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How does a small Australian algae startup end up partnering with global giant Lufthansa to build a state-of-the-art bio jetfuel plant? Welcome to the wild biofuel-frontier, where the new technology and tweaked microorganisms are often older than the rapidly changing rules of the game.
The main reason: struggling to cut costs, the airline industry has looked for biofuel salvation every time oil streaked across the $100-a-barrel mark. Unfortunately, commodity prices frequently moved in the same direction, creating chaos.
Lufthansa made a fateful mistake trying to catch the biofuel momentum in 2010 and 2011. Major airlines had already flown successful one-off demo flights by July 2011 when Lufthansa scheduled daily passenger flights between Hamburg and Frankfurt with bio jetfuel manufactured from jatropha, camelina, and animal fat.
Lufthansa abruptly ended its trial
At the time, Lufthansa even guaranteed that its biofuel wasn't in direct competition with food production. The airline, accustomed to the reliable infrastructure of oil refineries, pipelines, and storage, hadn't factored in the chaos of new commodity markets buffeted by improvised, Rube Goldberg supply chains.
So last January after 1,187 successful biofuel flights, Lufthansa abruptly ended its trial program because it had used up it's entire stock of certified biofuel - the pipeline was dry. And trying to scrounge up more fuel was impossible.
Reportedly, Lufthansa's camelina had come from as far away as Russia's Volga region and the plains of Montana, and the jatropha oil had come from Indonesia and Brazil; meanwhile, the animal fat was found in Finland. This improvised network was far more complicated than merely supplying kerosene from refinery-to-airport, and it was probably no way to run a profitable airline. Explaining the commodity shortfall to Biodiesel Magazine from a distant point on the supply chain, CEO Phil Hodgson of Australia-based Jatenerg, which had sold Indonesian jatropha oil to Lufthansa, said that, "We can't produce enough jatropha oil at the moment to meet demand. Apart from sales to airlines such as Lufthansa, there is also interest from power generators." At the same time, as Lufthansa was beginning its 2011 flights, camelina, another key ingredient, was falling out of favor with Montana farmers. A Billings Gazette article bluntly titled "Unpopular Crop," explained how camelina, which the Montana Governor had called his "new girlfriend" five years before, was struggling to get a date with Montana farmers. It turns out that wheat prices were historically high that year, and there was no incentive to chase an unproven cash crop.
Savvy Montana farmers had already planted half as many acres of camelina as they had two years before. It's now obvious that in the new biofuel era, airline operators are not just customers, they're responsible for sourcing and producing the fuel, which makes getting a fleet of planes to airports on time and passengers on and off with the right baggage a walk in the park. In spite of the six-month termination of Lufthansa's trial flights between Hamburg and Frankfurt, the airline's planes had posted impressive results. While the biojet fuel performed as well as conventional jet fuel, it also emitted 50 percent less CO2. According to Lufthansa, emissions had been reduced by 1,471 metric tons.
The new bio jetfuel plant will be located in Europe
So to exit the brutal global commodity markets, Lufthansa began studying algae-based biofuels. Finally, last week at the Berlin Airshow, where sourcing aviation biofuels was a major theme, the German airline signed an agreement with Roger Stroud, Chairman of Austrailia-based Algae.Tec, a small 2007 startup, to build a large-scale facility to produce aviation biofuels produced from algae. (Reuters article) Although the location, size, and the cost of the plant were not released, both companies acknowledged that it will be located in Europe near an industrial source of carbon dioxide emissions, which will be used as a feedstock for the algae.
Watch a CGI demo of the Algae.tec technology, video above. With two small demonstration plants already up and running in Australia and the US, Algae.Tec's technology uses 40-ft modular shipping containers where algae is fed nitrates and phosphorous, while supercharging them with carbon dioxide and sunlight beamed in with fiber-optic cables. This enriched environment causes the algae to reproduce every two hours, after which the biofuel is harvested. Each shipping container can produce 250 tons of algae a year. Watch a video of the opening of Algae.Tec's Australian demo plant. Mr. Stroud has said a commercial operation would start at around 400 containers and could be built up to an optimum 2,000 containers. At that scale, he estimates that an Algae.Tec plant would be capable of producing 3.5 million barrels of refinable oil a year. One 1,000 MW coal-fired plant could provide enough CO2 gas for an algae farm to produce 1-1/4 million tons of jet fuel a year. Under the agreement, Lufthansa will finance the project. Algae.Tec, which will manage the facility, will receive license fees and profits from the project. Lufthansa has agreed to buy at least 50 percent of the crude oil produced at the plant.
