UK-headquartered utility and wood pellet producer Drax and US low-carbon biomass-to-energy company Pathway Energy have reached a preliminary agreement on a supply deal for over 1mn t/yr of wood pellets from 2029 to a proposed sustainable aviation fuel (SAF) production plant in the US Gulf coast.
Commercial production at the proposed $2bn SAF facility, based in Port Arthur, Texas, will begin in 2029. Pathway will soon begin engineering design works with construction due to start in early 2026.
The plant will produce 30mn gallons/yr of SAF once fully operational.
Under a separate agreement, Drax could become a strategic partner in the project, with a potential investment of a convertible loan note of up to $10mn, Drax said. Adding that it has not taken an investment decision on this yet.
Pathway intends to develop bioenergy with carbon capture and storage (Beccs) at the Port Arthur SAF site, which could remove 1.9mn t/yr of CO2 from the atmosphere while powering the SAF facility, ensuring jet fuel is "carbon-negative", Drax said.
In the future, Drax "could potentially" supply biomass to two additional Pathway projects, delivering an additional 2mn t/yr of sustainably sourced wood pellets to the business' sites through the 2030s, it said.
This deal has the potential to be "the biggest third-party supply arrangement Drax's pellet business has made", Drax Group's chief executive Will Gardiner said. "Demand for sustainable biomass is accelerating, with international businesses seeking long-term fuel supplies for a range of projects globally," including SAF and Beccs, he added.
Along with the aligned commitment to decarbonise the aviation industry, the deal also "establishes the strategic alignment with Drax to deploy additional projects leveraging proven biomass conversion technologies, sustainable biomass feedstock, and carbon capture and sequestration", Pathway chief executive and founder Steve Roberts said. "With a global scale supply of Corsia-compliant biomass material, we are well-poised to address one of the hardest to abate industrial sectors."
Modelling by the International Air Transport Association suggests global use of SAF — which can reduce carbon emissions by up to 80pc compared with traditional jet fuels — is expected to deliver 65pc of emission reductions required for the aviation sector to reach net zero by 2050, the statement from the firms said.
This is Drax's second deal to supply biomass to the biofuels industry.
The firm signed in December 2023 a preliminary agreement for up to 1mn t of biomass supply for a biofuels project with a European utility that is targeting a final investment decision in 2025.
US wood pellet producer Enviva has also signed two supply deals with the segment — an agreement in January 2022 with a US-based clean technology company that will convert wood pellets to SAF, and in November 2021 a 10-year take-or-pay contract with a European industrial customer for 60,000 t/yr of wood pellets for SAF feedstock.
Drax looks for deals with data centres
Drax continues to explore opportunities with various industries to supply its services of dispatchable power generation, biomass supply chain and carbon removals though Beccs.
The company said last month it had "received positive engagement" with data centre providers on the potential to co-locate a data centre with biomass generation, and it continues to explore such opportunities.
The UK's national energy system operator's future energy scenarios suggest a potential for doubling data centre demand for power by 2030. Energy watchdog International Energy Agency also expects global power demand from data centres to soar in the coming years because of more widespread use of artificial intelligence technologies, which further stresses the importance of dispatchable renewable power sources such as biomass-fired generation.
