At first blush, it looks like the European Commission’s proposed regulation ReFuelEU Aviation, which seeks to impose the obligation to uplift a percentage of sustainable aviation fuel (SAF) for flights departing from EU airports from 2025, has already begun to meet its aim: invigorating the SAF market. Airlines across the region have signed more long-term SAF offtake agreements and projects to expand or build refinery infrastructure to be used for the production of non-conventional jet fuels, locking in forward purchase contracts worth $17 billion, according to International Air Transport Association (IATA) estimates. The association expects that figure to rise to $30 billion in 2025.
“Airlines are certainly increasing the sign-up of offtake agreements,” Alexander Kueper, director of fuel at IATA, told AIN. “However, this is very much as we expected and had forecast before. The positive aspect is the level of offtake agreements is now above the median of our forecast,” adding that “it would be wrong to assume, at this stage, that Fit for 55 has been a significant driver for this.” ReFuelEU Aviation is part of the EU’s Fit for 55 legislative package and the European Green Deal, which targets a net greenhouse gas emissions reduction of at least 55 percent by 2030 compared with 1990 levels.
European airlines are by no means alone in increasing their SAF contracts, yet they have visibly accelerated efforts to buy SAF in larger quantities. For instance, DHL Express, the express delivery unit of Germany’s Deutsche Post Group, in March inked a five-year agreement with BP and Finnish refiner and biofuel maker Neste to provide more than 800 million liters of SAF. Both suppliers will provide SAF produced from waste oils. These deals—which DHL described as “one of the largest SAF deals in aviation to date”—together with the previously announced SAF introduction in the DHL airport network in San Francisco, East Midlands, the UK, and Amsterdam, will exceed 50 percent of DHL Express’s target to reach 10 percent SAF blending for all air transport by 2026. DHL Group has committed to using 30 percent of SAF blending for all air transport by 2030 under its sustainability targets. That would far exceed the 5 percent SAF blending mandate foreseen in the ReFuelEU Aviation proposal.
“We are putting our hands on everything we can get,” International Airlines Group (IAG) CEO Luis Gallego told AIN at Airlines for Europe’s Aviation Summit in Brussels earlier this year. The group, which consists of British Airways, Iberia and Iberia Express, Aer Lingus, Vueling, and Level, needs to purchase 1 million tonnes of SAF annually to achieve its target to power 10 percent of its flights with SAF by 2030. IAG has committed to investing $400 million in SAF development in the next 20 years and has clinched partnerships with emerging sustainable fuel technology companies LanzaJet and Velocys to develop SAF. The investment includes a new household waste-to-jet fuel plant in the UK that will start operations in 2025. IAG’s UK airline, British Airways, will also buy sustainable jet fuel from LanzaJet’s U.S. plant to power some of its flights from late 2022 and in March took delivery of the first supply of UK-produced SAF from sustainable waste feedstock under a multi-year agreement with Phillips 66.
Likewise, Iberia has agreed to partner with Spanish energy and petrochemical company Repsol to secure a steady SAF supply. The Madrid-based airline on June 1 operated a set of transatlantic flights aboard Airbus A330-200s powered by a 2 percent blend of biofuel. The batch used was the third manufactured by Repsol and the first one in the Spanish market produced from waste (from the agri-sector) as a raw material. Future SAF deliveries will come from Repsol’s new advanced biofuels plant in Cartagena in southeastern Spain—scheduled to begin production in 2023—while in 2024 Iberia plans to operate flights burning synthetic SAF (e-fuel) produced at the Repsol Petronor refinery complex, located in Bilbao in northern Spain. In addition, both companies have begun working on a project to use hydro-treated vegetable oil (HVO) in airport service vehicles. Iberia also has joined the SHYNE (Spanish Hydrogen Network) consortium, led by Repsol, to accelerate the development of green hydrogen in Spain. “The aviation industry needs solutions, such as the use of biofuels, in order to continue with the decarbonization process we have embarked on,” commented Repsol CEO Josu Jon Imaz.
Other examples of the increasing interest from refineries and diversified energy manufacturing companies to shore up production of low carbon footprint jet fuels in Europe include Neste’s €190 million ($203 million) investment to modify its existing renewables capacity in Rotterdam to allow for the production of SAF produced from waste and residue raw materials (Neste expects to complete the project in the second half of 2023), and BP’s venture in Lingen, Germany. BP in February started producing SAF at its Lingen refinery by co-processing used cooking oil with crude oil in its existing plant. “Co-processing is an important step in replacing fossil fuel with renewable feedstocks within refineries,” noted Martin Thomsen, CEO of BP’s aviation fuel supply company Air bp. The bp plant in Lingen marks the first industrial production facility in Germany to use the co-processing technology for SAF production based on biomass from waste and residues, the company noted.
Austria’s integrated oil, gas, and petrochemical company OMV also started producing SAF by co-processing sustainable and regional raw materials, specifically used cooking oil, at its Schwechat refinery. It delivered the first batch of SAF in March to Vienna International Airport for fueling Austrian Airlines’ aircraft and plans call to increase its own SAF production from about 2,000 tonnes this year to more than 700,000 tonnes per year by 2030.
IATA projects that suppliers can produce 5 billion liters of SAF by 2025, compared with just 100 million liters (0.08 million tonnes) produced last year. “The growth is not just in Europe and the U.S.," said Kueper. “There is progress in other parts of the world including Southeast Asia, such as New Zealand, Singapore, and China where governments have announced their intentions to ramp up production. An independent study from the Netherlands Aerospace Centre (NLR) estimates that Europe could account for 50 percent of global production capacity in 2030. The emerging projects are diverse, and the chosen technology paths often differ from country to country in line with their respective governments’ energy transition strategy and the availability of sustainable feedstock—biomass or green energy and CO2—appropriate for use in producing SAF.
The NLR analysis shows that the projected amount of SAF projected produced by 2050 from bio-based feedstocks that would be available in the Netherlands could meet only a “fraction” of the anticipated fuel demand. “The supply potential for synthetic kerosene is larger and may be sufficient. In our view, that is an opportunity for the Netherlands to pursue a leading position in producing synthetic SAF,” its authors concluded. Several companies have launched e-fuel projects in the country, including Dutch start-up Synkero, which plans to develop a commercial plant capable of producing 50,000 tonnes of e-fuel annually.
In Germany, representatives of federal and state ministries, the aviation industry, and the fuel industry last year signed the “Power to Liquid (PtL) Roadmap” outlining the necessary requirements and measures to create the basis for producing at least 200,000 tonnes of PtL annually for German aviation by 2030. That amount corresponds to one-third of the 2019 fuel demand of German air traffic and connects to the country’s national hydrogen strategy. The world’s first industrial PtL plant, located in northwest Germany and operated by green NGO Atmosfair FairFuel, went into operation late last year, with Lufthansa as the pilot customer. The group has committed to purchasing at least 25,000 liters of the e-kerosene annually over the next five years. “Synthetic fuels from renewable energies are the kerosene of the future,” asserted Christina Foerster, member of the Lufthansa executive board. Lufthansa Group, which according to Foerster ranks as the largest customer of SAF in Europe, has until now used sustainable aviation fuels of biogenic origin.
The variety in technological pathways to produce SAF is “an excellent thing,” asserted Kueper, who characterized IATA as technology agnostic. “However, SAF with high sustainability profiles (those with greater CO2 reduction capacity and made with sustainable-certified feedstock) are desirable,” he noted, adding that diversifying the portfolio of fuel options in different regions of the world depends on research and development spending. “[IATA] fully supports early R&D into PtL to aid maturity of the technologies,” said Kueper. “It is also important to have the right government support to reduce the unit costs of such technologies as governments have successfully done with domestic renewal energy, for example, wind and solar.” IATA also has expressed intense interest in other pathways under development and expects certification of 11 pathways for SAF production by 2025, compared with the current seven.