Cathay steps up sustainable biofuel development ambitions
Mon 16 Mar 2015 – Hong Kong-based airline Dragonair, which is part of the Cathay Pacific Group, will later this week become the first to operate a commercial international flight from Mainland China using a biofuel blend. A Rolls-Royce powered Airbus A330-300 flight on Saturday from Shanghai’s Hongqiao Airport to Hong Kong will use a 50/50 blend of fossil-based jet fuel and a certified bio-based jet fuel refined from used cooking oil as feedstock. As well as reducing emissions by around 25 tonnes, Dragonair says the purpose of the flight is to demonstrate the Group’s commitment to using sustainable aviation biofuels as a part of achieving its corporate target of carbon-neutral growth from 2020. Cathay Pacific recently took a stake in US biofuel company Fulcrum BioEnergy, a decision which, said Biofuel Manager Jeff Ovens, was based as much on being a viable business case as on environmental grounds.
“With biofuels, the majority of the work carried out at most airlines is by the environmental team,” Ovens, who has spent most of his 10-year service at the airline in an engineering capacity, told GreenAir at the recent World Bio Markets in Amsterdam. “Our approach on biofuels is that this is a business as well as an environmental target. Our CFO wants to know whether the figures add up and it works on a standalone basis. We see our involvement in Fulcrum as a commercial venture – no other airline has done that so far.
“Most airlines are happy just to sign an offtake agreement with a biofuel supplier but we have invested our own money at a corporate level.”
In the short term, he accepts there will be an industry-wide premium for jet biofuels but is confident that despite the challenge, the price will come down to a “palatable” level close to parity with the fossil equivalent. “Eventually it will happen so we want to be involved today. If we can play an active role in the supply chain then that will put us in a very good position,” he said, adding that in the long term, the use of sustainable fuels may become a mandated requirement.
Ovens will not disclose the size of the investment in Fulcrum, except to say it is “significant”, but confirmed that as part of the deal, Cathay has an option for a bigger shareholding in the company and has entered into a long-term agreement to purchase an initial 375 million US gallons of biojet fuel over a 10-year period.
The airline was impressed with the low-key approach of Fulcrum, which had been under the radar even within the biofuels sector. “Like many, we hadn’t actually come across them before but when we drilled down into what they had actually achieved we found they had already done a lot of the necessary work, had a number of key management in place from different backgrounds and had various technology components that made sense to us,” explained Ovens.
Fulcrum’s technology is based on converting municipal solid waste (MSW) to fuels through gasification and Fischer-Tropsch, which has already been approved for commercial aviation fuels production. Cathay has focused most of its attention on fuel pathways from wastes and residues over the past few years, Ovens reported. Unlike other biofuel companies, Fulcrum could actually demonstrate that its technology worked and could produce fuel, he said.
Last September, the US Department of Agriculture (USDA) announced it had awarded a $105 million loan guarantee to Fulcrum that would help finance the construction of a $266 million MSW-to-jet fuel facility in Nevada that is expected to produce 11 million gallons of fuel annually. This was the first loan guarantee USDA had made for the production of jet biofuel.
To reach the anticipated jet biofuel production scale required, which Ovens believes will be from 2020 onwards, further facilities will have to be built and Ovens said that potential sites had been identified, some of which were at the advanced planning stage.
Ovens credits British Airways’ pioneering involvement with Solena for Cathay’s interest in the MSW route but says the key difference in approach is that his airline has directly invested in the company producing the fuel rather than just a facility, in BA’s case the proposed East London plant. Another difference, he added, was that BA sees it as an environmental initiative whereas for Cathay it is a business venture.
The airline doesn’t expect to use all the jet fuel eventually produced by Fulcrum but as a shareholder, Cathay will benefit from further offtake agreements made with other airlines and also the US military, which has shown an interest.
Another argument for the MSW route is Hong Kong’s own desperate waste problem. Cathay’s Head of Environmental Affairs, Dr Mark Watson, said local landfills are predicted to be full by around 2020 and sending waste to the Chinese mainland was not an option.
Added Ovens: “There is no official waste charging structure at the moment, as there is in London to help the financial viability of the Solena/BA plant, but clearly there is a potential opportunity for a facility in Hong Kong.” However, he said, there were technical issues over having to remove the high moisture content in the large amounts of food waste, which would affect fuel yields. A feasibility study has just been completed, reported Ovens, to find a way around this problem but with another partner, not Fulcrum.
Watson said local authorities, such as the Environmental Protection Department, were supportive of the development of biofuels from waste but it would be up to Cathay to take this forward.
“When we survey passengers and staff, the waste problem has shown to be a big environmental concern, perhaps even a more important issue than climate change,” he added. “That tells you we have to act now.”
On the broader contribution of aviation biofuels, Watson is in no doubt they will play an important part in the industry’s carbon-neutral growth challenge post 2020 and said he will be interested to see how they are treated in the global market-based measure under development at ICAO.
Update Fri 27 Mar 2015:
The Dragonair flight between Shanghai and Hong Kong last Saturday did not, in fact, use biofuels as planned. The flight was to use the same batch of fuel that was also to be used for the Hainan Airlines commercial flight of a Boeing 737-800 between Shanghai and Beijing, which did take place (see article). According to a Cathay Pacific official, the fuel was found not meet its and Airbus certification requirements for aviation fuel containing synthesised hydrocarbons. “The flight has been postponed until we are happy with the technical certification standard being used for our fuel,” he said.