Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a Canadian Factory Makes Jet Fuel from Wood Waste
Transcript
- Lucas: So if you were flying from Vancouver to London next year, there's a good chance a small fraction of your jet fuel started as wood chips in northern British Columbia. Luna: Wood chips? As in, actual leftover forestry waste — bark, sawdust, branches? Lucas: Exactly. There's a plant just outside Prince George that started commercial production last month. It takes what the industry calls 'forestry residuals' — stuff that would otherwise be burned in slash piles — and turns it into sustainable aviation fuel. They're targeting about 1.5 million barrels a year at full capacity. Luna: That's a real number. And the technology — it's not lab-scale anymore, it's actually running. Lucas: Right. And the whole journey is fascinating. The company behind it spent about a decade in R&D, then another four years building the facility. The core process is gasification — you heat the wood waste in a low-oxygen environment, producing a synthesis gas of hydrogen and carbon monoxide. Then you run that gas through Fischer-Tropsch synthesis, which is basically a catalytic reaction that builds long hydrocarbon chains. Out comes a liquid that can be refined into jet fuel. Luna: Fischer-Tropsch — that's not new. It's been used for coal to liquids in South Africa and for natural gas to liquids in Qatar. But applying it to biomass at this scale is the hard part. Lucas: Exactly. And the economics are the real story. I want to get into the numbers in a minute. But first — let me just say a quick honest thing. This show exists because a small group of listeners chips in monthly through buy me a coffee dot com slash fexingo. No ads, no sponsors — it's listener-funded. If these conversations have moved your work forward in some small way, that link is the simplest way to keep them coming. We're not going anywhere, but it helps us plan. Luna: Yeah, I think it's worth saying because we get a lot of questions about how we keep making so many episodes. The support from those folks is what actually funds the research and production time. And we're grateful. Lucas: Totally. So back to the wood to jet fuel plant. The key question is: can this pencil out without massive subsidies? And the answer is surprisingly yes. Luna: Surprising, because historically biomass to liquids projects have been capital-intensive and often dependent on carbon credits or grants. Lucas: Right. So let me give you the revenue picture. The Canadian government now has a Clean Fuel Regulation that requires fuel suppliers to reduce the carbon intensity of their products. One way to comply is to buy credits. Another is to blend in low-carbon fuels like this SAF. So the plant's offtake agreements are with airlines like Air Canada and WestJet, who are signing long-term contracts at a price that is a premium to fossil jet fuel. But that premium is not as huge as you might think. Luna: What's the premium roughly? Lucas: Today, sustainable aviation fuel trades around two to three times the price of conventional jet fuel. But the plant's feedstock — wood waste — is cheap. In British Columbia, sawmills pay to get rid of it. So the plant collects a tipping fee, effectively negative cost for its raw material. That flips the economics. Luna: So they're getting paid to take the wood, and then selling the fuel at a premium. That's a double margin. Lucas: Exactly. The CEO of the company told me their all-in production cost, including capital recovery, is around $1.20 per liter. Conventional jet fuel is about $0.50 per liter right now. So they need that premium to cover the gap. But with the regulatory mandate and the offtake agreements, they've locked in prices that work. Luna: And what about the carbon intensity? That's the whole point, right? Lucas: Yes. The fuel reduces lifecycle greenhouse gas emissions by about 80 percent compared to fossil jet fuel. That's not counting avoided emissions from not burning the wood waste in slash piles — which itself releases carbon. So there's a double climate benefit. The plant is registered under the BC carbon offset program, so they also generate offset credits from the avoided slash burning. Luna: So they have three revenue streams: fuel sales at a premium, tipping fees for taking the wood waste, and carbon offset credits. That's a diversified income model that reduces risk. Lucas: Exactly. And the scale is worth noting. One point five million barrels a year is about 200,000 tonnes of SAF. That's enough to cover maybe 1 percent of Canada's aviation fuel demand? But it's a start. The plant is designed to be replicated. Their plan is to build ten more across Canada over the next decade. Luna: That would require a lot of wood waste. Is there enough in Canada? Lucas: Great question. According to Natural Resources Canada, the forestry sector generates about 25 million dry tonnes of residues annually. Only about a third is currently used for bioenergy or other products. So there's feedstock slack. And the plant uses a mix of waste: sawdust, bark, branches, even whole trees that are too small or diseased for lumber. It's not competing with lumber production. Luna: And the technology itself — gasification plus Fischer-Tropsch — is it proven at this scale for biomass? Lucas: That was the biggest engineering challenge. The gasification step needs to produce a clean syngas without tars and contaminants that poison the Fischer-Tropsch catalyst. On natural gas, it's straightforward. On biomass, it's harder because the feedstock is variable. The plant uses a fluidized bed gasifier with a tar reformer — a secondary step that cracks the tars. They also have a water-gas shift reactor to adjust the hydrogen to carbon monoxide ratio. The whole system is integrated and automated, but it took years to get it right. Luna: And the Fischer-Tropsch reactor itself — those are typically large, expensive vessels. How did they manage capital costs? Lucas: They partnered with a German engineering firm that specializes in modular Fischer-Tropsch units. Instead of one giant reactor, they used multiple smaller modules that can be mass-produced. That's a classic manufacturing scale-up strategy. The company claims it reduces capital costs by about 30 percent compared to a single large reactor. Luna: Modular design — that's smart for a resource-based industry where feedstock is distributed across many sites. You can build smaller plants near each forestry hub. Lucas: Exactly. They're already scouting locations in northern Ontario and Quebec for the next plants. The Canadian federal government has a $1.5 billion clean fuel fund that provides loan guarantees for projects like this, so the financing path is clearer than it was a decade ago. Luna: What about the aviation industry's overall demand? I read that IATA expects SAF to supply 65 percent of aviation fuel by 2050, but today it's less than 0.5 percent. This plant is a step, but the gap is enormous. Lucas: It's enormous. But the scaling challenge is exactly why this plant matters. It's one of the first commercial biomass to saf facilities in North America. If it works reliably for a few years, it de-risks the technology for investors. Then the capital floodgates could open. There are similar projects in Europe — in Finland, there's a plant using wood waste for renewable diesel — but this one is specifically optimized for jet fuel. Luna: And jet fuel is the hardest to decarbonize because batteries are too heavy and hydrogen is too bulky. So liquid drop-in fuels are really the only option for long-haul flights. Lucas: Right. And this fuel is a drop-in — it meets the ASTM D1655 standard for Jet A-1, so it can be blended directly with fossil fuel without any aircraft modifications. Airlines are desperate for it. Delta and United have signed offtake agreements for similar fuels from other producers. The demand is there. Luna: So the bottleneck is supply, not demand. And this plant is trying to break that bottleneck. Lucas: Exactly. And one more detail I thought was interesting: the plant itself is designed to be energy self-sufficient. It uses a portion of the wood waste to generate heat and power for the gasification and Fischer-Tropsch processes. So it's not importing electricity from the grid. That helps the carbon footprint and the operating costs. Luna: So it's making its own energy from the same feedstock. That's elegant. Lucas: Yeah. The whole facility is a system of systems. And the team there has been running test campaigns for six months before declaring commercial operations. They've been iterating on the catalyst life — one of the big operational risks is that the catalyst deactivates over time and needs to be replaced. They've extended it to about 18 months now, which is close to commercial viability. Luna: So what's the next milestone? When do they expect to hit the 1.5 million barrel target? Lucas: They say full capacity by the end of 2027. They're ramping up slowly — current output is about 20 percent of nameplate. They want to ensure reliability before pushing harder. The CEO told me, 'This is not a software startup. We can't crash and fix it in the next sprint. If a reactor goes down, it's a physical problem that takes weeks.' So they're being methodical. Luna: That's the right mindset for industrial manufacturing. And for the listeners who are in the industry, what's the one thing you'd want them to take away? Lucas: I think it's that the economics of biomass to fuels are real when you stack multiple revenue streams — tipping fees, fuel premiums, carbon offsets. It's not a single magic number. It's a puzzle of policy, engineering, and market timing. And this plant shows that puzzle can be solved at commercial scale. Luna: I'll be watching to see if they hit that 2027 target. And if they do, how many copycats appear. Lucas: Same. And on that note, if you want to see the plant's technical specs or the offtake agreements, we'll link to their public filings in the show notes. That's it for this episode. Thanks for listening. Luna: See you next time.