What happened

Friday lit fire under shares of Gevo (GEVO -3.74%), sending them up 11.3% as of 1:15 p.m. EDT on heavy volumes. Although renewable energy stocks across the sector are surging, Gevo is up on heavy volumes for a company-specific reason.

So what

On Thursday, Gevo announced it had applied for environmental permits in South Dakota. Why is this such a big deal?

The permits are related to Gevo's key project, Net-Zero 1. It's the company's first such project under its Net-Zero program, which aims to produce gasoline and jet fuel from renewable energy sources like wind, biogas, and renewable natural gas. Gevo says engines running on the fuel will emit "net zero" greenhouse gas emissions, a proposition that is attracting attention from transportation companies in particular.

For example, Gevo has an agreement with Delta Airlines (DAL -1.62%) to supply 10 million gallons of sustainable aviation fuel (SAF) per year, to be produced at Net-Zero 1.

Workers refueling an airplane.

Image source: Getty Images.

Net-Zero 1 isn't expected to start before 2024, but Gevo has reportedly already secured contracts for 54 million gallons per year (MMGPY) versus its planned annual capacity of 46 MMGPY. Better still, the company recently said it has a whopping 900 MMGPY worth of contracts in the pipeline, which could be worth more than $20 billion.

Those numbers sound so promising that earlier this week, Stifel rated Gevo stock a buy with a price target of $10 a share. The stock has been rallying since, with today's development adding fuel to the fire.

GEVO Chart

GEVO data by YCharts.

Now what

Given that the Net-Zero 1 project's promising potential has driven almost all of the investor interest in Gevo's stock so far, today's jump in the stock price isn't surprising. That said, I'd be wary of betting on something that's years away from fruition, no matter how promising it sounds, especially in a high-potential industry like renewables that's chock-full of stocks already crushing it and primed to make big bucks from the clean energy transition.