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Opinion



WHAT’S NEXT FOR SUSTAINABLE FUELS?

Copyright © 2024 Energy Intelligence Group All rights reserved. Unauthorized
access or electronic forwarding, even for internal use, is prohibited.
Published:
Wed, Nov 20, 2024
Author
Conor Madigan, Chicago
Editor
Ronan Kavanagh
chayanuphol/Shutterstock
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Reaching net zero in commercial transportation is a hard technical challenge but
one we must overcome if we are to meet the targets outlined in The Paris
Agreement. Today, as much as 4.7% of global CO2 emissions come from airplanes
and 3% from marine shipping. Unless something changes in the coming decades as
other sectors (like power generation and road transport) increasingly electrify,
this proportion will increase, and these hard-to-abate sectors will be left with
an even higher share of global emissions.

There is broad consensus that sustainable liquid fuels will form the foundation
of reaching net zero in these industries. Currently, there are no alternative
technologies on the horizon that will economically provide the necessary range
and passenger/cargo carrying capacity — this is because neither gas nor solid
phase energy storage (including batteries and fuel cells) can match the energy
density of liquid fuels.

Ideally these sustainable liquid fuels should be “drop-in” fuels, compatible
with existing fleets and fueling infrastructure — as those fleets and fueling
infrastructure are designed for many decades of operation and scrapping them
prematurely presents too high a cost for these industries. The relevant drop-in
fuels are sustainable aviation fuel (SAF), sustainable diesel and sustainable
fuel oil. Using drop-in fuels also dramatically reduces the technical risks
associated with uptake, accelerating adoption.

Fortunately, the industry is maturing and starting to move from research and
development to scale and commercialization via a range of different pathways. As
Tim McDonnell writing in Semafor put it, sustainable fuels are a bright spot in
an increasingly challenging cleantech investment market; “Put the recent flurry
of deals together, and it’s clear that SAF is making strides toward large-scale
commercialization, offering a possible road map for many other corners of
cutting-edge climate tech.”

However, the road toward commercialization is long and needs to ascend a steep
curve; in 2023, SAF only accounted for under 0.1% of aviation fuel consumption.

So, what needs to happen in this next phase to help sustainable fuels scale
successfully?

Sustainable Markets

Here’s the good news: The amount of sustainable fuel produced globally is
growing fast. In aviation, for example, global production of SAF is set to grow
98% to 1.04 million metric tons this year and 81% from 2024 to 2025. This growth
is due in part to government mandates and incentives for airlines to use
sustainable fuels. These are currently essential to the adoption of sustainable
fuels because, at present, such fuels are more costly than fossil fuels. Many
airlines like JetBlue are setting their own, aggressive targets for the future
of cleaner aviation. However, unsupported voluntary market mechanisms are
unlikely to drive the level of investment and innovation in fuels and
decarbonization technology that shipping and aviation need to get to net zero;
there just isn’t enough voluntary market demand to pay the kinds of green
premiums required by sustainable fuel production today.

Several sustainable fuel mandates are already in place around the world. In the
EU, the ReFuelEU Aviation legislation aims for a 2% share of SAF in EU airports
by 2025 and 70% by 2050. These are part of a larger package that also put a
price on carbon emissions. In the UK, a mandate has started at 2% of jet fuel in
2025, increasing to 22% in 2040 — with plans to further increase if there is
more certainty in supply. Japan is aiming for 10% SAF use by 2030 and Singapore
3%-5% by the same year.

This may change, but currently the US aviation industry has set a goal of net
zero by 2050, with policy instruments to incentivize this transition, such as a
$1.25 tax credit per gallon of SAF blended into fossil fuel that meets the
greenhouse gas reduction criteria and funding of upward of $300 million through
the fueling aviation’s sustainable transition grants.

Maritime fuel mandates followed suit. The EU’s Emissions Trading System for
maritime transport went into effect at the start of 2024, and mandates for this
sector will begin in 2025. The International Maritime Organization is also
strengthening its global goals, including a proposed net zero by 2050 mandate.

Mandates with strong enforcement mechanisms such carbon taxes, fines and credit
buy-outs are creating more certainty about sustainable fuels demand, which is
attracting investment to build supply during this early adoption phase.

Going forward, however, the goal has to be a healthy, competitive market for
carbon reduction and current policy tools should ultimately aim to enable the
sustainable industry to scale to meet the needs of a future net-zero aviation
and ocean shipping sector and bring down fuel production costs as low as
possible. It is important to consider the alternative of continuing to use
fossil fuels and purchasing direct air capture and sequestration offsets (or
other high-quality offsets generated by industries that are able to remove more
carbon than they produce). Today there are far fewer such offsets available
relative to emissions (and they remain very expensive), and so policy is rightly
focused on driving these industries to bring down their own emissions so that
offsets can be preserved for only those emissions that have no other abatement
options. At the same time, sustainable fuels cannot simply assume they are the
only solution if costs remain too high.

Scaling SAF

One critical part of breaking through current economic barriers is to expand the
range of feedstocks that we can turn into fuel.

Today, SAF is overwhelmingly produced using the Hefa process, which converts
waste fats, oils and greases from sources like used cooking oil and animal fats.
Hefa-based SAF has been a huge step forward for the industry, but we are already
running out of feedstock for this process, and SAF adoption is still in the low
single digit percent range. Developing new (and more scalable) carbon feedstock
streams, and the process technologies to convert them cost efficiently into
fuel, is a core requirement of the next phase of SAF growth.

Feedstock comes in many forms including forestry waste, biogas, agricultural
waste, industrial waste gasses, captured CO2, green hydrogen and more. However,
these feedstocks are typically dispersed, both geographically, and throughout
different industries, increasing transport and logistics costs.

Locating relatively small plants (that are still large enough to be cost
effective, for example, at a scale of 250 to 5,000 barrels per day) near to
feedstock, ideally with a “catchment area” that overlaps with multiple feedstock
generators, unlocks new efficiencies that can ensure we can keep costs low.
These plants must be near the feedstock that works best for them, but still
large enough to scale up production — a key technical challenge for the sector
that will ultimately reward solutions that are inherently flexible.

Maintaining Sustainability

At the same time, the industry needs to ensure that the new pathways we develop
are genuinely sustainable and mitigate unintended consequences. Some of the main
critiques around SAF in particular stem from limited availability and knock-on
effects from land use change when relying on crop-to-fuel pathways, such as
deforestation or displacement of food production.

There are many frameworks for assessing sustainability, but for Aether Fuels, we
abide strictly by three pillars to determine sustainability:


 * Feedstock must be genuine waste.
   
 * Feedstock must not compete with food or feed production.
   
 * Feedstock must not cause land degradation (deforestation, loss in
   biodiversity, negative social impact).

Ultimately, tackling emissions from these critical transport sectors is one of
the make-or-break challenges of the global push toward net zero and bringing
climate breakdown under control. The sustainable fuels sector is ready to solve
this — but it’s essential that we do so in the right way, that doesn’t take up
limited carbon removal capacity (by relying on offsets), that is economical for
the end customer and doesn’t create new environmental problems.

Conor Madigan is the CEO of Aether Fuels, a next-generation sustainable fuels
and climate technology company. The views expressed in this article are those of
the author.


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Topics:
Biofuels (incl. SAF), Mobility, Low-Carbon Policy
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