Velocys reoptimizes Bayou Fuels SAF project for maximum decarbonization
Velocys plc announced Oct. 27 that its proposed facility, Bayou Fuels in Natchez, Mississippi, has been reoptimized for maximum decarbonization to a negative carbon intensity of minus 375g CO2e/MJ (previously minus 144g CO2e/MJ)—abating the carbon emissions from the equivalent of 1.1 million return economy trips from San Francisco to London per year.
The significant improvement in negative carbon intensity has the potential to increase future revenue for Bayou Fuels and enhance the attractiveness of the project for third-party project funding.
In particular, it will allow the Bayou Fuels project to derive maximum benefit from the 45Z tax credits under the Inflation Reduction Act of 2022, which incentivizes the total amount of avoided carbon instead of the volume of sustainable fuel supplied, thus prioritizing those technologies that offer routes to negative carbon-intensity fuels.
The Bayou Fuels project has a 15-year fixed-price offtake agreement with Southwest Airlines, which together with a further agreement for a 10-year fixed-price offtake account for in aggregate 100 percent of the SAF produced and underwrites a floor on certain credits.
Pursuant to the existing Southwest offtake agreement, each gallon of SAF generated by the project is expected to generate tradable greenhouse-gas credits for which Southwest guarantees, with respect to the SAF sold to it, a minimum price payable to the project.
The enhanced negative carbon intensity will increase the credits generated under IRA and the California Low Carbon Fuel Standard, improving the revenue and economic profile of the project.
The Bayou Fuels project, when it enters production in 2026, will now use renewable energy derived from sustainable biomass power instead of solar power, which will approximately double the carbon savings for its aviation customers, thereby enabling maximum carbon abatement from the Velocys conversion pathway.
“The Bayou Fuels SAF prospective carbon intensity of minus 375 g CO2e/MJ avoids more than 15 times as much CO2 as a typical HEFA SAF gallon from soybean oil,” the company stated.
Velocys carried out preliminary boiler-engineering evaluations, identified the most appropriate carbon-capture system, confirmed the availability of sustainable biomass and reevaluated the layout of the overall facility in order to validate the use of biomass power at the plant.
“The Inflation Reduction Act means that future SAF production must focus on the number of tons of avoided carbon and not gallons of fuel produced,” said Henrik Wareborn, CEO of Velocys. “The use of biogenic feedstock, biomass power and CCS at our project in Mississippi equates to a yearly reduction of 1.8 million tons of carbon and means our technology is ideally positioned to benefit from the SAF tax credits of the IRA.”