Velocys sees UK green policies kick-starting commercial SAF project

Green fuel technology company Velocys is confident that a UK clean energy push this year will spark new interest in Europe's first commercial-scale sustainable aviation fuel (SAF) project in northern England, the firm's CEO, Henrik Wareborn, said.

Backed by British Airways, the Altalto Immingham project suffered a setback in January when Shell withdrew from the joint venture to pursue its own biofuel projects.

Fed by household and commercial waste that would otherwise go to landfills, the plant is designed by Velocys to produce 20 million gallons/year of SAF and naphtha using its biomass-to-liquids technology.

While the UK is no longer subject to the EU's renewable fuel directive governing biofuel targets, the UK government has launched a Ten Point Plan for a Green Industrial Revolution that includes efforts to drive the uptake of sustainable aviation fuels.

"We are in intensive dialogue with the UK government, directly and via our industry associations," Wareborn told S&P Global Platts in an interview. "The UK government is acutely aware of the high value of all the different state and federal policy incentives there are in the US to stimulate investment in commercial scale sustainable fuels production. Britain has to compete with the US and other countries for inbound investment and technology, to build a domestic SAF industry in the UK."

Wareborn said he is confident that the UK government will announce policy incentives this year that will make Altalto an attractive investment for additional industrial or financial partners in addition to British Airways, which extended its option to take up to 50% equity in Altalto earlier this year.

Velocys is also a member of the UK government's Jet Zero Council, which aims to ensure that policy supports the establishment of UK SAF production facilities, commercializing the industry by driving down production costs.

Closing the gap

With SAF up to four times more expensive to produce than regular jet fuel, a key part of scaling up investment and supplies of SAF is leveling its cost premium to jet fuel. Wareborn said he was confident that a combination of low-cost, ready available feedstocks, carbon levies on fossil fuels, and incentives for non-fossil fuels had the potential to close the gap with regular jet.

In the US, the combination of federal and state support, notably the Low Carbon Fuel Standard (LCFS) in California, has created an environment favorable to investment in renewable fuels. The Biden administration is expected to bolster the commercial environment for SAF further.

A number of recent offtake agreements for SAF and carbon-neutral pledges from US-based airlines have been backstopped by supply-side investments for biojet production. In a high case, SAF production through 2025 could range from 300 million gallons to over 1 billion, equivalent to up to 6% of US jet fuel demand, analysts at S&P Global Platts Analytics said in May.

S&P Global Platts assessed jet FOB NWE cargoes at $586.50/mt June 3, compared with SAF ex-wharf NWE at $2,382.97/mt. SAF's premium over jet has also grown steadily since November. Platts assessed the premium at $1,060.17/mt Nov. 10 and at $1,796.47/mt June 3.

Velocys' technology enables the production of SAF from a variety of waste materials, including household waste and woody biomass, which in the case of the former can otherwise end up in landfills. This means Velocys does not compete with biofuel manufacturers for vegetable oil, which has seen price spikes in recent months, Wareborn said.

The S&P Global Platts assessed RED-compliant FAME 0 premium reached $1,077.25/mt June 3, surpassing the previous record of $1,064/mt May 18.

Refining impact

With no reliance on food crops, advanced waste-to-fuel projects have a key advantage over conventional biofuels.

In the case of Altalto Immingham, Wareborn said processed municipal solid waste is abundant and has a negative cost to avoid landfill or incineration.

Wareborn said he believed SAF also has a bright future in decarbonizing global aviation because of the inherent limitations of less energy-dense hydrogen and heavy batteries for aviation. As electric cars displace future demand for gasoline and regular diesel, the continued need for liquid aviation fuels will see a major shift away from conventional refining to more commercial scale SAF projects, Wareborn predicted.

"Distilling crude oil is going to be less attractive because the only fuel with continued potential growing global demand will be jet fuel, and the jet fuel yield from crude oil is limited to about 10%," he said. "The independent refiners, who are not encumbered with huge upstream crude oil assets, are now falling over themselves to see how they can integrate our technology into their processes, so they can reduce use of crude oil and increase processing of waste feedstocks instead."

The company announced in August that it had completed the manufacturing and delivery of four reactors to the Red Rock Biofuels plant in Lakeview, Oregon.

In February it announced it had signed a collaboration agreement with Toyo Engineering to develop commercial projects to produce SAF and other renewable fuels in Japan after a successful technology demonstration with a consortium of Japanese technology partners in Nagoya.