Safety will ultimately take the front seat in the certification process. Although domestic aviation currently produces 2% of greenhouse gas emissions compared to some 27-28% for ground transport, the industry faces more stringent safety hurdles. Safety weighs heavily on the approval of any particular biofuel.

However, the greatest challenge to bring alternative fuels to market may be convincing investors to grow biofuels. Investors need to see and fly themselves in airplanes powered by biokerosene to be convinced that indeed it works very well. Let us hope that no aviation accidents occur during the testing phase of biofuels — a crash would set back this green development considerably.

17.3

You can invest according to the Mother Earth Biokerosene Index (Figure 20.2), which aims to reflect stock valuations of companies active in research in, or pro­duction of, biokerosene. The companies covered include: feedstock producers of algae, Jatropha, ethanol, animal fat, woodchips; enzyme producers; airplane pro­ducers; engine producers; and refinery technology companies.

Index performance:

Index 31 May 2011 January 2009-May 2012 May 2011

12-month performance 2011 performance

20.2.8

Drop-in fuels are any quantity of fuels that can be put into the appropriate fuel tanks and pipelines with no changes to the cars, planes, and other machines whatsoever. For that reason alone, they are worth their weight in gold!

18.5

Converting Feedstock into Fuels

Figure 18.1 indicates the steps that need to be taken to convert a certain feedstock into a second-generation biofuel. For instance, you can go from Jatropha to bio­diesel via a process called esterification or you can take woodchips and turn them into cellulosic ethanol with the help of enzymes that change the molecular settings of hydrocarbons. We are only at the beginning of these conversion technologies and in the coming 10 years many more technologies will be added. Those investors as "first movers” at the beginning of these fascinating new developments in clean energy will reap the greatest benefits.

Ethanol cannot replace diesel and aviation fuel, but appropriately designed drop — in fuels made out of sugar can.

There are great advantages on the production side of genetically engineered hydrocarbons. They could guarantee a consistent quality, thus perhaps com­manding a premium with no extra effort, and they can be manufactured anywhere in the world. In the near future these fuels will be able to reduce greenhouse gas emissions and make a lot of money for investors.

Biotechnology gives the prospects for this second generation of biofuels a plausibility that was missing from its predecessors. The companies producing drop-in fuels are starting to come out of the laboratory, float themselves on the stockmarket, are take-over candidates, or are teaming-up with oil companies and building their first factories. The chess game is on, positions are being taken, and the dice are rolling.

18.6

I would rank sugarcane as the feedstock with the highest potential. The main reason is the speed and ease with which you can grow it. Jatropha has to grow for

5 years, but will give you crude oil over 50 years. Sugarcane, however, needs to grow only for 6 months for a good harvest, but you need to replant it every 6 years. Jatropha cannot be harvested mechanically yet, but already 50% of sugarcane is harvested mechanically, so it reduces the costs substantially. Furthermore, it has the potential to reduce greenhouse gas emissions, diversify energy supplies, increase independency from oil, and create jobs. Sugarcane and bagasse (the fibrous biomass residue after sugarcane is crushed) have a fantastic potential. You can use bagasse to generate bioelectricity, cellulosic biofuels, agripellets, biodiesel, and even biokerosene. New sugarcane plantations in Brazil are often planted on degraded pastures or on non-arable soil, so that there is no competition with other food commodities. Furthermore sugarcane is used for the production of PET products (e. g., biodegradable bottles). Last, but not least, sugarcane ethanol reduces greenhouse gas emissions by 90% on average compared to gasoline — the best carbon performance of any biofuel produced at a commercial scale.

22.6

Air China and Boeing have signed a Memorandum of Understanding with the intention of carrying out a trans-Pacific biofuel flight between China and the United States. The sustainably sourced biofuel for the trans-Pacific flight will be produced both in the United States and China to test and compare the respective qualities and capabilities of the fuels.

The Chinese venture was initiated following the signing of a series of Sino-US cooperation agreements in May 2011, which included the joint development of a sustainable aviation biofuel industry in China based on Jatropha, which is grown widely in the south of the country.

The demonstration flight will help verify the feasibility, supply capacity, and commercial potential of Chinese-produced biofuel that meets ASTM fuel stan­dards, and aims to build a platform for an industrial supply chain in the country, says Air China. The Department of Airworthiness Certification at the Civil Avia­tion Administration of China (CAAC) will track the fuel production process and carry out inspections before issuing approval for the biofuels to be used on the demonstration flight. Based on its experience, CAAC will begin the process of establishing national standards in aviation biofuel production.

As a first step, on 28 October 2011, an Air China Boeing 747-400 passenger jet, filled with a mixture of biofuel and aviation kerosene, made an inauguration test flight circling above Beijing. The 20-year-old 747-400 was fuelled in part by a biofuel produced from home-grown Jatropha, in the Yunnan province. The plane was powered by United Technologies Pratt & Whitney engines, although only one of four was running the biofuel blend. Honeywell International and PetroChina cooperated on the fuel production.

The use of Jatropha-based fuel could have particular appeal in China, which has plentiful stretches of dry and barren land to devote to growing the plant. Petro — China has planted nearly 200 000 hectares worth of Jatropha in various locations around the country. China has more than 58 million hectares of barren mountain land suitable for the plant.

19.11

Jatropha, cellulosic ethanol, and animal waste all have fantastic potential as bio­fuels. Refined into kerosene, these fuels emit about half as much carbon dioxide as emissions from petroleum fuels.

Personally, I think there are three problems:

1. The airlines cannot afford to pay for their extra emissions. This will be passed on to us — the consumer. Otherwise, their profitability will take a nose-dive.

2. There is not enough feedstock available to produce all these biofuels.

3. In weak economies passengers cannot afford an extra carbon credit charge. In the near future the breakdown of an airline ticket will look like this:

Total annual jet fuel use and planned World consumption of plant oils compared to

alternative use percentage feedstock needed to reach 10% target [m tons]

Palm oil Soybean Canola oil oil

Figure 17.1 Jatropha’s bio jet fuel potential: Jatropha-based jet fuel could create a new market of a similar size as other vegetable oils (up to 30 million tonnes per year}. Source: GEXSI Presentation at World Biofuel Markets 2010.

Among the top airlines, British Airways, United, and Delta will all have exposures in excess of 3 million tonnes of carbon dioxide, and face offset payments of more than $50 million each. Biofuels offers a way of escaping the payments and airlines are nervously watching the oil price ticker.

Figure 17.1 (left) shows the total annual jet fuel use and planned alternative use percentage (28 million tonnes), and Figure 17.1 (right) shows 28 million tonnes of the bio jet fuel market compared to other oils. The annual kerosene consumption is 225 million tonnes. Figure 17.2 shows the International Air Transport Asso­ciation (IATA)’s goals for 50% biofuels by 2040.

On 9 June 2011, the Aviation Initiative for Renewable Energy in Germany (AIREG; www. aireg. de) was initiated whereby 20 stakeholders ranging from air­lines to biokerosene producers and research institutions got together to promote biofuels for airlines. Starting 2020, the members want to grow in a carbon dioxide — neutral fashion and halve the carbon dioxide emissions by 2050, compared to the benchmark year 2005. In the future, AIREG wants to attract members outside Germany. The aviation industry is also now starting to feel the competition for biomass from the car industry and real-estate side.

17.4

Mother Earth Investments AG advises family offices, institutional, and private investors in the clean-tech arena.

You can open an account at your bank, and give Mother Earth Investments AG a mandate and a limited power of attorney to invest in listed biofuel companies and also in pre-IPO companies if you wish to do so. With sufficient funds it is entirely possible to sit in the front row and participate in IPOs. We are in contact with most private companies in the biofuel sector, we know who has invested in what com­pany, and we get information regularly on who the next IPO candidate is. Investing in the Biofuel Universe is one of the best investments you can make. This invest­ment type is excellent for pension funds, family offices, clean-tech funds, and other institutional investors. Such a mandate offers complete transparency, it is less costly than investing in a fund, you can set the parameters for the investment policy, and you can cancel the mandate within a reasonable amount of time.

Some family offices prefer to set up their own fund structure, when con­fidentiality plays an important aspect of the investment. As the only shareholder of your closed-end fund you can remain very discrete in the background and you can enjoy substantial legal tax benefits as well. You can have a big say in the invest­ment strategy, you can be on the advisory board of the fund, and you can choose your custodian bank and accountant so you can monitor you own transparent renewable energy fund! Mother Earth Investments AG accepts mandates to set up these funds, manage them and guide you.

20.3

Cellulosic ethanol can be made out of switchgrass, Miscanthus, Napier grass, waste, or woodchips.

Until recently, the assumption had been that cellulose would take over from sugar and starch as the feedstock for making biofuels. Making cellulose into sugar is technically possible and many firms are working on that possibility. The cel­lulose can be blended with enzymes or microorganisms. Still others have a hybrid approach — part biotechnological and part traditional chemistry.

The buzzword here is “RFS-2”, which stands for America’s Renewable Fuel Standard (http://www. epa. gov/otaq/fuels/renewablefuels/index. htm). The US government hands out subsidies and these require that a certain amount of renewable fuel be blended into petroleum-based fuels over the next decade or so. RFS-2 calls for a 10% blend of cellulosic fuel by 2022. Making fuels out of cellu — losic material is still difficult and costly. Production costs are, however, coming down. Not in Brazil, not in the United States, but in Crescentino, close to Turin in Italy, the biggest biorefinery in the world will be opened in September 2012 by the privately held Italian company Mossi & Ghisolfi, where 40 000 tonnes of ethanol will be produced out of a bamboo-like grass called Arundo donax at a production cost price of around $500 per tonne.

18.7

We are at the doorstep of a transition to a greener, more sustainable future, with the bio-based economy as the key enabler. No company or government can drive this transition alone — the public and private sectors have to work closely together. As innovation will be key in achieving this, the private sector needs to drive this with conviction and new open innovation concepts. At the same time, it offers governments worldwide a great opportunity, too, in which they help to create a positive framework with stimulating regulations and incentives to enable the pri­vate sector to accelerate its investments. The transition to a bio-based economy offers a lot of opportunities to all of the stakeholders involved. Over time, our cars, our trucks, and even our airplanes are going to run on low-carbon fuels derived from starch and cellulose. Plastics and chemicals will be made from plants rather than petroleum. Millions of new green tech jobs will be created in rural areas and in biorefineries, producing bioenergy and biomaterials.

Biorefineries are the beginning of a third industrial revolution with new rural and geographical winners, and a move towards a bio-based, lower carbon dioxide emissions society.

The development of the bio-based economy is at an early and high-risk stage, and no single industry or company is capable of managing this phase of its development independently. Governments, therefore, have a key role to play in providing seed support — particularly at the precompetitive stage — to the emerging bio-based sector and creating the market to ensure that it becomes established and successful as quickly as possible.

22.7

In November 2011, Alaska Airlines started commercial flights with biofuel-pow­ered engines between Seattle, Washington and Portland, Oregon. Alaska and its sister carrier, Horizon Air, are operating 75 select flights between Seattle and the two cities using a 20% blend of sustainable biofuel made from used cooking oil.

206 | 19 Airline Jest Results with Biofuels

If the company powered all of its flights with a 20% biofuel blend for 1 year, the annual emissions savings would represent the equivalent of taking nearly 64 000 cars off the road or providing electricity to 28 000 homes (www. alaskaair. com/ newsroom).

Alaska Air Group purchased the fuel through SkyNRG — an aviation biofuels broker in Amsterdam. The biofuel was made by Dynamic Fuels at its facility in Geismar, Louisiana. To the biofuel industry Alaska Airlines says: if you build it, we will buy it.

19.12