Turning Sunlight Into Natural Gas with Terraform Industries’ Casey Handmer

What problem does the Terraformer solve?

One way to think about what we’re doing is the Terraformer gives us the opportunity to turn any patch of open land into an oil well. Ordinarily, if you want to drill for oil you have to win the geographic lottery, which isn’t great if you happen to be a country without oil or lack the technology to do the drilling yourself. But virtually every location that people live has enough sunlight to produce natural gas (and soon, liquid fuels!) with the Terraformer. It is hard to overstate the implications of localizing any nation’s supply of critical energy products.

It’s a really transformational paradigm because currently humanity’s energy consumption and economic growth is bound by how much oil we can extract from the ground, which is also causing long-term environmental and climate problems. With the Terraformer, we’re really only limited by how much sun falls on the Earth, which is a staggeringly enormous quantity of energy. It’s not infinite, but it’s effectively unlimited compared to any other form of energy we have. In the longer term, in fact, I think we will be able to significantly undercut the cost of conventional fossil oil and gas production anywhere on Earth. 

What was the origin of Terraform Industries?

I’m a technical guy who is deeply interested in math and science of all kinds, which led me to get a PhD in physics at Caltech. After that I went to work at a startup called Hyperloop One doing magnetic systems design. Once I got my green card I went to NASA’s Jet Propulsion Laboratory (JPL) and worked on various projects there for about four years. During that time, I realized that a lot of the work that I’d done in my own time on understanding supply chains—particularly synthetic hydrocarbon supply chains for cities in space—would also work on Earth. 

I started thinking about problems related to climate change, energy, and economic growth about 15 years ago, and it was fairly clear to me that the solution lay somewhere on the supply side of energy. I just didn’t know how to put everything together. When the COVID pandemic hit, I was working at home with my wife and first child, and that’s when I started to think about the problem in a more formal way. I looked at how solar had become cheaper far faster than anyone anticipated and started thinking about the implications of this trend on synthetic fuels. I realized that it could probably hit cost parity with drilling for fuels faster than anyone thought and I should probably do something about it. 

It took me about a year after this realization to get my head around what the real challenge was and how I might solve it. By the end of 2021 I knew that this was something definitely worth doing and some successful entrepreneurs I knew offered to make a seed investment. So I resigned from my dream job at JPL and embarked on this crazy journey. Within about four months of founding Terraform we had hired six people and started to build real hardware. Since then we’ve proven that what we are doing is technically possible earlier this year, with our comprehensive end-to-end demonstration. In a technical tour de force, we produced the world’s cheapest DAC CO2, the world’s cheapest green hydrogen, and the cheapest pipeline-grade synthetic methane, of which we sold samples to multiple gas utilities. 

The next step is to prove commercial viability at scale by deploying our first of a kind projects in the field. This is the critical step for any new technology, since unless we’re able to generate a lot more value than we consume, we will not be able to scale!

A lot of the technologies in the Terraformer have been around for a long time. What are you doing differently?

The underlying technologies behind the Terraformer have been around for centuries to millennia. In principle, the ancient Romans could have made synthetic oil and gas if they really wanted to, but it would have been extremely expensive for them to do that. The key unlock for us is cheap solar. 

Once electricity from solar PV drops below about $45/MWh, it unlocks this vast new world of applications for cheap energy. We can do almost everything in our industrial stack that is energy intensive in a new, cheaper, environmentally friendly, and geographically localized way. Synthetic fuels are just one of maybe a dozen or so industrial processes that can be disrupted by cheap solar, but in order to make them work you have to make a few changes. 

For example, your process needs to handle intermittency. You have to be able to turn it off when the sun isn’t shining, which is nontrivial for a lot of chemical processes. That means it also has to be commercially viable despite lower utilization because every day the sun goes down and the machine turns off. Of course, there are plenty of systems that are naturally valuable enough that we tolerate low utilization. A great example is your car, which you probably only use about 2 or 3% of the time and the rest of the time it sits in your driveway, consuming space and depreciating in value. And that’s still considered a worthwhile trade even though cars are very expensive. 

Fortunately, the economics of cheap solar tolerates lower electrical efficiency in exchange for radically lower complexity and capex, resulting in an end product that is overall better, cheaper, and has a higher return on investment.

Does the Terraformer need to be sited next to a massive solar farm or is this something that you could conceivably install in a neighborhood for local fuel production with a few solar panels?

At 1 MW, we’ve already scaled it down a lot and we could, in principle, scale it down a bit more so that it could be put on a rooftop. But that’s not necessarily a great idea. One reason is that you need the cheapest power you can possibly get and that’s always going to be utility scale, megawatt solar arrays in the middle of nowhere. 

Hitting cost parity with drilling means an uncompromising attack on parasitic costs. Transporting energy in the form of electricity is extremely expensive, so we need to convert that energy into natural gas at the source. This means we put the Terraformer right next to the solar array so our electricity transport cost is effectively zero. 

If you’re doing rooftop solar, there are places where the houses are big enough and the sun is bright enough that you could produce all the fuel that you need within your own half-acre plot, but this isn’t useful for most of the world’s population. Cities are dense and most consumers are already linked into an incredibly effective distribution system that allows them to get gas out of a utility pipe that’s already installed in the ground. 

By focusing on upstream substitution of gas supply, there’s no need to do the far more expensive retrofit of midstream and downstream infrastructure!

What’s your perspective on the idea that we should electrify everything and move off of hydrocarbon energy entirely?

Let’s be clear: hydrocarbons aren’t great for the planet and the longer chain hydrocarbons can be quite toxic, as well. There are certainly hydrocarbon applications where electrification is an extremely compelling alternative such as for cars, trucks, trains, and other forms of ground transportation. But for aircraft and long-distance shipping, as well as industrial heat, electrification is less compelling. 

I really hope that the number of people on the planet who can routinely fly in an aircraft grows by a lot, because flying is amazing. Right now though, only about 50% of Earth’s population has ever flown on a plane and less than 1% of the population flies routinely.  I think that’s in many ways a moral abomination. But if you extrapolate current oil production to levels that you could achieve with Terraformers, and make fairly modest cost improvements over the next 20 years, you get to the point where not only can people afford to fly more, they can afford to fly supersonically, which consumes about 6 times as much fuel. 

Bigger picture, one of the really exciting things about oil is that it’s the antidote to poverty. When our grandparents were young about 95% of the world was living in poverty or extreme poverty, especially benchmarked against today’s standards. The vast majority of the world’s people lived as subsistence farmers, they were dirt poor, and if they lived long enough they’d likely experience starvation at some point. And within just three generations, we’ve gotten to the point where the number of people in extreme poverty is less than a billion and falling rapidly! That’s a really encouraging statistic, so how’d we do it?

The first order way to solve poverty is to increase energy supply in whatever form people need. Around 15% of our oil production goes to making plastic and producing steel, metals, and concrete also requires a lot of fuel. Plastic is environmentally harmful and also potentially harmful to human health, but there’s a good reason we use it. It’s a miraculous material and the need for it will not go away; if anything, I predict we will expand how we use it. Today, global hydrocarbon consumption sits around $6.8 trillion per year, which is on the order of 100 million barrels of oil per day. This isn’t evenly distributed of course. The per capita oil consumption in Texas, for example, is about ten times higher than average oil consumption globally. So although a lot of the world is no longer experiencing abject poverty, they’re still nowhere near as wealthy as people in the developed world. Their consumption of hydrocarbon products is not limited by fear of their environmental consequences, it’s limited by logistics and supply. They would consume more hydrocarbons if they could. The question is how can they get them and that’s the problem we’re solving with the Terraformer. 

If Terraform is successful, how does the world look different?

For the average consumer the world does not actually look that different. You go to the pump, you fill up your car, you turn on your gas stove, you use gas heating, and you fly in a plane just like you did before. The difference is the price of using that gas is stable and gradually declines relative to other things you routinely spend your money on. I think it’s wildly underestimated just how critical a stable and predictable future energy price is for making really big, long-term investments in physical infrastructure. We’re mostly talking about cheaper energy and more of it. For you and I in the United States, our energy supply is fundamentally secure. But for the other 7 billion people on the planet who aren’t in that position, I want them to be able to experience a lifestyle like ours sooner rather than later.  Why should they wait for their grandchildren to get that? I think that accelerating solar deployment will get us there within their lifetime.