming essentially girders or sheets of steel?
Sandeep Nijhawan (00:16:13):
Yeah, absolutely. Let me take that, and then Quoc can do the Electra how. First of all, as you said, two billion tons of steel. One thing important to note is that steel is 98% iron. When we talk about steel, the predominant metal we need is iron. About one to 2% is carbon that's locked in the matrix of iron which gives steel its structural strength. Iron, if it's pure, is brittle. It will not be able to work as a structural material.
Cody Simms (00:16:49):
Iron bends, iron rusts, right? Steel is essentially the treatment that causes that to not happen as much.
Sandeep Nijhawan (00:16:56):
Absolutely. First to make steel, iron gets produced, and the way iron gets produced is converting what's called iron ore, which is iron and oxygen bonded together, which is available on the crust of the Earth. We refine it in a way that we first melt this iron ore at about 1600 degree Celsius. It gets into molten state. That's the image you may have seen of hot metal pouring out of these furnaces.
Cody Simms (00:17:32):
These are called blast furnaces typically, and they're basically heated up mostly by coal today, correct?
Sandeep Nijhawan (00:17:38):
That's correct. The source of energy is coal, but that's one part of that equation. There is a role that carbon, which is coal, plays, which is carbon is also what we will call in chemistry a reducing agent, meaning that at that temperature carbon will grab the oxygen, which is on an ore, combine it together and make carbon dioxide, which is the global warming gas. Every ton of steel will emit about two ton of carbon dioxide. If you aggregate that globally, we're talking about 10% carbon dioxide emissions.
Cody Simms (00:18:21):
Just to understand, roughly what percentage of the emissions in a blast furnace method are from just the heat source itself, the coal naturally releasing CO2 as a heat source, and roughly what percent are the chemistry process of actually forging or reinforcing this iron?
Sandeep Nijhawan (00:18:40):
Very good, important point. Maybe let me break it down. If you take the full pie amount of emissions in the steel industry, first of all, 90% of the emissions comes from iron making step, this blast furnace step we're talking about. If you further break that down, 10% roughly of those emission will come from heating and melting the ore. Roughly rest of the 90% of the pie, which is the iron making pie for emission, will really be coming from the chemistry to break the bond between an iron and an oxygen, which expands a lot of energy to do that and that takes the CO2.
Cody Simms (00:19:23):
So 1600 degrees Celsius heat is only 10% of the emissions, and the other 90% are from the actual chemical process of actually, is it making the-
Sandeep Nijhawan (00:19:34):
It's making the iron.
Cody Simms (00:19:36):
Making the iron itself. Okay.
Quoc Pham (00:19:37):
Let me add one thing for clarification. When we talk about making iron from iron ore, it's not just the blast furnace itself. You have to see steelmaking the full value chain that go through multiple steps, and blast furnace is only one of the step. For example, in order to make the iron using the blast furnace, you don't start with iron ore the way you leak it out of ground. You have to prepare by what we call [inaudible 00:20:07], digging out of ground and then [inaudible 00:20:09] to some particle size.
(00:20:11):
And then you have to sinter. That's the sintering step, because if you put the ore as fine powders into the furnace, it may not have certain property fluid flow type property that you want. And so you have to prepare it to make sinter. That step already involve fossil fuel that generate ore and CO2.
(00:20:32):
And then there's another ingredient that need to add into the blast furnace that is metallurgical coal to make it into a coke. That's where you get the reductant to do the iron ore reduction. That step also take energy and release CO2 as well.
(00:20:51):
The blast furnace on its own generate only one or four ton of CO2 per ton of iron metal. The rest come from the other steps. When Sandeep talk about 10%, the 10% of the 1.4 ton CO2 coming from the heat requirement.
Cody Simms (00:21:07):
It sounds like this isn't just a matter of finding a different source of industrial heat because the actual chemical process of getting the iron ready to be made into steel is the bulk of the emissions anyway. And so if you want steel as a product the way it's currently made today, you have this problem to deal with.
Sandeep Nijhawan (00:21:22):
That's the clarification. People have this perception just because it's hot that's what's the emission is coming from. That's not entirely true. The bulk of the emission is highly energy intensive. You need lots of coal to pull the oxygen out of iron.
(00:21:41):
What you end up doing is once you do that, you're left with iron and some carbon in it which is coming from coal, and then you define that step further in what's called the basic oxygen furnace where you are again through oxygen, removing more carbon to get to the precise carbon you want in the final steel. That's when you roll it out into either a sheet or a plate or a beam, whatever you want to do it. But the bulk of the emission comes up to the iron refining or making step, which is in a blast furnace.
Cody Simms (00:22:20):
From a supply chain perspective, is the iron refining and then ultimately the steel forging which is happening after this sort of basic oxygen furnace is happening as I understood you just explained it, is this happening in an integrated fashion in one factory or is there a supply chain that is part of steelmaking?
Sandeep Nijhawan (00:22:41):
The bulk of it is an integrated fashion which is integrated steelworks. That's why they're very, very large steelworks. They go all the way from iron ore to steel. They buy coal, and then they refine the coal first to make it pure enough, metallurgical grade what's called, to be fed into blast furnace because it's part of the chemistry. It is not like we are burning the coal to make steam in a boiler and that makes the energy, the electrical energy in case of, let's say, coal-fired power plant.
(00:23:15):
There are lots of steps involved. That's one way to do it. It's worth noting that that's how 70% of the steel is made in the world today. 30% of the steel is actually made from recycling the scrap that we produce at the end of the life of a building or a car or [inaudible 00:23:35] like a washing machine or refrigerator. You pull away all the non-metallic piece and you can go into a process which is in industry called electric arc furnace.
(00:23:50):
It's an electricity driven furnace, or rather powered by electricity. You melt an existing steel. Again, as I reminded you that melting is not what consumes a lot of energy. This process as a result because there is no oxygen to split off, has much lower energy and hence a lot lower carbon emission associated with that.
(00:24:18):
However, in order to make old scrap into new steel, what happens is many of these scraps have impurities in them. You're not able to remove at the end of the life all the copper from a car. You have combination of both, and copper will be now an impurity that is going to make your structural steel bad. It's an element that will cause problem.
(00:24:46):
When you make high-end products, especially high-end steel products using EAF steel, you also need [inaudible 00:24:53] iron to reduce the impurities that are being in the scraps. It's what's called an industrial sweetener. You're trying to dilute the impurity. That's about 30% how the EAF steel is made.
(00:25:09):
Now, what may be useful for your audience to understand is that that ratio of 70 to 30 in favor of integrated processes flipped when you think about United States. In the US we cycle a lot, recycle a lot, which is a good thing. So 70% of our steel is actually made through recycling process and through an EAF steelmaking, whereas 30% is only made through integrated steelworks. That's in decline. That's in a steady decline already.
(00:25:43):
US in that sense, what may be useful for your audience is that it's already a world leader in terms of having the lowest carbon intensity steelmaking process, which as we think about how the industry transitions to and perhaps when we think about China and lots of other factors, this is a very important element to keeping in mind that we have a headstart here versus the rest of the world.
Cody Simms (00:26:11):
I'm so glad you brought this up. As I was preparing for our call, I uncovered a report from the US Department of Energy on decarbonizing steel, and it said exactly what you said, which is that in the US roughly 33% is made in a blast furnace and roughly 67% is made in an electric arc furnace. It said, but as compared to the rest of the world where globally 75% of steel today is made in a blast furnace or the iron ore is created in a blast furnace.
(00:26:41):
And so then I did a little digging on, okay well wow that seems like a wide swing of outcomes here. Where is steel made in the world? It turns out of the 15 top steel producers in the world, none of them are in the US, nine of them are in China, two in Japan, two in India, one in South Korea. Explain a little bit about the global steel industry maybe for all of our knowledge and understanding.
Sandeep Nijhawan (00:27:07):
Absolutely. I mean it's actually a fascinating story almost like you can do a whole session of how Rockefeller started in that sense. Even Carnegie Mellon, who is really the founding father of steel industry in the US, started with integrated steel processing.
(00:27:28):
What happens in the late '80s was that US was getting lots of competitive pressure from this integrated steelworks type of concept. An upstart company was now the largest steel company in the US. Nucor basically promoted this idea of recycling and reusing creating new steel products. That's the genesis of EAF steelmaking actually led by a US company.
Cody Simms (00:27:56):
This is the electric arc furnace method of taking recycled scrap steel and using that as your base product.
Sandeep Nijhawan (00:28:02):
Yeah. Now, in order to make that type of steel, you need to have a reservoir of scrap. So meaning to do that in a developing world where there is not a good way to collect that scrap it's very hard to deploy that. When the China growth happened, they were not ready to deploy that at massive scale. They went with the traditional integrated steelworks to support their growth and to large extent to date the next one on the curve from what is needed to help power or transition a developing country into a fully developed industrial nation for which you need lots of steel is also being powered, which is India through the integrated steelworks.
(00:28:46):
That's where the world is today. But now if you fast-forward to where the world needs to go, which is towards the net-zero path, it is very clear to us that first and foremost you should be recycling more. That means that let's develop a solution that is compatible with EAF steelmaking because that's how we recycle steel.
(00:29:09):
That is the predominant way other than potentially thinking of carbon capture back of a steel plant people can think of. But leaving that off the table, every path that we're talking about requires iron making first, which is what the blast furnace does today, which we want to displace it and feed that iron into the next step, which is to make steel.
(00:29:32):
As a result, where US is today fundamentally with the largest electric arc furnace fleet and recycling capability, it is actually uniquely positioned to lead this transition even though 50% of the capacity is in China, which is using integrated steel work and they need to shift that to something else. That transition is an opportunity to regain the competitiveness what I would say for US in steelmaking back.
Cody Simms (00:30:09):
I uncovered a McKinsey report that said over the next 30 years there needs to be $4.4 trillion invested to decarbonize steel production. It could increase production costs by 30% compared to today. Three fourths of this decarbonized methodology will be moving to hydrogen powered plants and the rest will be equipping existing blast furnaces with carbon capture solutions.
(00:30:36):
You just laid out a totally different roadmap from what McKinsey articulated. Maybe unpack a little bit the way they see the world going, and then let's dive right into the Electra solution and how you see a different pathway.
Sandeep Nijhawan (00:30:50):
Okay. There are really a couple of pathways where McKinseys of the world are seeing that these are probably well-developed pathways to do it. One is of course carbon capture in the back of the steel plant, but the predominant pathways people are talking about is displacing coal as a source of chemical to reduce iron oxide into iron and using hydrogen as a molecule that does the same thing but instead of making CO2 makes a byproduct of water. That's what the McKinsey's report are talking about.
(00:31:30):
Let's talk about that now a little bit, the hydrogen reduction pathways. That pathway, what probably may not be visible in the McKinsey report is that requires certain grades of ore to make this happen. Let me explain that in a minute, step back. Remember the blast furnace we talked about. We need to melt things. That has an advantage, which is that we can add other chemicals into the molten state which grabs the impurity from the melt. They float up on the top, which is called the slag. You tap the iron from the bottom, which is relatively pure. That's how we purify iron and remove the impurities that are coming in the ore.
(00:32:14):
Now, if you have a hydrogen which is a gas and you are making the same reaction happen with a solid which is of the iron ore, what happens is that iron gets reduced with the impurity state behind. There's nothing for the impurities to leave the system now. What that means is that you need to feed in the highest grades purity of the iron ore to still have something relatively pure to pick into the next step, which is the steelmaking, which would be through an electric arc furnace steelmaking process.
(00:32:52):
In order to get to those ores, well, world doesn't have those ores. If we start putting that supply chain together, that's highly capital intensive. The bigger issue is that if you're upgrading an ore, that means you're leaving some waste behind in the mine as well. Those mines have a lot of tailings, they consume energy, they consume capital, they produce emissions in the value chain for something that is becoming quite constrained.
Yin Lu (00:33:22):
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.
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Cody Simms (00:34:22):
Iron tailings as I understand it just for our listeners, these are these big pools of red brown sort of liquid that you see almost environmental catastrophe pictures of. Is that accurate in terms of what an iron mining tailing residual would look like?
Sandeep Nijhawan (00:34:37):
These are tailing that are definitely wet. You will see massive dams that hold these tailings. Besides the environmental issue that you mentioned, there's safety risk as well because some of these tailings have collapsed, and whatever is in the downstream basically gets decimated. There was a tailing dam failure that happened a few years ago in Brazil, for example, and the rest of the world.
(00:35:08):
The need to get to higher grade ores requires you to essentially have these tailings in the mine that you are referring to here. Now let's say we did produce these tailings and get to very high grade of ore to feed into now this reduction process that is going to happen with hydrogen, well, that process happens now at 1,000 degrees C, so hence that has a thermal mass and it has to run 24/7 which means that the hydrogen has to be fed into the process 24/7.
(00:35:41):
To get low cost hydrogen, you need to use the lowest cost energy because 70% of the cost of hydrogen is actually the cost of energy. The lowest cost of energy is intermittent renewables, which means that hydrogen now needs to be stored somewhere to feed into a plant that needs to run 24/7. You need hydrogen storage.
(00:36:03):
Where is hydrogen being stored at a scale that is so massive? This is not like hydrogen feeding a small chemical plant. Just to give you an idea, like a few million ton steel plant, if you just think about one day of hydrogen use and you think about compressing the hydrogen, let's say, at 40 times the pressure with a 40 bar that is available on the Earth atmosphere, so highly compressed, we are talking about in that pressurized system having being in a pipeline that could be 100 kilometers long and few meters in diameter to store that kind of volume.
(00:36:43):
Geographically, where does that infrastructure exist where the steelmaking exists, where are these ores that are available? That's a massive puzzle that needs to be solved, and that's the reason why we thought that, is there a way to bypass all of these ands. One and is ore needs to be purer and we need to store hydrogen and we need to get low cost energy.
Cody Simms (00:37:10):
We need to produce hydrogen at scale in order to store it.
Sandeep Nijhawan (00:37:14):
Yes. Even if you did all of that stuff, that is not pure metal because no matter what you did to the purity of the ore, you are concentrating the impurity, so you still did not get to pure metal. Somebody downstream still has to clean it up for you. There's a value to be all things are not created equal with even a hydrogen based process.
(00:37:39):
Given these ands the compounding risk of putting all of these pieces together is why Quoc thought up a different way to do it. This may be a good transition to bring Quoc in on how is Electra thinking about this?
Quoc Pham (00:37:55):
All right. As we started at the beginning by saying when Sandeep started Electra we only had a problem that we want to solve in mind. We did not have a real solution. That's how we work here meaning that we identify the problem and try to develop a solution to solve the problem.
(00:38:18):
Our approach to do that is in order to define a solution we need to also identify the requirements of a good solution, what a good solution would be like in order to solve the problem. That's why very early on, we come up the requirement that whatever technology we come up with need to be compatible with the intermittency of renewable electricity because that's where the world is heading.
(00:38:44):
We want do electrification of every production process, especially iron in our case. We want that to be compatible with the intermittency so that it doesn't require the energy storage, because if you require something that requires 24/7 electricity, you have energy storage in addition to the renewable electricity.
(00:39:08):
The difference in cost between intermittent renewable electricity and 24/7 type electricity is by a factor of three. The electricity cost is the primary OpEx cost for any electrification process in our case in particular. And so we need to keep that down. That requirement got to be the primary driver of the technology.
(00:39:32):
If we have a high temperature process like traditional approaches which will have a high total mass inertia that will make it difficult to turn on, turn off, or tune down when the electricity is not available. That's why we say that the hot dry process potentially should operate at low temperature so that you can turn it on, turn it off, or you can tune down the output when there's not much electric available. That's eliminate most high temperature processes, and that drove us down to the low temperature consideration.
(00:40:10):
Later on in the process we also identified some other requirement that I can share with you is that as the world move towards the sustainability, there is a question about the ore purity and availability. The reason is because if you can come up with a good technology that requires the highest purity iron ore, then where do you find that ore? There are reports out there that say that the high grade iron ore is going to run out as soon as 2030 and hence a new technology for grid steel need to be compatible with the new reality. That is you have to deal with low grade iron ore that has higher impurity content. That's become the second requirement in our course.
(00:40:59):
Those are our two requirement that we impose on our solution. One is compatible intermittency, the other one is compatible with requirement sustainability, meaning how can we use lower grade iron ore? How we come up with a solution was also is an implicit third requirement that was let's not start from completely scratch because that will take 20 year [inaudible 00:41:27] before we can get to a solution.
(00:41:29):
Is there a precedent somewhere that we can copy and leverage the understanding, the knowledge, and the experience in order to translate into a solution? That's where we look at zinc and copper that we found those technology actually they are doing electrification, they are electrifying the production process by using electricity just like what we do. They're doing that at a temperature of less than 100 degrees C. So can we leverage that technology to do iron making as well? That's the starting point of our solution.
Cody Simms (00:42:08):
Here's what I'm hearing you say. Let me try to spit back the combination of what each of you just described. One is up until maybe 20 years ago, the primary means of steel production was this large integrated steel mill where you start with raw iron ore, you have to refine it in this incredibly emission intensive process that ultimately gets it ready to be turned into steel.
(00:42:35):
In the US a couple decades ago this sort of new process emerged where you could take recycled steel or waste steel and you could refine it through these electric furnaces that were lower emissions but still required a significant amount of input of recycled steel.
(00:42:52):
And so your thought process here is hey, can we solve the front end of that process, which is how do we get more materials into the steelmaking process overall, but can we do it in a way that obviates the need for this vast amount of heat and can rely on electricity as a means for refining this iron ore at the rawest material of iron ore and actually displace that front end part of the integrated steel production process?
(00:43:20):
And so then you looked at the requirements of okay, if we have intermittent electricity, what are the different chemical reactions that we could rely on that could try to solve some of the same use cases that traditionally this heat and heavy chemistry process is using in the initial conversion of iron ore into steel readiness?
Quoc Pham (00:43:42):
Yeah, you summarized really well. Thank you for that. The high level idea is that we are going to make iron from iron ore using grid electricity. Once you have the iron, you can feed that into electric arc furnace to convert it into steel. You will use the existing infrastructure of electric arc furnace to make steel.
(00:44:05):
The benefit there is instead of relying mostly on recycled steel, which is not available everywhere in a large quantity, so we supply that iron form iron ore that has [inaudible 00:44:21] to electric arc furnace to make steel. That's our process.
Sandeep Nijhawan (00:44:21):
[inaudible 00:44:23].
Cody Simms (00:44:24):
If I understand it, you're generating this at a little higher than room temperature now. I think 60 degrees.
Quoc Pham (00:44:32):
The temperature of the coffee.
Cody Simms (00:44:32):
Yeah, 60 degrees Celsius range, which is the temperature of coffee. Why now? Why is now the time when this technology can find its way? Is it because we have enough renewable energy deployment today to be able to solve it whereas before there just wasn't enough electricity to do it?
Quoc Pham (00:44:52):
Almost correct? Yes, it is because we have renewable electricity. There's another factor that is crucial. That is the cost of renewable electric has come down tremendously over the last decade. We would not be talking about green steelmaking using electricity today if electricity were three time more expensive because the amount of electricity we need to use is tremendous. We've got to have very low cost electricity, and that's what we can get today with renewable energy.
Cody Simms (00:45:24):
I heard you say because it's not high heat, the ability to shut it down, turn it on or off based on the price of electricity, there's no significant startups or shutdown costs to the plant itself.
Quoc Pham (00:45:38):
Yes. With that also instead of becoming a burden on the grid because if you require 24/7, the grid need to have energy storage or backup energy to provide you what you need in terms of electricity, it become an asset to support the grid. If the grid is overburdened by high demand because it's so hot like in Texas, our plan can tune down or shut down freeing up that electricity support degree. There is a component of battery energy storage here that is inherent in our technology.
Cody Simms (00:46:16):
What is the actual chemical process that you are doing that is similar or different from traditional iron ore refinement?
Quoc Pham (00:46:26):
It's very different in the way because in traditional way to make iron from iron ore you have to melt it and then you have to use coal to extract that oxygen out of the iron oxide, which is the main component, iron ore. In our case, we use electricity. The first thing is to put that iron or into a solution, and then you use electricity to extract the iron that is solution that is the ionic form of Fe2+, a little bit of chemistry here, to convert that Fe2+, Fe3+ into iron zero, Fe0 that's the iron metal. That is the traditional process that is called electroplating. That's how we electroplate certain elements like copper and zinc or chrome even.
Cody Simms (00:47:16):
If we've been using electricity to do this in copper and zinc and chrome, why did we just now figure out to think to do it for iron?
Quoc Pham (00:47:25):
Because it's not easy. There are some roadblocks that we ran into originally when we thought okay, we can electrify iron making using traditional electroplane type approach like zinc and copper. However, very quickly when I first got the lab, I tried to verify something that was in the back of my mind was can we even dissolve iron ore because iron ore is solid that you need to convert into the liquid for the electroplating reaction and we need to be able to dissolve iron ore.
(00:48:03):
This was not clear to me that we could dissolve iron ore, and the very first experiment we got the lab was, well, it doesn't dissolve. I still remember to this day that I went to Sandeep and I told him, "Hey, you need to sit down. I have bad news for you. We cannot dissolve iron ore, so maybe that's the end of the story," because if you cannot go past the first step then don't bother talking about the rest. And so that was the very first challenge we ran into, and so we took about a month and we solved that problem. That allow us to move forward.
Cody Simms (00:48:39):
The process that I've heard is also a process I hear used in battery metal recycling which is hydrometallurgy. Is that correct? You're essentially using some form of water and acids to figure out how to dissolve the ore appropriately. Presumably there are industrial waste byproducts from this, which is one of the trade-offs you're getting in exchange for lower emissions I suppose. How does the company manage that?
Quoc Pham (00:49:05):
That's a very good question, and that leads to my third quick point about how do we define the requirement in the application. That is to minimize the amount of waste. Any process we generate some waste. Our goal is to avoid create so much tailing that will be environmental liability.
(00:49:26):
What we try to do there is to extract as much as possible any valuable metal that you can get out of the iron ore. That lead to the concept of full value refining. That mean that typically the world, let's say, we look for aluminum, we take oxide which is aluminum oxide, aluminum ore, and refine it to get aluminum. The waste could be so much iron for that. That's something that we still work in telling them that we know you talk about red color dam, that's mostly the one that we are talking about. That leads to the point that most of the time iron actually is a nuisance in those processes.
Cody Simms (00:50:13):
Oh, interesting. Iron tailings in many cases is a byproduct of aluminum making is what I just heard you say.
Quoc Pham (00:50:19):
Yes. In many other industry, because iron is everywhere, so it is something that people want to take it out of the product they want. It's the opposite for us because we want iron. That's the first challenge. The other challenge we deal with was, well, people figure out how to take iron out of their solution. We want to keep iron in the solution and take out the other things. We had the reverse of what other want to do.
(00:50:51):
That's the challenge we had to work on and we figure out how to keep iron solution, keep it stable, and we figure out how to remove the impurities that are in the iron ore and in the process potentially finding those impurity into valuable products. That's led to my point of what they call the full value refining, meaning that instead of creating everything else is a waste from iron making process, can we extract the other metals as a high value product as well.
Cody Simms (00:51:22):
You can take a commercial or a low grade ore of iron or you can take residual tailings that are leftover from some other industrial process like aluminum making and integrate those into your process today. You are going to have your own byproducts that come out of that, which is again a trade-off, but your goal is that you've created at least some degree of circularity of other waste streams as part of your process. That's what I just heard you say. Is that accurate?
Quoc Pham (00:51:46):
Yes. At some point the process become uneconomical. It's not like you can process everything waste and turn it into a valuable product. It's not that magical.
Sandeep Nijhawan (00:51:57):
Just to reinforce what Quoc just described, Cody, it's quite important, which is what he described to you was a scenario in which when we process any other mineral today, because this planet is made out of iron as the core, so anytime you dug a shovel into ground, some iron is always there in everything we do. What happens is that when we do any mineral processing today, its tailings is predominantly iron.
(00:52:27):
We're basically doing the reverse of the problem in which if we can create value out of iron, the question is what else is in there? Typically what we find is what else is in there is usually of higher value than actually iron metal because the price of steel is $500 a ton, price of aluminum is 10 times higher, price of copper is so much higher above that. There's more value that you can extract out of this.
(00:52:54):
What we generally find is other than the sand which is in the iron ore, pretty much everything else has higher value that can be extracted. One of our strategies what Quoc is stress on that is to take the iron ore. We are actually trying to evaluate whether the sand can be used as a secondary cementitious material for cement but leave that aside for the time being. But what else is in there In typical iron ores? Usually you have alumina in there. You can have titania in there. You can have other elements in there.
(00:53:31):
What our process that Quoc basically designed was to enable and make sure that those things can also be taken out as solids out of the system and they are refined enough that I can feed that into an existing infrastructure of how aluminum is being made. If you can extract that alumina and feed into an existing infrastructure, aluminum making, what you do first of all is A, we don't produce more waste, and two, it helps the other process to generate less waste now because their waste is always iron fundamentally.
(00:54:14):
And then there is a separate strategy that I think you guys touched upon, which is can I take somebody else's waste and refine it further? But the fundamental goal what we are trying to do is there are three anchors in this vision, decarbonization, sustainability. What does sustainability mean? Don't leave your shit behind. Do something, recycle it. Be compatible with recycling and be a good citizen on the planet of how you use that resource, so meaning extract as much as you can out of what you dug out of the ground.
(00:54:52):
The third element is what you also mentioned is circularity. How do you promote to be more circular, whether that is from an electric arc furnace steel recycling point of view or can it be used so that somebody's waste can be used in a circular way to make [inaudible 00:55:13]? These are really the core principles of how Electra set out to find the solution set with these things in mind upfront.
Cody Simms (00:55:24):
Yep. Well, I appreciate you both walking me through this and helping me learn as you go. This is obviously an incredibly complicated industry and process that you all are trying to develop to fit into the way this industry works today.
(00:55:40):
Assuming you're successful in all of this, what do you think the go-to-market looks like for Electra? Are you selling physical product? Is your goal to sell refined iron ore? Are you helping to sell the process into existing steelmaking facilities? Explain more how you see the business evolving.
Sandeep Nijhawan (00:55:59):
Vision is to solve the right problem, which is to get to iron here. We see ourselves as a company developing the technology to get to iron and feed that into existing partners and infrastructure of steelmaking, which is electric arc furnace steelmaking.
(00:56:21):
What our vision is really is if you think about it, one of our core strengths is also to use lower grades ore. What you don't want to do is take the lower grade ores which has impurities, which has oxygen in it and ship it across the world to refine it. What our vision is to take our technology closer to the mine and process the refinement step at the mine and create more value added product for the communities that own this asset, which is the iron ore, and make a very high dense metal and ship that to where steelmaking is needed, where the steel and demand is needed, meaning ship it to the factory of Nucor, which is a partner for us, and then they feed into whatever is needed for our industrial economy.
(00:57:18):
We see from a commercial vision point of view, us developing regional hubs which has the intersection of a few things. One availability of ores, ores that are likely been already been dug out of the ground and they're sitting as waste today because they cannot be fed into any existing process so that we don't take more dirt out of the ground. Let's recycle that dirt that already been dug out of the ground. That's one.
(00:57:49):
The second is of course we talked about the access to low cost renewable energy. Cost of energy matters. The third intersection is around access to existing logistics. To get two billion ton or to get a million ton, a million ton is thousand kilograms, which is 2,000 pounds. You're talking about lots of material movement that needs to happen, and that needs logistics to make that happen.
(00:58:20):
Let's not go invent the whole new logistical infrastructure, and convergence of that is where the plant should be and then bring in partners to help build a plant and then feed the iron into an existing infrastructure of steelmaking as well.
Cody Simms (00:58:42):
Given that, it sounds like your vision is that these local hubs that you'll build, if you will, will be Electra facilities where you are producing this better iron ore, this lower emissions iron. How do you envision the capital stack of the company evolving?
(00:59:00):
Today you all announced at the end of 2022 a significant amount of venture capital funding. You announced $85 million with honestly a who's who of investors. Kudos to you. It was Breakthrough Energy Ventures, Amazon, BHP Ventures, Temasek, S2G, Capricorn, Lowercarbon, Valor, Baruch Future Ventures. It was an incredible syndicate that you put together.
(00:59:25):
It sounds like I would imagine given your vision, you're going to need to also raise local project financing for the individual facilities as they would get built out over time. Is that an accurate assumption?
Sandeep Nijhawan (00:59:37):
Absolutely. That's exactly where we are headed. I mean, the caps stack was billed first of all analyzing that this is highly capital intensive and we need people on the table that have patience and depth from a capital perspective for deployment perspective to see this thing through. The names that you mentioned, which are six of them are financial investors, there's one common thread on them, each one of them is a billion dollar fund or larger. There's a reason for that because the check size starts becoming pretty large very quickly, even in early stage to do this kind of development.
(01:00:18):
But then there's a very thoughtful way to think about where the value chain is. We needed access to the oars to do the development and make sure that we're developing something that is going to be compatible with what the ores. None of us have steelmaking background. Let's not forget that. They are a bunch of yahoos thinking of changing the world that has been done same thing for 400 plus years.
(01:00:45):
It was very clear to us that we need people on the table that also have experience in the industry. We brought in BHP for that first reason, and when the time was right we brought in Nucor. As we mentioned, they have the largest EAF fleets in the world to help with the product development and so on so forth. And then OEM off takers, which is not mainly obvious to your listeners, is Amazon is a very large consumer given the footprint of steel across all their operations as well.
(01:01:22):
That's just basically bringing the capital stack to develop the solution. You fast this forward where you are headed is that for a regional hub we see regional partners that are going to come in and where Electra has an equity stake, let's say in a plant, but it could have an equity stake with other regional partners. Maybe the partner provides ore, maybe the partners provides an offtake, looking into this or its private equity capital equity capital, and there's a regionalization of hub's partnership. That is what we're headed in the direction of.
(01:02:00):
It's a very carefully laid out caps stack that layers on Electra as a parent company that also is setting up on this journey of these plants that have project financing and so on so forth tied into that.
Cody Simms (01:02:18):
That's an incredibly ambitious vision, not just the capital structure that you've laid out, but really everything that you're doing. I want to thank you for taking the time to come on here and share everything that you're building. As I said, 400 plus episodes and we've barely touched on this subject. It's upwards of 10% of global emissions. It's such a complicated and big subject.
(01:02:42):
And so do appreciate that you all are tackling one of the biggest challenges in this space. It sounds hard and incredibly important. What should I have asked that we didn't cover today given the complexity involved here?
Sandeep Nijhawan (01:02:58):
I would say the parting thought there, maybe I'll also have Quoc jump into his view as well, I think we didn't talk about explicitly, but maybe it could be implicit in the discussion we have had is that I feel that right now is not the time to go alone.
(01:03:13):
The magnitude of problem we are trying to solve for is so large and the time is so small that if you would've asked me 15 years ago, Sandeep, what the cap stack should look like, it would look like quite different actually versus what it is today where it is a very acute, in my mind, it's very clear that this is the time to do partnerships. It's the time to bring minds together to solve a problem.
(01:03:44):
That's really what we have been doing here is building the company in that way to tackle this problem. I don't want to take the listeners that these are a bunch of yahoos basically on a very ambitious mission, drinking a Kool-Aid, which is, while that is true, there is method to the madness in the sense that we are very systematically putting pieces of the jigsaw puzzle together to solve the problem. Time will tell whether we will be successful or not, but that's what we're attempting to do.
Cody Simms (01:04:15):
It's a good reminder of how important collaboration is in this space and bringing together the cross-functional stakeholders to work on these projects. These types of large industrial decarbonization projects are not things where the disruptors are just going to emerge from a corner and take over an entire industry. It is being built together with industry is what I'm hearing you say. I think that's an important point to drive home.
Sandeep Nijhawan (01:04:40):
Absolutely.
Quoc Pham (01:04:41):
Yeah. I want to add a little bit flavor to that as well. We believe at Electra that the team is answer to the problems. We believe that we'll face a lot of problems in our scale up, a lot of challenges. It will be very bumpy road, but the team that we build will be the thing that we can count on, that we can build our solution from.
(01:05:08):
I'm appealing to your audience that if you are passionate about climate tech, if you believe in the urgency to come up with a solution to our biggest challenge of mankind, then please consider joining us because we know we cannot solve this problem by ourself. We'll need all the help we can. If you have the passion for that, please consider joining us. We're not talking about just about technical team. We're talking about every expertise that can be in finance, in policy, all of that so that we can all come together to find a solution and progress this forward.
Cody Simms (01:05:50):
Well, Quoc, that's a great call to action, and certainly we have many, many listeners who are trying to find their pathway into climate tech and so appreciate your reminder to them to check out opportunities that are at Electra as a potential way for them to get involved. For many people who are lifelong workers and builders in this space as well, obviously and have transferrable skills, I'm sure there's good opportunities there for people to look at as well.
(01:06:15):
Sandeep and Quoc, I so appreciate you joining us today and thanks for taking the time to help me understand a little bit more about the challenge of making steel and a bit about how Electra is seeking to solve that problem.
Sandeep Nijhawan (01:06:30):
Thank you, Cody. Really appreciate the time as well, and I've enjoyed this discussion. Frankly, all the other episodes, you too and the community that you're building is very, very helpful.
Quoc Pham (01:06:41):
We appreciate your time and opportunity today.
Cody Simms (01:06:44):
Thanks y'all.
Sandeep Nijhawan (01:06:45):
Thank you.
Jason Jacobs (01:06:46):
Thanks again for joining us on the My Climate Journey Podcast.
Cody Simms (01:06:50):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity. If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. If you have a guest suggestion, let us know that via Twitter @mcjpod.
Yin Lu (01:07:12):
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.
Jason Jacobs (01:07:22):
Thanks, and see you next episode.