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The sustainable aviation fuel entrepreneurs poised for takeoff

(Reuters) - Sustainable aviation fuel (SAF) had a bumper year in 2022, with production soaring to at least 300 million liters, up 200% on the previous year, according to the International Air Transport Association (IATA). But that is a drop in the bucket of the 450 billion liters a year that will be required by 2050, with the airline industry relying on SAF to account for around 65% of the mitigation needed to achieve its net-zero targets.

One leading logistics company, DHL, is targeting using 30% of sustainable aviation fuel for all air transport by 2030. In March 2022, it signed deals with BP and Finnish oil refining company Neste to provide more than 800 million liters of SAF within the next five years.

“It’s a great story when an industrial value chain is increasing in size by 200% in a given year, but when you look at the starting base, SAF currently is only 0.1-0.2% of aviation fuel supply globally. The journey is insanely challenging, and though progress has been made, there’s just not enough of it,” says PwC director Scott Koronka.

Biofuel refinery capacity is forecast to grow by more than 400% by 2025 compared with 2022, according to IATA. The increased capacity is set to come from a number of companies. Neste is ramping up its SAF production capacity from 100,000 tons to 1.5 million tons by the end of the year, according to Jonathan Wood, vice president of Neste’s renewable aviation business in Europe.

Neste is constructing SAF production capacity in Singapore and the Netherlands, to add to its existing production facility in Finland, he says. As well as specialist renewable fuel production companies, oil majors in Europe and North America are also announcing plans for SAF production facilities, Wood adds. “The global project pipeline means that by 2025 there could be approximately five million tons of production capacity.”

Ramping up refinery capacity to meet demand is not necessarily a challenge since it can be produced at traditional oil refineries, where feedstocks can be changed and existing equipment can be tweaked, according to PwC’s Koronka. These adjusted facilities can be designed to be flexible in terms of the feedstock used, which will enable industry to maximize capacity of SAF production, he adds.

Italian oil company Eni converted its traditional refinery in Venice into a biorefinery in 2014, and made the same move with its plant in Gela, Sicily, in 2019. It is planning to start production of its Eni Biojet SAF at the Sicily and Venice plants, which will produce up to 150,000 tons a year, enough to meet the needs of the Italian market for 2025 and 2030, according to a statement from the company. Eni is also considering the construction of two new biorefineries, one within its industrial site in Livorno, Italy, and one in Pengerang, Malaysia.

Availability of feedstock is more of a challenge, Koronka says. Today, SAF is produced mainly from bio-based feedstocks, most commonly waste oils including used cooking oil and animal fats.

But many countries lack either a domestic supply of these materials, or the infrastructure to collect them. They are available in small volumes and have to be collected from a large number of locations. This is a completely different business model from crude oil, which can be collected from a single location and taken in large quantities to refineries, Koronka notes.

Neste, for instance, has a team focused on research and development on lignocellulosic raw materials, municipal solid waste, algae and power-to-liquid fuels, known as “e-fuels”. These are produced by combining hydrogen, which can be split off from water using renewable electricity, with carbon, which is either extracted from the atmosphere or from industrial waste gas.

Startups are also looking at using novel vegetable oils from different oilseed crops such as camelina, a crop with high oil content.

In January, Mitsubishi signed a memorandum of understanding with U.S.-based agricultural bioscience company Yield10 Bioscience to carry out a feasibility study on the potential of using camelina as a feedstock for SAF.

Yield10 is researching how to develop camelina varieties that have superior traits for particular purposes, including as biofuel feedstocks.

“The goal is to scale up camelina production in North America initially, then probably South America as well, and use it as a source of oil for the sustainable fuel space but also animal feeds for protein production,” according to Yield10’s chief executive, Dr Oliver Peoples.

The limit on the amount of land available to grow traditional energy crops such as canola and soybean means that alternatives with different growing seasons need to be found, he says. “The most attractive ones would be those with short growth cycles and high seed oil content that can be processed in existing oilseed crushing facilities,” he says. These can also be used as cover crops, with the high-quality protein meal remaining after the extraction of the oil being used in animal feed, he says.

Leading U.S. carbon capture company LanzaTech, is working on scaling a process it has developed to make SAF from any waste stream. Its gas fermentation technology, which was shortlisted for an Earthshot Prize last year, uses bacteria to turn waste into ethanol, which can then be converted into SAF.

The flexibility to produce SAF from any waste material means that it can be produced anywhere, using whatever feedstock is available, explains Freya Burton, LanzaTech’s chief sustainability officer. For example, in Japan, municipal waste would be most appropriate due to the lack of recycling infrastructure, while in China, emissions from industry are abundant. In fact, LanzaTech’s first commercial flight in October 2018, with partner Virgin Atlantic, used a blend of jet fuel produced from the emissions of a Chinese steel mill.

In December, LanzaTech secured 25 million pounds from the UK government to commercialize SAF production using waste emissions from the Tata steel factory in Port Talbot in Wales. The factory is scheduled to begin operating in 2026, and produce 79,000 tons of SAF when at full capacity.

But such sums are dwarfed by the incentives for SAF now on offer in the United States, where the Biden administration has set a “SAF grand challenge”, aiming to scale up U.S. SAF production from 4.5 million gallons per year today to 3 billion gallons in 2030 and 35 billion in 2050.

Under the Inflation Reduction Act a new sustainable aviation fuel credit starts at $1.25 per gallon, for technologies that reduce GHG emissions by 50%, and increases by for each additional 1% reduction, up to a maximum of $1.75 per gallon.

LanzaTech also benefits from the expansion of the existing 45Q tax credit, for carbon capture technologies, which rises from $50 per ton to $85 per ton of CO2 sequestered.

It is the lead investor in LanzaJet, a collaboration with Suncor, Mitsui, British Airways, Shell, Microsoft and Breakthrough Energy, to produce SAF, and its flagship commercial plant in Georgia, which is due to come online late this year, will produce 10 million gallons of SAF per year.

One of the blast furnaces of the Tata Steel plant in Port Talbot, South Wales. In 2022, LanzaTech secured £25 million from the UK government to commercialize SAF production using waste emissions from the plant. REUTERS/Rebecca Naden

Factoring in the various incentives and the cost of carbon, LanzaJet says its SAF price will be cost-competitive with conventional jet fuel, and it aims to fill one-third of Biden’s 3 billion gallon SAF target by 2030.

The technology can also use carbon emissions from industrial plants, in a process called direct air capture (DAC), although commercialization of this is nascent

“Our technology will evolve with changing innovations,” Burton says. “We don't see limitations to make the volumes we need in terms of feedstock supply, as long as we adopt this approach of using all different types.”

Burton is not alone in her optimism that SAF production targets can be met. “It’s a huge challenge, but most of the asset operators I speak to are focused on doing something on it, so that gives me a relative level of optimism,” Koronka of PwC says.

Neste’s Wood believes that SAF targets set by policymakers are too conservative. Stronger policy and support for new renewable feedstocks will boost investment to the levels needed, so the sooner it is there, the sooner the finance will flow, he says. “We’re optimistic that we can get to 10% by 2030. At least in the major markets, the production project pipeline is there,” he says.

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