August 17, 2008

Airlines Hunger For Homegrown Fuel

As the price of oil continues above $100 a barrel, the airline industry is aggressively seeking homegrown alternatives to petroleum-based jet fuel.

The biggest current challenge is finding that special mix.

"When you're in an airplane, you don't want your fuel to start solidifying," said Robert Dunn, a Department of Agriculture chemical engineer who is studying bio diesel jet fuel.

The industry is trying to make up losses by leaning on customers with a variety of new travel charges to help control a projected $61 billion industry wide fuel expense in 2008.

Scientists have studied alternative fuel sources for years, though aircraft manufacturers say the challenge is to find ideas that will work now.

For example, jet engines can be retrofitted to run on hydrogen, but hydrogen does not pack the same punch as traditional jet fuel - kerosene - and would require airlines to buy planes designed with massive tanks.

That's a hard choice for cash-strapped carriers, said Billy Glover, managing director of environmental strategy at Boeing Commercial Airplanes.

Experts said the safest bet right now for non-conventional fuel comes from South Africa in the form of a coal blend developed by petrochemicals group Sasol.

It's technically a "synthetic" fuel, which means it can be used without altering engines or other aircraft equipment.

U.S. companies are quickly developing a variety of similar synthetics. Airline experts say three companies in particular could provide as much as three million gallons a day of synthetic fuel by 2012: American Clean Coal Fuels of Portland, Ore., Baard Energy in Vancouver, Wash., and Rentech Inc. (RTK) of Los Angeles.

The Commercial Aviation Alternative Fuels Initiative (CAAFI) - a coalition that includes the Federal Aviation Administration, airline, manufacturing and airport associations - wants to set standards by the end of the year for a 50-percent synthetic jet fuel. It's believed significant supplies will not be ready for several years.

Executive Director Richard L. Altman said the push for new fuel standards is meant to show investors that airlines will buy synthetic fuel.

Altman said the move would send needed dollars to energy startups that may one day replace foreign oil.

"Nobody will invest unless the fuel is certified," he said. "So we have a bit of a chicken-and-egg problem."

With more companies investing in alternative energy, it is believed, the more synthetic jet fuel eventually becomes available. The more fuel available, the easier it will be for airlines to unshackle themselves from volatile petroleum markets.

Later this year, Boeing and Air New Zealand will test a bio fuel made from the oil-rich seeds of the jatropha tree, a Mexican plant that grows in warm climates.

More synthetic fuel tests will follow on Continental Airlines and Japan Airlines flights.

In February, Boeing partnered with Virgin Atlantic to test a flight that included a bio fuel mixture of babassu oil, which comes from a palm tree in northern Brazil, and coconut oil.

"We're looking for something that is so correct in its performance that it can be interchanged with petroleum-based kerosene," Glover said. "From a distribution standpoint, from a technical standpoint, it needs to fit without modifications or special handling."

Some believe bio fuels will create larger problems than they solve. Using food sources such as corn and sugar could raise the price of food. And if palm trees are harvested for babassu and coconut oil could lead to clearing large chunks of rain forest.

It seems algae-based synthetic fuel is the safest bet, and its getting a lot of attention.

You can't algae, and it has a relatively high yield compared with other crops.  It also uses less land to produce the same amount of oil.

"It can be grown anywhere you can have a pool of water and expose it to sunlight," said Stanford Seto, an expert in aviation fuels who works with ASTM International, a Pennsylvania-based organization that develops standards for jet fuel.

So far this year, investors have poured almost $84 million into companies developing algae-based fuel. That's up from $29 million in all of 2007, according to the Cleantech Group, an industry research firm.

However, it will be years before algae bio fuel could be sold at a price that would make sense to an airline, said Dave Jones, co-founder of LiveFuels, an algae fuel startup in San Carlos, Calif.

"If anyone is below $50 a gallon, I'd be stunned," he said. "We have a pretty good idea on how to grow algae. The biggest challenge is in the harvesting and how to extract it from the water."

Nancy Young, vice president of environmental affairs for the Air Transport Association said, even if prices come down, most airlines see synthetic fuel as a chance to run a greener airline, not necessarily a cheaper one.

Additional fuel sources could calm oil speculation off gas prices, and they could give carriers fuel at a cost they can count on.  But "you aren't going to find a fuel that's pennies on the dollar than what we find today," Young said.

For air travelers, that could mean fewer flight options and charges for checked bags, drinks and other items are here to stay.

"Even if we were to double the volume we were to make in biofuels every year for the next 10 years, we're still looking at maybe this will impact 15 percent of the overall fuel supply," said Brian Fan, Cleantech's senior director of research.

"Realistically, for anything to be happening at scale, enough to actually impact an airline's bottom line, we're years away," Fan said.


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