Clean Jet Fuel Technology Wins on Wall Street

Cutting emissions from airplanes is one of the toughest challenges in the energy transition. A small group of startups claim to have the answer, and investors are racing to give them cash.

The latest is a company called Twelve, which has raised $645 million from investors including private equity firm TPG and Alaska Airlines, making it one of the largest investments in clean jet fuel in history.

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Twelve’s investment is worth more than $1 billion. It’s one of several startups using a chemical process that mimics photosynthesis to produce jet fuel with significantly lower emissions than fossil fuels. They’re raising significant amounts of cash as funding deals pour in.

Last week, Brookfield Asset Management said it would invest more than $200 million in a company called Infinium that has a similar approach. Brookfield could invest as much as $850 million more. A few years ago, Prometheus Fuels, a startup with a fuel deal with American Airlines that has a similar process, reached a $1 billion valuation. A competitor called HIF Global is also a unicorn after raking in an investment.

Investors are shifting their bets on clean fuels to companies that use chemistry to turn carbon dioxide, water and renewable electricity into energy. Known as eFuels, synthetic fuels or power-to-liquids technologies, they offer the tantalizing possibility of producing unlimited quantities if they get enough cheap renewable energy.

“This really has the potential to eventually replace fossil fuels,” said Zachary Bogue, co-managing partner at venture capital firm DCVC, which was an early investor in Twelve and is reinvesting the money in a new fundraising round.

This approach is seen as the most practical long-term source of fuel. Airlines currently use some biofuels, which are made from fats, oils, and grease; garbage; or plants. Their supply is likely to be ultimately limited by the availability of feedstock and land.

Many clean fuel projects have faced high costs and setbacks, which contributed to Air New Zealand’s recent postponement of its 2030 emissions target.

The wave of investments in electronic fuels confirms a trend in the energy transition in which companies with cash and the backing of large enterprises are emerging as potential winners.

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“We’re trying to move as quickly as we can to get supplies to market,” Nicholas Flanders, Twelve’s chief executive, said in an interview. Alaska Airlines and a group of European carriers, including British Airways, have agreed to buy Twelve’s fuel, which could have emissions up to 90% lower than conventional jet fuel.

Twelve’s first plant, in Moses Lake, Washington, will produce about 50,000 gallons per year when it begins operations next year. Production of the new fuel won’t affect the 100-billion-gallon-per-year jet fuel market for at least another decade, but capacity is growing across the industry.

The list of industry unicorns is short. Twelve joins Prometheus, HIF and a rival startup called LanzaJet, which is backed by Southwest Airlines and makes fuel from ethanol.

TPG has committed $400 million to Twelve’s future bets and invested about $200 million in a fundraising round for the entire company. The rest of the funding comes from small loans from banks, including Japan’s Sumitomo Mitsui.

Flanders co-founded Twelve in 2015 at Stanford University’s business school with a pair of students who earned doctorates in mechanical engineering and chemistry. The company’s name is a reference to the most common form of carbon on Earth, carbon-12.

Twelve’s process uses renewable-energy devices called electrolyzers. They introduce carbon dioxide and water into contact with metal catalysts. Removing an oxygen atom from the CO2 creates carbon monoxide, which combines with hydrogen from water to create syngas. Syngas can be converted into fuel.

While many companies use electrolyzers to produce hydrogen, Twelve is one of the few companies adding carbon in an integrated process that it says can operate at much lower temperatures. Its technology also produces a hydrocarbon product that could be used to make everything from plastics to laundry detergent. Procter & Gamble and Mercedes-Benz are among the companies that are talking to it about its applications.

Flanders is Carlos Ghosn’s son-in-law and says he’s in talks with the former Nissan CEO about managing Twelve’s suppliers. Supply chain and construction issues have contributed to delays at Twelve’s initial factory and raised costs across the industry.

Climate Act 2022 subsidies and state incentives help producers close the cost gap with conventional jet fuel, as do government grants and loans.

One limitation of the growing industry is the supply of green energy. Twelve’s project in Washington runs on hydropower, which gives it an advantage over its rivals. Energy availability will be a key factor in deciding where Twelve locates its next plants, Flanders said.

Write to Amrith Ramkumar at [email protected]

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