Why We Invested in Flocean
“If we could produce fresh water from salt water at a low cost, that would indeed be a great service to humanity, and would dwarf any other scientific accomplishment” - John F. Kennedy
Water scarcity is increasing, and there are really only two responses: reducing demand (ie, conservation) and generating new sources of freshwater. Seawater desalination provides vitally important freshwater at scale today and holds tremendous further potential to be a solution for parched regions. But in many places, the expansion of seawater desalination has been hindered by environmental concerns, permitting, land use, energy use, and high construction and operating costs. There is much to improve. Flocean’s subsea desalination addresses these issues, and we think it could be a wonderful solution to help alleviate water scarcity worldwide.
Why We Invested in Flocean
From Japan to California, to the Middle East, South America, Africa, and Australia, to impending Day Zeros, and most coastal population centers around the world, the question of desalination is not if but when and how. And with the advent of climate change affecting rainfall patterns and more extreme water scarcity, the number of regions that could benefit from seawater (SW) desalination continues to grow.
While reverse osmosis (RO) has brought a range of benefits over thermal SW desalination, the drawbacks of today's state-of-the-art desal as we know it are many: the facilities require a sizeable amount of land, need lots of energy (adding to the climate change problem), can be difficult to move from concept to production, requiring years (even decades) to get permitted, and there is no good, proven solution for what to do with the brine. There are also huge structural impediments: around 45% of project costs can be expended on the initial development and permitting and another 45% on the engineering and construction, and only about 10% of the spend is on the tech to do the actual desalination. Expensing ~90% of the cost on “stuff” while spending only ~10% on the business part of a project is a pretty tough equation. When something like the Poseidon plant doesn’t get through after nearly 20 yrs and millions of dollars of trying, it shows that today’s desal is broken.
Enter Flocean, who are working in a different paradigm to develop seawater desalination projects ~400-500 meters down on the seabed where the seawater is cleaner, system energy requirements are about 40% less, land is available, and many of the non-value added costs and complexity of land-based desal are either eliminated or greatly reduced, while providing a much more environmentally friendly solution.
If operating at ~400 - 500 m below sea-level sounds hard, that’s because it is! The multitude of benefits of operating subsea are balanced by the challenges of building and operating a subsea desal system. That’s a big reason why we like Flocean so much. We think that if anyone can make this work, it will be them, being a spin-out of deep sea pumping and equipment leader Fsubsea that has decades of experience deploying highly reliable mechanical equipment and systems at ocean depths up to 3,000 m. Seawater desal has been on our watchlist for a time, and we are delighted to have finally found an on-ramp into the market. Here’s more on why we are thrilled to have co-led Flocean’s Series A.
Demand for New Fresh Water Sources
Water-scarcity is a real problem in many regions - McKinsey projects a 40% gap in the global water supply demand by 2030 - the need for new sources of water is real and urgent. For water-stressed regions that have already raised water rates to limit consumption along with implementing other water efficiency efforts, tapping the oceans along the lines of what John F. Kennedy envisioned is an intriguing proposition. Seawater desalination provides new fresh water sources for municipalities, industrial parks, resorts, and even agriculture to the tune of $20B/yr in global business, projected to reach $33B in 2030.
Attractiveness of Subsea Desalination
Today’s land-based seawater desal systems have a range of drawbacks that have limited deployments in many parts of the world. Subsea systems either minimize or avoid these drawbacks.
State-of-the-art land-based desal systems run at about 40% water recovery, meaning that about 2.5X the volume of seawater needs to be pumped and pretreated then boosted to high pressure before going into the RO system that produces ~1X volume of pure water and ~1.5X volume of concentrated brine that’s discharged to the ocean. Consequently, the pretreatment systems need to be 2.5X larger (and more costly) than what’s really needed, and these systems need energy recovery devices to recover some of the energy in the high pressure brine discharge in order to make the economics work. These large systems take up a lot of land and the concentrated brine effluent can be harmful to marine organisms. Much of the cost of these desal systems is non-value added and the energy requirement of the full system is significantly higher than just the energy required to pull pure water out of the ocean.
By operating at the seabed, Flocean only needs to apply a suction pump on the permeate side, along with a low pressure pump on the feed side, which means that high pressure pumping volumes are reduced by about 60% compared to land-based desal and energy recovery devices are not needed. Also, Flocean’s systems operate at lower recovery rates, meaning that osmotic pressure is minimized and the outgoing brine, which at depth is discharged away from sensitive marine life, is less saline and harmful. Subsea systems are less sensitive to algae blooms, are resilient to storms, require minimal chemical dosing, and are expected to be easier to permit in most cases. Working on the seabed eliminates many of the nonvalue-added costs and parasitic energy requirements. The systems are powered by a cable from land and the permeate is delivered to land through a conventional pipe - energy losses from each of these are minimal.
Performing desal subsea is a seemingly crazy idea that’s been around for a long time and to our knowledge only Fsubsea / Flocean have successfully tested a relevant size subsea seawater reverse osmosis (SWRO) unit, resulting in strong patent IP, and we think these learnings demonstrate that they have the subsea equipment domain expertise and desal know-how to pull this off.
Team/Market Fit
The Flocean team are as solid and credible as they come. And that’s even more important if you’re going to back a team that’s attempting something seemingly crazy like operating SWRO systems on the ocean floor. Flocean itself is a spinout of Fsubsea, a world leader in large, magnetically coupled pumps for subsea oil & gas pumping. Alex Fuglesang, CEO of Flocean, is a fifth-generation member of the family behind Fsubsea. He’s a smart, inspiring, charismatic leader who has spearheaded the effort behind Flocean. He’s supported by an outstanding team of motivated operating professionals that share his vision for abundant, cost-effective, and environmentally-sound solutions to water scarcity with the domain expertise and engineering skills to make it happen.
Risk Reduction Mindset
Flocean’s Fsubsea heritage means that engineering rigor is in their DNA. Fsubsea’s pumps, which include the world’s largest magnetically coupled subsea pump, have an amazing track record of reliability that’s an outcome of decades of expertise, outstanding engineering, quality mindset, and excellent testing facilities, and the team is bringing that to Flocean. The team helped develop Seabox, a commercially qualified sulfate and salt removal tech for subsea deployment, that operated 18 months with membranes, providing valuable learnings - and, to our knowledge, this is the only proper deployment of a subsea desal system to date. Flocean is deeply data-driven. They have developed and plan to employ digital twins of each system, used from the initial project feasibility assessment stage, for design optimization, and continuing into a working project for production optimization and maintenance planning. We like how they are approaching the challenge of building and operating reliable subsea desal systems.
Strong Market Pull
The Flocean team deeply understands the customer pain and has developed a business model to meet their customers' wants, which is clean water delivered to them reliably at a fixed price, in a water purchase agreement (WPA) over ~25 years - similar to how utilities purchase renewable energy in ~25 yr power purchase agreements (PPAs). Flocean’s “product” is a special purpose vehicle (SPV) that would own and operate a subsea desal plant that would deliver water to an end customer under a long-term WPA. Flocean has sold a demo system to a customer in the Red Sea area and announced agreements with Aqaba Water Authority (Jordan) and with the Maldives. The customer pipeline is robust and growing.
Strong Partners
In addition to their partnership with Fsubsea, the Flocean team have surrounded themselves with some seriously strong partners, such as Siemens Energy. We’re deeply pleased to invest alongside Nysno,the sovereign climate fund of Norway, ocean specialist investor Katapult, Freebird Partners, MP Pensjon, and a group of former Bridgewater executives. Alex has built a talented group of advisors and partners, including specialists with deep experience in renewable project financing and structuring of WPAs & PPAs. It takes a village, and Alex has expertly assembled an impressive team and set of partners.
Flocean is a massively impressive company with a bright future. Alex and the entire Flocean team: thanks for letting us dive into it with you.