Hello 👋

Martin here. Welcome to another edition of Founders’ Hustle.

Today I’m sharing the startup story of Zero Petroleum, a UK company on a mission to produce petroleum from water and air using renewable energy.

I sat down with their founder, Paddy Lowe, an ex-Formula 1 technical director, to find out how.

Highlights:

• What it’s like transitioning from Formula 1 to founding a startup. 🏎️

• Why he’s pursuing petroleum innovation over electrification. ⛽

• What’s wrong with current environmental policy. 🌳

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One of the things I love about running this newsletter is talking to incredibly smart people with fascinating insights and backgrounds.

And, today’s startup story is no exception.

I sat down with Paddy Lowe, an ex-Formula 1 engineering director with twelve World Championships under his belt from teams such as Williams, McLaren, and Mercedes.

With his new venture, Zero Petroleum, he’s working on producing petroleum cost-effectively from renewable sources (as opposed to fossil fuels).

You may be wondering why the world needs this ‘synthetic petroleum’, as it’s known.

With batteries seemingly on course to power everything from smartphones to cars, why does society need it? Why hasn’t this been done before? What are the challenges of making it work at scale? And, where do you start?

Whilst probing Paddy on such critical issues, the conversation naturally evolved into a broader discussion around the greatest challenge humanity faces this century—sustainable energy production and consumption in the face of exponentially increasing demand.

Looping together all of these themes through the lens of someone who spent over three decades fiercely competing in the most intense petroleum-fuelled contest on the planet proved to be a fascinating discussion.

Here we go. 👇

🔥 Q&A

What’s it been like moving from Formula 1 to founding and building a technology company?

I've been a Formula 1 technical director for a long time.

For me, there’s a lot of resistance, you know, a fear of risk in this startup space.

So many people I talk to are like ‘I’m not going to take that on because it’s too risky’. There’s a very high degree of risk adversity that I’ve encountered.

And when I map that to what I had to do in Formula 1, if you want to make the fastest car that wins the races, you take huge risks.

If you don’t take any risks in your programs or innovations, you won’t win.

So the skill is in backing the right innovations. Putting your effort into spotting the winners and backing them.

You're kind of a performance entrepreneur, where the outcome is the lap time of the car rather than financial success.

The startup space is so much more risk-averse than Formula 1.

I think ‘this is something we can do—it’s a no brainer’—because it doesn’t look risky to me.

But, in other people's minds, it’s like ‘this is really risky... we haven't seen it work yet’.

On a personal level, I’m finding that quite tough and frustrating. I just haven't had to be like that for 30 years.

What does Zero Petroleum do?

We make synthetic petroleum.

Many times when I explain it to people, they look at me like I’m performing alchemy.

We’re so hardwired to think of petroleum as something that comes out of the ground—drilling for oil. The thing we need to separate is the idea that petroleum has to come from underground as a fossil resource, and the chemistry of petroleum.

Petroleum, which is the set of chemicals involved in crude oil, chemicals that I’d say we’re addicted to in modern daily life, can literally be made from water and thin air

The main ingredient we need is energy.

We capture the energy from the sun, wind, water, or other natural resources. Then, we convert water and carbon dioxide in the air into petroleum liquids and oxygen.

It is the equivalent process to what happens in plants—exactly the same chemistry.

So what we do here is create a ‘forest in a factory’. 👇

With that process, you can make any petroleum product—gasoline, jet fuel, diesel, marine oil, or the precursors to plastics. It can ‘drop in’ to your existing car.

Who is in your team and why did you found the company?

I have one partner, Nilay Shah, who's head of chemical engineering at Imperial College.

The two of us started this after a realization there’s a gap in the energy sector, specifically the clean energy sector.

We burned so much petrol in Formula 1. It's been constantly on my mind for the last ten years. Was there a different direction we could take?

Like most people, you start thinking of biofuels. But, the more I looked into it with my business partner it was clear they're not the answer. The land required to grow the plants is massively wasteful and bad for the environment.

“Electric fuel”, or “eFuel”, which is the technical name for synthetic fuels made fully industrially from renewable electricity, is really the scalable solution for sectors that aren’t feasible to electrify now or in the realistic future.

For example, high-performance vehicles need high energy density power sources. 👇

Batteries are not a viable option for them.

Even today, liquid fuels store 50 times more energy than batteries. There’s been talk of battery-powered planes, but it’s just not realistic for them to fly long distances.

Plus, I could see nobody else was doing it.

Additionally, I've always had an interest in energy.

When you analyze motorsport, like Formula 1, it’s the demonstration and manifestation of energy in a very visible and entertaining manner.

That's why we like engines that make lots of noise and flames, brakes that glow, and rubber-burning. These are the things people come to see, and are very exciting.

It’s an industry of notorious excess and waste, depending on how you look at it.

But, on the other side of the coin, incredible technological development.

How so?

A great example is the current Formula 1 engine and hybrid system.

Formula 1 was one of the leading pioneers of high power and high-density lithium batteries that we now use today in everyday cars. This was the result of a system called kinetic energy recovery (KERS) introduced in 2009.

The rules for this were created around 2006-2007.

At that time, a lithium-ion battery was a thing you put on the back of your phone. It wasn't a technology that would match anything you put on a Formula 1 car.

Anything you use has to be very light and dense in terms of energy storage—weight is a disaster for a racing car. That's why, for instance, we use hydraulics rather than electrical drives on them.

When these regulations were first created, everybody (and I was part of that group) assumed the answer would be flywheels for weight-efficient energy storage and recovery—that’s when storing energy under braking and reapplying under traction.

But, the more enlightened developers, Mercedes being one of them, ran an electrical program in parallel to a flywheel program.

And to the surprise and amazement of all of us, it was the battery that came through. The battery supplier at that time produced a battery, eventually, that was 100 times better than even what they had predicted could be done.

This is one of the precursors to where we are today with Tesla and everything else. So that's a great example of Formula 1 development.

If batteries are advancing so fast, why start Zero Petroleum?

One of my problems with current environmental policy is the fact the volume knob is on 11, out of 10, for electrification.

Whilst I'm a massive supporter of electrification, it's too much a prescribed solution rather than what we should be doing as a society.

Global politics should be defining an outcome, not a solution. It's up to engineers and clever people to invent the best solutions to an outcome that's required.

The Formula 1 KERS system is a terrific example of that because the rules were written without any attachment to technology.

The new rules said ‘you may now store energy under braking from the rear axle, store it in some device, and deploy it back into the rear wheels down the straight’.

It didn't say how you could do it.

So the engineers, they're all very, very clever people, went away and found the best way of doing that.

Talk me through how you ended up working on electrofuel as the solution.

The core technology for synthetic fuels is quite old—it was developed in Germany. During the war they used coal to make synthetic gasoline for the Luftwaffe.

This same core technology can be applied to renewable power such as solar and wind farms, which is not very portable or dense in storage.

Such electrofuels are a known technology. You'll find a lot on the Internet about it. And there are people working on it, I don't want to pretend we're the only ones.

There are a handful of projects around the world. There are none in the UK.

Ricardo, a very well-respected research body of consultancy in engineering, has the same perspective—this is the solution that we need and will scale.

Why?

First, we still need petroleum fuels to power things like airplanes and combine harvesters.

Second, biofuels, which are the high-energy storage alternative to fossil-based petroleum, are not the answer.

They won't scale unless they use vast amounts of water, which is itself a very precious resource. And, they use land very inefficiently relative to industrial processes, such as solar and wind farms.

Fertile land is a very, very finite resource on this planet. Plus, we're distressed that forests are being cut down, all over the place.

Society still wants vast amounts of dense energy, but it’s wrong to hand this problem back to biology to solve again.

Let's keep the land for food, natural habits, parks, and leisure.

By comparison—solar farms are at least 25 times more efficient than biological crops in terms of energy capture.

So, then it becomes clear we need electrofuels.

We're the first group in the UK who seek to commercialize it.

So, you will see vast synthetic plants in deserts in the future.

They're already building huge solar farms in Egypt and India that are 10s of square kilometers in scale. They will keep doing that in areas that are completely uninhabitable. So this is a good use of wasteland for energy.

That's a great way to synthesize liquid fuels, because you create something that can be stored, transported, distributed, and then used in applications that need those dense formats.

What does the manufacturing process for synthetic petroleum look like?

This is best conveyed in a diagram.

So, the base technology for electrofuel exists. It can already be done. Your challenge is making it cost-effective in the marketplace?

Yeah. The modules that are required to make a synthetic fuel are pretty well commoditized. Carbon capture from the atmosphere, which is what's ultimately required for us to be completely renewable in this cycle, that's the least developed.

The technology that we're developing and will seek to commercialize is, how do you put a plan together with all of those modules, and make it work efficiently in the context that the sun doesn't always shine, and the wind doesn't always blow? It's quite complicated.

That's one of our specialties. It’s novel.

Other companies develop all the different bits and pieces, we’re the first to bring an actual product to the market that customers can buy and use.

Our brand, Zero Petroleum, is very important.

We’re producing a product that is practically the same as what you can go and buy at your local forecourt but more expensive.

So, we have to differentiate ourselves.

Our customers are buying the credential Zero Petroleum is not a fossil product.

They can feel good about it and tell people about it.

Can your customers mix fossil-based petroleum with yours?

In the aviation industry, they've already approved that. It's called sustainable aviation fuel (“SAF”). It covers a multitude of solutions, most of which are biofuels.

Commercial aircraft are already certified to run up to a 50% blend on SAF. And there's no reason why that couldn't be 100%.

That’s a great PR situation. Carriers can boast they run Zero Petroleum, whilst also keeping costs in control by blending with fossil-based petroleums until such time as electric fuels become even more cost-effective and up the percentage they use.

Is that your general go-to-market strategy?

There are different ways to get it into the market.

But, we have to accept that at the moment it’s a more expensive product.

So, you can't just simply turn up and sell it in the commodity market.

One of the problems is that fossil fuels are so ridiculously cheap. I mean, absurdly cheap. Cheaper than water or milk.

Yes, it feels like we’re living in an era of ultra-cheap energy.

One of the fallacies over current energy thinking is that we should and will use less energy in the future. But, I think we're gonna continue on the trend of using more and more energy per capita, across the planet.

We just have to convert to it being renewable. Solar and wind will get cheaper and cheaper as they get better. We've already seen that’s a very, very strong trend.

Solar panels have plenty of room to become more efficient. It's an electronic device, it so it follows similar trends to Moore’s law.

What’s your greatest challenge building Zero Petroleum right now?

It is a highly capital-intensive activity. The opposite end to software. So the challenge is raising capital, but we're making good progress.

What milestones have you hit in terms of product development?

We are out of the lab now and building our first production plant.

We'll carry on in the lab in parallel, to keep improving our product.

One of the really exciting things about synthetic hydrocarbon fuels is we can innovate in ways where fossil-based petroleum fuels have plateaued in terms of specifications and standards over the last few decades.

With synthetics, it costs the same to make a really, really high-grade high octane gasoline molecule, as it costs to make the worst bit of rubbish that they put into a marine engine far out at sea.

So, we can push the octane higher and make engines much more efficient.

So, fossil-based petroleum has an intrinsic octane ceiling?

Yeah, it's cost. Increasing the octane is expensive. So, what you put in your car is similar to what comes out of the ground.

Whereas in the world of synthetic petroleum, you just make exactly what you want in terms of octane level.

In terms of financing the business, some of the oil giants have VC arms. Is that the sort of investor that would back a company like Zero Petroleum?

I don't want to speak for the oil companies, they need to do that for themselves.

All I can say is, they're conspicuous by their absence in this space.

How does electrofuel compare to fossil-based fuel in terms of atmospheric pollution?

In carbon dioxide terms, it's exactly the same as a fossil fuel.

But, the difference being you make electrofuel from carbon dioxide from the atmosphere. So, it's a circular process.

If you do it properly, it can be even net negative.

For instance, in your synthesis process, if you don't make all of your carbon into fuel, you can make some of it into precursors for plastics.

And if those plastics go into building materials that effectively sequester carbon dioxide, then you have a net negative process. For every ton of carbon dioxide you take out the air, a percentage gets locked in a material somewhere.

You’re innovating in such a critical area for our species right now. It’s hard not to talk about this and get sidetracked into broader scientific and political narratives. How we produce and use energy is the greatest challenge faced by our civilization.

Yeah, one of the more interesting themes is the subject of waste.

The notion of waste is very much a function of our current industrial society. It didn't exist in pre-industrial society. If you go back to pre-industrial times, they weren’t concerned with wasting stuff like we do today.

You could waste your meal, but there wasn't a sense of permanent waste—because everything was circular. It didn't matter. If your potatoes went rotten, you could grow some more.

Whereas industrial society is fundamentally a linear system. Eventually, you won’t be able to grow any more potatoes.

Linear consumption, therefore, creates waste guilt. It’s a burden.

If you magic yourself 1,000 years from now humanity will either be dead or living in a circular society.

In the latter, everything you use and consume is circular. Just the same as in biology. There's no waste in biology. One guy's waste is another guy's meal.

The atmosphere is included in that circular loop. We won’t have waste, just circulation. And, rich people will circulate more than poor people.

Fossil fuel for me is the windfall that we have to make good use of, to invent ourselves to the circular system.

That's our challenge. To make use of that gift. Before it's too late, before it runs out, or we screw the planet.

Yes - 100%.

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