Late last week, Bloomberg writers Elizabeth Elkin and Allison Smith reported that, "North American farmers could be looking at less expensive crop nutrients this year, potentially easing the pressure on food costs that have pushed up consumer prices."
A news release on Monday from ADM indicated that, “ADM, a global leader in nutrition and agricultural origination and processing, and Gevo, Inc., a pioneer in transforming renewable energy into low carbon, energy-dense liquid hydrocarbons, announced today that they have signed a memorandum of understanding (MoU) to support the production of sustainable aviation fuel (SAF) and other low carbon-footprint hydrocarbon fuels.
“The MoU contemplates the production of both ethanol and isobutanol that would then be transformed into renewable low carbon-footprint hydrocarbons, including SAF, using Gevo’s processing technology and capabilities.
About 900 million gallons of ethanol produced at ADM’s dry mills in Columbus, Nebraska, and Cedar Rapids, Iowa, as well as its Decatur, Illinois, complex, is expected to be processed utilizing this technology, resulting in approximately 500 million gallons of SAF and other renewable hydrocarbons.
“The isobutanol is expected to be produced at a proposed new facility in Decatur that would employ ADM’s carbon capture and sequestration capabilities.”
The news release added that, “Demand for SAF is expected to increase as major U.S. airlines, airports, shippers and the U.S. government have agreed to work together to advance the use of cleaner sustainable fuels. The U.S. and the EU have set goals that together would support almost 4 billion gallons of annual SAF production in 2030, and more than 45 billion by 2050.
“The companies intend to work together to determine full commercialization plans and enter into definitive agreements enabling a timeline such that production of SAF can begin in the 2025-2026 timeframe.”
In a Bloomberg News article on Monday, Michael Hirtzer fleshed out some of the connotations of the ADM announcement, and provided additional context on evolving variables in the biofuels market.
The Bloomberg article noted that, “ADM, one of the world’s biggest grain traders, has plans to slash more than half of its capacity for corn ethanol for cars and transition it to clean jet fuel production. To accomplish this, ADM is planning to work with renewable fuel maker Gevo Inc., according to a release Monday.
The move comes as the popularity of electric vehicles raises questions about the future growth of ethanol that’s blended into gasoline for cars.
“The past year has also been rocky for the business, with reduced driving miles during the pandemic hurting profits. Meanwhile, demand for sustainable jet fuel is expected to boom in the coming years as the aviation industry, a major source of pollution, tries to reduce carbon emissions.”
Mr. Hirtzer pointed out that, “ADM has been pivoting away from ethanol, whose profitability is dependent on U.S. blending mandates. The company sold an Illinois ethanol plant last week.
“Demand for sustainable jet fuel is likely to jump to 3.6 billion gallons annually by 2030, or 3% of global jet fuel, up from less than 0.1% in 2019, according to a BloombergNEF report. Policy initiatives could push that statistic to 5.6% in a decade, the report said.”
And Des Moines Register writer Donnelle Eller reported this week that, “An Archer Daniels Midland ethanol plant in Cedar Rapids could be one of three ADM will use to produce millions of gallons of sustainable aviation fuel, the Chicago-based company said Monday.”
The Register article stated that, “Last month, U.S. Agriculture Secretary Tom Vilsack said the Biden administration wants to power the nation’s jets and other airplanes with fuel made from crops like corn and biomass such as wood waste. ADM said demand for sustainable aviation fuel is expected to increase as major U.S. airlines, airports, shippers and the U.S. government work together to advance its use.”
Ms. Eller explained that, “Often called ‘drop-in fuels,’ the biofuels are processed so they are chemically identical to petroleum-based fuels and meet the same standards, according to the U.S. Department of Energy. But along the way, Gevo and ADM will take steps to reduce carbon emitted in the production process and to offset carbon that is produced.
“The 900 million gallons of ethanol that could be used to make low-carbon jet fuel is about half of ADM’s total annual production capacity, CEO Juan Luciano said in a statement.”
Meanwhile, Financial Times writers Claire Bushey, Philip Georgiadis, Emiko Terazono and Justin Jacobs reported this week that, “When an estimated 20,000 people arrive in Glasgow for the UN climate change conference this weekend, they will draw inevitable jibes about the tonnes of carbon emitted by the aircraft many fly in on.
“The airline industry, acknowledging the problem, this month pledged to reach net zero flying by 2050. But the ‘sustainable aviation fuel‘ that forms the core of its strategy is scarce, costs multiples of petroleum-based jet fuel and in some cases may cause changes in cropland that undercut emissions goals, analysts say.”
The FT article noted that, “The International Air Transport Association’s (Iata) 2050 target relies heavily on changing fuel mixes to achieve nearly two-thirds of its planned reduction in greenhouse gas emissions. The trade group estimates about 450bn litres a year of sustainable aviation fuel (SAF) will be needed in 2050, or about two-thirds of total fuel consumption. Current annual SAF production is only 100m litres, the Iata estimates.”
This week’s FT article added that, “‘There’s no sustainable aviation fuel that is cost competitive yet with traditional jet fuel,’ Scott Kirby, United chief executive, told the Financial Times. ‘That’s why it’s important for us to invest and drive down the cost curve.’
“The vast majority of SAF today is made from animal fats and vegetable oils, including used cooking oil. These feedstocks are likely to predominate for at least several years, analysts said.
“While conventional jet fuel costs around 50 cents a litre to produce at today’s petroleum prices above $80 a barrel, SAF refined from fats and vegetable oils can cost between 85 cents and $1.50 a litre, according to the IEA. The same feedstocks are the building blocks of renewable diesel, a biofuel for which demand is also growing.”