Business Stripped Bare (32 page)

On CNBC's
Power Lunch
programme, I repeated my pledge. 'Obviously we are in the transportation business and we do our fair share of spewing out CO
₂
. . . We are pledging that any money that comes back to the group in the form of dividends, share sales or flotation, that 100 per cent will be invested in tackling global warming. We expect over the next ten years to put aside around three billion dollars.'

My notebooks for the weeks following my announcement are spiderwebbed with figures and arrows and exclamation marks as I tried to understand the economics of the fuel debate.

Less than a week later, on 27 September, Virgin Atlantic unveiled an initiative to reduce carbon emissions from aviation by up to 25 per cent. Our airlines use around 700 million gallons of fuel a year. I wanted to cut back on this consumption and floated a few ideas. At the time, I knew these were ambitious targets. What if our planes were towed to the runway before the engines were started? We proposed starting grids for planes at airports, and a method of landing planes called the 'continuous descent' approach, which meant a saving in fuels. We also pointed the finger at Europe's air traffic control system, which is punishing the environment by keeping planes on holding patterns in the sky. (There are thirty-five separate traffic-control organisations in Europe; there's a single one for the whole of the US!) Virgin Atlantic was working to pull together the airlines to make commercial flying more environmentally friendly, and by 2008, many of the world's airlines – now faced with growing criticism over their contribution to global warming – had begun to adopt these procedures to save vital aviation fuel.

Of course, we could all stop flying tomorrow. But that's not only an unrealistic idea, it's politically and economically disastrous for millions of the world's poor. If you stop people going to Africa, say, you will only increase the hardship of the people there. Many African nations have been building up worthwhile and profitable tourism ventures. You only need to look at Kenya in 2007, and how tourism dried up after the disputed presidential election results and the massive loss of jobs that followed, to recognise the industry's importance, and the destabilising effect the loss of tourism can have on a nation.

The global economy now depends on aviation and tourism, two of the world's most important industries. They have grown exponentially over the last forty years and have kick-started the economies of many developing nations. I can't see how we're going to stop this and return to the Stone Age. People love to travel. It broadens the mind and increases international cooperation and understanding. Ironically, eco-tourism is often the best way to protect sensitive environments such as rainforests.

Slowly the aviation industry is waking up to a harsh reality: the status quo is no longer sustainable. The airframe-makers – and indeed the engine-makers – must keep searching for quieter and cleaner engines. The other issue for all airlines remains the sustained high price of oil – indeed all of our Virgin airlines have felt the pinch as fuel costs have risen. Virgin's fuel bill went up by several hundred million dollars between 2004 and 2006. Cutting back our consumption of fossil fuels isn't a lasting solution, however. At best, it merely postpones the coming crisis.

What is the solution?

The key to saving our environment is to create a new breed of cleaner energy sources and fuels that do not damage the atmosphere, do not lead to deforestation, and do not eat up vital food stocks that the world's growing population will need to eat. The recent backlash against biofuels has lumped all kinds of energy and fuel initiatives together, without considering the individual arguments. But not all drugs are bad – compare aspirin with heroin – and the same argument applies to renewables generally. While I know they probably won't provide the overall answer, I believe we have so far not even begun to find out what biofuels might be able to deliver.

Burn any organic matter – and that includes coal and oil – and you release carbon dioxide – CO
₂
– into the atmosphere. Coal and oil are what happens to vegetation when it's compressed in the earth over millions of years. If we used living vegetation – sugar cane, willow trees, peanuts, corn, coconuts – instead of these 'fossil fuels', then we wouldn't be loading the carbon of previous ages on top of the carbon already in our environment. There's a phrase I like which sums up this view: 'Don't dig up the dead.'

Synthetic fuels have been around since the 1910s, when fuel alcohols first went into mass commercial production. Before Prohibition in the US, cars were run on the stuff – but since ethanol is a type of alcohol, the practice was eventually outlawed for fear that people would drink it.

Vinod Khosla, the man who founded Sun Microsystems and one of the most influential investors in California – indeed, the United States – believes that ethanol is likely to be the future fuel of cars, and a far more practical option than hard-to-handle hydrogen. However, ethanol – which would otherwise be a suitable alternative for traditional aviation fuel – freezes in temperatures above 15,000 feet.

For nearly a century, the unsuitability of ethanol seems to have put the dampers on research into alternative aviation fuels. When I first started to look into this area, I was astonished at the lack of progress or interest in this field. Had no one seriously thought of putting biofuel into a plane?

Apparently not: when I first mentioned in 2006 that we were looking for a jet engine fuel that was clean, we were laughed at and mocked by environmentalists and engine manufacturers alike. People said it was absolutely impossible. It's worth remembering that as recently as the 1950s, some airline people – including the American aviator Charles Lindbergh, then working for PanAm – didn't think the jet engine had a future in commercial aviation. Step changes, driven by business imperatives, do happen – but they need a catalyst.

Our first port of call was Rolls-Royce, the world's leading jet-engine makers, based in Derby. We tried to get them interested in biofuel development, but they were pursuing a different path, improving the efficiency of their engines. More than that, they told us that the fuel we wanted to develop was 'impossible'. So we went to GE Aviation, one of their rivals, and makers of jet engines for Boeing and Airbus airplanes. They did want to help us. And with them on board, we got Boeing Commercial Airplanes interested too. At last, the key players were engaging in the hunt for clean fuels.

Many of my notes from around this time are highly technical, as I tried to wrap my head around molecular structures, enzyme activity, the chemical formation of algae . . . The really dizzying part, though, was trying to get to grips with the sheer scale of the fuel economy. Our transport needs for the next two decades are still likely to be met by liquid fuels to drive the internal combustion engines in our cars, boats and generators. For any alternative liquid fuels to be a viable option, we need massive amounts of feedstock – the raw material to make the energy – and it has to be cheaper than – or at least comparable to – traditional fuels.

Our studies found that cellulosic biomass meets both these requirements, as does waste from agriculture, municipal sewage and animals. This is where new businesses must emerge, and investors such as the Virgin Green Fund and Vinod Khosla are spending billions of dollars on this bet. It is not simply the feedstock but its collection, transportation and processing which needs to be tackled so that the end product is competitive with gasoline. This brings lots of opportunity – and many blind alleys. I'm going to take you down a few unlikely avenues now to give you an idea of the scale and complexity of the biofuel sector, its sheer pace and the effort that's being invested.

Inefficient corn ethanol started the ball rolling in the United States, aided by massive government subsidy, while the Brazilian experience has long since proven the viability of sugar cane. Brazil has over thirty-five years' experience of using it as a fuel, and in 2008, its cars consumed more ethanol than fossil fuels. The primary feedstocks for the production of renewable fuel are sugar from sugarcane, and starch from corn, the source of most US-based ethanol. Corn ethanol has become a major concern because of its impact on food production. In Asia, tapioca, potatoes and other starches can also be used. But I cannot now see the benefit in growing food and using it for energy when people around the world are starving and basic food prices are rising elsewhere.

So I became interested in the discussion regarding the tonnage per acre of plants with no food value. Prairie grass, willows, corn stalks and wheat straw all can be used to manufacture cellulosic ethanol. I spoke to John Ranieri, vice president of biofuels at the chemical giant Dupont. I was interested in how the big players were tackling this. John's a very sound guy, and he gave me some excellent advice and information. He told me about Dupont's strategy to bring biobutanol and cellulosic ethanol technologies to market. This led to discussion with Ian Ferguson at Tate & Lyle, the sugar giant. We began to think that the Dominican Republic might be a suitable place for a sugar refinery and then considered a prairie-grass plant in Louisiana. Our research also led the Virgin Green Fund to make an investment in Gevo, a world-class biofuels company that converts biomass into butanol. It was important to invest in the development of many clean energy solutions, not just one.

We talked to Iogen, which was already turning some of the Canadian prairie's vast cellulosic waste into ethanol and had a 40-million-gallon plant making E10 biofuel for cars. We spoke to Cargill, one of the world's largest food and agricultural companies. We went to Brazil to look for joint venture partners.

We even played with coconuts.

Now, coconuts will never solve a global energy crisis. But they have a few things going for them. For a start, they thrive on sandy beach areas in the tropics, where other plants don't grow well. The market for copra – coconut flesh – has been falling worldwide, and so has the price, leading to declining incomes in regions heavily dependent on copra production, so it would be great to find another use for this important crop. The low return for the harsh work involved with the cutting and drying of copra has pushed many rural farmers into other cash crops, leaving unharvested coconuts lying on the beaches. It may be that the harvesting of coconuts on a large scale can bring much needed income to these areas.

Coconut oil in engines is not new. It was used in the Philippines during the Second World War when diesel was in short supply. Today, on the islands of Vanuatu in the Pacific Ocean, an Australian entrepreneur, Tony Deamer, has succeeded in using coconut oil in fuel for motor vehicles. Potentially, this enterprise could help to revitalise the market for copra and have wide-ranging environmental benefits as well. Tony, together with a local coconut-oil producer, has been negotiating with the government for a reduction of duty on coconut oil-based mixtures. In Vanuatu, the local electricity company UNELCO has been using diesel blended with coconut oil to run a large (and now pleasantly perfumed) four-megawatt generator.

I did some basic sums and quickly confirmed what we all suspected, that the sheer labour of breaking into the things and scooping out the flesh made coconuts an unlikely player on the world biofuel scene. Coconut oil was, however, an excellent local solution.

In general, I think that the debate about biofuels gets too easily hung-up on this or that single 'solution', its merits and demerits. We don't have to find a single biofuel that will do everything for everyone. What we can and should develop is a suite of solutions that work well in different places, for different purposes, and at different scales. It should, for example, be possible to cut dramatically the human carbon footprint by introducing bio-ethanol for cars and buses. Flying will require a major breakthrough, however.

That's why it was important to us that we prove, in principle, that we could fly a commercial airliner on biofuels. To demonstrate this principle, it didn't strictly matter what biofuel we used, or whether or not it could be scaled up. It just had to keep a Boeing in the sky. On Sunday 24 February 2008, we flew
Cosmic Girl
, a Virgin Atlantic Boeing 747–700, on a test flight from London to Amsterdam. A 747 has four engines, and in one of the engines, for the first time, we used, not fossil fuel, but a mixture of coconut oil and oil from a related fruit, the Brazilian babassu nut. No modifications were made to either the aircraft or its engines to enable the flight to take place.

The demonstration flight, piloted by Captain Geoff Andreasen, Virgin Atlantic's chief Boeing pilot, took off from Heathrow at 11.30 a.m. and arrived in Amsterdam at 13.30 local time. It was a quiet, intense affair: during the flight, technical advisers on board monitored readings and recording data for analysis. The flight was a success: we had shown that it was possible to fly a plane at 35,000 feet on cleaner fuels. Now the challenge was to develop a biofuel that would scale up, and that wouldn't eat into the food supply.

That work continues. Imperium Renewables, who manufactured our experimental fuel, have since opened one of the world's largest biodiesel refineries at Grays Harbor, Washington State, in the United States. It's capable of producing up to 100 million gallons of biofuel per year. The company has formed a subsidiary in Hawaii to develop another biodiesel production facility, which will likewise provide 100 million gallons of biodiesel fuel a year, using locally produced feedstock, including coconuts.

Meanwhile John Plaza, president and CEO of Imperium, is overseeing the development of a 'second generation' bio-jet fuel, harvesting algae which can be grown in fresh or sea water. I think that, for us, this approach promises a great deal.