Monday, March 14, 2016

Thanks to cheap oil, biofuels aren't in favor right now, but some airlines are still interested.

This article originally appeared on

Despite rock bottom oil prices and lackluster demand for biofuels in the U.S., United Airlines announced on Friday that it plans to power thousands of commercial flights between Los Angeles and San Francisco with biofuel created from farm waste like animal fats and oils.

While a handful of airlines have flown individual flights using a variety of types of biofuels, this is among the first times that an airline is committing to power a large number of commercial flights. If all goes well, a biofuel blend is supposed to be used for all of United's jet fuel supply at Los Angeles International Airport.

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United plans to use biofuel made by AltAir Fuels, using technology from Honeywell UOP. The technology converts bio wastes, like oil and fats from animals, into a fuel.

United has also been working with biofuel maker Fulcrum Bioenergy for awhile. Last year Fulcrum Bioenergy raised $30 million in financing from United. Fulcrum Bioenergy has been developing a factory in the Reno, Nev., area in the same industrial park as Tesla's large battery factory. That factory is supposed to be able to turn garbage—paper, plastic, fabric, and wood—into bio jet fuel in a couple years.

United is using the biofuel from AltAir Fuels to replace 30% of its petroleum-based fuel for the L.A. flights over the next couple of weeks. This morning a flight took off from Los Angeles to San Francisco powered by the biofuel. Fulcrum Bioenergy isn't supposed to produce its biofuel commercially for United until 2018.

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Biofuel companies have been targeting airlines over the past several years, looking for customers that are willing to pay for a fuel blend. The market to sell biofuel to replace gasoline for vehicles has been difficult, especially with the ultra low oil prices of the past year.

That United is using fuel from waste products is a good choice. Biofuels made from food crops, or plants grown on sensitive or usable land, have become controversial, because they use food crops that should be used for food, can push up food prices, and use land that should be used for other things. Ethanol made from corn has become a large industry in the U.S. but has become somewhat maligned because of strong government subsidies and issues with the environment.

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Building businesses off of the next-generation of biofuels—made from waste—has been difficult. Silicon Valley investor Vinod Khosla funded a dozen biofuel startups over the years and few have delivered much.

Airlines are partly interested in biofuels because they're facing increased pressure to reduce their carbon emissions by new government mandates. The Environmental Protection Agency drafted new rules last year for airlines to cut their emissions. In addition, airlines can pledge to buy a volume of biofuel at a set price, which is a hedge against the price of jet fuel going up.

Thanks to cheap oil, biofuels aren't in favor right now, but some airlines are still interested.

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