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

A: I’m Chris Ryan, I'm President and Chief Operating Officer of Gevo. I've been with Gevo for 15 years, and my primary focus is building out our net zero fuels business. This is a business that includes SAF production but also includes production of gasoline, renewable diesel and renewable natural gas. Prior to joining Gevo, I worked for Cargill for 17 years, including several years in a JV with Dow Chemical, where we developed and built out a large bio-based plastics business that is now global, with a number of producers there. That business was the first large plastics business that was launched since PET started. For a while there we were in a joint venture with Dow Chemical. Before that, I worked for a chemical company, so I've got a background in chemicals. I've also got a background working with bio-based feedstocks and bio-based feed stocks that fit in with the food industry and the feed industry, as well as being feedstocks for fuels. One of the things that I think differentiates Gevo from a lot of players is that we're very comfortable and we have a lot of experience working directly with farmers and the brand owners and users at the end of the value chain and everything in-between to pull together a whole business system that delivers what the brand owners and the end customers want to see.

 

Q: Sustainable Aviation Fuel development is gathering momentum. What’s driving this growth?

A: The aviation industry is really looking to reduce their risk of using petroleum fuels and the traditional high-carbon fuels, so they're looking to reduce their carbon emissions and the risk that those pose for investors and customers. So, the aviation industry itself is driving the demand for SAF, and there's a lot of demand there. What's interesting, though, for a SAF project like ours, is that you're offering a project that brings new jobs, brings a lot of economic growth to an area, can really revitalize the rural economy and really help the ag industry and the farmers and do all that in line with what people really want to see now, which is more and more energy production, more and more development and economic growth. And so, the aviation industry has got the demand there, but it's the big incentive to create more energy production – and all the benefits that go with that – that really is helping to provide tailwinds to the SAF development.

 

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

A: For a project like ours, if you were to look at the cash cost to produce the SAF that we project making, it's in the ballpark of being competitive with Jet A, the conventional petroleum jet fuel. The thing that is new is we have to build a new plant. It takes a lot of money, a lot of capital, and for that, we need help. We need to capture the carbon benefits and the revenue streams from various environmental benefits in order to cover the capital payback there. And in order to do that, there's risk around the carbon values going going forward, or these environmental benefit revenues. So, we need somebody that's willing to take some of that risk, and that right now is one of the key discussions we're having with customers of the SAF – which can be an airline or could be a corporate client of the airline or it could be a cargo company. In any case, somebody's got to cover that revenue risk. And that's been one of the hurdles we've had that we've been overcoming, but to really build this industry into a big industry that needs to get solved.

 

Q: Gevo is currently developing several major SAF projects in the US. Can you tell us a bit about them?

A: We've got our first SAF project, which we call ATJ-60 and that project is going to be built in Lake Preston, South Dakota. For that project, you're talking a couple billion dollars total – financed, installed for the entire project – where you're taking feedstock all the way through to finished SAF fuel. So that project has had the most attention from us. We will have spent a couple hundred million dollars probably by the end of this year on that project, so it's a big investment on our part. And that project would deliver roughly 60 million gallons of SAF, and another 5 million gallons of gasoline and renewable diesel components as well. And not only are you converting feedstock to SAF, but there's the renewable energy that's going to get built out that will be directly connected to the production plant, so that we can achieve a zero-carbon score or even a negative carbon score by sourcing a low enough carbon feedstock. So, the project really encompasses not only that production plant, but in this case also a 100-megawatt wind farm. There's also a green hydrogen plant, because we do need some hydrogen as the last step to finish the SAF. We've already engaged farmers in that Lake Preston, South Dakota region, working with them to quantify the carbon scores of their corn that's used as the feedstock, so that we can source the lowest-carbon, most sustainable corn feedstock for that plant and make sure that the farmers get paid for taking those extra steps to grow what some people call climate-smart corn. So, by putting together that whole business system, we're talking about impacting a lot of the components of the economy in that region and in the state of South Dakota. It's a really exciting project from that standpoint. We not only will be making fuel – jet fuel, gasoline, diesel – but on a weight basis, we'll be making more low-carbon animal feed than we will fuel, and we'll make corn oil as well. From that standpoint, we'll be able to serve industries that are looking for lower-carbon solutions – the feed and food industry is also looking for lower-carbon solutions – so it really touches on a lot of different industries. So, that's our ATJ-60 project right now. It's in the financing stage, it's already been fully designed. We have the EPCs in place and so now it's financing. Right now we've got a DoE loan guarantee – a conditional commitment for that project – which took a lot of work, a tremendous amount of work that translates into a lower-risk project, and one that equity investors are more interested in because we did get that conditional commitment from the DoE.

Now, beyond that, we have a number of sites that we've pre-qualified to be able to make SAF there. We also have a site that's in Richardton, North Dakota – Red Trail Energy, which we acquired in early February, which can be a future SAF production site– that's our expectation. That’s one site North Dakota, and we've also got another site in North Dakota that was pre-qualified. We also have a second site in South Dakota that we pre-qualified and have land option agreements on. We've got a site in Nebraska and we're putting land option agreements in place there. We've got sites in other places in the Midwest that we've pre-qualified but don't have land option agreements on yet, as well as the Gulf Coast. Our focus is taking low-cost feedstocks that are residual feedstocks from the food and feed industry, converting those to fuels and doing it in a way where we can deliver the lowest-carbon fuel possible. And to do that, you have to have low-carbon energy in order to drive the process. So, when we look at where to put plants, we're looking at not only low-carbon, low-cost feedstocks, but we're looking at low-carbon process energy in order to drive that production plant, in order to deliver the zero-carbon fuel. People have asked why we focus on this low-carbon fuel. Well, it's simple: the lower the carbon SAF that an airline or someone else can buy, the fewer gallons they need in order to decarbonize their business system, which makes it easier on them. And then the lower carbon the fuel, the greater the revenue we have from those environmental benefits, like the carbon credits. So for us, when we look at sites, those are the things we're looking at – low-cost, low-carbon feedstocks, the availability of low-carbon process energy. And then you look at things like logistics, your ability to distribute product to where it's needed, etc.

 

Q: What are some of the main challenges you have faced in the planning and development of these projects, beyond what you’ve touched on already?

A: We've been working on our ATJ-60 Project for a number of years and when we went through COVID, the capital costs for that project went way up. That's the same for everybody that was doing projects during that time. That was a challenge we had to work through that I haven't yet talked about, but we did work through it. Fortunately, we have good EPC partners that worked with us on that and now what we've seen over the recent past is that prices for these kinds of projects have leveled out. It's not as volatile now. The only other risk that I haven't mentioned that's worth pointing out is the availability of construction labor. And the cost of construction labor is still something that EPCs tell us is uncertain, so you have a hard time getting a fixed price booked upfront before you do the project from an EPC to cover the construction costs. But those are the kinds of discussions we're having and one of the ways we mitigate that risk is we maximize the amount that we can modularize in that plant – go build it somewhere else, not at the site, and go build as many pieces as we can and then ship those modules to the site so you minimize on-site labor.

 

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

A: We're a technology company at heart. We've developed a lot of technologies ourselves. When it comes to building a project like this, what we did was we asked who's got the most proven technologies being offered from a very credible company. We settled on technologies being offered by Axens to convert ethanol to jet fuel. And then we work with companies Fluid Quip Technologies and Praj on the both the ethanol side – converting corn starch to ethanol – and Praj is going to be delivering the modules. The idea is to go to investors with proven technologies so that you at least reduce that risk. And what we do is we have a group of engineers that will work with these technology providers. Axens is a good example, where they provide the heart of the ethanol, the jet process. Our engineers work with other engineering companies to design all of the pieces that go around the heart of the process so that you can bring the whole thing together in a finished package in order to get financed. But the name of the game is you don't reinvent the wheel. Use things that are proven and use companies that have a long track record of deploying their technologies and supporting their technologies after they're already built.

 

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

A: One is to plan and design modules right up front with the project. A lot of times you work with EPCs that will tell you: "We'll go do the front-end engineering work, and we can worry about designing for modularization later". One thing we've learned is that that's not the way to design for modularization. You want to get everybody at the table at once, making sure that what you come out of that design effort with is something that represents the maximum degree of modularization you can do, because we're in a different world now for projects. It used to be that you might 100% stick build something in the middle of South Dakota. Nowadays you really want to minimize the amount of stick built, you do. So, that's one of the lessons there – design for modularization right up front. That's the key message.

 

Q: You talked about working with the engineering, procurement and construction industry. How have you found the response from the EPC industry to your project development plans? And what would you love to see from this industry to help support the roll-out of these projects further?

A: We've had a lot of support from the EPCs. We've worked with a number of EPCs over the years. The limit they have, though, is they used to be more eager to offer full lump-sum turnkey proposals. Now – not so much. So, what we find is they're trying to lock down as much of the price as they possibly can. It's typically not 100% but we haven't found anybody willing to lock down 100% of it, so there is some risk left. And so, we really need the EPCs to step up as much as they possibly can to take on risk, because they're the ones that can best manage that risk. That would be the message I would have – find a way to reduce risk, to eliminate risk for the project and do it in a way that doesn't result in significantly higher project costs. So that's then back to the modularization theme as well, because one way to do that is to modularize as much as possible.

 

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

A: Right after COVID, say 2021, we saw project costs go up significantly – and we're talking two, three times what we expected. So we had to work with the EPCs to modify the project as much as we could, to take out any unnecessary costs. We had to go back to the modularization approach, to modularize more than what was originally anticipated. And then we also had to update the offtake agreements we have to accommodate these higher capital costs. Fortunately, when you look at projected carbon prices and the prices of the environmental benefits, they're all projected to keep going up. Those represent revenue streams that come back to the project, and that helps offset some of the capital cost increases, so that's good.

 

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

A: As long as people are eager to build up new energy production, we're there with a great story. If you look just within the United States, you've got red states and blue states. And the blue states have built out these carbon markets, which has really helped from a demand standpoint. The red states have been very supportive in terms of building the production – look at South Dakota, North Dakota, Nebraska – red states are tremendously supportive of building out new production and doing what they can to help us do that. So, in our discussions with the new administration, we expect that support to continue. And we're excited by the fact that as long as there's help building out the capital, there are markets out there that will buy the product.

 

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: For a project like ours, we just need help building out the capital because the ongoing cash cost to produce the product is competitive. And in order to do that, we need less risk around things like carbon credits or tax credits and that can come in different forms and fashion. A lot of it can come from private companies, but the government, for example when they talk about tax credits, the longer they can make those tax credits and the more certain, the better for investors. So I think there will be that intersection where the government provides the policy and enough certainty there that they shoulder some of that risk, and then private companies will be able to accept the remaining pieces of risk there in order to get these things built out.

 

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 the greatest success is by the United States, but of course, we're focused predominantly on the United States. We also have activities going on in Europe – we do have a site there that we've identified that looks good. We also have our eyes set on Asia. The United States benefits because our ag industry is extremely strong and it's great at increasing yields year after year after year and serving all of the food and feed needs while having residues left over from those industries for us to build out fuel plants. So, from my perspective, I think the United States is a great place to be building out SAF production. I think one thing that people need to keep in mind is there are different schemes being used to score your carbon score. So, if you make SAF you can depend upon which market you're selling into. There can be different models for calculating your carbon scores. And the thing we need to keep in mind is those models or those schemes – they can be designed for Europe, they can be designed for Canada, they can be designed for the United States. We can't let the perfect be the enemy of the good. The models that are designed to allow American farmers to get recognition, to get credit for the great things they're doing to reduce their carbon scores, are the kind of models or schemes that we support, as well as carbon sequestration – a lot of capability to do that in the United States. We think credit should be given when people can sequester carbon. And I say that because not all carbon schemes allow for those things. So I'd say that the United States is a great place to build it out, but we need to keep in mind that we need to take advantage of all the benefits the United States has when it produces SAF, and not accept a scheme that was developed for another region of the world that is biased towards that region of the world.

 

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: It comes back to risk. The airlines can only take so much of the risk and we're working with them to try to accommodate them as much as we can. But at the end of the day, in order to build out a huge SAF industry – which is what the airlines want, and what SAF producers are prepared to dig in and go deliver – somebody has to solve for risk in a big way. Meaning that if you're going to build out a project on SAF, you need some revenue certainty in order to justify spending that kind of capital. And that's really the thing that needs to be solved for the airlines.

 

Q: Is high quality feedstock availability for SAF an issue for you and how are you addressing it?

A: It's not an issue for us, because what we're tapping into – for our predominant feedstock in the United States – is corn. We have a background in this, coming from Cargill we know it extremely well. I got hired into Cargill in 1992 on a mission to help find use for waste sugar out of that industry. As we process corn, you end up with excess starch and sugar, and so by tapping into that as a feedstock, you've got a very scalable SAF business, because the amount of corn that's grown in this country is huge. Not only that, but the year over year increase in yields is significant. As you know, farmers get better and the technology gets better, and not only is it abundant, but the carbon score of corn gets lower and lower every year as farmers get better at growing it. The biggest issue we have with feedstock is people's misperception about corn and their belief that somehow, using cellulosic feedstock like corn stover would somehow be better. That's part of our effort, to educate people on our feedstocks, on farming, and show them why what we've selected as a feedstock is very good for demand.

 

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

A: I hope to see a whole bunch of projects in operation and in development. And I expect that to happen as long as we continue doing what we've been doing – there are a lot of developers out there all working in the same direction and there's a lot of demand. So, it's just a matter of putting all the pieces together and making it happen.

Chris Ryan is a key speaker at the Sustainable Aviation Fuels Conference & Expo, June 11-12, Houston.  For more info on the event please visit - https://www.epcshow.com/sustainable-aviation-fuels