Europe makes legislative push for aviation transition

Interest in cleaner alternatives to jet fuel is being stoked by the EU's push to reduce carbon emissions by 55pc by 2030 compared with 1990 levels.

A raft of new country-level emissions and blending legislation is being met by plans to increase production of biojet, or sustainable aviation fuel (SAF), which could lead to a narrowing of the currently huge price premium that SAF commands over fossil-based jet fuel. But the success of this part of the energy transition will depend in part on demand for air travel recovering from the heavy blow landed by the Covid-19 pandemic.

The European Commission launched a consultation in March with the aim of introducing measures to promote the decarbonisation of the aviation sector. It proposes the introduction of a 1-2pc EU-wide blending quota as well as the revision of the 1.2x multiplier component for SAF under the recast Renewable Energy Directive (RED II). The commission has tentatively scheduled SAF legislation by January, but pending a decision on an umbrella quota, several countries have begun to introduce measures to reduce greenhouse gas (GHG) emissions in the sector and to promote the development of competitive biojet.

France this week proposed a 1pc SAF quota from 2022, and Germany last week published a draft law calling for airlines to increase the share of SAF of non-biogenic origin in their fuel mix to 0.5pc by 2025, 1pc by 2028 and 2pc by 2030. Paris had already proposed to increase its SAF blending target to 2pc by 2025, 5pc by 2030 and 50pc by in 2050.

In the UK, a public-private partnership called the Jet Zero Council will promote the development of biojet. Members of UK industry group Sustainable Aviation have already committed to achieve net-zero carbon emissions by 2050 and to boost SAF development.

Nordic countries are at the forefront of efforts to reduce GHG emissions from aviation. Norway will introduce a blending requirement of 0.5pc of biojet from 2020, and the new government in Finland has approved 30pc biofuels penetration by 2030. In Sweden, the government is evaluating an emissions reduction of 0.8pc from jet fuel used in Sweden in 2021, increasing to 27pc by 2030.

The growing legislative push is leading to an increase in Europe's biojet production. UK company Velocys is developing Europe's first waste-to-SAF facility, Netherlands-based biojet producer SkyNRG is developing a 100,000 t/yr aviation fuel plant at Delfzijl, and Finland's St1 will commission a 200,000 t/yr biorefinery in Gothenburg, producing HVO and biojet, at the end of 2021.

Finland's Neste — Europe's largest SAF producer, with 100,000 t/yr from its Porvoo refinery — plans to produce 1mn t/yr from 2022 at a refinery in Singapore that is under construction, and 450,000 t/yr at a proposed facility in Rotterdam from 2023.

Several European refiners have moved to accelerate a switch to biofuels production in light of prospects for a swift energy transition and because of weaker refining margins for transport fuels arising from the pandemic. Such moves are given added urgency by fierce competition from newer, lower-cost refineries in the Middle East and Asia-Pacific. Total last week said it will convert its 93,000 b/d Grandpuits refinery near Paris into a biorefinery capable of producing up to 170,000 t/yr of biojet from 2024. Swedish refiner Preem will focus on renewable diesel and jet fuel production at its Gothenburg and Lysekil refineries, after cancelling plans to install a new residue hydrocracker at the latter. BP wants to reduce refinery throughput globally from 1.5mn b/d to around 1.2mn b/d by 2030 as it ramps up its renewables and power business. And Spain's Repsol will decarbonise its 240,000 b/d Bilbao refinery, to include a net-zero emissions synthetic fuels plant that will use CO2 from the refinery along with green hydrogen generated from renewable energy.

Increased biojet availability in Europe could reduce prices, which would be necessary to promote uptake. Argus assessed UCO-based SAF (HEFA-SPK) at $2,120.99/t at the end of last week, a $1,803.99/t premium to conventional jet fuel as of 30 September.

But all this will be broadly dependent on the return of travel demand when and if pandemic-related restrictions lift. And this is unlikely to be soon. The International Air Transport Association (Iata) this week revised its traffic forecast for 2020 to a fall of 66pc in revenue passenger kilometres (RPKs), reflecting a "weaker-than-expected recovery", down from its previous estimate of a 63pc year on year drop.

By Giulia Squadrin and Florence Schmit