Building Billion-Dollar Industrial Strategies for the Energy Transition: From Tesla to Twelve with Andy Stevenson

In our last post, we announced a series of conversations with leaders who have integrated operational strategy with financial engineering. In this interview, we delve into the experiences and perspectives of Andy Stevenson, a pioneering leader in the sustainable industrial transition. Andy shares his journey from Tesla to the founding team at Redwood Materials, highlighting the challenges and opportunities of battery recycling and advanced manufacturing. Now leading the commercial team at Twelve, Andy discusses the company's focus on innovative CO2 reduction technologies and the logic that led to Twelve’s strategic pivot to directly produce and sell sustainable aviation fuel (SAF). He elaborates on the decision-making processes behind product development, site selection, and navigating government incentives. 

This interview is a condensed and edited version of a recent live session we held with Andy at the MIT Entrepreneurship Center. Please sign up to join us at a future session, meetup event, or onsite factory tour and help advance the next generation of American manufacturing. 

From being the first full-time employee at Redwood Materials to negotiating the largest commercial SAF contracts, you’ve had a unique career. Tell us about your journey.

I was fortunate to spend several years working for JB Straubel, both in a personal capacity and on his special projects team at Tesla. As I was wrapping up a big project, we started talking more about the big gap in technology between core manufacturing producers – who were adopting cutting edge digital technology with a heavy focus on robotics and Factory 4.0 automation – vs the downstream recycling facilities where we were partnering with. We both knew that battery recycling would be a critical part of the future of the electric vehicle industry and a requirement to achieve true sustainability. However, tech companies were focused on the sexy production challenges and mostly ignored the entire post-sale supply chain. Eventually, we both got enough conviction about the opportunity and critical future needs for recycling that JB provided the initial seed funding for what became Redwood Materials – the company that today provides a closed-loop supply chain for lithium-ion batteries – and I left Tesla to be the first full-time employee at Redwood. 

JB and I got along really well, and it was a true complementary partnership. Over nearly 4 years, we went from zero to building out and bringing up our first 24x7 processing facility. With a first-of-a-kind plant up and running, we were able to raise a Series B in early 2020. I learned a ton and it was a good time for me to hand over the reins to the next set of leaders that would help take Redwood to the next level. 

I spent about a year consulting and exploring my own startup ideas before deciding to join Twelve full-time. To truly solve climate change, we need to source capture CO2 and apply large amounts of renewable energy to decarbonize the most challenging sectors, such as transportation. My experiences at both Tesla and Redwood set me up to be able to help Twelve scale to the commercial level.

Twelve is a company that is taking a pretty big swing in terms of scope and impact. The core technology is a CO2 electrolyzer that is based on our proprietary catalyst including several key design innovations. The electrolyzer converts water and CO2 into multiple types of hydrocarbon outputs. The molecule that we're focused on producing now is carbon monoxide – a precursor to a number of important industrial chemicals, including sustainable fuels produced via commercially available and mature syngas-to-fuel technology. Twelve is now designing and manufacturing its own electrolyzers and building projects that integrate the CO into sustainable fuels, starting with jet fuel.

Can you describe your role at Twelve and the main functions of the commercial team?

I lead the commercial team which today is made up of three main functions: sales, project development, and policy & government affairs. Sales works with the airlines and the end customers who use our fuel to transport goods and people around the planet. Project development is all about site selection and sourcing inputs for the projects, including sourcing electricity and CO2 feedstock. A big part of this role is managing the complex strategy and tradeoff decisions for where to locate the projects. Finally, policy & government affairs encompasses engagements with both local and federal organizations. There are tons of incentives available for sustainable fuels, which is one of the big reasons we decided to make jet fuel rather than CO. But that also means we need to keep track of and juggle multiple overlapping options. Ultimately, our team is responsible for defending and securing additional incentives to help the company grow.

Twelve’s catalyst technology is a massively powerful platform. What factors influenced Twelve's decision to shift its commercial focus to producing aviation fuel?

When I joined Twelve, the commercial focus was mostly on broad partnerships with large strategic companies in carbon transformation. These were framework agreements where we would use our technology and the various types of carbon in their supply chains to create new decarbonized products, whether it was using their carbon emissions to make an end product or using somebody else's carbon emissions to make a product that went into the supply chain. These conversations were extremely broad. While this meant the potential impact could be huge, it was quite challenging to move from the discussion phase to achieve alignment on an opportunity. 

Twelve was having a lot of positive engagements, but few were progressing to commercial agreements. We decided to focus our commercial efforts. After reviewing several options, we determined that sustainable aviation fuel was the best single product Twelve could make that would hit the sweet spot of incentives, cost of goods optimized for location, customer willingness to pay, and compelling market size. Some of the key alternatives we explored were just making and selling CO or producing a different flavor of sustainable fuel, such as marine fuel. Ultimately, there are many more government incentives available for transportation fuel than other types of sustainable input chemicals like hydrocarbons. By going through this commercial strategy process, we ended up choosing to focus on aviation fuel.

What factors led Twelve to decide to produce and sell an end-product instead of being an equipment supplier or just licensing your technology?

A big reason Twelve chose to shift to sustainable fuels as an end product is because of the government incentives and market structure of industrial gasses. Carbon monoxide is an integral part of an existing chemical plant. If we were to be a technology provider to a larger facility, we would have to meet very stringent uptime requirements with significant penalties if we didn't deliver and produce on schedule. Additionally, we couldn’t optimize for the cost of electricity by location, which is a big driver of our costs. We decided that it was very risky for the first couple of projects to have those types of requirements. Whereas, by making our own sustainable fuels, we could just develop, produce and sell directly to customers as one of multiple fuel sources.

When it comes to the SAF market specifically, as with a lot of other new technologies, there isn't a huge ecosystem of sustainable aviation fuel project developers. We have to do the full scope ourselves if we want these early projects to happen. Creating a new market means not only project development but also establishing long-term off-take agreements. In some cases, we are now just starting to see independent developers put together projects, secure the feedstocks themselves, and partner with the technology companies. This is a good sign the market is beginning to function. Also, having project development and technology R&D as part of the same company has some challenges. So, we are also actively exploring partnership opportunities and finding especially good alignment with large renewable energy developers who are entering the hydrogen market (which is also a feedstock we need).

How has Twelve developed its customer relationships for both aviation fuel and environmental attributes and can you share an example of a successful partnership?

Twelve sells both SAF and environmental attributes. The fuel customers we’ve announced are Alaska Airlines and IAG (which owns British Airways and several European airlines). In some cases, we'll separate the environmental attributes from the fuel to help companies reduce scope 3 emissions. We've sold environmental attributes to Shopify, Microsoft, and the Boston Consulting Group (BCG). The airline industry’s system to account for fuel sales and environmental attributes transactions is more advanced than many other industries which is helping to enable our business

We’ve benefited from talking to our customer’s customers. Most people wouldn't necessarily know that there's a strong connection between Alaska Airlines and Microsoft, but Microsoft is a significant business travel customer of Alaska Airlines. Microsoft is also a strategic investor in Twelve through their Climate Investment Fund (CIF). Their sustainable fuels team was looking to advance “e-fuels” as a promising new production pathway. So, the team at Microsoft was able to reach out to their contacts at Alaska Airlines, and that really helped get the partnership going. While we sell SAF to airlines, the fuel is actually used to move goods and passengers, so spending my time building relationships with those end-users can really help create pull-through for our product.

How did you decide where to locate the Twelve facility in Washington?

It was a challenging decision because the regulatory environment for sustainable aviation fuel has been in flux for the past several years. The regulatory landscape for renewable energy sourcing is dynamic, and the states compete to adopt new incentives. The location we chose in eastern Washington has a grid that is both inexpensive and clean, and we are able to access sufficient CO2 supply from an existing carbon capture system at a nearby ethanol plant. This removed several risks from the critical path of our project. 

In our discussions with Alaska Airlines and Microsoft, we found they were excited to showcase their commitment to the State of Washington, a major hub for both companies. There is alignment across both companies and the state to increase fuel production capacity in the Pacific Northwest. The fact that we were interested in potentially building a project in Washington State was a selling point. And so it all happened in parallel, where we were selecting the site while also negotiating the offtake agreement with them.

Can you discuss the financial strategies you've employed to fund the jet fuel facility in Washington State?

I really enjoy working with our CFO, Jimmy Chuang. Before joining Twelve, Jimmy spent two decades with SolarCity and large solar developers. He brings firsthand know-how in accessing sophisticated, repeatable financing structures for billion-dollar renewable energy projects. We are working to make the same types of financial structures available for solar to other types of renewable energy assets, like SAF. He has accomplished this based on the strength of his relationships with the people he's worked with in the past. It has been transformative having a CFO with structured finance experience and a deep network in energy.

Wrap Up

Thank you to Andy for his time and passion in sharing his story and the hard won lessons from his time at Tesla, Redwood, and Twelve. Solving the climate challenge with products like electric vehicles and sustainable fuel while leveraging closed-loop supply chains is not easy, but Andy has demonstrated it is possible. To scale our efforts, we will need to find creative ways to create the commercial alignment needed to unlock billion dollar industrial strategies. To join us on this journey to advance manufacturing, please sign up and stay tuned for future posts and events.