By Camille Mutrelle, Transport & Environment.
What if you could fly on a fuel that is close to CO2 neutral? That is what e-kerosene promises to the aviation sector. In 2023, the EU adopted the world’s largest Sustainable Aviation Fuel (SAF) mandate (known as ReFuelEU), including sub-targets for the use of e-kerosene. This law sent a strong signal to the jet fuel market. But will it be enough to scale up a nascent industry?
There is no easy solution to decarbonize aviation. Unlike cars, planes are hard to electrify, and hydrogen-planes won’t be available at scale for a long time. Luckily for the sector, alternatives to conventional jet fuel exist. Known as SAFs, sustainable aviation fuels are derived from non-fossil sources such as waste-based biomass (in the case of biofuels) or renewable electricity (in the case of e-fuels). E-fuels offer a more promising solution than biofuels, which cannot be sustainably scaled up due to the limited availability of biomass feedstocks. However, the e-kerosene industry is still in its infancy: there is not yet a single large-scale demonstration project running in the EU, and not a single drop of e-fuel in our planes.
Much hope is placed in ReFuelEU, the law which makes it compulsory for European jet fuel suppliers to deliver a minimum percentage of SAF to EU airports from 2025 onwards, gradually increasing over time. According to that regulation, at least 6% of jet fuel used in the EU in 2030 will have to be SAF, 20% in 2035, and, eventually, 70% in 2050. A share of this will be e-kerosene. By creating long-term predictable demand, these targets are supposed to de-risk investments in the sector and kick off the market of this precious fuel.
Since the EU announced its intentions to implement a SAF mandate, we have seen an eruption of projects to produce e-fuels in Europe. In a recent study, Transport & Environment has identified 45 projects in the making in the European Economic Area, including 25 large-scale industrial projects, which pledge to produce up to 1.7 Mt of e-kerosene in 2030, enough to power an equivalent of 70,000 transatlantic flights. The climate benefits are non-negligible with savings of 4.6 million tonnes of CO2. These projections exceed ReFuelEU targets for e-kerosene, which amount to 0.6 Mt in 2030, and 1 Mt in 2032.
Therefore, on paper, the EU is on track to meet its e-kerosene targets. However, let’s not cry victory too early, as none of the major projects identified have reached a final investment decision (FID) yet. Many are still running feasibility studies to assess their viability. As long as investments have not been secured, it is impossible to know which projects will actually materialise or not.
Europe’s nascent e-kerosene industry still has to face many challenges, starting with feedstock availability. Securing access to enough renewable hydrogen and sustainable carbon sources is far from easy, given competing demand from other sectors, like fertilisers, shipping, or the chemicals industry. Besides, producing e-fuels requires a lot of energy: according to T&E modelling, producing enough e-kerosene to cover 35% of total EU jet fuel demand in 2050 (as stipulated by ReFuelEU) would require up to 11% of total renewable electricity generated in the EU. Flying less will be the only way to bring these energy requirements down to more realistic levels.
The list of pitfalls does not end there. For instance, how to convince airlines to sign offtake agreements when e-fuels are projected to remain two to three times more expensive to produce than conventional jet fuel in 2050? ReFuelEU includes dissuasive financial penalties for non-compliant fuel suppliers, which should contribute to solving that issue. Besides, airlines will be subsidised to purchase SAF under the European carbon market, through a mechanism known as the SAF allowances, which will cover up to 95% of the price difference between e-fuels and conventional fossil jet fuel.
It would be misleading to say the EU does not provide any financial support to e-kerosene projects. In theory, they are eligible for grants under funding programmes like the Innovation Fund, but aviation does not take priority over other hydrogen application sectors, and e-SAFs are not prioritized over bio-SAFs. In practice, so far, only three e-kerosene projects have received Innovation Fund grants. Future funding prospects don’t look so bright for the sector, as e-kerosene projects have not been classified as “strategic” under the draft Commission proposal for a Net-Zero Industrial Act (NZIA). The EU is not the only one to blame. Member States should also do more to support the ramp up of e-kerosene production in their respective countries. So far, only France has earmarked some funding to support SAF projects.
ReFuelEU has laid the first stone to encourage the take-off of the e-kerosene industry, but there is still a lot to be done to ensure projects cross the finishing line. The transition of aviation from fossil jet fuel to e-kerosene will be a lengthy journey full of turbulence. Yet, to land safely in a net-zero world, aviation has no other choice but to embark on this journey.