Renewable Aviation Fuel: Ready for Take-Off

This is part one of a three part series introducing the renewable aviation fuel market in partnership with The Carbon War Room and has been reprinted from CCW Magazine. 

No sector of the world’s economy is more ripe and ready for the Carbon War Room’s approach to emissions reduction than aviation.

Encroaching international regulation, rising fuel prices and falling passenger numbers as holidaymakers look closer to home to save money are all contributing to commercial airlines’ healthy appetite for the uptake of renewable jet fuels.

And the airlines are not alone – militaries worldwide consume enormous quantities of aviation fuels. In fact, the US military is the largest buyer of transportation fuels in the world, and is spending tens of millions testing and certifying renewable fuels and has recently committed to spend $170 million on co-financing production facilities with the private sector.

Airlines are enthusiastically pushing for commercialisation of recently developed alternatives to traditional fuels in a bid to diversity their fuel supply, develop new hedging strategies and reduce their environmental impact, and a wide range of companies hoping to profit from this developing market have emerged with both new and proven technologies.

The Carbon War Room targets business sectors where potential exists for gigaton-scale carbon reductions, which can be achieved by implementing existing technologies within current policy and regulatory regimes, and where its expertise can catalyse change by helping businesses overcome barriers such as lack of information or high transaction costs.

Barriers to development

Airlines alone spent $178 billion on jet fuel in 2011. The industry is highly vulnerable to fuel price fluctuations, with fuel typically representing 25-40 percent of operating costs. And this year sees the sector join the EU emissions trading system, the first attempt to regulate reduction of greenhouse gas emissions in the absence of international agreement on how to tackle the industry’s growing impacts.

However, despite the enthusiasm – and concrete actions – of both the commercial aviation sector and militaries worldwide, a number of barriers to development of a renewable jet fuel production industry that can meet demand, at a price competitive with fossil fuels, remain.

As is typical when new technologies emerge, a lack of impartial, accurate information on production methods, performance and the potential for production of useful quantities is hindering investment in scale-up and forcing caution from consumers who cannot risk faltering supply.

Renewablejetfuels.org, a partnership between CWR and the world’s largest scientific publisher, Elsevier, aims to address this dearth of data using Elsevier’s Biofuels Techselect product. With economic viability, scalability and sustainability its three principal criteria, the site evaluates renewable jet fuel supply chain companies, providing rankings that “represent our best assessment of companies’ ability to contribute to near-mid term large scale carbon dioxide reductions.”

Offering impartial information
Jan Paul Grollé, managing director of alternative energy at Elsevier, says: “As the largest scientific publisher in the world, we thought we could provide real value if we could collect, organise and present information in the way we do in other markets to help people decide what technology is really viable and what isn’t.

“For the airlines, choosing a renewable fuel provider is a big risk, and they could face real problems if they get into bed with the wrong company. And it’s not just a yes or no question – there is a lot of complexity people have to handle.”

Suzanne Hunt leads the Carbon War Room’s work on aviation and renewable fuels. She says: “The idea is to figure out how to reduce massive amounts of carbon from the aviation sector, and where there is money to be made in doing so.”

There are a number of areas where progress can be made – from designing better planes and engines to switching to advanced satellite navigation to make flight paths more efficient. But it is the switch to low carbon fuels the Carbon War Room has chosen to focus on first.

“Fuels are the area we thought we could have the most impact and found the best fit with CWR’s entrepreneurial model,” Hunt says. “And when we looked at the renewable jet fuels space, we found a whole lot of companies facing the same challenges – feedstocks, resource constraints, sustainability challenges; and a major barrier holding the industry back is getting the finances to take it from where it is now, at research, pilot or demonstration scale, to commercial scale production.”

Crossing the valley of death

Through renewablejetfuels.org, the Carbon War Room aims to work with the aviation sector to help airlines gain access to renewable fuels, while helping the advanced renewable fuel marketplace and industry cross the financial “valley of death.”

Hunt says: “Where we are right now, it is very clear that with the complex array of technologies, new and old companies getting into a new space and a wide range of feedstocks, there is a lot of confusion, misinformation and missing information.

“In order to get over the finance barrier, companies need off-take agreements – binding contracts to purchase their products from the big fuel buyers.

“And for the airlines, militaries, delivery companies and other potential customers to have confidence to go forward they need a better understanding of this new space and new deal structures, because for their entire existence they’ve been buying the same fuels from the same companies in the petroleum supply chain.”

Grollé agrees that the lack of reliable information is a major issue for the industry. He says: “Even as a newspaper reader looking at articles in the press, you’ll find companies in biofuels that have gone belly up when not so long ago investors had put money in. In our talks with experts, we often find wrong investment decisions could have been prevented. Incidentally, these experts even come across companies claiming they’re doing things that aren’t possible. By unlocking reliable information, we aim to contribute to viable biofuel developers and producers being recognised as such.”

“But if you don’t know where to look for the experts or their opinions, it can be difficult.”

Grollé says airlines probably have just one or two employees with the capability to vet emerging technologies and suppliers. He says: “We’re employing people to call all the suppliers and gather the information we know decision makers need.

“We’re creating a resource people can trust, that allows them to compare the various technologies and suppliers on the same basis. And users are very enthusiastic – one comment we got back was ‘this is really the holy grail for us because this kind of information is hard to come by if you’re doing it on your own.’”

The site is a platform for buyers and producers to come together and understand their roles in shaping the future of the market. And that means doing deals: providing financiers with certainty buying into commercial scale-up of new fuel producers will bring return on their investment. Hunt says: “The next big challenge is the finance barrier, so the next big priority for us is to use the information tools we’re building to inform and accelerate deals.

“The airlines have many different companies coming to them and pitching themselves and their products. A few airlines have small one-off purchases, and a number have announced what they’re calling deals, but thus far they’re more intentions to work together, not legal contracts for purchasing fuel – it’s an important distinction: a contract you can take to the bank, but a press release you can’t.”

Attracting investment
The website means potential purchasers of renewable aviation fuels can compare companies they’re considering working with. Hunt says: “Maybe they need to understand what’s going on better, or maybe they have companies they’re planning on working with, but want information from an independent source.

“The website’s format offers comparability. When you’re faced with a bunch of PowerPoint presentations and pitch materials they can be hard to sift through. But with our database you can see side by side-by-side the companies you’re interested in – whether their product is certified, what quantities they can provide, where they’re based, what patents they hold, how much money they’ve raised to date, what technical validations they’ve obtained, what greenhouse gas reduction levels they can achieve, etc…”

Grollé also believes renewablejetfuels.org will play a role in facilitating construction of commercial fuel manufacturing facilities. He says: “It’s obvious investment is needed to build these plants and get production capacity to a scale where biofuels become available at a competitive price. That’s the hurdle the industry needs to beat now.

“Some of the technologies are viable, if only we could produce them at sufficient scale. That’s where we have a bottleneck at the moment, waiting for investors and buyers to commit.

“They need to have confidence the technologies are really viable, and that’s where we hope we can speed up the process and support better investments by providing the information investors need.”

Learn more about the Carbon War Room here.