AI-driven Industrial Decarbonization: Our Investment in Fero Labs

Blackhorn Ventures is proud to announce our latest investment in Fero Labs, alongside Climate Investment (formerly known as OGCI Climate Investments), Innovation Endeavors, and DI Technology.  Fero Labs is an AI-driven manufacturing process optimization software that simultaneously reduces emissions and improves operational performance in hard-to-decarbonize industries. 

Emissions from heavy industry and manufacturing are hard-to-abate, and a large and growing source of global emissions

Factories consume 54% of global energy resources, drive 25% of global emissions and comprise 16% of global GDP according to World Economic Forum estimates, making manufacturing a high impact area on the path to net zero. Asset-heavy approaches are necessary in emissions reductions efforts, but they take time and are expensive to implement. We believe that digital infrastructure (especially AI and Machine Learning) can be leveraged to accelerate emissions reductions and drive operational savings in the immediate term.  Factory optimization is a deep pool where we see massive opportunities for value creation.

Fero Labs works with some of the largest global players in cement, steel and chemical manufacturing, using AI to help their engineers make more efficient production decisions. Fero Labs’ software has uncovered upwards of $20M in savings across more than a dozen plants. Their customers, including Covestro, Gerdau, and CELSA Nordic, reduced more than 100,000 tons of carbon emissions and close to a million pounds of raw materials.  Reducing the carbon footprint of manufacturing is a much more complex process than making a one-to-one substitution for lower carbon raw materials, energy sources, or production equipment. Each change in the manufacturing process requires engineers to adjust operating conditions to maintain the same level of production quality, throughput, and profits. When these adjustments are made manually, production lines can take several years of engineering hours to achieve a 5% reduction in emissions. Fero Labs has helped their customers drive as much as 20% emissions reductions – in a matter of months.

Fero Labs offers a scalable, easily deployable solution for manufacturing process decarbonization

Fero Labs is no-code platform for manufacturing engineers and operators to identify areas for decarbonization in their operations, starting with cement, steel, and chemicals. These three subsectors are the highest emitting industrial sectors, according to International Energy Agency (IEA) data.

Unlike the black-box AI popularly seen in tools like ChatGPT, Fero Labs makes it possible for users to know if they can trust the results.  Their solution makes it easy to implement changes to an active manufacturing process, without sacrificing metrics such as profit margins or yield:

Predicting how changes impact the factory bottom line requires both deep data science experience and manufacturing process knowledge. The intersection of these two highly specialized skillsets in the same person is rare. Advanced data science is not typically taught as part of engineering training, and data scientists rarely have prior experience in manufacturing processes. Manufacturers struggle to compete with tech companies to attract data science talent. Fero makes it possible for manufacturing engineers to use complex data science-driven optimizations without needing to know how to program in Python.

(Image courtesy of Fero Labs.  The screenshot shows how one of Fero’s actual customers in the steel industry uses their solution to test the impact of changing raw materials suppliers impacts the tensile strength of the final product).

We got to know Berk and Alp, the co-founders of Fero Labs, over nearly a year before we invested. Their technical expertise was obvious from the beginning: Berk’s PhD research focused on optimizing optical networking using software, and Alp teaches machine learning at Columbia. During that period the team’s passion for decarbonization and unique product insight became increasingly apparent as we saw how quickly they were able to deploy the product to new customers, and how little support Fero’s users needed.

Fero’s platform drives long-term decarbonization strategy in heavy manufacturing

Fero’s customers use their platform to plan and execute their long term decarbonization efforts, rather than using it to merely drive a once-and-done emissions reduction effort. Reducing emissions in a manufacturing process is a gradual process that requires continuous adaptation to changes in energy supply, raw materials purity, and changing business priorities. In addition to predicting the operational or business impacts of decarbonization efforts, Fero Labs also recommends process changes in order to achieve emissions reductions goals:

Fero Labs directly drives Scope 1, 2, and 3 emissions reductions for heavy industrial customers via a suite of process optimization models, including:

• Energy minimization through shorter batch cycles and reduced over-processing of raw materials [Scope 2]
• Scrap rate reduction via improved process stability, despite variability in input purity [Scope 1 and 2]
• Enabling circular/recycled manufacturing and reducing raw virgin input consumption [Scope 3]
• Fouling minimization [Scope 2]
• Enabling alternative fuels for clinker production in cement [Scope 1, 2, and 3].

On a blended and averaged basis, their solution helps customers reduce emissions by 5-10% while improving process profitability. The company estimates that it could achieve over 800 MT in CO2 emissions reduction in heavy manufacturing.

Fero Labs is led by a highly technical team with deep domain expertise

Fero Labs is led by co-founders CEO Berk Birand, (PhD in Electrical Engineering from Columbia University), and Chief Scientist Alp Kucukelbir, (PhD in Engineering and Applied Science from Yale and faculty at Columbia). They have brought together key manufacturing sector leaders to join their management team and advisory board including Klaus Kleinfeld, ex-CEO of Alcoa and Siemens. The company serves major sector leaders as customers, including Gerdau, Covestro, and Henkel. Since launching in 2015, Fero software has provided industrial customers an average ROI of 233% and saved hundreds of thousands of tons of CO2 emissions. They’re hiring sales development representatives to scale up their go-to-market efforts. For more information on open roles visit our job board here.