Today: Feb 12, 2025

Reviving Green Dreams: Velocys’ New $40 million Investment Breathes Life into Sustainable Aviation

1 year ago

Hello Lion Herald readers, Happy New Week 

Today the story that caught my attention is about Velocys, an Oxford-based company focused on sustainable aviation fuel (SAF), that recently secured a substantial $40 million investment in a rescue deal that transitioned the company to private ownership. 

This is a long format piece, but if you are in a hurry, here are the key facts about the stories

Despite financial challenges, Velocys has received substantial government support and recently avoided insolvency through acquisition by a consortium of investors for £4.5 million.

The consortium, consisting of Carbon Direct Capital, Lightrock, GenZero, and Kibo Investments, has injected additional funds to accelerate the company’s technology deployment.

Velocys CEO, Henrik Wareborn, expressed optimism about the company’s future, highlighting its role in advancing lower carbon SAF production.

With the backing of new funding, Velocys plans to expand its US-based reactor facility in Ohio and pursue projects like its collaboration with British Airways in Lincolnshire, focusing on waste-to-fuel conversion.

The company’s strategic partnerships and innovative approach position it as a key player in decarbonizing aviation.

Chief Executive Officer & Executive Director Henrik Wareborn

After the News side of the story I tried to go deeper and learn more about the business side of Velocys, as a company builder there are three aspects that I always look into :

1) The Problem,

2) The Solution

3) The Targeted customers.

So let us dive into it, here is the breakdown:

 

Problem: The aviation industry is a significant contributor to carbon emissions, with traditional jet fuels being a major source of pollution. As the world becomes increasingly aware of the environmental impact of air travel, there is a growing demand for sustainable alternatives to conventional aviation fuels. Velocys identified this pressing problem and recognized the need for innovative solutions to decarbonize the air travel industry.

Solution: Velocys offers a revolutionary solution by developing technology that enables the production of sustainable aviation fuel (SAF) from waste materials. By harnessing advanced catalysts and innovative processes, Velocys transforms methane and carbon dioxide into high-quality fuels suitable for use in airplanes. This approach not only mitigates environmental harm by reducing carbon emissions but also provides a viable alternative to fossil fuels. Velocys’ commitment to sustainability and technological innovation positions it as a key player in the transition towards greener aviation.

Target Customers: Velocys’ target customers include airlines, aircraft manufacturers, and other stakeholders in the aviation industry seeking to reduce their carbon footprint. Airlines, in particular, are under increasing pressure to adopt sustainable practices and meet regulatory requirements for emission reductions. Velocys’ sustainable aviation fuel offers these customers a tangible solution to address environmental concerns while maintaining operational efficiency. Additionally, Velocys’ technology can also appeal to governments, environmental organizations, and investors interested in promoting sustainable initiatives and combating climate change.

Here are my Key Takeaways about the journey of Velocys so far:

Identify Market Needs: Velocys recognized the growing demand for sustainable aviation fuel amid concerns over environmental sustainability in the aviation industry.

Innovate for Impact: By developing cutting-edge technology and processes, Velocys created a sustainable solution to address a pressing environmental issue.

Target Strategic Partnerships: Collaborating with industry stakeholders, such as airlines and government agencies, can help drive adoption and scale the impact of innovative solutions.

Stay Resilient: Despite facing financial challenges, Velocys persevered, secured funding, and remained committed to its mission of decarbonizing aviation.

Focus on Sustainability: Emphasizing sustainability in business practices not only aligns with societal and regulatory trends but also opens up opportunities for growth and differentiation in the market.

The Journey of Velocys: Pioneering Sustainable Aviation Fuel from Waste

When you dig deeper you realize that,for over two decades, Velocys plc, born from the fertile grounds of Oxford University’s innovation hub, has been on a mission to revolutionize the aviation industry.

From its humble beginnings as a technology spinout called Oxford Catalysts to its recent endeavors in converting waste into sustainable fuels, Velocys has been at the forefront of sustainable energy innovation.

The founders have developed catalysts that can be used to transform waste methane into hydrogen for use with fuel cells, or into pure liquid fuels that can be used for engines or heating and are easy to transport.

Further applications include the partial oxidation of natural gas and removal of sulphur from crude oil.

The basis of the technology is an innovative method for catalyst preparation, which gives catalysts that are extremely active, selective and long lasting.

Origins and Technological Innovations

Velocys’ journey traces back to the visionary minds of Dr. Tiancun Xiao and Professor Malcolm Green, whose groundbreaking work in catalyst technology laid the foundation for the company’s endeavors.

Their innovations, developed over 18 years at Oxford, have paved the way for transforming waste methane into hydrogen and liquid fuels, offering a sustainable solution to the aviation industry’s carbon emissions.

In 2020, researchers unveiled a method to directly convert CO2 into aviation fuel using an inexpensive iron-based catalyst. This pioneering approach not only reduces carbon emissions but also offers a sustainable alternative to traditional fossil fuels.

So, in simple terms, these brilliant scientists have found a way to take something harmful, like carbon dioxide, and turn it into valuable fuel for airplanes, all thanks to their magical catalyst and some clever science tricks.

It’s like turning a villain into a hero for our planet.

Financial Challenges and Resilience

Despite its technological prowess, Velocys has faced financial hurdles along its journey.

In October 2023, the company’s shares plummeted, highlighting its precarious financial situation.

It appeared that the firm focus was on developing its proprietary technology solutions ahead of commercial adoption and  not on having recurring revenues.

As a result, it had historically been reliant on equity raises and grant funding to execute its business strategy.

However, Velocys sought emergency funding to stay afloat.

The subsequent bid from Madison Bidco Limited, though modest, provided a lifeline, allowing Velocys to continue its mission.

With renewed financial stability and ongoing technological advancements, the company is poised to play a pivotal role in decarbonizing global aviation.

Jet Fuel Market Soars: Predicted Surge to $297 Billion by 2029

So what will the fuel market look like in the near future?

According to Mordor Intelligence, the global jet fuel market is poised for substantial growth, with estimates suggesting a surge from USD 175.76 billion in 2024 to a projected USD 297.10 billion by 2029.

This upward trajectory, at a robust CAGR (Compound Annual Growth Rate) of 11.07% during the forecast period (2024-2029), is fueled by various factors driving demand in the aviation industry.

The market’s growth is underpinned by the rising number of air passengers, facilitated by affordable airfares, improved economic conditions, and increased disposable income.

However, the dominance of fossil-fuel-based jet fuels presents environmental challenges, hindering market expansion.

Despite these challenges, government mandates worldwide mandating the blending of renewable aviation fuel with conventional types offer a silver lining.

This presents significant opportunities for market players to innovate and contribute to sustainable aviation practices.

Market Trends: Commercial Segment Dominance

The commercial aviation segment emerges as a dominant consumer of jet fuel, accounting for a substantial portion of total operating expenditure for airline operators.

With air travel becoming more accessible and affordable, the demand for aviation fuel is expected to witness a significant upsurge.

Asia-Pacific emerges as the global market leader, driven by increasing passenger traffic, particularly from emerging economies.

Countries like China, India, and Indonesia are poised to witness substantial growth, surpassing traditional aviation powerhouses in the coming years.

The jet fuel market is moderately consolidated, with key players including Exxon Mobil Corp., Shell PLC, Total Energies SE, Chevron Corporation, and BP PLC.

These industry leaders are instrumental in driving innovation and shaping the future of aviation fuel.

The jet fuel market is on an upward trajectory, driven by evolving consumer dynamics, environmental imperatives, and technological advancements.

As the aviation industry navigates towards a sustainable future, market players must seize opportunities and overcome challenges to fuel the skies of tomorrow.

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Fabrice Iranzi

Journalist and Project Leader at LionHerald, strong passion in tech and new ideas, serving Digital Company Builders in UK and beyond
E-mail: iranzi@lionherald.com

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