On path to renewables don't forget big industry’s needs

The Australian

By Ampol CEO Matt Halliday

Through almost 60 years of fuelling Australian transport, Ampol’s Lytton oil refinery in Brisbane has played an important role as a strategic asset that safeguards the country’s energy security.

As our nation grapples with the multi-generational challenge from the energy transition, adaptable legacy infrastructure of this kind is positioned to play a pivotal role in the creation of a national renewable fuels ecosystem.

Rising public discussion and media coverage on the potential for renewable fuels is welcome. Put simply, for Australia to reach its global commitments on carbon emissions reductions, it is hard to discern a path that does not meaningfully address the needs of the heavy transport, mining and aviation industries.

It’s not broadly understood that the great majority of Australian fuel sales in 2023 were to these sectors with the balance predominantly petrol for private vehicles.

Meaningful government policy targeting passenger vehicle emissions is helping to drive the uptake of EVs, and we believe this trend will continue. That is why we are investing in the rollout of our charging network.

However, electrification is unlikely to be the only solution to the decarbonisation of our transport sectors, certainly not the domestic aviation fleet nor for the long-haul trucking business. Hydrogen may, over the longer term, prove itself. But presently there is an array of challenges that prolong the timeline for practical and widespread implementation.

Renewable fuels is the term used by industry to describe liquid hydrocarbons made from biomass material and offer a simple and ­rational way of accelerating Australia’s dual objectives around climate response and enhanced fuel security. Importantly, the technology exists today and is in use around the world. With supportive policy, real emissions reductions can be achieved – more quickly – while more nascent technologies mature.

The introduction of renewable fuels in Australia, at scale, would help the nation deliver on its emissions reduction targets by leveraging a compelling competitive advantage. But securing renewable fuels a place in the national energy mix will require government policies that aim to encourage demand and ameliorate additional consumer cost.

It is an unavoidable fact that renewable fuels are more expensive than existing jet fuel or diesel options. However, with the right policy settings and co-operation between industry and governments, the economic impact can be minimised and a faster reduction in emissions can be achieved.

Fostering a domestic renewable fuels capability would be transformative of a key part of the energy economy.

For a start, it would divert raw materials currently being exported into a new value-added and greenfield industry for Australia.

As a drop-in solution, there is no need to replace the equipment these fuels power, such as aeroplanes, trucks and heavy machinery, greatly reducing the econ­omic cost and time taken to transition. It also leverages the existing fuels manufacturing know-how and distribution infrastruc­ture both well-established and proven as economically efficient.

There are also significant ­national fuel security and resilience benefits. The existence of a domestic production capability would reduce our reliance on imported oil imports and re-establish a sovereign liquid energy production base by drawing on our acknowledged skills base in agriculture and manufacturing.

A particular benefit of renewable fuels will be to help decarbonise the aviation industry – seen as one of the six hard to abate sectors along with trucking, cement, steel, plastics and shipping.

Business and leisure aviation travel presently results in the release of an estimated 8 million tonnes annually of CO2-equivalent emissions from the exhaust vents of aeroplane engines.

Aviation is currently responsible for about 2.5 per cent of global emissions. But emissions mitigation for the aviation sector is no a long-term, high-risk pipe dream. There is a solution at hand, and it is being pursued around the globe with the active encouragement of governments determined to meet emissions ambitions.

Sustainable aviation fuel (SAF), manufactured from sources that range from newly crushed grain oils to used cooking oils and waste animal fats (known as tallow), is already being added to traditional aviation fuel mix in markets around the world where the requirement to blend with traditional fuels is being mandated or invited through tax incentives.

The CSIRO assesses that SAF can reduce aviation emissions by 60-100 per cent, with the variation being the raw materials from which renewable fuel is made. The more it is blended from waste ­materials, the lower its emissions toll.

Globally, airlines are already committed to using increasing levels of SAF in their fuel mixes over a range of timetables. Qantas has announced a goal of procuring 10 per cent of its overall fuel mix from SAF by 2030, increasing to 60 per cent by 2050. Critically, too, the world’s two major aircraft builders, Airbus and Boeing, plan to ensure that all their aircraft will be capable of flying on up to 100 per cent SAF by 2030.

Recently, Airbus reported that global production of SAF had doubled in 2023 to 600 million ­litres. But that is equivalent to only 0.2 per cent of all aviation fuel for the year.

History shows that when it comes to energy, engineering tectonic shifts is ever a battle between the best intentions and hardest of industrial realities. Just as it was for the early days of the now ubiquitous liquid natural gas industry, the SAF story is about the interplay between demand and supply, how either of them are to be triggered and who gets to carry the cost of making that first move.

Like others in the conventional fuels business, Ampol is keen to enter the renewable fuels sector generally, particularly SAF and renewable diesel, as part of the long-term transformation of our leading and strategic national infrastructure. Ampol is reviewing the addition of renewable fuels manufacturing at the Lytton refinery complex in Brisbane.

But the federal government has a critical role to play here in helping us secure that investment and its positive economic, environmental and security outcomes.

Research by Qantas and Airbus in November last year showed SAF production has the potential to contribute about $13bn in GDP annually by 2040, while supporting nearly 13,000 jobs in the feedstock supply chain and creating 5000 new high-value jobs to construct and run the facilities.

There is general agreement across the aviation industry that Australia needs to mandate the use of SAF and then curate increases in uptake from 2030 to 2040, as the technology evolves and scale is achieved to bring down costs. It has also been suggested that government might consider derisking first movers in SAF by providing direct capital support or offer some level of revenue support to new local producers to ensure they are price competitive with refiners already established in other countries.

Australia has the infrastructure, technical expertise, and availability of raw materials needed to sustain a new renewable fuels capacity – a key pathway to a more emissions-­efficient, sustainable fuel economy.

We must collectively acknowledge that it will take a carefully crafted and imaginative government engagement to ensure we climb through the window of opportunity before it shuts. Which is exactly what a Future Made in Australia should be all about.

Matt Halliday is the chief executive of Ampol.