#241 The Biz Model Making eFuels Pencil Out | Joe Rodden (Lydian)

Follow us on YouTube

---------

Today, we have a great episode with Joe Rodden from Lydian. And we are talking all things eFuels and their story. 

Lydian uses Co2, Water, and abundant Green Energy to create eFuels/SAF. And because of their flexible run method, they can do it profitably, consistently. 

In the recent past there has been a huge demand for SAF that has been hard for major airlines to procure. In part because the technology was not there, but mostly because there were no plants up and operating. 

SAF plants are assumed to look like chemical production facilities… ie: always on. This way the cost of the investment is paid back soon. 

Lydian made sure they used inexpensive materials to create their system. And they made it to start and stop whenever there is excess electricity being produced. It’s a game changer. 

On top of this, Joe has a great story. 

A story that I’m sure you’ll enjoy on today’s episode. Let us know your thoughts by leaving a comment and giving us 5 stars on your favorite podcast app. 

Chapters

• 0:00 Understanding eFuels and Lydian's Mission
• 3:00 The Journey to Clean Technology
• 6:05 The Role of Leadership in Innovation
• 9:06 The Science Behind eFuels
• 11:57 Operational Flexibility and Economic Viability
• 15:01 The Future of Energy and Technology Integration
• 18:03 Business Models in the eFuel Industry
• 26:35 Building Sustainable Technology
• 28:01 Vision for Energy Abundance
• 30:47 The Accelerationist Movement in Climate Tech
• 32:09 Rapid Development of Pilot Projects

Transcript

Joe Rodden, Lydian (00:00)
I think it's really important that you understand the technology as the CEO. It's really important that you don't view it as two silos and really treat it as a collaboration. You know, the main thing was I've always been fascinated in science and engineering and the ability of science and engineering to improve human lives. So I think the two problems really facing eFuel today are energy intensity and

Silas Mähner, CleanTechies (00:23)
If you're hearing this now, it's because you are a paid subscriber to Clean Techies. Thank you so much for supporting our mission. Enjoy this ad free listening experience. Hey everyone, welcome back to the Clean Techies podcast, the number one podcast for climate tech entrepreneurs. I'm Silas Maynard and I will be your host today. Even as you know, everybody's going undercover and changing their branding and climate tech, we will be here each week delivering valuable insights and lessons from other founders and investors in the space. So be sure to stick around even as the vibe shift continues.

Alright, if you're not already, do us a favor and subscribe on our YouTube channel, especially if you're one of our many free subscribers. You're getting a lot of value week after week, but you have not yet made that leap to become a paid sub. So show us some love by giving us a subscribe on the YouTube. It'll really help us increase our reach there. Okay, today we are talking about eFuels with Joe Rodden, the CEO and co-founder of Lydian. Their URL is LydianLabs.com. Not to be confused by Lydian Labs, which is a totally different company. So this is

Lydian. They have an e-fuels technology that takes in CO2 or air and water and then uses electricity to output aviation fuels. That's kind of the very simple version of it. You should know they went from initial tech discovery to pilot in just over three years. So if you want to know how you're going to have to listen. There is a dump truck load of value in this episode, especially for any deep tech founders. So let's dig in.

Alright, welcome to the show Joe, how you doing today?

Joe Rodden, Lydian (01:52)
Good Silas, thank you again for having me. It's great to be here.

Silas Mähner, CleanTechies (01:55)
No, absolutely. It's our pleasure to have you on where I'm at least a big fan of Lydian. I've known about you guys for a little while. I don't know if Somal is or not, but I'm excited to have this. So let's start off, guess. Give us just a really brief intro of who you are and what you're working on, and then we'll go from there.

Joe Rodden, Lydian (02:10)
Yeah, absolutely. So I'm the co-founder and CEO of Lydian. We have been, my co-founder and I working on the company for about three and a half years now. And we are a sustainable aviation fuel company working on a power to liquids pathway to produce e-fuels or, or ESAF at radically lower cost than alternatives. Yeah. So that's a little about us. My background is, is more on the finance and business development side. My co-founder is, is a chemical engineer by training. So.

and kind of marry those two parts of the business.

Silas Mähner, CleanTechies (02:42)
Yeah, it's obvious you guys have a little bit of the dynamic duo there because you mentioned in your very first pitch that we do it radically cheaper than other people, right? Otherwise we might be looking at a different situation in five years, but give us who is one like clean tech or clean techie OG that you would love to have dinner with it and why. Living or dead, by the way.

Joe Rodden, Lydian (03:00)
Okay. You know, I think Steve Chu would be an amazing one. Former Secretary of Energy in the mid 2000s during the so-called CleanTech 1.0. He's a literal Nobel Prize winner in physics, so a brilliant guy and oversaw DOE at a time during an early kind of boom in clean tech where we got so many things right, but also a lot of things kind of very wrong. And I think in hindsight, it's...

It's easy to look back at things like Solyndra and the other failures of cleantech 1.0. And I would just love to get Dr. Chu's perspective, Secretary Chu's perspective on, you know, what, what his viewpoint is in hindsight on some of those early failures and what we might be getting wrong again today and what he's learned from everything that he saw over the years.

Silas Mähner, CleanTechies (03:49)
Okay, amazing. Were you, guess out of curiosity, what were you doing during CleanTech 1.0?

Joe Rodden, Lydian (03:54)
I was in high school during cleantech 1.0. It wasn't doing much thinking about energy at the time, although my parents were both working in oil and gas for most of my early childhood. So I had some connection to the energy industry, but mostly I've been a student of that period of history in the years since after getting into the climate and energy space.

Silas Mähner, CleanTechies (04:16)
I love to see it when people are students of the past because it helps you avoid mistakes in the present. This is often something we see with any founders that end up folding in. If we look in hindsight with their conversations and they weren't as studious of those items. So I guess one thing I was curious after understanding a bit about your background is how do you go from being in finance at BlackRock to starting an eFields company? Give us the journey there.

Joe Rodden, Lydian (04:42)
Yeah, yeah, it's been kind of a windy one. You know, I would say I learned something at every step of my career. I got an itch to go work at a smaller company pretty early on. So BlackRock, you know, was, was a lot of smart people and in many ways a great start to my professional career. But it was pretty clear early on that I wanted to be in a smaller, more dynamic environment. so, you know, I was kind of aching for more agency, feeling like I could contribute a little more.

And so I then moved over to at the time, a FinTech startup, now a public company called Affirm. It wasn't necessarily the industry fit I was looking for, but it was a pretty natural extension from what I was doing at BlackRock and an easy jump into a younger company. And I think the biggest learning I took away from there is seeing firsthand how a small, young, scrappy company can really reshape an industry under great leadership. And I had some.

Really shining examples of that in Max Levchin, the former PayPal founder, Michael Linford, who was the CFO at the time that I worked under. But that obsession with climate and energy had kind of always been percolating in the background. And I was really interested in commercializing new technology, commercializing new hardware, you know, specifically doing it in the climate space and having an impact on that problem. So that really came to a head in 2019 or so I decided I had to kind of make a career out of that. And.

Cold emailed one of the co-founders of Forum Energy, Ted Wiley, eventually twisted their arm into hiring me onto their business team. Ended up working with them for a little shy of two years. And again, I think there got some great examples of what really good leadership works, what looks like with Ted and Matteo Jaramillo, the CEO, as well as some domain specific knowledge. And I think a really high level view of what commercializing a new technology looks like.

At a cool inflection point for the company. So I joined, think when there were about 50, 60 people almost entirely on R &D and engineering. And by the time I left, they were 400 or so. So that was a great experience. But again, I think the, you know, the stage and the desire for agency and zero to one problems kind of kept clawing at me. And I really wanted to branch out and do something that, was a little bit earlier and just kind of by luck actually ran into.

my co-founder when I was living in Boston and was immediately impressed by what he was doing. What had become a little bit familiar with the problem of eFuel from my time at Forum and a couple of other experiences at the time. And I think it was just immediately taken by him and the idea, the technology he was developing and started working together part-time for a few months and immediately had a rapport and decided to make it a full-time thing.

Silas Mähner, CleanTechies (07:27)
How exactly do you go from kind bumping into somebody with amazing technology and then actually going to work with them as a commercial person? I think there's plenty of people out there who want to be that commercial mind that goes with the tech mind. And from what I've heard, the stereotype is always that if you're a technical person and you went to Stanford or something, like you got all those business guys coming over your shoulder asking, hey, can I build a startup with you?

Joe Rodden, Lydian (07:48)
Yeah, you know, I think it's really important that you understand the technology as the CEO. I think Bronco would, my co-founder Bronco would say that I very much fit that bill, but it's really important that you don't view it as two silos and really treat it as a collaboration. There was a lot of luck involved. I mean, I had been looking into electrification of heavy industry from the perspective of, could we find potential buyers for a long duration battery?

whether that's in steel, cement or e-fuels, but also from the perspective of CO2 utilization, I had done a bit of work with a VC investor on a thesis around CO2 utilization. So I had a bit of a background in the e-fuel space and when that kind of helped us establish that rapport quickly because Bronco and I were able to establish that mutually beneficial relationship where

I wasn't just a business guy trying to do a startup and looking for a tech. It was actually an area that I was quite familiar with and could contribute some market knowledge and get up to speed on the

Silas Mähner, CleanTechies (08:49)
No, I mean, I just like I'll note it as a lesson for any of those people who are in the commercial seat is like don't just pursue a startup for startup sake, right? Build your own thesis. And then if you find somebody who matches, then there's going to be that natural fit to go together because otherwise you're kind of, you know, chasing down a broken incentive structure, right?

Joe Rodden, Lydian (09:06)
Yeah,

it's absolutely true. And one thing I'll add there is that I had, again, a great example at Form. I think they're the best in the business at this. And if you listen to the early history of Form, they were actually out raising money, exploring long duration techs before they ever had a chemistry chosen, right? They were defining the design space, what the market looked like, and really thinking about not just how to commercialize a cool tech, but how to develop technology that was serving a market need.

and really deeply understand the systems for you. And I think taking that into whatever you're doing is really important.

Silas Mähner, CleanTechies (09:41)
Yeah, no, no, that makes a lot of sense. What influences really kind of got you interested in clean technology in general? You mentioned a little bit about your parents working in oil and gas, but just kind of curious like what led you down this path, do think?

Joe Rodden, Lydian (09:53)
Yeah, I think, you know, the main thing was I've always been fascinated in science and engineering and the ability of science and engineering to improve human lives. I've always kind of gotten a kick out of hardware and kind of concrete problems. I, you know, my college major, I switched back and forth a bunch of times from more of the hard applied sciences to pure math and back and forth and ultimately realized that I had a lot more of a passion for.

for applied science and engineering over kind of the pure theoretical, but generally have always had a, you know, a big attraction to hard scientific problems. And so the ability to combine that with, you know, what I was viewing as one of the most important challenges and most important problems facing humanity, that just so happened to be also kind of what, what my parents were, were doing was kind of a, you know, a nice nexus of things that I was interested in and had a connection to.

Silas Mähner, CleanTechies (10:47)
Yeah, I find it fascinating the evolution, especially of technical people who really just interested in engineering problems, kind of gravitating towards the clean tech sector. And I don't think it's always because they were motivated by the climate change dilemma. It's often times just because of technology. And it just is fascinating to me to watch like we're seeing in America right now, a lot of people still disinterested in this new technology thinking it's just,

as a conservative, like to call it a green new scam. As they refer to it, it's kind of funny name, you got to admit. But the whole point is that people don't recognize that it's actually just the new technology, right? Like we've always been in favor of new technology, especially as America, like as innovators. So it'll be interesting to watch over the next 10 years as the general public realizes what's really going on.

Joe Rodden, Lydian (11:34)
And, and, and very much agree. And I think for me personally, and for a lot of people that I know in the space, it's, very much a combination of both. Yes, we care about the problem, but you know, equally importantly, sometimes more importantly, it's really fun work. It's, it's, reshaping an industry, one of the biggest industries in the world that touches every human being out there. and so many of the things we do in ways that we don't understand.

is being completely reshapen in a way that is exciting and multidisciplinary. And there are problems across electrical engineering and mechanical engineering and physics and chemistry and every other kind of cool discipline that you can think of, there is a problem to solve and an opportunity, you know, with potentially big financial outcomes awaiting at the other end. you know, we're driven by all those things at once. And I think that's what makes this industry, this sector so exciting to work in.

Silas Mähner, CleanTechies (12:25)
mentioned

that during your time at a firm that you saw how new technology with good leadership could reshape an industry. Can you talk a little bit about the lessons that you learned from the time working with that leadership team and what were the core things that you've taken forward into how you're building Lydian?

Joe Rodden, Lydian (12:42)
I think, you know, it starts with a belief that you can have an impact in an industry that's dominated by incumbents that are much better capitalized and much more experienced because I think there's a famous saying, which I'm going to mess up, but it goes something like, nobody has ever accomplished anything that they didn't initially think was possible. Right. So that's the first step is just having the conviction to know that a small team can have an impact and can approach a problem and

change it and solve it in a way that even a large company isn't able to. And I think it's really that generalism. I would actually probably stop there. That's the biggest thing that I took away from a firm is watching a team have that conviction and then relentlessly execute for years in a way that has now led to a great outcome.

Silas Mähner, CleanTechies (13:29)
Yeah, and don't let the haters shut you down, right? Exactly. Very good. So let's talk more about Lydian's technology. Can you just explain again, explain to me like I'm five, how does the technology work and we'll go deeper in from there.

Joe Rodden, Lydian (13:33)
Yeah.

The technology

started with a catalyst innovation that was invented by my co-founder Bronco. And we've since kind of designed a reactor and a process around that to try to unlock the benefits of what that catalyst innovation allows. And so I think the two problems really facing eFuel today are energy intensity and capital intensity. That's obvious, right? It's capex and op-ex. The energy intensity is really...

limited by thermodynamics, you're not going to get around it. You might improve it somewhat, but if you're trying to make a fuel out of a feedstock that has no embodied energy, you're going to have to put in a lot of energy. The only thing you can do there is make sure you're using the cheapest energy available. And what that means is that we need to figure out how to make the plant load follow, how to make sure that we can monetize the cheapest electrons out there, which today are wind and solar and increasingly are wind and solar.

So that was something that catalyst innovation, it was very clear from the start that it would be very well suited for load following. And from there, we had to solve the capital intensity problem. Particularly in the context of where you're trying to operate something intermittently and get a fairly low utilization rate, it becomes ever more important that your capital is cheap. So you're okay running it at a lower utilization rate.

And so there it's just been one engineering challenge after another, but starting from first principles of, again, doing that system level modeling and figuring out where does the plant need to be to deliver a commodity, which is at parity or close to a parity with the underlying commodity of fossil kerosene or jetting. And we have pulled a lot of levers to get there. I would say the two, it ultimately comes down to process intensification.

Your major equipment like your electrolyzers and your chemical reactors are a huge component of your capital cost. How can you make them as small as possible, but also made of cheap materials, you know, and mass manufactured so that you can make a lot of them and bring the cost down. And then there's process simplicity. There are going to be a lot of components like compressors and tanks and land and buildings, which you have virtually no ability to bring the cost down of. The only thing you can do is eliminate them.

as much as possible. And that is something you can only do if you can squeeze a lot of performance out of the major equipment, the parts that you do own. But to the extent that you can't eliminate them, you have to make them big. You have to make them standardized. You have to limit the non-recurring engineering. And so there's a lot of work underpinning all of this, but ultimately it's combining a first principles approach to technology design and leveraging the benefits of that catalyst that we originally invented.

Silas Mähner, CleanTechies (16:29)
Okay, got it. So we're going to back up a little bit and then let's talk about how the tech works. is it like, give us a basic explanation of what goes in, how do you change it and what comes out and then like, who's the end user, at least the conceptualized end user.

Joe Rodden, Lydian (16:42)
Yeah, absolutely. So our inputs into our plant are carbon dioxide and water, and we split the water into hydrogen. We do that with off the shelf technology from electrolyzer manufacturers. We don't have an innovation there. And then we take that CO2 and hydrogen and we convert that in a two-step process to a hydrocarbon fuel. And we are targeting specifically the jet fuel range, which tends to be about eight to 16 carbon atoms, give or take.

And that fuel that we end up with is a drop-in alternative for the airplanes that we have today. So it really is almost molecularly identical and close enough that you can use it in an airplane as a drop-in fuel.

Silas Mähner, CleanTechies (17:22)
And then so going back to what you said previously, you're talking about doing this in a way that is, what do you say? Like you drop off a container and this stuff is there. You don't have to build a huge plant. It's more flexible that way. Is that accurate?

Joe Rodden, Lydian (17:35)
I mean, our plants will need to be fairly sizable in order to have good unit economics, but you know, there is kind of an art to designing the major equipment in a way that can be quickly installed and that can be numbered up instead of scaled vertically. And that allows us to eliminate risk early on, right? So we'll do, we'll actually do a demonstration project in the next two years that we expect to be the largest kind of individual reactor that we ever built. And that timeline is something that is not.

not feasible for a lot of new technologies if they're kind of just scaling vertically.

Silas Mähner, CleanTechies (18:07)
And then so is there a component here that is you have a lot more location flexibility which allows you to get closer to cheap energy? Is that accurate?

Joe Rodden, Lydian (18:15)
Yeah, I think that's a great way to put it. think locational flexibility is ultimately going to be constrained by those inputs. So water and CO2 at the limit, we might be able to pull CO2 out of the air. Again, that's not a piece of the technology that we own, but a lot of people are working on that and continue to make improvements. In the near term, we'll get CO2 from an industrial point source. And there are a lot of those around the world. So we can co-locate or we can locate very close to one and deliver that CO2 ideally via pipeline.

but potentially via other means as well. So being able to operate intermittently does allow a lot of locational flexibility and being able to deploy the plant in a standardized module with limited recurring engineering allows us to do that really quickly. So yeah, there are a lot of benefits to the siting as well.

Silas Mähner, CleanTechies (19:04)
So just to make sure we tap into this a little bit more, you said something, you said two different things. So you said load follow and then intermittent usage. So can you explain to people what that means when you say that you don't have to like, is basically, you don't have to always be on like other plants would be?

Joe Rodden, Lydian (19:17)
That's exactly right. The conventional way that a chemical plant is designed is to run pretty much at full capacity. mean, they might have some operational flexibility, but typically you have an energetic feedstock coming in. That could be a crude oil or a methane or something else, coal. And the challenge has historically been, let's make this plant complex and squeeze the most yield as possible out of this feedstock, which tends to dominate the overall cost. So they're long-lived assets.

built to last for 50 years or more, and they're designed to operate continuously. What we do is, you know, think about at a high level, really our problem is trying to replace a very cheap commodity, crude oil, with a commodity that historically has been more expensive, electrons, and that's ultimately what we're doing. And we're also adding capex for that conversion step. So we need to make sure the electrons we're using are as cheap as possible. And really solving that challenge is the only way that we can

get anywhere close to the underlying commodity price. And again, today, wind and solar are by far the cheapest electrons we have and have ever had. They're not available around the clock. They'll never be available around the clock and we can store them in batteries, but that adds cost, which a lot of different applications can bear that cost. Computing can bear that cost, heating and cooling, vehicle charging, making a commodity hydrocarbon can't bear that cost. You really need to go to those very, very cheap electrons.

Silas Mähner, CleanTechies (20:44)
Got it. So you're able to take advantage of when there's excess energy on the grid, it's very cheap and they need somewhere to put it anyway so you can build a plant there. Does that mean, I mean maybe not now but in the future, you plan to partner with the energy developers directly who may need to like figure out a way to get rid of the excess energy? Because I know that there's been like Bitcoin mining operations or data center operations that have done kind of something similar to absorb the excess load.

Joe Rodden, Lydian (21:10)
Yeah, those are conversations that we're having absolutely. And we're able to do that in a few different ways. I mean, we can co-locate with a renewable energy project and take a portion of their load in a flexible way that allows them to sell a different profile that's more valuable back to the grid. We can procure that power virtually and operate in a way that adds value to the grid operator itself, not just to a single renewable energy developer. But yeah, that's absolutely part of the strategy. And I think.

Bitcoin mining has been an early model for this. There are other models. are a couple of aluminum smelters, one in New Zealand that is operating this way. So yeah, that's very much a part of how we'll deploy.

Silas Mähner, CleanTechies (21:52)
Interesting and so this is this the kind of the key difference that you guys have versus other companies who have tried to do something like this.

Joe Rodden, Lydian (21:59)
I think it's definitely one of the key differences. And we always say that when you're trying to operate in this way, there is a technical component. So you need to make the plant technically capable of load following. And again, that's a non-trivial thing to do for a chemical process. Upsets can deactivate catalysts. They can cause fouling of major equipment and just generally other problems that most chemical plants don't want to deal with. There's a lot of engineering and IP that goes into

unlocking that technical capability. But there's also an economic aspect there where you have to realize that even if your plant is capable of operating flexibly, if you make it too expensive, you're not going to want to do that because the of the economic signal, the equation, you're trying to pay it back. You're trying to get capital amortization. It ultimately starts to dominate your cost equation more than the OPEX in a way that would make you more willing to pay for more expensive electricity.

And that's what we see in computing and data centers, right? Flexibility is not that hard for certain computing applications, Bitcoin being a great example, but the value of the so-called watt bit spread typically, and the cost of those plants, by the way, data centers are billions of dollars, dictates that they tend to prefer to run.

Silas Mähner, CleanTechies (23:17)
So being from a finance background, does the model you have where you're not going to be running continuously but because you are it's cheaper to produce these things, these plants, it still will pencil out from a private equity perspective eventually coming in once the tech is proven because that's the dream that everybody's trying to get to is we need to get reliable enough income so that private equity can dump billions of dollars in rather than several hundred million dollars in here and there.

Joe Rodden, Lydian (23:42)
And there are many things that we have to creatively do to make sure that the model is financeable in that way. the reliability of the output in the cashflow streams is one of them. But the short answer is yes. And in fact, our plants are designed to operate not just in a way that's profitable with intermittency, but actually to be optimally profitable with intermittent operation. they're cheap enough that we actually prefer to turn down in many hours of the year and avoid the high-priced hours.

Silas Mähner, CleanTechies (24:04)
Thank you.

Yeah. Okay. And then, so how do you make money? are you, is the objective, I mean, maybe you're working on the financial model still, cause some people have multiple options, but is the objective just, we're going to produce, we're going to be a field producer and we're going to sell to the airlines. Are you partnering with other people? Like how, how do you, what's your guys' model currently?

Joe Rodden, Lydian (24:28)
Yeah, there are multiple options for us as well. And we're going down the route of both really two high level ways we can make money. One is to develop and operate our own projects and to sell fuel and we can sell fuel directly to the airlines. We can do it through an intermediate, like a fuel supplier. And then the second model is to sell technology. So we can either license a technology package. We can be an OEM and actually sell the equipment to renewable energy developers who are interested in developing fuel projects.

We will kind of lean toward the first model in the early days as we seek to prove out the technology and kind of, you know, focus on owning and operating the first of a kind plant. And then we may shift over time into more of a hybrid model.

Silas Mähner, CleanTechies (25:11)
Because it's common that if you're going to do a licensing model, have to be able to provide certain guarantees, which only comes if you've operated for a period of time. Is that correct?

Joe Rodden, Lydian (25:20)
Yeah, that's exactly right. Typically, there's often no way around having to prove out the first instantiation of the product on your own with your own capital, underwriting your own risk. There are also benefits to doing that, right? We can learn how the system operates, what works, what doesn't, and perfect the product over time before we go out to the market and try to license it. Yeah.

Silas Mähner, CleanTechies (25:41)
So another big thing I hear I'm trying to understand is what existing value chains do you or supply chains do you plug into? Because oftentimes if you have to rebuild the entire thing, when you're trying to build a new technology, difficult. But if there's kind of certain behaviors or existing infrastructure, you can just make an innovation that's going to not piss too many people off and benefit your customers. And you can pop in there. that what you guys have done it? Because it sounds like a lot of your hardware you said is off the shelf. And it sounds like there's probably a distributor, like distribution kind of network. Tell us more about that.

Joe Rodden, Lydian (26:11)
Yeah. So on the product side, mean, the goal of making a drop-in commodity is something that we were, that I've always been kind of really interested in. I've heard some people describe this as if you build it, they will come risk. So if you make a jet fuel, you've got to buy her for it. can go on existing pipelines. It can go on existing airplanes. You don't have to worry about setting up those supply chains from scratch.

On the actual build and fabrication of our technology, there are some supply chains that we are going to have to spin up and manufacture our own parts. There are specialized materials and technologies. Ultimately, we've solved for things that have a really low cost entitlement. So they're based on non-precious materials, things that we have a lot of, but that doesn't necessarily mean that we're using things that are off the shelf or mass manufactured today. We try to do that wherever possible, but

Ultimately, it's a new technology and a lot of the things that we're doing are completely new and we will have to spin up manufacturing lines to make that a reality at scale.

Silas Mähner, CleanTechies (27:12)
Yeah, no, that's helpful. So, you know, I might be putting words in your mouth here, but I'm just trying to think through the logical conclusion of if this works, right, if you guys continue to build this and we see the continued trend of, you know, this idea of energy abundance, right? If we can build lots of renewables, hypothetically, we have, you know, unlimited electricity to produce things like, you know, this fuel. I mean, is it basically, is it safe to say that, you know, just if we, for the average person who may not quite get this, like you look forward,

in however many years and you can see that we're able to produce the fuels that we use to fly around the world out of just air and water and we have all this extra electricity just everywhere. so even flying, we don't have to feel guilty about it because the CO2 that's going to come out is basically coming right back into the value chain. Is that like a fair assessment of what you're hoping to achieve with the vision and impact here?

Joe Rodden, Lydian (28:01)
Yeah, that's exactly right. And we think it'll be part of the solution. is space for others. Eventually, know, short haul aircraft, regional aircraft might go to batteries over time that might even extend to medium. It's very hard to envision that going to long haul aircraft anytime in the next 50 years, probably longer, but you never know. And you have biofuels as another solution and biofuels have their drawbacks, but in certain contexts, they can be pretty cost effective and they're made out of a

non-anthropogenic, non-fossil CO2 source or carbon source, I should say, that does have some climate benefits. So combine those pieces all together. And yeah, the vision here is we need to stop global warming. That means we need to have no kind of net flux of fossil CO2 being increased in the atmosphere. yeah, so the vision here is to really penetrate all the way into aviation and make sure that we can do that in a sustainable way.

Silas Mähner, CleanTechies (28:57)
Yeah, I mean, this has got the hair on my arm standing up. It's just, it's an amazing vision. think if anybody was a little bit down on, you know, things happening in climate right now, don't be because you can go work for Joe and you're going to change the world. So I'm sure you guys, I'm sure you guys will be hiring in the near future. I don't know when this coming out exactly, but definitely take a look at their careers page.

Joe Rodden, Lydian (29:13)
Yeah,

take a look at our careers page. I'll also just add one more point that, you know, we've got a lot of folks on our team that are, I'd say, av geeks, like really interested in the power of aviation to connect people, to drive new industry, to drive new economy. And I think it's really important to bring up that still today, you know, despite the fairly sizable impact that aviation has on the climate, a very small portion of the population is actually flying and can afford to fly today.

That's part of our mission is to really make sure that we have a sustainable solution out there to not just to decarbonize the aviation that we have today, but to expand access to that aviation over time.

Silas Mähner, CleanTechies (29:50)
Yeah, I think, you know, I didn't plan to talk about this, but I think it's interesting in the people who are kind of like accelerate everything versus, we have to slow down, we have to reduce our usage of everything. I don't think that, first of all, you know, we're going to cut back on everything. Like, yes, I understand it's needed, but it's not extremely exciting versus when you're saying, hey, we've got all this abundance, especially, you know, in these more developed countries, wealthier countries, we should be focused on finding ways.

to get to this point of total abundance where I don't care if I leave my lights on because electricity is so cheap and the sun, well, not in Wisconsin, but the sun's always shining somewhere, right? And I don't have to worry about it. And then we can, like you said, eventually massively reduce the cost of flying hypothetically, right? And I just, I don't know if you have any takes on this kind of accelerationist movement, but I know that a lot of climate people have kind of debated whether or not this is the right thing, but it feels like you're in the camp of, we didn't, if it weren't working on...

having this abundance future, we wouldn't be able to, we wouldn't be funding these things.

Joe Rodden, Lydian (30:47)
Yeah, mean, thinking about a future without abundance is not a very nice future to think about. And I think many times people underestimate, I think that the negative impacts that would come with not having that abundance and positive parts of their lives that they may not realize come from having that abundance and having had that abundance historically provided by fossil fuels is the uncomfortable truth that we have to contend with. Now, everything has to be done within limits, right?

There's a real economic cost to climate change and to the world warming. And we know that. And, and, you know, there is, there's a pretty big range of uncertainty on what the quote unquote social cost of carbon is, but it's very clear that it's real, that it's not priced in and that the more CO2 we emit, that's economic costs down the road. And so we have to do things. have to, you know, seek abundance and accelerate, but we have to realize that there is a cost to doing that. And if we don't address it.

It's going to be more expensive the longer we

Silas Mähner, CleanTechies (31:47)
Yeah, absolutely. I appreciate that thought. So recently you guys also had a successful pilot project. I would like to know a little bit more about this because my understanding from a little bit of prep on this is that you have successfully done this in three years, I think from tech to pilot. So can you just talk about how you do that? Because that is, if that's the right numbers, that is wild, right? Nobody does things that fast.

Joe Rodden, Lydian (32:09)
It's about three years from when Bronco started working on the idea. you know, at the time he was, he was still kind of doing some other work on the side and this was a bit of a side project. And it's really more like two years and three months from when we first got LabSpace and made our first hire and started working on this in earnest. So I think number one kind of factor there has been Bronco and the team and just the amazing pace and.

intelligence that and drive that they move with. But also I think that the design from first principles that we talked about realizing that the system had to be really simple and really cheap. We realized very early on that you don't start with this huge complex system with bells and whistles and just wait for it to get better over time. It's not going to work out that way. In fact, if anything, it goes the other direction. Complexity is forced on you as you scale up and uncover new problems.

So if you don't begin with something that is incredibly simple, you really have very little chance of scaling up and commercializing. And I think that's the second point that allowed us to do this was we designed for radical simplicity and low cost from the start. And that allowed us to deploy pretty cheaply and pretty quickly at a scale that has taken other folks a lot longer.

Silas Mähner, CleanTechies (33:26)
No, that's definitely got to be a clipped moment right there. That's something all founders who are trying to deep tech or hard tech of any sort should really, really think deeply about. No pun intended. Okay. So let's shift into trends a little bit. first thing I want to, guess, talk about is broadly speaking, how do you view the eFuel space? Obviously you guys are building in it, so I'm assuming you're somewhat bullish, but what is it like right now in the atmosphere out there? Are people still looking to pay a premium for this? Because I had understanding that there was a lot of demand, but not enough supply. So just tell us more about what's going on there.

Joe Rodden, Lydian (33:56)
Yeah, absolutely. mean, the e-fuels market, think is in many ways like the Wild West right now, there's a lot going on and it's all pre-commercial. To our knowledge, I don't think there's actually any commercial production of e-fuels in the world for aviation today. There are a couple of demonstration scale plants. HAF has the Haru Oni plant in Chile and Infinium has a plant down in Texas. Both of those are making non-aviation fuel products. So gasoline in Chile and diesel in Texas.

So it's very much the early days of this market. And there are a few demand drivers. So the biggest demand driver right now is the e-fuel mandates in the UK and the European Union. So in the UK, those kick in in 2028. And that's when we kind of expect to see the first commercial supply coming online. In the EU, there are a couple of years later in 2030. And they scale up kind of dramatically from there. And by 2050, the mandates in the EU dictate that half of all

sustainable aviation fuel and 35 % of all fuel consumed in the EU has to be an e-fuel, a power to liquid pathway. So it's this remarkable kind of market creation moment, considering we're starting from zero. I think at one point we did the math and we looked at the implied growth rate from now until then. I mean, it's infinity until we have somebody producing, but even from 2030 and beyond, the growth rate is comparable over 20 years to...

the iPhone after its release in 2007 over the next 10 years. So that kind of market creation opportunity is pretty incredible. And I think unprecedented arguably in climate tech and that that's just the mandated markets, right? If you start to see electro fuels getting cheaper than biofuels, which we do expect them to do in that time, all of a sudden that becomes the preferred pathway of choice, not just for the e-fuel sub mandate, but for the

for the mandated sustainable aviation fuel consumption in general. So then you're talking about 70 % of all European fuel. You've got similar mandates in places like Japan and Singapore and tax credits here in the US that can allow you to sell at fossil parity even before you get your production costs down that low. So it's a really remarkable tailwind. And I think that's coloring a lot of the optimism. On the flip side of that argument, you do have some macro factors which are making it

pretty challenging. think regulatory uncertainty is one. So, you know, the lack of certainty is kind of anathema to private investors, right? And, you know, that best describes what we have today here in the U.S., but there's also some uncertainty in Europe with how the regulations are going to be implemented. And what you'll hear from every airline and every fuel producer is that that kind of certainty from the governments that we're going to have a stable

scheme over time for developing and compensating this industry is really important for private capital to start playing in a really serious way. And then, you know, can't overlook the increase in electricity prices, right? So here in the US, we'll take the US context, pre-COVID, you had kind of the norm for renewable PPAs was mid teens to low 20s, dollars per megawatt hour of electricity.

Now, you you look in the places where renewable power is being built, it's gone up by three to five X, you know, up to 60 to $70 a megawatt hour on average. And early on there was a bit of supply chain constraint driving that. Right now it really is, it comes down to a supply and demand imbalance. We're not building enough transmission. We're not interconnecting enough power quickly enough. And that means that the virtually endless demand from retail customers, primarily hyperscale data centers.

is just driving the prices up and kind of letting surplus accrued to developers. There's also been some repricing of like the merchant risk premium at the end of the PPAs, but that is a big thing that is causing people to kind of pour a bit of cold water on the prospects for green hydrogen, e-fuels, you know, any derivatives of electricity really. But one thing I would say there is I think we talked about Steve Chu and the learnings from cleantech 1.0 early on. I think the biggest learning that

I've taken away from cleantech 1.0 and Cylindra in particular is the cure for high prices is high prices, right? They don't last forever because they cause new entrants, new solutions and things that ultimately bring the prices back to reality and potentially can lower them even further. So the case in cleantech 1.0 was famously Cylindra had bet on polysilicon prices, which at the time were about $500 a kilogram.

against a production cost that was maybe 10 to 20 % of that. So Indra was a bet that polysilicon prices would remain high and through this other pathway to make solar panels, they would win the market. And what happened was a bunch of new entrants came in and made very cheap polysilicon and made improvements on the process in China. And the prices crashed back to earth and the company went bankrupt.

I think it's going to be a similar dynamic where everybody betting on sustained high prices for electricity that are decoupled from the reality of how much it actually costs to generate that energy is just going to find that that investment thesis doesn't pan out forever and markets have a way of solving these problems. And in the meantime, I think our approach to being able to take those electrons where they're available, being able to kind of locate outside the constraints of the grid.

so we can go fully off grid and operate on just wind and solar. Those kind of things, I think, are ultimately the pressure that the market needs to start coming back to Earth.

Silas Mähner, CleanTechies (39:43)
Yeah, because the play allows you to deal with the fluctuations of the prices. You can still find pockets of areas to make it economical because if you're taking an assumption in your model, let's say, three or four cents or something per watt and then you're kind of increasing that by like two to three X, you completely blow up the model, right? It's not going to work, right? I was doing math with somebody I was chatting with in Houston when I was back there talking about hydrogen and the math looked really, really bad if you start increasing the price of electricity.

That makes a lot of sense. think this is interesting. I am curious if there's any component to market demand or your guys outlook reliant on the carbon credit side of things. Like, is that a component that can go along with your type of fuel? And is that still something that's happening in the U.S. at all? Is it only happened in Europe? What's that look like?

Joe Rodden, Lydian (40:30)
Yeah, I mean, so there are, there is a voluntary credit market for sustainable fuel production. It's pretty early. There are a couple of groups here in the U S working on that. There are groups in Europe and the airline approach to this kind of varies. So some airlines are monetizing those credits through their corporate customers. You may see a few that are offering them to you and I in the checkout page. So United, Alaska, think Lufthansa all have mechanisms where you can make a contribution to help offset the

the footprint of your flight. The retail facing versions of those have very low uptake to date. Not many people are voluntarily tripping in. The corporate side is where there is still a lot of involvement and a lot of activity. So there are a lot of corporate striving action to reduce their supply chain emission. And depending on which companies you're talking about, that can be a very small portion of their overall footprint, or it can be a very serious portion of their overall footprint. So we...

We have built a business model that does not rely on those voluntary markets. So they are where they are available. We will consider them upside, but we are not trying to rely on kind of corporate green premiums in the long run to.

Silas Mähner, CleanTechies (41:44)
seller

product. got it. Yeah, so I was kind of curious if you were able to in interim, in the beginning as you're getting the economics even better, if you could benefit from that. But it sounds like you've done the right thing and weaned yourself off before you ever got hooked, right? Okay, that's good. I guess I want to understand the traction that you guys are seeing as a company. Like what does it look like right now and can you put your finger on why that is? Why do you see a lot of interest and growth there?

Joe Rodden, Lydian (42:10)
So I think the pilot demonstration on the technology side is a big one. And I think, again, it really serves as the first major proof point for, you know, it's a demonstration in and of itself. It's exciting in that regard, but it's really the first major proof point that we can deploy this technology deeply and quickly compared to alternatives in the market. And I think that is driving a lot of excitement.

Particularly for corporate customers like airlines, they're not necessarily underwriting technology risk. That's not what they're good at. That's not what they want to be focused on. But the more that a project looks to be credible, the scalability looks possible, the promises that we've made, we continue to make good on them. That's when we really start to get traction. And what we're seeing now is very much confirming that.

Silas Mähner, CleanTechies (42:58)
your

so this is the first pilot or did you do another smaller demonstration before this?

Joe Rodden, Lydian (43:02)
So we had, I mean, we had bench reactors running in the lab, but this is the first kind of out in the field, fully integrated demonstration that we've done.

Silas Mähner, CleanTechies (43:09)
So how, a lot of people are trying to go through this process right now. So how did you pull this off? Was this through just you, did you fund it primarily with equity? Did you have a corporate who was willing to fund it kind of for PR purposes? Like how did that come together? If you can give the basics that you're able to share.

Joe Rodden, Lydian (43:23)
Yeah, we funded this all with equity and did it with a pretty limited amount of equity. you know, we're in a good position being able to do that. We do have some grant money, which we've won in the last couple of years, but that didn't go toward the first pilot that we did. It was all funded off our balance sheet. We did have some supportive partners along the way. So we deployed that partner at a site down in North Carolina that already had a lot of the infrastructure we needed. So we didn't have to go through permitting for the hydrogen and CO2 supply.

They had that infrastructure on site. They had the power we needed. So I would say, you know, that's a good learning for us is try to avoid doing all the green field work for, for demonstrations. Go, go find a place that has the infrastructure you need.

Silas Mähner, CleanTechies (44:06)
Are there any particular big benefits of, obviously it cuts into your equity to your fundraise, but is there any big benefits of funding it yourself rather than using some third party or some other partner?

Joe Rodden, Lydian (44:16)
I speed

is really the only benefit. If you can kind of line things up correctly such that you can do it with grant funding or with a partner, that's great, but it often comes at the expense of speed. know, transparently early on we applied for a couple of grants to deploy the pilot plant and we actually got responses back on several of them saying some version of, don't believe you can do this on this timeframe and so we're not going to fund it. We think you're full of it basically.

And that was based on their view of the R &D that we had done on the time and probably fair, but we went and proved them wrong. We actually did it in half the time that we proposed to do for those grant applications. it's, that's been a learning for us is to kind of know your audience and not make the same pitch to, you know, to grant funding that you maybe make to your investors and know you can do internally. But if you can get grant funding or partner funding and you can get it on a timeline that helps you accelerate, obviously.

In many ways it's better than equity, but often for speed, there's no better alternative to having an investor who believes in your vision and is willing to fund the value creating moment like the pilot.

Silas Mähner, CleanTechies (45:27)
Maybe, if you're willing to share, is there still involvement with DOE or Dark Portal? Because I know that a lot of these things, seems as though they're completely, like, they refuse to touch anything that has the word clean in it.

Joe Rodden, Lydian (45:37)
We

still have involvement with both. think the defense application is not one that we've talked about a lot today, but really is. There's a lot of reasons to do this for energy security outside of climate in a defense application. so making synthetic fuels in what they call an expeditionary environment, so think could be an aircraft carrier or a military base. There is a lot of strategic value. You you avoid loss of life. You avoid crazy high costs of supply chain in conflict regions.

There's a lot of value that goes above and beyond climate. that is very much kind of still in progress. We expect to deliver on the milestones of that program and hopefully establish a deeper relationship with the Department of Defense over time. And we still have ongoing work with the Department of Energy as well. I think there's some uncertainty right now with exactly what's going to be prioritized, but there are still awards being funded and work being undertaken. So we'll do...

do our best to understand the desires of this administration. And we think we have a really good solution to a few different problems across that landscape of energy security, energy export, in addition to the climate benefits. So we expect that there will be opportunities to keep engaging.

Silas Mähner, CleanTechies (46:51)
Now, I like to hear that. think I'm hopeful that people who have great economics for their projects and their technology will be able to get a seat at the table to still point it out because I think that there's a general rejection of anything that involves clean tech from some of the sources I have. That's what I've heard. And it's kind of on this like do not fly list effectively. And I really hope that that changes because so many of these technologies are critical for us to just excel as a country and to just not be left behind basically. But as we start to wrap here,

What has been as a founder, like what has been the biggest challenge of building Lydian so far for you?

Joe Rodden, Lydian (47:26)
I think that, you know, the so-called valleys of death get a lot of attention and I think rightfully so. It's a really challenging problem to deal with. mean, the early stage progress has been really exciting. I think a lot of people are excited by the vision, but ultimately somebody needs to underwrite a lot of risk with a lot of capital in that medium term of getting from, okay, you've done a successful pilot, the tech works, but how do you make the economic case work? And in between there has to be

A funder who's willing to take a lower return than they're used to. There needs to be a buyer who's willing to pay more than they're used to. It needs to be an EPC or some other engineering firm that's willing to take on more risk than they're used to. Lining up those pieces is really difficult. And that's something that we're very much in the throes of now and we'll continue to work through and execute as we always have. But it's a very difficult problem. There's not an easy solve because it involves so many different parts of the value chain.

But I think, not to be cliche, I'm sure you get that answer a lot, but it gets attention, I think, rightfully.

Silas Mähner, CleanTechies (48:32)
So what do you do when you just literally have no idea what the next step is? Like, you you already have you built or cultivated a large network of mentors or are your investors typically helpful? Like, what does a founder do in that situation where you literally have no idea what what kind of the path forward would be for the objective?

Joe Rodden, Lydian (48:49)
Yeah, we do have mentors. mean, the founders of, of form are still very much kind of, consider them mentors and, and, know, get in touch with them time to time when we're facing similar problems. We have a great group of investors, including our board, which has seen a lot of these issues and going back to clean tech 1.0. So investors who have been in the space for a really long time, they can typically help. And then I think, you know, the best thing that you can do as a founder is.

Figure out who has solved that problem best. Like who is best in class at doing the thing that you're trying to do and go try to get in touch with them and, and, you know, learn the tips and tricks, bring those people on as advisors. If you need to find a way to work with them, find a way to hire them, but most likely the problem that you think is unique to you has, been solved in some form, you know, by somebody in the past. And if you can find them, you're, you're going to be in better position than anybody else.

Silas Mähner, CleanTechies (49:44)
Yeah, absolutely. All right. Let's wrap things up here with a couple of quick hits. who is a climate founder that you feel is underrated? That's not a fair answer, man. You got to give us somebody else.

Joe Rodden, Lydian (49:51)
Bronco, my co-founder.

I mean, that's the one that comes to mind. do all the podcasts, I get the glory, but really none of this clicks without him. But I'll also shout out Kevin Bush from Molten Industries is a really deep thinker and somebody that I'd recommend having on the show. He's somebody that I trade notes with pretty often and somebody that I think is doing some really exciting work.

Silas Mähner, CleanTechies (50:19)
Amazing. Okay. And then are there any particular resources that you found very, very helpful or communities in the climate space or just broadly speaking building this company?

Joe Rodden, Lydian (50:27)
Yeah, I think the Princeton Zero Lab run by Jesse Jenkins puts out a bunch of papers on basically different questions within what does a net zero economy look like? What does a zero carbon power system look like? What does a zero carbon transportation system look like? Those are, think, unparalleled in terms of starting to get a feel for what does this system need to look like in the future? What are the puts and takes?

which areas do we have pretty well solved, which areas still need attention. And I think again, we talked about this early on, but understanding the system from a high level is really important before you go deep on any solution.

Silas Mähner, CleanTechies (51:07)
Got it. Okay. That's awesome. That's a great one. I haven't heard of that one before. And what is a book that you've read that generally like it doesn't be climate specific, a book that you've read that really, really influenced you in your career?

Joe Rodden, Lydian (51:17)
It will be climate specific. I'll say Taming the Sun by Varun Sivaram is a really good look at the potential of solar and just the size of that resource and the potential of harnessing it, but also the challenges that come along with it and kind of this, you know, the certainty that the availability of cheap solar energy is going to completely reshape our energy system, our power grids, what that looks like.

you know, the concept of base load to how we have to store energy in quantities that we never dreamed of to the value of flexible loads like ours and what that implies for utilization of transmission and distribution wires. Really that was the book that drove it home for me that this isn't just a one-for-one swap of one generation source for another. It really is a fundamental reshaping of how we deliver energy to our economy.

Silas Mähner, CleanTechies (52:14)
Very good. Well, that's amazing. This has been a really good episode. I feel like you've gotten some great answers. You've got some great experiences to here. So thanks so much for coming on. Any final, I guess, call to actions or where people can reach you, if you want them to reach you.

Joe Rodden, Lydian (52:26)
Yeah, mean, please take a look at our careers page if you're interested in working for Lydian and reach out to us, shoot us an email. We'd love to hear from you.

Silas Mähner, CleanTechies (52:35)
Awesome. Thanks so much for coming on, man. It's been a pleasure.

Joe Rodden, Lydian (52:37)
Thank

you Silas, great talking to you.