Robert Bryce 0:00
Hi, everyone, welcome to the power hungry Podcast. I’m Robert Bryce. On this podcast we talk about energy, power, innovation and politics. And I think we’re going to talk about energy, power and innovation on this on this podcast and maybe some politics. My guest is Danny rice. He is the CEO of net power a newly public company. Danny, welcome to the power hungry podcast.
Danny Rice 0:20
Good to be here. Thanks for having me.
Robert Bryce 0:24
I want you as I told you, I don’t want all the guests but guests on this podcast introduce themselves. So imagine you’ve arrived somewhere no one there knows you. And you are told you have 60 seconds to introduce yourself, please introduce yourself.
Danny Rice 0:38
Okay, 60 seconds. Born and raised in Boston, Massachusetts, probably as far away from from the oil and gas industry as you can be. But somehow find myself in the oil and gas industry surely at college, started a company with my brothers called Rex energy back in 2007. We moved to Pittsburgh and started to discover the Marcellus Shale, we grew REITs and energy into one of the largest natural gas producers in North America merged with et to create the largest in 2017. So I was CEO through the rest energy days through going public in 2014, till the very end, and merge with EQ t. So now the largest natural gas producer in the country, Toby, the middle race brothers, the CEO there. It was a fantastic journey, we learned a whole lot about natural gas about being able to decarbonize the grid responsibly by displacing coal. So I went on from the race energy days to then starting to make investments in private energy companies, a lot in the energy transition space. Again, around responsible decarbonization started in landfill gas business grew into one of the largest in the world, so that to BP in the last year. And then I went off and said, We need to find ways to decarbonize baseload power generation responsibly. And that’s led me here to becoming the CEO of net power. We just took the company public last month. And so I’ve been in the CEO seat one month is net powers, new CEO and really just turning the path forward of of decarbonizing power generation on a global scale.
Robert Bryce 2:06
So, let’s talk about that going public. So I’ve been following net power for a while. It uses a technology called the alum cycle, which I’ll ask you to explain. But before we do that, so the corporate structure. So net power was privately held, you had a spec, is that right? Through your family with rice acquisition company that you used a spec to go public? So who? How did that work? I’m just for my own curiosity. I know about specs. I’ve heard about this a lot. But how does that actually how do you take a private company with a publicly listed entity and make that work? I’m just briefly if you can’t, if you don’t mind?
Danny Rice 2:45
Yeah, and we’ve done this a couple times over at this point. So we formed our first spec, actually, back in 2019 2020. In the reason
Robert Bryce 2:54
I mentioned, that’s an abbreviation I’ve started for special purpose acquisition company, right, that spec is this lpac? Yeah,
Danny Rice 3:00
it’s essentially a blank check company. It’s a shell company, that you have a pool of cash that investors give you and you have a window of time to go able to go find a private company, and use that cash, take that private company public, through your blank check public company, and the private company becomes their surviving entity as a public company. So it’s an alternative to taking a company public versus the traditional IPO route. Into we Weiss back, why don’t we do a stack? Well, we did a stack the first time around. Because this is during the really the early days of the energy transition grace. And people were starting to say to see a lot of these companies go public, in the quote unquote, energy transition space. And I think energy transition to most people is electric vehicles, electrify everything, batteries, wind and solar. In most of it, the real focus at the time back in 2019 2020, was really around electric vehicles in electric vehicle batteries. Think Nikola, Tesla, that whole thing in we were sitting there, you know, having built rice energy into one of the largest companies in the energy space, that actually did more to decarbonize power generation, just by displacing coal fired power in the US. We said, all the stuff that people shouldn’t put capital into is good, it’s helpful. But is it really going to move the needle and achieve the results that people expect? Me said, just given our knowledge of most of the energy space, we said, not really. So we said, what’s the quickest and most expeditious way for us to get access to this capital to make sure that capital is going to companies that are actually going to make a meaningful difference in reducing emissions, but doing it in a way that’s not going to destroy shareholder value, but actually create it? And so that’s why we did this pack. A spec for us was a very quick way way for us as as you know, seasoned energy executives to raise a lot of capital to then go find those private companies and take them public. And then put even more capital around those businesses, for them to grow and succeed. So we did that actually with our Kia, the lympho gas business. Back in 2020, where we did our first back, we then went and acquired our Kia, we actually acquired our Kia and the largest renewable natural gas developer in the country at the time a company called Aria. So we acquired two companies that were both private, took them public through rice Acquisition Corp, one in the surviving entity was archaea. So through that combination, archaea was really, really well capitalized, great scale, and now it was this public company. And over the course of the year that it was actually public, we grew it into the largest landfill gas developer in the country. And then eventually BP said, We would like to get into the r&g business, renewable natural gas business, in a big way in in BP acquired that platform for $4 billion. So we went right back into our second spot back and we said, what do we want to do with our seconds back? When we said we need to go after baseload power generation, because I think for most people, when they think about reducing emissions from from power, they think about moving away from things like natural gas. And we said, what we really need to be doing is focusing on ensuring that we have this baseload dispatchable reliable power, but we need to find technologies that can reduce the emissions from it, rather than trying to move us away from these sources of power. Because what you’ll end up with the alternative way is you’ll end up with a very unreliable, very expensive grid. In unfortunately, like you’re seeing in some countries around the world, if you go too hard into renewables, you end up having to get back onto coal as your emergency source of power. And you’re not going to get the emissions reductions that you intended to at the beginning. And so that was that was really the thesis behind rice Acquisition Corp to in the ticker for that one was Roni, in so we really had a mandate from our investors, and they gave us $350 million. And said, you have two years to go find us something that is, is really promising. Double decarbonize baseload power generation. And so we’ve spent the better part of a year and a half, really looking at everything in the private space that was promising in so it wasn’t just net power that we were looking at, right, we were looking at all forms of carbon capture. So net power is certainly a unique one. But we’re looking at post combustion, carbon capture, we were looking at other other forms of low carbon baseload power generation to so we looked at geothermal, both conventional and advanced geothermal, we looked at all colors of hydrogen, you know, blue, gray, green, pink, we looked at all of it, we looked at hydro. And then in obviously, nuclear, as well, you know, both the conventional nuclear as well as the small modular reactors. So we looked at everything. And I think that’s like an important part of is we think of what just energy and the energy mix going forward, there’s not going to be one single solution, that’s going to be the sole source of power on any grid system, it’s going to require a mixture, it’s going to require a portfolio. But I think most importantly, it requires all of us to take a very objective view of the pros and cons of every single source of potential energy. And really evaluate does it make sense to do this here? Does it make sense to do this now? And so that was certainly the perspective that we really approached this with our second spec is, what energy solution do we need now? In net power was a really, really interesting one. Because it’s a new type of power generation using natural gas. They built a fantastic IP intellectual property portfolio around it, such that they’re kind of the only ones out there able to do this oxy combustion, supercritical co2 power generation. And so we approached them in we pretty much said, you know, guys, you’ve developed one of the most important energy technologies we’ve seen in the last couple of decades. Nobody really knows about this. You’ve kind of proven the technology and you’re pivoting to commercializing it. We want to take you public put a spotlight on this business, provide the capital for you to execute in help any which way we can. So that was really just the genesis of us getting to taking that power public through the spec in the first place.
Robert Bryce 9:20
So let me pause for just a second because we’re talking about net power. It’s a newly public company is based in Texas and my fifth home, right? Is it headquartered in Texas are your most or your investor relations are in Durham, North Carolina? where’s the where’s the company headquarters? Headquarters in Durham, North Carolina. Oh, okay. All right. But you do have a facility that’s in it’s on the ship channel, right. I’m remembering this correctly. Where is it in? Is in Houston.
Danny Rice 9:43
Yeah, Laporte, Texas Tech. So we built that demonstration plant. Right.
Robert Bryce 9:48
So I heard Bill Brown, present now several years ago on net power. So I’m familiar with some of the history here. And I heard about the alum cycle so the net pay Are is a couple of different technologies that come together. If so, walk us through if you don’t mind what they’re different combustion cycles that, of course, the Otto cycle, the Diesel cycle, the Atkinson cycle, what makes the alum cycle different you require if I can tee it up just a little bit, you have to do air separation on the front end, right? You’re separating out oxygen from ambient air and feeding pure oxygen into the combustion chamber. That’s the one thing that I’m pretty sure about the rest of it. Walk us through the technology from there. So you’re feeding natural gas and pure oxygen into a combustion system that is then the alum cycle. So if you don’t mind, talk us through that. Yeah, have I got this? Do I have this? Right?
Danny Rice 10:45
Yeah, you’re heading down the right path? So you’re 100% Right, I think, um, before we even start going down the path, the critical question that Rodney Allen, the inventor of the cycle asked was, if you really want to eliminate emissions from gas power generation, you really do. Can you use the existing power generation process? Or do you need to redesign the whole power generation process? That was that was really the whole thesis was, if you really want to eliminate emissions, you need to read, you need to totally redesign the way the power is generated in the first place. And why is that? And so to maybe start with helping the listeners understand how does like a traditional power plants generate its power? And why is capturing the co2 from a power plant? So tricky? Right? Good. Let’s go ahead. Yep. So in a traditional combustion process, you have the the methane, the natural gas, which is the fuel combustion,
Robert Bryce 11:47
Danny Rice 11:49
CH for Yep, it goes into a combustion chamber, and it’s mixed with air. And within air air is 77%, nitrogen 22%, oxygen, so 22%, oxygen, and then 1%, argon, one and a half percent argon. And that’s kind of news to a lot of people when when they breathe, they know that breathing in oxygen, and most people just assume, well, this, the atmosphere is just under percent oxygen. It’s not, it’s it’s three quarters of it is nitrogen, which is an inert gas, it’s a harmless gas. It’s just part of the atmosphere here on Earth. And so what goes into that combustion chamber is that mixture in a traditional combustion process, you have the air and the methane, that combustion process when you light it with a match, it’s the methane and the oxygen that combust the nitrogen doesn’t really react, some of it reacts with the oxygen. And that’s how you end up with Nox, which is a very, very bad air pollutant. But that nitrogen just flows through this combustion process. And this power generation process unobstructed. It doesn’t form a molecule with anything. And so what comes out of traditional gas fired or coal fired power plant power generation process, is you have a whole lot of power, you get a whole lot of water from that combustion process. And then you have a little bit of co2, and a whole lot of nitrogen. So that flue gas that gets vented to the atmosphere, and the natural gas fired power plant, it’s 5%, co2 95% nitrogen. So that’s, that’s the tricky part with post combustion carbon capture is being able to remove to separate that 5% co2 from that 95% nitrogen. And so that was really just like the the genesis of of the net power thesis was, if you really want to fix the power generation process, do not let nitrogen into the combustion chamber. And that’s so that’s so that’s, that’s how the process starts. You start with oxy combustion. So So what is oxy combustion, oxy combustion is a fancy way of saying the only thing that going into that combustion chamber is pure oxygen with the methane. So you have an air separation on the front end. And so before that gas even goes into that combustion chamber, you’re removing the nitrogen and the argon. So you have a pure stream of oxygen going in. And so then that reaction of the combustion of the pure oxygen with the methane with the natural gas creates three things, a whole lot of power to spin that turbine blade to generate power. It creates water, the CH for in the O to create h2o. And then you end up with a pure stream of co2. So no nitrogen blended with it. So you have this pure stream of co2 that is ready to be sequestered. Right, right varied and so there’s no cut. There’s no post processing cost to this oxy combustion process. But then it leads to another question of, okay, well, you’ve been able to combust you have this oxy combustion process. What is the working fluid going to be to spin that turbine to actually generate power. So in a traditional power plant, you actually have two cycles, you have the gas cycle. So just that combustion process itself spins one turbine blade, and that generates a certain amount of power. But then now now in a traditional power plant, you have all this excess heat in this water. And so what you do is you have a second cycle, where you use this excess heat to, to heat the water, that creates steam, and so you have a steam cycle. And so that’s what a combined cycle plant is. So what’s the combination, it’s a combination of the gas cycle with the steam cycle, right, that’s what a combined cycle gas turbine is. But in a net power plant, we don’t have nitrogen, which is one of those working fluids in that turbine. But we do have this fantastic thing, which is pure stream of co2, and co2, it’s a problem if it gets into the atmosphere. But if you can actually harness it, it has some pretty fantastic thermodynamic properties, in the most important one is the density factor of co2 goes exponential at certain pressures. And by that what I mean is, for most other gases, oxygen, h2o, even methane, and nitrogen, as you increase the pressure, its density factor is linear. So it just shrinks in a linear factor as you increase the pressure. But with co2, as you increase the pressure, its density factor actually starts to go exponential. So the amount of space it takes up actually becomes much, much, much smaller. So you can pack a whole lot more co2 in a much smaller area. And so when we talk about co2 being in supercritical state, supercritical co2 Is that point at which the co2 becomes exponentially more dense. And in that dense phase, co2 is actually a much better working fluid to spin those turbine blades to generate power. And so that’s really the magic. And that’s really the IP around this process is you have the Oxy combustion of just the pure oxygen in the methane. And now that we have this pure stream of co2, that co2 is boosted to supercritical state, and is actually the working fluid that spins that turbine to generate power. So obviously,
Robert Bryce 17:15
so let me interrupt if I could, because I’m somewhat familiar with these, these terms. But when it gets to supercritical, is it a liquid, then does it become a liquid as it go from the gaseous stage to the liquid phase, then?
Danny Rice 17:27
Yeah, it’s pretty much on the border between being liquid in a gas. So it has it actually what it has is it has the, um, the density properties of a solid, but it has the viscosity. It has the viscosity of a gas. So it’s, it’s very, very strong, but it’s very, very viscous and flexible to be able to go around those turbine blades.
Robert Bryce 17:53
So it’s somewhere between somewhere between the gas and the liquid phase, then somewhere in that range, am I am I understanding that right, are
Danny Rice 18:00
you? That’s right. And so it’s no small task be able to do that. So it takes a great degree of expertise in technology, and obviously equipment to be able to make this happen. It had never been done before where you combine oxy combustion with the supercritical co2 power generation cycle. And so the net power guys, you know, in 2016, said, We need to go build one of these plants. And so they went and built their own demonstration plant in La Porte, Texas, to actually prove that this ox combustion supercritical co2 cycle works. And that’s, that’s what now commonly known as the LM cycle.
Robert Bryce 18:43
What does that what is that pressure? Can you give me a psi or a bar rating on that pressure on the supercritical stage?
Danny Rice 18:50
Yeah, so the bar is 300 bar in for for that for the oil and gas crowd that listens, you know, it’s 15 Bar per psi si talking about 4500 psi. So, super, super high pressure, a typical power plant pressures are in the, you know, 1500 to 2500 psi range. So we’re at 4500 psi. So,
Robert Bryce 19:13
so does that require does that require special metallurgy? I mean, obviously, you’ve got special you know, your your your, your your forging your your your production, your manufacturing is going to be much more specific, much higher tolerances, right. So, is that one of the challenges then that you have in terms of really scaling this up as having the manufacturing capability? What are the in terms of that power plant that heat engine itself? What are the what are the challenges in putting that together?
Danny Rice 19:41
Yeah, and I think that certainly as we look at just what is the supply chain look like to be able to manufacture these plants at scale, it really is like a specialized supply chain. The nice thing is, is most of this equipment is is off the rack, as they’d say, you know, it’s it’s equipment that’s in service today. You know, the big pieces of equipment The plant, there’s really, I guess, three big things. There’s the air separation unit, and these air separation, and it’s a use for all industrial applications across the world. So that one’s like an off the shelf sort of thing. And then there’s the the combustor of slabs, Turbo expander, the turbine. And that’s certainly like the most specialized piece of equipment for this co2 Power cycle. And so we have Baker Hughes, spin up from GE, you know, in GE Oil and gas that is constructing that is building our turbo expander. So that’s the only specialized piece of equipment and then you have other things like heat exchangers, as we look from going from from one temperature to another temperature, heat exchangers are another critical components. But again, those are those are pieces of equipment that that have been around forever, the size and inspects that we need. And so that’s kind of like the beauty of this is really all of these pieces of equipment that we need have been around before it’s just within this specific configuration. Nobody’s configured them like this before. So that was that was a lot of what we needed to prove at the Laporte plant was Can you can you get this oxy combustion supercritical co2 process to work in So in 2016, they brought in oxy petroleum as a shareholder, and oxy provided a lot of that capital along with Exelon in McDermott, Sean McDermott to build the facility. So they built it, they commissioned it in 2018. And from 2018 to 2021, they did a bunch of science testing campaigns to actually prove the cycle work. And it ultimately culminated in them sinking this report plant to the ERCOT grid in about a year and a half ago.
Robert Bryce 21:49
Gotcha. So it’s, so it’s feeding power into the ERCOT. Grid today.
Danny Rice 21:53
So it’s just our demonstration plant that we use to do science to test that new components. So it was never meant to be a commercial plant. So the co2 that we’re capturing from this process, for example, it’s catch and release, where we kept the co2, and then we just released it to atmosphere, because it’s actually very expensive to build co2 pipelines and sequestration wells, it requires a requisite amount of just volume to be able to justify that, and we certainly don’t have it there at the Laporte plant. But the Laporte plant was really important, and being able to demonstrate that the cycle works at the temps and pressures that a utility scale plant will be. So this demonstration plant is a 50 megawatt thermal plant. It’s a five acre site. So you go there, and you think this is a real industrial scale power plant. It is. And it had to be of a certain size so that we could test out the components that will be in the utility scale design. But that’s ultimately now with the company’s pivoting from his proven technology to now commercializing it. And I think that’s the big thing that the company that we’re focused on is, what are we commercializing? Are we going to be commercializing something that’s really, really small and applicable and very niche applications? Are we going to be bringing to market something that’s very large, very scalable, to be able to address some of the most pressing energy needs we have, which is grid scale power generation. And so that is, that is what we’re bringing to market first. And it happens this decade, is this utility scale, 300 megawatt power plant with this oxy combustion supercritical co2 process?
Robert Bryce 23:31
And so you’re in the process now for so you’re going from a 50 megawatt turbo expander to a 300 megawatt system. So that’s in fabrication now with Baker Hughes, your first of a kind, then I’m thinking in my own head about the the will jet engine like designs that I see. And so you know, that are common in combined cycle gas plants, right, is that that’s the that’s the component that Baker uses. Is manufacturing now.
Danny Rice 24:00
Yep. Yep, that’s right. And we’re still going through the design phase of exactly what it’s going to look like when it’s when it’s when it’s manufactured physically. But yeah, so that that first utility scale plant, and so it’s actually 550 megawatt thermal 300. Net electric output, it’s actually 284. Net electric output is what we’re targeting. We’re targeting for that one to be to begin construction sometime next year. You know, site work, all that stuff, with intentive. Cod. So getting to commercialization, end of 2026.
Robert Bryce 24:39
And do you where’s the site? You said construction starting next year? Do you have a site that is already designated?
Danny Rice 24:45
Yeah, so it’s going to a Nazi hosted site in West Texas. The one thing that’s really just important about this plant and hopefully we can get into it later on in this conversation is this really is transformative to just what power generation Looks like because I think historically power generation, the only thing that really mattered to plant economics is just the power itself, right, and the efficiency of that power. But now you have a power plant, a net power plant, that not only generates that power, that same gas, you know, reliable low cost, power that you would come to expect from natural gas power generation. But now we have a pure stream of co2 that is ready for industrial use, it’s ready for sequestration, it’s ready for utilization. And within the United States, for example, under the inflation Reduction Act, I know, you know, when most people think about the inflation Reduction Act, they really think about the subsidies for wind and solar. But there’s subsidies available in there for sequestration in for a net power plant. So just to give people that just a sense of the scale, so each net power plant will generate 280 megawatts of power per hour. And that requires 45 million cubic feet of natural gas coming in. And what comes out is essentially 40 million cubic feet per day of co2 in pure form,
Robert Bryce 26:10
in order to sorry to interrupt, so it’s 45 million cubic feet of gas per day.
Danny Rice 26:16
Plan. Yep, yep. And that generates that generates that power, right in that 45 million a day of natural gas. When that combustion process, you end up with 40 million cubic feet per day of co2, which in a year on a tonnage basis is over 800,000 tonnes of co2 per year. And so if you just think about an a net power plant, replacing a coal fired power plant of the same size, a similarly sized coal plant, you know, emits one and a half million tons of co2 per year, right, and so you have a net power plant that’s actually capturing all 800,000 tonnes coming off of its process. And under that 45 Q at $85 per tonne, if you permantly sequester that co2, you’re talking about $70 million of a revenue line item that net power plant receives that a combined cycle that emits co2 does not receive. So first pain, so the co2 piece is a really, really critical part of being able to locate your plants in areas where you have the potential to geologically safely sequester the co2 forever. And so in West Texas, where they’ve built up a massive infrastructure on co2 pipelines that’s been built since the 1970s. That’s just one less risk we have is we look at really just proving this technology at utility scale. So we go into this plant will be going to an oxy hosted site in West Texas, where we already have close access to that co2 infrastructure network. Oxy will use a portion of that the power, this Clean Power for their own operations, and the rest of the power will go on to the ERCOT grid. It’s 24/7 power. So I think that’s the thing that really makes us so unique. Is it this is clean power. It’s as clean as wind and solar. But it’s 24/7.
Robert Bryce 28:02
So can you tell me the county in the it’s going to be in the Permian Basin? Right? What county gets in?
Danny Rice 28:09
Yeah, I think it’s going to be in it’s either going to be in Andrews, or it’s going to be read inside of Odessa. So it’s going to be in that general vicinity.
Robert Bryce 28:18
Gotcha. Okay. Well, so as you’re saying all this, I’m thinking in my head because I know a little bit about the about the Permian. Permian is power short, right? There’s a big need for more electricity. In the Permian. I had Scott Sheffield on the podcast he was talking about Pioneer is going to make their entire fleet electric grid electric grid powered electric on there, from drilling to completion, etc, that there’s not enough juice in the Permian, for all of this drilling and everything else that’s pumping, etc. That’s happening in the Permian. But also, I am told, is this true that in fact, there is a shortage, believe it or not, we have a lot of talk about climate change and so on, that in the Permian itself, there’s a shortage of co2 for secondary tertiary recovery. Is that, is that correct? That there’s it could the Permian could absorb a lot more co2 for oil and gas, or for stimulation of oil production than is available right now? Is that true?
Danny Rice 29:10
Yeah, I think that’s just one of the the ironies with all of this is, you know, there’s a lot more co2 Going into the atmosphere than I think anybody wants. But there’s not a lot of see there’s not enough co2 being harnessed and captured in that pure form for both industrial use, or even to take full advantage of the sequestration potential, the geologic storage potential we have here in the United States. So there is there’s there’s there’s there’s a need for co2. I think if you look at where that co2 is coming for, coming from for enhanced oil recovery, in the Permian, most of it is like geologically occurring co2 That’s already naturally varied. Right. And it’s been varied for millions of years. And now we’re actually unearthing it to use it for EUR. And so we would say putting our environmental hat on is, it’s much better to use anthropogenic co2 to displace that geologic co2, better for the environment on a lifecycle basis. And so hopefully, that that’s really what we’ve seen that power, being able to do from an AOR perspective is being able to displace the geologic co2 That shouldn’t otherwise be on Earth.
Robert Bryce 30:15
Yeah, that’s it well, so I know a little bit about that. That’s, it’s mainly a co2 pipeline from Colorado, if memory serves was owned by Kinder Morgan. So just one more bit of feedback here. So it’s just interesting. I don’t know why I didn’t occur to me before. But so the Permian is obviously long natural gas, there’s a ton of extra metric couple tons, there’s more gas, and it’s becoming gas here, their whole region in the Permian is producing more gas, the gas is easily available, but the whole region is short electricity and short co2. So your gas cost, your input, fuel costs are going to be assumed pretty low. And you’re producing and two outputs that are very much in demand. So let it would have been my observation. I haven’t heard you counter contradict me on those. But so I’m assuming that I’m correct there. But the other thing that I thought was interesting about your presentation, you said net power will be an asset light technology licensor. So you’re not going to operate these plants, you’re gonna sell the technology and let other people do it. What does that mean?
Danny Rice 31:16
Yeah, so So going back to the beginning, when When, when, when Rodney element in the team at eight rivers, which invented this technology, and then assigned all dropped, dropped the IP rights into its subsidiary net power. So that power owns the intellectual property to this whole cycle. So if anybody wants to do this oxy combustion, supercritical co2 power generation, they have to come to us for a license in really like, I think, you know, why are you guys going to do this licensing model versus just build on and operate these plants yourselves? And I think it’s a very fair question. And I think it really comes down to a couple of things. One, the opportunity set, just the addressable market for this thing is much larger than our balance sheet could ever withstand if we tried to do it ourselves. In just the resources that were to require for us to be able to build on and operate these plants, not just here in the United States, but in Canada, in the Middle East, in Southeast Asia, in Europe, it’s too much for just one company to handle into like the the most appropriate way is we need to be asset light, we need to be able to license this technology. Now, this doesn’t mean we’re not going to have a heavy hand in ensuring that these customers can do it correctly. Just because this technology is so important that it’s done responsibly. So we will have a heavy handed ensuring that we’re only we’re only licensing these, these plans out to viable projects that, um, that we can point to and say these things are great for the environment, these things are great for the consumer, and it’s great for our investors. So we’re actually going to have operational ownership of of serial number one, that first plant just to make sure it works the way we expect it to. So between us oxy and our owner group will be the owners of that plant. But for plants, numbers two through 1000, it’ll most likely be this licensing model. Now, that doesn’t mean we won’t be involved in originating opportunities in doing a lot of the upfront work of scoping out where these plants need to go securing the pore space, securing the surface rights, getting into the interconnect queue and really setting the table for utilities to own these plants. But at the end of the day, the the market potential for this thing is beyond incredible. And I think is we just look at, you know, well, where do these plants make good sense? Because I think as everybody is now starting to learn the hard way, wind and solar doesn’t work everywhere. You can’t put nuclear everywhere. So where does that power make sense? Where doesn’t it make sense. And so I think like the first thing that we start with is just the knowledge of natural gas, because it’s the feedstock to this entire process. In just given our experience and expertise. If you want to say, in natural gas, we have a very good handle on the natural gas resource that we have here in the United States. So for these plants to make good economic sense, you really need three things, you need access to natural gas in the lower cost, the better. And you need a place to store the co2, because this thing captures a whole lot of pure co2 that needs to be utilized and sequestered responsibly. And then you obviously need a whole lot of power demand. Because these, these are grid scale like this will power the entire city of of you know, Austin, Texas, 10 of these and you can power all of us. And so that’s the scale that we’re talking about with these plants. And so when you kind of scan the world and say, Find me the places in the world where there’s great power demand, there’s there’s not just access to low cost natural gas but also a place to store the co2. The United States is the largest most attractive market for this. Western Canada is fantastic. The Middle East is great in the common thing thing that that they all have is access to really, really low cost natural gas in the United States because of shale development, you know, we have over 100 years of really low cost natural gas, some of the cheapest in the world. And thankfully, some of the most responsibly produced natural gas to in terms of scope one emissions from operations. And that’s certainly a big part of what we’re really focused on. EGT is eliminating our scope one and two emissions from our operations so that the natural gas that does go into a net power plant, we can, we can almost get to zero scope three emissions, which is an incredible place for fossil power generation to get to. So the United States is the biggest market for this. And just to put some sides to it, I think we’re we’ve we’ve certainly been geologically blessed with the amount of oil and gas reserves we have here in the United States within the sedimentary basins. But within the sedimentary basins, there’s also formations that don’t contain oil and gas, but have rock that are high porosity, decent permeability, and are just water bearing. And so that’s what’s commonly known as deep saline aquifers, right, and so they’ve been proven to hold a whole lot of co2, you can inject a whole lot of co2 will stay down there for months or years. So that’s the same type of formations that actually oil and gas geologists are looking for, for oil and gas. So we’re looking for the same type of trapping features that has been proven to hold oil and gas for 10s of millions of years. That’s one of the other things is how can you prove that this stuff will stay on hold for 10s of millions of years. And all you have to really do is just point to some of these gas fields or any gas field in the world and say, that gas was actually formed 30 million years ago. And it’s been trapped down there in these geologic formations for 30 million years. And so if we can identify these reservoirs, that right now just contain water, and we can inject that co2 into it, we know without a shadow of a doubt that that co2 is going to stay down there for 20 to 30 million years if we do it the right way. And so within the United States, not every single state has the sedimentary basins, not every state has the potential. And we have a couple of really cool drawings in our slide deck from our analyst a presentation from a few months ago that that actually like maps out, hey, just so everybody knows, here’s where the sedimentary basins are relative to power generation demand. In the most remarkable thing is close to 80% of us power generation today is within either right on top of the sedimentary basins where there’s the ability to store co2, or within 40 miles of it. And so we’re in a place where the United States has more co2 storage capacity than any amount of co2 will we’ll be able to capture or emit over the next 1000 years. So we are we’re geologically blessed with oil and gas reserves are also geologically blessed with a place to safely and permanently store the co2.
Robert Bryce 37:58
Let’s come back to the CCS in just a minute because this is one of the things I’m passingly familiar with CCS. I wrote about it in my book power hungry 13 years ago. It’s it’s a complex process, it’s going to require drilling, etc. But the tax incentives, as you pointed out earlier, are very loop potentially very lucrative. But you said the market potential here is I think you said beyond incredible. So what I mean, I’m looking at your, on your website, now you have the one investor presentation. What is the addressable market here? how big your market cap today? If I’m right, for net power, the ticker is in P. WR, it’s on the New York exchange market cap is 2.6 billion. How big is this potential market? Blue sky it for me how long? You’ve been fortunate in business? How much? How much more money? Can you make it this would give me an idea of what how big net power could be.
Danny Rice 38:54
So what’s the addressable market? So if we look at all so the addressable market for us, I mean, this is this is a power plant, right? And so, I mean, the addressable market is anywhere where you have access to this low cost natural gas, and you can sequester the co2 safely. And so here in the United States, like the thing that’s most scary to me, is if you just look at the age, the average age of our baseload power plants that really is like the foundation of our low cost, reliable power that I think, at times, many of us take for granted. But the average age of that baseload plant, the average age of a coal plant in the United States today is 44 years old, I think nuclear is 43. And I think the average age of a natural gas plant is is you know, in the in the late 20s. So these are are by no means young assets. These are all plants that are going to have to be replaced in retired over the course of the next 15 to 20 years, right. So, within the United States, it’s the equivalent of close to 1300 net power plants. Just to replace the aging power generation fleet that we have today. So this isn’t giving any stock to international growth, new US domestic growth, I think as you look at just the electrification of everything continuing to happen, not just with electric vehicles, but just data centers, AI in what that’s doing to demand for more power, all of these things are really, really pointing to, you know, electrifying, everything is just putting even more burden of of energy onto a grid, that is aging, in a grid that, you know, quite frankly, you know, still requires a lot of coal power generation. And so the market opportunity for us here in the United States is beyond incredible. You know, I think when when we look at just, you know, what’s the revenue model for the business, it’s that licensing approach. And each licenses, we kind of have it drawn up as is worth around $65 million present value to us. So PB 10. And so, you know, in the United States, that’s, I’m sorry, that’s an interesting mark.
Robert Bryce 41:05
Sorry, sorry, P P. 10. What was the acronym there the present present value that okay, I thought you’re so explain that if you don’t mind, because we have a lot of listeners might not be familiar with PV 10.
Danny Rice 41:17
So PV is present value is just the present value of a future stream of cash flows or feature of any which numbers that are discounted based on the time value of money. So receiving something today is worth a whole lot more than receiving the same thing and 20 years in, so how do you how do you factor in the time value of something so you have a discount rate. And so that license fee that net power earns is over the life of the plant. So you earn that $5 million per year over that 30 year life along with the upfront piece. And so that the present value of those cash flows for each licenses around $65 million. So you know, in the United States, we’re talking about 1300, potential net power plants, and then internationally, because you know, the opportunity set for us really at a global scale, if you’re really looking at trying to reduce emissions, net power has to succeed in countries like India and China. Right? If you really want to have a shot at being able to achieve net zero, this is this is global warming, this is in country warming, in so if you try to do something without having technologies that you’re developing, knowing that they’re exportable, you’re really not going to be solving much. And so this is a technology that we’re developing here in the United States, we’re really going to scale it here in the United States to bring our CapEx down for these plants, such that a net power plant will be more economic than the carbon emitting alternative. We think that’s what we’re going to need to see. And we think we can get there, we’ll be able to leverage the benefit of the inflation Reduction Act that we have here in the country, to accelerate adoption, accelerate demand in guesswork with with us being able to produce more plants each year, that’s going to allow us to achieve massive economies of scale that allow us to just do things more efficiently and get down that cost curve, get those scale efficiencies, such that, you know, by the 2040, I don’t think we’ll need any subsidies will need any incentives for this thing to be more economic than the carbon emitting alternative. We certainly need now, to be able to get to that escape velocity of being able to produce these plants at scale. It’s like the real prize for us long term really is in the in China. I think all of them, I think every country, in all citizens everywhere deserve access to low cost, reliable energy, first and foremost. And if we can find a way to use new technologies to make it clean, that’s great. And I think that’s really what we’re focused on is focus on making this low cost and reliable. And in certain markets, they can afford for it to be very, very clean. And we’re gonna start here, the United States, but certainly, the real prize for us is the international market long, long term.
Robert Bryce 43:57
Well, God bless you, and everybody needs electricity. I’m Amen to that. Brother. I’m all about that. Your current cost though, if I recall, I we met in Dallas, I think in February at the Earth Day Earth X Summit. And as I recall, you said that the cost at the moment for that 300 megawatt power plant your your first one that you’re going to build out in the Permian is going to be five to 500 to $600 million. So it’s roughly two times the cost of a combined cycle plant if my numbers are right, so $2,000 a kilowatt $2 million dollars a megawatt is that still about the right price for the price that you’re projecting for that at first of a kind.
Danny Rice 44:35
So that’s where we expect to get to within this first generation plant, but first plants actually made a whole lot more expensive than that it’s going to be around $900 million. And so that’s why the the owner group is gonna own that one. I mean, remarkably, and this is really the interesting thing with the technology and what you can do under the inflation Reduction Act, with with this plant is that plants still going to be economic and Even though it’s going to be our most expensive one in a power market that you know, has actually very good power prices compared to other parts of the country. And so as we look at going from that first plant, to our 30th plant to our 50th plant, is we just get done that cost curve and really scale up the manufacturing process. Yeah, we’ll see our plant costs come down tremendously over time. But I think people have to keep in mind, you know, this isn’t you can’t compare just a net power capex to a combined cycle capex because a combined cycle plant or coal fired power plant has one source of revenue, which is power net power plants has to it has the power, and it has the co2 right in co2 is actually very, very valuable. In for enhanced oil recovery, the oil producers are paying 30 to $35 per ton to purchase co2. And when we’re in manufacturing mode, our cost our implied cost to capture the co2, we don’t have an optics associated with the capture, because that co2 comes out in pure form as a result of the toxic combustion process. Our cost to capture is all in the upfront capex of having all of that upgraded equipment to that makes this whole process happen, or unplanned cost to capture we expect it to be less than $20 per ton. Long term. And so that’s a pretty fantastic place to be. So
Robert Bryce 46:19
let me interrupt here for a minute. So I’m just looking you earlier, you said your revenue stream from the 45 Q tax credits at 800,000 tons of yours $70 million from we’ll just put it this way, Uncle Sam, but then you’ve got to $30 million, or $30 per ton for the co2. So that takes you to $105 per ton of recognizable revenue, right? I guess the tax credits aren’t revenue, I’m going to kind of mix things up here. But you actually then have three income streams because you’re selling the power to you’re selling the power, you’re selling the co2, and you’re getting the tax credits. So that’s three different income. And I’m calling them income streams. Dec tax credits aren’t necessarily income. But if I’m missing something.
Danny Rice 47:06
The one the one nuance feature is if if that co2 is going to be used for enhanced oil recovery, or it’s utilized, the federal government will only pay $60 per ton. Okay, got them. So they’ll pay you $85 per ton if you permanently sequester it. So from from our seat, we’re incentivized to want to focus on permanent geologic sequestration, we can capture more value. But certainly, there’s real industrial value for for EUR for carbonation, for greenhouses, for all these other just industrial applications, co2 actually is like real utility value. But but really, like the real prize for us is permanent geologic sequestration, because we really like focus on how do we want to how do we want to reduce emissions from the grid? How do we want to get to a clean grid that’s low cost, and reliable, it’s with permanent geologic sequestration of our co2. And in here in the United States, we have more plate, there’s, there’s 1000 times more storage capacity for permanent geologic sequestration than there is for EMR. And so the real opportunity for us is really focused on places where there’s deep seated aquifers permanent sequestration.
Robert Bryce 48:18
Gotcha. So but I mean, just looking again, at the numbers, if you if you do it will, obviously, if you’re going to put this project, the first one in Andrews County, and Odessa, you’re going to be using it for EO R, but then if you’re selling, you’re getting $60 for the ER or from the feds, and then $30 to buy the co2 plus the that’s close to $85 a tonne. So you’re gonna be in terms of that return on capital $70 million, or $70 million a year on a $900 million plant. That’s pretty good before you sell any power. So you’re going to be able to make money even if that first of the kind is more expensive project, regardless of whether it’s permanent sequestration or EMR. Is that Is that right?
Danny Rice 48:57
Yeah, and I think that that’s, I think just playing that out, as we just look towards getting down the cost curve in where these plants actually make good economic sense, as well as fantastic environmental sense. You know, as we look at really just focusing on getting our CapEx to below $500 million per plant, you’re still going to be having that $70 million per year co2, you know, profit stream per year for the first and you’re in there for the first 12 years of a plant’s life. And so, the present value of just that co2 under the 45 Q is worth $500 million. So just just think about that for a second. So, you have a power plant where you can underwrite the capex, you can underwrite the investment on just capturing the co2 alone. And then essentially, this clean 24/7 power becomes free upside in so if you think about just like how disruptive that can be, you really, really forced me to think about, I really need to start first and foremost with where I can sequester the co2, right and locate your plan. It’s there in those power markets. And I think the thing that’s most exciting to me is it’s a paradigm shift, not because of just this natural gas has now transformed into a zero emission source of power. But now, power markets all across the United States that aren’t blessed with the sunshine that California or Florida or Texas has, isn’t blessed with the wind that Texas has, but are in places like the Midwest, where they just don’t have these resources. They don’t have these renewable resources at their disposal. But I look at those states, Illinois, Indiana, Ohio, Michigan, Western Kentucky, I look at those states and I say they have the geologic sequestration potential, they have access to natural gas, they have the power demand, they have these aging thermal plants that are just emitting co2 that are reliable in low cost, but they’re they’re getting old. And they’re not great for the environment. I see those states and I say, with net power, those could actually be the first states to get to true net zero emissions, using natural gas without compromising reliability or cost of power. And so the I think so so that this is why I said I need to invest in this company, I need to join the company and help them however I can. Because this could be that single solution helps us radically decarbonize power, and really restore power to what it should be, which is a source of affordable, reliable power to people everywhere.
Robert Bryce 51:30
Again, I’ll say amen to that one. I’m all about electricity. One of my favorite things is CCS. Your biggest risk, though, when you look at your Okay, so I’m looking at your business from the outside, right. I mean, we’re, you know, but I want to, I want to push back on you a little bit here on the CCS part, because this to me, if I were looking at your business, and where where’s the risk, is that your biggest risk factor here and trying to make all of this work and in, because you’re gonna have to drill the wells, you’re gonna have to have some liability on capture, you know, and they’re people across the country are pushing back against pipelines of all kinds of pushing back hard against co2 pipelines, is that the biggest risk factor, you’re facing the the actual, the sequestration part?
Danny Rice 52:11
It couldn’t be if we don’t do it the right way. I think, um, I think property rights are so important. And I think it’s really important that we’re very cognizant and very sensitive to landowners, and we kind of learned this firsthand. I mean, it’s kind of, you know, built into our DNA having doing shale development in Appalachia, where you’re, you’re trying to put websites, in pipelines, across farmland, that really is the livelihood of of all these communities in you, you can’t just run roughshod over them saying, I’m going to put my pipeline here, I’m going to put my website here, because I’m a corporation, I think you really need to work with the communities to locate these things in a very compatible way. And so I think one of one of like, the inherent benefits of net power is, we really want to focus on putting our plants right on top of the sink, right on top of the grid. So find where those bright spots emerge, we’d have the sink, the co2 sink, directly beneath the grid. So you can get to a place where there’s not going to be 1000 miles of co2 pipelines, or gas pipelines, or grids, because we’re really just identifying where those two things stacked on top of each other. So we can minimize surface disturbance in so you have that piece that is really interesting with our power plants is going through a very exhaustive analysis of really being able to locate our plants to minimize surface disruption. And then the other piece that’s really just inherent to our plant is the energy density of our power generation, versus anything else out there is beyond incredible. So in Ted Ted to give some comparison to it, a net power plants, this 300 megawatt power plant requires 15 acres. A similarly sized, you know, gas fired power plant, or a coal fired power plant requires anywhere from 40 to 250 acres for assembly, so we’re 15 acres. So we are just very energy dense, the entire process is so concentrated and dense that it doesn’t require much land. Now, if you said okay, well, how does that compare against solar and this, this isn’t a knock against solar, but this is more of just stating the facts about surface disturbance. So a 300 megawatt net power plant takes up around 15 acres. If you said I want 300 megawatts of solar power generation in, you know, around the clock, so you got to install batteries and all that stuff. It’s going to require over 3000 acres. So, so you’re talking about over five square miles, versus a 300 by 300 foot sight. So that’s the difference between the surface disturbance of a solar farm versus the concentrated nature of net power. And so for net power, we’re really cool guess on how can we be able to deliver this power with almost zero disturbance to the local communities that we want to put our plants in a lot of just the opportunities that we’re really going to have over the next couple of decades, is repowering existing sites for these aging, coal, gas and nuclear plants as they just age up, right. And so a lot of them have these 200 300 acre sites, these brownfield sites, these plants are going to be decommissioned. In Syria, we see opportunities to step into those and say, we’ll put a fleet of 10 net power plants. So three gigawatts of power. Three gigawatts of power, by the way, is enough to power city like the size of Houston. Right? So we can do that within within like a 250 acre plot of land, you know, in the middle of nowhere connected to the grid, right on top of this think so.
Robert Bryce 55:54
So I just did your calculations there. If it’s 15 acres, I do it in watts per square meter. So my calculation is 5000 watts per square meter, which is double what Indian Point the nuclear plant that is now closed, but yeah, 5000 watts per square meter versus 10 watts per square meter for solar. That’s my calculation of those are the numbers that I can back up one watt per square meter for, for wind. So yeah, your power density numbers. Those are those are impressive. And that’s a part of this that I hadn’t thought about. But yeah, power density is absolutely, absolutely key. So let me shift gears a little bit here, because we’ve been talking for nearly an hour and my guest is Danny rice. He’s the new CEO of a newly public company called net power, you can find them on the web at net power.com. Your family history is interesting. You were the CEO of rice energy, then Danny now I’m sorry. Your brother Toby is now the CEO of EQ T, which as you said, is the biggest natural gas producer in the US. You How old are you?
Danny Rice 56:57
I now 40 ripe old age of 40. To
Robert Bryce 57:01
42. Okay, you had to think about? And that was the hardest question I’ve asked you so
Danny Rice 57:04
Robert Bryce 57:08
You’ve entered and exited several businesses talking about archaea, which I wasn’t familiar with until you talked about it, or actually, I was reading your bio on the ET website. You’ve had a lot of success for age 42. And it sounds like I’m not you know, making any anything that’s secret here. You’ve made a lot of money already. Why have you been so successful?
Danny Rice 57:29
I don’t know why, why have I been successful? I think we’ve done a very good job of building,
Robert Bryce 57:35
but you’ve done it with your mentor, you’ve done it with your brothers, which I think is interesting, too, because I’m a family of seven. Right. But you’ve done it, you’ve been successful, and you’ve done it with several different businesses, with your family, with your siblings. How Alaska again, I just wanted to clarify that point. Why have you been successful together?
Danny Rice 57:54
I think I think, um, you know, tick, tick, great, like differentiated success requires a differentiated approach. And think if if you come in, you know, saying this is how things have always been done, this is the way everybody does things. And this is the way that we’re going to do things, you’re probably not going to get results that are much different than everybody else. And you really have to hope you’re in a mark in a rising market. In in big because you won’t generate like differentiate performance, but you’ll generate Okay, performance, I think for us, you know, when we started raise energy, we didn’t have any experience in natural gas development. We just said we have we have skill sets, you know, between me on the oil and gas finance side, Toby with as a petroleum engineer, direct the third brother was a geologist. And then the fourth brother Ryan was a petroleum engineer as well. All four of us came in saying, Well, we have the skill sets, we know how to and we know how to do things. But how do we want to do it? What’s the strategy going to be in? And I think certainly, as outsiders to the industry, when we weren’t really focused, it was actually an advantage because we didn’t come in with a preconceived notion of how to do things. We didn’t come in with 30 years of experience. We came in with a blank slate saying, if we were going to do natural gas development, how would we do it? Not based on how did I do it for the last 30 or so us in our lack of experience, communion was actually a major asset to us. And I think things like that have been well documented in books, David versus Goliath. I forget who wrote that book. But it was a fantastic one where it talks about how some of your own limitations can actually be your biggest asset. And so for us, just being outsiders was a massive asset to us, because it really forced us to think not just outside the box, because we didn’t even know where the box was. It forced us to really just map out how should a company like this be run a company like this? What should our strategy be? What technology should we use? What technology do we need to develop to do things, what we think should be the optimal way which inherently ended up just being a much, much different way to do things? And so we did it ricin In our performance was differentiated in not that I judged us only by how we performed as a public company versus our peers. But during our time as the four years we were public, we were up an average of 50%, total shareholder returns, our peers were down an average of 50%. So we outperformed them by an average of 100%. And then we did the same thing with the ERP folks where we found that these entrepreneurs who were outsiders to the landfill gas business to the landfill business in general, and figured out just a way to do things differently based on what they thought was the right way to do it. And so Us and Them were totally aligned on the vision of archaea. And we said, we’re going to build something together that’s never been built before. And we grew it into the largest landfill gas developer in the world, in three short years, in so I think, coming into net power, all of this is so applicable, because coming into net power, I’m coming into an industry that would say this is the way power generation has been done for the last 50 years, the last 70 years. And I look at this industry, and I say, yes, but now I have a new stream of revenue, that is actually worth more than the power itself. So it’s really forcing everybody within power instead of net power to say, what is the right way to run this company? Do we run it the way a typical OEM original equipment manufacturer? would do it in the power industry? Or do we do it different? Do we start to internalize the skill sets, that utilities don’t have to really help us set them up for success long term, and that’s really on the sequestration and co2 side of things. And so you know, being an outsider to these industries can can be a massive advantage, because it really forces you to think about, what do you think is the best way to do things? Not? What is the best way to do things the way everybody else is doing it. And that’s that, for us has been like, the only way that I think we can explain why our success has been so differentiated, is just being outside, it really forces you to figure out the best way to do things on your own. And we’ve been blessed to be able to attract really, really smart people that are a whole lot smarter than us. And, and I’m stepping into a company with net power where we have some of the brightest minds in the industry, that that are entrepreneurial, and they’re hungry, and they’re willing to think outside the box. And I think certainly my experience of having done this multiple times now gives everybody confidence that this risk of thinking outside the box to really differentiate the way we commercialize this business, the way we create success is possible because you know, the rice guys have done it before. So if I can
Robert Bryce 1:02:47
interrupt there because I just think it’s like well being from a big family, but your four brothers and I didn’t realize your skill set. So you’re the finance guy. Did you get a degree in finance?
Danny Rice 1:02:58
Yeah, finance, economics,
Robert Bryce 1:03:00
and where did you Where did you go to school?
Danny Rice 1:03:03
So we grew up in the Boston area. So I went to Bryant University Smithfield Rhode Island when I was there. So there’s it was pretty it was pretty remarkable up in New England, there’s there’s three undergraduate schools that are just business only, like if you want to go major in English, you have to go somewhere else. But if you want to make your business, there’s Babson, Bryant, and Bentley, and they’re all in Massachusetts in Rhode Island. So I went to the one in Rhode Island. And then from there,
Robert Bryce 1:03:26
I’ve never heard of that school.
Danny Rice 1:03:32
So it’s kind of like an MBA for it’s like an MBA undergrad. Okay, which is pretty remarkable. But then Toby, Toby ended up getting his master’s in Petroleum Engineering at Texas a&m. Derek was tufts geologist. Up in Boston, they don’t have much of a petroleum engineer petroleum geology program. So he had to go get his master’s at University of Houston in in Ryan, the fourth brother petroleum engineer undergrad at Texas a&m.
Robert Bryce 1:04:01
So, but then you did your PhD. You also worked at Tudor Pickering and Holt, which is one of the best known investment banks in Houston, which then numerous different investment banks have come out of that, including, well, a guest I had on the podcast just a couple of days ago. Arjun Murthy is now at Veriton, which was founded by Maynard Holt, who was at Tudor Pickering and hold. So there’s this universe of entities around these investment banks, you’re part of that lineage. So just reading back to you. It’s interesting skill sets that you and your brothers have that came together to allow you to exploit those opportunities. And you’ve had had had, you know, a notable success. I’ll put it that way. So I mentioned the issue of risk with the issue of CCS, and you’ve been in these you’ve been in these different businesses and exited some of these businesses. How do you assess risk because this is one of the things that I talked with different entrepreneurs about being in business and that that that’s an essential element. that right you have all these things that you can put together the capital, the technology, the rest of it. But you have to understand, as George Kaiser once said that you have to understand where your risks are located. How do you assess risk on on business opportunities that you’re getting into?
Danny Rice 1:05:15
Yeah, the risk identification piece is is absolutely critical. And I think it’s a blind spot for a lot of folks that might not have those requisite skill sets internally to be able to assess risk. In so being able to build those complete teams so that you, you have folks that are really just focused on just risk mitigation, risk identification, first and foremost, in so within, like, net power, for example, I think the focus for the last 10 years, has been on proving the technology, right, it’s been on it’s been squarely on the plant. And I think the attitude has always been, if we can prove that this plant works, the market will take care of itself, the demand will show up in I think my attitude is yes, to a certain degree. But we also need to start being proactive on really the sequestration side of things, because it’s a whole new industry. And I think we control a technology that at the end of the day could be the largest source of co2 capture in the world. And so it’s incumbent upon us to internalize those skill sets. And it’s not so much on risk identification, because I think the risks on the CCSP are fairly well known. It’s really on just market assessment and market analysis to figure out where are the markets where you do have the greatest degree of success of sequestration. And so it’s being proactive in that regard. Because at the end of the day, and you know, I wouldn’t put my money on the utilities starting to internalize that skill set, I think they’re going to have their plateful as it is on just power generation and managing all of that downstream. I think it’s going to be incumbent upon folks from the oil and gas industry to migrate over to the sequestration side of the business, same skill sets they’re using for oil and gas, you know, just applying them to water bearing formations. It’s just like oil and gas in reverse, instead of pulling it out and understanding the reservoir. And how it you know, what happens to the reservoir is the pressure decreases, what happens to the reservoir as you’re injecting gas and the pressure is increasing?
Robert Bryce 1:07:21
Well, let me follow up on that. Because that’s, you know, again, I mentioned it before, but in terms of the risk part of this, this seems to be one of the more complicated, more complicated issues, are you going to have to take title to the land that you are over pressuring them or adding new new material new co2 in the under in the subsurface? Are you going to have to own that land? Because as I understand that, that this liability for the those co2 formations is one of the other outstanding questions? How do you see that? How do you assess that part of the risk puzzle in terms of that long term sequestration?
Danny Rice 1:07:54
Yeah, I think that’s one of the things that the industry is certainly ironing out is who takes liability to the sequestered co2? If right, if you’re saying it’s gonna stay down there for a million years, you know, when you’re rolling around for the next 100, who’s gonna take who’s gonna take liability for that for the next, you know, 990,900 years? Right. And I think it never leaves
Robert Bryce 1:08:15
usually, I’m sure that’s gonna take that bet, right.
Danny Rice 1:08:17
Yeah, that’s right. And so I think you’re starting to see states start to be more proactive in doing that. I think North Dakota is actually a leader in being able to underwrite and take a look at the long term liability of it. And so they’re looking at establishing state funds that the sequester has to fund into, and it’s essentially just an insurance product that they’re they’re funding funding into, for the state to take liability to a long term. But in terms of like securing the rights, Robert, is you’re asking, ultimately, it’s an agreement between the surface owner or the mineral owner and the sequestration company. So it’s, it shouldn’t be any different than than oil and gas. In certainly this is this is a unique This is unique to the United States, where the federal government in most parts of the country does not own title to the surface, all the minerals beneath the surface, right. So it’s, it’s it’s a fantastic opportunity for landowners, it’s a fantastic opportunity for the sequestration companies to go and make these arrangements. But I think ultimately, for this thing to be done with just that peace of mind that somebody is going to be there to backstop this thing. 1000 years from now, being able to have the federal government, either at the state or federal level, it’s going to be important just to give people some comfort, that, that somebody’s going to be there overlooking this thing for the next 1000 years, hundreds of years. But at the end of the day, it’s it’s incumbent upon the permitting agencies within the state in the EPA, and the companies to make sure that we’re putting these co2 into formations where we know it’s not going to migrate or come back to surface. And so I think that that’s a big part of why we want to be involved in the origination piece of this is to make sure that we’re setting this interest To up for success, because I think the first dozen or so plants, you know, there’s going to be a big spotlight on him from not just the investment community, but from the environmental community from everybody. And it’s, it’s so important that we can demonstrate that this could be done responsibly in prudently. Because I think that’s gonna be like the stepping stone to our future success.
Robert Bryce 1:10:22
Well, and you de risk at some by being in the starting with the Permian, because you’ve got a very well established set of rules out there, and they’re already sequestering co2 and the rest of it so that that’s interesting, and maybe will allow you to tee up some of these other get some of these other issues ironed out in the meantime. So the last two questions, Danny, because we’re now at more than an hour and I could talk about this and I’m sure you can all day so but um, we’re gonna keep this within the we’re gonna vent ring fence this. Two questions, I asked all of my guests, what are you reading these days? What are the books in the top of your shelf? Or have you been traveling so much? You haven’t had time to sit? You’ve been all over the world in the last month or two. But what’s what’s the top of your reading list these days?
Danny Rice 1:11:04
A top of my reading list I’ve been? Well, sadly, I’ve been reading just government reports. Just finished reading the EPA is proposed rules on thing under Section 111, B and D.
Robert Bryce 1:11:20
The new co2 rules. Yeah. Right. And when they came? Yeah.
Danny Rice 1:11:24
Yep. It’s a very exhaustive proposal. Really. I mean, it took me few weeks to get through it all. But But I felt like
Robert Bryce 1:11:33
it’s what 700 650 or 700 pages. Right.
Danny Rice 1:11:37
And it was a lot of pages. It was it was I mean, it was I mean, I mean credit to the EPA, it was it was actually pretty thoughtful. It was well done. Surprised, like net power was mentioned a couple of times in it is one of the technologies that that can actually help, that can actually meet the standards that the EPA is proposing. Which, you know, I don’t think any other technology company in the world can can can say that they’re targeting meeting those standards, the EPA setting and I think net power couldn’t be the only one that meets it. That doesn’t mean whether we’re supporting or not, you know, the rules. But more of just stating that, yeah, the rules, you know, the 90% capture, that they want to mandate that every power plant hits by 2035, we can edit that that’s what we’re focused on building on the technology is we can hit that in, we can hit it in our sleep, just because we’re inherently capturing 100% of that co2, right from this oxy combustion process. So sadly, I haven’t I haven’t had time to read lately, but I have started reading a book while I started it, and I got halfway through it. And it’s every EPA rules Team of Teams, by General standing, which is lessening McChrystal. Yeah. It’s a it’s a it’s a fantastic read. I mean, it felt like reading about why we did rice energy the way we did with a decentralized technology with using Salesforce. Is it a digital work environment? It’s it’s a really fascinating read. And but let me
Robert Bryce 1:13:13
let me follow up as Salesforce as your digital work environment, whether you use the Salesforce platform for your as your corporate what enterprise software is that? Do I have my terms right here? Is that what you’re referring to?
Danny Rice 1:13:25
Yeah, Salesforce for most, for most companies, it’s like a sales tool, a customer relationship management tool CRM, we actually like turned it around. So it was an internal tool for all internal structured communication, all projects. So digital work environment, everything’s decentralized, everything’s transparent. All communication is structured, all information structured, no email, no phone calls, all everything’s happening in Salesforce. And it was really meant to be able to just, it was really meant to ensure that all communication is project based, all of its structure on those projects. And you have that whole history and archive of all communication projects, right there in front of you within that Salesforce working environment. You’re starting to see a lot more technology companies start to build things like that. But I think in this really credit to Toby in what he was able to do at Rice on the technology side, he was the first one that that took Salesforce in used it for what we thought it could be used for nicer to see a lot more companies do it. So it’s a lot of geeky tea, which you know, right now with the largest gas producer in North America, you know, we’re running that company with only five or 600 full time employees. And we could manage a whole lot more production just because things are so well run within the Salesforce work environment and the entire company is 100% remote. You know, we don’t have an office.
Robert Bryce 1:14:52
That’s interesting. I didn’t know that about EQ tea, but I didn’t know that about Salesforce either. As you said I thought it was customer Resource Management. But well listen again, we were over time. So my last question what gives you hope? You’re you’ve had a lot of experience in 42 years, you’ve had a lot of success already. You, you’re betting, again, on another technology, what gives you hope.
Danny Rice 1:15:18
The net power technology gives me hope. I think, I mean, this is a wild place to be in energy, you know, you have calls every day for we need, we’re not, we’re nowhere clear. We’re nowhere close to hitting our environmental goals, you know, our emissions goals, emissions are still going up worldwide, how’s that happening is we’re trying to transition so hard to wind and solar. And so you have more and more calls from folks on, we need to find ways to transition off of natural gas and off of coal, and off of nuclear in some countries. So that you have that one group of folks saying we need more clean power. And then you have this whole other crowd, that is saying, hey, we need more reliable, affordable power in our area. And we’re looking down the pike. And we see, all of these baseload plants want to be decommissioned because they’re aging out. Nobody wants to build new baseload power generation anymore. So you kind of hearing the siren calls from these two different groups, one group saying we’re not doing enough clean power. And then you have the other group saying, we’re not doing enough for affordable, reliable baseload dispatchable power generation. And so it’s like, man, we’re just we’re, when something’s not working, right, when neither side is happy with the progress that we’re making. If you kind of put those two circles in, like a sort of a Venn diagram, with what energy solutions are out there, that’s both clean, reliable, and affordable. Like the only thing that we really see that fits right in that middle is this net power technology into like, that’s like a big part of why I’m, you know, 100% in, you know, as part of taking this company, public, you know, I invested $125 million into being able to help fund our DNA and our technology and commercialization. And I, you know, I’ve kind of committed my life through commercialization of this thing to make sure that this thing works, because we don’t see a lot of other solutions out there that are able to give everybody what they want, which is the energy trifecta. You know, for the last 100 years, we’ve only really been focused on reliable, affordable energy. And now that everybody’s demanding that it’s clean, we need to come up with new technologies, because those technologies do not exist today to get us there. And so that power is one of them, I hope to see a whole lot more. So I think what gives me hope is, there’s a whole lot of really smart people out there, from the energy industry that are now starting to say I want to focus my time on new energy technologies to give people the energy trifecta that I think everybody is really calling for. And so we’re seeing a lot of it on the private side, a lot of like the private equity companies that really cut their teeth, and were successful on traditional oil and gas, enough starting to say I have this tangential skill set in sequestration. And so I’m going to repurpose all of these teams, all of my capital into this area to support things like net power to support things like post compression, carbon capture, and you’re starting to see other folks seeing starting to say we need to do more nuclear, and if traditional energy folks, which is so refreshing to see. So I think like the thing that gives me hope, is I think, sort of like how when we did rice, in our Kia, we said we need to think outside of the box, we really can’t go off of the playbook of how things we’ve done for the last 30 years, and hope that it’s going to work going forward. It really forces everybody to say, we really need to establish a new way of doing things. And a new way of doing things is we need to start with a blank slate and say, if we had to redesign things from scratch today, how would we do it? What technologies do we need to invent to make it happen? And which ones do we really put a ton of resources, people on Capitol behind to ensure that gives us the best chance of success? And so I think it’s tough, because the loudest voices are the ones on the extreme ends, either the ones that are pro environmental, or pro fossil. But I think when you look at the middle, the middle is mostly sound and I think the middle constitutes 90% of the voices 90% of energy demand. And I think what everybody really wants is we all want access to clean fordable low cost power in folks that are designing those energies agnostic of what the feedstock is, like, I think where that’s in that power, the biggest challenge we’re going to have is probably not going to be on the technology. It’s not going to be on the sequestration. It’s going to be on public acknowledgement and public adoption of a clean source of power that originates from natural gas that originates from a fossil fuel. And so that’s the paradigm shift that’s that’s going to happen with us is all of us. Sudden, natural gas has been transformed into the cleanest source of power in the world. And that is a paradigm shift for people, right. And that’s going to take a lot of time for us on the education in the advocacy side. For us to be able to get people to understand clean doesn’t just mean renewable. Clean means low carbon intensity. Clean doesn’t mean colors. Clean means carbon intensity, it means numbers, right. And so that’s a lot of part of why we took that power public in the first place, was to put a spotlight on this business, because this business is going to be a vehicle to educate people on how energy works, in what energy solutions we need to be able to achieve that clean, affordable, reliable power that I think everybody in the world deserves. So a lot of lot of work to do.
Robert Bryce 1:20:51
Well, that’s a good place to stop them. And we will stop right there. My guess has been Danny rice is the new CEO of net power company that just went public in the last few weeks via SPAC. You can find out more about them at net power.com. Their ticker is in P WR. Danny, thanks for coming on the power hungry podcast. I’ve been interested in this technology for a long time. And it’s great to have you on and have you share your passion for it obviously, and the technologies behind this new this new album cycle design and the potential for it. So I appreciate you coming on.
Danny Rice 1:21:27
And thanks so much, Robert. This has been really fun.
Robert Bryce 1:21:30
And thanks to all of you in podcast land. Tune in for the next episode of the power hungry podcast until then, see you