Can this startup make ocean CDR pencil out, even absent the voluntary market?

When marine carbon removal company Running Tide shuttered earlier this year, it cited an intractable problem: the lack of a serious market for CDR services.

And while not everyone believed that market immaturity was the full story, the startup wasn’t alone in having deep concerns about the voluntary carbon market’s ability to prop up the nascent industry. As a result, there's a widening swathe of CDR startups, including in the ocean capture space, that are leveraging byproducts of their process to offset the still-high cost of removal.

• The top line: California-based Equatic’s approach to CDR produces hydrogen, a byproduct with relatively stable market demand and pricing, which the company hopes will support its efforts even if the voluntary market never takes off. And today, in Equatic’s early stages of deployment, the startup and its investors are betting on that byproduct to make the economics of its plants pencil out despite voluntary market risk. . 
• The nuts and bolts: Equatic pumps seawater into plants powered by curtailed clean energy, and uses an electrolyzer to separate it into acid, base, hydrogen, and oxygen. The acid stream is put into contact with rock to neutralize it and the base captures carbon dioxide from the atmosphere and converts it to stable forms — leaving the hydrogen to be sold as fuel or feedstock.
• The current take: Equatic COO Edward Sanders is skeptical that a voluntary market could ever get off the ground with companies aiming for prices in the $100-$500 per ton range — the market is just too elastic. The fact that so many companies are starting to adjust-up on their cost estimates may be indicative that the industry should be more focused on accessibility, he added: “Is the issue that there’s not demand at a thousand dollars? Or is the issue that we’re not able to do it for less than a thousand dollars?”

For every ton of carbon dioxide an Equatic plant removes from the atmosphere, its process produces 30 kilograms of green hydrogen, Sanders said. That by-product, he added, “can underpin a lot of the economics of the plant.”

And because the hydrogen market is not only big but also tends to be “characterized by really long contracts,” he added, the fuel bolsters the long-term stability of the company itself — a rarity in the ecosystem of CDR startups.

The company has yet to scale its model, but has two pilot facilities online currently, as well as a demonstration plant in Singapore that broke ground in May.

Sanders declined to share Equatic’s current removal price per ton, but emphasized that the company’s model isn’t necessarily reliant on the willingness of buyers to shell out early-stage prices. Indeed, if the entire voluntary carbon market disappeared, he said, the company would have a viable business model.

“Even absent credits, we can inset the carbon dioxide removal,” he explained. “Instead of selling a credit, we would be able to sell the hydrogen with a carbon negativity attached, and that inset [would go] directly into the scope one.”

That business model is in part what has given Equatic (and its investors) the confidence to put $100 million into building a commercial-scale facility in Canada, Sanders added. That plant, which is set to come online in 2026, will eventually remove 109,500 metric tons of carbon dioxide annually, while producing 3,600 metric tons of green hydrogen.

“Either the market will catch up in terms of volume, or there will be other ways to sell the product,” he said.

Even before the plant is built, it’s a model that Equatic is already leveraging, including with mega-client Boeing, via an agreement in which the aerospace giant is purchasing both carbon removal credits and several thousand tons of hydrogen.

Firming up trust

It’s not just the potential to sell carbon-inset green hydrogen that shores up Equatic’s stability. In Sanders’ view, the company's approach to both measurement and verification and to siting are helping.

In marked contrast with Running Tide’s approach, Equatic’s entire process is condensed within the four walls of its plants, including measurement, he said. The company measures the chemical composition of seawater inflow and outflow from a facility, doing so at various points throughout the process via an array of sensors. 

“We want people to understand that simply because we are using the ocean doesn’t mean it isn’t measurable,” he added. “There’s no carbon accounting done in the open ocean. We only sell the credits from what we can measure on land.”

And, because everything occurs within the plant, Sanders said Equatic doesn’t require special permissions or permits to operate. Those requirements represented a steep barrier for Running Tide, one which pushed it toward operations outside the U.S.

“We’re not putting anything into the ocean that is otherwise requiring special permission or approvals beyond any other industrial site,” Sanders said. “That gives buyers and investors confidence that there’s an existing regulatory pathway there.”