SAF incentives in Inflation Reduction Act ‘to underpin financing’ of Velocys’ Mississippi project

Upon passage of the Inflation Reduction Act of 2022 by Congress, which President Joe Biden is expected to sign soon, Velocys plc stated Aug. 15 that the sustainable aviation fuel tax credits and associated incentives in the bill “are expected to underpin the financing of Bayou Fuels, Velocys’ advanced SAF reference project in Natchez, Mississippi.”

Bayou Fuels is Velocys’ planned cellulosic biofuels plant scaled at 36 million gallons per year (mgy).

According to Velocys, the facility will enable production of carbon-negative fuel through the use of biogenic feedstock, renewable power and carbon sequestration.

Velocys expects the biorefinery will be capable of converting 3,000 tons per day of woody biomass forestry residues into 36 mgy of renewable fuels—predominantly SAF—with a negative carbon intensity.

“The biofuels produced will adhere to both the U.S. Renewable Fuel Standard and [California’s] Low Carbon Fuels Standard, and [they will] earn additional incentives via the associated renewable identification number (RIN) and LCFS credits,” the company stated.

Velocys announced last November that it has already secured long-term offtake arrangements for 100 percent of the SAF output expected from the Bayou Fuels facility with Southwest Airlines in a 15-year agreement and a memorandum of understanding (MOU) with IAG/British Airways for a 10-year agreement.

The company stated that the two deals would avoid 8.8 million metric tons of CO2 over the term of the offtakes.

“This new climate legislation is expected to allow finalization of conversion of the MOU to a full offtake agreement,” Velocys stated. “This critical legislative development in the U.S. follows last month’s launch by the U.K. 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 U.K. by 2025, and a mandate for the equivalent of at least 10 percent 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, U.K., to make SAF from commercial and residential residual waste, in anticipation of U.K. policy incentives competitive with those announced by the U.S. Importantly, the U.K. 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.”

Henrik Wareborn, CEO of Velocys, said, “The legislation passed in the U.S. 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 prioritizing those technologies that offer routes to negative carbon-intensity fuels. This development, coupled with the U.K.’s launch of its Jet Zero strategy, represents a major endorsement of sustainable aviation fuel, and Velocys’ proprietary technology to produce it.”