Commercial aviation biofuels: Translating green ambitions into green miles

July 5, 2013 |

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How to get from available field to affordable fuel in 14 steps. The MASBI report is out, and that’s good. 

But, what are the immediate steps, and why these 14 and why not others, and why this way?

The Digest gets the scoop from Honeywell UOP’s Jim Rekoske.

Last week, the Midwest Aviation Sustainable Biofuels Initiative, led by United Airlines, Boeing, Honeywell’s UOP, the Chicago Department of Aviation and the Clean Energy Trust, released their recommendations from MASBI’s year-long study of the potential for aviation biofuels in the Midwest.

“For every 5% of petroleum jet fuel that can be offset by biofuels [in the Midwest],” the report’s authors said, “nearly 3,600 jobs will be created and 150,000 tons of carbon emissions will be avoided annually.

RekoskeWe profiled those 14 recommended steps in the Digest last week. Today, we visit with Honeywell UOP’s Jim Rekoske, Vice President and General Manager of the Renewable Energy and Chemicals business unit, to look behind the report — who’s doing what, moving forward, to translate good ideas into miles in the sky.

R&D PRIORITIES

MASBI-technologies

1. Improve feedstock production capacity through agricultural innovation. Identify and promote potential additional biofuel production capacity generated by increased yield due to breeding and innovative planting such as crop rotations, and double and cover cropping with crops such as camelina, which can be produced between food crop rotations.

2. Tailor feedstocks to jet fuel. Develop advanced feedstocks tailored for jet fuel production, including the development of an oil seed crop with chemical properties predisposed for jet fuel production.

3. Investigate the impacts of uncertainty on production. Investigate the effects of uncertain conditions, such as changing policy, weather, seasonal intermittency, and co-products on the techno-economic performance of conversion technologies.

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4. Advance technologies to convert lignocellulosic biomass. Biomass made up of lignin, cellulose, and hemicellulose (wood, residue biomass such as corn stover) is a very large-volume sustainable feedstock source. Increase investment in bio/catalytic pathways to produce jet fuels from depolymerized biomass, cellulosic sugars, or simple alcohols.

Rekoske adds:

“One of the big challenges has been developing plants that make lipids that are geared to diesel and jet fuel, in terms of the carbon-chain length. There are lipids that work really well — others less so. Now, the industry has started working with Monsanto, for example, on developing C12 and C14 variants of soy oil. It’s something that Monsanto had come across in its research some time ago, but there wasn’t much use for them at the time, so the work was dropped. But biojet can use them effectively.

“Another area of intense work is crop protection — it’s one thing to develop a plant that will produce a very good lipid for you. But you have to defend it in the field [against pests, disease, competitors and predators]. There’s a lot of work USDA going on on how to protect crops.

“One more area? That’s to do better in terms of making biojet fuel from cellulosic feedstocks. One of the key announcements that come out of the MASBI process is a project in which United, Boeing and Honeywell will sponsor Purdue, in looking at corn stover. In addition the the assistance which [Honeywell’s UOP] can provide, United is provide value and price analysis, and Boeing its considerable experience with feedstock development.”

Notable milestones to date

The Old Switcheroothe “now” of cellulosic biofuels vs “five years away” in oil & gas

Soak up the Sun: The USDA invests $25M in new fuel-focused, crop-based technologies.

Jatropha Loves to Fly and It Shows. It is becoming increasingly evident that, in the near-term, acute demand for aviation biofuel is going, one way or another, to result in heavy demand for jatropha. New deals for SGB in Brazil are confirming the trend.

ARPA-E unveils Project PETRO ARPA-E aims to unleash new plants that recover more sunshine and produce more fuels. Specifically, a program titled “Plants Engineered To Replace Oil (PETRO)”.

Cobalt, Mercurius, BioProcess Algae, Frontline land $17.7M in military biofuels grants. Pilot-scale biorefineries for drop-in military diesel, jet fuel the focus of the DOE’s latest grant round.

PRODUCTION PRIORITIES

5. Identify means to expedite approvals by ASTM and the EPA. For the former, identify means to speed up the process in critical areas, such as generation of test data to evaluate the performance of proposed fuels and engine testing. Expediting this can speed up time to market of new conversion technologies.

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6. Allow producers to optimize product portfolios. The production of renewable diesel as part of the refiner’s product portfolio should be fully supported, allowing for improved renewable jet fuel supply and improved overall economics of biofuel production.

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Rekoske adds:

One of the biggest slowdowns in getting fuels into airplanes, has been the ASTM process for approving new fuels. It’s worked for 50 years, but this is in a world where there have been only a few new fuels. There are dozens coming forward now, and dozens more to come.

The ASTM has a product-by-process system. The problem is that the approval process is very experiential and slow.

[Editor’s Note. What is “Product-by-Process”? The US Patent and Trademark Office came up with this one, allowing an inventor to define a product “by the process of producing it,” when the inventor lacks other knowledge to “define and discriminate” the invention.

This “product-by-process” rule has particular application to complex biological and chemical products where the structure of a product is not completely understood but can be described by the process from which it is made,” says IP attorney Edward Dalley of Sunstein, Kann, Murphy and Timbers.]

What’s another way? Purdue is working on a project now, looking at ATJ and HEFA fuels to qualify them in a more fundamental way, to look at the fuels on a fundamental basis to see how this compares to product by process.

Then, there’s the recommendation on the portfolio of fuels.. This one was more controversial, and it was a watered down version in the MASBI final report, on purpose.

The principle is economic value optimization, accepting that refiners will take the return where they can get it. Creative buying and consortia are the best approach to help refiners to be able to make a viable business in jet fuel. If United can take 10% of the production as jet fuel, and can do so on a flexible basis – sometimes take 20%, sometimes zero – having that flexibility helps operators.

With multiple products, comes more opportunity to optimize the economics and in the end you get more viable refiners, more capacity.

Though, we recognize that customers are not going to put skin in the game if they are not getting guaranteed product volumes, and being the primary customer in all aspects in terms of projects.

Notable milestones to date

EPA green lights camelina, energy cane but keeps the lid on arundo. New renewable feedstock OKs. Good news, bad, neutral? The Digest looks in depth at the latest from EPA.

Virent Delivers Plant-Based Jet Fuel to USAF Lab for Testing. Produces Drop-In Jet Fuel from 100% Renewable Plant Sugars

Fly the (environmentally) friendly skies: United Airlines executed a definitive purchase agreement with AltAir Fuels, and has agreed to buy 15 million gallons of lower-carbon, renewable jet fuel over a three-year period. AltAir expects to begin delivering five million gallons of renewable jet fuel per year to United starting in 2014.

FINANCING PRIORITIES

7. Balance risk and reward for early adopters of technology. Aviation biofuel is technically ready to scale commercially. At this early stage of development, stakeholders should consider entering agreements with the aim to balance risks with partners, thereby accelerating the rate of industry growth. For example, airlines could consider innovative pricing structures and long-term off take agreements, investors could require lower cost of capital on investments, feedstock providers could enter into long-term supply agreements with better than market pricing, fuel producers could consider alternative margins, and refiners could consider slightly higher volumes of jet fuel. If all stakeholders are willing to compromise and consider the needs of partners, the industry will reach its potential sooner.

MASBI-financing

8. Demonstrate industry demand with aviation jet fuel purchase guidelines. Aviation stakeholders operate within a constrained operational and economic environment. Likewise, producers have their own sets of constraints. Each side is frequently unaware of the limitations of the other. Aviation industry stakeholders could articulate a series of purchase guidelines to initiate and inform discussions that would result in both sides setting respective parameters and identifying places of overlap where their commercial needs meet.

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9. Create a pool of capital to invest in biofuels. Private financiers are either reluctant to finance biofuel projects or require rates of return that are too high. Aviation industry stakeholders could collaborate with other advanced biofuel consumers, including government or commercial entities, to develop structures allowing for efficient capital raising and vertical integration such as investment in the biofuel supply chain.

Rekoske adds:

With respect to jet fuel purchase guidelines, CAAFI just put that out with their business team.

[Editor’s note: Yes, CAAFI and the Airlines for America Energy Council just did. Their “Guidance for Selling Alternative Fuels to Airlines”  is published, and here for free download.

They write in the preamble: “To help orient potential producers – and other supply-chain participants – with respect to how and when to engage with airlines, we have laid out a generalized process that describes key steps toward entering into a purchase agreement.” Additional documents and tools reside here.

Also, the AltAir deal with United is a great example of creative financing. In this case, United did not put money in or use the balance sheet, but the agreement was structured to give AltAir the certainty that would help in the financing effort.

In terms of creating a pool of capital to invest in biofuels, this is an idea I really like. Amy Francetic of Clean Energy Trust suggested this in a meeting with United, Boeing and Honeywell senior executives. Their response was surprisingly positive. They said “OK, if it’s good for the industry, maybe it is more effective to participate in something like this. For example, they were open conceptually to the idea of a venture fund for alternative aviation fuels, sponsored by customers. It was an interesting outcome.

Notable milestones and novel ideas to date

The SuperRIN. What exactly is a SuperRIN? It is a renewable fuel credit that can be purchased at a discount to current market prices, can be used to satisfy any renewable fuel obligation, never expires, and can be issued by an advanced biofuels project that has completed a demonstration of its technology but is raising capital for its first commercial plant.

POLICY PRIORITIES

10. Create longer-term policies that enable investment and production. Create a stable longterm policy environment, which is critical for the development of the renewable jet fuel industry and encouraging investment.

11. Level the playing field. The fossil fuels industry has relied on and continues to receive government subsidies, policies, and support that foster growth. The aviation biofuels industry should be afforded similar opportunities for growth. For example, allow master limited partnerships (MLP) for renewable jet fuel, which are currently limited to the conventional petroleum industry.

12. Fully fund the Defense Production Act Title III for the production of biofuels. Government action to develop new sources of energy has historically been an effective approach. The U.S. government and in particular the U.S. Navy has been instrumental throughout its history in transitioning from wind to coal to nuclear energy. The U.S. Government’s effort to support aviation and marine advanced biofuels is important, and the Defense Production Act Title III program sponsored by the U.S. Departments of Agriculture, Energy, and Navy should be fully funded.

13. Build regional demonstration facilities supported by municipal and state policy. In the short term, focus biofuel development on smaller facilities that will not exhaust local feedstock supply. Simultaneously, leverage coordinated municipal, state, and national policies to maximize opportunity. For example, allow state bonds to be sold to support the construction of production facilities.

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Rekoske adds:

Frankly, tax structures like Master Limited Partnerships, which exist in the oil & gas industry and are proven, are easier to sell than a 10 year commitment to RFS. Politically and practically, tax structures are the way to go right now.

In terms of building regional facilities, there’s a lot of road-mapping going on right now. There’s MASBI, there’s work in the Pacific Northwest, China, and elsewhere. One of the most important things to learn is what works regionally, what works globally. Take the regional success and duplicate those elements can can be translated globally, around the world.

Notable milestones and novel ideas to date

Coons, Moran introduce bi-partisan Master Limited Partnerships Parity ActA master limited partnership is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market.

The Battle of the Beltway: DoD awards $16M towards parity-cost, drop-in, non-food biofuels. DoD goes forward, after internal wrangle, with advanced biofuels program via $16M phase 1 investment — with industry cost share, project totals $33M: aims for sub-$4, drop-in military biofuels.

SUSTAINABILITY PRIORITIES

14. Incorporate sustainability standards and advance certification. Ensuring sustainable production of biofuels is critical to the integrity of this industry and incorporating sustainability criteria and standards is the responsibility of all its participants, from feedstock providers and fuel producers, to airlines and governments. These criteria should be consistent with, and complementary to emerging internationally-recognized standards, such as those being developed by the Roundtable on Sustainable Biomaterials. Third-party certification also could help ensure that greenhouse gases, land use, water use, and other sustainability criteria are appropriately considered.

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The Digest’s Take.

RSB is one of the structures that has come forward. It’s too soon to tell which standard is the best. It’s going to be like Beta vs VHS, the market will eventually focus in on one of them or another.

It’s true that biofuels in general undergo a scrutiny that no other fuel receives, and are held to a higher standard. But incumbents always receive less scrutiny than newcomers. It happens everywhere in life — sports teams, business innovation.

So, the goal is ultimately a level playing field where new fuels are held to high standards, but so are incumbents. Should there be a level playing field? Yes. Should we wait until the playing field is level to be sustainable? No.

Notable milestones and novel ideas to date

RenewableJetFuels.org launched, looking at viability, sustainability. In 2011, the Carbon War Room and Elsevier unveiled RenewableJetFuels.org, the world’s first platform for analyzing the efforts made by the renewable sector’s leading companies in the aviation industry.

In March, the Roundtable of Sustainable BiofuelsAssembly of Delegates agreed to include an optional add-on certificate to RSB certification identifying biofuels that pose a low risk to creating ILUC. The vote by the different chambers agreed 18 to 3 in favor of including the LIIB methodology developed by Ecofys as an “extra credit.”

In February, Dynamic Fuels has earned RSB sustainability certification. The RSB certification encompasses Dynamic Fuels’ Geismar, Louisiana plant, located near Baton Rouge, where it utilizes its technology to turn animal byproducts such as beef tallow and pork and chicken fat into renewable diesel.

The Bottom Line.

14 practical steps. We see the hold-up primarily in affordable feedstock, which represents up to 80 percent of the cost. If feedstock were half the price, most of the rest of the challenges would melt away. We continue to highlight the SuperRIN for financing and the Strategic Feedstock Reserve for affordable sugars and oils.

Download the full report here.

Download the executive summary here.

More on MASBI here.

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