Q&A: Fulcrum on waste-to-fuel plant, biojet prospects

California-based biofuels producer Fulcrum Bioenergy is building a 33,000t/yr sustainable aviation fuel (SAF), or biojet, plant in Nevada and is working with the UK government to identify ways to quickly scale up SAF production. Fulcrum managing director for the UK and Europe Jeff Ovens spoke to Argus about the Nevada Sierra Biofuels plant and the future of the SAF industry in the US and Europe.

Fulcrum has said it expects the expansion of the Sierra BioFuels waste-to-fuel plant in Nevada to be completed by 2021. How is the project progressing and what markets do you expect to supply once the plant is completed? The facility will be initially producing a synthetic crude product that will then be upgraded, to SAF and other products, by Fulcrum's partners. We do plan to eventually install our own hydrotreating equipment and there is a dedicated zone on site to locate this.

We will then have the ability to produce SAF and other products, directly on site. We have been operating our feedstock processing facility for three years and this has enabled us to fine tune our waste processing side of the business, ready for when the bio-refinery is completed.

Do you have any plans to build additional plants? How would you describe the prospects of waste-based SAF in the US and UK/Europe towards 2030? We have a comprehensive development plan that focuses on North America, with strategic, advanced development activity in the UK and Europe. Fulcrum sees massive demand for its waste-based fuel in the SAF and renewable diesel markets.

SAF is a key business focus, with 4.5mn t under existing US-based offtake contracts with our strategic partners, including BP, Cathay Pacific, United Airlines, Japan Airlines and Marubeni.

The UK market for SAF is very strong, with the government providing legislative support for waste-based fuels for aviation, underpinned by the country's net zero ambitions, in which aviation forms part. With additional enhancements to the UK's Renewable Transport Fuels Obligation (RTFO) or additional mechanisms to target SAF development, the domestic market for low or net-zero carbon fuels could be world leading.

One of the objectives of the recently formed Jet Zero Council is to accelerate delivery of SAF and make the UK the best place in the world to develop new aviation technology. The government, specifically the Department for Transport, are working with Fulcrum and the wider industry to identify ways to quickly scale up SAF domestically and put the UK at the forefront of the global SAF industry, securing long-term environmental and economic benefits for the country.

Similarly, proposed changes in policy in the EU and its member states are providing the correct messaging for advanced-biofuel developments. Instruments such as SAF mandates and multipliers are helping to raise the interest of developers and investors alike and we look forward to seeing the outcome of recent EU wide consultations on the subject.

Fulcrum is one of the few companies in the sector to have successfully developed a commercial scale waste-to-fuel project. What were the main challenges associated with the project and how do you see those challenges changing in the future for both US and UK projects? We have been developing our business for around 13 years. As you would expect, a portion of that time was spent developing and testing our process in various configurations and demonstrating our ability to physically produce liquid fuels from solid waste. This takes considerable time and resources to undertake.

As for future challenges, clearly owning and operating a commercial facility (Sierra) will bring huge advantages when seeking support for subsequent projects. We will have operating data from Sierra and lessons learned. There will still be challenges for a second plant onwards, but the path toward future project completion will be somewhat less convoluted for us.

For the UK projects in particular, such lessons learned both in development and operations of our US facilities, will help Fulcrum with its UK ambitions and enable us to bring in new partners.

How do you view the broader outlook for SAF feedstock availability and what steps has Fulcrum taken to ensure the facility is able to source 175,000 t/yr of municipal waste for its first project and more for subsequent projects? Are there any legislative restrictions that may hinder the use of this feedstock? For all our US projects, Fulcrum has secured feedstock supply with long-term contracts. Our contracts are with the three largest waste companies in North America. This early move, to secure feedstock supply covering at least the initial 20 years of operations of each waste-to-fuel facility, removes supply risk and provides stable and predictable costs.

In other countries such as the UK, feedstock supply contracts will be managed differently as the waste markets and how they are structured, differ to the US market. For the UK, the use of waste as a resource to produce low-carbon fuels will complement existing waste treatment options such as waste-to-electricity, in the near term. However, as more and more low-carbon and low-cost wind generation comes on line, we foresee a shift to direct more waste feedstocks toward the production of liquid fuels for the hard to de-carbonise sectors, such as aviation.

The UK still exports waste, mainly down to the national 'capacity gap' due to an insufficient number of waste treatment facilities. The country still landfills around 10mn t/yr of municipal solid waste, with other types of waste such as commercial waste adding to this figure. There is an opportunity for waste-to-fuels facilities such as ours, to fill this immediate gap.

We have seen recently a legislative push in Europe for a transition to sustainable aviation, with the EU mulling a 1-2pc umbrella quota and several countries introducing SAF mandates in national legislations. How co-ordinated are legislation and associated incentives in encouraging emissions savings in aviation both in the US and Europe? The US markets, specifically the federal-level Renewable Fuel Standard (RFS) and state-level Low Carbon Fuel Standard (LCFS) provide support for SAF production. There are still some aspects that favour renewable diesel (HRD) over jet, however these are recognised and work is in underway to ensure a more level playing field.

The EU is still heavily biased toward HRD production, but incoming SAF mandates will help shift some focus onto jet. Given the examples of how SAF facilities, such as our own, have been enabled on the back of the RFS/LCFS, there are opportunities within the EU and by extension the UK, to incorporate learnings from the US to help the commercialisation of SAF.

Are airlines more likely to use SAF to cut emissions in aviation or might they instead turn to other carbon offsetting schemes given the associated expenses? Do you think that increased SAF production capacity across the world will have a significant impact on SAF prices? Not all offsetting schemes are the same, with some being questionable in terms of their real environmental benefits or where the offset revenue ultimately ends up. The solution will be in the form of a basket of measures, such as new engine technology, SAF, quality offsets via Corsia, as well as improvements in the way aircraft are operated, such as better air traffic management/airspace modernisation, continuous descent, single engine taxing, and so on.

Such operational improvements can have an immediate effect in terms of reducing fuel burn, hence the reduction in overall emissions. However, the use of SAF will provide the largest benefit for net CO2 reduction, without costly changes to existing fuelling infrastructure, that would otherwise be needed if, for example, a switch to hydrogen was considered.

As more SAF facilities come on line, the market price of SAF will reduce over time, particularly as SAF production becomes optimised and the financing costs associated with perceived technology risks, reduce.

Do you foresee the establishment of an SAF spot market and how important will a transparent pricing basis for SAF be in the development of market trade? Unlike fossil-derived middle distillate jet fuel, that has typically only one source of feedstock and a small number of production pathways, SAF has multiple feedstock options, and multiple technology production pathways. Some SAF feedstocks are priced at levels higher than even finished regular fossil jet fuel in its own right, such as used cooking oil (Uco), whereas other feedstocks such as household wastes carry negative costs — you are paid to take.

Typically the cheaper the feedstock, the more expensive the production process, so the finished price of SAF tends to level out depending on your choice of pathway. However, the key differences that affect today's selling price lie within the policy landscape in which you are producing and selling your product.

We may end up with a European SAF index, US West Coast index and later, an Asia Pacific index and resulting arbitrage opportunities. But given production volumes are still very low, with only a handful of transactions, generating a dependable index will be challenging and any such index would be several years away.

We see a more localised production and use, to ensure emissions typically associated with moving product around the globe, are kept to a minimum.

By Giulia Squadrin

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