Q: Can you tell us a bit about yourself, your role and your company?

A: I'm Bob Schlatter. I'm the Managing Director of Delivery Services for World Energy, responsible for project development and execution. I joined the company in 2018 when we acquired the refinery in Paramount and I've had over 30 years of experience in capital projects. World Energy was founded in 1998 as a renewable fuels company, so as far as renewable fuels go, it’s one of the pioneers. We've evolved and driven the market from the early days in biodiesel to renewable diesel, to SAF and on to green hydrogen.

 

Q: Sustainable aviation fuel development is gathering momentum. What’s driving this growth?

A: I think fundamentally, it’s the need to address climate change and emissions in the transportation sector, the hard-to-abate sectors and in aviation in particular. There aren’t as many options for aviation as there are for other forms of transport – whether that's shipping or autos or trucking – and aviation is also projected to have one of the largest increases in emissions over the coming years. So, there’s that recognition that sustainable aviation fuel is a critical tool, and there's also been some level of policy support and a lot of market demand that we're getting in the voluntary markets, which have all helped to grow that momentum.

 

Q: What do you see as the main hurdles that need to be overcome to drive faster adoption of SAF?

A: I don't know that there's really an issue with adoption of SAF. I think there are availability issues, but when SAF is made, it's been actively marketed. But I think we need consistent policy and a regulatory framework that is more supportive. The cost of behaviour should be priced into activities as a long-term goal. If an industry or activity creates emissions, that should be included in their costs.  On the policy framework, the federal producer tax credit 45Z is great. But it only goes out to 2027 and you can't finance a project and build a plant on a three-year policy, or a four-year policy. You need something that's more consistent, more reliable, that can unlock capital, and you need 10-20 years for that type of timeframe.

 

Q: World Energy developed the world’s first commercial-scale SAF facility in California by converting a petroleum refinery into a renewable fuels hub. What were some of the main challenges you faced in the planning and execution of that project?

A: With all large capital projects, managing risk, raising capital and gaining market acceptance are always challenges. Our project was not just a renewable fuels project, but it was a revamp of an existing facility that had been designed for a different process and had been working with different feedstocks. People are used to working with oil, so there's a learning curve at a lot of different stages in the project, not just in design but working with different catalysts, metallurgical requirements and the whole supply chain is different. There are lots of challenges in that.

 

Q: What is your company’s technology approach to SAF production? And what are its key advantages vs other technologies?

A: We use the Ecofining HEFA process to convert fats, oils and greases into fuel. We found HEFA to be the most cost-effective way to produce renewable fuels, and it uses waste products as feedstocks that we convert into transportation fuels. That's a significant upgrade.

 

Q: Are there any key lessons learned your team have taken away from that project that you would apply to future projects?

A: Being from California, permits and stakeholders are always a critical element to success. For design and construction, I would say that it’s also putting more focus on not necessarily the primary processing unit, but the outside battery limits (OSBL) portion, utilities and logistics – having a great emphasis there.

 

Q: How is the plant performing to date?

A: It’s producing more SAF than at any time in our history!

 

Q: How have you found the response from the engineering, procurement and construction industry to your project development plans? And what would you want to see from this industry to help support the roll-out of these projects further?

A: Well, the market's new and the projects are of significant scale, so there's been a great interest from the EPC industry.  We've appreciated that in helping us develop the market. But just like for project owners and developers, shifts in policy and a lack of certainty makes it difficult for the EPC community as well. People don't want to practice building projects. They don't want to just design projects. They want to actually build things, and policy support is what's needed.

 

Q: Are you taking a modular approach to construction in any of your projects?

A: We prefer modular design and construction. It gives us better cost and schedule certainty. But at the Paramount project, we were limited in part by the location of the facility and not able to have large modules. We were primarily limited to pipe racks and some process modules.

 

Q: How has cost inflation impacted your projects over the past few years? And what ways have you found to mitigate these impacts?

A: Inflation has hit all significant projects, particularly as it relates to labor and electrical equipment – things that we're looking at. Long-lead items have somewhat different prioritization than we would have had in the past, particularly as it relates to electrical equipment – there's great demand worldwide for that. Modularization is actually one of the ways to offset that because one of the other components around labor, other than the cost, is just the availability. And depending on the market, you've got different challenges, particularly in the Gulf Coast with multiple large projects going at the same time, and modularization can bring more certainty to a project.

 

Q: How do you see the impact of an incoming Trump administration on the US SAF market?

A: While it's early, instinct would probably get you to lean towards it creating some challenges for renewables. He's got a well-known support for traditional energy markets. But the last time the administration pulled back on some elements of policy support, it spurred a lot of the corporate and voluntary market people to make their commitments for net zero. Those commitments proliferated in that timeframe. Also, the market has developed over the last number of years between administrations, and refiners are now the largest producers of renewables. Texas generates significantly more renewable energy than any other state. This is in Trump’s traditional support base, and we look forward to working with the administration to build the industry and increase SAF availability.

 

Q: At the intersection of policy and private participation, where do you think big investments and government support are most needed to support the growth of SAF?

A: Creating the environment for success to unlock capital, and there needs to be certainty. SAF plants are a significant investment, and they require a stable environment with clear demand signals. We had a Blender Tax Credit that provided the blender of the fuel with a $1 per gallon benefit. Now, we have the 45Z Producer Tax Credit which provides a deduction in taxable income.  However, the rules surrounding 45Z are still unclear, and it's proving challenging for the industry, as to how people should behave. So, I think that's going to continue to be a challenge.  Good policy can help us deliver SAF to our customers at a lower cost. So, yes, lower-cost SAF will help us build the market and create more projects.

 

Q: Where globally have you seen the greatest success in the roll out of SAF? And what lessons do you think can be learned in the US/Canada?

A: I think in the US, particularly in California, the LCFS regime, the Low Carbon Fuel Standard, has been a great support. There are two basic approaches – incentives and mandates. In the US, we tend to be more incentive-focused, as opposed to Europe, where it's much more mandate-focused. A mandate is good in that it creates a clear demand signal, but there's not a voluntary aspect to it. It's more much more fiat – a ‘make it or get fined’ kind of approach. But it's also difficult to mandate things that don't exist. So, in the incentive environments, it brings forward more creativity to develop the market. It gets people to be able to opt in, as opposed to mandates that tend to not only set a floor but also a ceiling on the amount of product produced.  

 

Q: How are you seeing the demand from the airlines/offtakers for SAF? And what needs to happen to drive further uptake of long-term SAF contracts?

A: Airlines are always very interested in SAF, but at the same time, they're also very sensitive to variations in price from petroleum Jet A.  We see significant interest growing from the Scope 3 corporate customers and their interest in decarbonizing aviation. SAF does two things – one is, it does the work of flying the plane, but it does so at a lower carbon intensity and lower emissions. What we see in the market is that customers need a verifiable decarbonization mechanism in order to increase further uptake in the amount of long-term contracts. And we provide that with our SAF certificates that allow customers to take credit for their decarbonization of aviation and meeting their net zero goals, because the certificates are tied to physical fuels. We work with Microsoft, DHL, Deloitte, BCG and many others. Fulfilling the need to decarbonize, be reliable and create a transparent market – that's what we're building with our SAF certificates.

 

Q: High quality feedstock availability for SAF is often cited as a key concern. Is that an issue for you and how are you addressing it?

A: Feedstock always comes up as an issue, but quite frankly, supplies of HEFA feedstocks are more than enough to meet our current and future SAF needs for many years to come. HEFA is the only technology that’s delivering SAF at commercial scale right now.  We’re very confident in our ability to keep innovating with the feedstocks to lower the carbon intensity of our SAF and increase yields. We’re constantly collaborating with our partners to identify additional feedstocks. So, we’re balancing the process of moving innovation along for the future while optimizing the feedstocks we’re using today.

 

Q: Where do you hope to see the SAF industry in the US by 2030?

A: We hope to have, as I’ve mentioned throughout, a consistent policy framework and support for the industry – things that allow capital to be deployed. And then we also see the growth of the voluntary market, along with continued investment from the private sector, continuing to expand and build more SAF production facilities and projects for the community and the EPC industry. And there is one other aspect, as far as the overall framework goes. Apart from creating incentives and policy support, there's also agricultural support that needs to be included.  The agriculture industry has a very broad base, has been involved in bio-fuels from the early stages of market development and it’s very important in the market.  Farmers punch above their weight and having them as part of our coalition will help generate the broad support we need to create an environment that that frees up capital and gets projects built.

Bob will be speaking at the Sustainable Aviation Fuels Engineering & Construction Conference this June 11-12 in Houston - https://www.epcshow.com/sustainable-aviation-fuels