Airlines and airports call on UK Gov to ramp up financial support for SAF production
Airports and airlines have written to Mark Harper, the new transport secretary, calling for more state intervention to support the “fledgling green fuel industry.” The aviation sector is placing most of its hopes, of being able to continue at its current size and to grow further, on so called “sustainable aviation fuels.” (SAF). These fuels will have to be produced from wastes of various sorts, in order to have credible claims to be lower carbon than conventional jet fuel. (Both sorts of fuel produce about the same CO2 emissions and non-CO2 impacts when burned in a jet engine). The aviation sector wants government funding, to help develop SAF. It says “Britain will struggle to create an industry producing sustainable aviation fuel unless the government provides regular subsidies to manufacturers.” The government has promised £165mn as seed capital to encourage manufacturers to open at least 5 plants producing SAF and hopes they will be started by 2025. It has also set a target under which 10% of aviation fuel must be SAF by 2030.They want the government to create “contracts for difference” (CFDs) to agree a set price for SAF, to give confidence to investors.
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Aviation calls on UK government to subsidise ‘Jet Zero’ push
Sector seeks more support to get fledgling green fuel industry off the ground
Airports and airlines have written to Mark Harper, the new transport secretary, calling for more state intervention
By Jim Pickard in London (Financial Times)
NOVEMBER 7 2022
Britain will struggle to create an industry producing sustainable aviation fuel unless the government provides regular subsidies to manufacturers, leading airlines and airports have warned.
The government has set a 2050 “Jet Zero” target for the airline industry to eliminate net carbon emissions, mainly through the use of green fuel produced by household waste such as cooking oil, known as “SAF”.
The government has promised £165mn as seed capital to encourage manufacturers to open at least five plants producing the new fuel and hopes they will be under construction by 2025. It has also set a target under which 10 per cent of aviation fuel must be SAF by 2030.
But leading airports and airlines, including Heathrow, Gatwick, Manchester Airports Group, Virgin Atlantic and British Airways have written to Mark Harper, the new transport secretary, calling for more state intervention to get the fledgling industry off the ground.
The letter, seen by the Financial Times, is also signed by some of the manufacturers with plans for SAF plants in the UK, including Fulcrum, Velocys and Alfanar.
“We believe UK SAF production has the chance to become a domestic success story, but the government needs to act now to ensure manufacturers get the price certainty needed to unlock private investment into this sector,” the groups wrote.
They want the government to create “contracts for difference” (CFDs) to agree a set price for SAF, similar to those the state has used to underwrite nuclear and offshore wind projects.
Under CFDs, when wholesale prices exceed a fixed level producers pay back the difference to the government. When the market rate is below the fixed price, the government tops up the difference.
The letter warns that without this kind of regular subsidy, investors will go elsewhere and airlines will end up importing sustainable fuel from the EU or US.
“To stimulate billions of pounds of investment in UK industry requires targeted action and further direction must be taken to share the current investor risk profile that is a barrier to capital investment in UK production,” the letter says. “The only question is do we make our own SAF, creating jobs and growth for the UK, or do we import it from other countries?”
Flying is one of the hardest industries to decarbonise and technologies such as electricity- or hydrogen-powered aircraft are years away from being able to make long-distance flights.
Aviation accounts for about 2 per cent of global CO₂ emissions and the International Air Transport Association’s (Iata) net zero 2050 target relies heavily on changing fuel mixes to achieve most of its planned reduction in greenhouse gas emissions.
Other countries, including Indonesia, have sought to produce aviation fuel from crops such as palm oil or soyabean oil, prompting concern from environmentalists.
A spokesperson for the Department for Transport said the UK government already had a SAF programme which was one of the most comprehensive in the world.
“We’ve already invested in eight SAF plants, [we] now have a further £165mn available through our Advanced Fuel Fund, and are creating demand by mandating that 10 per cent of jet fuel comes from SAF by 2030,” the spokesperson said.
“This is providing investors with reassurance while helping to deliver our ambition of having five commercial SAF plants under construction in the UK by 2025.”
https://www.ft.com/content/9a3ed7af-9637-4c03-bbc9-f1d8dcefe2c7
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Airlines and airports call on UK Gov to ramp up support for green aviation fuel production
BY:ILARIA GRASSO MACOLA (City AM)
7th November 2022
A group of UK airlines and airports has called on the government to ramp up state support for the production of sustainable aviation fuels (SAFs).
“We believe UK SAF production has the chance to become a domestic success story, but the government needs to act now to ensure manufacturers get the price certainty needed to unlock private investment into this sector,” the group wrote to transport secretary Mark Harper today.
Produced from the likes of solid waste and food scraps, SAFs reduce CO2 by 80 per cent over their life cycle.
They are considered the main tool the aviation industry has to become net-zero by 2050, as the development and adoption of hydrogen and electric planes is still several decades away.
Stakeholders – including Virgin Atlantic, British Airways and Heathrow – said the government should introduce a set price for SAF production as well as establish a “contracts for difference” scheme.
Used to incentivise investment in renewable energy such as wind, contracts for difference protect producers against wholesale prices by having the government pay back the difference if prices are too low.
On the other hand, if wholesale prices exceed the set cap, producers refund the government.
“Without action now, the UK risks losing out to countries in the European Union and the United States which are forging ahead in support of this emerging industry,” the letter – seen by City A.M. – read.
US and EU companies have already scaled up their production, with Finnish supplier Neste already boosting its annual production from 100,000 tonnes today to 1.5 million by the end of next year.
For its part, Washington recently passed a new SAF tax credit, which increased the existing $1 subsidy for green fuel production to between $1.25 and $1.75 per gallon.
A DfT spokesperson said the UK’s SAF programme was “one of the most comprehensive in the world.”
As it currently stands, the government has invested £165m to develop eight production plants by 2025. It also aims to have SAF make 10% of airlines’ fuel consumption by 2030.
The airlines’ remarks echoed those of trade body Airlines UK – which last month said Britain’s net-zero targets could be out of reach with further government funding.
IATA’s director general Willie Walsh said in late September that anything shy of net-zero would be a failure, a few days before countries around the world adopted a zero-emission aspirational goal by 2050.
US supplier World Energy told City A.M. government support gives producers “confidence to take that risk and be leaders in the development of this relatively new industry.”
But according to Neste, government support – whilst fundamental – is not the only factor, as airlines, businesses and individual travellers can all play their part.
“Airlines can help grow the demand for SAF, despite it costing more than fossil jet fuel, by including SAF into their sustainability targets, which more and more airlines have done,” a company spokesperson told City A.M.
“They can also offer SAF to their customers as a solution to reduce the carbon emissions from their air travel, for a supplementary fee, as part of the booking process.”
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