Is a commercial aviation biofuel industry around the corner? If turning that corner within a decade is acceptable, then the answer is yes. At least according to a major study released today that includes input from a wide range of stakeholders including the investment community, regulators, government and academia.
The study, completed by Midwest Aviation Sustainable Biofuels Initiative (MASBI), seeks to develop an “actionable roadmap” to foster a sustainable advanced biofuels industry that can help the US reduce carbon emissions from the aviation sector and strengthen energy security.
Each year, more than 20 billion gallons of jet fuel are required to support US commercial aviation and the US military. And while the military is the largest single jet fuel consumer, the armed forces account for less than 50% of the total, Seth Snyder, an ARGONNE National Laboratory researcher – and one of the study’s lead researchers – recently told Breaking Energy.
The military is famous for pioneering the use of new technology that becomes mainstream – some claim microwave ovens began this way – but Snyder believes major aviation biofuel breakthroughs will come from the private sector.
“The military has made some investments, at what some would call above-market rates, but the private sector is the most likely source of a breakthrough,” he said. “If we create the signals that there’s a market, industry will innovate. And the military can create those signals by saying they will purchase “x” amount [of fuel] at commercial rates.”
MASBI’s recommendations cover research and development, production, financing, policy and sustainability, and provide a realistic assessment of the prospects to commercialize renewable jet fuels.
With regard to R&D, the study recommends innovation for non-nutritional feedstock sources of aviation biofuels. Most of the fuel currently produced comes from vegetable oil, which mostly produces renewable diesel fuel and yields a smaller volume of aviation fuel, Snyder explained. “We recommend tailoring feedstocks so the product that comes out is jet instead of diesel.”
More research is required into potential market dynamics of various feedstocks and the products they can produce, such as soaps and lubricants. “What in addition to jet fuel can you make from these feedstocks?” Snyder asked. This is important because companies producing different products using the same feedstocks that produce jet fuel could create a competitive situation that constrains feedstock supply and increases the price of the finished jet fuel product.
“Companies will make what nets the most money. Why will someone make jet if there is a higher margin elsewhere? We need detailed analysis into this,” Snyder said.
On the production side of the equation, one critical recommendation is to expedite regulatory approvals for advanced aviation biofuels. For example, receiving EPA qualification for advanced biofuels – which is required to receive Renewable Identification Numbers (RINs), the mechanism used to enforce Renewable Fuels Standards(RFS) – is a slow process that must be sped up, said Snyder.
“If products are not approved, that sends a signal not to invest.”
The study makes several financing recommendations, like balancing risk and reward for early adopters. The research finds starting with smaller-scale operations that can become commercially viable, then grow over time is preferable to jumping directly into highly capital-intensive, high-risk, high-volume operations. “The idea is to lock in a certain volume the market will take and economies of scale will bring down costs and increase volumes over time,” he said.
Snyder referenced the recent United Airlines deal to purchase 15 million gallons of renewable jet fuel over a 3-year period as an example.
“We have executed a definitive purchase agreement with AltAir Fuels for cost-competitive, sustainable, advanced biofuels at commercial scale, representing a historic milestone for aviation. In this strategic partnership, AltAir Fuels will retrofit part of an existing petroleum refinery to become a 30 million gallon, advanced biofuel refinery near Los Angeles, Calif. AltAir will produce low-carbon, renewable jet fuel and other renewable products. United has collaborated with AltAir Fuels since 2009 and has agreed to buy 15 million gallons of lower-carbon, renewable jet fuel over a three-year period, with the option to purchase more. We’re purchasing the advanced biofuel at a price competitive with traditional, petroleum-based jet fuel, and AltAir expects to begin delivering five million gallons of renewable jet fuel per year to us starting in 2014. We’ll use the biofuel on flights operating out of our Los Angeles hub (LAX).” – United Airlines.
The study also makes several policy recommendations to help foster a commercial renewable jet fuel industry, with medium- to long-term regulatory certainty being of paramount importance. There needs to be a reasonable degree of certainty that policies will remain in place long enough for investors to recoup capital, said Snyder.
In keeping with the start-small approach, the researchers suggest demonstration projects could be built in regions that want this type of development – and the job/economic growth it brings – but don’t want to wait for federal policy support.
“States and regions can supply construction bonds to get smaller plants built, that over time will become the large-scale producers,” Snyder said.
The researchers anticipate a commercial-scale aviation biofuel industry could develop within a decade if their recommendations are acted upon.
“There was a lot of debate and discussion, we brought a lot of minds together to evaluate the entire value chain, including industry, academia, the investment community, government and NGOs,” Snyder told Breaking Energy. While 100% approval from all stakeholders was not possible, these recommendations represent a maximum compromise, he said.
“As an organization, we are committed to success.”