KLM and Lufthansa sign long-term agreements with US sustainable biofuel producers AltAir and Gevo
Mon 12 Sept 2016 – European airlines KLM and Lufthansa have each signed agreements with US biofuel companies for supplies of locally-produced sustainable fuels. KLM has agreed to purchase through a three-year offtake agreement an undisclosed quantity of used cooking oil based fuel produced by AltAir and supplied by Amsterdam-based SkyNRG. The fuel will be used on all KLM flights departing from Los Angeles and will be delivered to aircraft through the airport’s hydrant system. Gevo, meanwhile, has entered into a non-binding heads of agreement with Lufthansa to supply up to 8 million gallons annually of alcohol-to-jet fuel over a five-year period once its intended first commercial-scale facility in Minnesota is up and running.
The price differential between the cost of AltAir’s fuel and that of traditional kerosene is being covered through KLM’s Corporate BioFuel Programme in which large organisations pay a fixed supplement to ensure sustainable biofuel is used for a portion of their air travel. Participants include ABN Amro, Accenture, Heineken, City of Amsterdam and the Schiphol Group. The biofuel flights from Los Angeles are expected to contribute to KLM’s ambition of achieving a 20% reduction in CO2 emissions per passenger by 2020, compared to 2011.
“Sustainable biofuel is currently one of the most effective ways to reduce CO2 emissions in the airline industry,” said KLM CEO Pieter Elbers. “Owing partly to the companies taking part in the programme, we have been able to take this step, giving a further impulse to the consistent production of biofuel.”
AltAir is the first – and currently the only – bio-refinery in the world with a production capacity dedicated to sustainable jet fuel. In March this year, United Airlines started using AltAir fuel on regular flights from Los Angeles to San Francisco (see article). The airline has agreed to purchase up to 15 million gallons from AltAir over a three-year period, a quantity sufficient for around 12,500 flights on the route.
Commenting on the KLM deal, AltAir Fuels President Bryan Sherbacow said: “This multi-year biofuel offtake is a real milestone for the industry and shows their commitment to making aviation more sustainable.”
Los Angeles will become the world’s second airport to incorporate biofuel blends into its regular refuelling process, following a similar initiative at Oslo that commenced earlier this year, also involving KLM and SkyNRG (see article).
“Only five years after we supplied KLM to operate the first commercial biofuel flight in the world, our launch customer has now signed its first long-term biofuel offtake,” said SkyNRG CEO Maarten van Dijk. “AltAir’s dedicated production capacity marks an important milestone as creating scale is crucial to taking the next step in the development of the sustainable jet fuel market.”
The Gevo heads of agreement with Lufthansa is subject to completion of a binding off-take agreement and other definitive documentation between the two parties, which is expected to be completed in the next few months, according to the Colorado-based ATJ producer. Following certification of its fuel in April, the first commercial flights powered by Gevo's fuel were operated by Alaska Airlines on routes to San Francisco and Washington DC in June (see article). Under the Lufthansa agreement, the fuel would be supplied from Gevo’s first commercial-scale facility that it intends building in Luverne, MN.
The heads of agreement establishes a selling price that Gevo says is expected to allow for “an appropriate level of return” on the capital required to build-out the new facility.
The present Luverne facility has experienced production ramp-up delays of late but the company is expecting that by the end of 2016 to have the capability to be at a production run rate equivalent to 1.5 million gallons per year.
However, in its latest quarterly financial results it cautions: “Although Gevo expects to have this production capability, Gevo currently expects to run at a rate less than 1.5 million gallons per year during 2017 as it scales up and tests new process improvements to further reduce costs and optimise production in general at the Luverne production facility with a view towards significantly expanding production capacity in the future.”