by Jim Lane (Biofuels Digest) This week marks the 10th anniversary of the first demo flight on biofuel which was done by Virgin Atlantic.
LanzaTech CEO Jennifer Holmgren shared the factoid that, since that day, more than 100,000 commercial flights have used low carbon fuels. “This is especially amazing since in 2006 I was told over and over that biofuel flight would never be possible commercially; we aren’t gonna fly on anything other than kerosene,” she reminisced.
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The gallonage is still minimal and airlines would like to use a lot, lot more. The hold-up continues to be cost, and to some extent production capacity, and here or there a carbon policy not well-designed for aviation is causing problem. But really, it’s the cost.
Let’s do some math. Allowing for around 40 cents per gallon to amortize the capital expense of building a plant, and 20 percent margin to pay down the debt and offer venture-level returns for the partners taking elevated risks, it stand to reason that in a world of $2.00 jet fuel (more on that here ), a quick set of inputs on a canculator will tell you that you have $1.20 per gallon to pay for the operation of the plant, including feedstock. Allowing at least $0.05 per gallon for labor and other essentials, and think $1.15 for the feedstock, best case scenario, and that leads one quickly to a maximum price of 17 cents per pound.
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So it comes down to this: zero-cost feedstock (meaning zero cost now, and zero cost in 2030 too while the capex of plant #1 is still being paid off). Or, carvon credits.
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A report, titled Innovative Funding for Sustainable Aviation Fuel at U.S. Airports: Explored at Seattle-Tacoma International, reveals the financial tools available to U.S. airports, and outlines legal constraints and financial impacts of each tool. The report found that no single tool could generate enough funding to cover the higher cost of biofuel, and recommended combining a number of funding tools.
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The key recommendations?
1. While a U.S. airport cannot pay for aircraft fuel, it could pay directly for SAF co-benefits. Public dollars cannot cover a commodity used by a for-profit private firm. However, SAF produces direct air quality benefits, reduces greenhouse gas emissions, and supports regional economic development—all of which are valued by airports. These characteristics are referred to as SAF “co-benefits” for this report.
2. There are numerous viable funding mechanisms with significant revenue potential. Two of the four recommended mechanisms require FAA approval as they are currently not considered an acceptable use of airport revenue. The most promising mechanisms that can be implemented at Sea-Tac are:
Corporate Support—corporations contribute to offset their flight emissions ($1 million to $2.5 million per year)
Port Taxing Authority—these funds support air quality benefits, similar to the Port’s Clean Truck Program (Funding amount is variable and dependent on Port Commission priorities)ii
Use of General Non-Aeronautical Revenue (requires FAA approval)—while there are several individual non-aeronautical fees and revenue sources that could be directed toward SAF co-benefits(such as parking or landside fees), offering non-source specific revenues only when the airport achieves a particular total revenue threshold could create a low-risk, non-targeted source for SAF co-benefit funds ($1.0 million to $4.0 million per year)
Airline Agreement (requires FAA approval)—implement a fund via the airline operating agreement that is not subject to revenue sharing, or create a new fee ($380,000 to $2.3 million per year)
3. Infrastructure investment could jump-start regional SAF production. The most promising approach to support infrastructure is indirect via the procurement of SAF co-benefits. The certainty of a medium-to-long-term commitment made by the Port reduces investment risks for private sector funders. A longer-term contract from Sea-Tac to procure SAF co-benefits is favorable over one from airlines which are subject to greater market risks and exposure. Most other mechanisms identified for financing infrastructure projects are outside the Port’s legal scope. Focusing on funding SAF’s co-benefits is a better fit with the Port’s activities and mission.
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The ICAO Secretariat’s proposal intended to see 128 million tons of biofuels a year being burned in plane engines by 2040, going up to 285 million tons (half of all aviation fuel) by 2050. By comparison, some 82 million tons of biofuels are currently used every year in transport worldwide. The proposal would have led to an unprecedented expansion in biofuel production, more than likely in poorer countries. It would have accelerated the expansion of industrial palm oil which Friends of the Earth says is major driver of land grabbing across the tropics, threatening the lives and livelihoods of millions in the developing world.
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There’s good news. As we reported in October, Qantas Airlines will buy 8 million gallons of aviation biofuel annually from SG Preston beginning in 2020 to use in all of its flights from Los Angeles to Australia, flying on a 50/50 basis.
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The Military Option
In June 2011, the Secretaries of Agriculture, Energy, and Navy signed MOU to commit $510M (up to $170M from each agency) to produce hydrocarbon jet and diesel biofuels in the near-term.
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How’s that effort proceeding? This illuminating presentation from the DOE’s Zia Haq and Borka Kostova was given at the 2017 DOE Project Peer Review.
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It works, biobased jet fuel, that is. And everyone knows that airlines have to address carbon. READ MORE Download report