Ceraweek: US tax credits for low carbon aviation fuel need longer life, companies say

Green Plains

09/03/2023 23:26

By Stephanie Kelly
       HOUSTON, March 9 (Reuters) - The five-year shelf life of
U.S. tax credits for lower-carbon aviation fuel is too short to
anchor development of the nascent industry, energy executives
said this week in Houston.
    President Joe Biden's signature Inflation Reduction Act
(IRA) included major tax credits for sustainable aviation fuel
(SAF) that have stoked more interest in producing the fuel. 
    The credits would likely help spur some production and
investment, but the industry would benefit if they lasted
longer, the executives said.
    Sustainable aviation fuel (SAF) is seen as key to lowering
aviation carbon emissions, one of the most difficult sectors of
the economy to decarbonize because fuel for aircraft cannot be
easily replaced.
    The credits extend to 2027, but it would take much longer to
scale up production of SAF to make it competitive with cheaper
petroleum-based jet fuel. 
    "Having a policy that expires at that five-year mark really
doesn't help," said LanzaJet Chief Executive Jimmy Samartzis.
    Though the IRA is a "game-changer" in supporting the SAF
market, the tax credits are insufficient to make SAF competitive
with traditional jet fuel, said Bryan Fisher, managing director
at nonprofit RMI. RMI is focused on pushing federal and state
policies to help support the SAF market, Fisher said. 
    President Joe Biden's administration has challenged the
industry to supply at least 3 billion gallons of SAF per year by
2030.
    In 2022, oil refiners in the United States produced about
24.7 billion gallons of petroleum-based jet fuel, U.S. Energy
Information Administration data showed. 
    Devin Mogler, a senior vice president at Green Plains Inc
 GPRE.O , said he expected the tax credit would be extended past
2027. New alliances were building within the energy and biofuels
communities, as various players involved in the SAF, ethanol and
biodiesel industries have a stake in seeing the market expand.
They would be pushing for an extension for the credits, he said.
    "The battle lines have really blurred politically on
biofuels," Mogler told Reuters. "There will be momentum to get
it extended in some way, shape or form." 
    
    ETHANOL FOR AVIATION
    Large incentives for the biofuels industry are not new - the
U.S. Renewable Fuel Standard, enacted over a decade ago,
established a multibillion-gallon market for the corn-based
ethanol industry. 
    The new incentives around SAF, as well as the push to
decarbonize road transportation and shift away from fossil fuels
have prompted discussions around what is next for ethanol.
Conversations at the CERAWeek energy conference focused around
using ethanol as a feedstock for SAF. 
    Companies like Green Plains and LanzaJet are exploring how
to scale up the ethanol-to-jet market. United Airlines Holdings
Inc  UAL.O  in January announced a new joint venture with Green
Plains and energy infrastructure company Tallgrass to develop
and commercialize an SAF technology that will use ethanol as a
feedstock.
    "Those ethanol producers who have spent the last 15-20 years
developing out their infrastructure and their capacity want to
seek another market that they can service," said LanzaJet's
Samartzis. 
    Ethanol producers, however, need to leverage carbon capture
and sequestration to reduce the carbon intensity of their
ethanol, Samartzis added. 

 (Reporting by Stephanie Kelly; Editing by Simon Webb and David
Gregorio)
 ((Stephanie.Kelly@thomsonreuters.com; 646-223-4471; Reuters
Messaging: stephanie.kelly.thomsonreuters.com@reuters.net))