Editor’s note: What if we told you that one £28 investment could help you multiply your money from the AI craze no matter which individual AI stocks soar, crash, or stay flat? Our energy expert James Allen calls it the “AI Master Key”. We’ll let James explain more here in his latest presentation.
In today’s issue:
- Investors are rightly excited about energy transition investing
- But what if we’re too slow getting to net zero?
- This breakthrough material could be the answer…
There are many roadblocks on the path to net zero, and we need a solution for what happens if the energy transition doesn’t go to plan. But, so far, the quest to recapture carbon from the atmosphere using technology has been expensive and slow…
A key growth area for investors
There are many solutions that replace current applications with cleaner alternatives. Electrification, renewables, energy efficiency… These are all critical in the battle against climate change.
In 2022 the International Energy Agency outlined those as the three pillars of decarbonisation this decade, saying that 80% of the emissions reductions needed by 2030 could be achieved by those three alone. The point is that we have the technologies, it’s just about deploying them quickly and at sufficient scale.
Legendary investor Jeremy Grantham says the companies that are driving and benefitting from the fight against climate change will have growth rates that dwarf those of other sectors.
You can see this with many companies in the sector, like Encavis, the German renewable energy producer that has tripled revenues since 2017. Or BYD, the Chinese EV maker, which has grown its sales fourfold sine just 2020.
But many people rightly fear that the pace of change is too slow, and that we won’t reach net zero or reduce emissions fast enough. In that case we also need the ability to remove emitted carbon from the atmosphere. This is known as carbon capture and sequestration (CCS) and involves sucking or leaching carbon molecules out of the air and then storing it underground.
This is usually done at the point of emission, where the fuels are burned – e.g. at flaring sites on oilfields, or industrial factories.
Trees are one solution – nature’s CCS. Through photosynthesis they absorb CO2 and store it in their matter. That’s how, over millions of years, they become fossil fuels: decomposed carbon-based matter. More urgently, though, the search for viable carbon capture technology has been notable for its sluggishness.
Trees are cheap and plentiful, but we’re having a hard time stopping deforestation let alone starting the reforestation process. We are likely to need some technology-based forms of carbon capture.
However, existing efforts have not been up to the task. The latest studies show that $30 billion has been spent on carbon capture projects that have generated no significant emissions reductions. If anything, they’ve added to them through all the work, travel, construction and demand creation without a final product to compensate for it. Currently, CCS is only able to remove 0.1% of global emissions each year.
CCS has four key elements: capturing the CO2, compressing or liquefying it, transporting it and then securely injecting it for storage. The challenge in part 1 is separation: leaching out just the carbon molecules. This depends on the concentration of CO2 in the waste stream and the gas pressure, and requires highly complex membranes, sieve-like materials, to do it. Thus far, they’ve not been advanced enough to achieve the necessary efficiencies relative to cost.
But in the last few years, a few breakthroughs have emerged that could change that. One comes out of UCL, and it uses a surprisingly well-known material to achieve much higher performing membranes to sieve out the CO2.
The material used has “a really high utilization… because you put in relatively little, but it forms a pathway that is incredibly conductive, allowing you to transport CO2 through these membranes at much higher rates.”
Naturally I don’t fully understand the science behind it – they describe a complex process of “growing” dendrites into the membrane on an aluminium oxide base, driven by the flow of oxygen and carbon dioxide. The key thing is that it is working, because the resulting permeability of the membrane was an order of magnitude higher than what was required, and the capture of CO2 was the highest reported for this class of membrane.
Dr Mutch of UCL also pointed out that “there is a common metric for membrane performance – the ‘upper bound’. As our membrane relies on a unique transport mechanism, we avoid the limitations of most membrane materials and go far beyond the upper bound.”
One problem other membranes have faced is the ability to operate at the very high temperatures often required in CCS systems due to the heat of the waste gas stream, but this material Is able to operate at the multi-hundred degree temperatures involved, which improves its applicability. What’s more, it is only required in very small amounts to achieve this improved performance.
And this material isn’t just boosting CCS technology.
It’s also used extensively in other technologies that underpin all the megatrends of today like the energy transition. It’s critical for use in solar panels, used heavily in electric vehicles, and other clean technologies.
The AI Evolution
It’s not just new energy technologies though.
This high-performing but little-mentioned material is also found in circuit boards, AI data centres and more… and these are suddenly the fastest growing segments of the economy. For example, server sales are expected to grow 74% to $210 billion in 2024, up from $121 billion in 2023, and data centre capex is set to grow by 30% this year too.
With all those fast-growing end markets, you could almost say that this under-the-radar material sits at the nexus of the two biggest megatrends in the world – AI and energy transition.
Click here to find out how we’re investing in it.
Until next time,
Kit Winder
Investment Analyst, Fortune & Freedom
