🌿 Friday's Climate Infra Brief: Two Conservation Laws

Second Law of Thermodynamics: you cannot recover concentrated value from a diffuse system without paying in energy.

4 years ago I spent a lot of time researching battery material recycling. This was right as the supply chain started bifurcating along geopolitical lines, and there was an obvious sustainability story. But there was also a national security story that felt more durable: if China controls the midstream of refining and cathode production, then recovering critical minerals from spent batteries is industrial sovereignty.

I watched the category closely for a long time. And I kept running into the same problem. Ascend Elements (filed Chapter 11), Li-Cycle (sold for $40M), Redwood (pivoted to secondary-life as storage), these were genuinely hard companies to underwrite. Enormous capex, technical complexity, beautiful chemistry yet difficult to validate at thousand-tons scale. I assumed that this was a scaling problem. Get the volume up, ride the cost curve down, and the math would eventually close.

Then a physicist friend changed how I think about the entire space.

In a closed system, entropy always increases. Energy is conserved, but its grade only degrades from useful concentrated forms toward diffuse, less useful ones. A hot cup of coffee cools. A charged battery drains. Heat flows from hot to cold. A finished cathode is a very low low-entropy object: specific elements in specific ratios in a specific crystal structure. When you shred a battery into mixed black mass, you move up on the entropy gradient, and the Second Law says you have to pay for the trip back down in high-grade energy. The more dilute and mixed-up your feedstock is, the steeper that climb gets. Scale doesn’t save you. The toll is the toll. To justify the toll, the end product needs to be highly valuable to pay for the bill.

Once you have the lens, you see it everywhere. DAC is the same trade. CO₂ in air at 420 parts per million is so diluted, which is why the thermodynamic floor sits near half a gigajoule per ton and real systems run 5-10x that. The energy bill to pay for entropy decrease is extreme. The DAC projects that might eventually pencil are probably the ones colocated with energy nobody else wants, stranded geothermal heat or curtailed renewables.

But I still love recycling, maybe not the ones fighting against the laws of physics. I found another form of recycling!

When I was at school, I won a startup pitch competition with an embarrassingly simple idea. Office buildings have parking garages in prime locations that sit empty every evening and weekend. So rent that idle capacity to the public during the downtime. I pitched to recycle a physical asset’s slack, when an expensive, well-located thing was doing nothing.

Years later, I keep seeing the same formula at much larger scale and executed by talented teams. Voltus aggregates spare flexibility in commercial and industrial loads and turns it into market-accredited capacity, now managing 8 GW+ and pitching data centers a “BYOC” path to faster interconnection. GridCare uses AI to find the roughly 2/3 of grid capacity that sits unused under normal conditions and hands it to data centers waiting years to connect. LineVision does dynamic line rating, recycling the headroom that already exists on transmission lines once you actually measure what they can carry instead of assuming a conservative static limit. They all recycle slack in something that already exists.

So is there a Second Law for this kind of recycling too? I think there is, and maybe called the law of motivation - businesses are motivated by profit. These models all require multiple independent parties to agree to share an asset they would otherwise own and hoard. The single most reliable solution for that kind of coordination problem is profit.

For years, this category struggled for exactly that reason. Selling a flexible load agreement to a C&I customer when the only counterparty is a utility or a regulator is a dead end. Neither is profit-driven, and the motivation to share was thin. Genuinely good products died for the law of motivation.

What changed is that data centers showed up willing to pay enormous sums for fast access to power. That single new buyer rewrites the coordination problem. Now there is real money to split, so the C&I customer has a reason to commit its idle capacity, the utility has pressure to cooperate, and the aggregator finally has margin to operate inside. The slack capacity was always there. What was missing was a party hungry enough to fund the alignment.

Two conservation laws: One says you cannot recover concentrated value from a diffuse system without paying in energy. The other says you cannot (sufficiently) motivate multiple independent counterparties without paying in profit.