On the banks of the Humber estuary in north-east England, a small corner of a sprawling refinery turns waste cooking oil into a new type of jet fuel that is key to the airline industry’s plans to reach net zero by 2050.
The Phillips 66 plant is the only one of its type in Britain and can produce up to 20,000 tonnes of so-called sustainable aviation fuel, or SAF, annually.
But that figure is less than 2 per cent of the 1.2mn tonnes that will be needed to meet the government’s end-of-decade target, which stipulates that SAF must make up a tenth of the UK’s total annual jet fuel consumption by 2030.
The slow build-up of domestic production of the greener fuel has prompted industry executives to call on ministers for more help. Without further state support, airline bosses have warned the UK risks falling behind other countries in SAF production, leaving British passengers facing higher ticket prices to pay for the imports to meet the target.
Virgin Atlantic Airways boss Shai Weiss said the mandated switch to SAF represented an “opportunity to create an industry in the UK where one does not exist” but said the government needed to do more to “create a certainty of supply, and really help decarbonise aviation”.
SAF can emit as much as 80 per cent less carbon dioxide over its life cycle than traditional aviation fuel and, crucially, is largely compatible with existing aero-engines. It currently represents the only realistic way for the airline industry to reach net zero by 2050, given that breakthrough technologies such as hydrogen or electric-powered passenger aircraft are still in their experimental stages.
“On the big commercial planes, really over the next 15 to 20 years [the only] solution is SAF,” said Tufan Erginbilgic, chief executive of aero-engine maker Rolls-Royce. In contrast, environmental groups question the fuel’s green credentials and believe reducing flying is the only way to decarbonise the industry.
The UK government has pledged £165mn in funding to help companies build at least five plants to produce the new fuel by 2025. It has also announced a consultation on introducing a price support mechanism to further encourage investors to back the nascent industry.
Aviation bosses welcome these moves but say the level of support pales in comparison to what is on offer in the EU, where aviation taxes are ploughed into its production, and the US, which has unveiled huge tax breaks on production of SAF.
“We are trying to flag the risk of taking too long. the intent seems to be there, we just need to see that converted into reality,” said Carrie Harris, director of sustainability at British Airways.
Weiss agreed: “They can look at what the Americans are doing, and what the Europeans are doing. It is not that complicated. We are stuck somewhere . . . Government has a very big role to play, and shouldn’t shy away from it.”
Weiss was speaking on board a Virgin Atlantic aircraft as it completed the first-ever commercial long-haul flight entirely powered by SAF in November. None of the fuel for that landmark flight came from the UK and was instead shipped in from the EU and US.
Transport secretary Mark Harper, who was also on the flight, said he was “very mindful” of the risk of the UK falling behind other countries, but that the depth of government support so far had shown ministers were “absolutely prepared” to put taxpayer money into funding the transition to cleaner fuels.
Airlines executives have urged ministers to speed up the rollout of a financial support mechanism to encourage investors to put money into SAF production.
The industry wants a state-funded “price stability mechanism”, where the government guarantees a minimum price for the fuel, similar to schemes used to underwrite nuclear and offshore wind projects.
Harper said he remained “open-minded” about how best to structure such a support mechanism and that the government would have to launch a consultation because of mixed signals from industry as to exactly what it wanted. “There is no point cobbling something together and then it doesn’t work,” he said.
Industry and investors should also bear some financial risk, he added. “You couldn’t expect investors to make a good return if you are not taking any risk.”
Some industry executives have pushed for levies paid by airlines as part of the UK’s carbon trading scheme to be diverted to fund a price support mechanism.
“Investors are telling us . . . we need the price stability mechanism to help underpin their investments. without that, what we are hearing from the SAF investors is they will not be moving to the UK,” Harris said.
Tim Alderslade, chief executive of lobby group Airlines UK, said there was a risk the lack of new SAF fuel production projects would mean the industry would miss the government’s 10 per cent SAF target by 2030. This would drive up ticket costs for passengers as the sector would have to pay more to import the fuel or face financial penalties for missing the mandate.
“I’m not sure how the government can reconcile that without seeing huge spikes in prices for consumers . . . Somehow they need to speed things up and get both the mandate and revenue certainty mechanism into law as quickly as possible. Investors want legislative certainty and that’s what’s missing,” he said.
Investors and fuel companies similarly complain they cannot start building SAF plants in the UK until the government is clearer on the final details of what support it will give.
Noaman Al Adhami, head of UK at fuel company Alfanar, is waiting on those details before he can close the financing for a plant to produce more than 130,000 tonnes of SAF a year on Teesside.
“If we have certainty we could get the project done quicker,” he said. “Government has been very supportive. They are listening to our needs, and structuring the mandate with a very good ambition. It’s just the speed of getting things legislated in the UK,” he added.
