Get Aussie green jet-fuel onto the runway soon or miss out, govt told
Published Thu 17 Nov 2022
Australian Financial Review - Hans van Leeuuwen
17 November 2022
Sharm el-Sheikh, Egypt | The Albanese government has just one year to get behind a domestic green aviation fuel industry or else risk it heading offshore, Qantas and other industry players have warned.
With farmers already locking in long-term contracts to sell their feedstock to offshore producers of sustainable aviation fuel (SAF), the industry is calling on the government to ramp up its policy and funding support.
“To start domestic production in 2025, next year has to be the year of policy formation, investment, government support, and then industry coming together,” Andrew Parker, chief sustainability officer at Qantas, told The Australian Financial Review at the COP27 summit in Egypt.
“Because we are seeing now that in Europe, the UK, Canada, Japan, all the other major markets, but particularly the US, production is either under way, or it is in a sophisticated state of preparedness.”
SAF is made from feedstock such as used cooking oil, energy crops, forestry residues and animal tallow, which is blended with normal jet fuel. That can cut a plane’s emissions by up to 80 per cent, and its use does not require airlines to modify their jet engines.
SAF is seen as the answer to guilt-free long-haul flying because electric and hydrogen planes are suitable only for short-haul – prompting forecasts of exponential growth in demand and output this decade.
Bioenergy Australia chief executive Shahana McKenzie said Australia could miss the chance to join the SAF rush if its potentially plentiful feedstock supplies went offshore.
“If you look at contracts that are being signed today for feedstock, they are for five to 10 years. If you look at things like forestry residues, you look at the canola that is currently exported overseas for renewable fuels. These are not deals that are done on a one- or a two-year basis, they are offtakes for 10 years,” she said.
“So the risk is that if there isn’t a signal to the Australian market that we are going to be developing projects in this country, then we’re going to see a rush of project developers seeking to secure our feedstock for other regions. That’s the risk if we don’t move.”
Mr Parker said if the feedstock went elsewhere, and investment and technology followed it, that would be “a strategic loss to Australia”.
Some Qantas planes have started tanking up with SAF at Heathrow in London, and will access SAF in Los Angeles and San Francisco from 2025.
The airline wants to get to 10 per cent SAF use by 2030, but 70 per cent of the airline’s fuel uplift is in Australia. It is in talks to import SAF from Singapore.
Breaking the cost barrier
The government is setting up a Jet Zero Council, which Ms McKenzie said was a critical first step.
“That will bring together all of the different areas of government that need to play a role – SAF is in agriculture, it’s in trade, it’s in industry, it’s in defence, it’s in energy, climate, all of the sectors you can possibly imagine. And because of that, it tends to fall through the cracks a bit,” she said.
The most important barrier that the council would have to help dismantle, she said, was the amount of investment capital required – and that needed clear policy.
“SAF is far more expensive than traditional jet fuel. And so in markets that are rapidly progressing and accelerating, where you are seeing billions of dollars of investment, it is in jurisdictions where there is a policy framework that is really enabling that deployment,” she said.
The worldwide SAF industry was worth only $US66 million ($97 million) in 2020, but is projected to reach $US15 billion by 2030.
Robert Boyd, an Australian based in Geneva for Boeing’s global sustainability policy team, said the size of Australia’s jet-fuel market meant it still had a chance to deal itself into the burgeoning global industry.
“A lot of countries are now competing on policy. Australia has the chance to really get active and catch up, to get back with the big pack,” he said.
Ms McKenzie said potential SAF developers were circling the market, waiting for the government’s signal.
“There’s a bit of a race going on at the moment around five potential projects that are acutely interested in the Australian market,” she said.
“They’re doing the sums on what it would look like, around potential export of that fuel, potential feedstock availability within different regions.”
Mr Parker said there were also potential Australian start-ups, “those who have just got technology and want to join some part of the supply chain, given it’ll be a multibillion-dollar industry”.
Ms McKenzie said that if the Jet Zero Council could galvanise quick action from ministers, that could “support capital investments, development capital, so that we can start to have some projects be investigated more fully”.
The Australian Renewable Energy Agency offered $34 million to the SAF sector last year, but the funding need is an order of magnitude higher than that.
Besides funding, Bioenergy Australia is calling for a national framework for voluntary consumer purchasing, which would allow airlines to get carbon credits for using SAF; and an emissions’ intensity scheme that would set targets and incentives for airlines to switch to SAF.
Qantas and Airbus recently announced a $US200 million five-year partnership to help drive the domestic industry.
This month it also unveiled a SAF Coalition involving Australia Post, Boston Consulting Group, KPMG Australia, Macquarie Group and Woodside Energy. They will pay a premium to reduce about 900 tonnes of their air carbon emissions each year by contributing to the incremental cost of SAF rather than using traditional carbon offsets.