Redwood Materials, Oklo, and Other Unicorns of Clean Energy

Because the transition represents a stark change with plenty of unproven technologies, these companies all come with high risks—but also potentially high returns. It isn’t often that investors can place bets on a sea change in the gargantuan world of energy. There are dozens of promising clean-energy companies, but only a handful with the necessary size for public markets.

“Just because your technology works, it’s meaningless in the energy industry,” says Gene Berdichevsky, CEO of Sila Nanotechnologies, an electric-vehicle battery company. “It’s amazing the scale that it takes just to get in the game.”

With that in mind, it’s worth considering the small group of companies—Sila among them—that have broken out of the pack and could go public in the next couple of years, most with valuations of more than $1 billion. Most were born from lab work and garage-tinkering. Now they’re the new energy unicorns.

Redwood Materials

New battery manufacturing plants are popping up all over the U.S., helped by the Inflation Reduction Act. But the materials that go into batteries are in short supply domestically, and recycling scrapped products will be a key way to replenish those materials.

Redwood Materials, based in Carson City, Nev., is a significant player in the battery-recycling industry. Redwood was founded by JB Straubel, the former chief technology officer and co-founder of
Tesla.
It has already inked deals with
Toyota Motor,

Volkswagen,
and
Panasonic
to recycle battery materials. It even recycles some lithium-powered
Amazon.com
products. By 2025, the company aims to produce enough anode and cathode material to power one million electric vehicles. By 2030, its goal is to make five times that much. 

Redwood is a leader in the nascent industry, because it has a factory already up and running, notes TD Cowen analyst Jeffrey Osborne. That facility recycles material from the Panasonic gigafactory, which builds batteries for Tesla, and other partners. The company got a loan from the Department of Energy to expand its Nevada operations and is building a new factory in South Carolina.

Redwood plans to build “circular” factories that take used material from electric-vehicle makers and process it into parts that can be used in new cars. Toyota announced a deal in November where it will pay Redwood to take material from old electric and hybrid vehicles like the Prius and turn them into cathodes and other items for Toyota’s new EV factories. Cathodes are the most valuable part of the battery, making up about half its value. Right now, there’s almost no cathode manufacturing in the U.S., so auto makers are scrambling to secure as much domestic content as possible. Localizing the supply chain is “central to our mission,” says Jason Thompson, Redwood’s CFO.

Redwood’s business plan isn’t without risk. Competitor
Li-Cycle Holdings
halted work on a factory in upstate New York in October, and its stock has tumbled 85% this year. Redwood faced some supply disruptions during Covid, but otherwise its capital plan is moving forward on schedule, Thompson says. It helps that top executives worked at Tesla, and are no strangers to obstacles: “We’re fortunate to have that kind of capability on our team.”

Climeworks

Replacing fossil-fuel energy with cleaner alternatives will reduce carbon dioxide emissions. But even a world where every car is an electric vehicle won’t be carbon-free. To reach climate goals, it will be necessary to remove existing carbon from the air. Climeworks is focusing on that goal. “You can think of us as sort of a last-mile provider to net zero,” Climeworks CFO Andreas Aepli tells Barron’s.

Climeworks removes carbon dioxide from the air using a machine that resembles a supersize home air purifier. Fans push air through filters that capture the CO₂, after which it gets turned into liquid and pumped underground. Within two years, the liquid carbon solidifies into mineral form and is expected to stay there indefinitely, Aepli says. The company has a facility in Iceland, which removes 4,000 tons of carbon a year. 

Climeworks isn’t the only company trying to capture carbon directly from the air. Plans have been announced for 130 plants around the world, and
Occidental Petroleum
agreed in August to buy Climeworks competitor Carbon Engineering for $1.1 billion. But Occidental’s plants will pump much of the carbon it captures back into oil wells to force more oil out.

Climeworks’ business model is different. It commits to storing the carbon indefinitely and sells those commitments to corporations, which are willing to pay up for verifiable carbon offsets.
JPMorgan Chase,
for instance, is paying Climeworks more than $20 million to remove carbon from the air as part of its plan to offset all of its operational carbon emissions by 2030.
UBS,

Shopify,
and
Microsoft
are clients, too. Climeworks has presold over $100 million worth of revenue, Aepli says. 

David Heikkinen, a longtime energy investor who now works at carbon-capture company Carbonvert, has evaluated Climeworks and thinks it’s a “great idea” that still might be “overhyped” given how much energy it takes to remove a single ton of carbon. Aepli acknowledges that inefficiency—he says it would take 1,200 miles of air to be pulled through a filter inlet that’s 10 feet wide to capture one ton of carbon. But there aren’t other readily available ways to reduce the world’s existing carbon emissions.

And the company is scaling up. Climeworks is expecting to add another 36,000 tons of capacity in Iceland next year. It’s also planning a facility in Louisiana that can remove one million tons of carbon—one of three “megaton” facilities it hopes to be operating by 2030. By 2050, Aepli thinks the world will need thousands of carbon-suckers of that size. 

Solugen

Oil is starting to go out of style, at least when it comes to transportation. But it’s much harder to replace petroleum in other areas, such as chemicals. Chemical production contributes 5% to 6% of greenhouse gas emissions, and those emissions are particularly hard to abate.

Solugen is one of the up-and-coming companies looking to solve that problem. The company’s first breakthrough came when the founders discovered an enzyme that could transform sugar into other chemicals, such as hydrogen peroxide. They built their first reactor with PVC pipes and other materials they picked up at
Home Depot.
Since then, they have vastly expanded the capabilities of their technique, using artificial intelligence to engineer enzymes that can make a wider array of products. The company now creates products for several industries, including household goods like detergents and cleaners. In October, Solugen announced a partnership with South African chemicals company
Sasol
to test Solugen’s chemicals in its consumer products.

But co-founder and CEO Gaurab Chakrabarti’s ambitions go much further. He believes that to make a significant dent in emissions, companies will need to replace fossil-fuel chemicals used in industrial applications like water treatment and construction. Solugen says it can replicate a majority of the world’s chemicals using its process. The company even sells materials to fossil fuel producers themselves—a striking role for a company looking to wean the world off its oil dependence.

“We have to live in the middle right now,” Chakrabarti said in a recent interview at Solugen’s Houston headquarters. He doubts fossil fuels are going away soon.

The company’s “bioforge” where it makes chemicals is located on the site of a former wax distillery that exploded in 2004, damaging nearby buildings. Solugen’s reactions happen at much lower temperatures than at traditional chemical plants, meaning it doesn’t rely on volatile heat sources. Outside the Houston plant, tanks of corn sugar sit near the company’s enzyme reactor, a tall metal cylinder where much of the magic happens, before the chemicals are sent to processing tanks and then into storage. Inside the plant, workers tinker with new products, monitoring Solugen’s chemicals as they slosh around in appliances like dishwashers. 

To make a real dent in the pollution caused by the chemicals industry, Solugen will have to scale up quickly. The U.S. chemicals industry is a $600 billion behemoth that touches every corner of the economy, and it has proven particularly difficult to disrupt. Energy giants such as
Exxon Mobil
are putting more focus on chemicals and plastics as electric vehicles eat into fuel demand. Solugen’s annual revenue is nearing $100 million a year, and it is now working to scale up. The company is building a 500,000-square-foot factory in Minnesota, next to a corn complex owned by ag giant
ADM,
which will supply Solugen with feedstock. The success of that factory, set to open in 2025, will determine whether Solugen can clean up one of the world’s most carbon-intensive industries.

Sila Nanotechnologies

Driving-range anxiety is one of the biggest problems holding back electric-vehicle adoption. Sila Nanotechnologies says it has developed a technology that can solve it. Sila develops batteries using silicon instead of graphite in the anode, which the company says allows the battery to hold at least 20% more energy than even the best batteries in use today. That should give drivers more range and “make it much more appealing to consumers,” says Sila CEO Berdichevsky. Mercedes-Benz seems to agree. The auto maker invested in Sila in 2019, and announced a supply deal last year that’s expected to launch in the middle of the decade. 

Berdichevsky is an engineer who was Tesla’s seventh employee, working on the battery for the original Roadster. He and two co-founders launched Sila in 2011 out of Georgia Tech University. EV makers have been trying to figure out how to make durable silicon batteries for years, because silicon is one of the most abundant elements on earth and is much more efficient than graphite. But it is known for expanding dramatically when it is fully charged, causing it to wear down over time. “Basically, with silicon, the cookie crumbles and gets gooey,” Tesla CEO Elon Musk once said. So Sila’s founders spent years re-engineering the material, going through 70,000 iterations to find the right material for the battery, Berdichevsky says. For the past five years, the company has been scaling that technology up.

Silicon’s unique chemical characteristics should allow auto makers to make batteries smaller without sacrificing range, Berdichevsky says. It’s also easier to obtain than graphite, which is made almost entirely in China today.

Unlike many electric-vehicle start-ups, Sila is already producing revenue, though it doesn’t disclose how much. It makes batteries for consumer electronics, including fitness trackers. But EVs are a much bigger opportunity, and Sila’s technology could be powering a line of Mercedes vehicles in two to three years. The company is now building a factory in Washington state with the help of a $100 million grant from the Department of Energy. By around 2028, Berdichevsky says it will make enough batteries to supply several million vehicles.

Oklo

Nuclear energy has been gradually declining as a share of U.S. power production, to about 18% today. But a group of entrepreneurs is working to reignite the industry, which could take on a bigger role at a time when countries need more carbon-free power. Today, most American nuclear plants are behemoths built to generate hundreds of megawatts worth of power. Building new plants can take decades, and they often run over budget. But the new wave of nuclear start-ups aims to change the timeline and the price tag. 

Sunnyvale, Calif.–based Oklo is one of them. It also happens to have one of the most famous founders in Silicon Valley on its side—Sam Altman. The OpenAI CEO has been Oklo’s chairman since 2015, after founder Jake Dewitte went through the start-up accelerator YCombinator while Altman was running it. Oklo’s technology is “one of our best shots to get out of the energy crisis and get into this world of energy abundance,” Altman said in a video promoting the company.

The Nuclear Regulatory Commission rejected Oklo’s first application for a nuclear reactor last year because it hadn’t submitted enough information. But the company is working on reapplying and has made deals with other branches of the government. The Defense Department issued a notice of intent to award a contract to Oklo for power and heat at an Alaska Air Force base as part of a pilot program, and the Department of Energy gave the company a site use permit in Idaho for its first plant. 

Oklo’s reactors are different from most nuclear reactors in operation today. Existing U.S. reactors use technology that slows down neutrons and cools reactors with pressurized water. Oklo’s reactors will allow for faster reactions and be cooled with liquid sodium, a process that allows the facilities to use recycled nuclear material and produce less waste. Sodium coolants have been used successfully before, but designs that used water eventually became the standard due to nuclear-physics and commercial reasons that made sense when nuclear plants were expected to provide enough power for hundreds of thousands of homes. Oklo’s commercial ambitions are different, though. It plans to sell smaller amounts of power to facilities like data centers and factories. And because its plants are much smaller—around 15 megawatts versus the 500-megawatt plants that operate today—it can build them more efficiently.

Next year, Oklo plans to go public via a special purpose acquisition company, or SPAC, by merging with a company called AltC that was co-founded and is run by Altman. Nuclear-energy experts are watching closely. Rodney Rebello, an analyst focusing on nuclear at Reaves Asset Management, said in an interview that Oklo “could be a really disruptive company. There’s a large market to capture.” But he wouldn’t invest in the company on day one, given its current lack of permits.

“There are no red flags,” he says. “But at the same time, you are years away from producing revenue.”

Write to Avi Salzman at [email protected]