sustainable aviation fuel

Massive Task to Decarbonize Aviation Requires More Urgency

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Leading sustainable aviation fuel (SAF) producers Neste and Shell gave their latest take on the state of the nascent SAF industry at the S&P Global Commodity Insights Appec Conference in Singapore this week, with both firms emphasizing the size and urgency of the scale-up ahead.

Aviation industry plans to reach net-zero carbon emissions by 2050 will require up to 300 million tons per year of fossil jet to be replaced with SAF, according to Shell, at a total investment cost of $1.4 trillion-$1.5 trillion. “There is no substitute for SAF in the next three decades,” says Shell Aviation President Jan Toschka, who reckons SAF will account for two-thirds of aviation’s decarbonization effort by midcentury. The task “seems very, very big [but] nothing will be gained if we wait,” he adds.

Huge Disconnect

Neste Vice President for Renewable Aviation Sami Jauhiainen agrees “there is still some room to increase the sense of urgency.” SAF may dominate any conversation about the future of aviation. But there is still a huge disconnect between long-term decarbonization targets and what is happening today. Demand currently outstrips SAF supply but a rush of new projects could soon tip the market into oversupply. Shell’s Toschka warns that plans for new SAF plants, that cost $1 billion-$2 billion each, risk being delayed by a lack of certainty over what feedstocks will be allowed and where future buying will come from. Jauhiainen admits Neste took final investment decisions on Porvoo back in 2008 without any clarity on EU regulations, just confidence that they were “just a matter of time.”

Neste currently makes just 100,000 tons/yr of SAF, but production is set to hit 1.5 million tons/yr from late 2023 when new plants in Rotterdam and Singapore start production. Shell only sells third-party SAF at the moment but has plans for 2 million tons/yr of its own production by 2025 at sites that include Rotterdam, Singapore and Germany.

Neste remains confident that SAF demand would soon catch up with higher production but Jauhiainen is still urging more government action. He suggests voluntary demand from airlines and from corporations interested in reducing their flight emissions has been “critical” in showing that SAF was a viable solution. Some 5,000 corporates have now announced ambitions to hit net-zero 2050, points out Shell’s Toschka, which they can’t do without cutting emissions from business air travel. “But to ramp up demand for SAF, governments need to move aggressively on policies,” says Jauhiainen. He described the EU’s proposal for a 2% SAF mandate from 2025 — equivalent to 1 million tons/yr of SAF demand — as too cautious and urged much bolder action.

Both SAF producers ultimately want global rules on SAF to create a level playing field, but admit early moves by some countries have been critical in getting the SAF industry moving: “Even [if they are] at the expense of more costs for local hubs or carriers,” admits Jauhiainen. Most of the front-runners on SAF blending mandates have been in Europe but recent weeks have seen plans for mandates unveiled in New Zealand, Japan and Singapore. “The ambition needs to be set globally,” says Toschka. “The risk is we have a patchwork of different regulations on the planet that encourages airlines to wait and see,” he warns. Both firms are hoping more global alignment will come out of UN International Civil Aviation Organization meetings currently taking place in Montreal.

Neste favors EU-style blending mandates that guarantee SAF demand over US action to boost SAF supply through blender tax credits. The “green premium” on SAF needs to be paid one way or other, says Jauhiainen. “With a mandate, everyone has to pay for it. The SAF price is passed onto the fuel price and ultimately to passengers. In the US, it’s the taxpayers paying for these incentives. It’s useful for accelerating the scale-up of SAF but not a long-term solution,” he suggests, arguing that the SAF industry needs stability. Ultimately, higher carbon prices attached to fossil jet could also help bridge the price gap between jet and SAF, as will economies of scale. Jauhiainen thinks aviation needs its own carbon price so that emission reduction efforts aren't shifted to easier-to-abate industries.

Both SAF producers support “book and claim” (B&C) accounting that decouples the environmental attributes of SAF from the physical fuel. Jauhiainen says B&C is already widely used in voluntary airline SAF contracts but is still excluded from regulatory frameworks. Toschka suggests B&C will be vital in getting more corporates to help pay for SAF, which will only happen if they can claim the benefits.

Jet Fuel, Low-Carbon Policy, Biofuels (incl. SAF)
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