Drax and Pathway Energy agree heads of terms on sustainable biomass deal to supply new US SAF Plant

UK-based renewable energy leader Drax Group (Drax), and Pathway Energy LLC (Pathway), a carbon negative energy company, have reached heads of terms on a multi-year deal that could see Drax supply over 1 million tonnes of sustainable biomass pellets each year to Pathway’s proposed sustainable aviation fuel (SAF) plant on the US Gulf Coast.

Under a separate agreement, Drax could also become a strategic partner in the project, with a potential investment in the form of a convertible loan note of up to $10 million. No investment decision has been taken by Drax at this stage.

The heads of terms reflect growing global demand for SAF, which usually can reduce carbon emissions by up to 80% when compared to traditional jet fuels. Modelling by the International Air Transport Association1, expects the global use of SAF to deliver 65% of the emissions reductions required for the aviation sector to reach net zero by 2050.

Once fully operational, the plant will be capable of producing 30 million gallons of carbon-negative SAF annually, the equivalent of enough fuel to power 5,000 carbon-neutral long-haul (10+ hour) flights per year.

Pathway will shortly begin Front End Engineering Design and anticipates that it will begin construction on the $2 billion plant in early 2026. Following construction, commercial SAF production is expected to commence in 2029.      

Both companies also have a strategic interest in bioenergy with carbon capture and storage (BECCS), a carbon removal and renewable power technology. Pathway intends to develop a BECCS system on the Port Arthur site which could remove 1.9 million tonnes of carbon dioxide from the atmosphere each year while powering the SAF facility and ensuring the jet fuel is carbon negative.

In the future, Drax could also potentially supply biomass to two additional Pathway projects, delivering a further 2 million tonnes of sustainable pellets per year to the business’ sites through the 2030s.

Will Gardiner, Drax Group CEO, said:

“This landmark deal has the potential to be the biggest third-party supply arrangement Drax’s pellet business has made. Demand for sustainable biomass is accelerating, with international businesses seeking long-term fuel supplies for a range of projects globally – including sustainable aviation fuel and bioenergy with carbon capture and storage.

“Reaching heads of terms on this deal with Pathway is an important step in the energy transition and for decarbonising the aviation sector through sustainable aviation fuel production, which Drax is proud to be a part of. We also share Pathway’s aim of scaling bioenergy with carbon capture and storage to deliver the carbon removals that the world needs to fight climate change.”

Steve Roberts, CEO and Founder of Pathway Energy, said:

“This innovative agreement catalyzes our aligned commitment with Drax to decarbonize the aviation industry and establishes the strategic alignment with Drax to deploy additional projects leveraging proven biomass conversion technologies, sustainable biomass feedstock, and carbon capture and sequestration. With a global scale supply of CORSIA-compliant biomass material, we are well-poised to address one of the hardest to abate industrial sectors through the production of carbon-negative sustainable aviation fuels.”