The Kodak Moment: The world’s airlines consider their low-carbon options in an era of flight-shaming

“If we had no winter, the spring would not be so pleasant: if we did not sometimes taste of adversity, prosperity would not be so welcome.” — Anne Dudley Bradstreet

For the airlines, which met this past week in New Orleans for the Sustainable Aviation Fuels Symposium, it’s a Kodak Moment.

As in the moment when Kodak decided it wouldn’t pursue digital camera technology, fearing the impacts on their filmstock business. The photo industry went digital, Kodak’s film business cratered, and they were dumped out of a business they had practically invented.

Kodak was not immediately doomed in the 1980s by its decisions, and neither is the airline industry today. But the industry’s challenges with respect to greenhouse gas emissions offer existential threats in the near-term and in the long beyond.

Progress on flight-based emissions is moving slowly enough that the flygskam moment has sprung up, now worldwide, to shame people into flying less. Measured by the discourse at the SAF Symposium, Greta Thunberg definitely has gained the attention of the airlines.

How did we take-off so well and stall so fast?

Now, the airlines were just about the first customers to clamor for advanced biofuels. In 2006, Richard Altman of the recently-formed Commercial Aviation Alternative Fuels Initiative showed up at one of the earliest advanced biofuels events, and when he laid out the intent of the airlines and their commitment to making sustainable fuels a part of their future, longtime industry leader Graham Noyes remembers, “I was just stunned.”

13 years later, sustainable aviation fuels have become a reality, yet airlines are gasping in their efforts to voluntarily meet the industry target of cutting their 2050 emissions by half, compared to 2005. Even a decade of great progress in cutting CO2 levels per passenger mile has not been enough. Global growth in passenger traffic is one villain. Slow uptake of sustainable aviation fuels is the other.

Meanwhile, pressure on the airlines to make more dramatic emission cuts have been enormous. IAG, which owns British Airways and Iberia, made the stunning announce that they would reach net zero carbon emissions by 2050.

If you blinked at this, you wouldn’t be alone.

Some might ask how an industry without a pathway to cut half their emissions can reset their aim to cut out all of them, in the same timeline and facing the same headwinds. However, as IAG’s Jonathan Counsell noted, some 43 percent of that reduction to zero is expected to come from industry-purchased offsets.

“Amazing is not good enough any more.”

But Haldane Dodd, speaking at the SAF Symposium for the Air Transport Action Group, said that direct carbon reduction (as opposed to indirect offsets), resonated better with passengers, recent research had found, in a study conducted for the industry by FleishmanHillard.

Dodd said that airlines have to “communicate more effectively,” but also need to take more robust action. He said that the industry had achieved amazing reductions in CO2 and improvements in efficiency in recent years, but that “Amazing is not good enough anymore in terms of CO2 reduction.”

The FleishmanHillard study explains that up to 37 percent of passengers would be willing to give up flying if they do not think airlines were addressing environmental issues, Dodd revealed. And he cited recent UBS Bank research suggesting that 27 percent are thinking of reducing their flying due to climate concerns, and 21 percent already have.

However, passengers are known to support climate change more ardently in surveys than in boots on the plane. For example, 70 percent say they want personal carbon offsetting as an option, but the actual take up is around 3 percent, Dodd told the SAF Symposium.

Dodd’s conclusions?

“2050 goals are important for policymakers and our sector, but are too far away in our passenger’s minds; they say it’s an emergency that needs action right now, just not in 30 years. The industry needs to show we can make SAF viable, we need to demonstrate the feasibility of electric flight, and we need an uptick in offsetting. Should we feel threatened by flygskam? No. It’s a massive opportunity to improve, and thrive”.

But Dodd warned that research by Edelman and the Reputation Institute showed the public trust business more than governments, and 76 percent of people said that company CEOs should “lead on the environment rather than waiting on government to take action.”

“What will keep people flying?”

LanzaTech CEO Jennifer Holmgren focused on the public’s willingness to support ’short-term not much, long-term a lot’ policies touted by airline CEOs.

“Our global target is to limit global warming to 1.5 degrees, but we need to make sure everyone understands what ‘1.5 degrees’ means in the short-term. IF we are aggressive and IF we are net zero after 2050, and IF we are carbon negative by end of century, we will be back under 1.5 degrees by 2100. But the probability is that we will exceed 1.5 degrees in the next 15 years. Look at the world now, the fires, the floods. We’re at 1.1 degrees. Our message to airline CEOs has to be ‘what are you planning to ensure people want to fly?’

The long-time head of fuel procurement at US Airways, Michael Baer, was pessimistic that long-term existential threats move airline CEOs to action; he said that airline CEOs are asking for effective solutions to meet CORSIA or ESCH goals, and that is a more reliable driver for demand.

IAG’s Jonathan Counsell agreed.

“We’ve got to convince investors to put in billions, and targets have a value in that. They help unlock policymaker support, as well. Plus, we believe that market based measures [offsets] are a must if the industry is to reach net zero carbon by 2050.”

Baer said there was airline willingness to pay premiums for several years, but that “mandates and regulations that are being socialized are blunt instruments. Offsets will not decarbonize aviation and may have other shortcomings.”

At the Symposium, Baer launched his SAF Now consortium to catalyze SAF purchasing across the airline sector. He said SAF Now would be airline-owned, same as the consortia that have been developed for fuel infrastructure. The SAF Now consortium would work with all airlines, all producers — more on that at energyforairlines.com.

SAF, the biggest untapped measure

Which brings us back to fuels. As Boeing’s Sean Newsum observed, “SAF is the single biggest essentially untapped measure”. It’s a big part of any airline’s plan to reach net zero carbon by 2050. But more than 180,000 completed passenger flights using sustainable aviation fuels have not swayed what is a potent alliance of activists, corporate flyers and regulators. They’ve noted that the airline industry is less than one percent alternative fuels, and many “sustainable fuel” flights have only a handful of gallons of actual aviation biofuels in the tanks on the wing.

The problem is the old one, of price. The gap between what airlines are willing to pay and producers are willing to sell for is causing the same sort of stand-off that we see, for example, in real estate markets from time to time. There’s an absence of liquidity. Or, in this case, of the golden liquids.

“We need more airlines to do their part”

“Airlines aren’t willing to pay the price premium over the long term,” said United Airlines’ Aaron Robinson. “We do believe in investing to build the SAF market, not to subsidize it. We are paying some premiums because SAF is not yet at scale; there’s been an investment gap, and we want to help close it. Institutional investors want airlines to take the lead. That’s why we made the Fulcrum investment.”

And United pledged this past month to invest another $40 million towards decarbonization. “We need more airlines to do their part,” Robinson observed.

“There’s growing public concern.”

And Norwegian Airlines is not as optimistic as some about flygskam, or the wisdom of the recent Scandinavia mandates.

“There’s growing public concern,” said Norwegian’s Simon Mueller. “We’ve made a lot of progress — a 30 percent emissions reduction in 10 years because of fuel efficiency, lighter aircraft, modern fleet, advanced weather data, winglets, eco-friendly washes and more direct routes.”

But flygskam and related efforts could halve growth, he warned. And Mueller criticized the Scandinavia mandates, (Norway: 0.5 percent SAF from 2020 30 percent from 2030; Sweden 1 percent 2021 and 30 percent from 2030), as good in theory, yet loaded with real potential problems.

Usually, Mueller observed, what drives the market is price, first there’s the demand, then production, then an abundance of supply, and the price adjusts until there is an equilibrium. In theory, a mandate gives a stronger demand signal than the equilibrium price.

“But, we’re not allowed the mass balance approach,” Mueller said. “Instead, we have to buy and transport physical fuels. That creates potential for a higher CO2 impact from using less than optimal fuels, sourced from small-scale plants, and the artificial market will lead to higher prices.”

To avoid mandates that create bottlenecks and drive price and CO2 intensity up, Mueller prescribed reaching global scale and sensitizing and steering government bodies towards helping to create a global market rather than tiny micro-production markets everywhere.

The price problem’s backstory

It has become an ancient problem. The cost and availability issues were there in 2006 when airlines first started showing up at biofuels conferences to offer a demand signal. But, the underlying drivers of the gap are not the same.

Then, there were questions as to whether aviation biofuels were safe, or even possible to make. Those technical considerations have been long resolved. The fuels can be made, and safe.

Back in 2007-08, the expectation was that oil prices would hover in the $100 per barrel range. Today, oil prices have dropped into the 50s and the chill has swept across the sustainable fuel industry, which has labored for a decade to drag the costs down. The Navy led an effort to foster the development of commercial-scale production, and by 2016 AltAir was able to sell 10 percent renewable diesel and jet fuel blends to the Navy for $2.10 per gallon.

Yet, aviation fuel prices have fallen by as much as half in recent years, as oil producers scramble to protect their 8 percent of the petroleum barrel that goes to serve the 117 billion gallons jet fuel market. Now, the price of jet fuel is hovering at $1.88 per gallon and airlines say that their ability to spend more for renewable fuels is limited.

And now, there is another problem, and that is the unintended consequences of low carbon policies adopted by governments around the world.

Generally, aviation fuels were exempted from schemes such as the US Renewable Fuel Standard and the California Low Carbon Fuel Standard. At the time these scheme were hatched, sustainable aviation fuels were hardly available, and the focus was on converting cars and light-duty trucks over to ethanol. today, there are opt-in provisions that support aviation in some fuel standards, but no mandates, and no obligated parties. The result is Force 10 winds behind renewable diesel and a mild zephyr behind sustainable aviation fuels.

Which would not matter, except that every process that can make a SAF can also make diesel. Biofuels producers say they are unable to generate enough revenue from aviation sales to make more than token amounts of the fuel. So, worldwide consumption of aviation biofuels has grown slowly while the overall production capacity for advanced drop-in biofuels is expected to reach 4 billion gallons by 2022.

Conventional jet fuel is available and affordable, but not sustainable. There’s plenty of advanced fuel available that’s sustainable, just not affordable. And SAF that’s affordable and sustainable is not yet available because carbon policy loaded too much value into on-road diesel.

At the SAF Symposium, the problems were well understood. IATA’s discussions around SAF are always well-stocked with good coffee, excellent biscuits, elegantly-described problems, and a light that never quite beams strongly enough from The Charming Ante-Room Where We Keep All The Answers.

ROSE: I saw the iceberg, Mr. Andrews. And I see it in your eyes. Please tell me the truth.
ANDREWS: The ship will sink… in an hour or so, all this will be at the bottom of the Atlantic.

Well, not that dire. Yet. But you get the idea. Easier to describe a problem than a solution.

For ready solutions, Europe is thinking about what Europe usually does, a little old-fashioned autocratic absolutism, in a tech-speaky 21st century form. Silky bureaucrats are offering mandates without much of a plan to ever bring down the cost of the alternative fuels, and they have tipped that taxes designed to cool off demand for flying are in the offing.

Critics, libertarians, and I believe every registered voter in the state of Oklahoma maintain that mandates lead to high prices that reward less effective technologies and rarely drive innovation.

These same critics also point out that high taxes that stifle demand simply punish flying, which people want, instead of punishing carbon, which people want to avoid. Of course, punishing anyone you can find and worrying about the niceties later is an old European sport that goes back at east as far as Spartacus. But IAG in the form of Jonathan Counsell took the anti-tax line, a most un-European thing to say — though we don’t actually have a Brexit Airlines, most of the airlines and especially Counsell, were very cool in their receptiveness towards these EU moves to throttle demand.

Bad news from the Department of “Consumer Patience with 2050 Goals”

Just to give you a sense of the times, earlier last week a meeting of high-powered nutrition and wellness investors and executives was interrupted by news that the largest US dairy had declared bankruptcy, citing pressure from plant-based milks.

Meanwhile, we heard yesterday from the EU that “More than 300 clothing brands are asking shoppers not to buy anything in the Black Friday sales because of environmental reasons,” with the Make Friday Green Again collective saying that holiday discounting leads to overproduction and contributes to climate change.

You might be familiar with the concept of Tipping Points, and we may be fast approaching one that will impact airline travel right on the nose. Couple of data points offered in New Orleans:

1. 1 in 5 airline passengers reduced their flying owing to climate impact concerns
2. When asked, a well informed aviation fuels expert described a shift to using as much as 2 percent sustainable aviation fuels by 2025 as more or less “a far-fetched scenario”, adding helpfully that the target was useful as a stretch goal.

Which is why a number of attendees at the IATA SAF Symposium indicated that the approach of “we’ll do [fill in the blank] by 2050” may not be a good fit for the times.

At the morning break: Mammals, anyone?

At the first morning break, our band of Digestarians were generally aghast. Problems nowhere to be avoided, solutions nowhere yet to be seen. I asked one executive if he saw dinosaurs or mammals in the room, as we considered the kind of Tipping Point the airline industry may be facing.

“No mammals,” he replied.

“I’m very disappointed,” said another. “They don’t get it, yet,”

“Right now, we’re selling 95 percent of the fuels and that’s not a good thing, it’s a bad thing.”

Help came in the form of the producers. After all, if this were a Western, the airlines are the besieged homesteaders, the producers are the cavalry rising to the rescue. Carbon pricing is the Winchester repeating rifle that gives the cavalry its advantage. And there are a bunch of bad guys always trying to hijack or destroy the delivery of the ammunition.

The SAF Symposium keynote fell to one of the cavalry, World Energy’s chief commercial officer Bryan Sherbacow. He’s been as visible in the deployment of world-scale drop-in fuels as John Wayne was in John Ford’s cavalry trilogy, and when he took the stage for a keynote he said that the industry should not hold back from harsh truths, there was a Saddle up, pilgrim air to it all.

“Today, we have a capability to produce 50 percent as SAF because we can crack diesel into jet, but we have to look at the best opportunities and how do we get the best return, and policy doesn’t incentivize the entire barrel. Road has more support than aviation and that’s unfortunate and unnecessary, so we produce more diesel than jet and it is out partners who help us overcome the [policy-driven price] gap enough to demonstrate demand and change that policy.

“Last year, we bought the entire [Paramount refining] facility and we will grow from 3000 barrels per day to 25,000 barrels per day. And a little asphalt facility that was headed for idling will eventually produce 10 percent of the California distillate and 100% of its renewable jet fuel.”

“ENI has done something similar in Italy and we hope that keeps happening. Neste has a significant installed diesel base, and they and others will bring this to 3 billion gallon annual production in the next years, and a percentage of that could be for aviation. We need government policy to choose that fuel type, we need more feedstocks like woody biomass and municipal solid waste and cellulosic sugar fermentation. We need lots of technologies and we meed more winners. Right now, we’re selling 95 percent of the fuels and that’s not a good thing, it;’s a bad thing.”

“One thing we need is to be able to produce on a booking claim basis based on mass balance. We’d like to put it into supply locally and allocate it to other markets on paper. Moving it adds to the carbon footprint and is not efficient,. But we’d like to serve  foreign customers who could get the environmental attribute wherever they are, when theirs is the demand and the price that caused us to make it.”

As usual, Sherbacow is onto something. As John Wayne used to say, “If everything isn’t black and white, I say, “Why the hell not?”

No one actually thinks that when you order some renewable power, that a solar facility has to be built next to your home to provide it. Renewables are built where the sun shines or the wind blows or the cows live. The electrons are then fed to the grid and the renewable attributes go to the buyer, but it doesn’t mean that someone has to load those exact electrons into a boatload of Duracell batteries and ship them to you.

In natural gas circles, it is the same. You might buy gas from a producer in Pennsylvania and use it in California, which means that the production is fed into the pipeline in Pennsylvania and you extract molecules from California. The molecules you caused to be captured with your order will never be exactly the ones you end up using. The same goes for renewable natural gas.

Sherbacow gave the business jet sector as an example. He noted that the low-carbon commitments of corporations could be served via purchasing low-carbon fuels in a business program that provides more value for the jet services provider for low-carbon flight services.

“The more we excite the corporates about opportunities, the more they can help shoulder the risk. We have a really big opportunity and need and we need to activate a really big community. And we need to get that message out. And we need to have great relationships with big oil companies who have customers with low-carbon needs. We need to take advantage of those well positioned entities and their relationships, and continue to advocate for adoption and interest at the board level. Some of the relationships may seem non-intuitive, but big oil companies are all about hydrocarbons and we can help them as their customers evolve and collaboration is the key.”

A Spanish proposal

It was left to otherwise noble and well-spoken Cesar Velarde of Spain to relay what might have to be regarded as the most lamentable policy proposal ever offered for the advancement of sustainable aviation fuels. The Spanish government appears to have dreamed this one up, and it contains, more or less in our view, all the flaws of the US Renewable Fuel Standard and none of its virtues.

“Social pressure is driving us,” Velarde began well, noting that the “aviation sector has no alternative, SAF with strong sustainability safeguards is one of the more credible solutions, and it is time to be more ambitious”. So far, so good. And there was nothing wrong with his idea that any national targets should be “shown to be feasible from supply side, and economically acceptable from the user side.”

But then, someone in Spain dreamed up a process that had been discredited as far back as Joe Stalin and the five-year plan. So far as we understand, Spain proposes that national supply objectives would be defined with “a dialogue between regulators and industry”. That government would entertain offers from SAF producers [that would guarantee the return of investments], passenger demand by airlines would ‘assume an extra environmental cost,” and that there would be no getting around the paying of higher prices for SAF.

Finally, Verlarde related that several technologies were under consideration for a nationally-led ARTEMISA project that would produce 150,000 tons of SAF supply by 2025 for focus on SAF made from municipal solid waste, with a preferred approach of a Fischer-Tropsch biocrude that would be co-processed at a conventional refinery. The government would take the lead in identifying potential investors, a development roadmap, and in the identification of potential administrators. Overall, the goal is to establish a national supply of SAF with an initial objective of 2 percent of the fuel used in Spanish commercial aviation.

Now, the commitment to propelling a Spanish pioneer biorefinery is laudable. So, what’s lamentable about it?

Couple of problems come to mind.

1. F/T from MSW is a technology that has not yet run at commercial scale. Fulcrum’s project, which takes that path, won’t be operational until late in 2020, after commissioning, and took far longer than 4 years to get up and running.

2. Picking technology winners isn’t a great theater of operations for government, anyways.

3. Setting national targets for SAF production based on producers estimates for the timing, price and availability of a yet-to-be-seen fuel is what got the Renewable Fuel Standard in trouble when it went all-in on cellulosic ethanol before it was proven at scale.

4. What if airlines react to higher-priced Spanish fuels by tankering in cheaper SAF fuels from elsewhere?

5. Without special provisions, CO2 reductions would be split among all the fuels and chemicals produced at a refinery — leaving airlines adrift of their CO2 reduction goals.

6. New lower-carbon technologies will have no place to go, stalling the drive for improvement.

7. A “2 percent by 2025” target is unlikely to woo activists and governments from effort to cap flight demand via taxes and flight-shaming exercises.

Now, some of these problems simply need more time to address, so there’s room for hope. But not all of these problems can be mitigated over time. And time, in any case, is one thing no one has left.

The Producers and their Calls to Action

The producers were bullish, which is their way.

Gevo’s Tim Cesarek took the stage early in the parade of the producers. The approach, not the accent, is pure aw-shucks Jimmy Stewart. When Cesarak lays it out, a hard-line libertarian couldn’t disagree.

Waaaal, we have a sort of problem, you see, waaal, we just got too, too much pollution from particulates and CO2, and, waaaal, there’s an angry mob telling us we can’t ignore it, and they’re just about outside the door and, waaal, they’d hang a man just as soon as help him.

Sort of like that. Later in his remarks, he goes more Clint Eastwood.

“We can’t continue to keep heads in the ground, it’s time to stop the greenwash,” Cesarek continued. And just when I expect him to continue with ”so you go hump somebody else’s leg, mutt face, before I push yours in” he moves on to “bringing renewable resources to the process itself”.

“We have to bring dairy biogas to replace fossil heat and wind to replace fossil power,” he thundered. “We have to sequester CO2 wherever we can and capture value with co-products such as high-value animal protein. We have to access cellulosic feedstocks, encourage our farmers to use practices which build carbon in the soil and support market rewards for their improvements in farm practices. And in the excitement of all our clean energy developments I’ve kinda lost track myself. But being as this is a .44 magnum, the most powerful handgun in the world, and would blow your head clean off, you’ve got to ask yourself one question: “Do I feel lucky?” Well, do ya, punk?”

(Cesarek didn’t actually say any of what we’ve left in italics. It just felt like he did.)

Fulcrum: Won’t you be my Neighbor?

Fulcrum made a relatively dramatic presentation this week, primarily because of the images from their first commercial project showing great progress towards mechanical completion in 2020. The company now expects to finish commissioning and be in production in 2020. Fulcrum’s first plant will produce 80 percent carbon emissions reduction, using 350,000 tons of waste to make 175000 tons of feedstock.

As Fulcrum’s Bruno Miller noted, “the issue of waste, especially plastics, has come to the forefront. Yet, garbage is in large volumes, ideal locations, has established infrastructure and is a carbon rich feedstock with a predictable cost, and no competing uses. Converting it to renewable fuels resolves waste disposal problems, and we can use post-recycled, end of life materials. We can collect vast amounts of metals and plastics that go back into the system.”

Would you be mine? Could you be mine? Miller seconded the theme of collaboration, noting the array of partners that Fulcrum has assembled. Technical, fuel logistics, engineering, feedstock supply, and airline customers, and even the US Department of Defense in their desire to create a more distributed network of fuel refining around the world, especially in support of Navy and Marine operations.

Red Rock: World’s on fire

Red Rock CTO Jeff Manternach said that the Red Rock Biofuels Lakeview project in Oregon, based on 95000 bone dry tons of woody biomass, was under construction and that Red Rock aimed for production by the end of 2020 based on a 6 month start-up and mechanical completion in the second quarter.

He also made an eloquent plea for action.

“We have lost 8.6 million acres to wildfires, vastly more than we have lost in the past. That’s a country the size of Belgium. We are spending $2.5 billion on fire suppression alone, and California’s largest utility, PG&E, went bankrupt because of the fires. We have to change.”

Velocys: the Race for Waste

Velocys’ Philipp Strattman said that MSW is available in significant volumes, we can avoid costly disposal, divert waste to fuels and that fuel projects can pick up attractive gate fees in the EU.

Velocys has completed in so many ways its transition from product developer to project developer, over the past four years. It’s been a 17 year run in XTL projects, but the unfortunately named Altalto project, which is hard to pronounce and make us wish for an Alt to Altalto, which could be Altaltalto or Altaltaltalto somewhere down the line. For a fun time, try saying Altalto five times, really fast, without tumbling uncomfortably close to “adultery”.

What it lacks in mellifluence, it has in scope, scale, ambition, and a stack of partners that looks like the side of a NASCAR entrant. Of these, the most important are IAG and its British Airways subsidiary, and Shell.

Alan Shaw, in the glory days of the Codexis IPO, used to say that all you really needed for success was Sugar and Shell. The formula holds up today, though we might broaden the feedstock element there to include woody biomass. Velocys certainly will, especially in the second project they have in sight, their Natchez, Mississippi venture.

“Petrochemical infrastructure, and the large forest of the southeast,” Philipp Stratmann listed, in highlighting the project’s virtues to the audience. That’s not as pithy as ‘Sugar and Shell’, but it’s of equal value in the final analysis. “Vast volumes,” Stratmann described the forest resources, adding that Mississippi’s government is looking ardently for projects for north of the Interstate 10. “South of 1-10, they’re benefiting from oil & gas boom,” Stratmann said. “North of 1-10, it’s a different story. Pulp and paper plants are shuttering, and they are often the only major business in these communities. At Natchez we’ll operate a 25 million gallon plant at a shut-down pulp & paper site that used to consumer six times the wood that we need. The infrastructure is all there.”

All compelling thoughts, yet that’s not the Natchez secret sauce, not by a long shot. Because Natchez, for another reason, may offer a window seat to airlines seeking vast quantities of SAF fuels at affordable prices.

In the movie National Treasure, it was said that the secret lies in Charlotte, but here the secret lies in carbon capture. Velocys (we might add) is developing a CCS project in Japan — they’ve got chops in this field. Add carbon capture and sequestration to this project, and according to the Velocyans one might reach a carbon intensity of -85. Yep, carbon negative, a project that acts as a Hoover for skyfill.

And if you’ve seen the carbon credits available under the California Low Carbon Fuel Standard for carbon levels that low, well, hmmm. And if you’ve considered that an airline flying with a 50/50 blend of this fuel and conventional fossil fuel would be at a net carbon intensity of 7, or about 90 percent below where airlines were in 2005, well, hmmm, hmmm.

If you’ve seen a path in here for airline salvation, you’re not alone.

Neste on the expansion warpath

Neste was zesty, Sami Jauhiainen was on hand to detail the company’s expansion from 3 million metric tons to 4.5 million metric tons of drop-in hydrocarbons, by 2022. Any time an industry is in the middle of a capacity starvation crisis and a major international producer confirms a plan to increase production by 50 percent over 4 years — why, it’s like every delegate started binge-drinking Red Bulls.

Aaaargh! Now we’re getting somewhere. I feel GREAT! Aaaargh!

On the docket for Neste? New feedstocks. With capacity expansion comes the Jauhiainen pointed to algae MSW, lignocellulosics, and that they are looking to collaborate with an invest with partners.  I wouldn’t want to be the receptionist at Neste headquarters after that news gets around — there are about 1,000 companies that have interesting offerings in the Department of Feedstocks that Need Partners.

“Collaboration is critical,” Jauhiainen told the Symposium delegates.

With that news, we would like to offer the Digest’s new edition of “Bioeconomy Finnish in 30 seconds or less”:

Hei. Minulla on projekti “algae”. Tarvitsen paljon rahaa. Voitko ohjata minut Helsinki? (Hi, I have an algae project. I need a lot of money. Can you direct me to Helsinki?)

SkyNRG: we’re building!

If you’ve noticed, there’s so much shape-shifting and model-bending going on in the sector, that it might as well serve as an installment in the Transformers movie franchise. We have airlines becoming investors, technology suppliers becoming project developers, and oilcos becoming distributors. So why not a fuels aggregator becoming a project developer? Enter SkyNRG.

At the SAF Symposium, SkyNRG’s Theye Vess outlined the first dedicated DSL-01 SAF refinery, at the chemport in Delfzijl. The target is 100000 tons of sustainable aviation fuel with a 85% reduction in CO2, ready to start production in 2022, based on a €250 million budget.

SkyNRG, KLM, Shell and SHV are the primary backers, though it has a cast of thousands that Cecil B. DeMIlle would have been proud of and includes Schiphol Airport, Nouryon, Gasunie Susteen, Haldor Topsoe, Arcadis, and Technip FMC.

SkyNRG’s lessons learned? Find strong partners for risk taking and risk sharing, and get long term commitments for SAF and BioLPG from the offtakers.

Shell: industry must look at options to go faster

And then Shell itself took the stage, Bryan Stonehouse did the honors, though without sugar. Or sugar coating, we might add.

Shell’s ambitions are Olympian. The company aims for a 20 percent reduction in emissions intensity by 2035, and 50 percent by 2050, and Stonehouse noted that there is internal thinking now about net carbon zero. Shell has tied executive pay to emission targets, and the result, it appears, is a different mindset when it comes to to decarbonizing.

Shell has invested in the Velocys Green Humber project which will make jet fuels for British Airways among other products, said that Britain can decarbonize, redevelop industrial areas, reduce imports, and potentially export the advanced technology through its MSW-to-fuels technologies.

“God is in the details”, said Mies van der Rohe, so Stonehouse obliged with a tour of Shell’s additional technologies. There’s a raftful of them. IH2 technology to produce diesel and jet, Shell Hydrogen, eFuels which highlights a power-to-liquids technology aimed perhaps at water splitting. And a recap of Shell’s participation in the BA-Velocys and the SkyNRG projects.

A key? Logistics. Stonehouse said that a lot of conversations began with partners seeking logistics help. Securing supply, managing financial risk, assurance, customer deliveries, as well as increasing supply.

We mentioned the absence of sugar coating, and Stonehouse was not shy in admonishing delegates that to meet targets and stay in business, “industry must look at options to go faster”.

The financing front

With logistics comes the financing, or as was said in All the Presidents Men, “follow the money”. If you prefer, as Jerry Maguire put it, “show me the money”. You can use any verb you like in the advanced bioeconomy so long as it’s not “squander” and the noun is “money”.

Cindy Thyfault of Global Biofuture Solutions commented on the rise in deal flow for aviation-related projects and noted that more are finding the 25-35% equity, investment-grade feedstock and offtakers, are signing EPC contracts with performance guarantees, to secure a financeable BBB- ratings.

She warned that absolutely every source of revenue and risk mitigation had to be pursued zealously by every project developer. Despite $502 billion available for “IMPACT investing,” Thyfault said that large purchasers of green bonds and environmentally-friendly company stock had urgent and often un-met needs to quantify risk and sustainability.

“Yes, SAF. But also we need to bring co-products, RINs, LCFS or other carbon credits. We need a Warm Idle provision or some other type of monetary penalty, if fuel is not purchased.”

Allow us to summarize, as we once observed:

You can finance a liquid renewable fuel as long as the market is solid, especially if you are making solids, and the market for solids is liquid, and your liquidity is solid. Adding solids to your liquids will make you more solid, and eventually more liquid. If you know what I mean.

She warned about the danger of the gap between renewable diesel and jet fuel prices. “Producers have the same need to report to shareholders and maximize revenue and reduce risk,  as airline buyers. Renewable diesel can be less expansive to produce, there’s a large CA market, and a different sales tax picture. Finance is easier to obtain from investment grade companies. We need a bridge to successfully working together.”

The Bottom Line

You could think of it as a journey from Greta to GREET to great, and we wouldn’t argue with you. Yet, the problems remain, as our Dutch friends might put it, er, groot.

I am SAF pricing, I am a problem, I am Groot.

Carbon is the answer, which is to say carbon pricing, which is to say going carbon negative, seriously, which means, for now, focusing on waste, emissions in the process, and a means to sequester. It’s a sequester quest, and it’s on at an airline near you.

Or as John Wayne once intoned:

“Tomorrow is the most important thing in life. Comes into us at midnight very clean. It’s perfect when it arrives and it puts itself in our hands. It hopes we’ve learned something from yesterday.”