Navigant Research Blog

Targeting Aviation, Dedicated Energy Crops Take Root

— March 10, 2014

In our forthcoming report on aviation and marine biofuels, we forecast that global nameplate production capacity will reach 2.3% of global jet fuel demand.  This is just shy of 2.5 billion gallons of installed production capacity, up from just under 750 million gallons in 2014.  Depending on whom you speak to, this would be either a significant achievement or an abject disappointment.

For the optimists, surpassing a critical threshold of 1% is viewed as an important milestone in the emerging aviation biofuels market.  Experience with the commercialization of new technologies demonstrates that 1% to 2.5% market penetration often represents a technology inflection point, leading to accelerated market acceptance and diffusion.  Current nameplate production capacity for aviation biofuels stands at 1%, beating Boeing’s target to do so in 2015 by nearly 2 years.

For the pessimists, 2.3% in 2020 falls well short of aspirational industry targets.  The International Air Transport Association (IATA) has set a goal of meeting 6% of aviation fuel demand by sustainable aviation biofuels by 2020; Boeing’s primary competitor in the aircraft manufacturing business, Airbus, is targeting 5% by 2020.

Below Threshold

Adding further fodder for the pessimists, actual bio-derived jet fuel (biojet) production at emerging advanced biorefineries will fall below nameplate capacity.  Note that petroleum jet fuel – a high-performance kerosene-based product tailored for turbine engines – represents roughly 10% to 15% of the refined gallons produced from a barrel of crude oil.  Based on forecasts, the actual production of biojet fuel in 2020 is likely to represent just 1% of total jet fuel consumption.  ASTM certification of green diesel as a blend fuel with jet fuel would increase this share to just below 2%, still a ways off from achieving a technology diffusion threshold.

One of the primary obstacles impeding growth in the aviation biofuels market is feedstock availability.  It’s a multifaceted problem with no single solution.  While aspirational targets may prove lofty, based on recent developments, they may have accomplished their primary purpose: to stimulate industry investment, innovation, and development.

Two developments, in particular, show significant potential despite scant attention in the U.S. media.

From Prairies to Desert

Brassica carinata, or simply carinata, is an industrial oilseed mustard crop with two subtle characteristics: its oils produce long carbon chain molecules (C22) that can be tailored to match the carbon length (C9-C15) of petroleum-based jet fuels (picture a sawmill using whole logs rather than scrap timber); and it produces more fuel per acre on semiarid lands than any other oilseed in existence today.  The result is better yields of finished fuel than soy or other conventional oilseed crops, a significant achievement for an industry aiming to reach a production threshold measured in the billions of gallons.

Agrisoma Biosciences, a Canadian-based crop company, currently has exclusive global rights to commercialize carinata.  This effort is gaining traction in North America.  Technology developed by Applied Research Associates (ARA) and Chevron Lummus Global is processing test batches of carinata into renewable fuels that are 100% replacements for petroleum based fuels.  In 2012, Canada’s National Research Council (NRC) flew the world’s first 100% biojet civilian flight powered by carinata-derived fuel.  While Popular Science magazine named the milestone one of the top 25 scientific events of 2012, the event was overshadowed by a surge of aviation biofuels tests and commercial flights logged that same year.  More than 15 individual aviation biofuels initiatives took place that year, each relying on a fuel blend of no more than 50% biofuels.

Halfway around the world, a team of researchers in Abu Dhabi led by the Masdar Institute, Boeing, and Etihad Airways is studying the potential of halophytes, a salt-resistant desert crop that can be grown on marginal land.  Scientists leading the effort plan to build an integrated aquaculture ecosystem in which waste seawater from a fish and shrimp farm will nourish halophyte crops, which in turn, act as a filter that cleans the water for discharge into mangrove swamps.  The consortium recently announced that halophytes show even more promise than originally expected as a source of renewable fuel for jets.

 

Up in the Sky, Drones Display Cleantech Potential

— February 12, 2014

Unmanned aerial vehicles (UAVs) – a.k.a. “drones” – are beginning to make the jump from the war front to a domestic application near you.  Amazon’s use of drones in its proposed Prime Air service is perhaps the most high-profile example.  This service aims to disrupt inefficiencies associated with delivering products to customers’ doors via truck with drone quadcopters that make the same delivery in a fraction of the time.  Drones have begun to gain traction globally as delivery vehicles for everything from dry cleaning to beer and sushi.

Recent announcements point to the use of drones for everything from data collection to expediting renewable energy project development to the physical generation of renewable power.

Bird’s Eye View

The U.S. Geological Survey (USGS), in partnership with NASA and two academic institutions, has begun using drones to explore the vast expanse of the western United States for geothermal anomalies.  Using an experimental system called payload-directed flight (PDF) – essentially autonomous flight – researchers have been able to study and map the underground fracture and fault systems of a geothermal field in California.  The technique is being deployed in other remote geothermal landscapes as well.

Geothermal power holds tremendous promise as a source of renewable baseload electricity.  Currently accounting for more than 11 GW of installed capacity globally, or just 0.2% of the global installed base of renewable generation, geothermal power remains a vastly underdeveloped resource.

Two of the key barriers to more extensive development are long development timelines and substantial upfront capital requirements.  Initial scouting of potential sites for geothermal power development typically requires geophysicists to lug heavy backpacks full of equipment to survey vast swaths of remote landscape.  More promising sites are often surveyed by aircraft as well.  According to researchers utilizing drones for surveys, “Unmanned aircraft are ideal for scientific surveys because they can fly much lower than would be safe for piloted craft and are much cheaper to operate.”

Already used overseas in agriculture, drones also have the potential to improve economics across the bioenergy supply chain.

In Louisiana, drones are being used to monitor the health of sugarcane fields, collecting data at the individual plant level.  Close monitoring of individual crops is typically achieved by farmers physically inspecting their fields, a costly and labor-intensive undertaking.  Traditional airplanes are unable to capture data at the same level of detail.

Workhorse of Smart Energy

Borrowing from Amazon’s vision, drones may also have the potential to collect, move, and aggregate biomass materials, slashing one of the more significant (and often prohibitive) cost drivers for bioenergy.  With agricultural feedstocks used to make biofuels (e.g., cellulosic biomass to ethanol) typically representing 75% to 85% of the finished fuel cost – due in part to the manpower required to aggregate and collect the material – the use of drones could help overcome a challenging hurdle to more widespread commercialization of alternative fuels.

Google is among those companies taking notice of the cleantech drone phenomenon, having bought a slew of robotics companies in recent years.  Included in its portfolio of acquisitions is Makani Power, a renewable energy technology innovator aiming to disrupt the traditional wind turbine market by deploying high-flying autonomous wind turbines.  Makani has designed its drone kites to automatically take off and adjust themselves to the windstream to maximize energy production.

So-called “RoboBees” – developed at Harvard’s School of Engineering and Applied Science –demonstrate the confluence of drones and clean technology.  Designed to behave like a swarm of bees to carry out search and rescue operations or artificial pollination, the RoboBees’ need for high energy density power sources to sustain extended flight remains a key limitation to their use.  Advances in battery technologies could one day provide a compact enough power load that could extend flight times for both RoboBees and other drone hardware.

While 2014 is unlikely to be the year drones disrupt cleantech, the profusion of applications across the smart energy landscape suggests we’re just beginning to scratch the surface of their potential.

 

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.

 

As Demand Falters, Biodiesel Industry Chases Power Generation Applications

— January 30, 2014

In the next few months, the Argentinian government is likely to impose a 10% biodiesel blending requirement for power generation, alongside an increase in biodiesel blending in its transportation sector from 8% to 10%.  Publicly, the announcement is hailed as an effort to boost the nation’s rapidly expanding biofuels industry while increasing the use of green fuels.  In reality, it represents a desperate pivot for the fast-rising biodiesel exporter to ramp up domestic consumption of biodiesel production as global export markets collapse.

Although demand for its use as a transportation fuel in recent years has risen, biodiesel is economically feasible for power generation in only the narrowest of circumstances.  The use of liquid biofuels in Argentina’s power generation fleet, however, is another ominous signal of the shrinking market for biodiesel exports.  Despite efforts like those in Argentina, globally, biodiesel’s role in power generation applications is likely to remain limited.

Ongoing debate in the European Commission (EC) has resulted in an increasingly conservative outlook for the biofuels market in the EU.  Driven by efforts to protect market share for steadily increasing domestic production and to sidestep difficult sustainability issues related to foreign producers, the EC has reevaluated liquid biofuels’ role in the EU transport sector several times.  The resulting policy uncertainty has led to a dramatic slowdown in biofuel project investment across the EU, according to a recent report from Agra CEAS Consulting, a joint venture between Imperial College London and Informa Plc.

WTO Complaints

Corresponding legislation to impose antidumping tariffs on Argentina and other biodiesel exporting nations has caused exports from those countries to plummet in the past year.  According to the Wall Street Journal, the taxes on Argentine biodiesel range from €217 to €246 ($298-$336) per metric ton, “having the direct and immediate effect of closing the European market to Argentine biodiesel and affecting exports worth over $1.5 billion per year,” according to the country’s foreign ministry.

In mid-December, Argentina’s government filed a formal complaint to the World Trade Organization (WTO), challenging the imposition of 5-year antidumping tariffs.  The complaint is the third from the leading biodiesel producer.

Argentina has relied on the EU for 90% of its biodiesel sales, worth nearly $2 billion in revenue in 2012.  Built on the back of a highly efficient, modern, and large-scale soy industry, Argentina’s biodiesel output increased nearly 14-fold between 2007 and 2012.  With heavy investment resulting in a fleet of production plants already in the ground, the government is anxious to find new markets for the nearly 1 billion gallons of production capacity in place if the antidumping tariffs are upheld.

Plan B

Faced with the prospect of high production capacity and no outlet for its products, Argentina is trying to force excess biodiesel into its power generation sector.  This may not be the worst outcome, according to a 2009 study published in Science in which the use of biofuels to produce electricity to power electric cars was deemed to be a more efficient use of farmland than producing liquid biofuels.

But while the connection between electrons derived from biodiesel-based power generation and their end-use in electric vehicles remains tenuous, the direct use of biodiesel in generator sets (gensets) is not.  This makes crediting such use – such as in Renewable Portfolio Standards in the United States  – more straightforward.  Since many developing economies that rely heavily on refined petroleum products for primary energy use face rising diesel costs, alternatives such as biodiesel produced from domestic resources may provide an inexpensive alternative for gensets used for distributed power generation.

Still, Argentina’s power generation sector is not lacking in raw inputs.  According to the Energy Information Administration, 93% of domestic generation comes from hydroelectricity and natural gas.  Estimates suggest that the country holds the third-largest shale gas reserves in the world, behind the United States and China.  In a country flush with resources, the channeling of biodiesel into Argentina’s power generation sector is likely to be a temporary stopgap measure to soak up fuel from the country’s growing production base.

For the time being, Argentina’s industry may be stuck between a rock and hard place.  As discussed in Navigant Research’s report, Market Data: Biofuels, the EU’s biofuel broodings are likely to result in tepid demand for imports in the coming years.  Meanwhile, Argentina’s heavy reliance on soy-based feedstock means that sustainability issues may hamper longer-term expansion into emerging end-markets, such as aviation biofuels.



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