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Options trading Meet the Bill Gates-backed startup that pulled in $33 million in fundraising to help turn your trash into fuel


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Options trading Meet the Bill Gates-backed startup that pulled in $33 million in fundraising to help turn your trash into fuel

This story requires our BI Prime membership. To read the full article, simply click here to claim your deal and get access to all exclusive Business Insider PRIME content. The world has a titanic trash problem. On average, each person on Earth produces about 1.5 pounds of waste every day, which generates potent greenhouse-gas emissions…

Options trading Meet the Bill Gates-backed startup that pulled in $33 million in fundraising to help turn your trash into fuel

Options trading

This story requires our BI Prime membership. To read the full article,

simply click here to claim your deal and get access to all exclusive Business Insider PRIME content.

  • The world has a titanic trash problem. On average, each person on Earth produces about 1.5 pounds of waste every day, which generates potent greenhouse-gas emissions when it decays in a landfill. 
  • One startup sees opportunity in our garbage. Sierra Energy is commercializing a gasification technology that can turn municipal waste into valuable products like diesel and hydrogen gas. Recently, a coalition of investors led by Bill Gates has latched on. 
  • Bringing this technology to market faces steep barriers. There are “hundreds of single points of failure” along the way, which increase the costs, Mike Hart, the founder and CEO of Sierra Energy, said. 
  • Experts say the science of gasification is sound, but they question the economics of commercial gasification plants. According to them, these facilities are more effective when the stream of trash is homogeneous, but sorting trash makes “the economics fall down.”
  • This story is part of Business Insider’s reporting on the clean-energy industry. Please share any feedback and tips with us at bjones@businessinsider.com.
  • Click here for more BI Prime articles.

Carving through California’s Noyo River Canyon under the canopy of ancient redwood forests is a heritage railway that looks like it was plucked out of the 1800s. It’s one of the many trains owned by Mike Hart, who might be the only man on Earth who owns both a railroad and a startup company. 

In fact, the railroad is exactly what led Hart to his new venture: turning trash into fuel.

options trading Skunk Train

The Skunk Train is one of the many railways owned by Hart.

Lacy Atkins/AP


Options trading From trains to trash

In the early 2000s, Hart, an ardent environmentalist, was in search of cleaner fuel for his locomotives. So he opted for biodiesel, a type of fuel made by refining vegetable oil. His railroad became the first in the world to run on 100% biodiesel, and for that, Hart was awarded the title of “Environmental Hero” by the Environmental Protection Agency. 

But not everyone was happy with biodiesel, Hart said in an interview with Business Insider.

“The problem was that it was coming from food crops,” he said.

Biofuels derived from corn and soybean require inputs like fertilizer and land. And around that time, food riots ignited because of the rising costs of corn and other staples spread across Mexico, Hart said. 

“A lot of people were tying the two together and saying that biofuels like ethanol and biodiesel weren’t sustainable because you’re taking away food,” he said. 

That’s why when Hart came across a technology at the University of California, Davis, in 2002, it caught his attention. The technology, known as gasification, was essentially a converted blast furnace that could turn garbage into carbon monoxide and hydrogen gas — which, in turn, could be converted into low-emissions diesel.

Hart saw an opportunity for his trains, so he acquired the technology. 

But instead of using it to make fuel for his trains, Hart used it as the bedrock for a new company: Sierra Energy. Now, a decade and a half later, Hart is working to bring his gasification technology, FastOx, to market. And investors are latching on, excited by the prospect of a double-punch technology that could reduce both garbage and potent greenhouse gases. 

options trading landfill garbage

The world produces more than 4.4 trillion pounds of methane-emitting trash each year. Only a fraction of that gets recycled.

AP/Nick Ut


Options trading The world is drowning in methane-emitting garbage

The world is facing a titanic trash problem. We produce a lot of it — more than 4.4 trillion pounds a year — and we’re not very good at getting rid of it. In 2017, only about one-third of municipal waste was recycled or composted in the US, according to the EPA, while more than half of it ended up in a landfill. 

There are a couple of drawbacks to dumping trash in a pit. For one, it releases a hefty amount of the greenhouse gas methane, which is about 34 times more potent than carbon dioxide over a 100-year period, according to the United Nations. Burying municipal waste also costs money — an average of about $55 per ton in 2019 — and costs have been rising.

So why not just burn it?

Well, we do; nearly 13% of what we trashed in 2017 was combusted. But this process also comes with drawbacks: Burning trash produces carbon dioxide and other harmful pollutants, such as nitrogen oxides. 

That leaves a few other options, including gasification — the very technology that Sierra Energy is hoping to deploy.

options trading Coal gasification plant North Dakota

A coal-gasification plant in Beulah, North Dakota, that produces natural gas.

Kevin Cederstrom/AP


Options trading How do you turn trash into fuel? 

Have you ever seen a burning pile of trash? That’s combustion. Once you have a fire going, air reacts with carbon in the garbage (found in food, paper products, and plastics) to produce heat, water, and carbon dioxide.

Like combustion, gasification uses heat to break down garbage. But instead of using air as an input — which is mostly nitrogen and oxygen — Sierra’s gasification plant uses only pure oxygen and steam.

The oxygen and water in the steam react with carbon to make carbon monoxide and hydrogen gas, collectively referred to as syngas. All the while, the plant gets so hot that metals inside begin to melt. 

Sierra says that it can turn pretty much any kind of trash, including medical waste and batteries, into syngas, metals, and inert stone. 

That matters because syngas has commercial value. It can power generators to produce low-emissions electricity, according to Sierra. It can also be turned into hydrogen or diesel fuel, which Sierra says is “20 times cleaner than California’s ultralow-sulfur-diesel standards.” 

In theory, cities, developers, and other customers could make money off their trash, instead of paying to dump it. It’s a win-win. So then, why isn’t this technology already flourishing in the market? 

Options trading The long pricey path to commercialization 

Over the past decade, Hart has learned why so many tech startups fail. It’s not because their technology doesn’t work, he said. It’s because they underestimate the cost of building something and end up running out of money. 

When you’re building anything from scratch, there are “hundreds of single points of failure,” he said. 

“I know so many really good technologies that had nothing wrong with them,” he said. “The companies go out of business. What happened was a gadget broke, and then a second one broke, and they ran out of money.”

Sierra hasn’t failed, but Hart knows this problem well. Since he founded the company in 2004, Sierra has proven that its core technology works; it has a demonstration facility at an army base in Monterey, California, that processes 20 tons of garbage a day, according to the company website. 

But the startup still hasn’t reached commercialization — largely because of small but ultimately significant points of failure, Hart said. Just waiting for a new nozzle to arrive, for example, can morph into a major setback. 

“Every one of those months, it costs you hundreds of thousands of dollars because you’re delayed,” he said. “You can’t just turn a whole team on and off because you don’t need them for a few months while you’re waiting for the right component to be delivered.” 

This is what entrepreneurs often miss, he said. 

“Most people don’t understand the relationship between time and cost,” he said. “The entire burn rate of the entire company is the multiplier, and that is an absolute unknown for almost any entrepreneur I’ve ever met.” 

A single point of failure could mean a project takes years instead of months, Hart said. That’s one reason why clean-tech hardware costs so much — and why venture capitalists are so hesitant to back them. Fortunately for Sierra, it’s one of the exceptions. 

Options trading A Bill Gates-led investing group that includes Jeff Bezos and Richard Branson is now backing Sierra Energy

options trading Mike Hart Sierra Energy

Sierra Railroad is the first railroad in the country to run on 100% biodiesel.

Sierra Energy


So far, Sierra Energy has been largely self-funded, Hart said, which is “incredibly difficult and painful to do as a very small company.”

But in 2016, the company received backing (to the tune of $57 million, according to the Sacramento Business Journal) from the multibillion-dollar private investment fund SteelRiver Infrastructure Partners. Then in July, Breakthrough Energy Ventures, a fund spearheaded by Bill Gates that includes investors like Jeff Bezos and Richard Branson, led a $33 million Series A round.

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“The economics are developing,” Jim Cabot, a managing director at Breakthrough Energy Ventures, told Business Insider. “If you’re looking at tipping fees across the US, they’re going up, and so people are going to be looking for solutions. So when those things begin to happen, that’s when you see these opportunities begin to arise.”

Sierra is hoping to use the injection of capital to build out a “fully integrated” commercialized system, Hart said. The earliest the company would deliver the technology to customers — which will process around 50 metric tons per day — is 2021. 

“It’s a relatively small system, but our belief is that waste should be resolved at the community level,” he said. “A community of about 80,000 people could be handled by this.”

According to Hart, his startup has already received about 9,000 requests for FastOx from cities and towns, developers, and waste-management businesses. Sierra plans to license the gasification technology to manufacturers, Hart said, who would then sell it to customers. 

Options trading Experts say the science is sound, but some are skeptical about its commercial prospects

Gasification is a proven technology, according to Marco Castaldi, a chemical engineer at the City University of New York (CUNY). In fact, engineers have been using the basic approach for decades, he said.

“Most gasification technologies are a derivative or have grown up from coal gasification,” he said. “Is it a legit technology? The answer is yes because they’re following the format, the models, and the technologies of coal gasification.” 

But there’s an important distinction between coal and municipal waste, Castaldi said: Coal is a consistent fuel, whereas “trash” can mean many different things. 

“Over the years, I’ve seen gasification companies try to process mixed municipal waste,” Castaldi, who runs a research lab focused on combustion at CUNY, said. “It all comes down to the material that they get is not consistent enough, so, therefore, the syngas product that they yield is not high quality enough. The economics fall down, so I would not bet on it.” 

According to Morton Barlaz, a professor of engineering at North Carolina State University, that’s why there aren’t many commercially viable gasification facilities today. They’ve been held back by economics. 

“I’ll certainly be pleased with any technology that reduces net environmental emissions,” he said, adding, “I think it’s going to be expensive and difficult to apply [gasification] to mixed municipal waste.” 

(You can visit Sierra’s website to see a detailed breakdown of the costs and return on investment.)

Homogenizing waste, such as through sorting, costs money, Castaldi said. If gasification facilities could work with purer waste streams, he’d be all in. 

“Now there are material recovery facilities that, after they do their processing of the recycle, yield a more consistent, homogeneous feedstock,” he said. “If gasification companies go after that, then I would say they got a real competitive shot.”

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