Green Jet: The opportunity for Australia to become a global leader in sustainable aviation fuels

Aviation is one of the fastest growing sectors, but also one in which carbon emissions reduction can be the most challenging. Fortunately, there is a long-term solution in the form of sustainable aviation fuel, particularly power-to-liquid, and Australia has all the prerequisites to be a global leader, with potential exports of A$60 billion per year. However, making this happen will require rethinking our current approaches, particularly in terms of policy mechanisms. In this perspective piece, we provide an overview of the aviation industry and its decarbonisation challenge, explore the role of power-to-liquid sustainable aviation fuel and the potential for Australia to benefit.

Sustainable aviation fuel will be core to the efforts of decarbonisation in the aviation sector

According to the International Energy Agency, in 2022 aviation accounted for 2% of global energy-related CO2 emissions, having grown faster in recent decades than rail, road or shipping. As international travel demand recovers following the Covid-19 pandemic, aviation emissions in 2022 reached almost 800 Mt CO2, about 80% of the pre-pandemic level.

Electric, electric-hydrogen and hydrogen-powered aircraft could support decarbonisation, but challenges such as lower energy density and higher weight requirements affecting flight range and the need for extensive new infrastructure mean that they will only be a small share of the answer. The International Air Transport Association (IATA) has published a pathway for net zero emissions by 2050 for the aviation sector and noted that 65% of emissions reduction for the aviation sector would come from widespread use of Sustainable Aviation Fuels (SAF). SAF are ‘drop-in’ fuels that don’t require any changes to aircraft, engines, or infrastructure and don’t affect safety or performance. They are produced from feedstock that absorb CO2 while reducing emissions during use. Depending on the technology used, SAF can be ‘dropped in’ or blended with fossil-based fuels. This reduces the carbon intensity of the fuel used by the aircraft.

The demand for SAF is poised to grow rapidly due to regulatory and company targets, incentives, and fuel security concerns. The EU Commission has mandated that traditional jet fuel be blended with SAF starting in 2025. Aviation fuel suppliers must supply SAF for at least 2% of overall fuels, increasing to 32% in 2040 and 63% in 2050. Partly in response to these regulatory requirements, airlines have been announcing their own targets. For example, Qantas has targeted 10% of their fuel use to come from SAF by 2030 and approximately 60% by 2050. Government incentives also play a role, nowhere more prominently than in the US. The U.S. Sustainable Aviation Fuel (SAF) Grand Challenge, introduced in 2021 by the Biden Administration, has ambitious targets for SAF production, backed by large subsidies. Fuel security, although less often discussed, is likely to be another important driver. For example, Australia imports roughly 77% of its aviation fuel needs, and just four countries supply 90% of these imports. Safeguarding domestic supply, including for our defence forces, will require a need for thinking about domestic SAF production.

There are different SAF pathways, but power-to-liquid is the likely long-term option

There are many pathways to make SAF. Broadly, these pathways cluster into two groups based on the feedstock that is used:

Biofuels feedstocks, where biological residues are treated and transformed to SAF

1. A Power-to-Liquid (Power-to-Liquids) feedstock, where electricity is used to make green hydrogen that is in turn used in concert with carbon dioxide to produce SAF.

2. Biofuels are more cost competitive today, but have challenges to scale (particularly given the land requirements); they create tradeoffs with arable land for food; and have questionable CO2 impacts (due to the burning of CO2). Studies by the Air Transport Action Group (ATAG) show power-to-liquid will have the lowest future cost of different SAF options, and power-to-liquid is forecast to account for the largest share of SAF supply by 2050. Cyan Ventures has developed a detailed cost model for PtL and we have identified technology pathways that could lead to PtL being a cost competitive supply option in Australia by 2030.

Australia can be a global leader in power-to-liquid, creating a A$60b plus annual market

Australia has three significant advantages when it comes to producing power-to-liquid (PtL) sustainable aviation fuel:

1. Lowest cost renewable energy resources: Renewable energy is around 56% of the total cost of power-to-liquid production, and Australia has some of the most cost competitive solar (and wind) production globally.
2. Land availability: Only 2% of Australian land is enough to supply the world’s total aviation fuel needs.
3. Significant domestic market to help early scale: Australia’s demand for aviation fuel is growing rapidly. Assuming 10% of SAF blend by 2030, this could lead to up to 1340 million litres of demand.

Longer term, the economic opportunity is immense. IATA Forecast that global SAF production needs to be 449 billion litres to meet 2050 Net Zero. Assuming 50% of global demand can be supplied from PtL and that Australia can supply 20% of this volume (a not unreasonable target), this would equate to over A$60 billion of export revenue annually. This could be the second largest export sector for Australia in the future (only behind iron ore).

Making this happen requires a rethink of our policy and business approaches

The establishment of the Australian Jet Zero Council in June 2023 is an important signal of intent by the Australian Federal Government. However, much needs to be done. Our research has identified nine critical policy levers to stimulate demand and supply-side levers for PtL production. Australia has limited support in only three levers, and virtually no support in six levers. Government policy can shape both demand as observed in Europe, the US and most recently in Singapore (e.g., SAF blend mandates, procurement policies) and supply (e.g., input cost credits, direct investments).

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Power-to-liquid sustainable aviation fuel will likely be the major pathway for decarbonisation of the aviation sector and Australia could potentially benefit significantly by becoming a global production hub. Making this aspiration a reality will require a major rethink of supply and demand side stimulation measures.