Now and Never: What’s working, will work, and won’t work for aviation biofuels

February 14, 2012 |

New reports from Bloomberg and the USDA focus on 2018 as a critical year for commercial-scale, affordable aviation fuels

In New York, Bloomberg New Energy Finance said that jatropha-based fuels were the near-term candidate as sustainable aviation fuels available at prices competitive with conventional jet fuel. The BNEF research unit said that it expected jatropha-based jet fuel to be available at  $0.86-a-litre ($3.25 per gallon) by 2018.

The Bloomberg report

Following the emergence of jatropha-based fuels, BNEF said that aviation fuel made from pyrolysis of woody biomass represented the next most affordable category of aviation biofuels, projecting that jet fuel from this source could be available at $0.90 per liter ($3.40 per gallon) by 2018.

BNEF projected that aviation biofuels made from the gasification of wood, and the Fisher-Tropsch process – such as companies like Coskata and Rentech propose – would not likely be commercial “until well into the 2020s,” and would be available only at a cost of $2.60 per liter ($9.83 per gallon) by 2018.

BNEF also said that “large-scale, biofuel-producing algae farms will not appear this decade,” and that aviation biofuels based on pal, soybeans or canola “may never become fully competitive.”

In looking at downstream demand, BNEF noted that the International Air Transport Association has called for 6% of jet fuel demand, or 8 billion liters per year, to be met by biofuels by 2020, but said that it expects airline demand to be 2 percent or less over the next few years – uncompetitive on cost, and bought by airlines solely to “improve their environmental credentials and to gain experience of biofuels technologies.”

Harry Boyle, lead bioenergy analyst at Bloomberg New Energy Finance, said: “If governments want airlines to burn a significant proportion of non-fossil fuel before 2020, they will have either to subsidise advanced-but-not-yet-economic biofuels or, more likely, introduce mandates requiring carriers to use a certain percentage of sustainable biofuels in their mix, and put up with complaints that this is driving up ticket prices.”

The USDA Farm to Fly report

in Washington, the USDA released its “Farm to Fly report”, in which it stated: “the FAA has set an ambitious target of one billion gallons per year of aviation biofuel capacity by 2018, which the CAAFI team believes is achievable if sufficient progress is made in supporting a sustainable supply chain.

Last week, Airlines for America (A4A) and Boeing said that, in order to make significant progress toward that goal, they called for public sector support across the supply chain and at least two successful commercial-scale projects as a precursor to private investment.

Farm to Fly’s report, in addressing barriers, focused less on technology cost, and more on feedstock development efforts, and finance for scale. The report stated “Currently, there are more than 20 second- and third-generation biofuel development projects occurring throughout the United States. These projects utilize a variety of feedstock and process technologies to produce renewable fuels, and several have the potential to produce aviation biofuel. However, these projects need additional funding to support biofuel development in the near term.”

The complete Farm to Fly report, “Agriculture and Aviation: Partners in Prosperity,” is available here:

The bottom line: What’s here in 2018, sooner, later or never?

The independent reports key in on 2018 – the one, from a capacity buildup basis (Farm to Fly), and the other from a cost-basis (Bloomberg). The availability of affordable jatropha-based biofuel – since jatropha is not expected to be cultivated in the US – should be expected to be an incremental amount of global capacity by 2018, and the one billion gallons of build-up expected in the US is going to come from different resources.

What are the US feedstocks? While highlighting the potential availability of camelina-based oilseed biofuels at affordable rates, the Bloomberg report is emphatic on its emphasis on pyrolysis of wood biomass as the near-term winner. Winners there? Companies like Envergent and KiOR, among those where there is near-term visibility on capacity buildup. There are also earlier-stage companies such as Anellotech working towards commercialization.

Bloomberg does not address the near-term availability of jet fuels made from upgrading alcohols – the ATJ opportunity that has gained traction in recent months. A reason why? As with oilseed-based biofuels, airlines are expected to have to compete with road transport for biofuels, and the two gallons of ethanol that result in a gallon of jet fuel do not offer, presumably, a case that the airlines are going to be able to compete with road transport when it comes to, say, corn starch-based fuels in this decade.

In life, to the victor belongs the spoils. In biofuels, the spoils go to the financier. As we published in our overview, “Aviation and military biofuels: new thinking on finance, fuels,” we expect that airlines will be able to successfully compete for affordable fuels in the near-term, based on their ability to form buyer cooperatives that offer a futures-based financing to the advanced biofuels industry, in the form of advanced payments for aviation biofuel orders.

The Digest detailed how such a scheme might work, here.

Under those conditions, we do see the potential for capacity-building dedicated to aviation biofuels, instead of a bidding-war breaking out between the roads and the skies. Key to reducing costs – high-yield feedstocks available at scale.

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