For jet reset via renewable fuel, think carinata

June 7, 2017 |

The US ethanol industry is working hard on E15 deployment right now — from market deployment to regulatory relief, there’s action on every front aimed at making E15 a widely-available, lower-cost source of octane that can replace mid-grade 89-octane fossil fuels at US pumps. Those fossil fuels generally cost the consumer 10-20 cents per gallon more than conventional 87-octane E10 regular unleaded, but E15 generally prices at around 10 cents less.

It’s a noble effort, and would open up expanded opportunities for cellulosic ethanol production, for example.

Carinata and jet fuel

If here at the Digest we could snap our fingers and hand a market expansion to growers, we’d point them at carinata and jet fuel.

Here’s our math. Carinata starch can produce up to 140 gallons of jet fuel per acre and there’s not much income in the meal just yet, there are some mitigating factors.  First, it’s considered a non-food source, so no headaches with airline sustainability officers, and it is RSB-certified. Second, no need to do a second-step conversion from alcohol to jet fuel.

(Note to readers: there is nothing but good things to say about the costs and blessings of jet fuels sourced from MSW — but we’re thinking about very large-scale deployments in a hurry, here, and energy crops are quite scalable).

Carinata is reaching as high as 200 gallons per acre in trials, typical yields have been in the 1500-2000 lbs per acre range (according to this source). We’re using 140 gallons per acre as the model yield here — although we note the higher yields and the lower yields from various trials.

We think there’s a market price in there of $1.70 for the airline flying in and out of the California market, once jet fuel can be included under the California Low Carbon Fuel Standard.

That’s because carinata fuels could be eligible for support via the LCFS and the US Renewable Fuel Standard — up to $0.80 due to the LCFS and another $1.50 in advanced biofuels RINs.  (Yes, advanced biofuel RINs are priced around $1.00 — but consider that jet fuels have 1.5 times the energy density of ethanol, so they get added RINs)

That provides $4.00 to the value chain – growers, oil crushers and hydrotreaters.

Here’s what they say at MIT

According to this analysis from MIT in 2011, a 6500 barrel per day project, using a hydrotreating process and veggie oils,  could provide sustainable investor returns, producing $3.50 per gallon distillate fuels with a vegetable oil price of $2.78 per gallon. That’s right around 35 cents per pound, and that’s in the real-world market price range for vegetable oils — though they generally also have markets for the meal, and that will present problems for carinata except on acreage considered low-performing for conventional oilseeds, unless valuable markets are found for the non-oil fraction. It translates to around $389 per acre for the grower; that’s not great for Iowa corn farmers, but it’s not terrible in marginal production country where land costs are low.

Bigger plants, too

And, we’d like to think that someone could build a 20000 barrels per day plant if the location was right, or larger. After all, the Neste renewable diesel plant in Singapore is already 20000 BPD.

And carinata yields are still rising, and that’s with exactly one company and its partners shouldering the burden.

Those new billions of gallons

What that gives us is an added market of 140 million gallons of jet fuel for every 1 million acres planted. California’s jet fuel market would likely become saturated at something like 15 percent of US demand, or around 3 billion gallons, and there’s a 50 percent blend limit using the UOP process. So, the realistic California limit for now would be something like 1.5 billion gallons of added fuel into the marketplace.

So, think that there’s a new market for the production from 10 million acres currently idle.

And consider Canada, and Oregon. Put those together and they are together about 70% of the California economy. So, with the Oregon LCFS and the Canada LCFS, there might be similar levels of support for up to another billion gallons of jet fuel. Consider those outside of the scope for now, while we await details of Canada’s LCFS, its implementation timelines, and the market prices for carbon reduction it generates. But keep it in mind.

Other considerations

There are a host of other considerations — crop rotations, available arable land, competing uses, the impact on price, and the list goes on and on.

But it’s the market we’d be corralling everyone around. Consider that E15, if deployed to 50 percent of the market, which would be a complete near-term earthquake of market adoption –  would add around 7 billion RINs into the system. Jet fuel on the relatively modest scale we’ve indicated – just limited to a handful of LCFS markets, could add a gallonage equivalent to 4.25 billion RINs.

The Bottom Line

And, it’s added income for growers from a new market. No miserable oil companies fighting every step of the way. Airlines begging for fuels at these prices. Using well-established technology. Add farmer know-how. Add soil.

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