Robbie Bourke, Partner, Transportation and Services, Climate and Sustainability at Oliver Wyman, discusses the challenges of sustainable aviation fuel with Hazel King

According to consultancy firm Oliver Wyman, sustainable aviation fuel (SAF) is probably the most important tool airlines can use in their quest for net zero, but there is insufficient supply. At current maximum SAF production capacity in the EU, only about half of the amount of SAF required to meet the proposed mandate by 2030 will be available.

“Our analysis has shown that there is a significant gap between the current and forward-looking supply,” Robbie Bourke explains.

“The reason there is a supply gap is a multitude of things, but it largely comes down to three major factors,” he adds. “The first is the feedstocks themselves. The feedstocks are from recycled materials which is very dependent on the different pathways. These materials are hard to get hold of, and for those that are readily available there is competition with other biofuels such as renewable diesel.

“The second challenge is the market maturity. An airline would typically buy fuel as a commodity but that is not how SAF is available today – it is an early-maturity product so therefore the price point is different, the length of agreements is different, so it is hard to adjust that.

“And the last and most important challenges is the funding gap,” Bourke continues. “That is the funding to be able to develop refineries and get the feedstocks from the supply chain into the refining plants and get the fuel produced and out into the sky.”

Addressing the funding gap

According to Bourke, the supply gap is not an aviation industry issue, but an energy supply issue that cannot be solved by the aviation sector on its own. “Energy companies are dealing with this same question across many different sectors, not just aviation – and actually aviation is one of the smaller in terms of the general market coverage,” he explains.

Introducing incentives and mandates are one way of helping with the funding issues around SAF, as they can help reduce the risk of investment. “The investment [needed to fund SAF development] doesn’t happen at the volumes and scales that is required today is because of the risk of that investment. The more you can mitigate the risks of that investment, the more people will be willing to put money in place and incentives and mandates provide that certainty that the investors require.”

More collaboration for sustainable fuel

More industry collaboration will also help move the development of SAF, with chief technology officers (CTOs) from seven of the world’s leading aviation manufacturers releasing a statement on 15 June “to support the industry’s commitment to achieving net zero carbon emissions for civil aviation by 2050 and to highlight the importance of the production, distribution, and availability of qualified Sustainable Aviation Fuel (SAF) needed to achieve this goal.”

For Bourke, these types of statements are helpful as they “as they demonstrate a level of commitment and collaboration across the industry which is absolutely necessary to address some of the confidence challenges that are there”, but they will not “in their own right allow capital to flow to the places they need to get to and they won’t drive the level of commitment that is needed in a contractual sense,” he says.

“What is really needed is for the financial community to have a level of understanding of what that commitment means in a contractual sense for aviation to allow that investment to flow, to de-risk their investment either through offtake agreements or other forms of commitment that the aviation sector can make,” Bourke continues.

Achieving net zero

While a large focus is on SAF development to reach zero emissions targets by 2050, is it the only solution? Bourke doesn’t think so. “In the Oliver Wyman analysis that we have completed, we believe that just over half of the decarbonisation pathways for the aviation sector through to 2050 will come from SAF. A large portion of that will come from advanced feedstocks or advanced means of producing fuels – both biofuels and e-fuels – which are nascent technology at the moment,” he explains.

“Outside of that there are several other pathways that are relevant. The first is aircraft technology. This is new aircraft coming into the fleet that are 15% more fuel efficient than the aircraft they’re replacing. However, building a new more fuel-efficient aircraft takes quite some time to start to provide and reduce the emissions of an aircraft that is in operation today.

“The second lever is around aircraft operational efficiency – reducing fuel burn on a day-to-day basis based on how airlines fly their aircraft, from the weight of the aircraft through to the routes that they fly, looking to remove holding patterns, getting the right flight levels, etc. This is heavily dependent on air traffic control and there are a number initiatives, under the Single European Skies initiative, that will support this.”

Alternative propulsion

Bourke also favours the developments being made in alternative forms of propulsion, including electric and hydrogen, when it comes to achieving net zero.

He continues, “In my view, electric propulsion will provide a very limited mitigation of carbon by 2050 as it is likely to support only very short haul flying. However, the emerging market of advanced air mobility and regional mobility will continue to grow significantly in the coming years and will benefit heavily from electric propulsion because its generally shorter distances and city to city.

“Hydrogen propulsion is also identified as being a significant opportunity and many would say a higher order opportunity. The challenge with hydrogen is the infrastructure both off-wing and on-wing that need to be put in place. New aircraft designs are needed, retrofitting of aircraft is the current track, however this will squeeze already challenging unit economics. They are currently targeting smaller aircraft for usage and larger aircraft are something of a future development.

“By 2050, hydrogen will have a part to play – around 10% emissions reduction but if you were to project forward to later in the century, hydrogen is likely to play a bigger part,” he says.

Demand management

According to Bourke, demand management is a factor that most financial investors consider in their sustainability plans – how to manage demand and therefore reduce emissions.

He explains, “It is difficult for aviation because the underlying growth of aviation is driven by macroeconomic factors such as GDP and growing middle classes, and therefore global demand will continue to increase particularly in the developing world.

“The cost of the transition [to sustainable aviation] will increase the costs of operating aircraft, either directly or indirectly, however, aviation has traditionally been very good at managing their costs over time and therefore it remains to be seen what the impact will be on passenger ticket prices” he concludes.

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