BIOMASS HUB

As I wrote last week (see Aviation Industry Hangs its Future on Biofuels), aviation demand for biofuels is bursting at the seams.  The trouble is, there are no easy alternatives.  Sustainable, non-food feedstocks like Camelina and Jatropha are just getting traction and the process of turning algae into fuel is still under development, which leaves few alternatives for the petroleum-dependent aviation industry.

Unlike ground transportation, the key issue for airlines is that they are entirely dependent on liquid fuel, and this — right now — is hurting their bottom line.  According to the Air Transport Association (ATA), the industry trade organization for the leading US airlines, fuel expenses have historically ranged from 10 to 15 percent of US passenger airline operating costs, but averaged more than 35 percent in the third quarter of 2008.  In 2008, every dollar increase per barrel (42 gallons) drove an additional $464M in fuel expenses for U.S. passenger and cargo airlines.

But rising fuel costs aren’t the only thing making business especially difficult for the aviation industry.  Increasing price volatility has made it more difficult for airlines to hedge prices and increases in the crack spreads, a function of refinery capacity representing the difference between jet fuel prices and crude oil, are also necessitating an imminent shift towards integrating renewable aviation biofuels (see Aviation Caught Between a Rock and a Hard Place) into the supply chain.  When EU’s ETS comes online, GHG emissions regulations will hit airlines with another financial obstacle.

It’s about fuel security and financial viability.

A flurry of supply agreement deals are signaling this reality.  Most recently, the USA’s Defense Logistics Agency’s Defense Energy Support Center and the Air Transport Association of America have signed a strategic alliance agreement for the development and deployment of alternative aviation fuels.  The agreement highlights the two groups’ shared goals to advance the development and deployment of commercially viable, environmentally friendly, alternative aviation fuels.

James C. May, President and CEO of ATA, explains:

The airline industry and DoD collectively require more than 1.5 million barrels of jet fuel per day.

As this figure implies, increasing the supply of biofuels to meet growing aviation demand is no small feat, made increasingly difficult by the logistical challenges associated with ramping up the production of promising fuel feedstocks like Camelina (see Camelina Aviation Biofuels: Market Opportunity and Renewable Energy Report).  In theory, demand for biofuels in the aviation sector could be unlimited, but meeting that demand raises many questions about sustainability standards.

As the aviation industry transitions to biofuels, different approaches will be tried to maximize the potential of available feedstocks like Camelina.  For example, Great Plains Oil & Exploration – The Camelina Company and Accelergy Corporation have signed an agreement to produce a clean biojet fuel by blending domestic coal and Camelina oil by utilizing CBTL (coal-biomass-to-liquid) technology.  The press release released Monday states:

The aviation industry is demonstrating its desire for biojet fuel with the certification of biofuels on regular commercial flights expected in 2012, the Air Force’s target to use 50% domestic jet fuel by 2016, and the European Union’s mandate that transportation fuels consist of 10 percent biofuel by 2020, the industry is demonstrating its increasing readiness for biojet.

Image: Flickr/Olastuan