Renewable Aviation Fuel: A Market in the Making

This is part two of a three part series introducing the renewable aviation fuel market in partnership with The Carbon War Room & reprinted from CCW Magazine. Read part one here.

The renewable jet fuels market is on the cusp of remarkable success. Just a few short years ago, the idea of manufacturing fuels from algae, various plant species, waste, industrial off-gases and other feedstocks was theory – a glint in a scientist’s eye. Yet today, through a combination of research breakthroughs and demand from an industry eager to switch from fossil fuels, production of renewable jet fuels in the quantities needed to enable our hunger for air travel is just around the corner.

Technologies are proven, performance tested, and certification by bodies such as ASTM has been gained in a number of cases.

For some of the leading lights in this new market, scale-up to commercial production is underway; others are actively seeking investment to allow the millions of gallons of fuel required to power the world’s aircraft to flow.

Rapid development
Graham Ellis, vice president of fuels and business development for California-based Solazyme, whose fuel production process is based on genetically modified algae, says: “If you look back to 2007, the world didn’t have renewable jet fuels at all, we were sitting in labs and had just about figured out it was possible. A year or two later there were demonstration fuels being produced to show the processes would work and test flights began. And now we’ve got ASTM certification.”

Solazyme is not alone in its readiness for the next stage of market development. Kirk Haney, president and CEO of San Diego’s SG Biofuels, says: “We’ve developed the technology and brought the price down, we now need the capital to deploy at scale. However, all the capital markets are extremely nervous, as returns in the last ten years have not met their expectations.

“But we’re getting commitments from carriers that they’re willing to put off-take agreements in place. If we can demonstrate to investors we have customers willing to make 20-year commitments to buy what we can supply, their return is guaranteed.”

Lanzatech, a company born in New Zealand but with offices in the US and China, tops the rankings at the Carbon War Room’s renewablejetfuels.org website. Business development manager Carl Wolf says: “We’ve got projects planned all over the world, utilising multiple feedstocks, and we’re looking to rapidly scale up our production.

“We see a very bright future, particularly in the aviation field, which is going to be a big market, with demand coming from both commercial and defence sectors, which are crying out for jet fuel that’s not based on fossil resources.”

Diminishing oil dependence

“With airlines’ and defence departments’ massive operations, a rise in the price of a barrel of crude means millions of dollars more they have to spend. We hope with our fuels customers will be insulated from price rises to a certain extent, and we can help them with tightening environmental regulations worldwide.

“They’re eager for sustainable jet fuels – the aviation sector really wants to ramp this up to commercial scale so they can compete in the marketplace with fossil fuels.”

However, while airlines are both enthusiastic and committed, there are still barriers to be overcome. Wolf says: “We’re seeing everybody right now racing to scale up – there are a lot of companies and proven technologies out there, but getting to scale is going to be hard.

“It’s a tough climate to attract cash in out there, even though the airlines want sustainable jet fuels. The sector has to get some commercial scale plants built so we can show we can do it at a competitive cost. But there is the advantage that as bio-jet fuel facilities are built, we’re only going to see fossil fuels going up in price, which will help bring closer price parity from the other direction.”

Wolf, too, highlights the industry’s relative youth. He says: “I can remember six or seven years ago when the idea of aviation biofuels was kind of a joke, now we’re talking about commercialisation. But it may take a little more time.”

There will be some upheaval as the sector develops, Wolf believes, with winners and losers, mergers and acquisitions, companies failing while others fulfil their promise and bring their products to market.

He says: “There will be hurdles along the way, but the market signals are clear – the defence sector and airlines have made it clear they want renewable jet fuels, there is no doubt about that. It will happen.

“The industry is developing, and there has already been a lot of progress. Investors should act – the market is coming to life. It’s an exciting time.”

Learn more about the Carbon War Room here.