Insights on Sustainable Aviation Fuel Market

Hello and welcome to SAF Insights. In this podcast series, we'll be uncovering the market forces behind sustainable aviation fuel, or SAF. And in this episode, I'll be chatting to Tim Cezarek, Chief Commercial Officer at Jivo, a US-based renewable fuels producer. We'll be discussing Jivo's current biofuels and SAF production projects, its use of the alcohol-to-jet production pathway, and its presence in the global SAF market. Self-Insights is brought to you by Argus Media, a leading independent provider of energy and commodity pricing information. My name is Julia Esquedrin, and I'm the Associate Editor for Biofuels here at Argus. Hi, Tim. Thank you so much for your time today. It's nice to have you here. Hi, Julia. Thank you so much. It's a pleasure to be here. So let's get straight to it. And let's start by talking about Jeeva's current self-production plans and projects. So for our listeners who may not know, Jay was working on the development of a South Dakota plant in the U.S. and has several other biofuels plants in the pipeline. How are your projects progressing and will they be mainly located in the U.S. or are you looking at different regions as well? Thanks again. I would say that as it relates to the projects, we're mainly looking in the U.S. right now. However, we are considering other regions and I know we'll talk more about that further into the podcast. But if I may give you an update on where we are at our Lake Preston, South Dakota facility. We have some key milestones that we'll see delivered, let's say, in the second half of this year. We will close the purchase of the Net Zero One plant land in Lake Preston, South Dakota. We're executing on the commercial operating agreements with the water supply, the wind energy supplier, and our agreed hydrogen supplier. We'll select an engineering procurement and construction contractor at that point in time in the coming months here. We'll likely break ground by the end of this year and start ordering long lead items. In the first half, I should say, of 2023, our plan is to close on the financing. We hope to be in a position to deliver a product by the end of 2025. And just as a refresher, our plan is to deliver some 50 million gallons of sustainable aviation fuel. some 8 million gallons per year of renewable naphtha and some 4 million gallons of renewable diesel. And again, the alcohol to jet pathway provides for products. We'll also be producing some 420 million pounds of feed, which will be proteins that will go into animal feed as well as into aquaculture, and then some 31 million pounds of corn oil. So it's not just about the fuel we produce, it's about the food we produce as well. So. It's a food and fuel system when you look at the GEVO alcohol-to-jet plants. As it relates to additional plants, I would say that there are multiple greenfield sites where we would build facilities that would be from the ground up. And then there are a number of different opportunities where we can consider a joint venture or purchase of existing ethanol plants like the ADM announcement and the ADM MOU that we had announced earlier in the year. Particularly... advantageous in the sense that there are multiple ethanol sites that we need to decarbonize and that's infrastructure already in place and by virtue of having that infrastructure already in place can accelerate our growth and supply curve relative to the demand. Thanks Tim. It's interesting to hear about these developments and maybe just going into a bit more detail on the Alkyl-2-Jet pathway. and how it works. So as we know, the main challenge faced by HefaSaf is feedstock availability in the long term. So in your opinion, what challenges does the alcohol-to-jet pathway face and what are the advantages of this technology? And is JIVA considering any additional production pathways for SAF production? As we think about the alcohol-to-jet pathway, this is our primary pathway to ultimately producing renewable hydrocarbons or low-carbon hydrocarbons. So we're not considering additional pathways. alcohol to jet is our focus. So when I think about the challenges associated with alcohol to jet as a pathway, I would say that in comparison to other pathways, we don't see considerable challenges. Why is that? You know, a considerable amount of alcohol is produced today in the United States. The key will be the decarbonization of that alcohol. There are some 220 million ethanol plants located throughout the United States. through various portions of the U.S. and so we're keen to understand and focus on the assessment of those facilities and the decarbonization of those facilities. And also looking at building additional facilities that ultimately may be readily decarbonized. Like, for example, the facility we have or that we're building in Lake Preston, South Dakota. And we can talk more about that if you'd like. But as it relates to alcohol to jet, there's an abundance of feedstock, base feedstocks in the U.S. And particularly low carbon corn, which is inedible corn, is readily available. There's, by all accounts. more carbohydrates than there would be used cooking oils, tallow and the like. As we think about the utilization of low-carbon corn and those types of crops, there are other co-products that go with it, namely proteins and oil. As a matter of fact, for every gallon of jet fuel we produce, it's roughly 10 pounds of protein, which is high nutritional value that goes into the food chain. So we like the alcohol-to-jet pathway on the basis that feedstocks are readily available and we ultimately produce very valuable co-products. Thanks Tim. Yeah, I think that's an interesting point and especially with the Mondays and all the targets going up, I think these new technologies will be important and will be key really to meet these higher targets. Just kind of switching a little bit the focus. So, GWAS has entered several offtake agreements, simply totaling over 200 million gallons per year, including a memorandum of understanding with the One World Alliance. So what role do you think offtake agreements play in helping the development of the soft market? And how will the spot market in the future be impacted by this, considering the large volumes are already committed under these offtake contracts? Yeah, sure. Julia, good question. I would say that the primary reason why we are focused on offtake agreements is that we at Jibo will be looking to finance our projects, project equity and project debt. And so as we build out our production, these plants will need to show both equity investors and debt investors certainty of volume, certainty of price, and that all being done over time. So the tool by which to do that is through a financeable offtake arrangement. Albeit for project equity and project debt, we could just as easily sell product into the market. But again, as I mentioned, to have. I would say risk-adjusted returns, which are commensurate with those investors'thesis, I would say we need to have those offtake agreements. As a part of the second part of your question, as I look at the impact to spot market, if you were to look at the projects that ultimately have been announced relative to SAF globally, and if you look at the overall demand for SAF, it's our belief that if those projects were all to be built, demand would still by far outstrip supply. I think that even though you're seeing offtake agreements be secured, we've secured some 200 million gallons of offtake. I anticipate there will be more coming. As I've said, our goal is to secure a billion gallons by 2030. And so by putting that all together, though, if you think about a billion gallons or even three billion gallons, which is, as you know, is the grand challenge here in the U.S. for SAF, we're still talking what could be anywhere from 10 to 30 percent of the overall market. So that leaves quite a bit of space associated with SAF demand, even at what might be 10 to 20 to 30 percent blend ratios of SAF into Jet A. So I still think that spot pricing will be very robust into the future, even as folks like Jivo. who are looking to do project finance with equity and debt may be securing offtake arrangements. What's nice about the offtake arrangements that we have with our customer base is that obviously we've aligned all those incentives where they can participate in the environmental benefits. In the U.S. carbon markets are very transparent, they're very fungible, and our customers can participate in that. And by doing that, we help close the gap between the price of SAF. in fossil price. Thanks. It's very interesting that now you mentioned a little bit about the US system, because I think a nice way to conclude this podcast and this chat is kind of have a bit of an overview of the different options you have out there and how the different markets are structuring and how the different regions are structuring their staff markets. So Givo has agreements with US, Asia and Europe based airlines. And it's also working with the industries to... enable Indian refiners to produce renewable isobutanol from feedstocks like cane juice and straws. that can be turned into renewable jet fuel. And then, of course, you have your plants in the US. So how do you see the development of the self-market in the various regions and which system you have incentives versus mandates, CARES versus STICTA, we've heard lots of times, which systems is more effective to help the development of the self-market in your opinion? Sure. As I mentioned a little bit before, I mean, our primary focus has been in US and Canada. not only because we have boots on the ground here, but I think that as we look at the systems that are available globally, I would say that US and Canada, by virtue of the abundance of carbohydrates, say followed by Brazil, given the abundance of those carbohydrates, are very critical in the development of alcohol to jet projects. In addition to that, I think one has to look geographically as to one's ability to be able to decarbonize those alcohols. And so in the decarbonization of those alcohols, we need to have the ability to see to it that we can get access to renewable energy, whether that be through combined heat and power, whether that be through wind, whether that be through solar, whether we can displace our thermal load with renewable natural gas. These are all things to decarbonize the process, which is critical. It's not just about... low carbon feedstocks, it's also about the decarbonization of the process, right? So, as we think about regions that we ultimately can build, that's also very critically important. We're very concerned about the timeline to get things permitted, right? I mean, you got to build things. So, to the extent that you happen to be in a regime where environmental permitting is long, it's drawn out, where it's not, let's say, cohesive, we'll go to markets where we find permitting processes to be very straightforward, to be very clear, to be very transparent, where we can follow the rules and expedite the rate at which we get a project permitted. And then finally, you touched on this, we're obviously looking for, I would say, certainty and transparency associated with policy. And so, you know, obviously when we look at the U.S. and now what appears to be the Canadian system, we're seeing very clear transparency in carbon pricing. So, for example, the California LCFS program, which is obviously seen as the pillar, so to speak, of how carbon markets should behave. I can go to Argus and I can see what carbon markets are trading for today. And I have a benchmark and a price that ultimately can be quoted. I can look for under the RFS what a RIN ultimately is going to be selling for today. And, of course, I can. look at where jet fuel is pricing, et cetera. So I have the ability through that transparency, through a cap and trade or open carbon market system to be able to have certainty associated with price and lock in on that day, right? As you compare and contrast that, say, to policy where that's very disparate, where you might have a certain carbon ticket in one region and another carbon ticket in another region and another carbon ticket in another region, The question is, which carbon ticket does one use? And when you might have varying points of view around policy, whether that might be, say, in the EU or varying member states'influence on how ultimately the EU Red 2 and the feedstocks ultimately might be mandated, these are all things that need to fall into place to provide more certainty. We don't have that certainty yet. As I think you've heard me say before, we need that certainty to be able to have The ability to go to our shareholders and say, when we look at an allocation of our capital, what is the return on a project, say, in the U.S. region or the Canadian region on a risk-adjusted basis in comparison to the return in the EU on a risk-adjusted basis? We're also looking for price certainty, right? And so in a system that is, say, a policy that's driven more by incentives. I have a good sense of where those carbon markets are, if you were to use California and the EPA's RFS, let's say a benchmark to that, as opposed to a mandate where I'm still trying to determine what is the mandated price, right? And so if I don't have a good sense of what the mandated price is, I can't really judge whether I'll make money in that market or not, right, relative to the costs associated with it. So I would say that policy is very important to where we are. certainty of policy is very important as to where we will go build projects in the future. Though I would say we tend to gravitate more toward incentive-based systems, the carrot as it's sometimes referred to, as opposed to the stick. Needless to say, as being a supplier of SAF on a global basis, we'll need to navigate in each one of those types of systems, whether they be incentive-based or mandate-based. You mentioned Praj earlier. I would say that in India, I would say energy independence is important to the Indian society, along with the reduction in particulates. And so I would say the drivers there, again, India has very abundant forms of carbohydrates and waste-based carbohydrate. availability. And so foresee some very interesting opportunities to produce renewable hydrocarbons, SAF, renewable gasoline, renewable naphtha, renewable diesel. These are all things that as you look at feedstock basis and the cost of those feedstocks in those markets, with or without a mandate or an incentive-based system could make sense in India. So we're looking forward to growth in that market as well. Thanks, Tim. Yeah, it's very interesting. It's one of the discussions that always comes up these days. And it's really clear how much the industry really needs some clarity in the legislative framework to be able to make decisions, get investments and really scale up production. I think we have seen steps going in that direction and some more clarity emerging. But yeah, of course, as you said, especially in Europe, it's a long process to get all of the European countries to agree on one text and it's not. always as straightforward, but we have seen some progress in that direction. And yeah, I think, I mean, we could talk a lot more about all of this, but I think I've taken enough of your time for today. So thank you so much for joining us today. It's been a great discussions and look forward to chatting more in the future about new developments. And if you've enjoyed this podcast for our listeners, be sure to tune in for other episodes in our series Staff Insights. And for more information on Argus global coverage of the sustainable aviation fuel market, please visit argusmedia.com forward slash staff. and thank you again for your time team it's been great chat my pleasure thank you very much

We'll be discussing Jivo's current biofuels and SAF production projects, its use of the alcohol-to-jet production pathway, and its presence in the global SAF market. Self-Insights is brought to you by Argus Media, a leading independent provider of energy and commodity pricing information. My name is Julia Esquedrin, and I'm the Associate Editor for Biofuels here at Argus. Hi, Tim. Thank you so much for your time today.

It's nice to have you here. Hi, Julia. Thank you so much.

It's a pleasure to be here. So let's get straight to it. And let's start by talking about Jeeva's current self-production plans and projects. So for our listeners who may not know, Jay was working on the development of a South Dakota plant in the U.S. and has several other biofuels plants in the pipeline.

How are your projects progressing and will they be mainly located in the U.S. or are you looking at different regions as well? Thanks again. I would say that as it relates to the projects, we're mainly looking in the U.S. right now. However, we are considering other regions and I know we'll talk more about that further into the podcast.

But if I may give you an update on where we are at our Lake Preston, South Dakota facility. We have some key milestones that we'll see delivered, let's say, in the second half of this year. We will close the purchase of the Net Zero One plant land in Lake Preston, South Dakota. We're executing on the commercial operating agreements with the water supply, the wind energy supplier, and our agreed hydrogen supplier.

We'll select an engineering procurement and construction contractor at that point in time in the coming months here. We'll likely break ground by the end of this year and start ordering long lead items. In the first half, I should say, of 2023, our plan is to close on the financing. We hope to be in a position to deliver a product by the end of 2025. And just as a refresher, our plan is to deliver some 50 million gallons of sustainable aviation fuel. some 8 million gallons per year of renewable naphtha and some 4 million gallons of renewable diesel.

And again, the alcohol to jet pathway provides for products. We'll also be producing some 420 million pounds of feed, which will be proteins that will go into animal feed as well as into aquaculture, and then some 31 million pounds of corn oil. So it's not just about the fuel we produce, it's about the food we produce as well.

So. It's a food and fuel system when you look at the GEVO alcohol-to-jet plants. As it relates to additional plants, I would say that there are multiple greenfield sites where we would build facilities that would be from the ground up.

And then there are a number of different opportunities where we can consider a joint venture or purchase of existing ethanol plants like the ADM announcement and the ADM MOU that we had announced earlier in the year. Particularly... advantageous in the sense that there are multiple ethanol sites that we need to decarbonize and that's infrastructure already in place and by virtue of having that infrastructure already in place can accelerate our growth and supply curve relative to the demand. Thanks Tim.

It's interesting to hear about these developments and maybe just going into a bit more detail on the Alkyl-2-Jet pathway. and how it works. So as we know, the main challenge faced by HefaSaf is feedstock availability in the long term.

So in your opinion, what challenges does the alcohol-to-jet pathway face and what are the advantages of this technology? And is JIVA considering any additional production pathways for SAF production? As we think about the alcohol-to-jet pathway, this is our primary pathway to ultimately producing renewable hydrocarbons or low-carbon hydrocarbons.

So we're not considering additional pathways. alcohol to jet is our focus. So when I think about the challenges associated with alcohol to jet as a pathway, I would say that in comparison to other pathways, we don't see considerable challenges. Why is that?

You know, a considerable amount of alcohol is produced today in the United States. The key will be the decarbonization of that alcohol. There are some 220 million ethanol plants located throughout the United States. through various portions of the U.S. and so we're keen to understand and focus on the assessment of those facilities and the decarbonization of those facilities.

And also looking at building additional facilities that ultimately may be readily decarbonized. Like, for example, the facility we have or that we're building in Lake Preston, South Dakota. And we can talk more about that if you'd like.

But as it relates to alcohol to jet, there's an abundance of feedstock, base feedstocks in the U.S. And particularly low carbon corn, which is inedible corn, is readily available. There's, by all accounts. more carbohydrates than there would be used cooking oils, tallow and the like.

As we think about the utilization of low-carbon corn and those types of crops, there are other co-products that go with it, namely proteins and oil. As a matter of fact, for every gallon of jet fuel we produce, it's roughly 10 pounds of protein, which is high nutritional value that goes into the food chain. So we like the alcohol-to-jet pathway on the basis that feedstocks are readily available and we ultimately produce very valuable co-products. Thanks Tim.

Yeah, I think that's an interesting point and especially with the Mondays and all the targets going up, I think these new technologies will be important and will be key really to meet these higher targets. Just kind of switching a little bit the focus. So, GWAS has entered several offtake agreements, simply totaling over 200 million gallons per year, including a memorandum of understanding with the One World Alliance.

So what role do you think offtake agreements play in helping the development of the soft market? And how will the spot market in the future be impacted by this, considering the large volumes are already committed under these offtake contracts? Yeah, sure.

Julia, good question. I would say that the primary reason why we are focused on offtake agreements is that we at Jibo will be looking to finance our projects, project equity and project debt. And so as we build out our production, these plants will need to show both equity investors and debt investors certainty of volume, certainty of price, and that all being done over time.

So the tool by which to do that is through a financeable offtake arrangement. Albeit for project equity and project debt, we could just as easily sell product into the market. But again, as I mentioned, to have. I would say risk-adjusted returns, which are commensurate with those investors'thesis, I would say we need to have those offtake agreements. As a part of the second part of your question, as I look at the impact to spot market, if you were to look at the projects that ultimately have been announced relative to SAF globally, and if you look at the overall demand for SAF, it's our belief that if those projects were all to be built, demand would still by far outstrip supply.

I think that even though you're seeing offtake agreements be secured, we've secured some 200 million gallons of offtake. I anticipate there will be more coming. As I've said, our goal is to secure a billion gallons by 2030. And so by putting that all together, though, if you think about a billion gallons or even three billion gallons, which is, as you know, is the grand challenge here in the U.S. for SAF, we're still talking what could be anywhere from 10 to 30 percent of the overall market. So that leaves quite a bit of space associated with SAF demand, even at what might be 10 to 20 to 30 percent blend ratios of SAF into Jet A. So I still think that spot pricing will be very robust into the future, even as folks like Jivo. who are looking to do project finance with equity and debt may be securing offtake arrangements.

What's nice about the offtake arrangements that we have with our customer base is that obviously we've aligned all those incentives where they can participate in the environmental benefits. In the U.S. carbon markets are very transparent, they're very fungible, and our customers can participate in that. And by doing that, we help close the gap between the price of SAF. in fossil price. Thanks.

It's very interesting that now you mentioned a little bit about the US system, because I think a nice way to conclude this podcast and this chat is kind of have a bit of an overview of the different options you have out there and how the different markets are structuring and how the different regions are structuring their staff markets. So Givo has agreements with US, Asia and Europe based airlines. And it's also working with the industries to...

enable Indian refiners to produce renewable isobutanol from feedstocks like cane juice and straws. that can be turned into renewable jet fuel. And then, of course, you have your plants in the US.

So how do you see the development of the self-market in the various regions and which system you have incentives versus mandates, CARES versus STICTA, we've heard lots of times, which systems is more effective to help the development of the self-market in your opinion? Sure. As I mentioned a little bit before, I mean, our primary focus has been in US and Canada.

not only because we have boots on the ground here, but I think that as we look at the systems that are available globally, I would say that US and Canada, by virtue of the abundance of carbohydrates, say followed by Brazil, given the abundance of those carbohydrates, are very critical in the development of alcohol to jet projects. In addition to that, I think one has to look geographically as to one's ability to be able to decarbonize those alcohols. And so in the decarbonization of those alcohols, we need to have the ability to see to it that we can get access to renewable energy, whether that be through combined heat and power, whether that be through wind, whether that be through solar, whether we can displace our thermal load with renewable natural gas. These are all things to decarbonize the process, which is critical. It's not just about...

low carbon feedstocks, it's also about the decarbonization of the process, right? So, as we think about regions that we ultimately can build, that's also very critically important. We're very concerned about the timeline to get things permitted, right?

I mean, you got to build things. So, to the extent that you happen to be in a regime where environmental permitting is long, it's drawn out, where it's not, let's say, cohesive, we'll go to markets where we find permitting processes to be very straightforward, to be very clear, to be very transparent, where we can follow the rules and expedite the rate at which we get a project permitted. And then finally, you touched on this, we're obviously looking for, I would say, certainty and transparency associated with policy.

And so, you know, obviously when we look at the U.S. and now what appears to be the Canadian system, we're seeing very clear transparency in carbon pricing. So, for example, the California LCFS program, which is obviously seen as the pillar, so to speak, of how carbon markets should behave. I can go to Argus and I can see what carbon markets are trading for today. And I have a benchmark and a price that ultimately can be quoted. I can look for under the RFS what a RIN ultimately is going to be selling for today.

And, of course, I can. look at where jet fuel is pricing, et cetera. So I have the ability through that transparency, through a cap and trade or open carbon market system to be able to have certainty associated with price and lock in on that day, right?

As you compare and contrast that, say, to policy where that's very disparate, where you might have a certain carbon ticket in one region and another carbon ticket in another region and another carbon ticket in another region, The question is, which carbon ticket does one use? And when you might have varying points of view around policy, whether that might be, say, in the EU or varying member states'influence on how ultimately the EU Red 2 and the feedstocks ultimately might be mandated, these are all things that need to fall into place to provide more certainty. We don't have that certainty yet.

As I think you've heard me say before, we need that certainty to be able to have The ability to go to our shareholders and say, when we look at an allocation of our capital, what is the return on a project, say, in the U.S. region or the Canadian region on a risk-adjusted basis in comparison to the return in the EU on a risk-adjusted basis? We're also looking for price certainty, right? And so in a system that is, say, a policy that's driven more by incentives.

I have a good sense of where those carbon markets are, if you were to use California and the EPA's RFS, let's say a benchmark to that, as opposed to a mandate where I'm still trying to determine what is the mandated price, right? And so if I don't have a good sense of what the mandated price is, I can't really judge whether I'll make money in that market or not, right, relative to the costs associated with it. So I would say that policy is very important to where we are. certainty of policy is very important as to where we will go build projects in the future. Though I would say we tend to gravitate more toward incentive-based systems, the carrot as it's sometimes referred to, as opposed to the stick.

Needless to say, as being a supplier of SAF on a global basis, we'll need to navigate in each one of those types of systems, whether they be incentive-based or mandate-based. You mentioned Praj earlier. I would say that in India, I would say energy independence is important to the Indian society, along with the reduction in particulates.

And so I would say the drivers there, again, India has very abundant forms of carbohydrates and waste-based carbohydrate. availability. And so foresee some very interesting opportunities to produce renewable hydrocarbons, SAF, renewable gasoline, renewable naphtha, renewable diesel. These are all things that as you look at feedstock basis and the cost of those feedstocks in those markets, with or without a mandate or an incentive-based system could make sense in India.

So we're looking forward to growth in that market as well. Thanks, Tim. Yeah, it's very interesting.

It's one of the discussions that always comes up these days. And it's really clear how much the industry really needs some clarity in the legislative framework to be able to make decisions, get investments and really scale up production. I think we have seen steps going in that direction and some more clarity emerging.

But yeah, of course, as you said, especially in Europe, it's a long process to get all of the European countries to agree on one text and it's not. always as straightforward, but we have seen some progress in that direction. And yeah, I think, I mean, we could talk a lot more about all of this, but I think I've taken enough of your time for today.

So thank you so much for joining us today. It's been a great discussions and look forward to chatting more in the future about new developments. And if you've enjoyed this podcast for our listeners, be sure to tune in for other episodes in our series Staff Insights. And for more information on Argus global coverage of the sustainable aviation fuel market, please visit argusmedia.com forward slash staff.

and thank you again for your time team it's been great chat my pleasure thank you very much

Transcript for:Insights on Sustainable Aviation Fuel Market

Transcript for:
Insights on Sustainable Aviation Fuel Market