Fri 18 July 2014 – The potential to reduce UK aviation’s annual carbon emissions by up to 1.7 million tonnes by 2030 through the uptake of sustainable aviation fuels can only be realised with government support, says UK industry environmental strategy group Sustainable Aviation (SA). It calls for a clear policy framework to stimulate investment and production of new generation alternative aviation fuels, which could provide up to £480 million ($820m) to the UK economy per year by 2030 and create 4,400 jobs if 12 new plants were to be built. Backed up by a parallel report from sustainable energy consultancy E4tech, SA has published a discussion paper, Fuelling the Future, outlining the potential market penetration both in the UK and globally for sustainable alternative fuels up to 2050. It is seeking views from policymakers and stakeholders ahead of a roadmap it intends publishing later in the year.
To address what it sees as a policy vacuum, SA calls for the setting up of a joint public-private taskforce along the lines of the US Commercial Aviation Alternative Fuels Initiative (CAAFI), whose members include aviation and fuel industry representatives, academia and government agencies and departments such as the FAA.
The E4tech study, commissioned by SA, estimates a potential global supply of sustainable fuels for aviation of up to 1.3 million tonnes in 2020, including 50,000 to 60,000 tonnes from UK production, and representing around 0.45% of total aviation fuel demand. It says the volume of UK production up to 2020 is largely dependent on the success of the Solena/British Airways plant in east London, which is due to start production in 2017, with a possible additional contribution from LanzaTech/Virgin Atlantic plans to process waste gases from steel production into aviation fuel.
Demonstrating the uncertainty in the supply potential in the medium term, E4tech estimates between 3 and 13 million tonnes of sustainable aviation fuels may be produced globally in 2030, equivalent to 0.7-3.3% of global aviation fuel use. At the upper forecast, it says, GHG emission savings of 35 million tonnes would result.
Without government policy support, E4tech estimates sustainable aviation fuel production in the UK could reach 100,000 tonnes per annum by 2030, requiring around five plants, each producing between 20% and 60% of aviation fuel in combination with road transport fuels. With the necessary support, though, the UK could contribute around 640,000 tonnes, a 1.8% share of the global total, from about 12 plants.
Jonathon Counsell, Chair of SA and Head of Environment at British Airways, says the biggest challenge is attracting the necessary finance for these first-of-a-kind plants.
He concedes the CO2 savings by 2030 are not particularly high – up to 5% of the UK aviation total – for a required investment to build the 12 plants he estimates at up to $6 billion. However, he adds: “While the volume in 2030 is relatively small, it is an important foundation to enable us to ramp up supply to reach the 2050 level. Getting to this point will mean addressing significant risk and none of this will happen without regulatory support. We are not requiring a tax-payer subsidy but a level playing field with ground transport fuel incentives.”
The E4tech scenario analysis shows there could be between 90 and 160 sustainable fuel plants in operation globally by 2030 producing aviation fuels in combination with fuels for road transport and other products. It estimates global revenue for these plants at between £8 billion ($13.5bn) and £17 billion ($29bn) in 2030.
E4tech looked at SA’s own 2012 forecast, which estimated that by 2050 sustainable aviation fuels could offer between 15% and 24% in CO2 reductions, with a central scenario of 18%, attributable to UK aviation. This was based on an assumption that such fuels would contribute between 25% and 40% of the aviation fuel market, and achieve life-cycle CO2 emission savings of 60% compared to fossil kerosene.
E4tech believes higher life-cycle savings may be achieved and estimates the volume required to meet SA’s 2050 central emissions reduction target will be required to grow from 2030 to 2050 at an annual rate of around 18% to reach between 3.3 and 4.5 million tonnes per year in 2050. A similar international aviation commitment to the 50% emissions reduction target would require between 140 and 190 million tonnes of sustainable aviation fuel in 2050.
The consultancy accepts this is an ambitious target but says the historic wider take-up of biofuels suggests it is challenging but achievable.
“However, in order to put ourselves on the path to achieving this growth, the period to 2030 is critical,” says Dr Ausilio Bauen, Director of E4tech and Senior Research Fellow at Imperial College London. “There needs to be a shared vision, both within the aviation industry and also with government and civil society, to generate a positive sentiment for this new industry. There is also a requirement for risk sharing between the supply chain participants and early adopters prepared to enter offtake agreements for more expensive fuels. Finally, there needs to be a funding strategy given this is a high risk and high cost investment.”
SA is calling on the UK government to set long-term policy objectives that incentivise and stimulate investment, as well as support research and development. Counsell argues air transport has no alternative to using liquid fuels for the foreseeable future.
Under the UK Renewable Transport Fuel Obligation (RTFO), road fuel suppliers are required to provide a certain amount of biofuel to be blended with the fossil fuel – the total amount at present by volume is 5% – or pay a substitute amount of money. Biofuel owners are awarded one Renewable Transport Fuel Certificate per litre of biofuel supplied and the fossil fuel supplier is obliged at the end of each year to surrender a required number of certificates to demonstrate compliance with the RTFO.
As the certificates may be traded between participants in the scheme, they provide a potential revenue stream for biofuel suppliers and the confidence to invest and produce the fuels when costs would otherwise be uncompetitive. SA estimates the market incentive is worth $200-300 per tonne of fuel. As aviation biofuels are not covered by the RTFO, SA claims this has the effect of disincentivising investment and production of such fuels. By contrast, it says, the inclusion of aviation biofuels in similar schemes in the US and the Netherlands has proved successful. A zero rating for eligible aviation fuels in the EU Emissions Trading Scheme, whilst welcomed by SA, provides only “a very modest market incentive,” it adds.
SA is also looking for development funding support for demonstration plants through the provision of grants and equity co-investment, which it says would reduce investor risk. The government’s own UK Green Investment Bank could also play a key role, it suggests, with loans and loan guarantees to help establish initial commercial scale production plants.
The consultation period on issues raised by the SA discussion paper runs until 17 October 2014.
Sustainable Aviation discussion paper ‘Fuelling the Future’
E4Tech report ‘Sustainable Fuels: Potential for the UK Aviation Industry’
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