Gevo’s Jet Bet Bonanza: a series of SAF offtake stunners from Denver’s biofuels broncos

July 31, 2022 |

This week we received the long-anticipated news that Gevo closed on the purchase of approximately 245 acres near Lake Preston, South Dakota for its first commercial scale sustainable aviation fuel facility, Net-Zero 1. The site was optioned for purchase by Gevo in December of 2020, and now groundbreaking is expected in September 2022. This project schedule should allow Gevo to begin delivery of initial volumes of SAF in 2025 to fulfill a portion of existing supply agreements. Net-Zero 1 is expected to produce 55 MGPY of SAF, or 62 MGPY of total hydrocarbon volumes.

The offtake deals have been flying fast and furious, Some airlines are making token purchases — some are laying down plenty of chips on the table.

The American Airlines deal

The most striking perhaps is the Gevo agreement with American Airlines for the purchase of 500 million gallons of sustainable aviation fuel over five years. Striking because the order considerably exceeds the production volume of Net-Zero 1, and starts in 2026, which has Net-Zero 2 and or 3 written all over it. That agreement sets forth the terms for the sale of 100 million gallons per year of sustainable aviation fuel (SAF) for a five-year term, and is expected approximately $2.75 billion of revenue over the five-year term, inclusive of the value of environmental benefits. If you have a calculator revved up, you’ll quickly get to $5.50 per gallon. If you assign $3 per gallon to the carbon value, we wouldn’t recommend you for the looney bin — but perhaps 2.50 per gallon is closer to the right number. Giving us a $3.00 per gallon price for the energy value. That’s roughly 10 percent below the spot price of conventional jet fuel, today.

So, well done Gevo, well done American Airlines stockholders. 

The American Airlines fuel sales agreement is the latest in a series of agreements that have seen airlines and other businesses partnering with Gevo to join the front lines of the energy transition. Collectively they have expressed the intent to purchase an estimated 375 million gallons of advanced renewable fuel. The strategies behind their programs are a game plan for the energy transition.

The Aer Lingus deal

Another agreement? In mid July,  Gevo revealed a deal with Aer Lingusfor 6.3 million gallons per year of sustainable aviation fuel (SAF) for five years from Gevo’s future commercial operations, starting in 2026. Same price of $5.50 per gallon — pretty good deal for Aer Lingus considering they’re not qualifying for many volume discounts. Aer Lingus has pledged to achieve net-zero carbon emissions by 2050 and has committed to powering 10% of its flights using sustainable aviation fuel by 2030. 

The Finnair deal

The Flying Finns? In late June,  Gevo unveiled a contract with with Finnair for 7 million gallons per year of sustainable aviation fuel for five years. deliveries to start in 2027 and a price of $5.50 per gallon. Kind of feels like the One World alliance group price, doesn’t it? Indeedy, Finnair is a member of oneworld, which signed an MOU with Gevo in April 2022, laying the groundwork for the 14 world-class airlines in the alliance to purchase 200 million gallons of SAF per year from Gevo’s commercial operations. 

The Japan Airlines deal

Last but not least, back in early June Gevo shared word of the contracts with Japan Airlines for purchase of 5.3 million gallons per year of SAF for five years with deliveries expected to begin in 2027. We didn’t have a price on that one — but you can rightfully assume it’s around the same $5.50 peg per gallon.  JAL and all of oneworld have net-zero emission target set for by 2050, wand a 10% conversion to SAF by 2030.

“JAL sees the value in reducing its dependence on fossil fuels while still being able to continue to use its existing aircraft,” says Gruber. “Our agreement will empower the company to achieve carbon-emissions reductions now as it explores other technologies to manage its energy transition.”

About Net Zero commitments

All the agreements are subject to Gevo developing, financing and constructing the facilities, of course.  Gevo uses the Argonne GREET model established by Argonne National Laboratory with the support of the U.S. Department of Energy to measure greenhouse gas emissions. Argonne GREET provides an accurate lifecycle inventory of carbon and leverages the decarbonizing impact of sustainable agriculture and fuel-production practices. Gevo’s Net-Zero business systems are expected to reduce greenhouse-gas emissions to net-zero over the entire lifecycle of each gallon of advanced renewable fuel produced, including its SAF, and that includes the emissions resulting from burning the fuel in engines to power transportation. And of course, Gevo actually has to finance, build and operate the plants.

Reaction from the stakeholders

“After just over eighteen months of due diligence at the site, we are excited to commit and move forward. The potential of what we are creating here is, I think, immense. We are working to bring sustainable agriculture into the solution to capture carbon and catalyze the build-out of wind, renewable hydrogen, and biogas, combined with new paradigms for managing energy. I expect that Lake Preston and South Dakota will showcase what works well when all the parts unite. I want to get on with it and show people what is possible,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer. “Capturing renewable energy and transforming it into SAF and other liquid hydrocarbon fuels is game changing. It enables the transformation of renewable energy and carbon, in the form of liquids, to anywhere it is needed, and it can be done on a net-zero GHG lifecycle basis when all of the parts of the business system are accounted for. We expect that Middle America will continue to lead the energy transition.”

“The local availability of low-carbon corn as a feedstock for our process makes Lake Preston a favorable location for this operation,” said Tony Wells, Gevo’s Site Leader and General Manager. “Additionally, the local wind conditions are ideal for the wind power that will provide electricity to our plant, and there is a good local market for the high-protein animal feed product that we will be selling.”

Speaking about fuel supply deal, Aer Lingus Chief Executive Officer, Lynne Embleton said, “This agreement with Gevo marks an exciting and critical step on our journey to net-zero carbon emissions and underlines our commitment to powering 10% of flights using sustainable aviation fuel by 2030. The sustainable aviation fuel produced by Gevo will be used to power our flights from Los Angeles and San Francisco and, from 2026, 50% of fuel purchased by Aer Lingus from California will be sustainable aviation fuel.”

“Finnair has ambitious emissions reduction targets: by the end of 2025, we intend to halve the level of net emissions from 2019 and achieve carbon neutrality latest by the end of 2045. SAF plays an important role for reaching these targets,” says Eveliina Huurre, SVP Sustainability at Finnair.

The Bottom Line

The news this summer is slightly bifurcated. The groundbreaking relates back to Net Zero 1, the announces for the future and in particular the American Airlines commitment are essentially about Net Zero Other — NZ1 being too small to handle all these offtakes. NZ1’s major customer. We suspect it’s Delta, which signed a 75 million gallon per year agreement with Gevo back in March, more about that here,  and the original 2019 10 million gallon per year deal is here:

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