Navigant Research Blog

Boeing Bets on Green Diesel

— January 31, 2014

The race for aviation biofuels has accelerated in the last couple of years.  More than 1,500 individual flights at least partially powered by biofuels have occurred since Virgin Atlantic powered the first commercial jumbo jet in 2008 with a blend of conventional jet fuel and biofuel derived from babassu and coconut oil.  More than 30 commercial carriers have flown with a blend of biofuels over this period.  Most recently, Boeing announced it would pursue ASTM certification for use of renewable green diesel for use in commercial aviation.

Despite aviation biofuels’ broad appeal among key commercial and military stakeholders, limited production and high costs have remained challenging barriers to the 3% to 6% share of global jet fuel consumption that the International Air Transport Association (IATA) believes is achievable by 2020.

Derived from diverse resources like algae, camelina, jatropha, and used cooking oil, the current pool of aviation biofuels is shallow due in part to a lack of production capacity – at least as measured against prevailing expectations just half a decade ago.  This is why Boeing’s recent announcement to pursue green diesel certification could change the game.  For the aviation industry, certification would enable green diesel to be integrated into existing supply chains at a cost that is competitive with petroleum-based jet fuel.

Plenty of Capacity

More chemically similar to fossil-based diesel than conventional biodiesel, green (or renewable) diesel’s advantage over incumbent biofuels is its compatibility with existing infrastructure.  This means that it can be dropped into existing pipelines, storage tanks, and most importantly, existing engine hardware.  This avoids the substantial costs associated with building out additional infrastructure, which conventional biodiesel and ethanol require – a bottleneck that has stymied conventional biofuels’ penetration into the global fuels supply chain.

Another advantage of green diesel relative to other advanced biofuels is availability.  In 2013, though green diesel contributed to just 2.7% of the total gallons of biofuels produced worldwide, it made up more than 95% of the advanced biofuels pool.  A recent International Energy Agency (IEA) report called green diesel the most successful advanced biofuels pathway with respect to scaling up production capacity.  According to estimates compiled for Navigant Research’s Industrial Biorefineries report, there is currently more than 900 million gallons of green diesel production capacity deployed across the United States, Europe, and Singapore.

Just two pathways – Bio-SPK and FT-SPK – have achieved ASTM certification for use as jet fuel.  At their current stage of development, both pathways have proven to be prohibitively expensive to use on a commercial basis.  Alaska Air and Horizon paid $17 per gallon in 2011; the U.S. Navy, meanwhile, has paid between $20 and $65 per gallon for advanced biofuels used in various non-combat operations.  While it is important to note that these prices are for relatively small quantities used primarily for testing, with green diesel’s wholesale cost in the range of $3 per gallon, it is currently available at price parity with petroleum-based jet fuel.  Jet-A wholesale costs are currently just under $3 per gallon.

Flight Path

Although ASTM approval for green diesel would be a boon for advanced biofuels and the aviation industry in the near term, the availability of sustainable feedstock to support a mature industry remains a hotly debated issue.

At best, green diesel certification provides a bridge to more scalable thermochemical conversion pathways for aviation biofuels: fuels derived from large-scale algae production, or more likely, the realization of industrial-scale non-food oil production from promising feedstocks like jatropha or camelina.  At worst, it buys the aviation industry a few more years to build on the difficult progress that has already been achieved.

While Boeing and commercial airlines are among the winners if green diesel certification goes through in the near term, refining stalwarts like Finland-based Neste Oil, Honeywell’s UOP, and Valero are also well-positioned to ride a surge in investor activity.


Ethanol Growth Lies in Optimization, Not Mandates

— January 31, 2014

The last 2 years have been punishing for the ethanol industry.  In August 2012, the Environmental Protection Agency (EPA) and National Highway Transportation Safety Administration (NHTSA) revised the treatment of flex-fuel vehicles (FFVs) under CAFE standards so that manufacturers will no longer receive credit for FFV sales beginning in 2017 if they cannot provide data proving E85 (gasoline with up to 85% ethanol) use by the FFV.  Then, in November 2013, the EPA proposed a reduction of an estimated 3 billion gallons of biofuels blending quotas for 2014 under the Renewable Fuel Standard (RFS).  Additionally, while the EPA has approved the use of E15 (gasoline with up to 15% ethanol) in model year (MY) 2001 vehicles and newer, major automakers have been hesitant on the fuel, in some cases approving its use only in MY 2012 vehicles and/or newer.  As a result, there are few stations that supply E15.

All of these setbacks mean that the market for ethanol in the United States has peaked at 10% of retail gasoline consumption and has flatlined in recent years.  Additionally, Navigant Research forecasts in a forthcoming report, Biofuels for Transportation Markets, that retail gasoline consumption will fall before 2022 thanks to increasing fuel economy standards and interest in alternative fuel and light duty diesel vehicles.

Despite ethanol’s recent tribulations, though, there are opportunities for sustainable growth.

E30 = $

A report developed by researchers at Oak Ridge National Laboratory (ORNL) finds that the use of E30 (gasoline with up to 30% ethanol) can significantly improve vehicle efficiency in optimized engines, compared to a conventional internal combustion engine fueled with regular gasoline.  Efficiency gains are achieved through the high-octane properties of ethanol, which improve combustion, thus mitigating engine knocking and allowing for greater downsizing of the vehicle engine.

The findings are important because they identify an opportunity for ethanol to become an economic product for end consumers.  To date, E85 has failed to catch on in the United States because the fuel shows no significant improvement in reducing fuel costs due to the lower energy density of ethanol compared to that of straight gasoline.  While there are currently many FFVs on U.S. roads, on average FFV drivers rarely fill up with E85.  Reasons include a lack of available infrastructure and low driver awareness.  However, those reasons would evaporate if the cost of driving on E85 were significantly less than driving on E10.  If the latter were the case, E85 compatibility would be a more valuable selling point for automakers than it is now, consumers would be well aware of the cost savings, and demand for E85 would be robust and drive infrastructure development.

If it’s true that an ethanol blend above 10% can improve fuel efficiency given the right engine, then the cost savings to the end consumer will spur growth in a market that has stagnated.  Realizing this opportunity, though, requires significant buy-in from automakers that would have to develop the optimized engines and the assurance that fuel retailers will have the optimized blends available.  Those factors will likely require government support.


Lighting-as-a-Service Hints at Major Industry Shifts

— January 31, 2014

In November, Philips signed a 10-year performance lighting contract with the Washington Metropolitan Area Transit Authority (WMATA) to provide lighting-as-a-service in 25 WMATA parking garages.  Over 13,000 lighting fixtures are being upgraded to a custom-designed LED lighting solution at no upfront cost to WMATA.  The cost of the project will be paid for through the estimated $2 million in energy and maintenance savings the project will yield per year.  Energy usage is expected to be cut by 68%, or 15 million kWh, per year.  Philips will also monitor and maintain the system during the life of the contract, allowing WMATA to redirect approximately $600,000 annually in labor and material resources.  As part of the 10-year maintenance contract, Philips will also reclaim and recycle any parts of its system that must be replaced.

The implications of this business model are significant.  WMATA gets a top-of-the-line lighting system essentially free.  In fact, if Philips charges anything less than $2 million per year (or whatever the annual savings are), WMATA is making money on the project.  Throw in the maintenance contract and how could a potential customer say no?  The only potential downside would be if Philips welches on its customer service agreement and fails to perform adequate maintenance.  This would be a problem for Philips as well, as it would mean that the firm underestimated the resources needed to fulfill the maintenance contract and is missing its cost goals.

Reuse, Recycle, Re-Profit

According to Philips, lighting-as-a-service (or Pay per Lux) is their model moving forward, and that could be extremely disruptive.  While the fine details of the agreement have not been made public, it’s likely that WMATA agreed to pay Philips a percentage of the actual energy savings per year (compared to WMATA’s energy usage in a base year) as opposed to a flat rate.  This incentivizes Philips to maximize the efficiency of the system, which benefits everyone.  In that way, WMATA is truly paying for performance.

Echoing the theme of my last blog on cradle-to-cradle circular economies, Philips could also capture cost savings by recycling the lighting components, thereby turning a waste stream into a supply line.  Even if the upfront savings are small, they would provide an incentive for Philips to streamline the recycling process by designing products for disassembly, using fewer raw materials, and expanding relationships with recycling facilities, perhaps even acquiring them.  Then, if lighting-as-a-service starts to gain traction and the amount of material being recycled gains critical mass, the savings could become very real.

An efficient recycling process could lead to other opportunities.  For example, Philips could provide upgrades to WMATA’s system, increasing energy savings and customer satisfaction, more frequently and at lower cost without creating any waste.  If no material is being wasted, suddenly planned obsolescence doesn’t sound so bad.

I suspect any company that offers a technology that can pay for itself with annual savings is taking a long look at this business model.  If not, they should be.  The residential solar industry is already capitalizing on a similar leasing model.  If leasing and maintenance contracts become the norm in these industries where savings pay for the product, and customers begin paying for light as opposed to a lighting fixture, it could mean that hardware companies like Philips and Samsung will have to differentiate themselves more on customer service than on their physical products.


Futuristic Glass Spurs Solar Innovations

— January 31, 2014

First invented in the Bronze Age, 5,000 years or so ago, glass is such an integral part of modern life that we rarely give much thought as to how it performs or is produced.  Today, though, the development of novel forms of glass promises to bring high-tech, low-cost advances to a range of applications, including solar power.

Glass has many advantageous qualities and one major disadvantage: it’s brittle.  It shatters on impact.  We long ago mastered the art of molding glass into many different curves and fantastical shapes, but once it’s set, it’s set until you take a hammer to it.

That is changing, as researchers at McGill University in Montreal have adapted structural characteristics from the shells of mollusks to give glass new resilience and flexibility.  The scientists found that the extremely tough and bendable nacre, or mother-of-pearl, that coats the inner shells of the creatures is made up not of an unbroken surface, but of millions of microscopic components or “tablets.”  When the shell is bent or deformed, the cracks between the tablets allow it to bend, yet remain intact.  Think of blocks of sea ice floating on a moving water surface; they rise and fall and compress and spread, but the overall surface of the ice remains the same.

Fractured Yet Flexible

In the same way, the McGill researchers found that they can pre-crack glass with lasers to create a puzzle-piece design.  The resultant microfractures are filled with polyurethane, creating a material that is weak at the boundaries of the tiny fragments, but resilient as a whole.  Flexible glass.

The immediate applications envisioned include less breakable smartphones, for instance.  But advances in making glass more flexible, resilient, and versatile will likely have implications for solar power, as well.

When a technology is as commoditized as solar panels, with prices halving in just the last few years, the tendency is to think that innovation in the materials has reached an apex; the only further development needed is to squeeze more cost out of the manufacturing process.  Solar panels with next-generation glass, however, could help drive the Murphy’s Law process of price reductions in solar technology while also producing panels with a wider range of possible applications.  Crystalline silicon solar modules, which require the rigid protection provided by glass, are more efficient than amorphous silicon modules.  Amorphous silicon (often used in thin-film solar coatings) has the benefit, however, of being flexible, making it applicable in a host of environments where conventional glass is less robust.

Spray On, Not Tan

Developed at the University of South Florida in alliance with the National Renewable Energy Laboratory and being commercialized under the mark SolarWindow by New Energy Technologies, a new glass with tiny transparent solar cells integrated is due to reach the market this year.  New Energy produces both flat glass for windows and structural glass walls and curtains for tall structures that have all the usual qualities of glass and also act as solar panels.  Made of organic polymers (thus grown, not manufactured), the transparent solar cells are the world’s smallest, the company says, measuring less than one-fourth the size of a grain of rice.  They are sprayed onto the glass in a novel process that does not require the high temperatures and vacuum chambers of other spray-on solar technologies.

Meanwhile, building off of NASA’s R&D on solar panels for deep space satellites, Entech Solar has developed a concentrating solar system called SolarVolt that uses tiny versions of Fresnel lenses – originally developed in the 19th century to focus the beams of lighthouses for many miles out to sea.  The miniature photovoltaic array has achieved a 20X concentration of the sun’s rays, enabling much smaller-sized systems per unit of energy captured.

These advances in the structure of glass, a 5-millenium-old invention, could help accelerate the solar revolution and bring closer the day when renewable energy is less expensive, by any measure, than fossil fuels.


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