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How Can Alternative Jet Fuels Be Integrated into the Airport Setting? 41 sive infrastructure such as pipelines or railways. Thus, in the absence of pipelines or railways, truck transportation may be the most practical option. What are the logistical implications of the blending requirement of alternative jet fuels? Since thus far alternative jet fuels have only been certified as a blend (up to 50% in the case of FT), there will have to be a place in the supply chain, prior to the fuel reaching the wing of the aircraft, where alternative and petroleum-based jet fuels are blended. This is not expected to be a considerable barrier for an alternative jet fuel project, but it needs to be considered. Can alternative jet fuels use the same infrastructure as conventional jet fuel? As long as the alternative jet fuel is certified as a drop-in fuel, it can use the same infrastructure as conventional jet fuel. If the alternative jet fuel is certified as a blend (e.g., 50/50 blend), only the infrastructure downstream of the blending facility could be shared with conventional jet fuel. It is important to point out that infrastructure is a shared resource serving many customers. Therefore, all users who use that infrastructure must agree to the alternative jet fuel being present. How can the logistical characteristics of an alternative jet fuel project be evaluated? To evaluate the logistical aspects of an alternative jet fuel project, "Worksheet 4: Logistical Considerations" is provided in Section 5.2.4. Fill out the information for the current way in which the airport gets its conventional jet fuel and for as many options as are being considered. The following evaluation guide is recommended for grading the different options: Green: All or most transportation occurs by pipeline or rail/barge with minimal or no truck transportation; all transportation and storage infrastructure is in place. Yellow: Some truck transportation is required. Some minor transportation and storage infra- structure needs to be built. Red: Truck transportation over long distances is required. Major transportation and storage infrastructure elements need to be built. After completing the grading, fill in the appropriate circle in the "Green," "Yellow," or "Red" column in the "Logistical" row of "Worksheet 6: Evaluation Summary" in Section 5.2.6. Note: It is important to compare the proposed options to the existing way of bringing jet fuel to the airport. For example, a yellow rating is appropriate if truck transportation is the only possibility for both the alternative jet fuel and the petroleum-based jet fuel. 3.5.4 Financial Financial resources are another critical element for a successful alternative jet fuel project. This section discusses the main financial considerations that should be taken into account. What are the main financial considerations related to alternative jet fuel projects? Commercial-scale alternative jet fuel plants are large, capital-intensive projects that are very likely to require external financing. Alternative jet fuel facilities frequently involve more finan- cial risks than the average airport project because the technologies are new and frequently untested on a commercial scale. As a result, alternative jet fuel projects may have more difficulty in attracting financing than most airport projects. Thus, in order to attract financing, project developers must be able to demonstrate a high probability of the operation being profitable. This usually means that the technology has been proven on a commercial scale and that an indepen- dent feasibility study analyzing the likelihood of success of the project is available. Such a feasibil- ity study will ultimately require hiring an outside expert and is outside of the scope of this hand- book; however, there are some initial considerations, discussed in the following, that airports can analyze prior to deciding on a full-scale feasibility study.

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42 Guidelines for Integrating Alternative Jet Fuel into the Airport Setting The success of an alternative jet fuel project depends heavily on one external factor: the price of conventional jet fuel. Airlines and other end users may be willing to pay a premium for alternative jet fuel during a short start-up period, but eventually they will expect the alternative jet fuel to compete with conventional jet fuel in terms of price. At the moment, many indications are that the price of alternative jet fuel will be initially higher than that of conventional jet fuel. As the industry grows and matures, the price of alternative jet fuel is expected to decrease. When and how fast this happens, and how quickly profitable business models emerge, will be important for the financial success of alternative jet fuel projects. What financial elements should be evaluated as part of a comparative evaluation of options? "Worksheet 5: Financial Considerations" in Section 5.2.5 and the text following this para- graph offer a road map for airports to perform a comparative financial evaluation of alterna- tive jet fuel projects. For each option under consideration, start with the first step and follow the decision tree providing answers to the questions. A guide to rate each option based on these answers is provided. This worksheet represents an iterative process. If a rating of red or yellow is obtained, repeat the exercise taking into account new or expanded information that may be obtained through consultation with CAAFI and other experts such as those listed in Section 1.6. 1. Does the project have a financing structure in place? If the project already has a firm financing commitment, the project is likely to be financially feasible because the financial institution will have completed its own feasibility review. If so, the project gets a green rating. If firm financing commitments are not available, continue with Step 2. For each of the follow- ing questions, answer "Yes" or "No" in Worksheet 5. 2. Has the proposed technology and feedstock been used before? The use of an untested technology or feedstock for producing alternative jet fuels increases the risk of the project. To get a better idea of the risk factors, financial institutions would want to investigate the following: a. Has the proposed alternative jet fuel been certified for use in aircraft? b. Has the production technology been proven at the same scale as this project? c. Have the feedstock and alternative jet fuel logistics been solved? d. Are the feedstocks available in adequate supplies and at prices that make the alternative jet fuel competitive over the life of the project? e. Does the alternative jet fuel project have a long-term supply agreement with sufficient dis- ruption and quality protections? f. Does the alternative jet fuel project have long-term purchase agreements from creditwor- thy buyers? CAAFI and the resources listed in Section 1.6 can be consulted to help find the answers to these questions. 3. Are there indications that the production process can be profitable? Airports should determine if similar ventures to the one being evaluated are profitable (note that a nondisclosure agreement may have to be signed to obtain this information). 4. Does the project sponsor have a successful track record? Financing sources need to be confident that management of the fuel production facility is competent and will be capable of carrying out the business plan. Management with a successful track record is more likely to attract financing than untested management.