05 March 2023 |

The purist vs. pragmatist paradigm


I’m frontrunning myself a bit here to talk about the biggest fundraising news of the week. Divert, a company that turns food waste into renewable natural gas, raised $100M in equity funding and also secured up to $1B in project finance to build out digester facilities across the U.S. I’ll catch up with Divert’s CEO, Ryan Begin, this coming week, so this newsletter section is a bit more preparatory than comprehensive. I’ll follow up next Sunday with more notes. 

Divert’s business sits at the intersection of multiple significant climate challenges. For one, wood waste is a huge opportunity area. Almost 40% of food in the U.S. goes to waste. This wastes resources in production and also leads to emissions on the back end; when food waste breaks down in landfills, under the ‘right’ circumstances (or perhaps we should say ‘wrong,’ in this case, it can turn into methane

As alluded to in their name, Divert designs technologies and approaches to prevent food waste, including IoT tracking in stores and reverse logistics operations to transport food that would otherwise go to waste to local food banks. Divert already works with some of the largest food firms in the country, like Kroger. 

Eliminating food waste entirely isn’t a particularly realistic near-term goal, however. As a result, the crux of Divert’s recent fundraise is to finance efforts to turn wasted food into renewable energy via anaerobic digestion facilities. For more on the specifics of processes that turn waste into biogases, you can go deeper in this piece I wrote last August

There are almost 20,000 digester facilities in Europe. In the U.S., there are less than 1,000. There’s a significant opportunity to scale biogas in North American markets, which private sector interest (as evidenced by this deal) seems to recognize.

One of Divert’s digester facilities where they turn food waste into renewable natural gas

As much as I’d like to see a faster transition to a fossil-free world, natural gas will play a significant role in energy for decades. Even states like California that have invested heavily in a transition to renewable energy still produce the lion’s share of their power from natural gas. Opportunities to produce renewable natural gas – especially when producers are committed to keeping their process “air-tight” – are pretty important.

The net-net

Against a backdrop of intensified climate activism, especially as anti-oil activists zero in on the Biden Admin’s support of the Willow oil drilling project in Alaska, I’d expect mixed reviews of renewable natural gas projects, too. Many reasonable concerns can still be leveled at renewable natural gas, many of which I’m excited to cover with Divert’s CEO. One that immediately comes to mind is the natural gas supply chain; all-to-frequent leaks in pipelines that leak methane can derail benefits from RNG.

The fact that Enbridge, a Canadian oil major, is taking a 10% stake in Divert as part of this fundraise will raise eyebrows too. There’s a consistent push and pull between the more ‘purist’ faction of climate tech advocates who resists solutions that would valorize existing oil and gas operations, whether in the form of infrastructure like pipelines or end consumers (e.g., vehicles powered by renewable natural gas). 

From a more pragmatic perspective, it’s hard to imagine a transition to net zero that doesn’t involve oil companies, their existing infrastructure, and their expertise in building infrastructure in general. Still, past oil and gas investments in more renewable solutions often haven’t come to bear, so tracking how Divert’s operations progress in coming years will be a solid barometer of where we’re at in the purist vs. pragmatist climate tech paradigm.