Quick Win: aviation biofuels offers breakout for clean energy

October 13, 2011 |

Aviation biofuels may represent the breakout success opportunity that biofuels, clean energy needs. The Digest looks at the case.

In Copenhagen this week, a coalition of companies and associations involved in aviation biofuels made a strong case for the sector not only as a quick win for biofuels, but as a quick win for clean energy as a whole.

Pitching Martin Lidegaard, the incoming Danish Minister for Climate, Energy and Building over a working lunch, Paul Steele, executive director of the Air Transport Action Group made the quick win case.

“Aviation is hard at work with a spectrum of activities to reduce environmental impact. But we see aviation biofuels as a quick win. First, we have just 1700 airports as fuel points, versus distributing to and possibly retrofitting hundreds of thousands of gas stations around the world. Second, aviation biofuels involve no infrastructure change – they drop right into the existing engines. Third, you have a sector that has done everything it can to do the flight tests, the certifications, sustainability groups, and even participating with investment in biofuels, to stimulate production.”

The case is strong. To convert 20 percent of road transport around the world to biofuels  – a threshold most would describe as a major clean energy “win” – would take a transformative infusion of capital, and require the aggregation of as much as 1.5 billion tons of biomass. The impact? Transformative. The logistics? Daunting. The timelines? Awfully long for a public which feeds on 24-hour news cycles and 1-2 year product life cycles.

Road transport is the big prize – there’s no doubt, but is it as well shaped up for a quick win?

By contrast, converting 20 percent of aviation to biofuels would transform modern aviation, be a major signal that clean energy can work at scale, and offers a model for developing R&D, certification and supply chain consortia. It would take around 12 billion gallons of biofuels, and perhaps 120 million tons of biomass, distributed to 1700 or so airports around the world.

Feedstock, regulatory and finance challenges

The challenges, while simplified in terms of infrastructure, are complex enough when it comes to feedstock, capital and regulations.

For example, take sustainability rules. Naturally, there are different views around the world about how to define sustainability, and numerous groups like the Roundtable on Sustainable Biofuels are tackling the problem via slightly different methodologies. Which is fine in most cases, but taking off from Singapore, for example, where there are one set of rules, and landing in Frankfurt, where there might be another, can lead to problems.

A unified world standard for sustainability remains outside of the likely range of possibilities for some time, so groups like Boeing are calling for interoperability between standards, so that results under one set of rules can be swiftly translated into results in another, so that correct fuel sourcing approaches can be employed.

With feedstock, the long term problems of finding enough acreage for energy crops, will likely come through global zoning rules for energy crop cultivation. After all, it is effective zoning that protects prime agricultural land from conversion to, say, office buildings.

It may be time to do more than divide agriculture from, say, manufacturing, commercial and residential zones. It may well be time to separate out food land from energy land, though rules will need to take crop rotation into account.

It may well be fitting to do so. Calls for biofuels producers to avoid using food crops are, at best, facile and naive. Converting 15,000 acres of soybeans to camelina, for example, uses “non-food biomass,” but subtracts from the use of arable land for food production.

By all accounts, these are complex issues, and will take time to build consensus. Another reason why aviation biofuels, which can scale without resort, on the whole, to large tracts of arable or marginal land.

Can aviation biofuels be scaled up without adding a single acre of biomass production?

LanzaTech, in looking at just the inventory of waste gases from steel mills around the world, which form the feedstock for its alcohol-to-jet, estimated that there is enough carbon monoxide generated by steel mills to create 15 billion gallons of biofuels (though roughly half that, in aviation biofuels).

That’s not taking into account the substantial opportunities with algae grown in agricultural dead zones like Australia’s northwest-shelf, or the renewable jet fuel that cab be made today by Dynamic Fuels from animal rendering by-products.

In short, there’s more than enough waste to bring aviation biofuels to scale without troubling an acre of existing crop land, and that’s another reason why aviation biofuels could be a quick win.

No electric plane on the horizon

Not to mention that, unlike other areas of transportation fuels where there is controversy over competing platforms like electric hybrids, CNG vehicles, or biofuels – in the case of aviation, there really isn’t much wiggling room, because an electric plane is only on the most distant horizon and belongs, at best, to planning for a post-2050 world.

Bringing us to finance. Airlines simply don’t have the balance sheets, project finance is tough to unlock, project developers and their backers are near-to-tapped-out just bringing their technologies through to pilot and commercial demonstration. Meanwhile strategic investors are more attracted the by the high-value markets in renewable chemicals

A new system for advanced biofuels finance

In yesterday’s Digest, we circulated some proposals made at Copenhagen that have been gaining early support amongst some aviation biofuels cognoscenti.

Answering the financial challenge

In yesterdays Digest, we outlined a proposed three-part system for unlocking new investment channel in advanced biofuels. The source of the liquidity: direct investment from pension funds. How to protect Grandma’s pension? Advanced biofuels risk insurance, offered and managed by private industry, funded by producer-paid premiums, sweetened regionally through government investment in insurance funds. How to reduce risk to insurers and premiums to producers? Streamlined yet detailed due diligence that rates projects according to the amount of core technology, feedstock and offtake risk in a given go-to-market package.

Yesterday, we wrote:

“It has been proposed that a new asset class be established that will permit $28 trillion in pension funds to include green growth and clean energy investments in their direct investment portfolios.

It has been proposed that – out of the ashes of failed sovereign loan guarantee systems – a new system be deployed to narrow the gap between the risk that the private sector can afford in deploying new technology, and the rates of deployment needed to meet the aforementioned global carbon and growth targets.

Specifically, there are discussions regarding technology risk insurance funds. Unlike green banks – which essentially are vehicles for directive state investment – these technology risk funds would, after appropriate due diligence, insure projects in order to reduce the cost of financing. Since not all projects fail, insurance (like loan guarantees) foster more projects per dollar than direct investment.

Unlike loan guarantees, such a system would be based in public-private partnership – that is, governments could help to capitalize the privately-held, privately managed funds. The more that the government invests, the more projects built. It’s a sweetener mechanism.

How is this different from troubled institutions like Fannie Mae? First, by ensuring that government ownership does not man government control. This isn’t Private Money + Government Management, but rather Government Money + Private Money +  Private Management. In other words, government sweetens the technology risk insurance pot to the extent that it wants to accelerate development. Sweeten very little, some projects get through. Sweeten more, more projects get through.

Key to that system is reform in due diligence. It has to be both better and faster. Everyone understands that some projects will fail – just as, sadly, some houses burn down, that’s the nature of insurance and why it exists. Striking the right balance between too much risk and too little risk, that’s the key, and strong due diligence is a key to that.”

No new land required, a financing system identified, a committed end-user group, technologies ready to scale, and a small number of distribution points. All the forces have aligned.

What is missing is leadership. Leadership that is more than pointing the way toward the promised land, but taking the first steps and persuading others to join.

Print Friendly, PDF & Email

Tags: ,

Category: Fuels

Thank you for visting the Digest.