Distributed Futures
Corpus Christi, future fragility, and the most interesting companies in climate this week
Corpus Christi
“The future is here, it’s just not evenly distributed.” - William Gibson, Neuromancer.
One of the challenges in writing about the climate crisis is that humans are inherently wired to believe their priors are indicative of the future. This is true in domains as varied as cryptocurrency speculation (bitcoin always goes up, right?), health (I’ve never had a heart attack before so that can’t be it, right?), and the suitability for human life of large parts of our planet (My home could never burn down, right?). Wildfires, droughts, and superstorms are incomprehensible, then one-offs, then once in a generation, and then common. The future is not evenly distributed, until it is.
This brings us to Texas, where a mid-size American city is about to run out of water. The “how” of the event is not particularly interesting or atypical; that part of Texas has been under drought conditions for ages, has little fresh groundwater and lots of oil refineries that use about half of what’s available, and has failed to build any desalination capabilities thanks to unbalanced budgets and bureaucratic idiocy. This can, and will, happen in more places, likely starting with the Texas coast and the vast swathe of the Southwest dependent on the parched Colorado river.
This is not, and should not be allowed to feel, normal. It also gives us three thoughts;
We have long believed that the future of the electric grid is modular, distributed, and renewable. The same appears to be true for food and water. If you’re an entrepreneur and building home to town scale desalination, atmospheric water capture, or kitchen-garden-in-a-box solutions, call us. Yes, there are existing products for the first two categories, which are both bad and expensive. We can do better. For the kitchen gardens, we don’t mean the sleek little boxes that grow herbs or a few tomatoes. We mean something that can genuinely feed a family, and is likely based around legumes.
Extractive industries should be legally mandated to replace those resources they use. If this means the 6 refineries in Corpus Christi splitting the bill for a city-owned desalination plant, and trucking water into town in the meantime, so be it.
This situation has been 20 or so years in the making. Who is doing the best research or extrapolations on which cities are likely to be next?
Quick Hits
Company we’re intrigued by; Energea, which invests in the buildout of overseas renewable energy assets, then bundles the revenue and sells them as dividend-yielding securities to retail investors. This isn’t precisely a new business model, since similar things have been done in commercial real estate for many years, but incredibly smart and innovative in the application to a new industry, project size, and development regions. Related to the discussion above of what we see as the distributed future for food and water supply chains, we’re curious if similar things could be done in those industries as well. Freehold farming or water purification sites, perhaps? We’d love to meet entrepreneurs looking at these areas. This is something where the rise of mobile technologies to solve downstream problems in, for example, agricultural process controls, point of sale, banking, communications, and data might be close to making the unit economics make sense.
Transat, a Canadian budget airline, just announced large cuts to their flight schedules, in response to Donald Trump’s impossibly stupid war in Iran continuing to spike oil and aviation fuel prices. This comes shortly after Spirit Airlines, their American peer, went to see the big spirit in the sky for the same reason. There are a number of keystone industries, chief among them agriculture, trucking, construction, mining, and shipping, which are currently being saved from similar decisions and destruction by slightly higher margins, and the historic willingness of national governments to provide large bailouts. This will not last.
Can someone please raise a few billion dollars to scale up a fleet of modern, sail-driven, shipping catamarans? We can’t help with this in the slightest, but someone needs to do it and soon.
We need to produce raw materials closer to where they’re used across the board. Many startups are going to win big on enabling this change.
Nscale, a UK based AI hyperscaler, and Ayar Labs, a maker of optical connectivity solutions for AI GPUs (basically, it allows chips to talk to each other much more efficiently than copper wiring), raised $2bn and $500m, respectively, to do much more of that. We have no expertise and no particular opinion on the technology of either company, other than thinking that Ayar’s looks particularly neat. But, we continue to worry that all these megarounds are based on the belief that AI demand will grow on a steep curve for at least the next five years (building data centers takes a while, so a fundraise today won’t turn into revenue for at least 2-3 years), when there’s already material evidence of a slowdown forming. This ends in pain and a lot of lost money that could have been spent better elsewhere.
We find it fascinating to contract Energea’s model with the AI infra mega raises. The former is raising modest amounts of capital from retail investors (minimum investment is only $100), to build immediately cash flowing assets with excellent return profiles. The latter is raising ungodly amounts of money to build data centres with uncertain demand, which might as well be the burning cash pile from The Dark Knight if not fully utilized once built. One of these is a good investment, the other gets all the headlines. We need to do a better and louder job of communications here, both in celebrating the good stuff, and calling out irresponsible capital deployment as such.
Speaking of; Valar Atomics, yet another nuclear startup, just raised $450m at a $2bn valuation, all based on promising tests of their proposed reactor core, and from a portfolio of techno-oligarchs including Peter Thiel, the founder of Anduril, and multiple Palantir executives. We’ll simply note here that part of the reason Valar seems to now have the inside track to a number of large DOE grants is that they, um, sued the nuclear regulatory body to be more friendly to networked microreactor configurations much like the one that Valar Atomics is threatening to make. Look, we’re not nuclear physicists and maybe this is all groovy. Then again, neither is Valar’s 27 year old founder, who also seems remarkably chill on the safety concerns raised by actual nuclear experts about his company’s pathway. Maybe, just stay with us here, new fission paradigms being the most regulated activity on the planet is a good thing?
Also, can we please just stop funding this bullshit and build some solar farms?
Company that’s so close to getting it; Panthalassa, which just raised $140m in a round led by Peter Thiel (ew), in order to prototype the combination of wave power and (deep sigh) AI compute. Basically, floating data centers that draw power from the kinetic energy of the ocean. We hate this. Not because of the wave power angle, which is real and promising technology. We used to write enthusiastically about competitor EcoWave Power every few months until they, too, decided to forgo actual fiscal responsibility. No, we hate this because we see promising founders chasing the easy dollars of an investment wave (pun absolutely intended), that’s going to dry up before they reach commercial viability. It will cost a ton more than $140m to build a revenue-generating data center at sea. How much better to find a real, stable business model in real, stable industries, do it the hard way, and shoot for a generational company. This smells like another spac-and-dump in the making.
Finally, a question for our readers. Where do you go and what do you do for in-person climate-centric community and learning these days? Write back and let us know!
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