Fuelling the future of global aviation

In Tuas, Singapore’s industrial-heavy district, Finnish company Neste Oyj is building what will one day be the world’s largest facility for sustainable aviation fuel (SAF).

Once up and running in 2023, the plant should produce one million metric tonnes a year – a decent amount, but still less than 0.3 per cent of annual global jet fuel demand. What little there is will be expensive: SAF costs as much as five times as traditional jet fuel, itself coming off a 14-year peak.

This is a problem for the airline industry, which is counting on sustainable aviation fuel, as a critical component in its efforts to decarbonise. As of now, airlines contribute more than 2 per cent of the world’s carbon emissions and lag almost all other sectors in pledges for a cleaner future.

Carbon neutral by 2050
The International Air Transport Association, the lobby group of 290 airlines, has said the industry will become carbon neutral by 2050. Getting 65 per cent of the way there means switching to SAF in a meaningful way, it says. It’s hard to see how it gets there. SAF currently accounts for less than 0.1 per cent of global jet fuel use. It’s expected to rise to about 4 per cent in 2030, nearing only 6 per cent by 2050, according to BloombergNEF.

Even as production ramps up, a goal to replace 100 per cent of jet fuel with SAF by 2050 is “overly ambitious,” according to Bloomberg Intelligence. What Bloomberg Intelligence says: “Though production could exceed one million metric tonnes a year by 2023, around 445 million tonnes will be needed  if SAF is to displace jet fuel entirely. Projections of supply based on current trends anticipate more than 9 million tonnes are likely by 2030, with up to 24 million tons possible under an aggressive policy-support scenario, which would require significant new stimulus.” There doesn’t seem to be any obvious Plan B.

Leading the way
SAF, though, is ahead of the known alternatives. Electric planes or flying taxis are so far limited to extremely short ranges. Breakthrough innovations like hydrogen-powered aircraft remain confined to research labs. Getting frequent fliers to purchase carbon offsets has been widely deemed ineffective — likened by some to “pushing the food around on your plate to create the impression that you have eaten it.”

There may be other technologies that could help the airlines decarbonise, but they may not have been invented yet, said Cuneyt Kazokoglu, director of energy economics and energy transition at London-based energy consultancy FGE. At the moment, SAF is produced at 17 sites globally, with most concentrated in Europe and North America. The greener fuel is allowed to be used for commercial flights provided it’s 50 per cent blended with jet fuel. Many carriers have made inaugural flights using SAF, almost always accompanied by media fanfare.

United Airlines Holdings flew passengers from Chicago to Washington DC in December, a demonstration flight that used 500 gallons of SAF in one engine and the same amount of conventional jet fuel in the other “to further prove there are no operational differences between the two,” United said. The SAF took sugar from corn, beets and sugarcane to make the synthetic aromatics required. Singapore Airlines has pledged that by the third quarter, all SIA and Scoot flights will use blended SAF as part of a pilot project. The SAF will be supplied by Neste, produced from used cooking oil and waste animal fats, then blended with refined jet fuel at Exxon Mobil Corp.’s facilities in the city-state. It will be delivered to Changi Airport through an existing fuel hydrant system.

Including Neste’s Singapore site, at least 80 additional SAF sites are planned around the world. Those could be able to meet the needs of the aviation industry if they were to run at full capacity and produce SAF exclusively, according to research by Aircraft Leasing Ireland, a trade association of aircraft lessors, and Oliver Wyman. But many aren’t expected to produce SAF exclusively. The EUR1.5bn ($1.5bn) Neste plant in Singapore can also make biodiesel, for example. “In practice, this means that publicly announced SAF sites may fall short of meeting demand from the aviation sector,” Aircraft Leasing Ireland said in its January paper.

While carriers including British Airways owner IAG SA, Delta Air Lines Inc. and United have made around $17bn of forward-purchasing agreements for SAF, going green entirely will come at a massive cost. “It’s difficult to see a time when SAF and traditional fossil jet fuel prices will be at parity,” said Sami Jauhiainen, the Singapore-based executive at Neste in charge of decarbonising aviation. Even as efficiencies of scale have a positive impact, “there will be a premium we have to deal with in the long run,” he said. Already the expense is expected to stretch to $2tn. Ultimately, airlines may need to raise ticket prices to cover the cost of using SAF, which could make flying too costly for some of today’s ready travellers.

Making it mandatory
A few countries in Europe, including France, Norway and Sweden, have required airlines to use SAF. More must follow to achieve economies of scale so that big oil has an assured market before committing billions of dollars, Jauhiainen said: “We need regulators to create certainty of demand.”

Airlines, on the other hand, have criticised government mandates, arguing it’s not within their power to increase the production of SAF.“Mandating airlines to use a product that isn’t available doesn’t make sense,” IATA director General Willie Walsh said in October last year. “They should be mandating the fuel suppliers to provide it.”

There’s also the cost of collecting feedstock, or whatever other ingredients are being used to make SAF, said FGE’s Kazokoglu. “There are problems at this early stage, in particular on the procurement side,” he said.Apart from Neste, several other big refiners have been investing. Shell plans to build a 550,000 ton-a-year biofuels plant in Singapore, while major Asian refiners such as China Petroleum & Chemical Corporation, known as Sinopec, and South Korea’s Hyundai Oilbank are also expanding their ability to produce SAF.

On a late morning earlier this year, dozens of construction workers were braving the oppressive heat at Neste’s new facility, being built along the coast and across the road from one of its existing refineries. They were assembling giant metal domes to store cooking oil, tallow and fish fat that Neste will haul in from ships as they dock nearby. Once in the refinery, the feedstock will be filtered and distilled to make either biodiesel or SAF.

Neste chose to put the plant in Singapore because it’s already a petrochemicals centre with sound logistics and available talent, Jauhiainen said. The plan is to supply SAF to airlines passing through Changi, an important aviation hub in Asia, and to use other traditional methods of transporting jet fuel to more remote airports. “The challenge of course is big,” Jauhiainen said. “What we need a bit more is a sense of urgency.”