A feasibility study has concluded that by 2050, Ireland could generate at least €2.55 billion ($2.8bn) in revenues and create around 1,000 skilled jobs by producing its own sustainable aviation fuel. The research was led by SAF supplier SkyNRG and SAF facilitation and advocacy group SFS Ireland, backed by Boeing and aircraft lessors Avolon and ORIX Aviation. Their report finds the country would need 10 production plants, each with an 80,000 ton capacity, to meet its own EU-mandated SAF requirements by 2050. Significant additional benefits would also accrue if SAF was produced in Ireland for export. It identified the country’s best SAF production pathway as power-to-liquid (PtL), through which renewable energy is used to create eSAF by combining green hydrogen with biogenic CO2. But it said significant research, development and government incentives would be needed to kick-start the sector.

The report, ‘Ireland’s Sustainable Aviation Fuel Opportunity’, was launched by Ireland’s Minister for Enterprise, Trade and Employment, Simon Coveney, who said the government was committed to supporting EU and global actions to help cut harmful emissions from aviation, and welcomed “the proactive approach from the aviation sector to progress its own net zero commitments.”

The European Union’s ReFuelEU aviation initiative requires oil companies to gradually increase the proportion of SAF in aircraft fuel supplied at EU airports, increasing from 6% by 2030 to 70% by 2050.

“The European Green Deal has set ambitious targets for reducing net emissions by at least 55% by 2030, when compared to 2019 levels, and to be the first climate-neutral continent by 2050,” said Coveney. “This research shows there are clear future economic benefits from the green economy, which can create new jobs and exciting new business ventures. We look forward to engaging further with industry to explore Ireland’s sustainable aviation fuel potential.”

Ireland currently imports all its aviation fuel. The year-long SAF study was conducted to assess the viability of commercial production using local feedstocks, and focused on a minimum annual output of 100,000 tons of the fuel, commencing before 2030.

Based on RefuelEU SAF mandates for Ireland, the report says three production plants would be needed to deliver 230,000 tons by 2035, with an estimated economic value of €800 million, and 10 plants to deliver 800,000 tons by 2050, valued at €2.55 billion.

It indicated a large potential existed for PtL fuels produced with energy generated by offshore wind turbines but added SAF produced using bio-based intermediates such as renewable natural gas could expedite production to meet the advanced biofuels portion of the ReFuelEU mandate.

To help stimulate development of SAF and green hydrogen sectors in Ireland, the report highlights the need for public-private collaboration and support mechanisms including capital allowances, tax credits, guaranteed minimum pricing and investment incentives. It also urges funding and promotion of SAF technologies through third-level institutions and government entities such as Enterprise Ireland and Science Foundation Ireland.

It recommends SAF production plants should be considered in Ireland’s industrial planning processes, investment is needed in hydrogen storage and transport, and operation and planning of the electricity grid should be optimised to resolve congestion in power delivery.

“Significant progress is required for Ireland to be able to develop eSAF at scale, particularly to ensure renewable power is available on the scale required for production of hydrogen in the required quantities,” cautions the report. “The increased levels of offshore wind power generation that government initiatives are targeting by 2030 will put the country in a much stronger position to develop a domestic SAF industry.” 

Sheila Remes, Boeing’s VP Environmental Engagement and Business Development, said Ireland’s potential for growth in renewable energy made it a prime location for SAF production.

SkyNRG CEO Philippe Lacamp, added: “Ireland has an opportunity to combine its renewable resources, skilled workforce and the right policy environment to create a thriving SAF industry. While there is still work to be done, we are convinced that Ireland can play a significant role in creating this SAF production capacity.”

Darren Carty, Partner, SFS Ireland, said the feasibility study was “the foundation for establishing a low-carbon SAF industry in Ireland. We look forward to advancing collaboration and essential public-private partnerships.”

Andy Cronin, CEO of aircraft lessor Avolon, said: “Large scale deployment of SAF and the transition of the global fleet to new technology aircraft are two of the biggest near-term drivers that can progress the sector’s net zero by 2050 goal. It is going to require large levels of investment and close collaboration across many stakeholders, and we value the minister’s engagement to explore Ireland’s sustainable aviation fuel opportunity.”

Marie-Louise Kelly, CFO of ORIX Aviation, and Chair, Aircraft Leasing Ireland, a group representing the Irish aircraft leasing industry, said the SAF report had identified multiple opportunities for the country. “Along with our sectoral experience [in aviation] we were also able to add the wider ORIX Group’s extensive expertise in renewable power generation to the study,” she added. “We welcome the minister’s commitment to engage on SAF production and look forward to exploring ways to position Ireland at the heart of the global drive to Net Zero 2050.”

Meanwhile, daa, the operator of Dublin and Cork Airports, has welcomed the adoption of the ReFuelEU Aviation regulation.

“There’s a willingness amongst airlines to use SAF but there currently isn’t enough of it available, leading to prices being higher than for conventional fuels,” said Andrea Caroll, Group Head of Sustainability at daa. “The regulation is an important step towards reducing the aviation industry’s carbon footprint that can have a notable impact in the very near term.

“We’re fully committed to reducing overall carbon emissions at our airports and are able to fully facilitate SAF once there is demand and availability. daa is ready to facilitate the increased transition to SAF and we are working hard with airlines and all relevant stakeholders at both airports to meet our net zero 2050 targets ahead of time.”

The airport operator has announced proposals to incentivise airlines to operate lower CO2 emission aircraft at Dublin Airport. A low emissions discount would apply to aeronautical charges, with airlines that fly high emission aircraft charged more.

Photo: daa

Tony Harrington

Correspondent

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Southwest Airlines has agreed to purchase over 400,000 carbon credits from SMBC Aviation Capital, the world’s second largest aircraft leasing company, to support the airline’s employee business and charitable travel, or to meet CORSIA requirements. As the first aircraft lessor to develop a carbon credit programme, SMBC Aviation Capital announced in September 2022 an initial investment of $53.3 million in projects that align with up to 10 of the 17 UN Sustainable Development Goals (SDGs), including good health and well-being, gender equality and climate action. Part of the investment will also support local community initiatives such as irrigation schemes and micro finance opportunities for women. Carbon credits can be obtained from the Ireland-based lessor by airlines either as part of an aircraft lease contract or independently. It has placed 12 Boeing 737-8 MAX aircraft with Southwest and is also collaborating with partners on scaling up sustainable aviation fuel production.

“Southwest continues to make sustainability a priority and we are delighted to partner with them as the first customer of our newly-established carbon credit programme,” commented David Swan, Chief Operations & Sustainability Officer at SMBC Aviation Capital. “This announcement supports our objective of working with our airline customers to accelerate their path to environmental sustainability. We believe that by taking tangible actions and working together we can make a positive change, especially in a hard-to-abate sector like aviation.”

Through Belgium-based CO2 Logic, SMBC Aviation Capital has invested in a project in Burkina Faso, West Africa, that will provide energy-efficient cookstoves to 28,000 families who have previously relied on traditional cooking methods that are harmful to health and the environment. According to the Clean Cooking Alliance, the use of open fires and solid fuels for cooking causes nearly 4 million premature deaths each year and, according to the US Environmental Protection Agency, the average open fire produces nearly as much CO2 as the average motor vehicle.

Separately, the lessor is working with US carbon project developer C-Quest Capital to forward purchase carbon credits from a range of cookstove projects across Africa, Asia and Central America, which aim to reach over 3.2 million households and meet a minimum of seven SDGs.

Due diligence across all projects has been independently undertaken by Climate Focus, which is based in the Netherlands.

Under the agreement with Southwest, the airline will be acquiring over a five-year timeframe carbon credits certified by either Gold Standard or Verra from SMBC Aviation Capital’s funded projects in Africa and Central America.

“We recognise the important roles that both in-sector and out-of-sector levers play in our sustainability journey,” said Chris Monroe, SVP Finance Treasury & Sustainability, Southwest Airlines. “Expanding our existing partnership with SMBC Aviation Capital supports these projects that are expected to help mitigate carbon while contributing positively to local communities.”

In October 2021, Southwest laid out a 10-year plan to maintain carbon neutrality to 2019 levels, which included the first US-based carbon offset initiative that offered customers loyalty points, and for every dollar contributed towards offsetting Southwest’s carbon emissions, the airline would match the contribution.

The plan also incorporated a target to reduce carbon emissions per available seat mile (including scope 1 and scope 2 emissions) by at least 20% by 2030 through fleet modernisation, route optimisation and other initiatives. The airline also plans to replace 10% of its total jet fuel consumption with sustainable aviation fuel by 2030.

Towards the end of 2021, Southwest signed a 15-year offtake agreement with Velocys Renewables for 219 million gallons of SAF, with deliveries commencing as early as 2026 from the Velocys Bayou Fuels facility in Natchez, Mississippi. The airline estimates the fuel could avoid 6.5 million tonnes of CO2 over the term of the agreement.

In June last year, Southwest announced an investment in SAFFiRE Renewables, a company formed by D3MAX, which in 2021 was awarded a grant by the US Department of Energy towards a pilot-scale facility. The grant is being matched by Southwest and the SAFFiRE project is expected to utilise technology developed by the DOE’s National Renewable Energy Laboratory to convert corn stover, a widely available waste feedstock in the US, into renewable ethanol that then would be upgraded into SAF. The investment and grant supports phase one of the project, which is expected to include technology validation, preliminary design and a business plan for a pilot plant.

“This is a unique opportunity to invest in what we believe could be game-changing technology that could facilitate the replacement of up to approximately 5% of our jet fuel with SAF by2030, with the potential to significantly continue to scale beyond the decade,” commented Southwest CEO Bob Jordan at the time of the announcement. “This first-of-its-kind investment is another step we are taking to address our environmental impact and it also supports our efforts to partner with organisations and government entities to help our industry reach the goal of carbon neutrality by 2050.”

SMBC Aviation Capital has an owned, managed and committed fleet of over 900 aircraft and is working to a target of up to 80% of new technology aircraft in its fleet by the end of 2025. It is working with shareholder Sumitomo Corporation to explore ways to increase the supply of SAF and is also collaborating with Aircraft Leasing Ireland on starting production of SAF in Ireland. It has developed its own framework to achieve net zero in its own operations by 2050 and has offset all of its operational emissions since 2019. Scope 3 emissions are determined by Fexco Group company PACE.

Image (Boeing): Southwest Airlines Boeing 737 MAX

Christopher Surgenor

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Leading aircraft leasing companies are becoming increasingly vocal about their commitment to sustainable aviation, as evidenced in recent reports and thought-leadership papers from Aircraft Leasing Ireland (ALI), the body representing 31 of the world’s largest lessors, and major lessors Avolon and SMBC. It is hardly a surprise that businesses with large corporate shareholders take ESG seriously as it is an industry that has a 25-year investment horizon raising and deploying billions of dollars in capital globally every year to finance hundreds of jetliners and turboprops, writes Mark Pilling. The drive to aviation operations with net zero emissions has a fundamental impact on the demand and types of aircraft acquired and placed by lessors and thus the risk and reward considerations of the air finance world. These initiatives are expected to be followed by all major players in the air finance industry as they fashion and declare their sustainability and ESG strategies.

ALI launched its ESG narrative, ‘Aviation Sustainability: Our Future’ at a recent Airline Economics conference in Dublin. Declan Kelly, Chair of ALI, said: “Air travel has been a catalyst for our global economy. With the industry set to achieve a steady growth rate over the coming years, it is essential that this is delivered sustainably. Today we are taking our first, unified, positive steps as lessors to show our commitment to supporting the wider industry to achieve net zero carbon emissions by 2050.” ALI is a relatively new body formed by Ibec, Ireland’s lobby and business representative group. The report outlines tangible steps to be taken by aircraft lessors to support aviation to reach the net zero goal.

“This is achievable, but it requires a seismic shift in the development of new technologies in the area of carbon sequestration, sustainable aviation fuels (SAF) and new propulsion aircraft,” said Kelly. “Support is therefore required at all levels across government and industry. Ireland, as an island aviation nation, can play a leading role in this technological research and leasing can underpin this by deploying our capital and buying power.” 

Authored in conjunction with Oliver Wyman, the University of Limerick and TU Delft Netherlands, the narrative outlines aviation’s pathways to achieve net zero through aircraft design, operational improvements, SAF, electrical/hydrogen propulsion and recycling. Jan Melgaard, Executive Chair of FPG Amentum and Chair of ALI’s Sustainability Committee said: “The complexities of aviation, driven by an extensive regulatory environment, result in the technological leaps required to address the climate threat being measured in decades rather than years. As a result, the need for us to take action today to transition our industry to carbon neutrality by 2050 is even more outspoken, even though the results of our actions are not immediately visible.”

ALI pledges to be the leading aircraft lessor organisation on sustainability and driving the commitment across the entire aircraft lifecycle. Objectives include the development of a charter during 2022 that would demonstrate leadership in carbon disclosures and accelerate progress in future aircraft and low-carbon technologies. As buyers of more than 50% of the world’s new technology aircraft, ALI is encouraging its members “to use their very significant influence with aerospace manufacturers and airlines” and require a step change to ensure the industry can achieve net zero by mid-century.

To encourage members to act on the environment today, it recommends their employees choose travel service providers based on their sustainability credentials, steer aircraft investments towards aircraft with low energy intensity, increase the recycling of aircraft and expand members’ value chain to include sustainable investments in, for example, SAF or electric/hydrogen-based propulsion projects.

ALI also intends working with the University of Limerick in respect of leadership of sustainability initiatives and broaden involvement with other Irish universities in a collaborative effort to drive sustainability via research, curriculum development and continued development of thought leadership. Another commitment is to hold a first Aviation Sustainability Day in Ireland this year, inviting participation from relevant stakeholders for discussion on progressing the sector towards net zero by 2050.

Robbie Bourke, Partner, Oliver Wyman and co-author of the narrative added: “The aircraft leasing community is taking its first practical steps to support and work with the entire industry to achieve net zero. This will be delivered through close collaboration with OEMs, airlines and governments, who have within their gift the power to accelerate change.”

Meanwhile, Avolon, one of the world’s largest lessors (and a member of ALI), issued its annual outlook paper for 2022 titled ‘Rise Above’. Co-authored by Jim Morrison, Head of Portfolio Management, and Rosemarie O’Leary, Head of Counterparty Risk, at Avolon, the paper reviews the key trends in the aviation industry for airlines, manufacturers and lessors, identifying themes that will shape the year ahead. Of its seven forecasts for 2022, three – covering eVTOLs, SAF and carbon credit prices – had sustainability at their core.

It notes a “handful” of electric vertical take-off and landing (eVTOL) prototypes flew in 2021 and Avolon predicts full-scale prototypes of 10 all-electric aircraft will fly this year. Disruptive technologies start small “before growing to attack incumbents’ fortresses,” it says, “and watch out for expanding customer bases as the technology is proven and performance is enhanced.” Avolon itself ordered up to 500 electric aircraft in June 2021, becoming a launch customer of Vertical’s VA-X4 eVTOL machine.

Although supply is limited, demand for SAF is strong and Avolon projects a quadrupling of SAF production by 2030 as projects are funded in 2022. Policies must be structured to ensure the economics stack up against other renewable fuels, it says, whilst believing blending mandates and production incentives will ensure long-term demand and so enabling airlines to sign up for offtake agreements. “With revenues secured, so projects will be financed and construction started, leading to SAF production capacity growing exponentially,” says the paper.

Avolon sees the price of carbon credits doubling again in 2022, with the global voluntary offset market potentially worth $50 billion by the end of the decade, up from $300 million in 2018. The Taskforce on Scaling Voluntary Carbon Markets is enabling this growth by crafting market standards to create certainty over the value of carbon credits and liquidity that creates price transparency, it says, and believes the price of mandated EU carbon permits will continue to rise as demand increases from the reopening of economies while supply is squeezed.

In December, lessor SMBC Aviation Capital, another member of ALI, launched its inaugural ESG strategy which outlines the long-term objectives of the business to 2050. It commits to setting science-based targets and disclose in line with best practice reporting under the Task Force on Climate-related Financial Disclosures (TCFD), as well as aligning all its initiatives with the UN Sustainable Development Goals (SDGs). It has a current fleet of over 730 owned, managed and committed aircraft, of which 61% are latest technology and most fuel-efficient types. SMBC is targeting raising this proportion to 80% by the end of fiscal 2024 and intends to be one of the first to invest in electric and/or hydrogen powered commercial passenger aircraft, which are expected in the next 15 years.

“We will work with our customers on their decarbonisation journeys,” promises the company in its ESG strategy report. “We are providers of finance and can develop creative ways to help the industry to progress to SAF and zero emissions aircraft.”

SMBC adds it will maintain and enhance its “best-in-class” corporate governance, embed ESG into its corporate governance framework and introduce metrics to encourage strong performance in ESG across the organisation.

“Aircraft leasing will have an increasingly influential role in the future of the industry,” comments Peter Barrett, Chief Executive of SMBC in the report. “We must lead by example on all aspects of ESG and in particular on the critical issue of the environment. The transition to a more sustainable aviation industry is going to move at a rate far in excess of anything seen before. Leadership will be a source of competitive advantage and we are committing resources to ensure that this is embedded into our business and core product offering.”

Photo: Aircraft leasing company Avolon and Japan Airlines announced in October 2021 a partnership to commercialise zero-emissions eVTOL aircraft in Japan

Mark Pilling

GreenAir Contributing Editor

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