The Energy Verticals

Is there such a thing as sustainable liquid fuels and gaseous carbon waste reuse?

Last year I went to Bioenergy Australia’s New South Wales Bioeconomy Summit. A few hundred people convened at Deloitte’s pristine Sydney headquarters. The day ended with a debate over which was better, renewable gas or sustainable liquid fuels. What struck me was the Sustainable Aviation Fuel and Renewable Diesel team assumed they had won the debate before it even started.

This is Issue 2 of the Verticals and today we’re talking all things energy.

First I want to clarify - energy in the modern economy generally refers to fuels or electricity. However, if we widen the aperture like a good optical astronomer, we should really include all of life on Earth when conceptualising energy webs. Most of the energy consumed throughout human and non-human food webs begins with photons being devoured by plants, algae, bacteria and every other weird and wonderful sunlight sucking host dreamed up by evolution.

But we’re not talking about food webs today. The focus here is on the fuels used to gas up humanity’s abiotic technology mix.

Liquid fuels

Sustainable liquid fuels get rebranded faster than most corporate linguists can keep up.

But there are two specific types of renewable fuel I’d like to draw your attention to: Sustainable Aviation Fuel, otherwise known as SAF; and renewable diesel, often simplified to r-diesel.

There are also a host of other mixes making a market, such as ammonia, hydrogen, and hovering out there in the “maybe one day” is power-to-liquid (PtL). Then there are intermediates such as your ethanols and methanols. For those who want real-time updates, there is no better place to go than the Biofuels Digest. Readership of the Digest is slightly more than 30% of all the accounts on Substack alone.

The breakdown of bunker fuels¹ is not that sexy. For marine there’s Bunker A, B and C, depending on how much the fuel needs to be heated prior to atomisation. There are now a range of bunkering blends that incorporate LNG or biofuels.² For aviation, there’s Jet-A, Jet-A1, and AVGAS, all with different freezing points. There’s also JP-8 for those who need to refuel the odd military jet. And then there are the diesel and petrol derivatives that go face-to-face with the consumer in the highly branded and marketed environment of the service station.

The crux of the liquid fuels vertical comes down to a simple calculus — is there more value in producing and consuming a renewable fuel vs a naturally extracted and refined fuel vs electrifying the vehicle and the associated infrastructure? Carbon costs, while they tend to be a down-the-chain consideration, are critical for understanding the full structural consequences of this choice.

How much carbon has gone into producing the current global maritime, aviation and trucking fleet?

How much carbon would be needed to completely electrify this fleet with the same shipping capacity?³

How much carbon would be required to produce renewable drop-in fuels so this fleet’s life can be extended?

Now weigh that balance against the psychology of boards, banks and small family businesses that own and operate most of the assets in question. The search is on for a price competitive and high quality fuel that doesn't create negative environmental consequences.

Gaseous Carbon Waste Reuse

There's an obvious linkage between gaseous waste and liquid fuels, we're talking front and back ends of the same economic cycle.

Gaseous waste has a bit more nuance to it though, as gas aggregation points are typically linked to major infrastructure and production nodes, and the captured offtake can be valorised into a wide product range. As NASEM’s 2019 Report on Gaseous Carbon Waste Streams Utilisation makes clear, this aspect of the energy vertical can best be described as point-based carbon capture and reuse. Coal fired power stations, liquefied natural gas, refineries, manufacturing, mining, any industry that requires local off-the-grid energy generation fueled from a carbon source — these are the voluminous aggregation points for concentrated gaseous carbon waste that can service the renewable bioeconomy.

Municipal waste, sewage processing and anaerobic digesters also generate a fair bit of gas. Just remember to block your nose when you do a site visit.

Much of this gas is currently released into the atmosphere, generating a not insignificant percentage of global emissions. Not only is this proving environmentally catastrophic, it’s just plain bad business.

LanzaTech and their spin-off, LanzaJet, have long been some of my favourite companies to watch. The subhead of LanzaTech’s website says it all, recycling carbon with biology.

I’m not going to harp on this too much, but point-based carbon capture and reuse is a fundamental and intrinsic element to providing large-scale infrastructure and energy generation with their first step towards decarbonisation. Everything begins with capturing existing fixed-point carbon waste and using that carbon to sustainably displace the inputs for products in the petrochemical vertical. Or more imaginatively, to create entirely new classes of products that displace multiple elements of extractive linear carbon cycles. We should quite obviously be looking for return-on-carbon investments of greater than one.

Here’s a simple use case: waste carbon to SAF. Put simply, the carbon gas generated during the production of Jet-A1 could be used to produce Jet-A1. A continuously closed loop maximising the value extracted from each molecule pulled out of the ground.

There is an elegance and simplicity to the possibilities of carbon cycling.

Moral Hazard

Whenever sustainable liquid fuels and gaseous carbon waste reuse are discussed, there is an inevitable sigh and exclamation of remorse. Obvious questions get raised.

Doesn’t this incentivise extending the lives of the carbon-heavy assets and doesn’t it reward the infrastructure we are trying to close down?

Doesn’t this support vested interests that have done do much historical political damage to the speed of the transition?

The answer, as always, is complex.

There will always be a need for energy to be stored and used in liquid and gas substrates. It is a remarkably efficient method for storing and moving energy, while also ensuring that the carbon invested into building legacy infrastructure and logistics networks isn’t needlessly discarded. The vision of Power-to-Liquid partly comes from the idea that solar and wind farms can be used to capture energy in one location, store and then transfer that energy in liquid form to anywhere in the world with minimal leakage of energy potential. Something simply impossible with current battery technology. Liquid is king, queen and empire for long range energy transport.

There is a more complex ethical quandary though. What if we could extend the life of a coal power plant ten more years, while transforming its gaseous carbon waste into sustainable aviation fuel? Is the carbon mitigation generated through the aviation fuel displacement worth the asset life extension? What could have occurred instead?

If this scenario blocks a decade of solar and wind rollout, the tradeoff will not be worth it. Yet we should make these kinds of decisions based on total lifecycle carbon cost. That means every new energy build should show return-for-carbon benefits that outstrip extending the life of legacy energy infrastructure or alternative technology mixes for achieving the same outcome. This goes for new oil and gas builds just as much as it does for solar, wind, geothermal, hydro or nuclear. If we don’t make these lifecycle assessments we’re putting more carbon into the atmosphere than we otherwise would have, and going through needless economic disruption just because it tickles.

I completely acknowledge this may be an unconventional opinion. But we don’t have a decade to wait, we need to transition now.

Final Thoughts

It is remarkably odd that atmospheric carbon release continues from major fixed-point sources when gaseous carbon waste capture and reuse technology could be implemented now.

The trick is in finding a middle way where existing industry players, their investors and their banks, can find certainty in a roadmap to total carbon capture and reuse. It is absurd that we currently release an economically valuable feedstock into the atmosphere so that it can further amplify long-term negative environmental consequences. These absurdities make low hanging fruit for companies that begin with the word Lanza.

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The Verticals series is designed to help you categorise the techno-economic changes underway and prompt you to find new opportunities amid the mirage of challenges we face.

All images made using DALL·E, prompts available on request.

1. Here’s a Perplexity Bunker Fuel Brief I cooked up for you earlier. I’ve thrown some pricing information in here to show you the premiums currently demanded by sustainable alternatives. As with all AI-gen material, treat with some caution, and read the references if you want to know more.

2. For once-a-week bunkering intelligence check out Engine on Fuel Switch and watch Rotterdam and Singapore duke it out.

3. The Rare Metals War by Guillaume Pitron has a few comments to make about the carbon costs of battery technology. These are front-loaded carbon-heavy manufactures due to the energy and infrastructure involved in rare earth processing. For a car this carbon cost makes sense, for a ship, less so. That said, Maersk recently completed an 88-day retrofit of the Maersk Halifax to a dual-fuel methanol ship. This retrofit was completed at the Zhoushan Xinya Shipyard in China by MAN Energy Solutions.