Alternative fuels still face hurdles

 - August 27, 2010, 5:21 AM

The alternative aviation fuel industry continues to conduct flight tests to validate the use of new jet-fuel blends. At the end of April, United Airlines became the first U.S. commercial carrier to fly using a certified synthetic-fuel blend that received ASTM approval last year. The 40/60 mix powered one of the engines on an Airbus A319 in an engineering validation flight that departed Denver International Airport and reached an altitude of 39,000 feet. The drop-in fuel, supplied by Los Angeles-based producer Rentech, was derived from natural gas and converted to liquid through the Fischer-Tropsch process. 

"This flight confirms our assumptions about how this fuel performs on a commercial aircraft in a variety of situations and represents the next step in our effort to stimulate competition in the aviation fuel supply chain, promote energy security through economically viable alternatives that also demonstrate environmental benefits and contribute to the creation of green jobs," said Joseph Kolshak, United Airlines senior vice president of operations.

That test flight followed one by the U.S. Navy, which for the first time operated one of its fighters on a biofuel blend. On Earth Day (April 22) an F/A-18 dubbed the Green Hornet took to the skies over the Navy's flight-test center in Patuxent River, Md., powered by a 50/50 mix of camelina-derived biofuel supplied by Honeywell subsidiary UOP, which has developed the technology for the fuel under a contract from the U.S. Defense Advanced Research Projects Agency (Darpa) to help satisfy the service's stated goal of meeting half its energy needs with alternative fuels by 2020. UOP also supplied the fuel for the June test flight of a Royal Netherlands Air Force Boeing AH-64D Apache, the first use of sustainable aviation biofuels by a helicopter. In this case a blend derived from algae and used cooking oil powered one of the Apache's engines, which required no modification for the demonstration.

Financing Options

While such flights provide a boost to the quest for alternative energy, this would-be industry faces deeper issues as it attempts to achieve relevancy in terms of the global jet-fuel supply. Companies such as UOP and Rentech have proved that alternative aviation fuels can be produced, and test flights have demonstrated their use, but exactly how to finance the construction of refineries and the growing of feedstock in quantities sufficient to meet the thirst of the aviation industry was one of the key topics at the recent Advanced Biofuels Leadership Conference. 

"Who is going to pay for all this really is a question," said conference organizer Jim Lane. Opinion varies widely on the question of exactly how much capital is needed to jump-start the industry. One biofuel executive estimated the need for a $20 billion investment in refineries, plus a similar amount to stimulate feedstock production, while another viewed that number as excessive. According to Lane, the current predicted capital cost for an alternative fuels refinery ranges from $2 to $12 per gallon of output. With plans calling for most refineries to be capable of producing 100 million gallons per year, the potential financing needed could be significant. 

"Aviation biofuels is a 60-billion-gallon- per-year behemoth, so you could do the math," said Lane. "You could get to $360 billion and I wouldn't blink an eye." Given those numbers, the availability of financing still represents a major hurdle for the industry. "To get project finance in this area you need to have a feedstock contract with a long-term fixed price from a credit-worthy supplier; you need to have an off-take contract [an agreement with a customer to purchase the producer's entire output] with a long-term fixed price with a credit-worthy customer; and you have to have a proven, stable, safe, reliable technology. The biofuels industry doesn't have any of that," explained Lane. 

At the end of last year, the government–through the Departments of Energy and Agriculture–handed out approximately $600 million in biorefinery funding, the bulk of it earmarked for pilot and demonstration-scale projects to help accelerate the commercialization process. 

While the ASTM last fall approved the use of the Fischer-Tropsch process for synthetic jet fuel blends, and is expected to do the same for advanced biofuel blends this year, getting full-scale production of these fuels going will still take time. Refinery technology specialist UOP developed the green jet fuel process–which uses natural oils from non-food crops such as jatropha, camelina and algae to produce bio-derived synthetic paraffinic kerosene (bio-SPK)–and expects to announce the first licensees for its technology later this year. 

"From when [biofuel producers] say they are going to license the technology it will take 24 to 30 months to get the unit up and running," said Jennifer Holmgren, UOP's former v-p and general manager of renewable energy and chemicals. "My expectation is that by the end of 2012, there will be biojet [fuel] production in place. I would say in the range of a couple of hundred million gallons and then working to a billion gallons in the 2015-2016 range."

Once production starts it might still take some time before alternative aviation fuels make an impact on the market. "Building 10 billion gallons of [alternative aviation fuel] capacity can take a while," said Lane. "The entire biofuels industry by comparison has around 30 billion gallons of capacity worldwide and that's taken most of 25 years to build."

Even when the alternative fuels arrive in quantity it might take some time before they find their way into the tanks of business aircraft. As production increases, the price for alternative fuels will presumably descend to the range of standard jet fuel, but until then, much of the supply will be used by the military and by commercial carriers. 

At the end of last year, potential large-scale alternative fuel providers Rentech and AltAir Fuels announced they had signed non-binding agreements with numerous airlines to provide hundreds of millions of gallons of renewable jet fuels starting in 2012. In March the Air Tran s port Association (ATA) and the U.S. Department of Defense announced a strategic alliance. The joining of the world's two largest consumers of jet fuel–on the order of 1.5 million barrels a day–was aimed at spurring the growth of the alternative fuels market, as well as leveraging efforts and research between the two groups.

Based on its tremendous thirst for jet fuel, the alliance is expected to have a large impact. "If it weren't for the airlines and the military saying that they are willing to buy fuel in advance of it actually being produced, then I don't think there is any hope for these things to move forward right now," said Holmgren.