Australian aviation biofuels technically viable but face significant obstacles, says major Qantas/Shell report
Tue 10 Dec 2013 – An investigation into producing sustainable aviation fuels (SAF) on a commercial scale in Australia concludes that action to address the lack of local feedstock and infrastructure availability will be required to make them economically viable. The 105-page report released by Qantas and Shell was carried out with the support of the Australian government and is one of the most comprehensive studies yet undertaken into the setting up of a national SAF supply chain. It looks at natural oil-based production pathways, modelling a plant capable of producing 1.1 billion litres of renewable jet and diesel fuel per year, and also assesses opportunities around a waste-based pathway. The feasibility study also finds that extending biodiesel production grants to biojet fuel would go a long way to making a commercial plant viable.
Qantas’ Head of Environment, John Valastro, said aviation biofuels were the only technology capable of delivering the generational change required to meet the industry’s target of a 50% reduction in carbon emissions by 2050 and the report presented a clear picture of what actions were required to make Australian regular biofuel flights a reality.
“It’s well-established that certified biofuel can be used safely in commercial flights,” he commented, following the publication of the report. “Qantas’ focus is now on making it a viable alternative to conventional jet fuel. It won’t be easy, but we are armed with a stronger and more detailed understanding than ever before of all aspects of the biofuel supply chain.”
Added Shell Australia’s Vice President Downstream, Scott Wyatt: “While the establishment of an aviation biofuels industry might not appear viable in the short term, innovative research on supply chains will help inform future decisions.”
The study, which brought together key players from each segment of the supply chain, looked mainly at certified biofuel production methods already approved for use in commercial aviation and which meet strict operational and environmental criteria, said Qantas.
Partners to the Qantas/Shell study included Sinclair Knight Merz (SKM), the Australian Research Council (ARC) Centre of Excellence in Plant Cell Walls at the University of Adelaide, US-based AltAir and Netherlands-based SkyNRG. Although these partners focused on the production of SAF from hydroprocessed natural oils and animal fats (the HEFA pathway), Qantas independently commissioned municipal waste to jet fuel specialist Solena to provide insights into the production of such fuels from the certified Fischer Tropsch pathway.
The study partners assessed the commercial viability of SAF using a 3,000 tonnes-per-day (one million tonnes of feedstock annually) base case refinery facility, which would produce around 20,000 barrels of renewable hydrocarbons (SAF plus other products such as diesel, naphtha and refinery gas) per day. Depending on the process configuration and bio-refinery size, the SAF fraction would represent between 5% and 35% of Qantas’ current domestic jet fuel demand when certified in a 50/50 blend.
The construction and operation of such a facility is anticipated to cost around US$877 million and US$112 million per year respectively. Reducing the processing capacity to 1,000 tonnes per day only decreases the capital cost by just under half, thereby demonstrating the importance of scale in the refining business, says the report.
However, the study’s partners find that although there is enough domestic market volume to feed a bio-refinery of this size, in practice there is limited domestic natural oil feedstock currently available. Approximately 42% of domestic natural oils feedstock is exported at a higher export price and non-food volume available for domestic use is small at 15%.
The report analyses existing food-related crops such as canola, an edible cultivar of rapeseed, and cottonseed, which are Australia’s two largest oilseed crops. Also examined are non-food feedstocks like tallow (rendered animal fats), brown grease and used cooking oil.
“While food-related natural oils could go some way in filling the domestic demand requirements, the preference of the study partners is to maximise the use of non-food competing feedstock and to avoid feedstock sourced via unsustainable land use or that breach human rights, consistent with the sustainability practices of the key study partners,” says the report. “It is important to realise that producing the target biofuel quantity of 20,000 barrels per day requires almost all of Australia’s natural oils and animal fat volume.”
The main commercial barrier to developing a hydroprocessed natural oil and animal fat-based industry in Australia is that the price of feedstock is generally higher than the price of unsubsidised end products such as diesel and jet fuel. “Under these conditions, the economics of a SAF value chain are not viable,” suggests the report.
The study examined the potential for importing existing feedstock from abroad to fill an approximate 90% shortfall, representing 900,000 tonnes, in domestic supply. It finds that despite the required volumes being available from the global natural oils market, the combination of high price forecasts, high price volatility, a strong pull on edible oil from the food markets, an uneven playing field with respect to road transport globally and increasing strictness on sustainability criteria all make imported commodity vegetable oils difficult to rely upon for SAF over the medium to long term. In addition, while there is a large global natural oils market, only a small portion – less than 5% – is non-food.
The partners examined emerging non-food competing crops that are seen to have potential as HEFA (hydroprocessed esters and fatty acids) pathway feedstocks for SAF production, such as jatropha, pongamia, mustard and camelina.
Projections suggest that if jatropha could be commercialised, it would be a leading candidate for economic SAF production by 2020. However, it is currently listed as a banned, noxious weed in Queensland, Western Australia and the Northern Territory, the states with a suitable agro-climate for its cultivation. Pongamia has received increased attention as an advanced biofuel feedstock and several R&D projects are underway in Australia. However, it is a very early-stage feedstock that has yet to be domesticated and there is a long delay until the trees reach maturity, which is a disincentive to investment.
Mustard, on the other hand, has been the focus of commercial establishment efforts for non-food applications in Australia for more than two decades and despite questions marks over yields and production sensitivities, it has potential near-term viability, found the study.
The annual oilseed crop camelina, promoted as a rotational crop with wheat, especially in areas with low rainfall, has a natural fit to the Australian agricultural landscape. It is being commercially produced on more than 40,000 hectares in the United States, with other plantings in Spain and Romania lined up to produce SAF. However, only very small-scale agricultural trials have taken place in Australia.
The primary barrier, says the report, is co-product development and the reluctance of farmers to adopt new crops and break existing crop rotations. The camelina industry, it adds, is struggling to raise capital and organise sophisticated breeding and modification efforts required to commercialise the crop and adapt optimal varieties for Australian conditions.
The study also looked at the potential of autotrophic algae and heterotrophic algae as HEFA pathways as they produce natural oils. Over the last five years, algae biofuel companies have had great difficulty in scaling up to commercial viability, notes the report, although significant financial support from the US and other governments provides some promise. It points out that despite the enormous promise of algae-to-biofuel technology in relation to yields, land use and sustainability, no algal company has yet demonstrated an economically viable production pathway for commercial volumes of fuel.
It believes commercial-scale demonstration of autotrophic algae, which are cultivated through photosynthesis in open ponds or photo-bioreactors, is at least three to five years away, or five to seven years in an Australian context.
Though several companies have used heterotrophic algae – which are grown in dark, closed fermentation vessels based on a sugar input rather than through photosynthesis – to produce algal oils, these have been focused on high-value essential oil and nutraceutical production. Only Solazyme is working to additionally develop biofuel feedstock and Qantas is engaging with the US company to assess the potential development of SAF in Australia using this feedstock.
Heterotrophic algal oil production could become commercially viable for biofuel applications globally in the next five to seven years, estimates the study, assuming that an adequate supply of low cost, sustainable sugars is available. Given the volatility in the price of sugar as a commodity, and the increasing correlation between sugar and energy driven by the Brazilian market, the availability of sugar as a cost competitive alternative will be challenging, it adds. In addition, despite the fact that sugar is technically not a food but rather a sweetener additive, there is a risk that the reliance on sugarcane could attract the political repercussions of the fuel versus food debate, especially as it relates to sustainable land use that could be used for food crops.
Despite these concerns, key emerging feedstocks such as algae will play a critical role in driving affordable feedstock supplies for Australian bio-refinery production, says the report. However, even with end-user demand, emerging feedstocks are caught in a ‘chicken and egg’ cycle, it suggests, as a lack of development and scale up means increased investor risk and reduced investor interest, compounded by a lack of local bio-refining infrastructure.
Recent developments involving the established Fischer Tropsch (FT) process to produce sustainable, ASTM-approved jet fuels have focused on biomass such as ligno-cellulosic or municipal solid waste (MSW) as a feedstock, referred to as biomass-to-liquids (BTL).
Although FT production requires a high capital outlay (around US$500 million), under the Solena model this is offset by the negative cost of the MSW feedstock. In the UK, where Solena is partnering with British Airways on a proposed plant in east London, there is a significant landfill levy. Solena will source its waste at a price that incentivises waste companies to pay Solena to take away the waste at a cost per tonne that is lower than the landfill levy. The plant is planned to convert around 500,000 tonnes of waste per year into 150 million litres (2,500 barrels per day) of fuel product, including 60 million litres of SAF.
The Qantas/Shell study shows that such a model might work in the Australian context as there is enough volume of MSW available in cities such as Sydney and Melbourne, as well as appropriately high landfill levies. However, the study found that several questions still remain to make the concept viable in Australia, not least the fact that BTL technology remains globally unproven at a commercial scale. A key issue is whether a long-term feedstock supply agreement can be negotiated at a reasonably cheap or negative cost. In addition, the cost of sorting technology will need to be borne at some point in the supply chain to ensure the appropriate level of energy content in the waste feedstock.
In the medium term, there is a significant opportunity to explore the feasibility of next-generation pathways, such as alcohol-to-jet fuels, that are likely to be ASTM certified in the near future, found the study. These emerging pathways have the potential to involve feedstocks that are cheaper, more plentiful and more sustainable than natural oil feedstocks, and have lower capital expenditure than Fischer Tropsch derived fuels.
Government assistance is likely to be required to break the ‘chicken and egg’ cycle and the study calls for a balanced policy environment that incentivises the production of all renewable transport fuels equally and removes market distortions; the provision of limited direct financial assistance in the form of grants, loans and guarantees; and for government to use its spending and purchasing power to stimulate demand in markets that require a kick start.
“The next step for Qantas is to work closely with our partners to find ways of increasing the supply and reducing the cost of aviation biofuel feedstocks in Australia,” commented Valastro. “At the same time, we will be talking to governments about the importance of a supportive policy environment for biofuel production, given its potential to create jobs and open up new opportunities in the agriculture sector and regional Australia.”