The Clean Jet-Fuel Technology Winning Over Wall Street
Cutting emissions from aircraft is one of the toughest challenges in the energy transition. A small group of startups say they have an answer, and investors are racing to give them cash.
The latest is a company called Twelve, which raised $645 million from backers including the private-equity firm TPG and Alaska Airlines in one of the largest investments ever for clean jet fuel.
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The investment values Twelve at more than $1 billion. It is one of several startups using a chemical process that mimics photosynthesis to produce jet fuel with far lower emissions than fossil fuels. They are raising significant amounts of cash in the midst of a rush of funding deals.
Last week, Brookfield Asset Management said it would invest more than $200 million into a company called Infinium that has a generally similar approach. Brookfield might put in up to $850 million more. A few years ago, Prometheus Fuels, a startup with a deal to sell fuel to American Airlines that has a comparable process, hit a $1 billion valuation. A competitor called HIF Global is also a unicorn after raking in investment.
Investors are shifting their bets in 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 limitless amounts if given enough cheap renewable power.
“This actually has a shot at eventually replacing fossil fuels,” said Zachary Bogue, co-managing partner at the venture-capital firm DCVC. It was one of Twelve’s first investors and is putting money in again in the new fundraising.
Such approaches are seen as the most practical long-term fuel source. Airlines are currently using some biofuels, which are made from fats, oils and greases; trash; or plants. The supply of these will likely be constrained eventually by the availability of feedstock material and land.
Many clean fuels projects are facing high costs and failures, contributing to Air New Zealand’s recent shelving of a 2030 emissions target.
The wave of investment into eFuels backs a trend in the energy transition under which companies with cash and the backing of big companies emerge as potential winners.
“We’re trying to move as quickly as we can to bring supply to the market,” Nicholas Flanders, Twelve’s chief executive officer, said in an interview. Alaska Airlines and a group of European carriers including British Airways have agreed to buy Twelve’s fuel, which can have emissions up to 90% lower than conventional jet fuel.
Twelve’s first plant, located in Moses Lake, Wash., will make about 50,000 gallons annually when it starts operating next year. Production of the new fuel won’t make a dent in the 100 billion gallon a 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 committed $400 million to future Twelve plants and invested in a roughly $200 million fundraising for the company as a whole. The rest of the funding is 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 getting doctorates in mechanical engineering and chemistry. The company’s name refers to the most abundant form of carbon on earth, the isotope carbon-12.
Twelve’s process uses devices that run on renewable power called electrolyzers. They bring carbon dioxide and water into contact with metal catalysts. Removing an oxygen atom from CO2 yields carbon monoxide, which is combined with hydrogen from the water to make synthesis gas. That syngas can be processed into fuel.
While many companies use electrolyzers to make hydrogen, Twelve is one of the few adding carbon in an integrated process, which it says can work at much lower temperatures. Its technology also makes a hydrocarbon product that can be used to make everything from plastics to laundry detergents. Procter & Gamble and Mercedes-Benz are among the companies talking to it about its applications.
Flanders is the son-in-law of Carlos Ghosn and says he talks to the former CEO of Nissan about managing Twelve’s suppliers. Supply-chain and construction kinks have contributed to delays at Twelve’s initial plant and pushed up costs across the industry.
Subsidies from the 2022 climate law and state incentives help producers close the cost gap with conventional jet fuel, as can government grants and loans.
One constraint on the burgeoning industry is the supply of green power. Twelve’s Washington project runs on hydropower, giving it an edge over its rivals. Power availability will be a key factor dictating where Twelve locates subsequent plants, Flanders said.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com