Airlines in price negotiations for Solena's waste-derived biofuel

Airlines and the US Air Force are negotiating prices for a biomass-derived jet fuel scheduled to enter production in California beginning in 2011.

The fuel will be supplied by The Solana Group, a Washington, DC-based bio-energy specialist that initially plans to convert Northern and Central California’s waste into 1,800 barrels per day of liquid fuel for military and commercial aircraft.

But the company also plans to expand production by opening similar plants in other cities, with active negotiations underway in the US, Germany and Argentina.

In the long-term, Solena also foresees a transition to algae-based jet fuel leading to an even more dramatic boost in production capacity.

The US company is negotiating five-year off-take deals for the San Francisco biofuel with a number of unnamed domestic and foreign airlines, as well as the USAF, says Robert T. Do, Solena’s president and CEO. He declined to disclose the names of the airlines until the pricing deals are complete.

The fuel will be produced by converting San Francisco’s waste into a synthetic gas product, which can then be converted into liquid fuel using the Fischer-Tropsch (F-T) conversion method.

Solena has received financial backing from Germany’s Deutsche Bank. Meanwhile, Rentech, a coal-to-liquid fuel producer, has signed on to provide the F-T catalytic conversion process.

Finally, the biomass feedstock will be delivered to Solena by Norcal Waste Systems, which currently trucks waste from San Francisco and Sacramento to a landfill in Gilroy, California.

Do believes the company’s conversion method can produce biomass fuel more cheaply than petroleum-based aviation fuel at current market rates.

"We feel that we can survive at the current commercial market price," Do says.

However, he adds, part of Solena’s production estimates are based on a tax credit for US biofuel producers that is scheduled to expire at the end of 2008.

Although several airlines are interested, Solena expects the USAF to become its principle customer early on. The USAF has a mandate to convert at least half of its aviation fuel to non-petroleum-based products by 2010, driving demand for about 150,000 barrels per day.

The first plant in California is aimed at supplying only a small fraction of that amount, and even less of the 1.6 million barrels consumed by US airlines every day, Do says.

In the long term, the company wants to also develop algae as a biomass feedstock, using sequestered carbon from coal-powered utility plants to grow the plant-like oil producers.