Huge steps in legislating for sustainable aviation fuels on both sides of the Atlantic have been welcomed by Velocys as the company prepares to realise a refinery on the Humber Bank.
Chief executive Henrik Wareborn believes the contrails of policy action in the US and UK will stir other governments to act too.
The leader of the sustainable fuels technology business behind the British Airways-backed Altalto Immingham plant has given his reaction to the passing of the Inflation Reduction Act by the US Congress. It includes key tools to tackle climate change, and is expected to be signed off by President Biden shortly. It follows the launch of a Jet Zero Strategy in Westminster last month.
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Mr Wareborn said: "The legislation passed in the US is of historic significance, putting the United States on a path to lower its emissions significantly by 2030, and beyond. We believe this landmark legislation represents a compelling model which other governments will seek to follow, in particular in its focus on total amount of avoided carbon instead of volume of sustainable fuel supplied, thus prioritising those technologies which offer routes to negative carbon intensity fuels.
"This development, coupled with the UK's launch of its Jet Zero strategy, represents a major endorsement of sustainable aviation fuel, and Velocys' proprietary technology to produce it."
In the US, $369 billion (£306 billion) will be allocated to reducing greenhouse gas emissions and incentivises to expand production and use of domestic clean energy.
SAF tax credits are an integral part of the act, together with other incentives and mechanisms to accelerate the deployment of advanced fuel technologies, generating non-fossil fuels with a significantly reduced carbon intensity.
SAF is the only current commercially scalable decarbonisation route for the aviation sector, according to Velocys, with multiple pathways to SAF production needed to satisfy the aviation industry's decarbonisation targets.
Mr Wareborn said the SAF tax credits and associated incentives are expected to underpin the financing of Bayou Fuels, Velocys' advanced SAF reference project in Natchez, Mississippi.
Bayou Fuels is a planned cellulosic biofuels plant enabling the production of carbon negative fuel through the use of biogenic feedstock, renewable power, and carbon sequestration. The biorefinery will convert 3,000 tonnes a day of woody biomass forestry residues into 36 million gallons a year of renewable transportation fuels, predominantly SAF, with a negative carbon intensity.
As announced late last year, Velocys has already secured long-term offtake arrangements for all of the SAF output expected from the facility with Southwest Airlines in a 15-year agreement, and IAG/British Airways, under a memorandum of understanding, looking at a 10-year agreement. The company said the new climate legislation is expected to allow finalisation of conversion of the MOU to a full offtake agreement.
In a statement released to the City, the London AIM-listed company added: “This critical legislative development in the US follows last month's launch by the UK Government's Department for Transport of its Jet Zero Strategy, setting out the Government's approach for achieving net zero aviation by 2050. “This includes an ambition for a minimum of five commercial-scale SAF plants to be under construction in the UK by 2025, and a mandate for the equivalent of at least 10 per cent SAF to be blended into conventional aviation fuel by 2030.
“Velocys and British Airways are jointly developing the Altalto project, which is to build a full scale plant in Immingham, to make SAF from commercial and residential residual waste, in anticipation of UK policy incentives competitive with those announced by the US. Importantly, the UK mandate is to be expressed in terms of greenhouse gas reductions, rather than simple volume, which will benefit Altalto due to its ultra-low carbon intensity.”
The Immingham plant is described as technically ready to enter the final stage of development, as finance continues to be sought for what is a £350 million capital project, creating scores of jobs. It has been designed to plug in to emerging carbon capture plans for the Humber region.
Early trading saw the share price up 13.9 per cent to 5.9p (11am).
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