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For U.S. corn farmers, the rise of green jet fuel is their best hope of staving off an existential threat.
With battery-powered cars poised to slash gasoline demand by 2040, corn-ethanol makers need to find new markets, and fast. After all, roughly 40% of the country’s output of the grain is used to make the biofuel that’s blended into gasoline.
That’s why some producers are betting on a nascent technology that promises to use ethanol to power planes.
“It’s a lifeline,” said Patrick Gruber, chief executive officer of renewable fuels producer Gevo Inc., which is building an $850 million plant to make green jet fuel from corn. “It creates an outlet for ethanol and it’s actually huge.”
The search for new uses for ethanol represents a pivot for an industry that has been powered by the force of the U.S. government for almost half a century. Even with disputed environmental credentials, the federal government has subsidized corn ethanol as a way to curb tailpipe emissions and promote energy security.
Now President Joe Biden is throwing his weight behind electric vehicles, prompting biofuel makers and crop traders like Archer-Daniels-Midland Co. to pursue investments in sustainable aviation fuel, or SAF.
If it all works out, the U.S. market for converting ethanol and other alcohols to jet fuel could grow to about $105 billion by 2050, according to BloombergNEF. That’s because the likes of United Airlines Holdings Inc. and other major carriers are under pressure to cut greenhouse gas emissions.
But for now, ethanol has yet to be used for aviation fuel at commercial scale, and it’s not even clear whether ethanol-derived SAF will be eligible for tax breaks.
Ticking clock
The clock is ticking. Ethanol consumption is set to plummet 12% by the end of this decade and almost 90% by 2050, according to BNEF, mirroring a drop in gasoline demand as EVs become more popular and gasoline engines more efficient.
Ethanol producers are facing a “make-or-break moment,” U.S. Agriculture Secretary Tom Vilsack said this month at a forum held by ethanol lobbying group Growth Energy. “The future of this industry is in fact linked to its capacity to take advantage of this new and amazing opportunity.”
Some farmers are skeptical. Nick Pingsterhaus, a corn grower in Illinois, sees green aviation fuel as a promising development. But it’s far from a sure thing, in his view.
“It is a good thing to have another player bidding on our grains by the river, but if the government has to pay for it, is this really a profitable long-term plan?” the second-generation farmer said.
Failure to seize the moment would be another blow to U.S. corn farmers, who handed the exporting crown to Brazil this year and might never get it back. Several factors are behind that shift, including rising costs, the lingering effects of former President Donald Trump’s trade war with China and a stronger dollar.
Huge market
Still, many ethanol advocates reject the idea the industry needs saving, arguing that liquid motor fuel will be needed for the foreseeable future. Further, producers are hopeful for higher export sales and lobbyists are pushing for U.S. policy they say could help expand year-round sales of the fuel nationwide.
The potential market for sustainable aviation fuel from ethanol is huge. If all the surplus supply of the U.S. biofuel were diverted into sustainable jet fuel, it would make almost 7 billion gallons of SAF, or 17% of the country’s projected jet fuel demand by 2050, according to BNEF analyst Jade Patterson.
Biden signaled support for crop-based SAF in a July speech, saying he expects farmers to provide 95% of all SAF in the next two decades. The White House is calling for sustainable jet fuel output in the U.S. to jump to 3 billion gallons a year by 2030, up from 15.8 million last year.
Airlines are setting aggressive goals for sustainable jet fuel as they chase net-zero carbon targets. Delta aims for SAF to make up 10% of its aviation fuel consumption by 2030 and 95% by 2050. United Airlines plans to convert completely to SAF by 2046.
If ethanol demand for aviation fuel takes off, the market has potential to “more than make up” for the forecast decline in motor fuel demand amid the transition to EVs, Scott Irwin, an agricultural economist at the University of Illinois, said in an interview.
There’s a long way to go. Overall, sustainable jet fuel accounts for less than 0.1% of the fuel used by major U.S. airlines.
“Right now the biggest challenge we face is supply and scaling the infrastructure necessary to increase the supply” of green jet fuel, whether from ethanol or other sources, Rohini Sengupta, head of decarbonization at United Airlines, said in an interview.
U.S. tax breaks make SAF producers potentially eligible for a credit of $1.25 per gallon, as long as their fuel cuts greenhouse gases by half compared with conventional aviation fuel. It’s not clear whether corn-derived SAF can reach that threshold, however. Currently, it has a carbon intensity only 15% lower than regular jet fuel.
“This is a massive hurdle to overcome,” BloombergNEF’s Patterson said in a report last month.
Washington fight
To reach it, ethanol producers will need to use technologies like renewable energy and carbon capture and storage technologies to lower their greenhouse gas footprint. But the latter hasn’t yet proven economically viable on a large scale and planned carbon pipelines to trap emissions face opposition, including from corn farmers.
Pending SAF policy has sparked a fierce lobbying fight in Washington. Biofuel producers and farm-state lawmakers are pushing for a carbon emissions tracking model used by the Energy Department that they argue is the most current and transparent.
Fuel retailers, concerned about biofuel ingredients shifting to SAF and away from renewable diesel used to power trucks, are joining environmentalists in calling for an approach from the United Nations, one they claim is more stringent. The concern among biofuel makers is that this model could prevent some crop-based SAF production from qualifying for incentives under the White House’s signature climate law.
Ethanol opportunity
There’s also the question of whether the industry can shrink its carbon footprint fast enough to go head-to-head with rival SAF ingredients that command a premium because of their low carbon intensity, like used cooking oil.
Still, ethanol supplies are more ample than rival feedstocks, according to Barry Glickman, vice president and general manager of sustainable technology solutions at Honeywell International Inc. His company, which has dozens of SAF technology licensing deals, inked its first one involving ethanol earlier this year.
For industry watchers, the message is clear: Sustainable aviation fuel represents an opportunity corn farmers and ethanol makers can’t afford to miss.
“You have to fight for it,” Vilsack said in a speech to ethanol supporters earlier this month. “I want you to have it because it’s critical to keeping small and mid-sized folks in business.”
©2023 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.
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