The Inflation Reduction Act, otherwise known as “IRA,” was signed into law in August and promises to be helpful to many companies working in the energy transition and in particular those in the renewable energy industry.
“The passage of the Inflation Reduction Act is a game changer and is expected to reward companies like ours that drive to net- zero emissions,” says Dr. Patrick R. Gruber, CEO of Gevo, Inc. “We now have approximately 375 MGPY of commercial offtake commitments and we expect Net-Zero 1 to demonstrate how a commercial scale SAF plant can achieve net-zero greenhouse gas emissions.”
The IRA is very positive for sustainable aviation fuel specifically, putting forth a two-phase approach to encourage investment the production of SAF. The first phase creates a SAF blenders tax credit for the 2023-2024 period with a value potential of $1.25 per gallon. In the second two-year phase, 2025-2027, it created a Clean Fuel Production Credit (“CFPC”) that has a credit of $1.75 per gallon for domestically produced, net-zero carbon intensity (“CI”) score SAF. The value of both credits is based on the CI score of the fuel produced and requires a minimum 50 percent reduction in greenhouse gas (“GHG”) emissions. Gevo, like other net-zero businesses, is expected to benefit from such a program because of the expected low CI score of Gevo products.
Gevo takes the benefit a step further, however, because we’re not only working towards creating advanced renewable fuels that deliver the benefits the IRA encourages. We’re also creating Verity Tracking, a blockchain-based distributed ledger system that creates additional value by incorporating the advantages of sustainable agriculture techniques and plant processes powered by renewable energy, and assigns the reduction in carbon intensity to each gallon of advanced renewable fuels produced. Gevo plans to deliver a high-quality carbon accounting system that will help reward growers who adopt farming methods that reduce GHG emissions. This accounting system will focus on the importance of immutable tracking and tracing of carbon-intensity scores that begins at the farm level and follows the molecules through the production of SAF and finally to its ultimate use in a jet engine.
To that end, Gevo is proud to have been tentatively awarded up to $30 million by the U.S. Department of Agriculture to advance its Climate-Smart Farm-to-Flight initiative. This award and program are expected to be finalized in the coming months.
Gevo is working with its strong team of partners in the Lake Preston, South Dakota area to lower the Company’s carbon footprint throughout the SAF business system as well as within other projects in Gevo’s portfolio. Gevo plans to accomplish these goals through further development and implementation of Verity Tracking, which is a blockchain- enabled solutions platform for carbon tracking throughout an entire business system.
We recently broke ground on our Net-Zero 1 (“NZ1”) project at a ceremony in Lake Preston, South Dakota. The project is on schedule with initial volumes of SAF expected to be delivered in 2025. NZ1 is expected to produce approximately 55 MGPY of SAF, or 62 MGPY of total hydrocarbon volumes, which would satisfy part of the approximately 375 MGPY of financeable SAF and hydrocarbon supply agreements that are currently in place.
“We are excited to get on with building out capacity and getting product to the market at commercial scale,” Dr. Gruber continued. ”Our team will take all that we have learned, and continue to learn, from the design and construction process for NZ1 and leverage that growing knowledge base as we plan and design each subsequent plant.”
Through the rest of 2022 and into 2023, Gevo expects to update stockholders about key milestones related to the development, financing, and construction of NZ1 as well as subsequent Net-Zero plants. Updates to those milestones will be found in the our press releases and investor presentations in the Investor Relations section of Gevo’s website.
We are continuing to make progress in our efforts to secure future SAF production locations beyond NZ1. These future sites will offer an appealing mix of attributes that enable Gevo to produce low-cost fuels with the lowest carbon footprint possible. We keep decarbonization in mind as we refine our preferred list of partners and locations and we are engaged in preliminary feasibility and development discussions with several of them, including ADM.