Vinay Shandal:

Hey everybody and welcome to Pitching Progress. I'm Vinay Shandal and today we're talking steel. Steel is everywhere and if we are serious about decarbonization, then we need to acknowledge that we will need more steel to build that low-carbon economy. The problem is that steel production contributes 8% of global CO₂ emissions, the same as all emissions coming out of India. And while we recycle a lot of scrap steel, there's nowhere near enough scrap to meet global demand, hence the massive focus in recent years on low-carbon steel. Now when people think low-carbon steel, they often think flashy new facilities with fields of electrolyzers and gigawatts of new clean power. But today's guest company, Utility Global, has a different pitch. Use the off-gas from existing steel mills to generate hydrogen fuel and in the process create a single stream of concentrated carbon dioxide that's easier to capture. And no need to tap the grid for this either. The whole process powers itself.

Sound too good to be true? Let's find out. We'll dig into how it works, what it costs, and where it beats the other ways of producing lower-carbon steel. Let's get into it with my guest, Parker Meeks, CEO of Utility Global. Reformed consultant and someone trying to take the business to the next level.

Parker, let's start with the problem we're solving. Why is steel production so carbon-intensive?

Parker Meeks:

You are reducing iron down to steel, and to do that you need traditionally a lot of carbon. So what that does is puts off a very high amount of CO₂ or carbon emissions in the process. And on top of that, even though our customers have innovated how they make steel, electric arc furnaces or EAFs has been a tremendous innovation in the steel business. And everywhere where you have ample access to scrap and a grid that can provide all the electricity you need to melt that scrap you see EAFs going in, you see it going in the US, you see them going in Europe, but unfortunately, much of the world, and particularly the higher emitting parts of the world don't have those supply chains or those grids. They don't have the scrap availability. They don't have the power to put in EAFs and make them make sense.

Today, 70% of steel production comes from what are called blast furnaces and blast furnaces are the high emitting part of the steel space. So with 70% of global production coming from highly carbon-emitting blast furnaces, you can't just turn those off. You have to transition those and these are 40 to 50 plus year-lined assets. When you look at projections that we've seen in terms of steel demand and the need for blast furnaces looking out to 2050, even with all innovations with EAFs and other technologies, blast furnaces are projected to grow, not to shrink. There will be new blast furnaces built. There are new blast furnaces being built right now.

Vinay Shandal:

What is your claim to fame when it comes to your tech? It feels a bit science fiction given all of the other efforts underway to address this issue. And you guys roll in, you're like, "Look guys, don't change anything. Don't put big CapEx in the ground. We're just going to add some cylinders and boom, here's your low carbon steel. Off you go."

Parker Meeks:

That's right.

Vinay Shandal:

Walk me through it. How does it work?

Parker Meeks:

This is my favorite reaction because we get it all the time. It's like, "Guys, what am I missing? This can't be this simple." And fortunately it really is. So at a high level, we are using the electrochemical potential of these gases to create a current to electrolyze steam. So we are electrolyzing water and creating hydrogen from that water. At the same time, we're oxidizing carbon monoxide co into CO₂ in separate segments to give them a high concentration CO₂ stream all without electricity to drive the core reaction.

The core, our technology is a relatively simple three foot long, one inch diameter ceramic tube, a hollow ceramic tube. Nothing can pass through it, no gas, no liquid except for two things. Oxygen can pass from the inside of the tube out and electrons can pass from the outside of the tube in. And so when you have carbon monoxide in the off gas that's on the outside of that tube and you have steam through the middle, the electrons from the CO get ripped off and passed through and create that current that you would typically need a grid for. You need a grid typically to provide power to use electrolyzers to separate and split water. We pull that electrons from carbon monoxide in the off gas, and as that O is freed up from the water of the H2O, the O passes back through. O free oxygen wants to find something. It sees this carbon monoxide missing electrons and bam, That CO is oxidized into CO₂.

Vinay Shandal:

I know this seems a bit complicated, so I just want to jump in here to make sure this is abundantly clear. Utility comes to these steel plants and essentially says, "Okay. So that waste gas that by the way you're struggling to deal with anyway, we're going to install a tube that will turn that gas into a stream of CO₂ that is concentrated enough for you to capture it before it escapes out into the atmosphere. And that same tube will also generate a clean source of hydrogen, a really potent fuel that can be sent back into the plant as a source of energy for further steel production." So simultaneously reducing emissions and generating a clean source of power with waste CO₂. Sound like science fiction? I told you.

Parker Meeks:

One blast furnace can make typically up to 300 tons per day of hydrogen and it can make up to 40 tons of CO₂ per ton of hydrogen. Pure hydrogen, good enough for fuel cells for trucks, and they use that back in the plant as fuel to offset higher cost energy inputs. And so this is the system that works. It's getting to low cost carbon capture through hydrogen.

Vinay Shandal:

You mentioned trucks, I want to talk about that too. So let's talk about heavy duty transport. What are you doing there? What's your offer? What's your value prop relative to the other ways to decarbonize heavy duty trucking and transport?

Parker Meeks:

Mobility can happen with clean hydrogen at the right scale that it needs at a cost structure that makes sense and that's what utility can provide. Today what we're seeing is there's this perfect fit between what utility can do with a single reactor, the same reactor by the way that we're using in steel. A single reactor can make anywhere from one to five tons a day of hydrogen depending on how we set it up. So one to five tons a day of hydrogen, that will fuel depending on the application and heavy duty trucking anywhere from 50 to 500 trucks in a single location. And we can uniquely take biogas, waste-fired turbogas gas, landfill gas, animal manure gas and convert that to hydrogen and a carbon intensity and a cost that no one can compete with that we've seen at that scale.

We have our first project biogas conversion to hydrogen is in California advancing well. We've actually signed our first nonbinding offtake on that project, I'll say at very attractive pricing leading to a project that's very, very viable. And that project is not going to be dispensed on site but is within a hundred-mile radius of significant demand for trucks, for passenger cars and for buses that are already fueling hydrogen from the existing stations.

Vinay Shandal:

Parker, look, I'm a huge fan of hydrogen, but it's a really annoying gas. Help me understand how you guys are making it way less annoying for prospective users.

Parker Meeks:

Yeah. The key is you do not want to move hydrogen. This is very annoying to move into a store. So transportation distribution of hydrogen is a huge problem. For those that aren't aware, hydrogen is one of the most abundant elements on earth. It's also among the lightest. If it tries to escape, it's going to go straight up into the atmosphere. So you end up with these very large high pressure tanks to try and store it. So if you think about a truck stop, a truck stop that fuels diesel trucks today, if you made that all hydrogen, you would need about four tons a day of hydrogen. What does that mean? That means if it's gaseous form, four spherical storage containers that are going to more than triple the size of the footprint of that station with these big massive storage spheres. So what they do is they put it in liquid form. Well, how do you put a liquid form? You freeze it down to like minus 250 degrees Celsius and then you have to use it relatively quickly because if you don't, you got to spend a bunch of money and a bunch of likely carbon-emitting power to keep it cold.

And if you just look at available projects for us, we've done the analysis on landfills, dairy farms, wastewater plants, just in California. There's over a hundred locations that have a relatively small biogas stream that's not being utilized today. It's not being converted to power, it's not being converted to RNG, but from that size stream, we can make one to five tons a day of hydrogen. Over a hundred locations. And of those locations, dairy particularly pops out because from dairy that animal manure gas is so bad for the environment. You release methane in the environment, it's significantly worse than even CO₂.

So California and with the US GREET model, which is the model they use to quantify essentially carbon intensity, a measure of how much are you helping the environment or hurting the environment with the carbon in your process all the way from your source material, in this case the gas coming out of the dairy farm through your process to what happens at the end. Even without capturing our CO₂ stream, letting that vent, we're able to get to a negative 870 CIS score. That is so valuable that the state of California with their low carbon fuel standard subsidy program is willing to give a project like ours today over $12 a kilogram of subsidy. Bottom line is we produce the most carbon helpful negative carbon. I call it deep, deep, deep green. If you want to use colors, which I hate the color wheel. But we are the deepest green, we are able to provide economic hydrogen, produce it within a hundred miles of where it's going to be used and do it in a way that they can dispense it competitively with diesel, with a nice attractive return project for us.

Vinay Shandal:

So we've got these tubes that can be fitted into existing infrastructure in steel plants essentially. So they can be used to create both CO₂ streams for capture and also hydrogen, and the hydrogen can be used to power the plant itself. On top of that, utilities tech could be installed in landfills, wastewater treatment plants, dairy farms, all with the goal of creating a stream of green hydrogen that could decarbonize heavy transport. Perfect. Let's do it. Climate crisis solved, right? Well, maybe. To find out more about their potential barriers to success, let's consult my colleague Mike Matson, one of BCG's leading experts on carbon capture and hydrogen fuels. Mike, welcome to the pod, my man. It's great to have you.

Mike Matson:

Excited to be here Vinay.

Vinay Shandal:

So Utility Global positions, its approach as a pragmatic near-term step, but when you compare this to other decarbonization roads, where does this technology fit in the broader portfolio of solutions and what's the trade-off Mike?

Mike Matson:

That's a great question and it definitely fits in that portfolio. I think as with most things in climate change, there's never really a silver bullet. It's usually a slurry of technologies and ideally, each one of those working in special cases where these will be ideal for where they're working. This has a strong advantage in the fact that you're utilizing a off-gas from this blast furnace that already exists. Assuming this works as projected and it scales effectively in certain scenarios, that'll be an incredible plus because the gas is there, I'm able to capture it on site and ideally minimal retrofit. Now the issue that we're going to potentially find is what does that retrofit look like? That'll be one of the distinguishers. And I think the other thing you brought up is this will have carbon capture component associated with it, and so there will be certain areas in the globe where that will be great, and one of these facilities in the Texas Gulf Coast, for example, where carbon sequestration is ample and cheap would be ideal. There are other places where you may be 500 miles from the nearest sequestration point and the cost for transporting that CO₂ may be cumbersome.

Even with something like this, there's no escaping. There's an added cost. And if they can do this cheaper and the scales and the cost projection stay as low as they're trending towards, there will be certainly environments where that lower cost to decarbonize that steel will be an advantage. I think the things to test that are still out there. One is will the market be willing to pay for that? So is there going to be a green premia associated for this technology and the decarbonized steel that it produces, and how will that compare to say, other mechanisms that are out there?

Vinay Shandal:

You look out 10 years, Mike, what role do you see hydrogen and carbon capture playing in decarbonizing heavy industry? Is this still niche applications or do you see this scaling into a mainstream solution beyond what Utility Global brings to the table?

Mike Matson:

I feel like this question is a bit of a broken record as we've gone through ebbs and flows of carbon capture over the past few decades. It has been the silver bullet of the time multiple times, and we've seen a failure to launch, to be candid. We've had that impetus that needs to happen and a couple of project announcements and then a retraction, and we've seen this a few times over the past few decades. But I do think that carbon capture as a whole, to answer your question, is going to be needed.

Vinay Shandal:

Okay. But Mike, you said failure to launch. What's been the biggest single bottleneck in that failure to launch and that failure for carbon capture to scale?

Mike Matson:

One of the interesting things about carbon capture is that one of the most vocal opponents to it has been some of the environmental groups. There are groups that associate carbon capture with fossil and fossil is bad, therefore carbon capture is bad. And I think without that delineation, it's been very difficult to get a lot of the support, which is interesting because from a policy perspective, carbon capture tends to be one of the more cross aisle mitigation strategies.

Vinay Shandal:

Has that opposition gotten stronger or weaker? I would've hoped that given that reality, pragmatic views would prevail and people would say, "Gosh. Okay. We better double down on carbon capture because this stuff is not going away anytime soon despite whatever efforts we may make." Is that too simplistic a characterization of what's going on out there?

Mike Matson:

No. I think that's the right trend and I think that is the right overgeneralization. I think the thing that I would throw on top of that where carbon capture relative to some of the others ... And again, most of these technologies to be very clear, are very high CapEx. But am I willing to write that large of a check and a heavy CapEx investment on something that we aren't a hundred percent certain has global acceptance? I think to your point, as we get more acceptance, more coming to the middle, we'll see more of that cashflow into this.

Vinay Shandal:

Now, here's the question that I wrestle with. You've got this great technology. You can take any off-gas or virtually any off-gas and help decarbonize steel, which is fantastic, and do it in a way that's highly economic. It assumes that I get to roll in with my three-foot-long ceramic cylinders and start tinkering with somebody's steel facility, safety issues, plant design issues. Maybe we need to shut down the systems for a few days so you guys can do your thing. How hard is the pitch and how willing are they to let you show up and start messing around in their facilities?

Parker Meeks:

Yeah. Look, that is one of the highest bars you can imagine. You talk about any industrial industry and a leading global player, steel being one of the highest bars for safety. Safety, quality, consistency, conformity and footprint, by the way, another thing that's highly valuable. They want minimal change and you have to meet their standard. So we're highly confident for a few reasons. One, we have done the work. Over the last several years. The company's worked very hard both in our own testing internally and in the $3,000 of runtime out of real steel facility. Before we even hit that demonstration site obviously that partner for the demonstration made sure we passed every test in terms of protocols and HAZOPs and safety procedures and shutdown procedures and study and analysis on failure modes so we're highly confident, and the reason is because of our people. We have people in our company from leadership down who have done this at the large industrial gas companies, at various technology companies, oil and gas companies at EPCs. They've run these plants, they've been in these plants, and I'm very thankful to be representing a team which has seen it done it and now is adapting it to meet the very high standards of steel.

Vinay Shandal:

I've got to believe you're relying on both policy to make the math work and the persistence of voluntary corporate commitments. Corporates that are saying, "I care about life cycle emissions, I care about putting out low carbon product in the market and I'm going to stick to my commitment and procure among other things, lower carbon steel." What's the state of play on each of those and where do you think the puck is heading?

Parker Meeks:

Well, I'll start with the customer. This all starts and ends with, well, who wants to go through all the effort of assessing technology, bringing it into their site as we talked about previously, integrating into the asset. And we need customers who are like-minded who say, "Look, economics are king and everyone's clear, economics are king. You don't get access to our site. We don't spend time with you unless you can show us an economic pathway, but we want to take carbon out. If we can do it economically, we want to take carbon out." And in steel you've got a number of leading players around the globe who clearly are still on that track. We found those customers were engaged with them. The majority of the major steel customers around the world are at some stage with us of pushing ahead. Arcelor was the first to announce a project with us, which we're very, very thankful for.

In terms of subsidy with our technology, because of how capital efficient, it's because of the lack of needing power to run the operation in the core, we can get to a cost of hydrogen at scale and steel that is under $3 a kilogram levelized cost of hydrogen, and that's without subsidy. When you're at that level cost of hydrogen, you're very close to not changing the cost of steel without subsidy. In some markets we can, but even in developed markets like Europe, if you just take the value of carbon today trading on the carbon market in Europe, we do not change the cost of steel when you account for including the carbon offset and the cost that those steel companies either have to pay or will have to pay. It's a highly attractive value prop where I see us as needing the minimal amount of government support, very aligned with our customer's mission and able to do it with a way that has minimal disruption to their operation and to the financials of their core business.

Vinay Shandal:

Parker, I bet the mood at Utility is quite positive given you guys had a big announcement earlier this year. Tell us more about that and also tell us about what's coming up in Brazil.

Parker Meeks:

Yeah. No. It was a huge celebration, as you can imagine. So as context, those that haven't followed our story, we've had tremendous milestones in technology development, maturation, but commercial contracts. We had not announced a major commercial contract yet, and we announced our first commercial project with ArcelorMittal in Brazil. It's a tremendous first step. It's a up to three ton per day project, which is the scale that these first projects will be. Again, every major steel customer is looking towards the hundred to 250 ton per day hydrogen scale project. That's the goal. The first step will be typically between one and 10, 14 tons per day, and those are the projects that we're signing up now. In Brazil, particularly in steel. They've been really leading in trying technologies to take out carbon. It's in the industrial culture there. At the plant that we are collaborating with Arcelor, the Juiz de Fora plant in Brazil, they've already done tremendous steps to take carbon out. They use biogenic charcoal as part of the plant's core operation, which is a lower carbon footprint. And they also happen to have a flare available that we can utilize for the source gas, which is a very unique opportunity. So we can decarbonize in that case without having to capture the CO₂.

So it's a great opportunity for us and for Arcelor to work together as partners to shape that project, to get it into the facility and to really prove in their operation that this technology works really well, and we look forward to hopefully building on that both in other customers in steel and also in potential larger opportunities within their portfolio.

Vinay Shandal:

Yeah. If I had asked you this question when you were at your consulting firm, you would at BCG, let me ask you this question, your current role, what competitor do you envy most?

Parker Meeks:

I love it. So competitor is a funny word for us. Our technology is so unique, not much if anything can do what we do in the way we do it. I will say that what we compare ourselves against are really the advancing technologies in the space. So carbon capture certainly is something we have to go up against every day. Water gas shift is another technology people can look into where you effectively convert off gases like steel blast furnace gas to a different process. Renewable power fed electrolysis of water is hydrogen is something that we compared against all the time. I don't envy any of those because we all have our challenges, but we've shown consistently that we can now compete those technologies economically in how we integrate with operations in the footprint that we provide. So I can truly say I don't see another situation, technology or company that I say, "Man, I wish we had that." However, we take all of our competition seriously, and I look forward to us continuing to stay laser sharp and on our value prop and understanding what technologies we need to make sure that we are staying one step ahead of.

Vinay Shandal:

I love it, Parker. I love when a CEO walks in and doesn't even mention the competition's name. It's like he who shall not be named. It's very Harry Potteresq. Parker environmentalists. We're all in this space focused on decarbonization, but there's a range of views in that category of people that are focused on energy transition and climate change. The subset of people that are critical of you, what are they critical of and what do you say to them?

Parker Meeks:

No. This is something that every company in our space has to deal with in some way. What I would say, people look at what we do ... If you take our at scale application of steel, they see us as blue hydrogen. They lump us in the blue hydrogen camp. Because we are creating hydrogen through electrolysis of water using the gases that exist electrochemically, and then you do have to capture that hydrogen and do something with it, which makes it effectively blue hydrogen. What I say is simple. Those emissions already exist. These are existing assets that are providing a critical product for the world. They're providing steel. Steel demand is growing. These blast furnaces are not going to be shut down anytime soon. In fact, they are building new ones to replace the old ones with 50-year useful lives. We have to do something to capture those emissions if we're going to reduce carbon in the next 50 years. And we provide an avenue for them to do that without creating new emissions.

The other ways to decarbonize steel involve things like true blue hydrogen of running an SMR, a steam methane reformer at scale, taking natural gas and then creating an emission that you're then capturing and providing that hydrogen to the steel plant to use instead of coke. We're not doing that. We're taking emissions that already exist that would exist, and we're finding an avenue to capture them and put them in the ground or do something else with them. So in our view, this is truly eliminating emissions and we have to clear that.

Vinay Shandal:

Yeah. I'm glad you guys taking a pragmatic approach because there's a narrative out there which is quite divorced from reality, which is, Hey, technology for green steel exists. We should deploy it everywhere all day, every day, and there's this naive belief that the end market will pay the premium. And yeah, I think there is a little bit of a green premium in this market in some regions of the world. I think some corporates are willing to pay a premium. We've seen evidence of that. But to get the broad-based willingness to pay that kind of premium, A, is divorced from the reality of how corporates think, and B, is divorced from the local economies in which steel is produced. These facilities create local jobs for people. They're deeply entrenched local communities where you can't just roll in overnight, generate all the clean power you need to introduce electric furnaces and expect that with a snap of a finger it's all going to be green steel everywhere.

The need for a credible transition step is critical. And I got to be honest, Parker, before you and I met, I wasn't confident that there was a robust interim step. And I know you guys are still just getting started, but I have high hopes for your business and what it could represent for a world where we need a lot more steel, not just for existing purposes, but for decarbonization. Steel is going to be an input into decarbonizing the rest of the economy. And if you guys can help us get to lower carbon steel, that is a massive service to the planet, and the fact that you can do it economically is what's going to drive so much of your growth.

Parker Meeks:

I do think that the outlook is bright in the medium to long-term. Six months ago there was so much uncertainty around what direction was decarbonization going to take in major markets in the US certainly in Europe even, and in Asia. But I think what we've seen, even in the US, you've seen more than we expected in terms of the opportunities, for governments to assist some of these technologies to come to market with the policies that have remained. And you see companies, again, as we've discussed in major segments like steel that are not walking away. They're being pragmatic. Steel companies are telling parts of Europe and the US, we're not going to accept your billion euros here or your hundreds of millions of dollars there because you're incentivizing something like electrolytic green hydrogen that we don't think the economics work on. But they're signing contracts with companies like us and others to move forward. And we're not the only ones. There are green steel projects by the way that are happening. There's happening in places where you've got some significant amounts of low-cost renewable power or access to renewable resources like hydro, which are very limited in nature, but technologies like us and others are going to make it happen.

Vinay Shandal:

Parker, it's fall of 2025. We're 10 years out. We're having this massive dinner that you're hosting with your employees, your investors your favorite podcast host. What are we celebrating?

Parker Meeks:

That's a beautiful vision. I think at that time, we're celebrating proving that decarbonization impact has scaled economically, proving that large leading companies around the globe and steel and refining and chemicals and biogas care to make things like this happen, but that as a team, we've been able to harness the power of technology, make it economic, scale it together, and deliver tremendous impact in helping our planet, but also in doing it where companies thrive on the back of decarbonization. And that's a world that I think is very, very possible.

Vinay Shandal:

Everybody, Parker Meeks, CEO of Utility Global, and the man with the plan to decarbonize heavy industry and heavy transportation. Parker, thanks so much for being on the podcast. It's been an absolute delight,

Parker Meeks:

Vinay, I can't thank you enough. Enjoyed the conversation, look forward to more in the future.

Vinay Shandal:

That was Parker Meeks, the CEO of Utility Global. If you want to learn more about their efforts to decarbonize steel production and heavy transport, we'll include a link to their website in the show notes. And that's it for this episode of Pitching Progress. If you enjoyed the conversation with Parker, if you learned something, please throw us a follow or review on Apple Podcasts or Spotify. That would be hugely helpful. And if you have any thoughts on today's episode or ideas for future topics, feel free to shoot us an email at pipe@bcg.com. That's pipe as in P-I-P-E@bcg.com. This is Pitching Progress. I'm Vinay Shandal and we'll be back in two weeks spotlighting a new company with new climate solutions.