US Midwest report recommends route to developing a successful aviation biofuels industry in the region
(photo: United Airlines)
Mon 15 July 2013 – With its significant airline presence and agricultural resources, the American Midwest holds the promise of potentially contributing to advancements in the aviation biofuels industry, says the Midwest Aviation Sustainable Biofuels Initiative (MASBI) in its final report. Formed in May 2012, MASBI was led by Chicago-headquartered United Airlines and Boeing, along with Honeywell’s UOP, the Clean Energy Trust and the Chicago Department of Aviation, and involved 40 or so organisations across the aviation biofuels supply chain. The Midwest region consumes nearly three billion gallons of jet fuel per year and MASBI estimates that for every five per cent of petroleum jet fuel that can be replaced by biofuels, around 3,600 jobs can be created and 700,000 tonnes of CO2 emissions saved.
The Midwest boasts a rich history of agricultural development, clean technology innovation, research institutions and a vibrant investment community, says MASBI, with Midwest governments and policymakers recognising the importance of the advancement of the aviation biofuels industry.
“These factors combined highlight the region’s potential,” conclude the five MASBI leaders. “The recommendations of the MASBI report, if enacted, will accelerate the development of this industry.”
The report highlights a number of recommendations to deliver a robust sustainable aviation biofuels industry in the 12-state region, covering R&D, production, financing, policy and sustainability.
After substantial private and public investment in agricultural R&D, oil seed crops have been found to naturally produce oils that are chemically predisposed to producing biodiesel, the closest chemical relative to jet biofuel. The opportunity exists, says MASBI, for R&D investment in designing oil seeds that would produce a suitable feedstock for aviation biofuels that would reduce production complexity and cost.
With the US market for blending ethanol with gasoline nearing the 10% “blend wall”, thus saturating the gasoline market, the authors of the report maintain this is increasing interest in converting biomass to advanced biofuels such as diesel and jet fuel. They say that feedstock production capacity can be improved through agricultural innovation, for example rotation with crops such as camelina, and feedstocks could be tailored to jet fuel production.
Biomass made up of lignin, cellulose and hemicellulose – for example, wood and agricultural residue biomass such as corn stover – could provide a very large volume of sustainable feedstock, and so increased investment in bio/catalytic pathways to produce jet fuels from such sources is recommended, says MASBI.
For some technology pathways, there are strong economic drivers to produce other biomaterials and surface transportation fuels rather than lower-margin renewable jet fuel but, it believes, the latter has the attraction of a concentration of buyers and high-volume demand.
With upstream blending and existing petroleum infrastructure already in place, the Midwest has sound logistics available to support the development and quick integration of a jet biofuels industry, says MASBI. The report calls, though, for means to be identified to speed up the approvals process by regulatory bodies ASTM International and the US Environmental Protection Agency of new conversion technologies. The production of renewable diesel as part of the refiner’s product portfolio should be supported to allow for improved renewable jet fuel supply and improved overall economics of biofuel production.
Feedstocks are the largest contributor to the cost of biofuel production and current prices are too high for cost-competitive aviation biofuels, finds the report. New crops developed for advanced biofuels face challenges for adoption and scalability although they have the potential to reduce feedstocks in the long run. In the meantime, says MASBI, government policies are necessary, particularly as institutional investment in biofuels has decreased and, due to policy renewal and uncertainty surrounding the possible ending of tax incentives, investors devalue government credits when calculating returns and perceive the industry to be high risk.
“More direct involvement by the aviation community as a strategic partner in commercial opportunities likely will help win institutional backing in the early years of the industry’s development,” MASBI suggests.
stakeholders to consider entering agreements with the aim to balance risks with partners, such as adopting innovative pricing structures and long-term offtake agreements;
investors to require lower cost of capital on investments;
feedstock providers to enter into long-term supply agreements with better than market pricing;
fuel producers to accept alternative margins; and
refiners to 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,” it argues.
MASBI suggests that with private financiers either reluctant to finance biofuel projects or require rates of return that are too high, aviation industry stakeholders should 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 biofuel supply chains.
As current biofuel measures are often short term and do not address fundamental inequities in the treatment of fossil fuels and biofuels, government policy should provide long-term, reliable market signals as the industry grows to commercial scale because of the long-term capital investment required.
“The fossil fuels industry has relied on, and continues to receive, government subsidies, policies and support that foster growth, and the aviation biofuel industry should be afforded similar opportunities for growth,” requests MASBI. “For example, allow master limited partnerships for renewable jet fuel, which are currently limited to the conventional petroleum industry.”
The report suggests that in the short term, biofuel development should be focused on developing smaller facilities that did not exhaust local feedstock supply and build regional demonstration facilities supported by municipal and state policy. State bonds could also be sold to support the construction of production facilities.
Although reduced carbon and particulate emissions are a major potential benefit of advanced biofuels compared to petroleum, biofuels must be produced in a sustainable way. “If production is not carried out with sustainability at the forefront, the desired environmental benefits may be lost or minimised and the resultant fuel may drive negative impacts,” advises the report. “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-recognised standards, such as those being developed by the Roundtable on Sustainable Biomaterials. Third-party certification could also help ensure that greenhouse gases, land use, water use and other sustainability criteria are appropriately considered.”
Commenting within the report, Jimmy Samartzis, Managing Director, Environmental Affairs & Sustainability for United Airlines, said: “Advanced biofuels are important to the aviation industry’s sustainability, both as a way to diversify our fuel supply and lower our carbon footprint. Development of this new, clean energy industry drives innovation in the American economy, benefits the environment, creates jobs and strengthens the communities we serve.”