One Fish, Two Fish, Red Fish, CO2 Fish
One Fish, Two Fish, Red Fish, CO2 Fish
Remora promises to pull carbon away from semi-truck tailpipes. Can they go the distance?
The Problem
The global freight shipping sector represents 8% of greenhouse gas emissions, per MIT Climate Portal. The majority of this, almost 65%, comes from road vehicles, primarily semi trucks and smaller panel vans. While we’ll save the full discussion of emission differences between various freight-transport methods for another post, it is worth noting that ships and trains are much more efficient on an emissions-per-pound-mile basis than cars and trucks. The rise of e-commerce, last-mile delivery, and urban / suburban sprawl also make road transport an egregious emission source long-term.
What about electric trucks, we hear you ask? Our more detailed views on this are coming shortly, but for today let’s just say that Coral is bearish on the prospect for the next couple of decades. Trucking is a low-margin business, batteries are heavy and need to be swapped out or charged every few hundred miles, and there simply isn’t a viable path to make the unit economics work in the next few generations of these technologies. Electric trucks will come, but the future is more distant than the advertising for Nikola (remember them?) would have us believe.
Effectively decarbonizing any industry requires decarbonizing shipping, and this needs to work with the existing stock and infrastructure of trucks and logistics operations, at least in the short- to medium-term. So…
Products and Strategy
Remora, like the suckerfish for which it’s named, is designed to ride along with existing infrastructures. The company offers a multi-part device, which is attached to its’ end-customer truck fleets; a carbon-capture unit fitted over and in the truck’s exhaust pipe, tanks to hold the carbon which are mounted between the truck’s cabin and bed, and the associated piping to carry CO2 from one to the other. They claim that their device can filter out up to 80% of the carbon dioxide and other pollutants, such as nitrogen oxide and carbon monoxide, from the exhaust. This means that for every 100 tons of carbon dioxide that a truck would normally emit, Remora’s device can prevent up to 80 tons from entering the atmosphere.
Remora sells two products:
CO2 Capture Device: According to an interview by their CEO, Remora’s device sells for around $15k. However, the device can pay for itself in a few years from Remora’s revenue sharing from selling the captured carbon dioxide. More on this later.
Captured CO2: Remora sells the captured carbon dioxide to various end users including greenhouses that use the carbon dioxide to enhance plant growth and concrete producers that use the carbon dioxide to make stronger, greener concrete.
Secret Sauce
The company’s secret sauce is in the carbon-capture device itself. Their device uses a molecular sieve filter, which has tiny pores that selectively capture carbon dioxide and other pollutants. When the filter is heated using the heat byproduct from the exhaust, it causes these tiny pores to expand which releases the captured carbon dioxide into the storage tank. The device is switched between carbon capturing and filter regeneration modes and, unlike other direct capture systems, doesn’t need additional energy besides the exhaust heat to regenerate.
Challenges Ahead
Remora has a great solution for point of source emissions capture but hasn’t figured out what to do with the captured stuff.
Lack of CO2 Dumping Locations: The driver needs to dump the carbon dioxide periodically at an offload tank. Remora states that their device can hold carbon dioxide emissions for up to 600 miles of driving; this requires drivers to empty the tank every 1.5 days on average for long haul routes. While there is a bypass system that will allow the truck to keep running if the tank fills up, the availability of offload locations reduces the performance of the overall solution.
Trade-offs between Capture Device and Truck Performance: The capturing device and storage tank add weight (up to 6200lbs for the current model), which reduces fuel efficiency and performance as well as overall load capacity. They need to balance how long the truck can go before offloading the captured emissions and the effect of the additional weight on fuel efficiency, cargo capacity, and general vehicle wear and tear.
Limited Number of CO2 Buyers: One stream of Remora’s revenue depends on their ability to sell to and the demand of end-users who can use the carbon dioxide. The market for selling carbon dioxide is growing faster than end-user demand, which will drive revenue down for this segment.
What We’d Do
The device cost is set too low. It is standard practice for shipping companies to amortize fixed truck expenses over their useful life, which is usually at least five years. Due to revenue sharing with the truck, Remora has stated that each truck will generate around $7k of revenue from the device each year, suggesting a two year payback period. We suggest raising the upfront cost to $35k, thus allowing breakeven over the typical amortization span. Also, Remora needs to update their revenue sharing model for the captured carbon dioxide. It’s likely that this is the primary profit driver of the business on a go-forward basis, as the amount of steel and equipment in their on-truck devices suggests that hardware is a loss-leader to secure contracts.
The largest current weakness of Remora’s business model is the lack of clarity around who does what with the tanked carbon, post capture. While we recommend that Remora scales this function via partnerships and doesn’t take on the work themselves, the possible avenue to maintain control would be as part of a recurring service fee to replace and refresh the carbon capture device. By following the Gillette razor model for their devices (good enough performance, replaced more often than strictly necessary), Remora can create enough margin to stand up a self-sustaining business.
This business will require significant capital to scale. Remora should partner with one of the big box retailers, such as Walmart or Costco. They will be able to help Remora scale their CO2 dumping locations across their distribution centers, own a lot of trucks themselves, and can use their purchasing power to help Remora secure contracts with other large shipping and freight forwarding providers. While this will require a real investment in enterprise sales and partnerships expertise, we see both the company and the fish better served by borrowing energy from elsewhere in their respective ecosystems.
Lastly, Remora hasn’t answered how to make the lifecycle of their solution carbon neutral (let alone negative). Their website references biofuels as a long-term solution, which reminds us of Uber’s early bets on self-driving cars as a way out of considering drivers to be employees. While development of biofuels is a worthy and necessary long term goal, Remora has all the ingredients to become a scalable enterprise on its own, primarily through charging in a way that befits the immense value they provide.
If you enjoy this, check out our piece on Macro Oceans.
Do you ever reach out to founders when writing these? It would be interesting to hear what they have to say regarding your list of challeneges, suggestions.