Airlines are banking on sustainable aviation fuel to reduce the industry’s planet-warming pollution. But the amount of lower-carbon alternatives available to them right now represents just a few drops in an ocean of petroleum.
On Wednesday, the U.S. Department of Energy announced a nearly $3 billion effort that it said could significantly boost America’s output of sustainable aviation fuel, or SAF, over the next few years, Canary Media has exclusively learned.
The department’s Loan Programs Office has made conditional commitments to two companies in the Great Plains region that are working to turn crops and waste feedstocks into jet fuel.
Montana Renewables, a subsidiary of the industrial manufacturer Calumet, could receive a loan guarantee of up to $1.44 billion to expand its existing renewable fuels facility in Great Falls, Montana. The company makes biofuels for planes and trucks using vegetable oils and leftover animal fats and greases. The expansion would allow Montana Renewables to produce about 315 million gallons per year of biofuels, most of which will be SAF — equal to nearly eight times the country’s total SAF production capacity in 2023.
Colorado-based Gevo is vying for a loan guarantee of $1.46 billion to build a new jet-fuel refinery in Lake Preston, South Dakota. The facility, named Net-Zero 1, would turn corn into ethanol to produce up to 60 million gallons of SAF per year. Because the ethanol-making process creates carbon dioxide emissions, Gevo is planning to capture CO2 at the refinery and send it via the proposed — and highly contentious — Summit Carbon Solutions pipeline to a storage site in North Dakota.
Patrick Gruber, CEO of Gevo, said the announcement “marks a watershed moment for the Net-Zero 1 project and a critical step forward” in the company’s mission to produce low-carbon jet fuel.
The projects are the first SAF-related ventures to win the backing of the Loan Programs Office, which has issued $42.4 billion in loans and loan guarantees and made $21.6 billion in conditional commitments as of June 2024. The office is supporting other clean energy initiatives such as battery manufacturing, virtual power plants, fuel-cell production, and the repowering of old nuclear plants.
The two fuel producers will have to meet certain milestones before they can close on the federal loan guarantees and start putting the financing to work.
“As the aviation sector aims to meet its decarbonization goals, SAF will become increasingly vital,” said Jigar Shah, director of the Loan Programs Office. Today’s announcement adds to the Biden administration’s efforts to “build a thriving bioeconomy” and “cut harmful emissions” nationwide, he added.
The fledgling SAF industry takes flight
Air travel accounts for about 3.3 percent of the country’s total CO2 emissions every year.
To start tackling that pollution, the Biden administration has set a goal of increasing the nation’s SAF production to 3 billion gallons per year by 2030. That’s more than 100 times the amount of SAF that U.S. airlines consumed last year.
Alternative jet fuels aren’t entirely carbon-free. But aviation experts still consider SAF to be the most viable near-term solution for reducing emissions from air travel. The fuels can “drop in” to existing infrastructure, making them minimally disruptive for airlines to use, and can potentially reduce life-cycle CO2 emissions by 50 to 80 percent compared to fossil jet fuel, depending on how they’re made. Other low-carbon technologies like electric planes and hydrogen-fueled jets are in much earlier stages of development — and it’s not yet clear whether they can power long-haul flights in a cost-effective way.
Wednesday’s announcement from the Loan Programs Office comes as an unprecedented amount of federal and private funding flows into the emerging SAF sector.
A United Airlines plane is fueled with a blend of SAF and conventional jet fuel. (United)
Last month, the startup Twelve said it raised $645 million in funding to scale production of its “E-Jet” fuel, marking one of the largest investments in SAF to date. The company makes synthetic fuel using electricity, water, and CO2, and it’s working to complete its first commercial-scale facility in Moses Lake, Washington. Air Company, which also repurposes CO2 into fuel, just raised $69 million to expand beyond its two pilot facilities in New York City.
Meanwhile, the Biden administration recently announced nearly $245 million in grants through the Inflation Reduction Act (IRA) for projects that produce, transport, blend, or store alternative jet fuel. Perhaps most crucially, the U.S. Treasury Department in April released a set of highly anticipated tax-credit guidelines that are expected to boost the profitability of SAF refineries nationwide.
Under the IRA, fuel producers can receive $1.25 per gallon for SAF that is 50 percent lower in life-cycle emissions than standard jet fuel. The greater the emissions reduction, the more companies can earn, up to $1.75 per gallon. The new guidelines also provide a pathway for ethanol producers to qualify, a change that has drawn mixed reactions.
Biofuel trade groups and major U.S. airlines applauded the tax-credit rules, which allow producers to subtract from their overall emissions if they do things like use renewable electricity, deploy carbon capture and storage, and source crops from farmers who use so-called “climate-smart” agricultural practices. Gevo, the potential loan-guarantee recipient, says it’s planning to adopt all three strategies for its plant in South Dakota.
But climate groups have questioned Treasury’s methodology for analyzing total CO2 emissions from crop-based fuels. They’re concerned that it risks undercounting the full life-cycle impacts of biofuels, which could result in making SAF that is just as polluting as the fossil jet fuel it’s meant to replace — or worse.
The DOE’s big SAF bet
Gevo, for its part, has said the SAF tax-credit changes could be a boon for the company’s financial prospects.
The company currently produces renewable natural gas in Iowa by collecting manure from dairy farms. It also makes corn ethanol and isobutanol, a chemical building block, from a facility in Minnesota. Gevo is now angling to expand into SAF production with its Net-Zero 1 project, which will deploy an alcohol-to-jet process that uses grid electricity, fossil gas, and hydrogen to transform ethanol into aviation fuel.
Gevo said its SAF facility “will reduce life-cycle emissions compared to fossil jet fuel, enabling the avoidance of over 600,000 metric tons of CO2-equivalent annually,” according to a news release. Construction is expected to begin in 2025 and ramp-up of the facility is slated for 2027, the company said.
Yet even with the conditional loan-guarantee commitment, the project faces uncertainty.
Gevo executives have said that Net-Zero 1 can’t pencil out economically without access to the Summit pipeline, the news outlet South Dakota Searchlight reported in May. The company needs to capture and sequester CO2 from the SAF facility in order to meet emissions-reduction thresholds for the federal tax credits. But regulators in both North Dakota and South Dakota recently denied permits for the pipeline.
The $8 billion Summit pipeline project would funnel CO2 from nearly 60 ethanol plants in five states, then pipe the gas into an underground storage site in North Dakota. Landowners and neighbors of the proposed pipeline have expressed concerns about the conduit’s safety, while environmentalists oppose the project in part because it furthers the country’s reliance on crop-based fuels.
To hedge its bets, Gevo in September announced a $210 million deal to acquire an existing ethanol plant in Richardton, North Dakota, that already captures CO2 and stores it onsite in an underground rock formation. Gevo said the investment is “synergistic” with its South Dakota plant and will “mitigate risk around carbon sequestration” by potentially providing an alternative way to sequester CO2 beyond the Summit pipeline — though the company didn’t elaborate on plans to integrate the projects.
The other potential loan-guarantee winner, Montana Renewables, likely won’t face such challenges with its planned expansion in the northwestern U.S. state.
The company has been producing biofuels in Great Falls since late 2022, using a process called hydroprocessed esters and fatty acids, or HEFA. The vast majority of the world’s SAF is made this way, with feedstocks such as used cooking oil, pork fat, and beef tallow, as well as oily seeds like canola, mustard, and soybean.
Montana Renewables primarily makes HEFA for road transportation, though the company is steadily shifting production to make more aviation fuel. At present, the Montana facility is the largest SAF refinery in the United States, though the competition hasn’t been particularly fierce. Only one other U.S. facility was producing SAF at the start of this year: World Energy’s refinery in Paramount, California.
To be sure, the HEFA process is energy-intensive, and most facilities use fossil-derived hydrogen to drive chemical reactions. But fuels made from waste oils and fats can still be potentially cleaner than conventional fuels, and they likely don’t need carbon capture to meet tax-credit targets. In Great Falls, Montana Renewables’ owner started making clean hydrogen last year using waste gas from an existing biorefinery; it then uses the hydrogen to make SAF and renewable diesel.
Although it didn’t give a specific number, Montana Renewables said its expanded facility “will produce fuels with significantly lower greenhouse gas emissions” on a life-cycle basis when compared to conventional jet fuel. The company expects about half of its expanded SAF capacity to be online by 2026.
Meeting the Biden administration’s 3-billion-gallon SAF goal will require quickly scaling up facilities that can process HEFA feedstocks and even ethanol, industry observers say. However, such materials are expected to become less available and more expensive over time as U.S. biofuel production soars for planes, trucks, and ships. In the long run, next-generation fuels made from hydrogen and CO2 — which have the potential to be even cleaner — could wind up fueling the bulk of the country’s fleet.