The Grand Switcheroo: Is the Biden Administration aiming corn ethanol at SAF, putting spirit in the sky?

November 18, 2021 |

Just back from the AFCC event in Washington, and I have to say, the mood was reasonably glum in the world of Sustainable Aviation Fuels, where you’d think that the leaders would sound like brides and bridegrooms on the brink of happiness, after President Joe Biden announced a goal of 3 billion gallons of SAF capacity by 2030. 

Instead, there was quite a bit of nervousness around “the BTC/PTC problem,” which is to say, a tax credit the SAF industry, airlines and their stakeholders believe is essential to having a realistic chance of reaching that 3 billion gallon goal via Plan A, which is, more or less:

1. To deploy technologies, lot of ‘em
2. Approve new pathways, as many as needed.
3. Put SAF and renewable diesel on a level playing field
4. California, here I come.

Looking at conditions

CAAFI executive director Steve Csonka was so circumspect about the 3 billion gallons goal, absent action on tax credits, you wanted to give him a teddy bear. Michael AuBuchon Senior Director, Fuel Supply Management, Southwest Airlines made reference to his hope that future SAF deals by Southwest could be firm, and not conditional.

Wait, did he say “conditional”? 

So, one goes racing back to the Velocys offtake deal just announced. And, yes, there it is: “The agreement is subject to certain customary conditions precedent including…enactment of the proposed SAF tax credit legislation.”

Yikes. So, where are we on that? Not exactly the no-brainer of the year. Because it is in the Build Back Better Act, right? Not quite. Because it’s in the House version of the bill, right? Not quite. It’s in the House Ways and Means version of the tax provisions which is in the as-yet unpassed House version of the Bill. Which in Washington DC reduces it from “law of the land” to “negotiating chip” status.

Is there a Plan B?

Dire straights? Not really, not yet, anyway. Tax credits are popular, and this provision, there’s a $1.25 per gallon credit “available for each gallon of SAF with a demonstrated lifecycle GHG reduction of at least 50% compared to conventional jet fuel if sold as part of a qualified fuel mixture”. And the tax credit rises by one penny for every point of further carbon reduction, up to $1.75 a gallon.

Heading in to AFCC, everything seemed A-OK. DOE had launched the SAF Grand Challenge in support of President Biden’s goal, and Plan A looked pretty good. Now, you have to wonder — just exactly what Plan B is.

So, here’s my theory, which I would like to add is informed speculation on my part, which is to say, please label this in the “opinion” department.

Seems to me that Plan B is this:

1. Electrify the light-duty fleet as quickly as possible, and bring an end to gasoline as we know it.
2. Pursue technology investments toward extending electrification into the heavy-duty road fleet as far as possible, and get hybrid technology going at sea.
3. For aviation, which needs the heavy lifting capability of liquid fuels, upgrade 6.2 billion gallons of ethanol into 3 billion gallons of jet fuel by 2030.
4. Declare victory, exit Vietnam.

Then, there’s Son of Plan B, which takes us from 2030 through net zero in 2050 and, for aviation, appears to look like this:

1. Electrify short-haul to the extent possible with R&D investing.
2. For volume, use ethanol conversion.
3. To drive the carbon intensity lower, foster demonstrations and commercials of all those smaller volume projects of the Velocys, Fulcrum and SkyNRG type, with a goal of CI-negative fuels.
4. To foster a wider assortment of feedstocks, finance a whole bunch of projects aimed as converting wood and cellulosic crops to heavy-duty fuels, no fermentation please.

No one said it, I suspect that I am not, however, the only person who is thinking it. For one thing, there’s no mystery that you can create SAF from ethanol, or that the ethanol industry is looking into it, that the Biden Administration is interested, and that electrification of the light-duty fleet represents a headwind for ethanol, which blends with gasoline.

What’s new is not the idea, but the possibility is that this is going to be, uh, pretty much the whole enchildada. That the Grand Challenge is pretty much the Grand Switcheroo, we’e going to deliver the first generation of big-volume sustainable aviation fuel by re-purposing the first generation of big-volume sustainable road fuel. 

I think I would have been more circumspect if I had seen outright gloom from the big alcohol-to-jet players. Yet, Gevo CEO Pat Gruber was powerfully energized at AFCC. LanzaTech board director Roger Wyse had the most positive things to say about biofuels I’ve heard from him in some time.

The rest? An awful lot of hope pinned on tax credits, and the forlornness that comes from the belief that Father Christmas might not come this year, is what I heard. I may have missed the optimism.

Plan B also feels attractive when you consider the storied Fulcrum Bioenergy project, which crushes the CI and expands the feedstock supply into the realm of MSW. Marvelous! It’s in commissioning right now, but let’s reflect on how long it has taken to build that revolutionary plant, it’s been something like a 14-year journey when all is said and done from company formation to today. And, I might add, Fulcrum is a technology aggregator, they skipped the painful years of nursing along a new tech.

Does NLACM still apply?

Now, somewhere Aemetis CEO Eric McAfee is about to mention NLACM, the Natural Law of Alternative Commodity Markets, that no one will ever take two perfectly good ethanol molecules worth two bucks each and make one gallon of jet fuel worth about a buck eighty. Especially if you lose a gallon of carbon credits in the process. 

But electrification changes the game. It’s not a matter of road vs jet, but idle vs jet.

So, why not simply take that potential farm sector debacle and hand the corn growers a vibrant new market in aviation. In aviation, electrification of heavy-duty jets is almost as far away as Warp Drive and Mind-Melding. And, the blend limits are better — 50 percent vs 10 percent today, and drop-in fuels at 100 percent blends are becoming a reality. 

Do the economics work? Is that the strategy. We’ll have to wait for more,. But I do wonder if I was the only observer saw a Grand Switcheroo on the immediate horizon?

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