By Padraic Halpin
DUBLIN (Reuters) - Neste could have excess sustainable aviation fuel (SAF) production capacity by 2028 and requires more certainty about long-term demand to justify investment after that point, a senior executive at the refiner said on Monday.
Neste aims to ramp up its production of renewable fuels to over 6 million tonnes by 2026 from 4.5 million this year, 33% of which will be SAF, vice president of renewable aviation Jonathan Wood told an aviation sustainability conference in Dublin. He said that meant Neste alone would have enough capacity to meet the initial amount of SAF mandated by the European Union from 2025 to 2029, but it was crucial suppliers see "a pathway to demand growing beyond that", including from passengers.
The EU has adopted rules requiring flights departing from EU airports to carry a progressively increasing amount of SAF, which has net-zero or lower CO2 emissions than fossil fuel kerosene, starting with 2% of total fuel from 2025. "To make any further investments, we need to have demand certainty... We have to find other mechanisms to help stimulate demand further because only then will it be possible to justify the internal investments," Wood said "Right now we could be even in five years time actually having more SAF production capacity than we actually have demand" and end up producing renewable diesel instead of aviation fuel.
The EU proposal aims to increase both demand for and supply of SAF, which is currently produced in tiny quantities and is far more expensive than conventional aviation fuels. Executives from Norwegian Air, British Airways-owner IAG (LON:ICAG) and Icelandair said the EU needed to adopt measures beyond mandates, including helping fund the scaling of SAF beyond 2030 and contributing towards lowering the price gap between conventional and alternative fuels. Norwegian Airlines' vice president for sustainability said without this, the financial penalties the EU is introducing for airlines that fail to meet the SAF target of 6% in 2030 and 20% in 2035 could threaten their survival.
"If we're not able to secure these resources and long term offtake agreements with a pricing model today that we can live with, I think we're probably going to be out of business," Anders Fagernaes told the conference.