Problem: Many airlines want to be more carbon neutral, net zero, or net negative. United airlines, for instance, needs 4 billion gallons of fuel per year and is willing to experiment with sustainable aviation fuel (in 2022 they consumed 3 million gallons of SAF and in 2023 they expect to consume 10 million gallons of SAF). However, there is far more demand in the market than supply.
That’s why United launched a $100 million fund to invest in startups creating fuel in new ways (you can read here to learn more about the fund). The Wall Street Journal’s analysis is phenomenal for a deep-dive in the industry. One of the biggest questions, however, is how to get feedstocks that create SAF to the right production facilities.
United Airlines and the WSJ aren’t the only ones looking at this industry. For instance, the Biden administration set a goal to scale US SAF production to 3 billion gallons by 2030. Here’s an excerpt from that 128-page report:
"The Sustainable Aviation Fuel (SAF) Grand Challenge is a U.S. government-wide approach to work with industry to reduce cost, enhance sustainability, and expand production to achieve 3 billion gallons per year of domestic sustainable aviation fuel production that achieve a minimum of a 50% reduction in life cycle greenhouse gas emissions (GHG) compared to conventional fuel by 2030 and 100% of projected aviation jet fuel use, or 35 billion gallons of annual production, by 2050.”
While exciting, another problem is that SAF can be 2x - 3x more expensive than traditional fuel.
Can SAF truly compete with traditional fuel? Could a new SAF production company solve these problems?
This posts explores the future of aviation.
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Solution: This business would focus on creating new, novel sources to generate SAF for highly-demanding airlines. It would aim to lower the product cost of this while potentially increasing its efficacy. Rather than me writing a business plan, let’s turn to GPT-4…
Business Plan: JetGreen Fuels – Transforming Waste into Sustainable Aviation Fuel
Executive Summary
JetGreen Fuels is a pioneering company aiming to convert waste into Sustainable Aviation Fuel (SAF), to reduce carbon emissions and meet rising demand for eco-friendly fuels. The business model addresses the supply and cost challenges of SAF through technological innovation, strategic partnerships, and government support.
Company Description
Founded in 2023, JetGreen Fuels, inspired by the likes of Fulcrum BioEnergy, is committed to creating a sustainable future for aviation by providing an abundant supply of cost-effective, low-carbon aviation fuel.
Customer Analysis
Our primary customers will be commercial airlines, governmental agencies, and fuel distribution companies. Globally, at least 30 airlines, including United, Cathay Pacific, and Japan Airlines, have committed to using SAF for 10% of their fuel consumption by 2030. This commitment demonstrates an active demand for SAF.
Airlines have committed to aggressive net-zero emissions targets by 2050, and SAF is a critical element in achieving these goals. JetGreen Fuels aims to help airlines attain these targets by providing a viable alternative to traditional jet fuel. Our customer base will also include military and private aviation sectors that are equally committed to reducing their carbon footprint.
Supply and Demand Dynamics
As of now, the SAF supply covers less than 0.1% of the total fuel supply. Despite the environmental benefits of SAF, its limited availability and higher costs have hindered widespread adoption. However, with the growing pressure to decarbonize aviation, the demand for SAF is expected to surge.
The current annual production of SAF in the US is approximately 15.8 million gallons, while the consumption of jet fuel is around 17.5 billion gallons. To meet airlines' sustainability commitments, the Biden Administration has set a target of scaling US SAF production to 3 billion gallons per year by 2030.
Meanwhile, the available feedstock for SAF production is vast. Trash and other waste materials are abundant and have been vastly underutilized. By tapping into these feedstocks, we can dramatically increase SAF production, creating a balance in the supply-demand dynamics.
Expanded Market Analysis
The aviation industry's share of global carbon emissions was 2% in 2021, a figure projected to rise as air travel increases. Furthermore, as other sectors such as automotive shift towards electric power, aviation's relative share of global emissions will also increase, thereby magnifying the industry's impact on climate change.
Despite this, the aviation sector cannot switch to electric power due to current technical limitations, making it even more imperative for them to find low-carbon fuel options. SAF, which can replace conventional jet fuel without requiring any change in infrastructure or aircraft, is the most promising alternative.
However, the production of SAF in the U.S. was only around 15.8 million gallons in 2022, while the total jet fuel consumption was approximately 17.5 billion gallons, demonstrating a vast gap between supply and demand. As airlines and governments pledge to decarbonize aviation, the demand for SAF is set to grow rapidly. By 2030, at least 30 airlines have committed to using SAF for 10% of their fuel needs, and the Biden administration has set a goal of 3 billion gallons of SAF per year.
Currently, SAF is more expensive than traditional jet fuel, but the introduction of tax credits and increased investment is expected to bring the price down. As SAF becomes more affordable and its supply increases, the market will continue to expand, creating substantial opportunities for companies like JetGreen Fuels.
Expanded Organization and Management
JetGreen Fuels will be organized into four main departments: Research & Development (R&D), Operations, Marketing & Sales, and Finance.
The R&D department will focus on continuous technological innovation to optimize the process of transforming waste into SAF. It will also work on developing new technologies to diversify the types of waste that can be used as feedstock.
Operations will oversee the collection and processing of waste, the production of SAF, and the maintenance and upgrading of facilities. This department will also work closely with R&D to implement new technologies and processes.
Marketing & Sales will be responsible for promoting our brand and our product. They will communicate the benefits of our SAF to potential customers, including airlines, fuel distributors, and government agencies. They will also secure sales contracts and negotiate long-term supply agreements.
The Finance department will manage the company's finances, including securing funding, controlling costs, and ensuring profitability. They will also handle financial planning, budgeting, and reporting.
The management team will consist of seasoned professionals with substantial experience in the renewable energy, waste management, aviation, and business development sectors. They will guide the company's strategic direction and oversee the operations of the four departments, ensuring they work cohesively towards our common goals.
Expanded Product Line and Services
JetGreen Fuels' primary offering is the conversion of waste materials into Sustainable Aviation Fuel (SAF). Our SAF has the potential to cut carbon emissions by up to 80% compared to conventional jet fuel, contributing to the global effort of decarbonization.
In addition to creating fuel from household and commercial waste, our technology allows for the utilization of other waste streams, including forest residues and waste from the agricultural sector. This not only expands our feedstock base but also provides a solution for waste management, adding a secondary benefit to our operations.
Furthermore, as part of our services, we also aim to provide consultancy and advisory services to airlines and other stakeholders on their path to sustainability. This includes advising on emission reduction strategies, the incorporation of SAF into existing operations, and guidance on navigating the evolving regulatory landscape around SAF.
Technical Feasibility
The technology to convert waste into SAF has been proven effective by companies such as Fulcrum BioEnergy. The process begins with sorting and shredding the waste, which is then converted into synthetic gas (syngas) through a multi-stage gasification process. The syngas is then converted into a liquid transportation fuel through a Fischer-Tropsch system.
JetGreen Fuels plans to adopt and improve upon this technology. We will invest heavily in research and development to optimize the process and expand the types of waste that can be used as feedstock. We are confident that the process is technically feasible and can be implemented at scale.
Expanded Marketing and Sales Strategy
Our marketing and sales strategy will focus on emphasizing the benefits of SAF over conventional jet fuel, including the reduction in carbon emissions and the potential for airlines to meet their sustainability commitments.
We will target airlines committed to reducing their carbon emissions and have made pledges to incorporate SAF into their fuel mix. Our sales team will work closely with these airlines to negotiate long-term offtake agreements, providing them with a reliable source of SAF and us with a steady stream of revenue.
In addition, we will reach out to government agencies and fuel distributors, highlighting how our SAF can help meet national emission reduction targets and create a more sustainable fuel supply chain.
Our marketing efforts will include a strong digital presence, participation in industry events, and the production of thought leadership content. This will position JetGreen Fuels as a leader in the SAF market and a key player in the transition to a more sustainable aviation industry.
Funding Request and Financial Projections
JetGreen Fuels seeks $50 million in funding for setting up waste processing plants, fuel production infrastructure, and funding R&D. Given the aviation industry's fuel consumption and the premium prices commanded by SAF, we project a revenue potential in the billions annually once at full capacity.
Exit Strategy
We aim to become an attractive acquisition target for major energy companies, biofuel producers, or airlines looking to secure their SAF supply. Alternatively, an IPO could provide an exit for investors while securing additional capital for expansion.
Risk and Mitigation Strategies
The main risks include volatile fuel prices, regulatory changes, and technological challenges. We plan to mitigate these risks through fuel price hedging strategies, active engagement with policymakers, and continuous investment in R&D.
Conclusion
JetGreen Fuels offers an innovative solution to a pressing environmental challenge and a significant market opportunity. By leveraging waste feedstocks, strategic partnerships, and supportive policies, we can make a substantial contribution to decarbonizing the aviation industry while delivering robust returns for our investors.
There’s not much more that I can say than that!
Contributed by: Michael Bervell (Billion Dollar Startup Ideas) & ChatGPT