Airlines alone spent $140 billion on jet fuel in 2010. That cost is expected to reach $200 billion in 2012. The Aviation industry is highly vulnerable to fuel price fluctuations with fuel typically representing 25-40% of an airline’s operating costs. Hedging in a volatile fuel market can be both risky and costly. High prices, coupled with tremendous volatility, have made identifying new fuels a priority for the industry.
As a result, the renewable jet fuel industry has grown rapidly over the past 5 years. This growth can be seen in:
- Hundreds of companies working on developing viable renewable jet fuels
- Several successful initial public offerings of biofuel companies developing renewable jet fuels, with others planned
- Over 10 demonstration-scale operations brought online worldwide
- The U.S. military (the largest transportation fuel buyer in the world) spending tens of millions of dollars to test and certify renewable fuels, committed to spend $510 million (along w/ USDA & DOE) on co-financing production facilities, and poised to spend billions of dollars purchasing renewable fuels instead of fossil fuels.
- Systematic specifications for renewable aviation fuel are being designed and approved by the international standards organization ASTM (facilitated by the Commercial Alternative Aviation Fuels Initiative).
- 23 major airlines (comprising The Sustainable Aviation Fuel Users Group) have pledged to use renewable fuels with lower carbon impact.
- More than 30 test flights flown by commercial airlines and the military since the first in 2008
- Over ten airlines have carried out commercial flights using renewable jet fuel since HRJ/HEFA (a type of renewable jet fuel) was approved for use in July of 2011.
The early stage companies in the renewable jet fuel industry are struggling to meet capital requirements due in part to investor uncertainty in this complex technology and market landscape. These concerns surround the entire value chain, and include scale-up risk, technology status, environmental and carbon impact, feedstock availability, as well as perhaps the most important - costs. There is currently no publicly available source for measuring or comparing these factors across companies.
Carbon War Room believes that increased transparency and access to information will accelerate the formation of the renewable jet fuel market (as well as additional renewable markets since most companies who produce renewable jet fuel also produce other renewable fuels and chemicals). Participants in the industry need a more complete understanding of the firms in the market, supply chain risks, technology performance and differentiation, and scalability in order to form partnerships, sign contracts, and provide finance that will be essential for this historic shift to a commercial scale, global renewable jet fuel industry.
