United becomes second airline investor in US household waste to renewable jet fuel company Fulcrum
Thu 9 Jul 2015 – In what it describes as the single largest investment by a US airline in alternative aviation fuels, United has taken an equity stake valued at $30 million in waste-to-biofuel company Fulcrum BioEnergy. The two have also agreed to jointly develop up to five projects located near United’s hubs that would be expected to produce up to 180 million gallons a year. Subject to availability, United will additionally have the opportunity to purchase at least 90 million gallons of jet biofuel a year for a minimum of 10 years at a price competitive with conventional fuel. This is the second major investment in Fulcrum by an airline, following an agreement signed in August 2014 with Cathay Pacific that included an equity stake and a long-term biofuel supply arrangement.
United Airlines’ interest in alternative aviation fuels goes back to 2009 when it became the first North American carrier to perform a two-engine demonstration flight using sustainable biofuels, which was followed in 2011 by the first US commercial passenger flight to use approved advanced biofuels made from algae. In 2013, United announced an agreement with AltAir Fuels to use biofuels made from non-edible natural oils and agricultural wastes on flights out of its Los Angeles hub, making it the first US airline to enter into a commercial scale agreement for aviation biofuels (see article). The carrier says it expects to begin using AltAir fuel on regular flights later this year.
“We know alternative fuels is an emerging industry that is vital to the future of aviation and this is just one of our initiatives to help make these fuels saleable and scalable,” said United EVP and General Counsel Brett Hart. “Investing in alternative fuels is not only good for the environment, it’s a smart move for our company as biofuels have the potential to hedge against future oil price volatility and carbon regulations.”
Fulcrum’s technology converts household waste, known as municipal solid waste (MSW), into renewable jet fuel and benefits from the low cost of the feedstock and an expected 80% reduction in life-cycle carbon emissions when compared to conventional jet fuel. The company claims to have successfully developed and proven its thermochemical process and has already received support from the US Air Force and US Navy for future production of fuel that meets military specifications.
In May 2013, Fulcrum was awarded a $4.7 million grant by the US Defense Department towards the engineering and development of its first MSW plant. This was followed in September 2014 by a $105 million loan guarantee from the US Department of Agriculture to help finance the construction of the $266 million Sierra facility in Nevada that is expected to produce 11 million gallons of fuel annually. Fulcrum has since awarded a $200 million fixed-price engineering, procurement and construction contract to Abengoa.
Details of the equity deal with Cathay Pacific have not been disclosed beyond being described by the Hong Kong-based airline as “significant” and carries an option for a future bigger shareholding. The agreement also includes the purchase of an initial 375 million gallons of jet biofuel over a 10-year period (see article).