Velocys improves CI score of proposed US facility

By Velocys | October 27, 2022

Velocys plc, the sustainable fuels technology company, announces that its proposed facility Bayou Fuels in Natchez, Mississippi, U.S. has been re-optimized for maximum decarbonization to a negative carbon intensity (CI) of -375g CO2e/MJ (previously -144g CO2e/MJ); abating the carbon emissions from the equivalent of 1.1 million return economy trips from San Francisco to London per annum.

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 which 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 MOU for a 10-year fixed price offtake account for in aggregate 100 per cent 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 the Inflation Reduction Act (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 -375 g CO2e / MJ avoids more than 15 times as much CO2 as a typical HEFA SAF gallon from soybean oil.

Velocys carried out preliminary boiler engineering evaluations, identified the most appropriate carbon capture system, confirmed the availability of sustainable biomass and re-evaluated the layout of the overall facility in order to validate the use of biomass power at the plant.

Henrik Wareborn, CEO, said, “The Inflation Reduction Act means that future SAF production must focus on the number of tonnes of avoided carbon and not gallons of fuel produced. The use of biogenic feedstock, biomass power and CCS at our project in Mississippi equates to a yearly reduction of 1.8 million tonnes of carbon and means our technology is ideally positioned to benefit from the SAF tax credits of the IRA.”