Trailblazing the path to DAC 3.0: Why we invested in Phlair
By Torben Schreiter, Carlota Ochoa & Elisabeth Iszauk
In our ongoing mission to support innovations that drive the transition towards a sustainable and decarbonised world, Extantia is thrilled to announce that we have led Phlair’s Seed round. We are joined on the journey by strong partners including Planet A Ventures, Verve Ventures, Counteract, Atlantic Labs, and others. This Munich-based startup is developing a novel and mass-manufacturable electrochemical approach to direct air capture (DAC) that is poised to be compatible with intermittent renewables, thus significantly lowering energy inputs, and paving the way for costs below $100/tCO2 at scale.
The problem: We need to remove billions of tons of CO2 from the atmosphere by 2050
As we approach the critical 2050 deadline for achieving Net Zero targets, the urgency to develop effective carbon capture solutions intensifies. The Intergovernmental Panel on Climate Change (IPCC) highlights the necessity of removing carbon dioxide (CO2) from the atmosphere as an essential component to curb emissions and stabilise global temperatures. By 2050, the IPCC projects that around 6 gigatonnes (Gt) of CO₂ need to be removed per year to limit global warming to 1.5°C. Atmospheric cleanup in these massive amounts will only be feasible with a broad mix of high-quality approaches in both nature-based solutions (NBS) and engineered carbon dioxide removal (CDR) — including affordable direct air capture (DAC).
Currently, global DAC capacity remains in its nascent stages (less than 1 Mt per year), with the leading DAC 1.0 companies like Climeworks, 1PointFive/Carbon Engineering, and Global Thermostat pushing to scale up operations. For instance, Climeworks is on track to complete construction by the end of 2024 of its newest facility, Mammoth, which has a nameplate capacity of 36,000 tons of CO2 per year and is ten times bigger than its predecessor plant, Orca. This ambitious scaling is vital, as the IPCC estimates the need to escalate to a CDR capacity of 10 GtCO₂ annually by 2050, with the potential to increase to 20–660 GtCO₂ per year by 2100. The International Energy Agency (IEA) has reported that current DAC capacity is below 1 Mt per year and can scale to ±65 MtCO2/y by 2030 if all currently planned large-scale DAC facilities advance as expected. Some of the main challenges to overcome in order to scale DAC capacity rapidly include high CAPEX costs and high energy input for regeneration of the system’s sorbent (the main OPEX).
DAC 1.0 solutions, like Climeworks’, have been pioneers in the field and demonstrate immense value in establishing the carbon removal market, though these players do have clear cost limitations. This poses a particular challenge as meaningful market demand is expected at a price corridor around $100-$200/tCO2 — a cost of capture that has not been achieved yet. However, this is the expected price range where large-scale DAC deployment becomes financially exciting, primarily for two reasons.
Firstly, because DAC results in a pure CO2 stream, it can be used as a feedstock of green C-atoms into existing and new chemical processes. Around the $100–200/tCO2 price range, CO2 utilisation becomes feasible not only for high-value end products but also for commodity products. As the cost of DAC-sourced CO2 falls below the commodity price of grey CO2, it becomes economically attractive for use as a feedstock in the production of green synthetic fuels and other chemicals. DAC-sourced CO2 as a feedstock is neither capped in scale nor does it come with the logistical challenges of biogenic CO2.
Secondly, for sequestration, in a scenario where DAC removals can be used to offset actual emissions and reduce companies’ compliance liabilities, this implies a huge market when DAC costs are below compliance markets, which EU ETS currently prices on average ~$101/tCO2 for 2030 to 2040 forward contracts. Although legislation today does not permit industrial polluters to offset emissions with carbon removals to reduce their liability under the EU ETS, it is widely anticipated that this is going to happen for high-quality removals, which DAC-sourced CO2 would fall under. This would further expand the market opportunity for Phlair, and position their path to DAC at <$100/tCO2 at scale as particularly financially exciting.
The solution: An electrochemical carbon removal technology that can run on intermittent renewables
Phlair is pioneering an innovative carbon removal technology, centered around the hydrolyzer — an electrochemical hydrogen looping cell (EHLC) for energy-efficient pH-swing regeneration. The team has developed a patented closed-loop system involving CO2 capture, desorption through an acid-base reaction, and regeneration of acids and bases. A differentiator to other DAC systems, Phlair can generate the acidic and alkaline solutions through electrolysis when energy prices are low (or even negative), and then store these liquids in tanks to be utilised later when energy prices are high. Because of this, Phlair’s DAC process can be fully powered by intermittent renewables, but still achieve uninterrupted 24/7 CO2 capture without expensive battery storage. To enable a sophisticated load-flexible operation, and thanks to the ability to run at high-current densities, the system can operate not only in an ON vs. OFF state, but can — following the electricity price — be gradually tuned between highest performance and highest energy efficiency mode of operation (down to all the way OFF). This wide operating window without the need for additional CAPEX buildout is unique in the market. It allows for an optimal OPEX/CAPEX trade-off, leading to ultra-low capture costs.
The technology is inspired by established technologies like alkaline water electrolysis and proton exchange membrane (PEM) fuel cells and contains components from well-understood and already-scaled supply chains. Through iterative improvements, the team has refined its hydrolyzer, improving energy efficiency and reducing costs related to cell components. Importantly, given the scale of DAC required to meet net zero targets, Phlair has been hyper-focused on low-cost manufacturing since its inception, and as such has designed its primary hardware, electrolyzers and absorbers, in a modular way to facilitate rapid scale-up.
Currently, Phlair has achieved a technology readiness level (TRL) of 5 with its 1 tCO2/year demonstrator, which is shown below. This fully operational demonstration prototype (1 tCO2/y) has been run for multiple hundreds of hours, showcasing the practical viability and effectiveness of the technology.
The team is currently working on a 10 tCO2/year outside pilot — called Electra 00 — that is set to go live later this year which will demonstrate Phlair’s commercial-sized hydrolyzer stack, integrated with their absorption and unique chemical energy storage concept. Given Phlair’s modular approach, the hydrolyzer stack (shown below) will be the same building block for all of Phlair’s future commercial DAC units — without any additional scale-up necessary on the component level. This step will bring their technology to TRL 6 and be a further derisking point for offtake prospects in their impressive pipeline.
A rendering of 260 tCO2/y FOAKs (Electra 01 and 02) that will be built in 2025 for pre-purchase customers Frontier/Milkywire and Deep Sky, as part of this round’s financing is shown below. Beyond Electra 01 and 02, Phlair plans to launch its first commercial facility, Dawn, in 2026 to remove 20 ktCO2/y.
Beyond DAC, Phlair’s technology could be cost-effective for CO2 capture from low-concentration point sources, like aluminium production facilities, which the company is actively exploring.
Phlair is EPIC: How the carbon math adds up
From a top-down perspective, the IEA assumes that 1 Gt of DAC is needed by 2050, so with our Extantia projected impact calculations (EPIC) we generally assume that a category-defining company can capture up to 20% of a market. Factoring in plant net removal efficiency and operating factor, this conservatively results in 196 Mt/year in 2050. Of course, if DAC technologies successfully scale up at the right price point, with the abundance of renewable energy available, then the total DAC market for 2050 could be much larger, and thus the overall annual emission reduction potential for Phlair by 2050 would increase as well.
Given the small scale, low net removal efficiency, and TRL of the current technology, we did not factor in an embodied carbon appraisal as it would not be reflective of the technology at scale. We plan to do an embodied carbon assessment (including carbon payback period) for the 260 tCO2/y plant.
We’ve been particularly impressed by Malte, Paul, and Steffen’s complementary skill sets, professionalism, and exceptional execution power on both the product and commercial sides of the business. We are very excited to support the founders and the Phlair team as they scale up their novel electrochemical system at a time when the market pull is clear and continuing to increase!
To learn more about DAC affordability and the rise of DAC 3.0, check out our Medium article published in February 2024.
