The cost equation
Currently aviation biofuels would be priced at about $5 to $7 a gallon, according to experts at the Chicago conference, compared to petroleum-based aviation fuel at just over $3 a gallon. That gap will need to be eliminated if biofuel is ever to really take off as a jet fuel.
But oil prices are expected to rise, and a federal price on carbon emissions could make biofuels more competitive. Industry backers are also calling for aviation fuel to be covered under the federal Renewable Fuel Standard, which mandates a certain amount of renewable fuel to be blended into gasoline and diesel.
“We need to build better planes and operate them more efficiently, and being able to switch fuel to sustainable, low-carbon fuel is really important,” said Samartzis. He said the aviation sector currently has “very limited” options when trying to reduce carbon emissions.
Clean Energy Trust executive director Amy Francetic says states can also give regional biofuel development efforts a boost. Washington state has passed a bonding authority meant to help airports invest in biofuel infrastructure and development, and Kentucky supports biofuels through their alternative fuels tax break. Ohio is supporting an algae biofuels research program in conjunction with the Defense Department, she said, and North Carolina has devoted $5 million a year in state funding to aviation biofuel efforts. In Illinois, the University of Illinois’s biosciences institute is working with BP with funding from an Illinois Department of Commerce and Economic Opportunity (DCEO) grant.
“We need to leverage ways airports can work with their cities and states; help universities and young companies compete for research funding; look for state, municipal and federal incentives and bonding mechanisms; and establish Midwest regional partnerships, including with airports,” Francetic said. She added that airlines stand to benefit long-term from using biofuels since they create less wear and tear on engines.
Stephen Emmert, environmental strategy-regional director for Boeing Commercial Airlines, boiled the aviation biofuels cost equation down to three crucial trends that he thinks all point toward future viability.
“There is the price of oil increasing, the price of environmental attributes of biofuels increasing, the technology is improving – the cost of conversion, the cost of processing have decreased,” he said. “When those three overlap and the price point for biofuels and conventional fuels crosses is a hard question to answer,” but he thinks it will happen eventually.
A complicated supply chain
James Rekoske, Honeywell UOP vice president and general manager, says coordinating the supply chain for an aviation biofuel industry is especially challenging given that it involves transport routes and players who haven’t necessarily worked together before. Whereas there are long-established markets and processes for selling petroleum products and transporting them between sources, refineries and end users, no such network exists for aviation biofuels.
“This value chain starts with someone who grows something, continues to someone who can convert it to something usable, then to someone who can distribute it to others, selling it to consumers who want it,” said Rekoske. “That value chain is long, distributed and unique in many ways … what’s familiar in agriculture is not familiar in the oil industry.”
For example, he explained, oil contracts are usually settled on 30-day timetables, whereas agricultural producers are typically paid within three days. He said the company converting the feedstock to fuel will typically be the lynchpin, bearing the main responsibility for brokering deals and raising capital and depending on reliable suppliers and distributors on either side of the equation to make it all work.
Aviation biofuel research projects aimed at commercial deployment have been carried out in Australia and New Zealand and in the U.S. Pacific Northwest, and a similar project is currently underway in Mexico.
Diversity in job creation and feedstocks
In December, according to Francetic, MASBI members will report on initial conclusions about the viability of different feedstocks. Until then, she said, members do not want to speculate on which feedstocks might be most appropriate for a Midwestern industry.
“A portfolio approach is necessary because you don’t want to have the risk of one feedstock being the key one,” she said. “If airlines are going to purchase quantities long-term, they want diversity – a lot of different small companies with different technology solutions.”
In an interview after the conference, Francetic noted that MASBI participants are “also very focused on the metrics of job creation, economic impact.”
“We’re very excited about the fact this could spur job growth and a new industry, draw revenues into the region for our small companies and research labs,” she said. “We have the opportunity to have a great impact.”