Bill Gates has gathered more than $1 billion in corporate investment for Breakthrough Energy Catalyst, with the help of Larry Fink of BlackRock Inc. and Satya Nadella of Microsoft Corp. to support some of the world’s most difficult clean-energy projects.
BlackRock’s charity foundation will contribute $100 million in the next five years. In addition, Microsoft is providing $100 million. General Motors Co., Bank of America Corp., American Airlines Group Inc., Boston Consulting Group, and ArcelorMittal SA are the other investors, offering a mix of stock funding and so-called offtakes, or project purchase agreements.
Mr. Fink, the chief executive officer of BlackRock, said in an interview with Bill Gates on Bloomberg Television, “We’re not doing this to make money, We’re doing this to seed these ideas, to rapidly accelerate ideas.”
Breakthrough Energy Catalyst was founded by Bill Gates to promote the commercial viability of four important climate solutions: green hydrogen, sustainable aviation fuel, long-term battery storage, and carbon capture from the atmosphere. Catalyst will provide the cash needed to get capital-intensive projects up and running before debt finance and government money can be raised to cover the remaining 90% of the cost.
None of the four alternatives are now affordable enough to encourage widespread use. For example, jet fuel derived from more sustainable sources such as industrial waste or alcohol is about five times as expensive as kerosene.
By proving that the underlying technology can be cost-competitive and eliminating the “green premium” over conventional standards, the Catalyst initiatives will demonstrate that the underlying technology can be cost-competitive.
“The model here is what happened with wind and solar and lithium-ion. Those products had very high prices compared to conventional techniques, and fortunately, Germany & Japan and other buyers funded the scale-up, and now those products fit the normal sort of client-investing metrics,” Bill Gates said.
The only difference now is in the speed. Governments that signed the Paris Climate Agreement in 2015 are rushing to attain a mid-century goal of net-zero emissions. This goal necessitates not only emissions reductions but also the removal of carbon dioxide from the atmosphere.
Nine of the world’s top economies, as well as a number of businesses, including BlackRock, have committed to meeting that goal.
Further, Mr. Fink stated, “The pathway for solar and wind, that was a 30-year pathway to make it competitive with hydrocarbons. We don’t have 30 years. We don’t have 10 years.”
Bill Gates hopes that his proposal, which he estimates will cost $50 trillion to achieve net-zero emissions, will serve as a model for public-private cooperation to address the problem of climate change.
In August, Catalyst agreed to raise $1.5 billion in exchange for billions more in support from the US Department of Energy, some of it conditional on legislation. In June, Catalyst made a $500 million commitment in exchange for matching money from the European Commission and the European Investment Bank for a comparable endeavor on the other side of the Atlantic.
Gates pitched Nadella first, then Fink, who said he had some “very serious conversations” with other CEOs to persuade them to back Catalyst. ArcelorMittal will spend $100 million in the company over the next five years, and American Airlines will also contribute $100 million. GM, Bank of America, and BCG did not provide any information on their role.
Most tech goods and clean-energy solutions differ significantly in terms of upfront cost and scalability. While developing a smartphone app may require little to no money, even a pilot project in carbon capture might cost tens of millions of dollars.
Furthermore, large investors have often avoided risky green ventures due to unclear returns. Gates has stated publicly that he “lost a lot of money” on the development of batteries.
Fink, who controls almost $10 trillion in assets at BlackRock, claims that there is an “enormous” amount of money waiting to be invested in green technologies that reduce the green premium.
“I’m not frightened about where the money’s coming from,” he said. “I just want to make sure that we have the science and technology and the viability. Once we know that, the capital will be there.”
Catalyst is asking potential projects to fill out a request for information in conjunction with the infusion of new funding and pledges. Then, possibly by the end of the year, a more specific and technical request for proposal, or RFP, will be issued.
In the interview, Gates outlined a timeline and certain guidelines:
• Catalyst will start funding projects in 2022, probably several in each area.
• Funding will cover early-stage costs such as design and add up to “maybe 10%” of the total cost.
• The plan is to recruit a total of about 20 companies as anchor partners and increase the pool of private capital to $3 billion.
• Green hydrogen and sustainable jet fuel are advanced enough that they could “get to a low price” in three to four years.
Further, Mr. Gates added, “I’d be very disappointed if we don’t see a dramatic reduction in the green premium, even in less than five years. Because that should let us do two rounds of projects, the first projects, and then take the learning from those first two and a half years and do a second round that will bring the costs down even further.”
Catalyst is the most recent of Gates’ Breakthrough Energy-related programs. Breakthrough Energy Ventures, the company’s venture capital arm, received funding from billionaires Jeff Bezos and Michael Bloomberg, the founder of Bloomberg LP, which owns Bloomberg News. Catalyst is a stand-alone organization that is self-funded.
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