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BFD Expert Voices - Climate Deals

BFD Expert Voices

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Purchase your ticket here – Axios Pro subscribers get 50% off using code "AxiosProSub".

The amount of sustainable aviation fuel (SAF) produced or imported into the U.S. jumped by 75% in the second quarter of this year, according to new data.

Why it matters: Airlines and corporate flyers have been clamoring for SAF to help them meet sustainability goals.

Yes, but: Production constraints have slowed the flow of the alternative fuel.

Zoom in: According to data from BloombergNEF, companies produced or imported close to 33 million gallons of SAF in the U.S. in Q2, a 75% spike from the prior quarter.

Prior to this year, SAF volumes didn't break the 10-million-gallon mark. Before 2022, annual volumes hovered around 1 million gallons.

Nine million gallons of the Q2 2024 total were imports, including from Finnish company Neste, which ships SAF from its plants in Singapore and Europe to be used in the U.S.

The biggest producers of SAF in the U.S. are Montana Renewables, World Energy, and LanzaJet, according to BloombergNEF. Other major producers like Phillips 66 are planning plants in the U.S.

Zoom out: Most of the big producers are turning organic waste like used cooking oil into SAF, in a process called HEFA. But those feedstocks can be hard to come by.

The future engine of SAF will be new types of technologies like turning ethanol into fuel and using CO2 as a feedstock.

LanzaJet only started up its Georgia plant in January, and it's supposed to produce 9 million gallons per year of SAF from ethanol.

Twelve and Infinium are building large first-of-a-kind plants that will turn carbon dioxide into jet fuel.

Follow the money: Investors are betting on next-gen SAF players.

Twelve said last week that TPG plans to invest $400 million in project equity into Twelve's plants and also led its Series C equity round.

Brookfield agreed to invest up to $1.1 billion in Infinium to help it develop its SAF production plants.

And VCs are still backing SAF ventures. SAF maker Air Company said last week it's raised a $69 million Series B to develop a commercial production plant.

Reality check: Some producers, like Shell, have canceled SAF plans citing technical difficulties and fluctuating government policies.

What's next: The SAF market is just getting started, and analysts expect that global production volumes will start to soar from the relatively low levels now.

The SAF spike of 2024

Drax, the operator of the largest power plant in the U.K., announced the creation of a new U.S. subsidiary called Elimini to seek carbon removal credits under the Biden climate law. 

Why it's the BFD: Drax burns biomass such as wood pellets at its U.K. power station to generate electricity and receives subsidies in return for providing such "sustainable" energy. 

Now it is seeking to add carbon capture and storage technology to the plant and sell credits for such carbon removal. 

Zoom in: The company is thinking big and plans to invest $12.5 billion on new bioenergy plants in the U.S. and elsewhere in the next decade. 

It is already evaluating more than 20 sites for potential bioenergy plants with carbon capture and storage capability, also known as BECCS, the company said in a statement. 

Elimini would also seek to sell carbon removal credits from the Drax power plant in the U.K., with the planned conversion of that facility to BECCS.

Yes, but: This technology hasn't yet been proven at scale but is one of the options the UN IPCC identified in 2018 as potentially helpful for meeting the Paris targets. 

It noted the tech faces considerable hurdles on multiple fronts.

Friction point: Environmental groups and many climate scientists argue that bioenergy, particularly when using wood pellets, emits more carbon than it absorbs. 

This is because young trees are less efficient at carbon sequestration compared to the older trees the company's suppliers cut down. 

The BFD: U.K. power coming to America 

The Drax Power Station in the UK, with cooling towers emitting steam.

Residential housing in the village of Drax by the Drax Power Station near Selby, U.K. Photo: Dominic Lipinski/Bloomberg via Getty Images

Solar power has always had one pesky limitation: It needs daylight.

State of play: That's the question being asked by Reflect Orbital, a startup that recently raised $6.5 million led by Sequoia Capital.

The big idea: Build and deploy a low-orbit constellation of Mylar "mirrors" that would send sunlight to solar installations in places that are still 90 minutes before sunrise or 90 minutes after sunset.

Once low-light minutes are included, this could mean an extra four hours of power generation.

Why it matters: The world needs more renewable power, particularly with the rise of data centers.

This could help eat into that new demand without needing to build much new physical infrastructure, which consumes both money and space.

Catch up quick: If this feels a bit familiar, you might have seen a viral video that Reflect Orbital CEO Ben Nowack (ex-Zipline) posted back in March. And also that one of the responses, shortly after it was posted, came from Sequoia Capital partner Shaun Maguire, who wrote: "Very clever insights."

Maguire tells me that the general concept of space-based solar has been around for at least 15 years, but that it wasn't pursued because of the on-ground capital expenditures that would have been required.

Now, however, there are so many solar stations on Earth that a company like Reflect Orbital is viable. Well, after figuring out things like how to unfold the mirrors, steering, computation, and making a solar sail to power the electronics.

He adds that there are understandable concerns that the tech could brighten dark areas on the ground, but insists that Reflect Orbital's tech works more like a laser beam than a flashlight (i.e., very little diffusion).

Deal details: Other Reflect Orbital investors include Starship Ventures, two Zipline execs (Keller Rinaudo Cliffton and Keenan Wyrobek), and Baiju Bhatt (the Robinhood co-founder who's working on a separate space-based energy project).

Zoom in: The company recently put out a "request for sunlight" and claims to have received over 10,000 inquiries. Including from some power plants.

It's also received a lot of inbound from venture capital firms.

The original plan was to launch a proof-of-concept via the $6.5 million, but the massive "RFS" response may lead it to accelerate both its fundraising and deployment plans.

The bottom line: The days are getting shorter. For now.

Reflecting on solar power's daylight problem

Illustration of a hand turning off the sun with a pull chain.

🫰 $1 trillion+ needed: The world needs $1 trillion investment annually to triple clean energy capacity by 2030, says a new report from BloombergNEF.

Clean energy deployment investments are setting records, with $623 billion invested in renewables in 2023.

But it's not enough to reach goals of cutting rising carbon emissions.

🌆 Biden, live from New York: President Biden addressed the climate in his outgoing speech before the UN General Assembly yesterday afternoon as well as another speech at Bloomberg Global Business Forum.

Biden used both speeches to tout his historic climate policies.

"Kamala and I have pursued an ambitious climate policy focused on growth," he said at the Bloomberg forum. "We were told it couldn't get done. But we did it."

🛢️ Fatih Birol on Big Oil: ​​Oil companies' investments in low-carbon energy sources are falling short of their rhetoric, International Energy Agency head Fatih Birol told Axios' Ben Geman on the sidelines of Climate Week NYC.

"There's a bit of a contradiction in the share of the climate change or sustainability in their speeches" relative to clean energy's share in their portfolios, said Birol.

Temperature check

Illustration of a thermometer shaped like a smoke stack with smoke spewing out.

• Crisp, a supply chain data company based in Bentonville, Ark., has raised a $72m Series B including from new investors Wellington Management, Toshiba Corporation, DNX, Cox, and Prologis. Go deeper

• Cyclic Materials, a rare earth recycling company based in Toronto, raised a $53m Series B round led by ArcTern Ventures and including BDC Capital's Climate Tech Fund, Hitachi Ventures, Zero Infinity Partners, Climate Investment, and Microsoft's Climate Innovation Fund. Go deeper

• GEOX, an Israeli platform for analyzing real estate risk from climate-related disasters, raised $19m in Series A funding led by Flashpoint Venture Capital. Go deeper

• La Solive, a French provider of career training for "energy renovation" professionals, raised €4m in Series A funding led by Partech, alongside Brighteye Ventures. Go deeper

• Masdar plans to acquire clean energy firm Saeta Yield from Canada's Brookfield in a deal valued at $1.4b. Go deeper

• Heliene, a solar panel maker based in Mountain Iron, Minn., sold $50m of 45X tax credits managed by Basis Climate. Go deeper

Hot deals

😎 Katie is enjoying the fall warm spell this week in the Bay Area.

👋🏻 Alan is on the ground in NYC for Climate Week. 

Thank you to Michael Flaherty, George Moriarty and Chris Speckhard for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and sustainable aviation fuel fans.

September 25, 2024

1 big thing: The SAF spike of 2024