The modern world is dependent on a vast network for extracting, processing, transporting and ultimately consuming hydrocarbons like crude oil and natural gas. But these resources come with a cost: they’re finite, difficult to extract, and take carbon dioxide out of the ground and release it into the air.

Instead of reducing humanity’s dependence on hydrocarbons — which is impossible or undesirable or both, depending on who you ask — Terraform Industries’ solution is to produce this resource, using electricity and air, via a system it calls the Terraformer. Today, the startup is announcing that it has commissioned a demonstrator Terraformer and produced synthetic natural gas for the first time.

Roughly the size of two shipping containers, the Terraformer consists of three subsystems: an electrolyzer, which converts solar power into hydrogen; a direct air capture system that captures CO2; and a chemical reactor that ingests both these inputs to produce pipeline-grade synthetic natural gas. The entire machine is optimized for a one-megawatt solar array.

As CEO Casey Handmer admits, what the company has done is not “super original.” Electrolysis and Sabatier chemical reactors are well understood processes, for example. But the company has been able to innovate on the process, including building its proprietary direct air capture system, and adapting all of it to work with a variable energy source, solar power. So while any particular subsystem can trace its origins to, say, the nineteenth or twentieth century, the entire process is entirely new.

Image Credits: Terraform Industries

The result is some fairly staggering cost reductions: Terraform says its system converts clean electricity into hydrogen at less than $2.50 per kilogram of H2 (currently, green hydrogen ranges from $5-11 per kilogram, Handmer estimated). The direct air capture system also filters CO2 for less than $250 per ton, which the company said in a statement, is a world record.

The startup says that improvements are already in the works to bring these prices down even further to ensure that its synthetic natural gas hits cost parity with conventionally sourced liquified natural gas. Much of that is dependent on the build-out of lots (and lots and lots) of cheap solar power, and the requisite production of thousands of Terraformers per year.

Indeed, while Handmer is an extraordinarily ambitious thinker, it would be a mistake to think his head is stuck in the clouds. He’s keenly aware that Terraform’s plans will be dead in the water without a strong business case behind the company.

Image Credits: Terraform Industries (opens in a new window)

“There’s this idea that we’ve been driving towards, which is, a lot of these cool technologies to address the climate problem are fundamentally not within the realm of capitalism because they don’t make money,” he said. “They actually consume more money than they make. That makes it really, really hard to scale them. But if you can figure out some way to make more money than you use, then you are inside the tent of capitalism. That is just a system to which money naturally flows. That’s the critical thing to do.”

Burbank, California-based Terraform has agreements to sell the small amounts of natural gas it produced to two unnamed utilities, but even though the initial volume is low, “it’s a very key step,” Handmer said. “It shows that we have produced gas that meets their standards.”

The company has ongoing discussions regarding prototyping or selling standalone electrolyzers as separate products, and making liquid fuels other than methane. Terraform is also taking reservations for the first production Terraformers — with the ultimate aim of ramping up factories to support a buildout that could do nothing less than transform the world’s energy systems.