Carbon War Room
1 Introduction and Statement of Purpose
1.1
Purpose of Notice
The following is a Request for Information (RFI) issued by the Carbon War Room (CWR) to obtain information pertaining to your company’s technical and market capabilities as they relate to
participation in a renewable jet fuel (RJF) supply chain, capable of supplying up to 100 million gallons of RJF per year to one or more airlines, with a targeted initial production date within the next 1 to 5 years. The RFI will also consider the option of green diesel (GD) production, recognizing the rationale for co-production of diesel and jet fuel as well as the recent efforts to certify GD as a small percentage blendstock for commercial aviation fuel. In particular, the information provided will be used to determine 1) your company’s business model and operational history, including a description of current scale of operations, 2) technological capabilities and business case, as supported by techno-economic data, and 3) specific capabilities for participation in the proposed RJF and/or GD supply transaction. The RFI is not a competitive proposal, and the issuing party will not use
responses to the notice as a basis for the issuance of a contract. Rather, the information provided will be used in the selection of a group of companies for more detailed consideration of their eligibility in the RFJ/GD supply transaction being developed by the CWR.
This project initially has no geographic constraints. We are interested in identifying a combination of renewable feedstock production, conversion and refining operations, and logistics and market-making capabilities that together represent a credible supply chain for future commercial scale RJF and GD production.
1.2. Introduction to the Proposed Transaction
Fuel price volatility and shifting regulations pose significant risks to airlines. Fuel costs represent a very large portion of every airline’s operating costs, and even small increases in fuel prices can significantly reduce profits. In order to better manage these risks, many airlines have adopted fuel hedging strategies. Hedging instruments available to airlines include the purchase of over-the-counter forward contracts, swaps and options, as well as exchange-traded futures contracts. These are short in duration, typically extending no more than three years into the future, and so do not hedge against long term changes in fuel costs. Further, the establishment of a hedging practice within an airline does nothing to address carbon dioxide or other green house gas (GHG) gas regulatory compliance or broader environmental impacts. Many airlines have therefore sought to incorporate RJF into their fuel supply mix as a way to both decrease their exposure to fuel price volatility, and reduce the risk associated with future compliance costs within various regulatory schemes.
Currently, there is no commercial scale supply of RJF and no significant market for the purchase and sale of commercial volumes of physical RJF is anticipated in the next few years. Airlines could potentially benefit from low-cost RJF coming to market, but there is currently no model to secure economically advantaged access to emerging supplies. Airline influence is constrained in several ways: 1) airlines are unable to pay a premium for large volumes of RJF to initiate early production, 2) airlines generally do not have the capacity for capital investment in businesses outside of core
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operations, and 3) a majority of airlines have insufficient credit ratings to secure a capital loan on a fuel production facility through a long-term off-take agreement with a prospective producer.
The CWR is supporting the execution of a fuel cost, price volatility, and carbon solution for airlines that will catalyze the commercial scale-up of biofuel suppliers. This will take the form of a fuel hedging product – a syndicated forward purchase contract for up to 100 million gallons of RJF (and/or GD blendstock) per year at a predetermined price structure, competitive with petroleum based jet fuel, beginning in the next 1-5 years and extending over a long term. The fuel will be both EU-ETS and EPA-RFS compliant and ASTM- and Roundtable on Sustainable Biomaterials-certified. Airlines will secure rights to this output, including the rights to the associated carbon credit under the RFS and EU ETS, through the purchase of RJF and/or GD forward contracts. RJF and/or GD suppliers will receive as proceeds of this offering a non-dilutive payment for the rights to this future output along with associated off-take contracts and the global publicity and support afforded by this transaction. We expect that this transaction will deliver tremendous commercial benefits to the selected supplier(s).
The information gathered in response to the RFI will be used to assess your company’s ability to participate, along with one or more supply chain partner companies, in a supply chain capable of meeting the terms of the proposed transaction structure. Following a review of the RFI responses provided to the CWR, a group of companies will be selected for a more in-depth due diligence process in order to validate the information provided and better assess the capacity of these companies as prospective suppliers in this transaction.
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2 Response Guidelines
White Paper Response: incorporating the considerations presented above, interested parties should provide a statement of interest on company letterhead. The statement shall include, at a minimum, the following information:
(1) current and future RJF and/or GD production capabilities, (including pilot-scale capability) through 2024,
(2) future plans to build/expand/retrofit, including ability to finance and a rationale for where operations could be best sited including any transportation constraints,
(3) a general description of your technology, a description of your existing or contemplated supply chain, and any partnerships contemplated or required,
(4) description of key value-added co-products resulting from the processing and conversion processes that have the potential to provide economic benefits and impact the overall business case,
(5) an estimated time from project inception to commercial scale-up, including breakdown of time allowed for EPA review and approval of RIN-generation under the RFS, RSB certification, ASTM certification, permit approvals, preliminary engineering, detail design and engineering, construction, commissioning, production startup and operations, and
(6) any available lifecycle carbon analysis associated with your RJF or GD would also be beneficial. Expected Timeline for RFI Process
RFI distribution date: September 4, 2014
Target date for receipt of all initial RFI questions: September 12, 2014 Deadline for Delivery of White Paper Statement of Interest: September 22, 2014.
CWR and its partners will compile and evaluate white paper responses over the week of September 29, 2014, and invite a select number of companies to provide a full reply to the Request for Information specified below, under a non-disclosure agreement.
Target deadline for complete RFI submissions: October 20, 2014. Email submissions to: [email protected]
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3 General Questions
3.1 Business Model and Technology Overview
3.1.1 Business modelProvide a detailed description of the company’s business model including: Products and/or services provided and market justification for each Relative importance and focus on each product/service through time
Extent of existing and/or planned participation in the RJF and/or GD value chains Forecast production milestones though time
Known financial and technical barriers to commercial production
Key existing partnerships including capital partners, and commercial partners and/or customers
Any government support or grant funding received
Competitive advantage of firm relative to companies offering similar products or services 3.1.2 Technology
Provide a detailed description of the company’s technological capabilities, including the following (where applicable):
Feedstock Suppliers
Overview of feedstock production process and technological approach, including the following (where applicable):
o Identify primary feedstock(s) and estimated reliance on each feedstock (percentage) in a multi-feedstock process
o History of R&D efforts and major milestones achieved
o Production model, e.g. out-grower, plantation, waste collection, etc.
o Input requirements and a breakdown of outputs including primary product(s) and co-products
o Chemical description of primary products and requirements for conversion of primary product(s) into RJF and/or GD
Geographic potential:
o Specify current production geographies and scale
o Provide an overview of the geographic potential of the feedstock, based on relevant criteria, including the following:
Agro-climatic restrictions and theoretical boundaries on productive yields
Access to infrastructure including roads, rail, port/barge transport, storage facilities and existing fuel distribution networks, agronomic support facilities, irrigation infrastructure and economically recoverable supplies of fresh water, etc.
1-10 year plans for production scale-up and the specific targeted geographies for production
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Harvesting, storage, and transportation:
o Technological requirements for feedstock harvesting and post-harvest handling o Can your feedstock be moved and stored using existing infrastructure?
If not, what is your company’s plan for moving feedstock from production sites to downstream storage, processing, and distribution locations? What, if any, are the special logistical considerations for your feedstock as it relates to full-scale, commercial production?
Conversion Technology Companies
Description of conversion technology including inputs, process flows, and outputs If applicable, an overview of product outputs and unique downstream requirements
necessary to convert the company’s primary product into RJF and/or GD, along with any unique storage, transport, or other logistical considerations
Fuel certification: if applicable, has the proposed fuel been certified for use on aircraft? If not, what is the company doing to have the fuel certified and what is the timeframe for obtaining certification?
Provide a detailed technical description of the range of feedstocks that your process is capable of utilizing, along with any specific input requirements unique to your particular process, e.g. dryness requirements, ability to handle impurities, etc.
Marketer, Distributor, or Other “Downstream” Companies
Provide an overview of the company’s capabilities in the marketing, transportation, distribution, etc. of RJF and/or GD. Please indicate whether or not these capabilities reside within the company or with strategic partners. If with strategic partners, describe the nature of the partnership(s). Consider the following criteria:
Geographic potential and any geography-related restrictions on fuel production and distribution
Range of volumetric production capabilities at each step in the RJF/GD value chain, including secondary feedstock production, processing, blending, certification, and distribution
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3.2 Management Structure and Operations
3.2.1 Management StructureProvide an overview of the organizational structure of the company, along with brief bios of managers and any other key personnel, including advisory board members and members of the Board of Directors as appropriate, and a description of their roles within the organization. 3.2.2 Operations
Provide a brief overview of the company’s historical and projected operations, including (where applicable):
Feedstock Suppliers
Major funding milestones and capital partners Production information including:
o Size and location of production sites
o Aggregate volumes of product(s) produced and yields achieved
o Desired scale for commercial production (e.g. nth production operation) Scale of current operations
If applicable, a list of commercial customers and/or off-take partners Expected volumetric supply capabilities over the following timeframes:
o 0-1 year o 1-3 years o 3-10 years o 10-20 years
Conversion Technology Companies
Major funding milestones and capital partners Production information including:
o Location and scale of production facilities
o Size of largest facility currently under production, as well as volumes of product(s) produced and yields achieved
o Aggregate volumes of product(s) currently produced and yields achieved o Desired scale for commercial production (e.g. nth production operation) If applicable, a list of commercial partners for feedstock supply, as well as intermediate
and/or finished products
If applicable, a list of commercial customers and/or off-take partners Expected volumetric supply capabilities over the following timeframes:
o 0-1 year o 1-3 years o 3-10 years o 10-20 years
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Marketer, Distributor, or Other “Downstream” Companies Major funding milestones and capital partners related to renewable fuels
If applicable, a list of current customers and commercial partnerships including feedstock suppliers, fuel suppliers, and technology providers
Scale and location of current operations
Aggregate volumes of renewables marketed/distributed
Expected volumetric supply capabilities over the following timeframes: o 0-1 year
o 1-3 years o 3-10 years o 10-20 years
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4 Proposed Transaction Participation
The following section relates specifically to the company’s potential participation in the proposed fuel supply transaction. Specifically, the answers provided to the following questions will be used in considering the company’s ability to scale its current operations in order to participate in a supply chain producing commercial volumes of RJF and/or GD (up to 100 million gallons of RJF per year), reaching this annual production target within the next 1-5 years.
4.1 Capital and Operational Requirements to Scale Current Operations
4.1.1 Capital RequirementsIf your company is not capable of producing at commercial scale over the near-term (within the next 1-2 years), provide an estimate of the capital required to scale your company’s current operations in order to meet the output required by the proposed transaction (up to 100 million gallons of RJF and/or GD per year).
4.1.2 Capital Planning
Where applicable, provide a high-level breakdown of how capital would be allocated through time in order to scale your company’s current operations to achieve commercial production within the timeframe of the proposed transaction.
Include a plan for how production capacity will be scaled through time, including capital requirements and predicted production volumes at each scale.
4.1.3 Reduced Production Capacity
If the company will not be able to meet the full supply requirement of the proposed transaction, please provide an estimate of the scale of production that the company would be able to achieve over a 1-10 year timeframe, and the capital required to establish such estimated production capacity.
4.2 Compliance with Regulatory Regimes and Sustainability Standards
4.2.1 Regulatory Regimes
Due to the inherent global nature of the airline business, any participating fuel purchaser will require assurance that any renewable fuel purchased will meet the requirements set forth in all relevant regulations to which they are subject as fuel buyers. Similarly, the producers will need to qualify and benefit under any renewable fuel regulatory schemes in their relevant production geographies. To that end, provide an analysis of the company’s ability to produce/refine/transport/track RJF and/or GD (including ability to track RJF/GD production/consumption credit through the supply chain) that will be compliant with relevant global regulatory regimes and standards.
Relevant regulatory schemes include the following:
The United States Renewable Fuel Standard (RFSII) The EU Emissions Trading Scheme
The EU Renewable Energy Directive
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4.2.2 Sustainability Standards
As with the regulatory regimes discussed above, participating airlines will require assurance that any RJF and/or GD purchased will be compliant with relevant sustainability standards, in particular the standards outlined by the Roundtable on Sustainable Biomaterials (RSB).
Discuss the company’s ability to achieve compliance with the RSB and any other relevant sustainability standards, as appropriate. The analysis should include the following:
A high-level breakdown of relevant sustainability factors associated with the company’s product or process, including net carbon balance, impact on indirect land use change (ILUC), and resource requirements of the product or process (water, fertilizers, and other relevant natural resources)
If available, results of any GHG life cycle analysis conducted on the company’s product or process
If available, proof of certification with the RSB and/or other relevant sustainability standards
4.3 Techno-Economic Data
In order to develop and validate cost estimates and pricing terms for RJF and/or GD produced under the structure of the proposed transaction, techno-economic data will be required. This data will be used to develop assumptions used in the construction of a supply chain-level pro forma financial model covering the target RJF and/or GD supply chain. To that end, please provide data relating to the following:
4.3.1 Mass and Energy Balances
A high-level mass and energy balance analysis of the company’s product and/or process, including the following:
o Input requirements, including, but not limited to, water, nutrient inputs, catalysts, reagents, and other process inputs, as well as energy requirements for each step of the feedstock production process and/or conversion technology
o Outputs, including primary, secondary, tertiary, etc. of the feedstock production process or conversion technology, including any intermediate products resulting from any of the steps in the production process and/or conversion pathway o Guidance on changes in these assumptions through time, and timing thereof 4.3.2 Costs and Product Prices
Based on the mass and energy balance analysis above, provide a breakdown of costs assumptions for all of the identified inputs
Based on the mass and energy balance analysis above, provide a breakdown of price assumptions for all identified outputs, and any relevant market analysis to support said assumptions
Guidance on changes in these assumptions through time, and timing thereof If available, provide any third party engineering assessments, process validation, etc.
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4.4 Logistics
Please provide an overview of the current and/or expected logistics requirements associated with your production, including: possible location of plant(s), transportation of feedstock to the plant, transportation of the finished fuel to the delivery point, blending, etc.
