Velocys on Scaling Up Net Negative, Carbon Capture-Ready Fuels

02.17.21 | Podcast | By:

Following the successful Q&A roundtable discussion on the future of sustainable aviation fuel (SAF) in December 2020, I decided to do a video podcast series with several SAF producers and technology developers to get their insight into the future of SAF. For this video podcast, I spoke to both Neville Hargreaves, Vice President, Waste to Fuels and Drew Miller, Project Finance Director of Velocys about their SAF projects in the U.S. (Bayou Fuels) and in the UK (Altalto). We also talked about how they see the policy and market environment unfolding over the next 5-10 years. Following are several excerpts from our discussion, which you can view or download below, or listen to in ITunes.

Neville on the Policy Direction in Europe:

“I think there’s clear direction in Europe that that will be SAF mandates. The British government indicated in November, in their 10 point plan for industrial decarbonization, that they would be looking at, not only at band aids, but at means of supporting early investments in these technologies, because you’ve got to get the first few commercial plants out there before you can start driving the costs down and really rolling it out quickly around the world. Much bigger access to capital, many opportunities become available once you’ve got those first few in the ground.”

Drew on the Potential for Tax Credits to Support SAF Scale Up in the U.S. and the Potential for a National LCFS:

“One of the most important things here in the U.S. is this burgeoning discussion around a SAF tax credit. And so somewhat modeled on the blender tax credit, at $2 a gallon, this would provide the incentive uplift for producers to ultimately make SAF as opposed to renewable diesel. And I think this is a really interesting time — there is a groundswell of support around this, both from the airlines and the producers as well…

 

…As for a wholesale replacement of the RFS with a national LCFS, I just see it as a real challenge due to the existing asset base and the money that’s been invested under a certain regulatory construct. As more of the traditional fossil fuel companies are knee-deep in renewable diesel, you look at the earnings calls and their presentations and making renewable diesel is the hot thing for a lot of these refiners. They now have a vested interest in the RFS. So I think it’ll be an interesting development. I expect we’ll see more of a patchwork on the state level LCFS, but I would not discount a national LCFS. The whispers keep growing and don’t go away.”

Neville on Mitigating Market Risk to Encourage Investment:

“This is something that I’m certainly spending a lot of my energy on right now. I think when you’re bringing technologies to market in a space where the market is highly regulated and newly been created, you’ve got the issue that every new set of technologies has to do with the fact that it is new and it’s first of a kind, but you’ve also got the market risk associated with the uncertainties about how those revenues are going to turn out. And for me, that one is the single most important thing. So we’re making arguments for a contracts for difference approach, which is used very successfully in the offshore wind industry around the UK.

 

That’s been hugely successful in stimulating large investments into that sector. We think something of the same nature could be applied in the SAF sector. The purpose of that is to provide an investible instrument that makes it possible for investors to get over the hump and put money into the early plants. It also provides, importantly, confidence as to how much the cost is going to be to those who are actually paying for it. For us, that’s pretty important. Having that in place will advance the rollout of the market by several years, compared with something that just sort of sets a mandate and leaves industry to work out how to fulfill it. We think that’s really important.”

Drew on the Applicability of Velocys’ Technology to the E-Fuel Space:

“I think it’s worth noting that Velocys does have its core technology. It has developed an integrated technology package, which we will continue to offer to third-party developers. And I would also note that the FT that we’ve developed is uniquely suited for small scale bio-refineries, but also to the growing area in the power-to-liquids and e-fuel space. There’s a lot of interest in Europe as they’re utilizing CO2 to make fuels. And ultimately you need a synthesis of that syngas. So Velocys’ FT is well positioned there and we’re in discussions with a number of folks.”

 

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