Gevo, Inc. (NASDAQ: GEVO)
Gevo is a company that I believe has incredible upside potential. One of the big reasons for this is the company’s green jet fuel. It is the first approved fuel on the market that is not derived from fossil fuels. Instead, it’s a corn product. The company recently saw its fuel being used in two Alaska Airlines commercial flights. Of course, with this news came quite a few questions about the fuel. Pretty soon, the company will be holding a conference call surrounding earnings. One of my friends on StockTwits reached out in hopes that I would ask Pat a big question that has to do with demand for the jet fuel GEVO created. Here’s the question:
“Pratt & Whitney and GE have both perfected and produced jet turbines that are not only fuel efficient, they have cut emissions dramatically. They are being offered on most Boeing & Airbus new models as turbine options. Please ask Dr. Gruber if he foresees this impacting the use of isobutanol negatively. These new engines may impact the future of GEVO.” A big thanks to VaporEyes69 on StockTwits for this question! And yes, I will do my best to ask Pat on the upcoming call!
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Will This Have An Impact On GEVO In The Long Run?
The truth is that no one can see the future, and I don’t pretend to be able to. Therefore, the effect that efficient turbines have on the company in the long run is unknown. However, in my opinion, this isn’t an issue at all.
Yes, Pratt & Whitney and GE have perfected efficient, low emission turbines. Yes, these turbines are already on the market. However, they are also far more expensive than the standard turbines offered. This comparison, alone, makes green jet fuel from GEVO the better option. At the end of the day, the fuel that is made from left over corn doesn’t come with a highly increased price. In fact, dependent on market conditions, it can be cheaper than standard jet fuel in many cases. So, on the cost comparison side of things, parsed as an either or question, jet fuel would be the better option.
If the goal of either using the new age efficient turbines or Gevo jet fuel is simply to reduce emissions and offer a green experience, the jet fuel takes the cake there too. While the new turbines are designed to reduce emissions, it’s hard to create a lower emission portfolio than what can be created when you move into the renewable space.
The One Thing These Turbines Have Over Jet Fuel
While, overall, I don’t believe that GEVO has anything to worry about with the more efficient turbines, there is one area where these turbines outweigh the benefits of clean jet fuel. That is in efficiency. Ultimately, flights could happen using less fuel overall. Of course, this plays a bit into the cost. However, the cost decrease from added efficiency would take quite some time to add up to the cost increase associated with the upgrade.
Even If All Airlines Started Buying These High End Turbines, GEVO Would Still Be In Good Shape
Let’s say that every airline in the world decided to ditch the old turbines and upgrade to the new, more efficient turbines tomorrow. Of course, the emissions released by these turbines would be reduced, and planes would be able to fly longer on less fuel. However, would that really steer them away from clean fuel, especially considering that this clean fuel comes at a comparable (if not lower) price? I don’t think so. The truth is that the new turbines can get the same efficiency using the clean fuel product offered by GEVO. Even with these turbines, airlines are better suited to using Gevo’s jet fuel from an environmental standpoint, which, of course, leads to a better brand in the eyes of consumers. So, at the end of the day, I don’t believe that efficient turbines are going to lead to headwinds for the company when it comes to selling their corn-based jet fuel!
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