Precision-engineered proteins are on the cusp of disrupting the meat industry, according to an exceptional, 75-page report, published recently by RethinkX. The science is rapidly improving, to create foods with vastly superior nutrition, superior taste and superior costs, by the early-2020s.
The energy opportunities are most exciting to us, after reading the report. If RethinkX’s scenarios play out, we estimate: direct CO2 savings of 400MTpa, enough to offset 10% of US oil demand; 2bcfd of upside to US gas demand; and enough land would be freed up to decarbonise all of US oil demand, or increase US biofuels production by 6x to c6Mbpd.
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RethinkX Re-Thinks Food and Agriculture
ReThinkX argues “we are on the cusp of the deepest, fastest, most consequential disruption in food and agricultural production since the first domestication of plants and animals ten thousand years ago”. The disruption is producing proteins via precision fermentation (PF), which programs microorganisms to produce complex organic molecules in a fermenter.
It is a classic “tech disruption”. Individual molecules are now being engineered by scientists and uploaded to databases. Constant iteration is improving the process. Hence as Impossible Foods’ CEO has said: “unlike the cow, we get better at making meat every single day”. Eventually this will result in a superior product at a far lower cost than today’s cow-based meat industry.
Precision engineered proteins “will be superior in every key attribute – more nutritious, healthier, better tasting, and more convenient, with almost unimaginable variety”. Every aspect can be optimised, in a way impossible with animal-based meat, to yield better taste, more nutrients, higher purity, yet less salt, fat and no need for antibiotics. You could even, in principle, replicate meat proteins from extinct animals, if you want to eat mammoth or giant moa burgers.
The cost of producing PF molecules is deflating: from $1M/kg in 2000 to $100/kg today, on course to hit $10/kg in 2025. The descent matches genome sequencing, which now takes a few days and costs c$1,000, compared with 13-years and $1bn in 2000; and it matches computing, which now costs $60 per teraflop, down from $50M per teraflop in 2000.
The cost of producing meat. Today, animal beef costs c$4.5/kg. PF beef costs $7/kg. RethinkX expects cost parity in 2021, $2/kg pricing in 2024 and $1/kg pricing in 2030. The same trend holds for milk, where just 3.3% of the content is protein, the rest water and sugar. PF production times are also likely to be 100x faster than rearing animals.
More recent context. The number of new US food products with added protein doubled from 2013 to 2017. Protein-enriched milk is becoming popular with baristas as it’s easier to froth. Halo Top was the most popular new consumer product in 2017, an ice cream with 2x more protein than normal. Soylent’s breakfast-replacement costs $3.25 and has the equivalent of a grande latte’s caffeine, three eggs’ protein, 6 Oz tuna’s omega-3s and all 26 essential nutrients. $17bn has been invested in plant-based foods in 2013-18. Disrupting agriculture is already on the ascent.
The consequences. It is argued that “product after product that we extract from the cow will be replaced by superior, cheaper, modern alternatives, triggering a death spiral of increasing prices [for the cattle farming industry], decreasing demand, and reversing economies of scale”. RethinkX’s report explores potential savings of $100bn for families across the USA by 2030; and potential downside for the $1.25 trn per annum US livestock industry. We recommend the report. It is linked here.
Thunder Said Energy Re-Thinks Food and Agriculture Energy
PF energy economics are transformative. The rumen of cow is a 40-50 gallon reactor, with c4% feedstock efficiency, responsible for 70-120kg pa of methane emissions per year, which is in turn, a 23-36x more potent greenhouse gas than CO2. However, an industrial fermenter is a 50-10 thousand gallon reactor, with 40-80% feedstock efficiency and no methane emissions.
Implication 1. 400MTpa of Direct Decarbonisation. The US currently contains 93M cattle, which in turn account for 530MTpa of CO2-equivalent emissions, or c8% of total US greenhouse emissions. RethinkX sees cow numbers reducing 50% by 2030, as the US needs 70% fewer cow products (90% less dairy, 70% less ground beef, 30% less steak); rising to 80-90% by 2035. By 2035, the data imply 400MTpa of CO2-equivalents could be saved, which is equivalent to offsetting c2Mboed of oil consumption.
Implication 2. Incremental Gas Demand of 2bcfd? Although fermentation reactors are c10-20x more thermally efficient than cows, they will still require incremental energy. We believe natural gas is emerging as best placed to provide heating and electric energy for industrial processes. Modern foods in the US could require c2bcfed of incremental gas consumption, 2.5% upside on current US demand, and stoking our expectations for the long-run rise of gas.
Implication 3. Decarbonising US Oil? We recently analysed seven major themes, which could eliminate 45Mbpd of global oil demand by 2050 (note here). But even on this aggressive scenario, we foresee US oil demand at 16Mbpd in 2035 and 11Mbpd in 2050. How can we decarbonise this oil? One solution is provided by re-purposing the 835M of land acres currently associated with US livestock farming: 655M for grazing, and 180M to grow crops. 60% will be freed for other uses by 2035, equivalent to 485M acres, or the entire Louisiana Purchase of 1803. If all of this land could be repurposed to grow forests, at a yield of c5.4T CO2 sequestation per acre, then we estimate enough CO2 could be absorbed to decarbonise 14Mbpd of oil demand. It is unlikely that all of this land can be repurposed in practice, but CO2 offsets could nevertheless be very large.
Implication 4. 5Mbpd of incremental biofuels. Another possibility is that some of the liberated land could be diverted into producing biofuels: Let us assume 250M acres can be devoted to growing corn, at a yield of c120 bushels per acre, and 2.8 gallons of ethanol per bushel. Multiply through and the total ethanol production would be 80 bn gallons per annum, equivalent to c5Mbpd of oil: 5x larger than current US biofuels production. Here is a positive opportunity for the energy industry, including the companies with the leading biofuels technologies.
Implication 5. Venture Opportunies? Finally, we have noted leading Energy Majors’ diversification into new energy technologies in their recent venture investments (chart below). Natural partnerships may emerge in PF companies. Indeed, we already saw BP deploy $30M investing in Calysta in June-2019, an alternative protein producer, for the aquaculture industry. Companies in the space are numerous: Beyond Meat went public in 1Q19. Impossible Foods is private, but valued at $2bn, having sold 13M units since 2016, and Burger King is introducing an Impossible Whopper in 2019, initially costing $1 more than the conventional Whopper. In March 2019, Geltor announced HumaColl21, the first human collagen created for cosmetics. We will tabulate other companies in a future screen.
References
Tubb, C. & Seba, T. (2019). Rethinking Food and Agriculture 2020-2030. RethinkX Sector Disruption Report. Full report linked here.
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We would be delighted to introduce clients of Thunder Said Energy to the reports’ authors, Catherine Tubb and Tony Seba. Please contact us if this is useful.